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Tips on managing your 401 (K) plan

- Alan Lavine and Gail Liberman

The American Instiute of Certified Public Accountants suggests that if you're working, you should take these steps to plan for retirement:

  • Sign up for your company's 401(k) plan if it's not done for you automatically. Be sure to take advantage of matching contributions provided by your employer.

  • Know your investment choices and all that's available at work. A growing number of plans will automatically enroll you in a 401(k) as soon as you're hired unless you specifically opt out. Many offer a program that will gradually boost your contributions according to a preset schedule--say, an extra 1 percent of your salary annually, until you hit the maximum. Overwhelmed by the investment options in your 401(k)? No problem. Many plans let you direct money to a target-date fund, or life-cycle portfolio. These do the investing for you. Or, you might be able to turn over your account to an independent financial adviser who will custom-tailor a portfolio for you. When you're finally closing in on retirement, some plans even will help you convert your account balance into a monthly income that will last the rest of your life--in effect, providing the equivalent of a traditional pension. Examine all your options.

  • Stay on top of your 401(k) plan. If you don't have the time or you just don't want to be bothered, the do-it-for-you option may make sense. It definitely beats not participating in your plan at all. But keep abreast of what's going on.

  • Consider the new Roth 401(k)if your company offers it Unlike with a regular 401(k), you pay tax on the money you contribute. But come retirement time, withdrawals are tax-free, much like they are with a Roth IRA.


    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

    To read more columns, please visit the column archive.

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