401(k) Champion Honorable Mention: Karen Murano

Karen Murano of Regional School District 16

Prospect, CT

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In order to give financial advice or have a collegial conversation with a co-worker, I would first ask or have a conversation with them about their financial goals and financial challenges.  After listening, I would factor in their goals with my personal experience in investment strategies.  There are many options for investing money or financial investments; real estate, stocks, bonds, money markets, but everyone who works for a company that offers a 401k matching fund contributions should sign up for it when completing paper work for the human resource department on day one. The advantages to 401k investment is that the contributions are not taxed, money is deducted from the gross income before taxes, therefore for every dollar you contribute your take home pay will not fall by a full dollar.  Since a traditional 401k is a long term investment strategy, young employees can start out contributing a small amount, and increase the amount withheld as their salary increases. 

Young employees should be optimistically cautious when investing, so as not to find themselves in need of borrowing against their 401k at any point in time, they should also have money in a savings account.  Money borrowed against a 401k must be repaid from savings, there is a ten percent penalty for the one time early withdrawal of the savings before the age of 59 1/2, and the withdrawn amount is subject to state and federal taxes. Many or most employers offer a matching program.  The two most important advantages to a traditional 401k is developing healthy habits for both saving money and investing money. Most employers have a financial service, on hand or through a workers union, that offers 401k plan and the service makes the decisions the investors as to which funds are showing the most profit or potential for growth, therefore they are beneficial to young employees starting out with beginning or early retirement planning.  In summary, chose automatic payroll deductions so that the money is taken out of your paychecks before taxes, and ask and take advantage of the employer matching program.  The other option is for an individual to shop for investment companies outside the workplace, wither online or at a branch office.  Moreover, many young workers work a second job when out of college even after entering into the professional workplace, therefore they should take advantage of a second 401k plan if the part-time employer offers a 401k plan as well.  As soon as my colleague is established in their career and any outstanding college loans are paid off, I would advise that they increase their contributions to 15%-20% of their annual earnings as soon as they can manage it financially.  The 401k is often an employees primary investment and savings strategy and source for retirement. 


If you decide to invest in a 401k fund outside to work you may have the option to pick and choose from a mutual funds a type of investment pools, in areas that show potential for the most growth, among which target-date funds are a strong option.  It is alright to take risks when a worker is young because the market may become volatile but over time will rebound, and the money can be recuperated.  Most importantly, young workers starting out should have a lot of financial vision, ask questions of others both their own age and older, and diversify their financial portfolio and planning. 

The best advice I would offer a co-worker would be to have at least two 401k’s, a traditional 401k and a Roth 401K.  The traditional 401k contributions are tax deductible, and Roth 401k contributions are not.  Many employees think that taking a tax deduction on their 401k investment contributions is a positive for choosing a traditional 401k, most individuals or families to not see much financial benefit overall for the deduction.  The advantages to the Roth 401k that out weigh the traditional 401k are that when you retire and begin to withdraw money from your retirement savings, Roth 401k withdrawals are not taxed, including money you will earn from capital gains, interest and dividends over the course of your twenty to thirty years of contributing.  In summary, writing off the maximum amount I am allowed to contribute in one year for an annual income tax preparation is $3,000, does not allow a great deal of savings in any one year.  My Roth 401K will yield more savings for me after working 35 years and with capital gains, when I begin to withdraw money from my retirement fund.

As a single person having an understanding of investment options, discipline, and vision, I am able to use all of the tools to my advantage and to manage my retirement, so that I not only can survive but have long term financial security after a long and rewarding career.