3 Pieces of 401(k) Investment Advicehttp://www.fool.com/retirement/401k/2014/06/07/3-pieces-of-401k-investment-advice.aspx Nicole Seghetti
June 7, 2014
Your 401(k) is the best option for ensuring you retire when and how you want. But it's not likely your employer offers much 401(k) investment advice, making it important for you to gain as much knowledge as you can. Here are three ways you can best manage your 401(k).
1. Read your materials
By not reading your materials, you could be missing out on valuable pieces of information regarding your plan. Ask your HR department for a copy of your summary plan description, or SPD. That's a plain-English document that provides you with the ins and outs of your plan. Learn about your possible company match and profit sharing, 401(k) loan provisions, and much more.
2. Pay attention to fees
Small improvements in plan fees can pay off big-time. A Government Accountability Office study compared the difference between paying 1.5% in fees versus 0.5%. It started with someone with a 401(k) account balance of $20,000 and assumed the investment grew by 7% each year. A person paying 0.5% in fees would have about $70,500 in 20 years, but a person paying 1.5% in fees would have a retirement balance of only $58,400 in 20 years, representing a cost of more than $12,000.
Plan fees fall into three categories: asset-based (mutual fund expense ratios), administrative (record keeping and custodial service fees), and individual participant fees (special-request activity like expedited paperwork and overnighted checks). Historically, these figures weren't spelled out in hard dollars and cents for you, but a 2