Your company 401k plan can provide what many argue is the best vehicle for saving for retirement. Navigating the choices and determining your mix of investments within the funds, however, can be tricky. Matt Allgeyer, Financial Planner with Wamhoff Financial Planning & Accounting Services, offers the following do’s and don’ts.
1. DO – Participate in your 401k Plan
• Invest until it hurts, or at least up to your company match (if applicable) which is free money!
2. DO – Start now
• That way, time can be on your side and allow for more growth
• If you start early, you can continue to bump up your percentages over the years
• If you start late, it may begin to seem like an insurmountable task to save what you need.
3. DO – Consult an Advisor
• The average annual return for employees who sought advice was almost 2% higher than when they did it alone.
• An advisor will help you create a plan that you can work, and measure against.
4. DON’T – Cash Out or Borrow from your plan
• Don’t give up on your retirement when times get tough.
• Don’t cash out your plan when you switch jobs – believe it or not, 46% of people switching jobs do.
• Don’t borrow from your plan – chances are, you’ll never put it back
5. DON’T Overinvest in Company Stock
• If your company runs into financial difficulties, not only may you lose your job, you may also take a big hit on your investments.
6. DON’T – Leave Your Retirement Savings in Your Company’s Plan After You Retire
• It’s easier to track your investments if you roll your 401k into an IRA upon retirement
• An IRA will likely offer you more investment options than your company plan.