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