The constant change in the economy has impacted the way people handle their finances, and investments are no exception. A sharp decline in the number of traditional pensions over the years has led many people to save for their own retirements. One of the most common ways to save for retirement is through employer-sponsored 401k plans. According to the Investment Company Institute, 401k plans held more than 4 trillion in assets. Even with these numbers, many people are not getting the most out of their 401k plans and need help whipping them into shape. Use the tips below to get more out of your 401k.
Start Early
Time is of the essence, so if your employer offers a 401k plan, take advantage of it. If you do not participate in this plan, you are cheating yourself. The sooner you begin, and the more you contribute, the better your earnings and savings will be. Remember that you are in control of your own financial outcome for your future non-working years. The sooner you begin saving, the more time you have to watch your 401k grow. You always want your investments to work in your favor, so when it pertains to your 401k, start saving early.
The Employer Match
Your employer will match your 401k contributions, up to a certain percentage, based on your salary. Be sure to partake in this program. Employees who do not participate in this type of plan are leaving free money out in “space.”
Cut your Costs
Sometimes 401k providers stock their plans with high-fee mutual funds. This could cost you money.These hefty fees are not justified. Instead, they soak up a large amount of your investment returns. Some investment funds with higher fees are actually worth your time and money. However, low-cost index funds almost always are the better option.
Look Internationally
Many of the current 401k plans go light on international investment options. This is not a good idea. If your current plan offers international options, consider taking advantage of them. There are always opportunities available in markets around the world and increasingly diversifying your portfolio is always recommended.
Consolidate, Consolidate, Consolidate
It is not uncommon for you to leave one job and take your 401k with you. In fact, many Americans have their 401k accounts sitting with various managers. If the option is available, take these accounts and roll them into your current employer’s plan. You also can roll these accounts into a retirement plan when applicable. It is important to make sure these investments are not just sitting idle. Get them aligned with your current investment strategies.
Chances are that you have a 401k plan, but it is not working as hard for you as it should be. Now is the time to turn that around and begin to make the most of your savings plan. Use the tips above to help get your 401k into shape. Remember that you are never alone, so when you have questions, ask one of the plan’s representatives for assistance.