Nowadays, securing funding for your retirement comes in the form of 401(k)s, and for many Americans, that’s the only source they have for building a decent nest egg. 


With few people participating (or able to participate) in traditional pensions, making sure you have a well-balanced 401(k) is your best option for retiring with enough money to continue living comfortably. 


As you contribute to and use your 401(k) plan, pay attention to the taxes, fees, and other rules that mistakenly reduce your savings balance. Here are some tips to always make the most out of your retirement fund. 

Take a Risk Assessment

One of the first things many people do when opening their 401(k) is take a personality quiz. This will give you your investor temperament, telling you how much risk you can withstand when you're investing. 

 

Even though high levels of risk can potentially yield better gains, not everyone wants to be put on that emotional rollercoaster. It's always best to invest the way that is right for you.

Push Past the Default Savings Rate

Oftentimes, new employees can enroll in a retirement account through their employer, and the default savings rate in these initial setups is only around 3%. That means only 3% of your pay is deducted and put in the company’s 401(k) plan for you.


While that’s better than saving nothing, you’ll likely want to save more than that to maintain your standard of living throughout retirement. So, try to increase that percentage whenever possible. When you get a raise, boost your retirement deduction by a percent or two, and make a goal of saving 20% of your pay for retirement. 

Invest in a Targeted Fund

Consider investing your 401(k) in a targeted mutual fund if you don't know much about investments. Targeted mutual funds are mutual funds that are aimed at a specific retirement year; the goal is to keep adjusting your risk and potential profit to be ideal for your current age. 

 

These funds are highly diversified and thus convey relatively low risk compared to other stock investments.

Choose Your Investment Allocation

In addition to choosing targeted mutual funds, you can choose your investment allocation directly by investing in funds that follow specific industries. For instance, if you think that the real estate market will be doing well, you can invest directly in a mutual fund that deals with real estate.

 

This is an excellent way to control your investments while still minimizing your risk, as you won't need to balance your own stock portfolio.

Donate Up to Your Employer Match Amount

Not only should you be maximizing your 401(k) contributions each year, but you should definitely be donating up to the amount that your employer will match. 

 

Your employer's matching contribution is essentially free, untaxed money to you that will grow at the same rate as your account. Just don't forget about vesting. 

 

Your employer's money isn't "yours" until you're fully vested; If you leave the company before you're fully vested, they may take it back!

Know Your Company’s Vesting Process

Some companies require an employee to work for several years at the company before they become fully vested, meaning before the company will pay the match amount to your 401(k) plan. 


Leaving the company before you’re fully vested may mean losing a portion or even all of the matching contributions. Check with your employer on their vesting procedure; thousands of dollars may be on the line. 

Keep Your Investment Growing

It may be tempting to withdraw money from your retirement account early or when you switch jobs. While it may seem like possible cash, remember that withdrawing money before the age of 59 ½ will result in a 10% penalty, and you will have to pay income tax on the amount withdrawn. 


Along with losing the full potential of the money withdrawn from the penalty and taxes, you are also lessening the compound interest you need to grow your savings. That’s more likely to hurt you in the long run, so once money is in that retirement account, keep it there until you’re retired. 

Start Saving for Retirement With One Tech

Need more information on how to manage your 401(k) properly? At One Tech Staffing, we offer qualified employees access to a 401(k) plan with a 50% matching employer contribution and additional employee benefits. Through our 401(k) provider, you can arrange your retirement plan for your family's goals and needs.

 

Talk with a member of our team anytime by messaging us on our contact page or calling 952-884-9199.