Our team has the experience and expertise to help you make the most of your company’s benefits and explain how they play a role in your broader financial plan.

401k

A 401k is a benefit that companies offer eligible employees to help them save for retirement. Participation is optional but highly encouraged to help build a pool of funds to replace your paycheck when you’re retired. When you enroll in a 401k, you will have to make a few elections, mainly:

1. How much to contribute;
2. How to split your contributions between the Pre-Tax 401k and Roth 401k; and
3. How to allocate those funds.

Pre-Tax 401k or Roth 401k?

How you decide to split your contributions between Pre-Tax and Roth will impact your take-home pay today and how those contributions and any gains are taxed in the future. We can review your retirement elections with you to ensure they are working best for you and your financial goals.

Company Matching Contributions

If you contribute a certain percentage of your annual compensation to your company’s 401k, they may match your contributions, creating a stronger investment strategy for you long term. Leveraging the matching contribution of your company can have large rewards. 

In 2024, individuals can contribute up to $23,000 in their Pre-Tax and Roth 401k every year combined. If you’re 50 and over, the limit increases to $30,500 including the $7,500 catch-up. The company match is on top of these limits!

What You Choose Today Will Impact Tomorrow

When you contribute to a Pre-Tax 401k, you are choosing to make a pre-tax deduction and reduce your taxable income today. Roth 401k contributions, on the other hand, grow tax-free because you are using after-tax dollars. You’re not ever required to withdraw from a Roth account but are required to begin withdrawing from a Pre-Tax 401k. These are called Required Minimum Distributions. We can partner with you to help guide your contributions and elections based on your near- and long-term financial goals.

Employee Stock Purchase Plans (“ESPPs”)

We have an expertise in ESPPs. In fact, Baird is employee-owned, with our own employee stock program for qualified associates!

ESPPs allow eligible associates to purchase shares of their company’s common stock at a discount. Typically, associates can contribute 1%-10% percent of their annual compensation up to $25,000 in 2024 through after-tax payroll deductions. This is a great investment back into your company, and a benefit to you as an employee.

When to Sell Company Stock

Once the stock is purchased, you can choose to sell it immediately to lock-in a gain, or you can choose to hold on to it for longer to potentially see higher returns. We can work with you to determine the best approach and its associated tax implications based on your near- and long-term financial plan.

Single Stock Concentration vs. Diversification

Enrolling and participating in an ESPP can play a part in building wealth over time. However, a high concentration of any single stock in your overall investment portfolio can be risky. A common recommendation is to have no more than 10% of your portfolio in a single stock. We can partner with you to look at your overall portfolio allocation and help determine the right level of single stock exposure given the stability and growth prospects of your company, your risk appetite, and your financial goals.

Questions?

If you would like a second opinion on the decisions you’ve made regarding your company’s retirement benefits, please reach out! We welcome the opportunity to review your situation and get to know you better.