Broker Check

Maximizing Your 401k

| September 15, 2020

By Kristi DeRycke, Registered Assistant

When is the last time you looked at your 401K? No not the balance. I mean really looked at your 401K.  What funds are you in? What is your balance between stocks and bonds? What are the fees on your funds?  By tweaking your 401K you can make a big difference in the balance of your 401K for the day you eat that cake and carry your box of personal items out of the office. Do a quick screen on the following things:

  • Are you getting all of the free money? Are you putting enough in to get the full company match? Most companies will offer a 50% or 100% match up to a certain percentage that you contribute. Consider putting at least that amount into the 401K. The company will then give you money to match which is the equivalent of a quick raise. 
  • What funds do you have your money invested into? Do you consider yourself conservative, moderate or aggressive? Does your balance of stocks and bonds equal that risk level? 

    You may be able to choose a target date fund with the date that you expect to retire. These target date funds slowly decrease the amount of stocks and increase the amount of bonds the closer you get to that date.

  • Do your funds have a low expense ratio? The lower ones mean that you pay less to be invested in it.  There may be some low cost index funds options to choose from but if not consider the expense ratio for each fund that you are invested in and compare them to other options in your 401K. You should be able to look up each fund’s performance as well. Keep in mind that expense ratios are not the only thing to consider. You would want to balance that with the fund’s performance compared to the other options in the portfolio.

  • Do you have a mix of domestic and foreign stocks and short term and longer term bonds? 
  • Set your contribution to be automatic so it increases by 1% every year matched with a raise. That way if you have a 2% cost of living raise (you will give your retiring self a 1% raise and the current you 1%). 

Did you know: Greg Johnson with Johnson Insurance is an approved advisor for 401Ks at certain companies including Unity Point, John Deere, AEGON, University of Iowa, University of Northern Iowa and Pella Windows? We have a complete listing of companies that we are approved on so please call with any questions. 

By Greg Johnson

Spending a little time getting familiar with your 401k plan can be extremely helpful.  If you are busy and don’t feel comfortable reading or trying to understand what you are reading, then contact us for help.  We work with people all the time in helping them truly understand and maximize their 401k plans through their employers.  There is nothing wrong with asking for help from a professional and I would rather assist you now while you are still contributing than wait until you are ready to retire to get serious about retirement plans. 

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