401(k) Investing: A Tool to Help You Know


1.) Start now

Throughout your life, there will always be excellent reasons available as to why you absolutely can’t start saving for your retirement right now. You need to pay off student loans. You need to have a wedding and buy a house. Babies are expensive! You need to invest in your start-up that will make you rich. The family needs a bigger home and a bigger car. You need to keep up with the Joneses – one must project success to become successful! The kid’s college fund. Health insurance. Helping aging parents and wayward sibblings.

2.) Save at least 5% of your pre-tax income

Save at least 5% of your pre-tax income for retirement, no matter how poor the plan offered by your employer is. A lot of people let the employer’s plan dictate their savings. If the employer only matches 2% of contributions, they only contribute 2% and so on. Don’t fall prey to this type of thinking.

You can save as much as you want – employer matching is just a bonus, not a yardstick.

3.) Check available options

Sometimes a 401(k) is the best choice. Sometimes other investment opportunities are better. It’s all down to individual circumstances. You might want to engage in some risk management by having some of your retirement savings in a 401(k) and some of your savings (retirement and other) spread out over alternative investments. Don’t forget to check applicable tax law.

4.) Be active

Be active and informed. It’s your future. Don’t just sit back and let your employer make all the tricky choices regarding your 401(k). Get involved. It’s your future, it’s worth giving a damn about. Who do you think cares the most about your quality of life in your golden years; you or your current employer?

Yes, being involved takes time and effort, and it is also scary. It feels safer to sit back and then blame others if the savings take a plunge.

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