A 401k plan is a common savings vehicle offered by employers that allows employees to make contributions towards their retirement savings. However, simply contributing to a 401k account is not enough. It is important to regularly review your 401k and assess your account to ensure it aligns with your long-term goals and needs. In this blog post, we will discuss three crucial elements you should regularly review in your 401k account.
1. Understand Your Investment Options
The first thing you should do when regularly reviewing your 401k account is to understand your investment options. The investment options available vary from plan to plan but may include stocks, bonds, target date funds, and other mutual funds. The investment options available can change so make sure to review your elections at least on an annual basis. It is important to research and understand these holding options so you can make informed decisions on how to allocate your contributions.
When choosing your investment options, it is essential to consider your risk tolerance. This refers to how comfortable you are with taking risks in hopes of generating higher returns. Gauging your risk tolerance in conjunction with your financial planning goals will play an important factor in the risk level of your 401k allocation.
Once you have constructed your desired allocation, you will want to make sure that you apply the changes to assets currently in your 401k. In addition, you may have to make a second election for all future 401k contributions as well. Working with a financial planner can help you confidently select the right investment strategy to maximize your retirement goals.
2. Review Your Contribution Elections
Another crucial aspect of maintaining a healthy 401k account is regularly reviewing, and preferably increasing, your contribution elections. Most plans allow you to contribute a percentage of your salary, and some even offer employer matching contributions. If possible, try to contribute at least enough to take full advantage of any employer matching contributions. Some 401k plans also allow you the option to choose between making pre-tax, Roth, or after-tax contributions. It is important to regularly review and adjust your contribution amount based on your financial situation and retirement goals. Consulting with your financial planner can help you determine the ideal amount and what type of contributions to make.
3. Verify Beneficiary Designations
Many people overlook the importance of updating beneficiary information on their 401k account. Having a beneficiary listed on your account will supersede any instructions in your will. Therefore, you want to check on this regularly to make sure it is up to date. Life circumstances may change, such as marriage or divorce, which may require you to update your beneficiaries. For example, even if you have been divorced for 10+ years, if your ex-spouse is listed as beneficiary then they will still inherit your 401k assets. Make sure to review beneficiary designations annually or during any major life-changing event (marriage, divorce, new child, job change, etc.) to ensure that your assets pass according to your wishes.
Why You Should Regularly Review Your 401k
Regularly reviewing and checking on these important aspects can help you make the most out of your retirement savings. By understanding your investment options, reviewing and adjusting your contribution elections, and verifying beneficiary designations, you can ensure that your 401k aligns with your long-term financial goals. It is important to regularly consult with a financial planner to make informed decisions and stay on track towards a secure retirement.
Please remember to contact BentOak Capital (“BentOak”), in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that BentOak to effect any specific transactions for your account. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.bentoakcapital.com.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Securities offered through LPL Financial, Member: FINRA/SIPC. Investment advice offered through BentOak Capital, a registered investment advisor and separate entity from LPL Financial.
