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.
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