As we head into late October, we're about to "fall" into open enrollment season - when employees get a first look at what benefits they'll be offered next year and potentially have the opportunity to change their current coverage selections. While most of the attention is generally on medical insurance, it's a good idea to focus on your retirement as well. So, while you're making the rounds at your company's benefits fair, don't forget to stop by the 401(k) table to get the latest information on your plan. A recent Schwab survey found that half of participants find their 401(k) more confusing to understand than their healthcare benefits*, so this is a great time to ask your most pressing retirement questions.
With that in mind, here are my top suggestions for getting your 401(k) in shape this open enrollment season:
Get out of the waiting room. Many employers have a 401(k) waiting period - a mandatory amount of time workers must serve before they are eligible to enroll in the company 401(k) plan. This could be as long as a year, making it difficult for new hires to keep track of when they're able to sign up. Take this opportunity to ask about your company's policy, and if you haven't been automatically enrolled, sign up for the plan as soon as you're allowed.
Meet your match. I always say that your number one financial priority should be saving enough in your 401(k) to take full advantage of any matching dollars offered by your employer. Not doing so means missing out on more savings for retirement. In the aforementioned survey, 14 percent of people who have access to a 401(k) match said they are not saving enough to receive it in full - don't be one of them!
Step it up. While contributing at least enough to get the full employer match is a good first step, try to boost your contribution level by one percent (or more if you can) whenever you get a raise or bonus. Thanks to the power of compounding, the more you save early on, the more you may have when you reach retirement. The IRS just announced new contribution limits for retirement plans: in 2015, you can sock away up to $18,000 in your 401(k), up from $17,500 in 2014. And if you're 50 or older, you can make additional catch-up contributions of up to $6,000, up from this year's $5,500 limit. With that in mind, consider adjusting your contributions to get closer to the new maximum.
Ask for a second opinion. Many 401(k) plans come with some form of professional investment advice to help guide your decisions and meet your individual retirement goals. Some 70 percent of 401(k) participants surveyed* said they would feel very or extremely confident in their investment decisions if they had the help of a financial professional, but not everyone takes advantage of this benefit. With something as important to your future as a 401(k), it's always a good idea to seek a professional opinion.
Perform a rebalancing act. If your plan doesn't offer advice, or you're a do-it-yourselfer, check your asset allocation to make sure it still matches up with your age and ultimate retirement goals. This is especially important in light of recent stock market moves.
Now that you know which questions to ask and what to look out for, you're ready to give your 401(k) a proper checkup. Happy enrollment season, and happy fall!
*Schwab Retirement Plan Services, Inc. in conjunction with Koski Research, 401(k) Participant Survey, 2014.
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