Advice for Savvy Retirement Planning

401K Contribution Limits for 2017

401K Contribution LImitsEach year the IRS publishes updated Maximum 401K contribution limits, as well as catch-up contribution limits for the new year. Typically, the limits the IRS sets each year is based on inflation factors (with minimum $500 increases), so they do not necessarily increase the limit each year.

The 401K Max Contribution Limit for 2017 has now been set, with NO increases over 2016, and will remain at $18,000. The Maximum 401K contribution Limit for 2014 and 2015 was $17,500 and $18,000, respectively.

READ:
Don’t Buy-and-Forget the Investments in Your 401K Plan

IRA Contribution Limits 2017 and Previous Years

Social Security Cost of Living Adjustments for 2018

History of 401K Max Contribution Limits:

As you can see, the Maximum 401K contribution limits do not rise dramatically each year. Although over time, if investors are diligent about increasing their contributions, it can certainly make a difference. The limit on contributions for 401K, 403B, most 457 plans, and the Federal Government Thrift Savings Plan (TSP):

  • 2017 – $18,000
  • 2016 – $18,000
  • 2015 – $18,000
  • 2014 – $17,500
  • 2013 – $17,500
  • 2012 – $17,000
  • 2011 – $16,500
  • 2010 – $16,500
  • 2009 – $16,500
  • 2008 – $15,500

Age-50 401K Catch Up Maximum Contribution Limits

For those of you that are over age 50 (or turn age 50 before the end of the year), you are allowed an additional 401K catch-up contribution. These limits also adjust for inflation, but at a much slower pace. The $500 increase to $6,000 for 2015 was the first 401K catch up increase since 2009. For 2017, there is NO increase:

  • 2017 – $6,000
  • 2016 – $6,000
  • 2015 – $6,000
  • 2014 – $5,500
  • 2013 – $5,500
  • 2012 – $5,500
  • 2011 – $5,500
  • 2010 – $5,500
  • 2009 – $5,500
  • 2008 – $5,000

READ: Social Security Leveling Option

Employer Match and Total Maximum 401K Contributions

In addition to total allowable employee 401K contributions, there is a maximum total contribution allowed into your 401K (when factoring in employer match). For 2017, the maximum allowed to be contributed into your 401K has increased from $53,000 to $54,000 (or 100% of income, whichever is greater) with minimum $1,000 increases thereafter. Therefore, with employee standard contributions, potential over-50 “catch-up” contributions, plus employer contributions, the maximum overall contributions are $60,000 in 2017.

For IRS Limits on Other Types of Retirement Plans (ie. SIMPLE, SEP, etc.), please see IRS Retirement Plans Guide

Login to Fidelity 401K – Fidelity Net Benefits

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Robert Henderson is the President of Lansdowne Wealth Management, an independent, fee-only advisory firm in Mystic, CT. His firm specializes in financial planning and investment management for retirement, with a special focus on the particular needs of women that are divorced or widowed. He is an Accredited Asset Management Specialist and a Certified Divorce Financial Analyst. Mr. Henderson can be reached at 860-245-5078 or bhenderson@lwmwealth.com. You can also view his personal finance blog, The Retirement Workshop at http://lwmwealth.com/blog and the firm’s website at http://www.lwmwealth.com.

If you are an employee or retiree of General Dynamics, Pfizer, or L&M Hospital, and you would like advice and direction on managing your Fidelity 401K or Hewitt 401K plan, please sign up for our monthly newsletter, which provides complimentary ongoing advice, commentary, and model portfolios for each of those plans. You can sign up automatically at Your 401K http://www.lwmwealth.com/services/your401k.html.

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Don’t Buy-and-Forget the Investments in your 401K Plan

401K InvestmentsThe buy-and-hold investment strategy for company sponsored retirement plans, such as a 401K plan, has become a relic of the past. Let me re-phrase that: Buy-and-forget investing is a relic of the past.

Read: 401K Contribution Limits

Buy-and-Forget is not an Investment Strategy
I often have prospective clients come to me with a stack of statements…brokerage accounts, 401K accounts, IRA’s, CD’s, and other odds and ends. Invariably, one or several of the accounts have been completely ignored over the years. In some cases, the investment allocations in their company 401K plan account is still invested with the same exact options they chose when they first opened their accounts.

Just recently, I helped a new client re-allocate his 401K funds that had not made a change in over 15 years. It was entirely invested in high-growth (or high-risk, rather) funds that performed superbly – until the year 2000. He had managed to eke out a total return (not annual return) of about 31% – over the course of 15 years. That works out to less than 2% per year (compounded). The technology bubble and growing euphoria for the stock market drove much of the investment gains in the 90’s, a situation which reversed abruptly in 2000, and is not likely to repeat itself anytime soon.

We are currently in an economic environment vastly different from years past. Interest rates are at an all-time low, unemployment still remains remarkably high, and the federal debt is unsustainably high and growing rapidly. The point is, what may have done well 5 or 10 or 15 years ago, is most likely NOT working well today.

READ:
401K Contribution Limits
IRA Contribution Limits

What to do
If you are the type of person that has neither the time nor inclination to regularly review your investments, you need to begin reviewing your 401K portfolios at least once per year. I usually recommend doing this at tax time, since you can get all your painful financial exercises out of the way at once.

The place to start is with your 401K plan provider. If you work for a large company, chances are they may have some great online tools to use to help guide you to an appropriate allocation. But buyer beware; some 401K product providers (brokerage firms, mutual fund companies, and insurance companies) will attempt to steer you towards the products THEY want to sell you. In some cases, these may not be in your best interest, even if they might be considered “suitable” for you. So make sure you are comfortable with the recommendations provided by online tools.

If you do not have the resources of a 401K provider, or are not comfortable taking advice from an online calculator, you can consider seeking out a fee-only financial planner to assist you in creating a simple allocation for your 401K plan.

Robert Henderson is the President of Lansdowne Wealth Management, an independent, fee-only advisory firm in Mystic, CT. His firm specializes in financial planning and investment management for retirement, with an added focus on the particular needs of women that are divorced or widowed. He is an Accredited Asset Management Specialist and a Certified Divorce Financial Analyst. Mr. Henderson can be reached at 860-245-5078 or bhenderson@lwmwealth.com. You can also view his personal finance blog, The Retirement Workshop at http://lwmwealth.com/blog and the firm’s website at http://www.lwmwealth.com.

If you are an employee or retiree of General Dynamics, Pfizer, or L&M Hospital, and you would like advice and direction on managing your Fidelity 401K or Hewitt 401K plan, please sign up for our monthly newsletter, which provides complimentary ongoing advice, commentary, and model portfolios for each of those plans. You can sign up automatically at http://www.lwmwealth.com/services/your401k.html.

Pfizer 401K Connection Newsletter – September 2012

401k Nest EggHere is the September 2012 issue of the Pfizer 401K Connection newsletter.

The 401K Connection Newsletters are independent evaluations of 401(K) plans that help participants better understand their retirement accounts, the many investment options available to them, and provide them with model portfolios that they are free to follow and emulate at their discretion.  The newsletters are in no way affiliated with General Dynamics, Pfizer, L&M Hospital, or any of their affiliates. They are 3rd party newsletters provided for no cost to assist employees with better understanding and managing their 401K plans. Lansdowne Wealth Management is an independent wealth management firm that has no affiliation to General Dynamics, Pfizer, or L&M Hospital, nor the administrators of their 401K plans, Fidelity and Hewitt & Associates.

Around the first week of each month, subscribers receive our newsletter, customized to their employer (currently General Dynamics, Pfizer, or L&M Hospital). The newsletters are chock-full of useful information to help manage their 401K plan, including market & economic updates, analysis of your retirement plan, feedback on the various investment options, and model portfolios that are developed by our firm using the same strategies and philosophies we utilize for our own private clients. In addition, periodically you will receive articles written by our firm that can be useful in managing other aspects of your financial life, in addition to your 401K. The articles can always be accessed at our blog as well – http://lwmwealth.com/blog/.

To sign up for one of the newsletters, please go here:  http://www.lwmwealth.com/services/your401k.html

What Is a “Stable Value Fund” in a Fidelity 401K?

Stable Value Fund in 401KStable Value Funds

Just as the term implies, a Stable Value Fund at Fidelity attempts to maintain a constant price, or principal value, regardless of stock market or interest rate environments. These funds are typically found in company-sponsored retirement plans such as 401K’s, 403B’s, and the like. Stable Value Funds (also sometimes referred to as “Fixed Accounts” or “Fixed Income Accounts” in your retirement plan literature) typically offer interest rates that are 1 to 2% higher than ordinary money market accounts. This is common in Fidelity Stable Value Funds.

See: 401K Contribution Limits

How Do Fidelity Stable Value Funds Work?

Most Fidelity Stable Value Funds invest in what are known as Guaranteed Investment Contracts (GIC’s), Synthetic Investment Contracts (SIC’s), Bank Investment Contract’s (BIC’s), and other guaranteed or insured investment pools issued through banks, insurance companies and other financial institutions. These days, the majority of the investments tend to be in Synthetic Investment Contracts, which are basically pools of short-term bonds, packaged inside an insurance wrapper. If the interest crediting rate falls below the contractual rate set by the insurer, the insurance company pays the difference back to the fund. If the interest rates rise higher, then the insurance company pockets the difference.

Why Are Stable Value Funds Useful?

Like an insured money market account, they provide some piece of mind that the price of the funds (known as the “Net Asset Value”) will not fluctuate – you can feel comfortable knowing that you likely won’t lose any principal. However, the downside of that insurance protection is that the interest rate will rarely exceed the rate of inflation. Currently, most Stable Value Funds are crediting interest in the range of 1-2%, with no prospects of rising in the near future.

Should I Invest in a Stable Value Fund in My Fidelity 401K?

As said previously, the goal of these funds is to no lose money. Having said that, one should not expect to earn much return while invested in these funds.  They are suitable for investors with very low risk tolerance or who are currently preparing to make withdrawals from their portfolio, and do not want to risk losing principal on money earmarked to be withdrawn shortly. They are appropriate for the “cash” portion of your investment portfolio.

How Do I Get More Information About the Stable Value Fund in My Fidelity 401K?

Since most Stable Value Funds are not publicly traded, you must seek information from your employer-sponsored plan. Most plans have online access to fund and investment information available to their employees.

READ: Social Security Leveling Option

If you are an employee or retiree of General Dynamics, Pfizer, or L&M Hospital, and you would like advice and direction on managing your Fidelity 401K or Hewitt 401K plan, please sign up for our monthly newsletter, which provides complimentary ongoing advice, commentary, and model portfolios for each of those plans. You can sign up automatically at http://www.lwmwealth.com/services/your401k.html.

Robert C. Henderson is the President of Lansdowne Wealth Management in Mystic, CT. His firm specializes in financial planning and investment management for individuals approaching retirement or already in retirement, with an added focus on the particular needs of women that are divorced or widowed. He is an Accredited Asset Management Specialist and a Certified Divorce Financial Analyst. Mr. Henderson can be reached at 860-245-5078 or bhenderson@lwmwealth.com. You can also view his personal finance blog at http://lwmwealth.com/blog and the firm’s website at http://www.lwmwealth.com.