401k Plan Advice For Lawyers And Legal Professionals
Planning for retirement, especially at a young age, is boring. There’s just no other way to say it. However, the fact that it’s boring is not a legitimate excuse to ignore it. Legal professionals, more than almost any other profession, should understand the value of planning ahead. And one of the best ways to do that is with a 401k plan from your employer.
What Is A 401k Plan?
A 401k is a retirement savings plan sponsored by an employer. It allows employees to save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account.
401k plans are, by a fairly wide margin, the most popular and prevalent type of employer-based retirement plan in the country. When taken full advantage of, these plans offer substantial benefits to employees who make the effort to maximize contributions over the long term and keep a close eye on how their account is performing.
Still with us? Good. We understand what a snooze-a-thon retirement planning can be. Hang in there. Being broke at 70 is not a fun life challenge. If you fell asleep, drink a Red Bull and read the last two paragraphs again before proceeding.
How To Get Started
To get started with a 401k retirement plan, there are three key things you’ll need to know up front:
- When are you eligible to enroll?
- Does your employer offer contribution matching?
- How much of your paycheck will you contribute?
The first two questions can be answered either in your firm’s employee benefits guide, or from a human resources representative. The last question is a matter of personal preference and should be carefully considered before starting.
If your firm does offer some form of contribution matching, it is highly recommended that you make the effort to fully understand how the matching program works, and take full advantage of it for as long as possible.
It may require you to contribute more of your paycheck than you originally planned, but doing so is absolutely worth the additional hit to your paycheck every month.
Finally, your firm may have additional retirement plan incentives for senior level associates and/or partners. If possible, ask around and find out what additional benefits, if any, are available. It is not uncommon for top firms to offer incentives to their most valuable attorneys to help retain them for the long term.
Alien Attack! Just kidding. We’re still talking about retirement plans. Please don’t leave.
How To Be Successful
While there are a lot of levers and dials that can be adjusted throughout the lifespan of your 401k account, there are really only two major rules you’ll need to follow to ensure that you don’t end up living in a cardboard box when you’re ready to stop working:
Rule #1: Start early.
When it comes to retirement plans, the best time to start saving in a 401k is yesterday, the second-best time to start saving in a 401k is today, and the worst time to start saving in a 401k is tomorrow.
Does that sound a little corny? Maybe. Is it true? Absolutely.
Rule #2: Give it all you can.
Trust us, we realize that asking you to forego some of that hard-earned boat money (link to previous article) is a tough sell at this stage of your career. But retirement is easily in the list of “top five things most Americans really suck at”. Don’t be one of those people.
Put as much money as you can comfortably contribute into your retirement account every year. Keep an eye on your account’s performance, and trust your money to grow.
Bonus Tip: Hire a professional
Remember the levers and dials we mentioned before? Having a professional financial advisor who can fine tune your 401k account’s performance can have a big impact on both the short and long-term health of your savings.
A good financial advisor will also help you understand and evaluate risk, make recommendations, and act in your best interests to prevent financial loss.
The financial world can often be as complex and obscure as the law. Having a guide to help you through it is just as important as needing a lawyer to help navigate legal problems.