Investment Trends, Tips and Taxation Archives

Why Every Retiree Needs a War Chest

Mario Riccadonna on December 3, 2025

Murphy’s Law is the adage that “Anything that can go wrong, will go wrong,” and usually at the worst possible time.

There’s a retirement version of this, too: “The day you retire, the market will drop 20–30%.”

It’s not always literally true, but ask anyone who retired in 2000, 2008, or early 2022, and they’ll tell you that it sure felt like it. After decades of saving, the moment you finally start spending, the markets seem to turn against you.

That fear is real. But instead of trying to time the market (which no one can), the solution is to prepare for downturns with what we call a retirement war chest.

What is a War Chest?

A war chest is a 5–7 year bucket of cash and bonds that you maintain throughout retirement.

Think of it as a self-funded pension. No matter what the stock market does, you know you can cover your expenses for the next several years.

Why 5-7 years? History shows that’s usually enough time for markets to recover from even the worst downturns.

Take 2008. The S&P 500 lost nearly 37% that year. Painful. But what if you had 5 years of living expenses set aside in cash and bonds? You wouldn’t have been forced to sell stocks at the bottom.

By 2012, were we out of it? Yes… for the most part. While the market didn’t reach its pre-crash peak until early 2013, by 2012 the S&P 500 had climbed back significantly. In fact, from the March 2009 bottom through 2012, the S&P 500 gained over 100%.

In other words, by 2012, we were through the thick of it. A retiree with a war chest could have safely lived off that bucket while letting their stock portfolio heal.

Here’s a 5-year chart from that time period from Bloomberg as a reference:

So, how do you build a War Chest?

Figure out your spending needs
Example: $100,000 per year
Multiply by 5-7 years
That means setting aside $500,000-$700,000 in a mix of cash, CDs, and bonds
Keep the rest invested for growth
Your remaining portfolio stays in the stock market, giving you the growth needed for a decades-long retirement
Replenish as you go
In good years, refill the war chest by trimming gains from your stock portfolio. In bad years, let the bucket carry you until the markets recover.

The Psychology Bonus

This isn’t just about numbers, it’s about peace of mind. When you know your next 5–7 years of income are covered, market downturns feel less scary. You don’t feel forced to sell at the wrong time. You don’t panic. And you give your long-term investments the time they need to bounce back.

The Bottom Line

You don’t need to predict when the next downturn will happen. You need to be prepared for it. By building and maintaining a 5–7 year war chest, you can retire confidently—even if Murphy’s Law shows up on your first day of retirement.

The goal isn’t just financial security. It’s peace of mind so you can stop worrying about market headlines and start enjoying the retirement you’ve worked so hard to create.

Ready to build your War Chest?

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No portion of this commentary is to be construed as the provision of personalized investment, tax or legal advice. Please consult with the appropriate professionals for advice that is specific to your situation. Note Advisors, LLC can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.

How to Take Money Out of Your IRA Completely Income-Tax Free

Mario Riccadonna on November 13, 2025

The Power of Qualified Charitable Distributions

When you’ve saved diligently for decades, the last thing you want in retirement is to watch your hard-earned nest egg get eaten away by taxes. If you’re charitably inclined, there’s a powerful tax planning tool available to retirees that can allow you to support the causes you care about and reduce your tax burden: the Qualified Charitable Distribution (QCD).

Let’s unpack what it is, why it matters, and how you can use it to take money from your IRA completely income-tax free.

What is a Qualified Charitable Distribution (QCD)?

A QCD allows individuals aged 70½ or older to donate directly from their IRA to a qualified charity. Instead of taking money out of your IRA, paying taxes, and then writing a check to charity, the funds go directly from your IRA to the nonprofit.

Age requirement: You must be at least 70½.
Annual limit: Up to $100,000 per year, per person, can be donated.
Eligible accounts: Traditional IRAs (not 401(k)s or other plans, unless rolled into an IRA first).
Qualified charities: Must be 501(c)(3) organizations (not donor-advised funds or private foundations).

The key benefit? The amount distributed is not reported as taxable income on your return.

Why QCDs Are So Valuable in Retirement

At first glance, you might think, “Well, I already donate to charity, why not just deduct it?” But here’s why QCDs can be much more powerful:

They Work Even If You Don’t Itemize:
Most retirees take the standard deduction. If that’s you, a QCD gives you tax credit for charitable giving that you wouldn’t otherwise receive.

They Reduce Required Minimum Distributions (RMDs):
Depending on your birth year at age 72, 73, or 75, the IRS requires you to start withdrawing from your IRA. These withdrawals are fully taxable as ordinary income. QCDs count toward your RMD, but they’re excluded from taxable income.

They Lower Adjusted Gross Income (AGI):
Unlike a normal charitable deduction, which reduces taxable income only if you itemize, a QCD reduces your AGI directly. Why does that matter? Lower AGI can reduce:

-The taxable portion of your Social Security benefits.

-Medicare IRMAA surcharges (the extra premium charges on Parts B & D).

-Phaseouts for other deductions and credits.

The Power of a QCD in Action

Let’s look at an example of how this works. Let’s say you’re 74 years old with $2 million in a traditional IRA. Your RMD for the year is about $78,000. You also typically give $20,000 a year to your church and a local hospital foundation.

Option 1: Traditional Giving

You withdraw the $78,000 RMD.
You owe income tax on the full $78,000 (let’s say ~24%, or $18,720).
You write a $20,000 check to charity.
Since you take the standard deduction, you don’t get any tax benefit for your giving.

Option 2: Using a QCD

You direct $20,000 of your RMD to the charities as a QCD.
That $20,000 never hits your tax return as income.
You only report $58,000 of taxable income instead of $78,000.
That lower AGI could potentially reduce and shadow tax (i.e. Medicare premiums or the amount of your Social Security subject to tax)

Result: You supported the same charities, but you saved $4,800 in taxes simply by changing how the gift was made.

Common Mistakes to Avoid with QCDs

Don’t withdraw first. The money has to go directly from your IRA custodian to the charity. If you take possession, it’s taxable.
Don’t wait until December 31st. Processing times can get messy, and if it’s not completed in the calendar year, it doesn’t count.
Don’t use QCDs for donor-advised funds or private foundations. They don’t qualify.

Don’t forget to tell your tax preparer. IRA custodians report distributions on Form 1099-R without showing which were QCDs. If you don’t flag it, your return may show the full distribution as taxable.

Who Should Consider QCDs?

QCDs are especially valuable if:

You’re charitably inclined and already give annually.
You’re 70.5 or older.
You want to reduce Medicare IRMAA surcharges or taxes on Social Security.
You take the standard deduction and wouldn’t otherwise benefit from charitable contributions.

Final Thoughts

Qualified Charitable Distributions aren’t just about giving, but about giving smarter. They allow you to align your wealth with your values, while also reducing one of the largest expenses in retirement: taxes. If you’re over 70½ and have a traditional IRA, QCDs could be one of the most tax-efficient strategies available to you. Whether you’re giving $5,000 or $100,000, it pays to be intentional about how you give.

Learn more about how to save on taxes before year-end by scheduling a call with us!

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5 Myths of Tax Planning

Mario Riccadonna on September 28, 2023

They say all you need to survive is food, shelter, and love.

I think they forgot tax planning.

It doesn’t have the kind of marketing that love gets, but it’s the most unbelievably useful financial practice you might never have heard of.

Picture this: over the past 40 years you have been stockpiling savings into your employer retirement plan. But on your retirement date, it’s worth less than what the statement says. Sound alarming? Well, this would be the case if you haven’t given any thought about tax planning for those 40 years, especially around your retirement.

The IRS is not-so-patiently waiting to take anywhere from 0% to 47% of your pre-tax retirement account. Our goal as tax planner is to reduce your total lifetime tax to get you closer to the 0% than the 47%.

When I first mention tax planning, I often find that people have some pretty profound mistaken beliefs about it. Here are five myths I hear the most:

#1 – Tax planning has to be complex.

Surprised? Don’t be, even though an alarming number of tax planning “experts” insist that the only way to lower your total lifetime tax bill is to implement some ultra-obscure tax strategy. While yes, these strategies may work for a select few, the “experts” often gloss over the “boring” and easy-to-implement strategies.

For example, implementing annual Roth conversions, HSA strategies, or selecting between pre-tax or Roth contributions can potentially reduce your total lifetime tax by tens of thousands of dollars.

There’s an old adage that’s a great frame of mind for your tax planning strategy:

“Small hinges swing big doors.”

Little choices now can make a big difference later.

#2 – The goal of tax planning is to pay zero tax every year.

A year where you pay zero tax is a lost opportunity in the realm of tax planning. When we look at successful tax planning, we want to see a reduction in your total lifetime tax paid.

This means potentially paying more tax one year and less the next. Years with lower income can provide a great opportunity to implement a number of tax strategies (capital gain recognition, Roth conversions, etc.)

The professional handling your tax planning should be computing tax projections each year to determine what strategies are best to implement. As we like to say at Note, “pay the IRS every dollar you owe, but don’t leave them a tip.”

If your wallet’s feeling too heavy or you’re just feeling extra patriotic, the U.S. government happily takes donations against the national debt.

#3 – Your accountant does tax planning for you.

I’m sure there are some accountants who do real tax planning, but speaking from experience, the vast majority do not. While having a rockstar accountant in your corner helps, they tend to make better historians than planners.

Your accountant is more like a rearview mirror. They’re useful, but unless you plan on driving in reverse, you’re going to need someone looking down the road with you. Your tax planner is more like a windshield. It’s crucial to look through the windshield and have someone planning out your future tax strategies.

Know what’s even better? If your financial planner and accountant can work together closely to ensure the tax strategies get reported and implemented correctly.

#4 – The benefits of tax planning can be seen quickly.

Tax planning (when done right) is more like well-aged bourbon than lemonade. If you have a short-term frame of mind, you might still come out with a good outcome. However, if you keep your sights on the long-term and give it years to mature, you can have an amazing product to enjoy.

There are almost always strategies to implement now to see a payoff in the short term, like safe harbor payments to avoid an underpayment penalty. But most strategies need time to mature.

For example, if we decide to do a six-figure Roth conversion, it might take decades to benefit from that strategy. But the models suggest that a conversion like that could generate seven figures worth of tax savings.

Patience can pay off.

#5 – Tax planning is only for the “rich.”

Ever read a book on tax planning? Probably not! But if you had, it would probably sound like you need to own a yacht or a villa before tax planning is relevant. It’s not true!

Every person who is paying taxes can and should implement some sort of tax planning strategy.

There are strategies to utilize no matter your income or net worth. It all comes down to being intentional with your personal finances. As we’ve seen with our clients, what you give your attention to makes all the difference.

Whether that’s making the intentional choice to save in pre-tax dollars, or after-tax dollars, or both. Knowing how different retirement accounts work is tax planning. Deciding which ones are best for you and your goals is tax planning!

If you want to be intentional with your tax planning and/or your personal finances and don’t know where to start, I’d urge you to seek the help of a tax planning professional.

It’s never “one and done”.

Tax planning is not just a one-time thing. You should have eyes on your tax return and tax planning strategies each and every year.

Here’s three easy steps to get you started:

Review your prior year tax return. It’s important to understand your income and how it affects your total tax. Take note of your total income, taxable income, total tax paid, and marginal tax rate.
Understand your eligibility to contribute to pretax, Roth, and After-tax retirement accounts. Be intentional with how you will fund each.
If all of this seems overwhelming, I urge you to reach out to your financial advisor.

If tax planning isn’t in your advisor’s arsenal, we should talk. Schedule a 15-minute consultation to see how we can help.

Schedule a call with me

Does Asset Allocation Make Sense for You?

Tom Waring on January 22, 2021

At Note, we frequently encounter business owners who tell us they get approached by “wealth” managers preaching asset allocation. These managers possess little information about them, their businesses, their objectives, or the headwinds they’re facing. These managers then readily preach about the importance of diversification and the investments that owners need to make.

The thing is, most business owners aren’t thinking about asset allocation at all. Rather, they’re focused on asset concentration.

Why?

Because their life savings and sweat equity are tied up in their business. This is punctuated by the debt they’ve taken on in order to feed the engine of their business – their most concentrated investment.

While asset allocation may be wise advice from an “Investment 101” standpoint, it is not an effective conversation with most small business owners. Many I’ve spoken to over the years are quick to say, “I have nothing to invest.”

However, if I have their ear, I’m able to persuade them they have everything to invest.

They have themselves, their tomorrows, and the investments they’ve already made. With good fortune and perseverance, those assets will give them the kind of financial capital that wealth managers very much want under their management. However, it can take a decade or two before that happens. Only then does asset allocation advice become relevant.

An effective financial advisor must be able to see you – the business owner working to build equity. They must recognize the importance of promoting asset concentration, not preaching diversification. They should fully understand your business, your objectives, and the headwinds you are facing. Only then can they be dedicated to working with you to mitigate the risks associated with business ownership. Only then can you more easily move from concentration through liquidity, and onto successful allocation.

Who’s Got Your Back?

Tom Waring on January 6, 2021

Have you ever explored the full meaning when someone says, “I’ve got your back?”

Is it that they’re committed to watching out for you and taking care of things that you are likely to miss?

Are they dedicated to being that second set of eyes and hands for you when necessary?

Is it someone willing to help when you need assistance, even before you know you need it?

How about somebody who will literally enter into a physical battle on your behalf?

Have you ever taken the time to consider who’s got your back in your business?

Perhaps it’s an advisor who has a single-minded area, whether it be law, accounting, or lending.

Maybe it’s that individual who’s able to rise 30,000 feet for a broad view of your world and then tell you how your business fits in your life, particularly during stressful times.

Maybe it’s the person who can keep the bigger picture in mind when aiding you in your day-to-day business battles. Or someone who can pull you aside – despite your protests that you ‘don’t have time’ – and offer strategic perspectives and advice you can trust.

These “have your back” individuals will ask questions that stop you in your tracks, that allow you to take a deep breath while the stress of the moment leaves your body. They do this without fear that their questions might be simple, naïve, or lacking a complete understanding of your business.

They don’t worry if they’re the biggest thought leader or genius in the room. They’re focused on helping you slow down, making certain that you’re not ignoring the larger implications of whatever task is at hand.

They maintain the big picture, yet they are at the street level, working right alongside you. They open their network and introduce you to the accountant, the attorney, the banker, even the medical professional, and ask them for exceptions on your behalf, all because they truly believe you are exceptional.

These are the people who see you for who you are, believe in what you are trying to accomplish, and give all they’ve got to help you get there. In effect, fully defining what it means to say, “I’ve got your back.”

We all need someone like this, don’t we? I know who it is for myself and the impact they continue to make in my world. Who has your back, in your business, and in your life?

AUM vs. LUM

Tom Waring on December 14, 2020

“What’s your AUM, Tom?”

During financial industry conferences and meetings, this seemingly innocent question surfaces almost without fail.

AUM = “assets under management.”

To me, that question is a veiled and vulgar way of trying to find out the total assets being managed by our firm. When using the term “assets,” the person inquiring doesn’t mean the humans and their lives that we’re helping to navigate. Rather, it’s all about the dollars and cents under our direction. The question they’re really asking is, “How much of other people’s money do you control?” To many in our industry, this is the badge of honor that they believe measures success.

I believe that “assets under management” is a crappy way to categorize clients.

I also believe that if all you have is financial capital, then you don’t really have all that much.

While it’s an important data point for valuing a business, it unfortunately doesn’t indicate the true value of a financial professional or their client base. At Note, we have a different standard of that value for both.

We like to think in terms of “lives under management.”

When considering the “assets” we manage, our focus turns to people we advise. The human beings we help to successfully navigate their personal and financial challenges. Challenges such as:

Investing their limited resources of time and money in starting a business.
Taking on the financial capital risks of borrowing money to begin and/or grow a business.
Sweating-out the personal guarantees needed to secure loans in early-stage businesses, or businesses under stress.
Lost sleep and compromised health due to the pressures of financial and business risks.
Business distractions that prevent clients from being “present” with their family, spouse or significant other, and the resultant dissatisfaction over a loved one being mentally somewhere else.

Often when we begin advising clients, they find themselves in uncharted waters as we help them navigate their “lives under management.” Yet because of our years of experience, we know the management plan we are creating for them will deliver results. We’ve seen it. We can smell it. We know it, often before those we are working with actually experience it.

We also know that helping people transition their sweat and tears into something of value, and extracting that value over time in the form of financial capital, can give them valued independence. People can live in ways that allow them increased control over their time. They can enjoy extended vacations. They create the ability to transition their business to family or employees, or sell their businesses and move on to their next venture with a smile on their face.

Most importantly, they become fully aware that they are not simply “assets under management.” They are human beings who we value and whose lives we are helping to build and enjoy.

Make Sure You’re Ready

Shawn Glogowski on October 1, 2020

According to a recent survey, 80% of Americans say that saving for retirement is critically important. However, only 56% are actually putting money away for their golden years.

In 2006 U.S. Senators Gordon Smith and Kent Conrad introduced a resolution that was passed by Congress, creating National Retirement Security Week in the third week of October (this year October 18-24.) On September 2, 2020, the National Association of Government Defined Contribution Administrators (NAGDCA) updated its legislative priority to advocate for October to become National Retirement Security Month.

The purpose of observing National Retirement Security Week/Month is to raise awareness and help individuals take concrete steps towards a secure retirement. Over and above elevating public knowledge on the subject, there is also an effort to encourage employees to speak to a retirement plan consultant or expert and participate in an employer-sponsored retirement plan if available.

At Note Advisors, we are here to help you build and increase your retirement funds. While it can seem like an overwhelming process, here are some basic ways that you can start to secure your retirement future.

Start saving money

Statistics show that 32% of Americans did not start saving for their retirement until they were in their 30s. Another 13% waited until their 40s. The longer you wait, the greater the amount you will need to save each month, but it’s never too late. Start saving now.

Automate Your Savings

Have your contributions automatically deducted from your paycheck to guarantee that you are saving.

Boost Contributions as You Age

If you are over 50 years old, you can save an extra $6,000 per year tax deferred.

Don’t Rely on Social Security

Social Security was never meant to serve as a total retirement income replacement source It was meant to supplement pension income. Further, nearly a quarter of public sector employees are ineligible. Social Security benefits replace roughly 40% of pre-retirement income among average earners. While this is a meaningful supplement to other income sources, it’s hardly enough to maintain a comfortable lifestyle on its own.”

If You’re Young, Invest More Aggressively

Choosing a more aggressive investment strategy early will quickly grow your nest egg and also give you time to recoup if the market takes a dip.

Meet Your Company Match

If your company offers to match your contribution up to a certain percentage do it. It’s free money and that match can be tax-deductible for your employer as well. Diversify Add a tax-advantaged retirement account like a Roth IRA to your retirement portfolio, so that some of your saving grows tax free.

No Company Retirement Plan?

While 28% of Americans take full advantage of their company’s retirement saving options, 20% aren’t offered a plan by their employer, or are independent contractors. If you fall into that category, consider alternative solutions, like an Individual Retirement Account (IRA).

Speak with a retirement plan consultant or expert

Nearly 60% of Americans say they have a workable knowledge of how retirement plans operate, but 30% say they don’t have a clear vision of their own plan. If you are unsure about planning your retirement, we at GCW Capital are here to help. Contact us today and let’s work together to develop a retirement strategy that meets your needs and will fund your future.

Your Finances and the Upcoming Election

Shawn Glogowski on September 30, 2020

Recently we published a blog about financial uncertainties across our nation as the countdown to the 2020 US election continues. Clearly, some of the most concerning of those are potential changes to federal tax laws. That is why we decided to follow up with specific financial information and strategies that we believe could be effective should such changes occur.

Let’s start with the bottom line. A lot can, and will, change between now and the election. The reality is that no matter the outcome, proposals take time to become legislation. Additionally, to make changes to the tax code, Congress must pass a bill by a majority vote (in both the House and the Senate), followed by the president signing it into law. With the current political makeup of Congress, that path will be difficult.

None the less, if changes to federal tax laws are on the horizon post November 3rd, below are some suggested scenarios and strategies we believe could be effective in protecting your investments and portfolios, if initiated by year’s end.

Most importantly, we suggest you take this pre-election time to GIVE US A CALL to review your financial concerns and plans, and help you stay focused on a diverse portfolio allocation and wealth management plan and avoid distraction-driven election proposals.

Parts of this blog were excerpted from a Charles Schwab investment advisory.

The top marginal tax rate is raised from 37% to 39.6% for income over $400,000.

If possible, defer losses and deductions to future tax years, when tax rates could be higher.
Initiate Roth conversions which could potentially reduce future taxable distributions.

Tax capital gains and qualified dividends are established for incomes over $1 million at the ordinary income tax rate of 39.6%.

Utilize tax gain harvesting to lock in capital gains at the current preferential rates.
Defer loss recognition and possibly deductions to future tax years when taxes could be higher, which could increase the tax benefits of the loss deduction.

Basis on transfers of appreciated property at death are stepped up and the federal estate tax exemption is decreased by 50% or more.

Gift assets to lock in the estate tax exemption and avoid losing the higher limits, which could disappear if tax policy is changed.

Itemized deductions are capped at 28% of income.

Consider accelerating deductions if the 28% limit could cause some deductions to be lost in the future.

Tax credits for middle-to-low-income households are increased.

These tax credits would have income limitations, and there is little higher-income households can do to qualify for them.

The corporate tax rate in increased from a flat 28% from 21%, and tax book income of companies at an increase of 15% if they do not report taxable income.

Clients should review their portfolios and ensure proper diversification to help mitigate the potential negative impact from reduced corporate profits due to increased taxes.

Start collecting additional taxes for Social Security after $400,000 of income.

Owners of pass-through businesses (such as LLCs and partnerships) could consider a transition to an S-corporation to reduce Social Security taxes.

The tax deduction for 401(k) contributions is changed to a tax credit (discussed but not a proposal.)

For this year continue to contribute to a 401(k) as you normally would.
Start or increase contributions to a Roth 401(k).
If passed into law, those who may not receive a tax credit for contributions should consider a Roth account or saving efficiently in a brokerage account.

Parts of this blog are based on a Charles Schwab advisory publication.

Self-employed and Deferred Payroll Taxes

Shawn Glogowski on September 18, 2020

If you are self-employed, you shouldn’t count on the payroll tax break the president has issued via executive order — at least not yet.

Payroll taxes are normally shared by employers and employees. Each covers a 6.2% tax to fund Social Security, as well as a 1.45% tax to fund Medicare.Self-employed people foot the entire bill for these levies themselves, at a cost of 15.3%, and pay for them as part of their quarterly estimated taxes

The president’s executive order would suspend the employee’s share of payroll taxes from September 1st through the end of the year. It would cover workers who make no more than $4,000 per biweekly pay period or $104,000 annually.

It is currently unclear whether this relief would apply to the self-employed, which is raising a number of tax concerns including whether employers or employees could face surprise tax consequences and compliance issues related to the executive order.

Separately, business owners, including independent contractors and freelancers, are already eligible to defer the employer’s side of the Social Security tax via the CARES Act. Under this provision, employers may choose to defer the share of tax that would have been paid from March 27 through Dec. 31. They would then pay 50% of the amount owed next year and the remainder in 2022.

With so many unanswered questions, the best course of action if you are self-employed is to continue to set aside your self-employment taxes and pay them as usual. At the very least, you should wait until further guidance is issued by the Treasury Department to decern on whether you qualify to defer this slice of the tax.

If you have questions, or need to talk about this or any other financial issues, give us a call. We’re to help

Has Your Company Suspended 401K Contributions?

Shawn Glogowski on September 15, 2020

The pandemic has had a major economic impact on employers as well as individuals. According to a national survey by the Plan Sponsor Council of America, as of April more than 20 percent of large organizations had already suspended matching 401(k) contributions.

The beauty of a 401(k) is that it offers tax advantages and makes regular contributions seamless. Having a match on top of that is icing on the cake—but not having it doesn’t negate the other benefits.

When money is tight, you may have to rethink and reprioritize. You don’t want to jeopardize your future, but you also don’t want to make imprudent decisions like racking up a huge credit card bill or defaulting on other commitments in order to continue contributing.

On the other hand, if your budget still allows you to make regular contributions, you definitely should. In fact, as counter-intuitive as it may seem, now could be the time to increase your contribution to make up for the lost match.

It’s a balancing act. So, before you decide what to do, ask yourself these questions.

How Stable is Your Job?

When the company you work for, whether large or small, is looking at its balance sheet to find ways to economize, you want to be realistic about the future of that company. Are there layoffs ahead? Cutback in hours? If you think your position could be impacted, now is the time to make sure you have enough cash on hand to be able to make it financially.

Do You Have an Adequate Emergency Fund?

Today’s uncertainties have brought the importance of emergency funds front and center. The standard recommendation to have enough cash easily accessible to cover three-to-six months essential expenses may even be an understatement. If your emergency fund is less than adequate, building it up should be a primary focus.

Look at your budget. Can you redirect some dollars to this important fund? If there’s no other way to do it, you could reassess how much you’re currently contributing to your 401(k) in order to balance present financial stability with future security.

Have Your savings to Date Been Adequate?

A common employer match is 50 cents on the dollar for the first six percent of your salary. This means that if you have only been contributing up to the match, you’ve been contributing nine percent between you and your employer. That’s good, but below the 10-15 percent recommended for someone in their 20’s (an older person just beginning to save may need to contribute even more). If you’re behind in your savings already, you’ll likely have to work harder in the future to catch up.

How Close Are You to Retirement?

This is a crucial question. If you’re far from retirement, you may feel like you have plenty of time ahead to save. However, the reality is that the earlier you start saving—and the more aggressively you save—the more time you have to benefit from potential market appreciation and compound growth. Stop saving now and you will have lost the power of time. Conversely, if you’re close to retirement and still have a way to go to meet your savings goal, every dollar you save now is essential.

There’s More to Your 401k Than the Match

While getting an employer match is a definite plus—and an opportunity you never want to pass up—there’s more to it than that. Obviously stopping contributions, or temporarily reducing your percentage, would put more dollars in your pocket and potentially help ease your cash crunch. On the other hand, it’s a trade-off, not only in terms of your future security, but also your current tax situation.

If you have a traditional 401(k), your contributions are tax-deductible, which lowers your taxable income. Decrease or completely stop those contributions and you potentially increase your tax liability. You also decrease your long-term, tax-deferred earnings potential. If you have a Roth 401(k), you don’t get an immediate tax benefit, but the ability to take tax-free withdrawals in the future is huge.

It Doesn’t Have to be All or Nothing

If you need some extra money now for essential expenses or to boost your emergency fund, reducing your contribution (rather than stopping it completely) could make sense in the short term. Still it’s important to promise yourself that you will recommit to saving more as soon as things turn around.

Match or no match, when it comes to long-term retirement saving, contributing as much as you can to a 401(k) is one of the best things you can do.

This blog was excerpted from an online article by Carrie Schwab-Pomerantz, CFP®, Board Chair and President, Charles Schwab Foundation; Senior Vice President, Schwab Community Services, Charles Schwab & Co., Inc.; Board Chair, Schwab Charitable