In a recent Wall Street Journal article the writer gives those who are getting within 10 years of retirement six very useful ideas about getting their 401(k) plans prepared for the day they will actually leave work.
- If you haven’t done it lately, review your 401(k) investment mix.: Typically after people enroll in employer-sponsored plans and make initial investment choices, they forget about how their money is allocated in the plan—sometimes for years. Don’t let this happen to you. It may mean that just as you should be getting more conservative you are actually increasing your risk.
- Beware of the rate sensitivity of fixed-income funds you own in your 401(k).: Bonds traditionally were the safe-haven choice for near-retirees, but the bond market has changed and rising rates could result in losses just as retirement approaches. Not all bond funds are created equal and caution is the watchword in today’s bond market.
- Look for greater variety within your 401(k).: When advisers construct portfolios for clients, they often include a mix of U.S. and international stocks, multiple types of bond exposure and, increasingly, “alternative” investments such as commodities and a variety of hedge-fund-like strategies. So should you.
- Use IRAs and other accounts to complement your 401(k).: Too often people who change jobs leave their 401(k) behind at their previous employer. When you leave, roll your 401(k) money into an IRA and don’t leave “orphan” accounts behind and unattended.
- Check whether your 401(k) plan includes a brokerage window, or self-directed account.: if your plan allows you to make your own investment decisions, you can often get greater variety and better asset allocation options than are offered in most 401(k) plans.
- Consider getting professional advice. : As you would expect we are 100% behind this recommendation. In fact, if you want guidance with your 401(k), call us and see what we can do for you.