As income in retirement becomes a bigger and bigger challenge, your Employer Retirement Plans must take on a greater burden. Look at these common mistakes employees make in managing their 401ks and see if any of our tips can help you get back on track.
1) No 401k left behind. Big red flag here. If you have a retirement plan through a former employer you need to do something, you just can’t forget about it. Choices include consolidating the account into your new 401k or rolling over to an IRA. While both options have benefits most retirement plans only have a limited amount of investment choices. The flexibility to pursue best in-class investment choices often makes rollovers the wiser decision.
2) Don’t ignore your plan. Another common oversight is managing your 401k independent of your other accounts. This can cause your overall portfolio to be concentrated into just a few positions and leave too many eggs in one basket. Instead, analyze the investment options and blend the best options into your overall portfolio. When the statements come, don’t just ignore them. A lot has changed in our economy and markets over the past few years. Keep asking he right questions and ensure you are on track.
3) Like free money? Not contributing up to the company match could be costing you thousands! If your company matches at 3 percent or 5 percent you need to try to contribute at least that much. Let’s say the company matches at 5 percent; by joining the program and contributing your 5 percent you will receive a 5 percent match. Think of it like getting a 5 percent raise. You should find out what the company is matching and aim to contribute at least the same percent.
As Social Security looks bleaker and bleaker and pension paying jobs become harder to find, your workplace retirement account takes on greater significance. Speak with a Financial Adviser and review your options, your contributions and other accounts you may have. Spending a few minutes today could pay big dividends tomorrow. If you have any questions we would love to hear from you.
Shawn Miller is a fee-only Financial Adviser at Sovereign Financial Services based in Bel Air, MD where he provides advice to individuals, businesses, and endowments. You can reach Shawn at 410.575.3120.