How to Salvage Your 401k Plan

The recession and bear market have left millions of workers wondering what happened to all of the money they socked away in their company 401(k) plans. Here's a repair kit that can help you to resurrect your retirement dreams.

Difficulty: Moderate

Instructions

1. Increase your rate of savings to jump-start your portfolio. If you haven't been taking advantage of your employer's matching contributions, now is the time to start doing so. But you'll be surprised at the difference that an additional 5 percent contribution can make in a relatively short time.

2. Keep buying stock and stock funds at this point. Don't fly to safety now, because the markets always go up after recession. Get in on the post-recession bull market and see your account value rise with the stock indices.

3. Assess your company stock purchases within your plan. Although it can always be good to own some company stock, be careful about overfunding this portion of your plan. Carefully analyze your company's financial position from an unbiased perspective and find some reliable third-party research before putting more than 10 percent of your plan assets into company stock.

4. Watch the fees and expenses being charged to you in your plan. If your plan is invested inside an annuity contract, you can expect to pay additional mortality and expense fees and insurance contract charges in addition to the standard portfolio management fees and sales changes assessed to your contributions. Look to index funds and unit investment trusts (if they are available as choices in your plan) to defray expenses.

[edwardvance]

on 10/26/2009 Excellent advice on salvaging a 401k. 5*