5 Ways to Improve Your 401k

Blain Reinkensmeyer

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With these trying financial times it can be daunting to even consider retirement. It may seem impossible to set aside anything from your paycheck for the future. But, it’s important that you take advantage of the resources available to you. Many companies are offering 401k plans to their employees these days and it’s time to make sure that you’re getting everything you can out of your 401k. Here are five ways to get the most you can from your retirement account:

1. Set aside whatever you can. Research suggests that close to 25 % of employees with access to a 401k plan aren’t contributing. This reverts back to the point that many people think it’s foolish to set aside money now when they badly need every dime. Even if you contribute just one or two percent you’ll be establishing your financial goals and at least will be acquainted with how a 401k plan works.
2. Play the matchmaker. Find out what your company will offer as a match in your 401k plan and take advantage of it. Find out if the company match goes into your investments that you’ve already selected and how much you have to contribute to get the company match. This is free money that you can’t afford to let slip out of your hands.
3. Diversify. It’s important that you don’t put all your eggs in one basket when it comes to your investment selections. Figure out what kind of risk you can assume with your investments and channel your money accordingly. Also avoid going too crazy with the company stock option. It’s wise to keep, at most, ten percent of your portfolio in the company stock.
4. Education is the most important asset you have. When it comes down to it, you’re the only one that really has your financial interest at heart. Accordingly, you have to make sure you know the ins and outs of your plan. Read the Plan Summary and get acquainted with everything that your company’s 401k plan has featured. Talk with representatives from the investment company that handles your plan. They are there to answer any questions you have. Remember it’s your money!
5. Keep the money in the plan until retirement. It can be difficult to avoid the temptation of tapping into your 401k money before you actually retire. Resist this temptation. If you take the money out while still employed you’ll get hit with penalties and taxes.

Note: This post was contributed by Heather Johnson, who is an industry critic on the subject of entrepreneurial finance. She invites your feedback at heatherjohnson2323 at gmail dot com.