New 401(k)? 3 Decisions You’ll Need to Make – The Motley Fool

32
118
New 401(k)? 3 Decisions You’ll Need to Make – The Motley Fool

Gear up to do some thinking.

Maurie Backman

Whether it’s your first time working for an employer that sponsors a retirement plan, or you’ve gotten a different job, having access to a 401(k) means you have a solid opportunity to sock away money for your golden years. That said, you’ll need to make some important decisions with regard to that account, and here are three big ones to contemplate.

1. How much of my salary should I contribute?

For the current year, you can contribute up to $19,000 to your 401(k) if you’re under 50, or up to $25,000 if you’re 50 or older. Most people, however, can’t manage to part with that much cash, so if you’re one of them, worry not. What you should do, however, is work out a budget and figure out how much of your salary you can afford to part with. If you guess at that number, you might overfund your account and start falling behind on your bills (though the good thing about 401(k)s is that you can generally change your contribution amount easily — it may just take a couple of pay cycles to go through). But you don’t want to contribute too little, either, because if you do, you’ll risk falling short on funds later in life.

Man holding up white card with 401K written on it in red letters

IMAGE SOURCE: GETTY IMAGES.

One thing to keep in mind when making this particular decision is your company’s matching policy. Many employers match 401(k) contributions made by employees to varying degrees, and that’s something you want to capitalize on, as it’s effectively free money. Therefore, see how much you’ll need to put into your 401(k) to get your full match, and aim to hit that target. For example, if your employer will match up to 3% of your salary, and you earn $50,000, make sure to contribute a minimum of $1,500 to your 401(k).

2. How should I invest my money?

The money in your 401(k) shouldn’t just sit there doing nothing; you’ll be tasked with investing it so that it grows. You typically can’t buy individual stocks and bonds with a 401(k). Rather, you’ll need to put your money into stock or bond funds which generally fall into two categories: actively managed mutual funds, and index funds.

The benefit of actively managed funds is that you get to capitalize on the expertise of the people who run them. But, you’ll pay higher investment fees to get a piece of that action. Index funds, on the other hand, simply track existing market indexes and are passively managed. As such, their fees are much lower. This isn’t to say that actively managed mutual funds don’t have a place in your 401(k). Just make sure you’re aware of the fees involved.

Additionally, make certain the funds you choose align with your investment strategy and appetite for risk. If you load up on too many bond funds, you’ll usually limit your returns. The result? Less money for you in retirement. Stock-focused funds are generally more volatile, but typically offer higher returns, so you’ll need to take those factors into account when setting up your portfolio.

3. How often should I check my balance?

You may be tempted to check up on your 401(k) frequently. After all, the money sitting in that account is your hard-earned cash (plus whatever funds your employer contributes), and you want to make sure it’s growing. But remember, saving for retirement is a decades-long process, and if you check your account balance weekly, you may very well end up driving yourself crazy. If the market has a tough couple of days, you could see your account balance plummet overnight, but chances are, that loss will only be temporary.

That said, it is a good idea to check on your 401(k) investments periodically to make sure they’re performing as expected and meeting your needs. You may therefore want to make a calendar note to review your 401(k) quarterly or semiannually.

The right 401(k) decisions will help you make the most of your retirement plan. And you know what that means — more money for you when your golden years eventually roll around.


disclosure policy.

“>

32 COMMENTS

  1. … [Trackback]

    […] Information on that Topic: worldnewsnetwork.co.in/new-401k-3-decisions-youll-need-to-make-the-motley-fool/ […]

  2. I simply want to tell you that I’m newbie to blogs and truly savored you’re web site. Most likely I’m going to bookmark your website . You actually come with tremendous articles and reviews. Appreciate it for sharing your webpage.

  3. I would like to thnkx for the efforts you’ve put in writing this site. I am hoping the same high-grade web site post from you in the upcoming also. Actually your creative writing abilities has inspired me to get my own website now. Actually the blogging is spreading its wings rapidly. Your write up is a good example of it.

  4. Thanks, I have recently been searching for information approximately this subject for a long time and yours is the best I have found out so far. However, what concerning the conclusion? Are you sure in regards to the supply?

  5. Hey! I could have sworn I’ve been to this blog before but after checking through some of the post I realized it’s new to me. Anyways, I’m definitely happy I found it and I’ll be book-marking and checking back often!

  6. Thanks for some other informative web site. The place else may just I am getting that kind of info written in such an ideal manner? I have a venture that I’m simply now operating on, and I’ve been on the look out for such info.

  7. Faytech North America is a touch screen Manufacturer of both monitors and pcs. They specialize in the design, development, manufacturing and marketing of Capacitive touch screen, Resistive touch screen, Industrial touch screen, IP65 touch screen, touchscreen monitors and integrated touchscreen PCs. Contact them at http://www.faytech.us, 121 Varick Street, New York, NY 10013, +1 646 205 3214

  8. Sapid Agency is a Search Engine Optimization company in New York City that provides SEO Services. Their proprietary SEO strategies help struggling websites and aspiring business owners to rank their websites higher in multiple search engines like Google , Yahoo and Bing. They provide local and gmb map ranking for businesses in NYC and many other local areas. Find more at https://www.sapidagency.com/ @ 145 E 57TH NEW YORK, NY 10022, USA, +1 971 341 5608 USA

  9. I do consider all the concepts you’ve offered in your post. They’re very convincing and will definitely work. Nonetheless, the posts are very quick for beginners. May just you please prolong them a bit from subsequent time? Thank you for the post.

  10. I like what you guys are up also. Such smart work and reporting! Carry on the excellent works guys I have incorporated you guys to my blogroll. I think it will improve the value of my web site :).

  11. I’m really enjoying the theme/design of your weblog. Do you ever run into any web browser compatibility problems? A number of my blog visitors have complained about my website not operating correctly in Explorer but looks great in Safari. Do you have any solutions to help fix this problem?

  12. Remarkable issues here. I am very satisfied to see
    your article. Thank you so much and I am taking a look ahead to touch you.
    Will you kindly drop me a e-mail?

  13. I’ll immediately seize your rss as I can’t to find your e-mail subscription hyperlink or newsletter service. Do you have any? Please permit me understand in order that I may subscribe. Thanks.

  14. I just intend to inform you you that I am new to wordpress blogging and genuinely enjoyed your write-up. Likely I am probably to save your blog post . You truly have memorable article information. Love it for share-out with us your main site document

  15. What i do not realize is actually how you are not really a lot more smartly-favored than you might be right now. You are so intelligent. You know thus significantly on the subject of this subject, made me in my opinion believe it from a lot of various angles. Its like women and men aren’t fascinated except it is one thing to do with Girl gaga! Your individual stuffs outstanding. All the time deal with it up!

  16. Good day very nice website!! Man .. Excellent .. Amazing .. I’ll bookmark your website and take the feeds additionally…I’m satisfied to search out a lot of useful info here within the put up, we’d like develop more strategies in this regard, thanks for sharing.

LEAVE A REPLY

Please enter your comment!
Please enter your name here