How to Make the Most of Your 401k

Investing in a 401k is an important financial decision and it’s in your best interest to start making contributions as early as possible. The American Savings Education Council reports that almost 25 percent of people with access to a 401k don’t even participate, so it’s important that you take control of your finances and take advantage of a 401k plan when it’s available.

Here are some essential tips for making the most of your 401k:

1. Contribute as much as you can, as often as you can. Plan limits change by year, but you will be helping yourself by contributing as much as you can as frequently as possible. Put in the maximum amount each year if you can afford it.

2. Diversify your portfolio. If you want to enjoy the fruits of your labor during retirement, take the time to meet with a financial advisor so that you can spread your assets. It’s usually a good idea to invest in your own company’s stock, but you should also branch out to other investments if you want to maximize the return on your investment.

3. Consider investing in equity mutual funds as part of your 401k plan. Even though the stock market fluctuates a lot in the short term, you can still get a solid return on your investments when you invest in equity mutual funds as part of your 401k plan. Discuss your options with a financial advisor so that you can make the best financial decisions.

4. Find out about employer contributions. Many employers will match your 401k contribution each year that you are building up your retirement fund. Make sure you have submitted all the paperwork and have a copy of all contributions each year so that you know what your 401k looks like at any given time. Make the employee contribution a part of your asset allocation strategy.

5. Don’t withdraw before the withdrawal period. The only way you will be able to get the best return from your lifelong 401k contributions is to leave it there until you reach retirement age. If you withdraw from your 401k early, you will have to pay a penalty and pay taxes on all of your funds. Financial experts recommend making changes to your spending habits and turning to other sources of cash if you need to so that you can leave your 401k fund intact.

There are several ways to maximize the return your 401k, and working with a financial planner or financial advisor can help. Use these tips to make the most of your 401k investment.

Tags: 401k advice, 401k investments, 401k planning

How to Manage Your 401k and Protect Your Investment

Contributing to your 401k regularly puts you in an attractive financial position and may help you look forward to a comfortable retirement. However, not everyone is able to manage their 401k successfully and protect their investment for the long term.

If your 401k account was set up by your employer, you may be like many employees who don’t have any knowledge of investing, and you may be vulnerable to making some financial mistakes. Here are some tips for managing and protecting your 401k investment:

1. Get help from a financial advisor. Many people overlook the benefit of speaking with a financial advisor about their 401k plans. Even though this type of retirement plan is self-managed, you don’t have to make all the financial decisions on your own. Seek help from a certified financial planner or investment advisor so that they can help you plan your investment decisions for the oncoming years.

2. Review your investments at the end of each quarter. Get into the habit of meeting with your financial advisor to take a close look at your investment portfolio, and see how your investments are performing at least once each quarter. Some people get caught up in monitoring their stocks on a daily basis, but those daily fluctuations won’t have much of a long-term impact. Checking in a few times per year will help you make the best decisions about reallocating your funds to stocks and other investments if needed.

3. Don’t put off your contributions. It can be tempting to avoid making contributions to your 401k, but you need to keep making contributions and avoid putting it off for an extended period of time. There really is no ‘ideal’ time to invest, so you just need to make sure you are investing as much as possible with each paycheck – or on a monthly basis.

4. Avoid borrowing money from your 401k. Protect your 401k investment for the long term so that you  can earn the highest possible return when you retire. If you withdraw from your 401k early, you will be responsible for paying high fees for the withdrawal and taxes on the amount of the withdrawal. Avoid the high costs and penalties by keeping the funds in your account for the full length of the investment. Congress mandates that everyone pays a 10 percent penalty if they withdraw from a 401k before they reach the age of 59 ½.

5. Remember that it’s a long-term investment. Your 401k is a long-term investment, not a stock fund or money market account. The only way you are going to reap the rewards of your investment is to leave it untouched and keep making frequent contributions. Keep that in mind as you make your financial decisions.

Tags: 401k, 401k advice, 401k basics, retirement plans