For most Americans their 401(k) is their largest savings vehicle, yet they have no idea what's going on with it or what options they might have. We offer independent professional advice from a certified investment fiduciary to help you deal with your pain. Just
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Just for visiting us we've provided you with the helpful info below. Nine Deadly Employee Mistakes You Must Absolutely Avoid When Investing in Your 401(k)
(which of these make you feel like your in Vegas?)
1. Not taking advantage of the employer match. A lot of employers match some portion of your deferral into your 401(k) sometimes up to as high as 5% or 6%. This is and instant return on your money with a return that is hard to beat no matter what investment you’re in.
2. Taking out a loan or taxable distribution from your 401(k). Just because you can get to it doesn’t mean you should. Pulling money out of your retirement savings for something other than retirement will extend your working years or drastically decrease your income in your retirement years.
3. Buying employer stock in your 401(K). We call this the Enron lesson. Your income is dependent on the success of the company, you don’t want all your eggs in that basket by betting your retirement on your company. There are numerous examples (Enron is just one) of people losing there jobs at the same time there 401(k) got wiped out because they bought company stock.
4. Trying to time the market by getting in and out of your investments. Timing the stock market does not work. If you try to time the market chances are you’ll miss more of the positive days than the negative ones and this will ruin the growth of your 401(k).
5. Leaving all your money in the fixed income account. These accounts sometimes earn as low as 1% or 2%, with inflation averaging over 4% this is a guarantee to lose purchasing power on your money. A properly diversified account historically as earned well over the rate of inflation over time.
6. Using track record investing to pick mutual funds. Academic research shows there is no correlation between what a fund has done in the past and what it will do in the future. Again this is the importance of a diversified portfolio.
7. Thinking a lot of stuff is the same as diversification. Just because you own a lot of mutual funds doesn’t mean you are properly diversified. The important thing is to be sure they are not in the same asset category so they have dissimilar price movements. Historically this has both reduced risk and increased rates of returns.
8. Thinking cookie cutter allocations will suffice. A lot of plans are now offering cookie cutter 401(k) allocations (sometimes called target date retirement plans), and while helpful and better than nothing, they hardly account for your personal situation.
9. Not getting personalized 401(k) help from an independent unbiased professional. The good news is you have an answer…Finally! For just pennies a day you can get professional personalize advice to help you avoid the 8 traps killing you 401(k). Just call us or shoot us an email This e-mail address is being protected from spambots, you need JavaScript enabled to view it saying help me with my 401(k)! and we’ll send you no obligation FREE information to let you decide how much professional advice can help your 401(k).
Getting the Most Out of Your 401(k) Plan
Social Security benefits are up in the air, and traditional pension plans have been in decline for years. We are becoming increasingly responsible for saving for our own retirements. Unfortunately, many workers with the option to invest in 401(k) plans either don’t participate in them or don’t fully understand them. Here are some tips for getting the most out of your 401(k) plan:
- Participate - Find out if your employer has a matching program for 401(k) contributions and if so, up to what level of contribution. Then make sure you’re contributing, at a minimum amount, so you at least get the benefit of the matching funds. Even contributions that aren’t matched are tax-advantaged. They are withheld from your pay before tax is deducted and any earnings accumulate on a tax-deferred basis. On October 18, 2007, the IRS announced that the official maximum 401(k) limit for 2008 would be $15,500, (plus an additional $5,000.00 for those over 50-years old), the same amount as 2007. (Prior to this official announcement, several organizations and Web sites jumped the gun and announced a higher contribution limit.)
- Choose - Choose the funds to which your contributions are allocated. In many plans, if a participant fails to choose, the default investment choice may be the stable value or money market option, which in this environment may barely keep pace with inflation.
- Diversify - Make sure your investment choices result in a diversified portfolio. One way to achieve opportunities for growth with a portfolio is to be in a position to weather the storm when the market takes a turn for the worse.
Diversification means more than choosing many different investment options. Putting your money in half a dozen different domestic large-cap funds may not provide you with much diversification. You want to include low or non-correlating investments if those choices are available. Your plan provider, human resources department, (or a financial adviser) may be helpful in educating you here.
Many plans offer the company stock as an investment option. For the same reason, limit your allocation to a fairly small percentage of your total retirement assets, say 10%.
- Re-balance - Every year or so, re-balance your 401(k) holdings to offset the under or outperformance of various asset classes. There are no tax consequences, and this process can help keep you from chasing past performance.
- Investigate - Do a little homework to find out the fee structure of the plan. Smaller plans, in particular, can be subjected to excessive expenses levied by consultants, administrators, and other third parties. If this is the case, raise the issue with your benefits department. Fees and expenses are increasingly important to investment results in a low-return environment, and employers are becoming more and more sensitive to the cost-efficiency of their plans.
- Take Charge - If you feel your investment options are too limited to allow you cost efficient access to a variety of asset classes, raise the issue internally. It’s your money. Many 401(k) plans now offer a self-directed brokerage account as an alternative investment choice. This may be an opportunity to gain exposure to asset classes not otherwise available in the plan.
- Get Help – Your employer may offer literature, a Web site and/or access to financial planning services and investment advice, however, you may still feel that an independent, professional opinion would be wise – after all, this could be your most significant part of your retirement nest egg. While there are many financial advisors who would love to help you if you have “investable assets” – meaning money you hold outside of your 401(k) plan – you may find many turn you away if the money is tucked inside of your 401(k) plan because they can’t earn their normal commissions. If they can’t manage the money for you or sell you products, they are simply not interested. There is, however, a new option for obtaining independent, objective help and advice on selecting the investments within your 401(k) plan. A select few professionals are looking out for the employees, for just pennies you can get access to an SEC registered investment advisor to assist you. Call us or send us a no obligation email This e-mail address is being protected from spambots, you need JavaScript enabled to view it to find out more.
401(k) plans can be fantastic wealth-building tools. Use yours to full advantage
and start building toward a brighter financial future.
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