8 Tips to Having a Supercharged 401(k)

For many, the 401(k) is one of the largest asset they will own in their lifetime. Don’t you deserves to have a “lean mean muscle machine” of a plan? Everyone should take the time to speak to a financial advisor to ensure they have the most efficient 401(k) possible. Here are eight tips to get you started:

1- Contributing enough each pay period to get the full company match is a smart decision in every case.

2- Knowing the expected rate of return of your 401(k) portfolio is essential to determining whether you will have adequate retirement income. Unfortunately, few plans provide an annual analysis to tell you the expected return and fewer participants know how to figure it out.

3- Knowing the expected range of returns of your 401(k) portfolio is important so that in a down market you are not caught off guard by having more risk in your portfolio than you can afford to take.

4- Rebalance your portfolio at least annually.

5- Be aware of the fees that are associated with your account. High-fees are a prime cause for poor performance. Remember, the investments in your 401(k) charge a management fee (the expense ratio) and the 401(k) provider also charges a fee.

6- Have funds from various asset classes in your portfolio to ensure adequate diversification.

7- Participants, regardless of how much investment education they receive, will not be able to design a portfolio as well as an unbiased professional. Unfortunately, the majority of plans are sold by salesmen who often direct investments into funds that make them more money. Speak to a fee-only financial advisor who does not get paid a commission on the products he recommends because he can provide objective advice.

8- Be sure to contribute enough to reach your retirement income goal. One way to know if you are on track is to have an annual retirement income analysis completed. This information would indicate if your current plan along with future contributions will provide the income you plan on having when you retire. After all that is the purpose of the 401(k) in the first place.

If you need help with any of the above issues, be sure to speak to a fee-only financial planner. Click here for more information about Net Worth Advisory Group’s current special: fee-only financial planners “tune up” 401(k)s.