• Briefly Noted
  • If Your 401(k) Could Talk…

    If your retirement plan could talk, what would it say? Actuarial consultant Milliman imagines it would bring up 10 important points.


    1. Save More. Citing data from Fidelity showing an average account balance of $75,900, Milliman says employees are not saving enough for retirement.
    2. Figure Out How Much You Need for Retirement. Nearly 60% of those who have used a calculator to estimate required retirement savings say they save more as a result.
    3. Know What You Are Paying in Fees. Review what you are paying in fees regularly and take actions to reduce them when possible.
    4. Diversify. If too much of your savings is in one place, your account could be hit hard by losses in one investment, so diversify across different assets.
    5. Take Advantage of Compounding. Compounded returns can have a dramatic impact on your wealth by allowing you to earn profits on both your contributions and your investment gains.
    6. 401(k) Loans Are a Double-Edged Sword. When you borrow from a 401(k) plan, you are paying yourself back on an aftertax basis. When you retire and take distributions, you will pay taxes on that amount again.
    7. You May Not Be Entitled to Your Entire Account Balance. If your employer has a vesting period for contribution matches and you leave your job, you may forfeit the amount that has not fully vested.
    8. 401(k) Accounts Are Portable. When you leave a job, you can roll your old 401(k) plan to your new employer’s 401(k) plan or, if you prefer, to an individual retirement account.
    9. Tax Reform Could Affect Your 401(k) Plan. Congress could look to reduce or eliminate deductible contributions to retirement plans as part of a deficit reduction strategy. Congress did this before, in 1986.
    10. Buy Shares in Bulk. By combining employee contributions together, some 401(k) plans may be able to negotiate lower fund fees than would otherwise be available to you.

    Source: “Ten Things Your 401(k) Wants You to Know,” Jinnie Regli, Milliman Insight, January 21, 2013.

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