Your 401(k) Resolutions for 2013
It’s late December, a time when most of us start making resolutions for the new year. While you might be vowing to eat less or get to the gym more, it’s also important to get your finances in tip-top shape. At Schwab Retirement Plan Services, we believe a great place to start is with your 401(k). Here are some ideas to help get 2013 started on the right foot:
- Contribute enough to get the full employer match – A vast majority of the 401(k)s we administer, 73%, offer a matching contribution. If your plan does, make sure you contribute at least enough to get the full match. Not doing so means you are leaving money on the table.
- Sign up for advice – Most 401(k) plans offer some type of professional advice, so be sure to take advantage of it. Data for plans we serve shows that people who take 401(k) investment advice save more, are better diversified and are better equipped to handle inevitable fluctuations in the market.
- Raise your contribution level – Some plans have an automatic contribution increase built in, so as your career (and hopefully, your salary) grows, you’re stashing away a larger percentage of your earnings for retirement. If your plan doesn’t do this automatically for you, make a conscious effort to increase your contribution percentage in 2013.
- Look for low-cost options – Review your investments and check for those with lower operating expenses. For example, index mutual funds may be an effective and less expensive alternative to actively managed funds in your plan. Also make it a point to look over your 401(k) fee disclosure statement and educate yourself on your plan’s fees. Cost matters.
- Evaluate your beneficiaries – If your family situation has changed, your 401(k) account records may be outdated. The start of a new year is a great time to review your list of beneficiaries and update it as necessary.
- Address old 401(k)s – If you’re like many Americans, you’re wondering what to do with an old 401(k) from a previous job. Resolve to explore your options, which include rolling it into an IRA, moving it to your new plan or leaving it alone. If you choose the latter, be sure your investment options reflect your current preferences.
- Don’t touch that cash! – With so many presents to buy, the holidays often leave us a little strapped for cash. But even when times are tough, resist the urge to dip into your 401(k). A 401(k) loan or withdrawal can significantly derail your long-term savings plan (and even trigger taxes and penalties). Remember, this money is for your retirement.
Do you have financial resolutions of your own? Let us know in the comments section.
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The information provided is general in nature and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, attorney, or financial planner.
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