Tag: traditional ira

How to Get Your 401(k) Ready for Retirement

In a recent Wall Street Journal article the writer gives those who are getting within 10 years of retirement six very useful ideas about getting their 401(k) plans prepared for the day they will actually leave work.

  1.  If you haven’t done it lately, review your 401(k) investment mix.: Typically after people enroll in employer-sponsored plans and make initial investment choices, they forget about how their money is allocated in the plan—sometimes for years.  Don’t let this happen to you.  It may mean that just as you should be getting more conservative you are actually increasing your risk.
  2. Beware of the rate sensitivity of fixed-income funds you own in your 401(k).:  Bonds traditionally were the safe-haven choice for near-retirees, but the bond market has changed and rising rates could result in losses just as retirement approaches.  Not all bond funds are created equal and caution is the watchword in today’s bond market.
  3. Look for greater variety within your 401(k).: When advisers construct portfolios for clients, they often include a mix of U.S. and international stocks, multiple types of bond exposure and, increasingly, “alternative” investments such as commodities and a variety of hedge-fund-like strategies.  So should you.
  4.  Use IRAs and other accounts to complement your 401(k).:  Too often people who change jobs leave their 401(k) behind at their previous employer.  When you leave, roll your 401(k) money into an IRA and don’t leave “orphan” accounts behind and unattended.
  5. Check whether your 401(k) plan includes a brokerage window, or self-directed account.: if your plan allows you to make your own investment decisions, you can often get greater variety and better asset allocation options than are offered in most 401(k) plans.
  6. Consider getting professional advice. : As you would expect we are 100{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} behind this recommendation.  In fact, if you want guidance with your 401(k), call us and see what we can do for you.

You're never too young to start thinking about retirement.

For most 20-somethings, the idea of retirement isn’t front and center. It isn’t even a glimmer.  But it ought to be.  This is especially true for young people today, many of whom believe that Social Security will not be there for them when they retire.  When you’re young the most valuable resource you have is time.

Time provides you with the power of compound interest.  Albert Einstein called it the “greatest invention of all time. ”  For example, a 25-year-old who starts saving just $600 a year could have $72,000 at age 65, nearly twice as much as someone who saves $1,200 a year beginning at 45, according to calculations by LearnVest, an online financial-planning service.

Retirement may be 40 years away, and your paycheck may small, you may have rent to pay and student loans to pay off, but saving even small amounts early on can make a big difference.  Many employers offer 401(k) plans that offer a company match, which is “free money” to the employee.   The money grows tax deferred, or if it’s a Roth plan it grows tax free.  These plans are often among the single biggest pools of funds that people have to draw on when they retire.   If you don’t work for a company that offers some kind of a retirement plan, start your own by contributing to an IRA or a Roth IRA.  The best time to begin was yesterday, the second best time it today.

 

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