How to Review a 401 K Investment Policy Statement
The 401k investment policy statement is a tool to help you manage your retirement funds.They can be a combination of stocks, bonds and mutual funds. Many employers offer 401ks as an option in your salary plan and may match up to a certain percentage you contribute. Here is a guideline to help you review your statement.
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Instructions
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Review your 401k statement twice a year. The current state of the economy can affect your investment's performance, so you may need to make adjustments to account for these conditions.
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Check your contribution amount. This is total money you have added to this account during the current year. Find out the maximum amount you can contribute for the year (see Resources). If your company matches your 401k contribution amount by a percentage, look on your statement and add it together with your contribution amount for a total. If it is below the maximum allowed and it is close to the end of the year, you may want to increase the percentage you add to your 401k.
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Look at your transaction details.This is money that you have withdrawn or deposited. Make sure that the statement reflects any changes you have made to your account. If not, contact the investment company right away.
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Adjust your 401k investments based on when you want to retire. If you are more than five years away from retirement, consider more aggressive, riskier stocks. Otherwise, put your money into safer investments, like bonds.
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Consider investing into "target" mutual funds.These funds will have the year of your expected retirement in its title (for example, 2010 Sample Mutual Fund). Funds will automatically be adjusted to more appropriate types of investments based on how close you are to retirement. If you use these types of mutual funds for your 401k, do not mix it with other types of stocks as it will conflict with your plan.
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If you are 50 years or older, take advantage of the "catch up" provision, which allows you to make additional contributions to your 401k past your normal maximum contribution amount. The average is around $5,000.
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Check your 401k investment policy statement for excessive charges by your brokerage company.These can include trading costs and commission fees. If you have a broker who helps you allocate your 401k money, be sure their fees are no higher than 2 percent.
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Compare your 401k investment fund's performance with stock market benchmarks, such as the S&P or Dow Jones. It will help you get a better picture of how well your money is working for you.
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