For example, you participate in your employer's tax-deferred plan (Account A). You also have a taxable investment account (Account B). Each account earns 8 percent per year. You're in the 28 percent tax bracket and contribute $10,000 to each ac- count at the end of every year. You pay the yearly income taxes on Account B's earnings using funds from that same account. At the end of 30 years, Account A is worth $1,132,832, while Account B is worth only $757,970. That's a difference of over $370,000. (Note: This example is for illustrative purposes only and does not represent a specific investment.)
Capture the full employer match
If you can't max out your 401(k) or other plan, you should at least try to contribute up to the limit your employer will match. Employer contributions are basically free money once you're vested in them (check with your employer to find out when vest- ing happens). By capturing the full benefit of your employer's match, you'll be sur- prised how much faster your balance grows. If you don't take advantage of your em- ployer's generosity, you could be passing up a significant return on your money.
For example, you earn $30,000 a year and work for an employer that has a matching 401(k) plan. The match is 50 cents on the dollar up to 6 percent of your salary. Each year, you contribute 6 percent of your salary ($1,800) to the plan and receive a matching contribution of $900 from your employer.
Evaluate your investment choices carefully
Most employer-sponsored plans give you a selection of mutual funds or other invest- ments to choose from. Make your choices carefully. The right investment mix for your employer's plan could be one of your keys to a comfortable retirement. That's be- cause over the long term, varying rates of return can make a big difference in the size of your balance.
Research the investments available to you. How have they performed over the long 18 Kalon Women Magazine May 2012
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