Rules For 401k Plan Success

 

 

 

Many of my clients are retired but a good many still work and make contribution to a retirement plan. Some work at non-profits and save through a 403b, which is a plan much like a 401k but structured for employees at hospitals,  churches, government agencies and schools. There are other non-profit organizations that have the 403b but you get the idea.

The retirement plan market is extremely competitive. The biggest players are mutual fund companies but a lot of exchange traded funds are showing up.

Insurance companies are also deep into the 403b market with variable and fixed annuities. Mostly the insurance companies are in school systems and small to medium size companies that want all retirement plan services bundled into one package.

I’ve always preached simple is best for managing your money but in some 401k plans the offerings are like Chinese take-out menus, almost everything looks good and there is a lot to choose from. If you don’t know what you’re doing the best advice I can give is to choose a Target Date Fund and use that as your investment vehicle. It’s probably not the best but certainly not the worst thing you can do.

But, I’m not writing to tell you where to invest but some simple rules for not messing up your plan so that at retirement you end up with less than you put in.

• Invest as much as you can without taking food off the table. Remember you get a tax benefit so the$100 isn’t really $100 but something less than.
• You may plan on working the rest of your life but employers and the economy may have other ideas. Plan accordingly.
• Don’t fall into the trap that you won’t invest unless the company matches. The company doesn’t care if you eat beans or less at retirement. Open those baby blues understand this and invest for yourself.
• Be prudent with how much you put away into the company stock. Some firms have gone kaput, remember Enron, dear reader? K-Mart? G.M.?Enough said.
• Don’t invest by using the rearview mirror and checking out what did the best yesterday. Sometimes the bus leaves early and you missed it. If you can’t spell ETF stay away from them unless you know what you’re doing. I mean REALLY know what you’re doing.
• Don’t borrow or cash out money from your retirement plan unless you absolutely positively have too.
• Take advantage of professional advice if it is offered. But, don’t be blind to those handing out freebees. Some are not so smart so check credentials. I’ve met guys who were plumbers one year and financial gurus the next.
• Check your values quarterly. You just go nuts looking at stuff everyday. Forget rebalancing unless you really love that sort of thing. Don’t react to economic events like its the end of the world. Try not to do the same thing that your co-workers do, they usually don’t know what’s happening anymore than you do.
• When you leave an employer take your plan with you. Don’t think your employer is going to be there forever.

If you have questions on this blog call Paul at 877 783 7080 or write pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.