Your Money

Take this key step to strengthen your retirement savings in 2019

Here's how to get on track for retirement
Here's how to get on track for retirement

If you want to position your retirement savings for success in 2019, now is the right time to do it.

That's because October tends to mark the beginning of annual benefits enrollment for employees. It's when you review your health and life insurance selections for the upcoming year.

Since your employee benefits are already top of mind, you might as well take a few minutes and sign into your 401(k) account, too.

Pay close attention to these aspects of your retirement plan. It could help you step up your savings in the new year and head off a disaster.

Fishy activity

It's easy to ignore those mailers from your 401(k) plan administrator. Indeed, only 57 percent of people recently polled by Charles Schwab said they review their annual fee disclosures.

The plan provider surveyed 1,000 401(k) plan participants and found that about 4 in 10 reviewed their quarterly statements in the last year, too.

If you blow off your statements, you run the risk of missing suspicious account activity, said Marina Edwards, a senior retirement consultant at Willis Towers Watson.

Six of her clients have had this experience.

Hackers have been scraping up personal details and contacting providers' call centers, disguising themselves as the account owner, said Edwards.

Many people have been conditioned to think about not opening the statements, to "set it and forget it" because investments fluctuate, she said.

"If there was a fraudulent withdrawal in small increments — say $15,000 or $20,000 — would you notice it if you were looking at your balance online?" said Edwards.

"We are encouraging people to pay attention to the transactions and make sure there isn't unauthorized activity."

Bump up your contribution

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Remember, you can contribute up to $18,500 to your 401(k) each year.

If you're turning 50 at any point in 2019, Uncle Sam has a birthday gift for you: You can put away an additional $6,000 in your retirement plan.

If you don't have the flexibility to max out your retirement plan, try to save enough to get the employer match, if available.

About 1 in 5 workers isn't putting away enough money to qualify for the match, according to data from Alight Solutions.

While you're reviewing your retirement plan contributions, see if your company offers an auto-escalation feature, which will automatically boost your savings rate by 1 percent or 2 percent each year, said Edwards.

Roth options

411 on a Roth 401k
411 on a Roth 401k

As of the end of 2017, more than 2 in 3 retirement plans at Vanguard offered a Roth 401(k) option, and 12 percent of participants with these plans chose to contribute to them.

While a traditional 401(k) allows you to save money on a pretax basis, you're using after-tax dollars to contribute to a Roth 401(k). At employers that offer both, the most you can contribute combined is $18,500, plus the additional $6,000 if over 50.

Direct contributions to Roth IRAs are subject to income limits — you cannot contribute directly to the account if your modified adjusted gross income exceeds $135,000 if single or $199,000 if married.

However, your Roth 401(k) doesn't have any income limits.

"For the people who understand it, the in-plan Roth conversion is a nice tax-planning feature," said Edwards.

You may also be able to convert some of the money in your traditional 401(k) to your Roth 401(k), if it's available at your employer.

Don't forget: You must be ready to pay income taxes on the amount converted.

This is known as an "in-plan Roth rollover" or "in-plan Roth conversion."

Today's income tax rates may also make Roth conversions attractive; the rates have been trimmed due to the Tax Cuts and Jobs Act.

HSA contributions

Let's say that you're already maxing your 401(k) contributions, and perhaps you've even managed to allocate some of that money toward your in-plan Roth option.

The next best thing you can do is squirrel money away in your health savings account, which is compatible with a high-deductible health savings plan.

More than 9 in 10 employers expect to offer high-deductible plans in 2019, according to a recent survey by the National Business Group on Health.

HSAs, as they are known, allow you to put money into an account on a pretax basis, where it can accumulate free of taxes. If you draw down the account to pay for qualified health expenses, you can do so on a tax-free basis.

Unlike other medical savings accounts — namely, the flexible spending arrangement — you can carry your balance into future years.

"Consider treating your HSA as a retirement savings vehicle," said Edwards. "I would challenge anyone to say that you don't need medical savings in retirement."

Know your investments

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Have you made the mistake of haphazardly spreading your 401(k) contributions among all of the funds available in your retirement plan?

Or maybe you made the mistake of concentrating all of your deferrals into that one high-flying tech stocks fund that's in your plan's menu.

Take a look and consider selecting a target-date fund if one is available to you. These are professionally managed portfolios of equity and bond funds and other investments.

As your retirement date approaches, these funds gradually reduce their risk and become more conservative.

"Data shows that investing in diversified target-date funds can help minimize risk and maximize return," said Edwards. "It's an easy one-stop shopping option to think about."

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