Investment Strategies with Aileron

By: Bill and Cindi Porter, AILERON INVESTMENT ADVISORS

Q: Should I be maximizing my 401K or investing outside of my employer’s plan?

A: It depends.

TAX IMPLICATIONS

Contributions to a traditional 401K are not included in your taxable income, thus none of your contributions are currently lost to income tax. Also, important to note is your 401K provides tax deferral on the growth of those funds. Investing outside the plan may or may not allow for tax deferral.

CURRENT 401K MENU Some 401K menus offer a wide-array of options, others do not, making it difficult to diversify. If someone has very limited fund choices and has accumulated a substantial amount of money in their 401K, it may make sense to diversify elsewhere. The fees associated with your 401K should be considered and compared to the fees with other investment options.

ROTH 401K OPTION Many 401Ks offer a Roth 401K option. It may make sense to take advantage of this option. Many workers are not eligible to contribute to a Roth IRA because of the income restrictions (2017 phase out begins at $118,000 single, $186,000 married filing jointly). The contribution limits are higher in a 401K versus an IRA. You may only contribute $5,500 ($6,500 if age 50 or over) to a Roth IRA. Depending on your employer’s plan, you may be able to contribute up to $18,000 ($24,000 if age 50 or over) in your Roth 401K.

COMPANY MATCH If your company matches your contributions, you should contribute at least up to the percentage they are matching. When making decisions regarding where and how much to be investing, you should consult with your financial advisor.

This is for education only. Before using this information in any way discuss it with a financial professional. There are many risks associated with stock trading. You may lose some or all of your financial investment. Securities offered through Dempsey Lord Smith, LLC Member FINRA/SIPC. Securities offered through Integrated Financial Planning Member FINRA/SIPC. Advisory services offered through Dempsey Lord Smith, LLC. All the information in this letter is published in good faith and for general information purposes only. We do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information is strictly at your own risk.


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