Saturday, March 28, 2015

401K Tips and How to Stay on Top of Your Retirement

When it comes to saving for retirement, a mix of investment options is integral to your future success. A 2013 report by the American Benefits Institute states that about 94% of employers offer a 401(k) retirement plan to their employees, yet many employees aren't sure how to get the most out of their plan. Here are some tips for maximizing the rewards of your 401(k).

Take the Entire Match

Plenty of employers offer a full or partial match of your contributions. For example, your company may match 100% of the first three percent and will match at 50% thereafter up to seven percent. Read your plan's details to make sure you're getting all the matching you can. Talk to your employer if they might be able to match more if you have a special circumstance like retiring early. It's free money, so don't leave it on the table and take advantage of everything offered.

Consider Your Tax Withholding

If finding the money to bump up your 401(k) contributions is proving to be difficult, take a look at your take withholding. If you aren't claiming enough dependents, you will receive a larger tax return in the spring. That money could be squirreled away in your 401(k) over the course of the year. Review your W-4 form with your HR department, and file a new one if you are claiming zero or not claiming all your dependents. Find other ways to get more for your money by talking to a professional tax accountant or even your credit card merchant account for bad credit and how you might improve it. This way you can really improve your profile and secure future finances more easily. 

Be Cautious of Age-Related Fund Distributions

Some 401(k) plans offer a target-date fund distribution. On its face, this can be a great idea. Simply input how many years left until you retire and the plan will do your allocations for you. However, this can be a bad idea. If you are young, age-related distribution can expose you to far more financial risk than you might be comfortable with. On the flip side, older workers may have far too conservative choices implemented for them. Look at your entire retirement portfolio to determine your comfort with risk. If you have a paid-off home, an investment in a credit card processor of bad credit, and plenty of cash in your IRA, you may feel fine with accepting some risk in your 401(k) to maximize gains. If your other assets are small, you may not want to take risks. Think this through and allocate your funds accordingly.

Reduce Debt and Spending

If you’re starting late on your savings for retirement make an effort to reduce any debts you may have and cut back on unnecessary spending. This might mean getting rid of the cable, going to free community events instead of the movies, and only eating out once a month. Make up a budget and make sure you have a spending limit for things like gifts and entertainment. If you have debts you need paid off before retirement make sure you work on those first and that a good chunk of your paychecks go to getting the balance down on each one.

A well-funded and smartly allocated 401(k) plan can be a great way to save for retirement. However, it should be just one piece of your overall investment portfolio. Keeping these tips in mind will help you get the most out of your 401(k) and give you the relaxing retirement you’ve always dreamed of.

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