401k Asset Diversification
Most companies offer their employees the option to participate in a 401(k) plan. We encourage every employee to participate in these qualified plans for 2 primary reasons:
- The money can be invested before taxes are taken out, therefore, your taxable income is reduced.
- Almost all company plans will ‘match’ the funds invested up to a certain percentage. We strongly recommend that, at a minimum, you always contribute enough to be eligible to receive the full company match. (This is one of the few times you will have access to “free money”!)
These plans offer the employees a menu of investment options which leaves the investor asking “What options do I choose and why?” The right answer depends upon many factors such as:
- Your age
- Your other investments
- Your goals
- Years to retirement
- Your risk tolerance
As part of our normal client reviews, We analyze the 401(k) investment options and make recommendations based on the factors listed above.
We realize the information that is given to you regarding the options can be daunting so here are some tips to consider when reviewing the list of available investment options:
- Diversify your investments! Which means do not over invest in any one sector, such as technology, or any one investment style, such as growth stocks or value stocks. And remember your investments should include those that you have outside of your 401(k) plan such as individual IRAs, Roth accounts, trading accounts, etc.
- Watch your plan – look at your statements at least semi-annually and always consider making changes to your investment mix depending upon life and market circumstances.
- Be sure to always keep the beneficiaries of your 401(k) in mind as life events happen: marriage, births, deaths, divorce, etc. and be sure to update your beneficiaries in your 401(k) as well as your other investments.
For most investors, their 401(k) is just one part of their investment portfolio so it is often prudent to meet with a financial advisor that will help you determine the right asset allocation to choose for your individual circumstances. This is the perfect time to contact us. We will be happy to make recommendations for you that are personalize to your goals and objectives.
If you have recently left your employer due to a job change, retirement or otherwise, you may be wondering what to do with your 401k. There are a few options available to you. Debbie covers the 4 main options in this video.
Any opinions are those of Debbie Craig and not necessarily those of Raymond James. 401(k) plans are long-term retirement savings vehicles. Withdrawal of per-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal penalty. Diversification and asset allocation do not ensure a profit or protect against a loss.