In a recent post Eight Financial To Do Items for the Rest of 2014, I outlined several items for your financial to do list for the rest of 2014. One of those items was to review your 401(k) plan. Here are a few more steps to take with your 401(k) plan yet this year.
Review your salary deferral amount
The maximum dollar amount that you can defer from your salary is $17,500 or $23,000 if you are 50 or over at any point during 2014. If you are not on track to max out your contributions now is a good time to see if you can increase your salary deferral percentage even by 1%. In the long run this will put you that much farther ahead in your question to build a retirement nest egg.
Review and if needed rebalance your account
Both the S&P 500 and the Dow Jones Industrial Average have hit a number of new record highs during 2014 on the heels of a very solid 2013. In fact the S&P 500 Index is up almost threefold since the market lows of March, 2009. If you haven’t recently rebalanced the asset allocation of your account back to your target allocation this is an excellent time to do so. Better still if your plan offers auto rebalancing this is a great time to sign up if you haven’t already.
Be aware of any changes to the plan
Fall is open enrollment time for employee benefits for many companies. While changes to the level of your salary deferral contributions as well as to the investment choices you make can be done throughout the year, many companies choose this time frame to announce changes to their plan for the upcoming year. This might include the level of the employer match, the addition of a Roth 401(k) feature, or changes to the menu of investment choices available to you. You need to be aware of any and all changes to the plan and be ready to make any applicable adjustments based upon your situation.
Be cautious when it comes to company stock
Perhaps as a sub-set of the rebalancing section mentioned earlier if your account includes an investment in your company’s stock this is a good time to review how much you have allocated there and if needed pare that amount down. There are no hard and fast rules but many financial advisors suggest keeping your allocation to company stock to 10% or less. The rational here is that you already depend upon your employer for your livelihood; if the company runs into problems you might find yourself unemployed and holding a lot of devalued company stock in your retirement plan.
Get a handle on any old 401(k) accounts
It’s not uncommon for folks to have several old 401(k) accounts from former employers. It’s also not uncommon for these accounts to be neglected and unwatched. If this describes you make this the year to get your arms around these accounts and make some decisions. Roll them over to an IRA or if eligible to your current 401(k) plan. If leaving one or more of them with that former employer is a good decision make sure you monitor the account, rebalance when needed, etc. The point is even if these accounts are relatively small they can add up and help as you save for retirement. Take charge and take affirmative action here.
Understand your options should you leave your current employer
Let’s face it the last part of the year is often when companies do layoffs. If you suspect that you will be impacted in this way you should at least start thinking about what you will do with your 401(k) account. The same holds true if you are looking for a new job or considering going out on your own.
As we head into football season, the kid’s activities at school, and the holidays please make some time to tend to these and perhaps other items in connection with your 401(k) plan. For many of us our 401(k) is our primary retirement savings vehicle, make sure that it is working hard for you.
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