Does it feel like someone has robbed your retirement? Job losses, economic slowdowns and stock market volatility are guilty of assaulting your 401(k). In response, many companies have locked down their 401(k) matching contributions since 2008. But here in 2010, less than half have reopened those jail doors and begun to reinstate those cuts. What’s a person to do?
Take control! After all, this is about your retirement, not someone else’s.
1) Keep contributing: Stopping your contributions because the company stopped contributing doubles the personal pain and stops any gain.
2) Invest wisely: Fewer dollars going into your account means you need to manage them all the more carefully. Talk to your company’s HR director about investment education from the company, the 401(k) provider or an outside advisor.
3) Get fee savvy: Ask your employer about all the fees associated with the plan and who pays them. If some or all of the fees are paid by the employees, ask your employer to consider additional fee sharing. And, make sure you select low-cost options in each investing category. The internal expense ratios of your investments are guaranteed to erode your returns.
4) Adopt a “no-loan” policy: Don’t allow current conditions to damage your future. Loans from a 401k may seem easy, but the cost is heavy. Not only do you pay the loan interest out of your own pocket, but if you default on the loan or leave the company, your loan balance immediately becomes taxable income.
Too many 401(k) participants take their plan for granted. Stop it. Read the Summary Plan Description, ask questions and request improvements where they are needed. You can’t control the economy or how much your employer does/doesn’t contribute. But you don’t need a taser gun to avoid being the victim. Take control where you can and quit feeling victimized by what you can’t control! It’s your retirement.
D. DRUMMOND OSBORN, CFP, is a Certified Financial Planning practitioner and Director of Wealth Management at OSBORN Wealth Management, where he focuses on retirement planning and investment management. Have a personal finance question? Visit him on the web at www.osbornwealthmanagement.com or e-mail him at Drummond@osbornwealthmanagement.com.
