MAKING CENTS

WRITERS: THOMAS H. RUGGIE, CHFC, CFP

One of the most important benefits a company can offer its employees is a 401(k) plan.

Such plans have become the primary way workers prepare for retirement, so it’s important to know that specific features can differ — sometimes significantly — from employer to employer.

Being familiar with your 401(k) is the best way to make sure your retirement savings are working in your best interest.

A 401(k) — and its sister plan for nonprofit organizations, the 403(b) — is a retirement plan in which you participate through your employer. Such plans allow your employer to contribute a portion of your paycheck to the account. Contributions can be made only through payroll deductions, unlike contributions you make to an IRA or brokerage account.

When you sign up for a 401(k), you receive a menu of investment options from which to choose. You’re responsible for picking investments that are most suited to your risk tolerance and retirement objectives.

When you can start contributing to your 401(k) varies with companies. A little more than half of plans allow new employees to begin contributing immediately; others require new hires to wait three months to a year. About 30 percent of employers automatically enroll workers in the company 401(k) plan unless an employee opts out.

At this time, you can put up to $17,500 a year into your 401(k). If you’re age 50 or older, you may qualify for additional “catchup” contributions that allow you to sock away more.

Some employers will match what you put in — otherwise known as free money. The most common 401(k) match is 50 cents for each dollar contributed up to 6 percent of pay. Here’s how that breaks down: If you make $50,000 a year and contribute 6 percent of that amount, or $3,000, of your own money, your company would kick in 50 percent, or an additional $1,500. Matching funds from your employer don’t count toward your maximum contribution.

Regular or traditional 401(k) retirement accounts allow you to contribute money on a pretax basis. You don’t pay income tax on the amounts you contribute, nor do you pay tax on investment gains in the account — until you take withdrawals from the plan.

Contributions to a Roth 401(k)s are not tax-deductible. They don’t give you an upfront tax benefit; however, distributions are tax-free.

Even if your employer makes a contribution to your 401(k) account, there could be a vesting schedule in effect, depending on the type of plan. A vesting schedule is the amount of time your employer requires you to be at the company in order to walk away with 100 percent of your matching contributions. Check with your employer to see if this applies to your plan.

A 401(k) is not like a savings account, from which you can withdraw money at any time. The IRS prohibits you from withdrawing funds before age 59½, except in extreme cases — and even then you may still have to pay an early-withdrawal penalty. Once you reach 70½, you must start taking required minimum distributions or face steep penalties.

Many, but not all, plans allow you to make hardship withdrawals for certain immediate financial needs, such as preventing foreclosure or paying medical bills, for a funeral, or college. If you qualify for a hardship distribution, it’s still considered an early withdrawal that’s subject to the 10 percent penalty.

Determining how you should be invested for the long haul begins with figuring out what mix of stocks, bonds and cash is right for you. That’s also known as asset allocation. Finding the right investments will be a product of your age, years until retirement and risk tolerance. Investment lineups may range from those for participants with limited knowledge of investments to those for the most knowledgeable investor who prefers a more hands-on approach to selecting investments. Regardless of how knowledgeable you are about investing, your plan sponsor and 401(k) adviser and/ or independent financial adviser can help determine if your money is working as hard as it should be to help you achieve your retirement goals.

Workplace retirement plans can be complicated, but it’s worth taking the time to figure them out because they offer such great benefits. The first step to beginning a 401(k) account is to talk with your employer to learn what the requirements are to get started. If you have 401(k) plans from previous employers, you may want to roll them into your new plan or into an IRA. That may depend on the investment options available in the new plan.

The bottom line is failure to execute a retirement plan means you will probably have to work longer.

THOMAS H. RUGGIE, CHFC, CFP is the founder of Ruggie Wealth Management. With more than $425 million in assets under management, he has been ranked among the nation’s 50 Fastest Growing RIA Firms , the Top 100 Wealth Managers, Top 100 Independent Advisors, Top 40 Most Influential Advisors, and again, as one of Barron’s Top 1,000 Advisors. truggie@ruggiewealth.com

Board-certified foot surgeons Dr. Michele McGowan and Dr. Timothy Henne offer a number of foot and ankle services for comprehensive foot care and ankle disorders. They are trained to handle problems as small as ingrown toenails and warts to as large and complex as bunions, hammertoes and heel pain.

AUGUST 1

Paddle on the Wekiva River in Eustis from 9a.m.–noon. $2. Reservations required. Hosted by the Trout Lake Nature Center and Wekiva River Aquatic Preserve. Information: tlnc.info@gmail.com

AUGUST 2-3

Experience a unique opportunity from 10a.m.–noon. Adults and students 14 and over can participate. $85. Picnic Pavilion near Highlander Hut, 100 Third St., Clermont. Information: wendy@ lakecountyrowing.org

AUGUST 5

Native American storyteller Peggy Hanner and the TLNC naturalist will weave together nature-related stories, a walk and a craft from 10a.m.–noon. Trout Lake Nature Center, 520 E. County Road, Eustis. Information: tlnc. info@gmail.com

AUGUST 6

Moms and dads learn the basics of how breastfeeding works, how to put your baby to breast for a feeding, how to recognize feeding cues, how to troubleshoot problems and more. $30. 1935 Don Wikham Drive, Clermont, 6:30–9p.m. Bring or send registration form to South Lake Hospital Education Department. Information: 352.241.7109

AUGUST 7

An opportunity to receive education and support during your time of need. Florida Hospital Waterman Cancer Institute, Conference Room, 1000 Waterman Way, Tavares, 1:30–3p.m. Information: Latanya Ruiz 352.253.3605

AUGUST 9

Learn about labor, relaxation, and breathing techniques, pain medications, cesarean birth and how to care for yourself after your baby arrives. Bring two pillows and a blanket. $75, 9a.m.–5p.m. Live Well Fitness Center on the South Lake Hospital Campus, 1935 Don Wikham Drive, Clermont. Scholarship and other Information: 352.241.7109

AUGUST 13

Children of all ages can join park rangers in this hands-on explanation of where our drinking water originates. Palatlakaha River Park, 12325 Hull Road, Clermont, 9–10:30a.m. Information: parksandtrails@ lakecountyfl.gov

AUGUST 20

AUGUST 16

Experienced bird-watching volunteers are invited to help conduct surveys at Ellis Acres Reserve from 7:30–11p.m. Must be able to identify most common birds by sight or sound and have your own binoculars and field guides. Volunteers participating in the butterfly survey should be able to identify most common species. 25302 County Road 42, Paisley. Information: parksandtrails@ lakecountyfl.gov

AUGUST 19

For those who would like to work with school-age kids at Trout Lake. Docents teach curriculum-based activities while sharing their love and respect for nature with the next generation. Trout Lake Nature Center, 520 E. County Road, Eustis, 9a.m.–1p.m. Information: tlnc.info@gmail.com.

An opportunity to reach out to others who have had similar challenges and foster an improved understanding of lifestyle management. National Training Center, Education Department. 1935 Don Wikham Drive, Clermont, 10a.m.–noon. No need to register.

Information: 352.242.2350

AUGUST 21

Available to the public and no appointment necessary. Leesburg Community Medical Center, 1210 W. Main St., Leesburg, 8:30–noon.

AUGUST 27

Helps you understand how medications, nutrition, exercise and blood sugar monitoring play a role in developing a healthy lifestyle. Please bring lunch. Spouse or guest welcome, 9a.m.–1p.m. $10. Live Well Fitness Center, on the South Lake Hospital Campus, Clermont.

Information: 352.241.7109

The Leesburg Area Chamber of Commerce and Tom Grizzard Realtors teamed up to host a golf tournament and raise money for the Muscular Dystrophy Association (MDA). The tournament at Harbor Hills Country Club featured a putting contest and an awards ceremony. MDA is a national health organization working to defeat 43 neuromuscular diseases.

More than 100 people attended a charity raffle hosted by The Bridge at Ocala, an assisted-living facility. The event, which raised money for Habitat for Humanity of Marion County, included food, beverages and live entertainment by keyboard player Steve Robinson. Numerous items were raffled throughout the event including a flat-screen television, spa packages and gift baskets.