As an executive, by the time you retire, you may have accumulated a substantial net worth in assets. And yet, in many cases, your 401(k) will only make up a small fraction of your overall wealth — as little as 10% or less. As a result, you might not pay as much attention to your retirement accounts as you should, opting to focus on other assets like your company stock instead.

Still, by the time you’re ready to retire, there’s a good chance that you’ll have stashed a significant amount of money away in your 401(k). But if you’re not careful and just set your account to autopilot, it could cost you.

To maximize the amount of money that actually winds up in your pocket, avoid the following mistakes.

Mistake No. 1: Being More Concerned with Contributions Than Distributions

Most executives look at 401(k) management like checking a box. They dutifully max out their contributions every year but otherwise don’t give them much thought until there’s a big market correction. While maxing out your contributions is important, if that’s all you’re doing, you’re shortsighted.

If you want to keep your retirement savings, you have to think about your distributions, not just your contributions. That’s because if your retirement savings are in a traditional 401(k) or IRA, they’ll be taxed once you start voluntarily or mandatory distributions. If, however, you’re able to put some or all of your savings into a Roth 401(k) or a Roth IRA for you or your spouse, you’ll be able to take your distributions tax-free in retirement. That has massive implications in terms of how much money you get to keep.

Look beyond simply making contributions. Take the time to think through the most tax-efficient way you can take distributions when the time comes. Simply put, uniquely successful executives are not like everyone else, the strategies for success are different. If you can diversify your distribution strategy, using a combination of traditional and Roth accounts, you’ll be better positioned by growing your capital tax deferred annually while you work and then distribute your capital tax free during retirement.

Mistake No. 2: Lacking a Disciplined Approach to Managing Risk

Market context is critical. Knowing, for example, whether money is flowing into equities or into money markets can give you critical insights about where the market might be heading. That can either make you, or save you, a lot of money.

Unfortunately, most people aren’t very disciplined about understanding when the balance between risk and reward is in their favor. When that balance is in your favor, it’s risk on, meaning that you should be investing in equities. When it’s not, it’s risk off, and you should be protecting your money and putting it into no volatility investments. Simply assessing whether the market is risk on or risk off once every quarter, and adjusting your asset allocation accordingly, can have a dramatic impact on your retirement savings. Not only will it help you preserve what you have, but it will help you increase your balance exponentially.

Mistake No. 3: Not Taking Advantage of Tactical Opportunities

As an investor, you have a number of tactical opportunities with your 401(k) that you may not be taking advantage of. Some pertain to thinking about the end game and the implications of taking distributions from your account from a trust and estate tax perspective. Others are simply knowing the right workarounds.

We already discussed the benefit of Roth IRA vs. Traditional IRA for you and/or your spouse, so that’s one. Say you’re looking to generate stable, consistent income in your 401(k). Normally you might turn to bond funds for that. But in such a low-interest-rate environment, few, if any, bond funds are going to deliver decent returns over the next few years. So how can you get around this? One way is by taking up to a $50,000 loan or the maximum your 401(k) plan will allow from your 401(k) and paying yourself back at the plans loan rate, which is circa 5% interest. Not only do you get the temporary benefit of additional liquidity on your balance sheet to pay off revolving debt or create a better liquidity cushion, but also, when you pay yourself back, you can add an additional $2,500 in interest annually to your account.

Make Your 401(k) Work Harder for You

Your 401(k) may not represent the majority of your assets, but chances are, it’s still a considerable amount of money (seven figures). To make the most of that money, so that it not only grows but is also sheltered and you actually get to keep it, you need to take the right steps. Avoid the mistakes above, and you will be in a much better place to maximize your results.

Set up a meeting with me to learn more.

Any opinions are those of John Pulliam and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Diversification and asset allocation do not ensure a profit or protect against a loss. Investing involves risk, and you may incur a profit or loss regardless of strategy selected.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Roth 401(k) plans are long-term retirement savings vehicles. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free.  Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 70.5. Material prepared by dcustom, an independent third party.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

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