5 Tips to Getting the Most from Your 401 k

Written by: Mike Valles

It is easy just to let others handle your money in your 401 k. While this will enable you to gather money for retirement, handling it wisely and taking advantage of a few simple things could certainly give you much more, which will also make your retirement much more interesting. Here are five things you can do to make your 401 k much more productive.

Take Full Advantage of Matching Funds in 401 k

Most likely, your employer will offer some form of matching funds. This amount will vary between employers, but you should take advantage of this free money by ensuring that you contribute enough to get all of the matching contributions your employer is willing to make. Also, make sure you understand how long it takes to be fully vested, or you could lose a bundle of those matching funds, possibly all of them, says Emily Brandon at USNews. This is the amount of time it takes to keep the money your employer contributes to your 401 k – yes, it may have strings attached.

Use More Stocks to Build Your 401 k Faster

If you are young, you want to have a strong emphasis on the stocks in your portfolio. While a 401 k will offer investments in money markets, they also invest in bonds and stocks. Historically, stocks have been shown to bring in more money over the long term than the other two, says Ibbotson Associates in an article by Fool.com. In fact, stocks alone can produce more than twice as much as the other two combined. If you are closer to retirement, however, it is not worth the risk involved, you should focus more on bonds and the money market.

Avoid Making Any Early Withdrawals

The primary purpose of a 401 k is to get money for retirement. Taking money out of it for any other purpose should not be necessary. There will also be taxes and penalties that you will have to pay for any money withdrawn, and the Wall Street Journal mentions that you cannot make further contributions until the loan is paid completely.

Manage Your Own 401 k

If you have the option to be selective about your particular plan, don’t make the decision too quickly. You can get the most out of it if you take the time to learn more about your 401 k plan options. By understanding how to get the most out of your 401 k based on your age and retirement goals, you will be able to make good choices about diversifying your portfolio between money markets, stocks and bonds. Bankrate.com points out that merely having your money in a 401 k will not necessarily help you reach your goals.

Roll Over Funds When Leaving a Job, Rather Than Withdrawing It

When it comes time to take on a new job, be sure to have the funds in your 401 k rolled over into your new plan instead of having the company write you a check. Remember that when the money is withdrawn, you will have to pay taxes on it. Keep your retirement money intact by having your old company deposit it directly into your new 401 k.


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5 Tips to Getting the Most from Your 401 k

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