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Some Hot Tips worth Looking into for Your Retirement Savings
from: Pat MoauroAt one time, safety features weren't needed in car design. Neither were they needed in a 401(k) account, but that's no longer true.
Here are some suggestions and tips to watch for:
1. Save automatically
Twenty-five percent of eligible workers don't or decline to sign up for a 401(k) plan. Workers who don't sign up are risking their future. As well, about $30 billion in company contributions are unpaid.
If only a few rank-and-file workers participate, contributions by higher-paid workers are limited as required by IRS rules. An increasing number of companies now have automatic 401(k) enrollment; however, employees can still choose to opt out.
Twenty-five percent of large companies have employees automatically enrolled in the 401(k). However, this means many new employees are in a conservative investment that may not be enough to beat inflation.
If you're one of those higher-paid employees, you may want to move your money into a stock fund to take advantage of long term growth. You may also want to boost your contributions each year until you reach your maximum contribution limit.
2. Simplify your investment
During the late 90s when the stock market was going up, giving workers more investment choices was the rage. A few companies introduced new options and some offered 'brokerage windows' letting employees invest their 401(k) savings in an array of funds and stocks.
True-blue investors loved the choices and unfortunately the increased amount of trading drove up costs. Most workers didn't choose at all.
If you don't want to mess up your 401(k), simply tell your company to add a life-cycle or a target-maturity fund. You can also invest your savings in a balanced-fund option. A 60% stock to 40% fixed-income ratio is still a good choice.
3. Seek a low-cost alternative
Anomalies in mutual funds and awareness of high, hidden fees are causing some employers to explore other forms of savings in addition to mutual funds. A commingled fund is an available option in which the service provider combines small employer contributions to reduce costs.
The problem with commingled funds is that they aren't publicly traded and investors usually have less information about how the money is invested. When your plan is offering mutual fund alternatives, make sure to compare costing for long and short term plans.
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