401(k) Help

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People are saving more in their 401(k) plan as a result of the automated enrollment efforts initiated by their employer. Workers under thirty continue missing out on the free money given away by their employers. People are investing solely in their company’s stock. Today, these stories make headlines and continue to prove that employees need help.   

Studies have shown investors, when asked whether their company’s stock or the S&P 500 is more risky, consistently point to the S&P 500. One of the reasons people have a lot of company stock is when you’re looking at ten investment options, none of which you recognize, but you work for the company, familiarity makes it feel safer.” Lower salaried workers also tend to rely on company stock.

Other staggering results show one-fourth of 401(k) participants closest to retirement (those sixty years old or older) invest more than half of their workplace retirement plan in their company stock. Some of those older workers take even bigger risks: 15 percent of sixty-year-old or older workers invest more than 80 percent of their portfolio in their company stock.

Real savers have budgets and have acquired good spending habits. Saving is a skill that has to be learned. People need to learn these skills and become better informed. Research articles on topics such as finding money to save and how to choose the right mutual fund.    

It’s obvious that people have issues and they need help with managing and investing money. People that know the value of saving are investing in the wrong products. Remember Enron? You should never invest more than 10 percent in your company stock. Follow these guidelines to help you gain control of your investments:

1. Contribute enough to get your employer’s match.

2. If you’re not sure of how to invest, consider a target fund that matches investments to your age or planned retirement date.

3. Read the article “What you need to know before you buy mutual funds.”

4. Avoid taking hardship withdrawals or loans unless it’s a dire emergency, such as bankruptcy.

5. Resist cashing out small accounts when you leave an employer. The money can be rolled into another employer’s plan or an individual retirement account.

6. When rolling over accounts, try to get the money transferred from one trustee to another rather than taking a check. If you don’t reinvest promptly in an IRA or another 401(k), you’ll have to pay taxes on the money and you could pay a penalty as well.

You work hard for your money. Now make your money work hard for you. The companies no longer offer a pension plan and the 401(k) plan is the only option available in Corporate America to save for retirement. 


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