Are you participating in your employer’s 401(k) or retirement plan? Your 401(k) can be a major portion of your savings for retirement, because of this you should make sure that you’re taking full advantage of all of the opportunities that exist to boost your savings.
Step 1: Don’t Delay Getting Started
It doesn’t matter if your right out of college and it's your first day on the job or if you’ve been working for 20 plus years, it’s never too late to start contributing to your retirement plan. Even if all you can contribute is a small percentage, it’s still worthwhile and every bit helps come retirement time.
Step 2: Maximize Your Employer Match
Are you fortunate enough to have an employer who offers an employer match for contributions to your 401(k)? If so, the benefits of contributing become more appealing because you’re boosting your savings immediately. For example, if your employer offers a 100% match up to 6% of your salary, if you contribute 6% you’re doubling your money immediately. If you’re not able to contribute that much, set a goal for a smaller percentage and then each year boost your contributions by say 1% until your able to reach the level of the match.
Step 3: Selecting Your Investments
You’ve filled out all the paperwork and you’re starting to save, you now need to select what investments you’d like to invest in. This can be a very daunting task if you’re not familiar with the stock market, most likely you already have a day job that doesn't have to do with stocks or investments, so how are you expected to be up-to-date and able to determine what investments are best. If you’re like some people you may take a look at the funds recent performance and select it or maybe you choose something that was called XYZ Target Date 2050 because you thought you might retire that year, however, these target date funds may not necessarily provide the best performance (We'll touch on this subject in a future post).
In the short-term this may work out for you, but over the long-term it’s important to periodically review your investments and make proper changes over the years to make sure that you’re 401(k) investments are in-line with any other retirement savings and is invested in the proper funds.
Step 4: Pay Attention to Fees
Fees can eat away at your savings over time – look for low cost options where available. Ideally, if your plan offers such funds, look to pay under .60% in fees. If your plan doesn’t offer such funds, you might want to consider investing up to your employers contribution match and then use an IRA to make up the balance of your saving, as you’ll have better investment options there.
Step 5: Periodically Review Your Plan
It’s important to always remember to review the investments you’ve selected in your 401(k) or retirement plans. Over time, things change and your investments should reflect different stages of your life. Because contributing to your plan is very automated it can easily be overlooked. However, you may be opening yourself up to too much risk if your invested too aggressively for what you’re comfortable with or maybe your sacrificing growth potential because you selected an investment that was too conservative.
How We Can Help
If you’re someone that hasn’t reviewed your 401(k) investments recently, maybe it’s time to do so. The good news is we can help you! We offer a 401(k) and Retirement Plan Check-up. This is a one-time service, where we make sure that your 401(k) is invested properly. We will review your current investments, your different fund options and provide investment selections that fit your needs specifically.
We want to help make sure you are prepared for whatever lies ahead with the stock market in the upcoming years. If this extended stock market rally ever stops, we want to make sure that your retirement savings are invested properly and your hard-earned money is not at risk!