Year End 401(k) Housekeeping

We’ve all heard about the retirement savings shortfalls here in the United States. I spend a ton of time at my 401(k) participant meetings convincing them to save more. So here’s a list of things you should do in your 401(k) plan before year-end.

1. Increase your deferrals. Almost every book or article you read discusses the need to save at least 10% of your income. I challenge participants to save that amount. If you aren’t at that level now, you can adjust your withholding by 1% every six months. That way it is gradual and doesn’t hit you all at once. You could just enroll in auto-increase if your plan has that feature. Try to at least contribute enough to get the full match.

2. Do a review of your 401(k). Set up a regular interval to review your allocations. If you have an advisor for your plan, consult with him or her about it at least once per year. Better yet, some plans have auto-rebalance that will adjust your investments when they are out of balance from their normal percentages.

3. Include your 401(k) as part of your overall portfolio. I try to look at this with my plan participants during reviews. You may want your plan to have a similar allocation to your personal investments. In some cases it could be allocated very differently. The point is, don’t forget about it.

4. Review any changes to the plan. Sometimes I have to replace an investment or two due to underperformance. Other times investments get added to expand your choices. Make sure you keep up with these changes. You may want to replace or include some of the newer options for your asset allocation. You may want to be aware if matching options have changed. On occasion employers drop or increase their annual match, or the inclusion of the Roth option.

These housekeeping tips are not a one and done. They have to be repeated at least annually. Your 401(k) is a great benefit, so take full advantage of it. If you’d like a review of your retirement plan, write me at david@lexwealth.com, or call me (859) 225-2596.