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Are you on track for a confident retirement?

The 401(k) plan at your company is a key employee benefit and one that is fundamental to your long-term financial plan.

It’s unlikely that Social Security will be enough for you to fund your retirement dreams, so you have to take charge yourself and take advantage of all the savings and investment resources available to you. In general, most 401(k) plans have the same basic structure, but company to company, plan to plan, there are some differences in rules and how plans are managed.

To maximize the value of your plan, you’ve got to know how it works. Read the plan documents, talk with fellow employees and ask your human resource department. Find out the answers to these important questions:

  • What is the maximum percentage of my compensation I can contribute on a pre-tax basis?
  • What parts of compensation, in addition to my salary, are eligible for my savings plan?
  • Does the plan offer a matching contribution by the company? What are the terms of the match?
  • What do I have to contribute in order to maximize the company match?
  • Does the match vest immediately, or is there a waiting period?
  • How often can I change my savings rates?
  • What are my investment options?
  • How often can I change my investment elections?
  • What are the costs of the plan, including investment product costs, and who pays them?
  • Does the company offer any investment education to plan participants?

Contributing aggressively, making sensible investment decisions and maximizing the value of your 401(k) can help you reach your retirement savings goals.

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Why life insurance is worth thinking about

If you’re recently married and just starting your career, or if you’re mid-stage in your work life with a family and a growing net worth, you should consider life insurance as an important building block of a solid financial plan.

If people depend on you financially, and you die prematurely, life insurance will help replace the income you would have generated in the future. Life insurance is a way to help prevent a financial catastrophe from befalling your loved ones if you’re not around to provide for them.

If your company offers group life coverage, you should consider taking advantage of that benefit. Premiums for group life are often reasonable, and you may qualify for the insurance, generally up to a certain amount, just because you are an employee. And, depending on the coverage, you may not even need a physical or lab work to prove your insurability.

Since group life coverage is usually limited to a percentage of your compensation, you may find that you wish to supplement group coverage with personal policies you purchase outside of your workplace. Additionally, group coverage is not as portable as individual policies, and if you are in good health you may be able to purchase an individual life policy for less money over the long run.

There are two main types of life insurance: term and permanent. Term life insurance is just that, a policy that covers you for a specific period of time, usually 10 or 15 years. It is pure insurance; if you don’t die during the term of coverage, no death benefit is paid.

On the other hand, permanent insurance can provide lifelong protection. As long as you pay adequate premiums and do not allow the policy to lapse, the policy will remain in force, and your beneficiaries will receive the death benefit. In addition, permanent life insurance policies have the potential to accumulate cash value, which may be available to meet other goals, such as charitable giving, estate, education and retirement planning. Keep in mind that accessing cash value may reduce policy values, the death benefit, or cause a policy to lapse.

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What you should know about disability income insurance

If your benefits plan includes disability income insurance coverage, think seriously about enrolling in that benefit. Many people pass on disability income insurance thinking it’s unnecessary and expensive. But your ability to earn an income may well be your single largest asset. Disability income coverage is a smart idea and the cost of group coverage as part of your benefits is usually reasonable.

Why buy disability income insurance? This type of insurance pays you if an accident, illness or other disabling event prevents you from working. If you are unable to generate a paycheck, you may have to tap into other savings or retirement accounts to pay your mortgage and your family’s day-to-day expenses. Hard-earned savings and your financial security can dwindle quickly.

U.S. Department of Labor statistics show that suffering a disability is most likely to occur in your income-earning years, not after you retire. So, income protection should be one of your financial planning priorities right now while you’re working and in good health. Take these action steps:

  • Find out the details of your company-sponsored disability income benefits.
  • What portion of your compensation would be replaced?
  • What does it cost?
  • How often can you make changes to your coverage?

Your disability income coverage at work is not likely to cover more than two-thirds of your income, because most group plans cover a percentage of your base salary, not bonuses or other compensation. That may not be enough protection. You can purchase individual coverage from several major insurance companies. With a personal disability income policy, you will have to qualify for coverage by taking a physical exam and filling out an application. Having the peace of mind that your income is protected could be worth the cost.

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Before you purchase, be sure to ask your sales representative about the insurance policy's features, benefits and fees, and whether the insurance is appropriate for you, based upon your financial situation and objectives.

Investment products are not federally or FDIC insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

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