PPT: Thinking About Retirement

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Professional Tip Tuesday

First off, I really do like my company. However, after a whole 8 days on the job.. it's time I start thinking about retirement. So today's Professional Tip Tuesday:

Understanding 401k basics.

Figuring out a 401k plan is one heck of a beast. The truth is, I am not sure I even understand the surface of it all yet. But after some digging, I wanted to pass along some of the important info I found. This is a big topic, so I will share more on this in the future too.

Here are the big 3 factors to focus on with a 401k plan: 

1) Take it for all it is worth. 

• A good company plan will match a percentage of what you designate to your 401k. Read the fine print carefully. 
• It might read something like: "Company will match 3% of up to 6% of your income." - 
• Translation: "You can put in up to 6% of your salary and the company will match a portion of that!" 
• If you can afford it, give that full 6 percent so you can take full advantage of the company's matching policy. We are used to having a small income in college. So subtracting that small percentage out of our bi-weekly paycheck will barely phase us. Plus, this will make it so you have a lower taxable income which is just one more positive to add to the list! 

2) Do not just pick the default plan. 

• The list of the 401k plan's might be kind of overwhelming. But make sure you are checking into that default plan so you know what is right for you. Some of those autopilot plans are too good to be true! 
• Google the default option. Take a look at it's past, current, and future performance to get a good idea of what you can expect. 

3) Do MORE research.

• Something to especially look out for when picking your 401k investments are the fees. Especially with those general mutual funds - many fees are typically between .5-2% of what you are investing. That adds up quick and just loses you money. 
• A little hidden gem I found - Index Mutual Funds. There are less fees associated with Index Funds and there is less turnover. So you often will get more for your money. Here is an article on U.S. News that explains more about why this is something worth looking into! 
• BUT make sure to search your options. Like I said, just type the stocks, mutual funds, and index funds into Google and you will find a wide array of results. This will help you make a better judgment on how different investments might do over time. 

So that is what I have found so far. I think I am going to "Choose my own plan" which is an option with my 401k and split my contribution between a few different options. What experience and tips do you have for picking the best 401k plan? Comment below and that might drive the future posts on this topic!