The debt crises. Spending cuts. Pension reforms. Modifications to Social Security and Medicare. What does it all mean for you and your retirement? No one really knows for sure. The only thing you can be reasonably sure of, is that the money your socking away now in your 401k will be there when your ready to retire.
There are a few steps you can take right now to get the most out of your plan. Make a plan. Take charge. Guide your own destiny.
Not All 401k Plans Are Created Equal
It’s true. There are good plans and not so good plans. If your plan falls into the not so good category, and your investment choices are a bit lacking, talk to your plan sponsor, who in most cases is your employer.
Your plan sponsor has a fiduciary duty to act solely in the interest of the plan participants(you), pay only reasonable fees and expenses and to diversify plan investments.
A conversion about how bad the investments in you 401k plan have been of late might be all it takes to bring some new choices into the plan.
Fees Really, Really Matter
It’s been shown time and time again how seemingly small monthly fees can have a huge impact on your retirement savings. This is because fees have a compounding effect. Every dollar spent in fees is one less dollar to invest and compound over your lifetime, so read those statements!
Pay attention to the fees assessed directly to your account and talk to your sponsor if you feel they may be excessive. As mentioned above, your plan sponsor has a duty to ensure the fees you pay are reasonable relative to the benefit received.
Some 401k plan fees might be entirely hidden from you or very hard to come by. The reason is that there have been no clear government guidelines or regulations on fee reporting. But that’s all due to change shortly with new fee disclosure rules coming in early 2012.
Increase Contributions
Whatever your putting away every month now, it’s probably not enough so consider increasing your contributions. This is especially true if you feel receiving social security is a long shot.
The big unknown will always be health care. What will it look like in 10, 20, 30 years. Again, no one really knows but it’s a pretty good bet it will be really, really expensive. Health care costs can eat into your retirement savings like nothing else.
Plan
Above all else, set some some attainable goals, get a plan together and stick to it! The key word there is attainable. Be reasonable in what retirement lifestyle you can save for. A good retirement calculator can be found on the AARP website here.
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