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managing your 401KMore than 73 million Americans actively participate in employer-sponsored defined-contribution plans such as 401(k), 403(b), and 457 plans.1 If you are among this group, you’ve taken a big step on the road to retirement, but it’s important to understand your plan and what it can do for you. Here are a few ways to make the most of this workplace benefit.

 1. Take the free money.

Many companies match a percentage of employee contributions. When managing your 401(k) plan, you should aim to receive a full company match and any available profit sharing. Some workplace plans have a vesting policy requiring that workers be employed by the company for a certain period of time before they can keep the matching funds. Always find way to take the free money.

2. Bump up your contributions.

Saving at least 10% to 15% of your salary for retirement (including any matching funds) is a typical guideline, but your personal target could be more or less depending on your goals. Managing your 401K plan enables you to defer income taxes on the money you save for retirement, which could enable you to save more. In 2016, the maximum employee contribution to a 401K plan is $18,000 ($24,000 for those 50 and older).

3. Rebalance periodically.

The percentage of your portfolio dedicated to certain types of products or vehicles should generally be based on your risk tolerance and planned retirement timeline. But results from those products can drift over time. Rebalancing your plans so that it remains in line with your overall retirement goals. Consider reviewing your portfolio at least annually and learn retirement strategies for people 55 and older.

4. Managing your 401K by knowing your vehicles.

Examine your  options and choose according to your personal situation; some employer-sponsored plans may automatically enroll new employees in default plans. Many plans have a limited number of options that may not suit all of your needs and objectives, so you might want to add additional funds outside of your workplace plan. Just remember to make choices that best suit your long term goals.

5. Keep your money working.

When managing your 401K, some plans allow you to borrow from your account. It is generally wise not to use this option. But if you must do so, try to pay back your loan as soon as possible to give your nest egg the potential to grow again. Remember that all products and vehicles are subject to market changes, and they come with risks!  Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty.

Source: 1) American Benefits Council, 2014


Freeman Owen, Jr -Retirement Specialist

There is expert guidance available to you for your retirement planning goals. Start by managing your 401K. Let me help you get it done right!

Meet me for a FREE retirement strategy consultation at my office at (866) 471-7233 | MD, VA & DC.