Is Your 401K OK?

October 27, 2015

You have a 401K, and you contribute to it regularly. But is that effort enough to get you to where you need to be when it’s time to retire? Here are some tips for making sure your 401K is OK.

Is Your 401K OK?

Maximize Your Match

Does your employer offer a match on your 401K investments? If so, are you maximizing that match? A match on your 401K means that your employer will contribute the same dollar amount as you into the retirement account, up to a certain percentage. It’s one of the best perks of 401K plans and is a perk that you should fully utilize.

Seek Guidance

According to Retirement Investing: What you Don’t Know about 401Ks can Hurt You, a major reason many employers avoid investing in 401K plans is because they don’t understand the details of those plans.

Looking at an informational packet regarding your company’s 401K plan for the first time can be a little daunting. However, rather than setting the package aside to read when you have more time, read it now and seek guidance on the details you don’t yet understand. Everyone started as an investment beginner, so don’t feel afraid to ask any questions that pop into your mind. The more guidance you seek upfront when starting a 401K plan, the better you’ll feel about your future investment decision.

Know Your Needs

The biggest determiner of the health of your 401K is what you’ll need from that plan when it’s time for you to retire. Knowing such details as what lifestyle you hope to have during retirement when you want to retire, whether you’ll carry any debt into retirement and others are essential for building a solid retirement plan. Those details show you how much you should put into your 401K plan each month and provide concrete investing goals.

Invest Automatically

Life can change on a dime, as can your monthly expenses. When those changes occur, people are often tempted to divert their monthly retirement account allocations to other bills. Avoid that temptation and keep your investing goals on track by investing funds automatically into your 401K.

Most employers now offer their employees the option to allocate a percentage of each paycheck automatically into their retirement accounts. If your employer offers this plan, sign up for it today. If that option isn’t available, set up automatic withdrawal from your checking account to your retirement account.

Track Growth (or Loss)

Your investing tactics may need to change from year to year based on your plan’s performance and more. Know when changes need to happen by tracking the growths or losses of your 401K. If your account isn’t growing as quickly as you’d like, meet with your advisor to discuss the option of investing in higher risk funds. Or, on the other hand, if you’ve been nervous about the level of risk associated with your account’s current funds, discuss the option to lower the risk level. By tracking the performance of your 401K, you’ll have the information needed to continue making informed investing decisions.

Don’t leave the health of your 401K to chance. Instead, maximize your employer’s match, invest in your retirement plan automatically and more. By taking the reins on your retirement planning, you’ll have more peace of mind and may be able to retire sooner.