Setting Up and Managing Your 401(k)
Choosing mutual funds from within a 401(k) retirement plan, or similar defined-contribution plan, can be both daunting and frustrating. Depending on your employer’s plan, you may have a large number of funds to choose from or a limited amount. If the funds are primarily institutional funds, they can be difficult to research. That’s not to mention that you will be handed a large folder or directed to a website to find answers to many of the questions you might have.
Potentially adding to the confusion is the growth of default options. Many employers now enroll workers with a pre-specified contribution amount and pre-select a fund choice (typically a target date fund). The goal is to get employees enrolled and saving. Though effective for getting workers to set money aside for retirement, it may not be the best option for you.
In this article
- It Starts With Allocation
- Maintain Your Diversification Benefits
- Choosing Funds
- Target Date Funds
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Fortunately, there are some basic guidelines and strategies you can follow to take control of your 401(k) plan. You will still need to read through the plan documents and navigate through the plan’s website, but with a little bit of effort, you can better position yourself to achieve your financial goals.
It Starts With Allocation
The key to constructing any portfolio is allocation. You want to include both assets that will grow your net worth and assets that will help preserve what you have already saved. This means combining stocks and bonds. These are your building blocks and your road map. Your very first decision is determining how much of your portfolio should go into stock funds and how much of your portfolio should go into bond funds.
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