Evaluate Your Company 40l(k) Plan
Don't leave your 401(k) account on autopilot. As with all investments, you should review your 401(k) account at least annually. If you haven't done so in a while, use the arrival of your 401(k) statement as a trigger for a review. Be sure to consider the following items:
- Evaluate your investments compared to all investment alternatives offered by the plan. Your investments should be appropriate for your goals. As you age, you might want to shift some of your investments. Or, based on recent market fluctuations, you may want a more diversified portfolio. Selling investments within your 401(k) plan typically doesn't generate tax liabilities, so you can make these kinds of changes without worrying about the tax effects.
- Make sure no single company's stock comprises more than 10-20% of your 401(k) balance. Especially as you near retirement and don't have as much time to recover from market declines, you don't want too much of your balance allocated to one investment. This is especially important if that investment is stock in the company you work for.
- Review how much you are contributing to the plan. Over time, you should strive to increase the percentage of your income that is set aside for retirement. One way to do that is to immediately allocate any salary increases to your 401(k) plan. At a minimum, make sure to contribute enough to take full advantage of any employer matching contributions.
- Check your statement for errors. Always check your statement to make sure all payroll deductions and employer matching contributions went to your account and that the proper investments were purchased with those funds. If you have a loan, verify that the balance is accurate and that loan repayments have been properly applied.
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