Getting the Most out of Your 401(k): Develop a Solid Investment Plan and Follow It

Here is tip #4 of our seven-part-series to help participants get the most of their 401(k) plans.

Saving for retirement is about so much more than money. It is about providing yourself peace of mind; the kind that comes with knowing you will be comfortable and ready for retirement when the time comes.

To benefit from your 401(k) plan, you don’t need to be the next Warren Buffet or Peter Lynch. In fact when first starting out, the decision of where to invest your money is probably the least important thing.

Developed a Solid Investment Plan

Most plans today offer a series of Target Date Funds (TDF); if your plan does, simply select the fund closest to the year in which you are likely retire and they will manage your funds accordingly.

If your plan does not offer a TDF series, look for a single broad market fund, like an S&P 500 index fund, which will offer balanced returns. Either of these options would be a reasonable first place to start investing your contributions. Then as your account grows larger, you may review your holdings and strategy with the help of a professional.

Follow Your Plan

Once you have accumulated a healthy account balance, you’ll want to develop a well-diversified investment plan covering most market segments.  A well-diversified portfolio will help reduce the risks associated with stock market investing. Most plans enlist the services of financial professionals to assist participants in this regard.

Tip number 5 is next! Click here to read the next tip!