How to Get the Most Out of Your 401K Plan

For most people retiring in the future, a 401k plan will be the financial key to retirement. Here are some tips to help you ensure that you’re getting the most out of your plan.

1. Never misses the match. If you are not contributing enough to gain the employer match in your 401k today, stop reading now and call your HR department to start contributing at least the minimum required for the full company match today. Never passes up free money!

2. Contribute more than you’d like. Retirement for most people will last a long time, perhaps longer than you’d like. To be prepared, you’ve got to contribute more than you’d like to a 401K. With the help of a financial advisor—your employer should give you access to one—you can determine the degree to which you need to be saving each month.

3. Money saved today is useful to more than money will save tomorrow. Every day you help your 401k, is current that you are giving up the investment returns on the savings. Those who plan ahead will spend money they earned on the money they saved; those who are placed in a position to plan will have only their own money to spend—and painfully little of that.

4. Be consistent. Everyone encounters problems from time to time that put pressure on the budget. Do what you can to treat your retirement savings as too sacred to use in solving typical problems. Don’t cut down your contribution one month or one quarter with plans to contribute extra later. You won’t likely ever make it up. Be disciplined year after year.

5. Consist of two stocks and bond funds. As you manage your investments in your 401k, make sure to include funds that invest in stocks and bonds. Investing in five to seven distinct over the long haul is generally wiser than investing in just one or two. Be thoughtful about asset allocation among stocks, bonds and cash. For retirement, generally you’ll want most of your money in stocks and bonds and just a bit of cash. Before your 50th birthday, you may not have to maintain any cash—keeps it all in stocks and bonds, which earn more on average.

6. Educate yourself. If you’re not a financial expert today, it is unlikely that you’ll be an expert tomorrow. If you consistently attend employee education meetings about the 401k and read the business pages of the newspaper, you’ll become knowledgeable enough to ensure that better decisions. The sooner, the better.

7. Be patient. When you start contributing to your 401k at $100 per paycheck, it takes a while for that to become $1,000; longer still to become $10,000 and $100,00If you consistently contribute 10% of your income for your entire career, you could accumulate the better part of $1 million. Be patient. It takes time.

By performing the following simple guidelines, you’ll be much better prepared for retirement. Retirement takes a lot of money; those who plan well will have what they need.