Tools to Help You Build Your Retirement Accounts
Company-sponsored 401(k) plans may feature matching contributions from your employer, and automatic enrollment, rebalancing and contribution escalators, to name a few. Even if you don’t have these options, you can still model your retirement investing behavior after some of these plan features.
If your retirement plan doesn’t offer automatic enrollment, ask what you need to do to join. If you don’t have a workplace plan, make it your mission to research the qualifications and contribute to an individual retirement plan.
Before you start a new job, forecast your take-home pay for your monthly budget after subtracting a number like 10% for retirement contributions. (Remember that your contributions will likely be tax-deductible.) Start contributing as soon as you’re eligible.
When you get a raise, why not put the extra money into a retirement account? Employers often do this automatically for plan participants who receive raises. If yours doesn’t, request to change your contribution level.
Some people don’t enroll in 401(k) plans because they don’t want to have to choose among investments. So some employers automatically put employees’ contributions into target-date or balanced accounts for them. Do the same if you don’t want to choose among investment options.
If you choose your own investments in a workplace or other retirement plan, it pays to diversify.* To keep your portfolio diversified as planned, you’ll need to rebalance it every six or 12 months.
*Diversification cannot eliminate the risk of investment losses. Past performance won’t guarantee future results. An investment in stocks or mutual funds can result in a loss of principal.