401(K) Review And Rollover Rewarding


Your 401(k) offers tax-deductible contributions, tax-deferred growth of earnings potential and a variety of investment options — so it’s a great tool for building retirement savings. Yet like all tools, your 401(k) must be used properly to get the best results. That’s why you should review your 401(k) at least annually and make adjustments as needed.

Depending on where you work, you may get some 401(k) help from your plan provider. But if that assistance isn’t available, you might want to consult with a financial professional.

As you review your 401(k), your first question should probably be:

“How much should I contribute?” At the very least, try to put in enough to receive your employer’s matching contribution. If you don’t earn a match, you are essentially walking away from “free money.”

Beyond this, the amount you put into your 401(k) depends on what other retirement savings vehicles you have available. For instance, if you’re eligible, you may also want to contribute to a Roth IRA, which offers tax-free growth potential, provided you’ve had your account for five years and don’t start taking withdrawals until you’re 59-1/2.

Of course, it’s not only how much you put into your 401(k) — it’s also how you choose to allocate your investment dollars.

Your 401(k) may have a dozen or more investment choices. To choose the right mix, you’ll need to consider a variety of factors, including:

Your age — Generally speaking, the younger you are, the more aggressive you can afford to be with your 401(k) because you’ll have decades in which to potentially overcome the inevitable down periods of the market. As you get older, you may wish to invest more conservatively, but you’ll still need some growth potential.

Your goals — You might want to retire early and travel the world, while your co-worker desires to work as long as possible and then, upon retirement, stay close to home. Because you each have different goals, you may need to follow different investment strategies.

Your other retirement income sources — If you have a variety of retirement income sources you may need to invest differently, perhaps less aggressively, than if you had fewer options for income.

If you have worked at various jobs and acquired multiple 401(k)s, consider rolling them together. You might save money on fees and reduce paperwork, but more importantly, you’ll be able to concentrate your resources and pursue a unified investment approach.

As you can see, a 401(k) review and rollover can reward you in many ways.

Scott Flake is a financial advisor with Edward Jones. He hosts regular investment discussions. For more information, call (928) 468-1470.

This article was written by Edward Jones for use by your local Edward Jones financial advisor.


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