Jun 11

Is Your 401k Plan a Good One?

If you contribute to a workplace 401(k) plan, you might not be getting your money’s worth.  While many plans are indeed good, others, not so much.  Signs of a good plan include an employer match, low administrative costs and low cost investment choices.  Here are a few things to check to see if you have a bad plan.

First off, administrative, maintenance and recordkeeping fees are generally standard.  However, there are some administrators that don’t follow the norm.  Typically, these fees are based on the number of participants in the plan, not on the value of the assets.  If your administrator charges you a percentage on the total assets, you should probably look elsewhere.  Speaking to the administrator may also help lower the percentage as the assets increase.

Is Your 401k Plan a Good One?Next, your investment options will have funds managed by your plan’s provider, however no fund company can offer you the best choice in every asset class.  Make sure you have other lower cost options throughout all the classes.  Often, the funds offered may be more in the provider’s best interest not that of you and your employees.

Beware if you have a group annuity plan.  These plans offer mutual funds or annuity sub-accounts that are ‘wrapped’ into a group annuity.  These types of investments are expensive and complicated and don’t offer you many benefits.  It might even be hard to change providers if you have one.

Lastly, make sure you have a wide array of index funds offered across several asset classes.  These investments are usually low cost and easy to understand and a staple for many savers.  Options should include an index fund that covers both domestic and foreign stocks as well as domestic bonds.  This helps investors better diversify his/her portfolio.

There are other red flags to be aware of and these or more thoroughly discussed in this article from Investopedia.  If you have any questions, please contact one of our 401(k) Experts @ 800.472.0646.

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Feb 25

Hot to Succeed in Saving for Retirement

Hopefully, everyone knows how important it is to save for retirement.  There are many ways available to do this.  The most common is the employer-sponsored 401(k) plan.  If your job offers a plan, you should be investing in it.  If not, there are other alternatives such as an individual retirement account (IRA).  Further, if you have any self-employment incomes, such as from freelance work, contracting or a side business, you can look to fund a Solo 401(k) plan.  No matter your options, it’s important to follow some basic guidelines to investing.

When saving for retirement, do so effectively or pay the priceFirst and foremost is to invest as much and as early as you can.  If you were automatically enrolled in a plan, you’re probably only save 3-4% of your annual earnings.  That’s not nearly enough to retire on.  Try to get that percentage to double digits as soon as you can.  Plus, the earlier you start saving, the more compounding will help your nest egg.  Investing a smaller amount right now and letting it grow will serve you better than a lump sum 20 years down the line.  As we’ve seen over the last decade, the stock market is a roller coaster of a journey.  The more time you have to save, the less the monthly/yearly swings of the markets will effect your savings.  Over the long haul, you will see gains, so don’t worry too much about the fluctuations of the market.

In conjunction with that is to make a plan and stick to it.  Trying to time the market (buy low and sell high) is not something even professionals succeed at too often.  In time, you will see nice returns on your investments.  The one thing you should do at least annually is rebalance your portfolio.  Your asset allocations will fluctuate with the market.  With this, you might be putting yourself at a higher (or lower) level of risk you’re comfortable with.  This move will also give you a better chance of selling high and buying low.

Next, be sure to take into account the fees associated with your plan.  Index funds are a great way to keep fees to a minimum.  You might think a few hundred bucks a year doesn’t matter all that much, but multiply that by 40 years and you’ll look at those small percentages a little differently.  If your plan looks like it costs too much to run, speak to a representative to see how you can lower those fees.

Speaking of index funds, they have several advantages over actively managed funds.  As stated, they are usually less expensive.  They typically outperform the latter as well.  Plus, they have low turnover which is great for taxable accounts.  Lastly, they’ll help keep your investments in line with your overall savings goal.

Lastly, if you are self-employed you may not even have a retirement plan.  A Solo 401(k) lets you save for retirement and choose the investments you want to make.  The Solo 401(k) offered from the IRA Financial Group will let you invest your money any way you choose.  We aren’t looking to sell you on a product, but we can help guide you to make sound investments.  You may not know that you can invest in other things other than the typical stocks, bonds and mutual funds.  You may flip homes or rent out real estate properties, invest in small businesses and even hold precious metals in the plan.

Different retirement plans offer different advantages.  Find out the best one for you and start saving for retirement.  The tax experts at the IRA Financial Group can help you out.  Contact them at 800.472.0646 or visit their website today!

May 30

Tips to Boost Your 401k

The markets are doing well, 401k balances are reaching all time highs, but that doesn’t mean you just feel secure.  The crash of 2008 is not a distant memory.  You should be doing everything you can to make the most of your 401k plan(s).  Here are a few tips from MarketWatch.

The first tip is to invest in index funds.  This will reduce expenses and reduce asset turnover (which will also keep expenses down).  As a result, diversification will be improved and it’s the best way to control the exact asset classes in your portfolio.  If your plan does not have index funds in some asset classes, look at exchange traded funds or ETFs.  “Otherwise, remember that if you have access to an asset class (small-cap value stocks, for example) only through an actively managed fund, it’s more important to have that asset class than to hold out for only index funds,” says contributor Paul Merriman.

Utilize these tips to improve your 401k savingsNext, you contributions should be automatic.  Don’t look at a bear market and decide not to contribute.  In fact, this is one of the best times to invest.  You can buy assets at “below-average per-share prices”.  Deciding to contribute no matter the situation will take a lot of stress out of your retirement planning.

An easy piece of advice to stick with is to save as much as you can.  Even if you can’t afford to contribute the maximum every year, select a percentage of your pay to contribute, not just a dollar amount.  When you get a raise or bonus, more money will go towards your retirement.  Trust us, you won’t regret saving more now in the future.  You can go back in time to save more so do it now while you still can!

Lastly, don’t get too overconfident in the markets.  They’ve done staggeringly well over the last 12 months or so, but every investor knows that will change sooner or later.  The younger you are, the more risks you can take.  However, as you near retirement, you should look to include more bonds in your portfolio.  You don’t have as much time to makeup for a down year in the market.  If you are younger than 40, you should have mostly stocks, the reward is worth the risk and you have plenty of time to allow the markets to correct themselves over the years.

Utilize these bits of advice to make saving for retirement a little easier to take.  If you have any questions, contact one of our 401k experts at the IRA Financial Group today!