Happy 401(k) Day!

It's 401(k) Day, and there is no better time to check in on your retirement fitness. 

In the spirit of that, JMB Financial Managers has put together our five most useful tips for ensuring your investments are on course. Keep reading to learn more.

1. Consider Your Financial Position

Your financial position will play a significant role in how you approach your retirement. This consists of three main areas: age, risk tolerance, and your retirement number.

Retirement planning starts by knowing how many years you have until retirement. If you're 40 years old and plan to take early retirement, then you currently have 22 years to plan.

Risk tolerance is about how much you're willing to lose for more aggressive gains. Finally, there's the retirement number, or how much you'll need to retire. Use a retirement calculator to figure it out or speak directly to your financial advisor. 

2. Avoid Putting All your Eggs Into One Basket

For a 401(k) to get you to where you want to be, it's best to not over-invest in any one thing. When you diversify your portfolio in financial planning, you make allowances for the ebbs and flows of more volatile investments. 

Risk tolerance weighs into this, but so does the amount you currently have saved. If you're just starting to save for retirement at age 40, for example, you may need some more aggressive investments to make up for lost ground.

Unfortunately, many Americans have not saved enough for retirement. If you find yourself in this position, resist the urge to "go for broke" with one primary investment versus diversifying within your 401k.

3. Match the Max

One of the best 401(k) tips we can give is to never leave money on the table. If you are not participating in a 401(k) when your employer offers matching dollars—you are doing just that!

Let's say you work for 25 years and have a median salary of $50,000 a year. If your employer offers contribution matching up to 5%, everything you contribute up to that limit is essentially doubled.

5% of your $50,000 annual salary means contributing $2,500 to your 401(k) per year. While it may seem like a lot, especially if you are just starting out, it’s approximately $48 per week. With employer matching you are in reality doubling the amount each week, so by the end of the year your 401(k) contributions will total $5,000 instead of just $2,500.  Also, because it comes out of your paycheck straight into your 401(k) you won’t be tempted to spend that money elsewhere like you might be if you were putting that money into an accessible savings account.

If you have been giving 5% of your annual salary to your 401(k) for 25 years, you will have $62,500 in total lifetime contributions. Add employer matching to that and you have $125,000 in your retirement account, not including any interest or increases your money earns. If you choose not to participate in an employer-matched 401(k), you are leaving $62,500 of free money on the table!

4. Spend Time With Your Money

Another of our essential retirement planning tips is to spend a little time with your money each week.

The more time you spend with your money, just looking at it, noticing its fluctuations, and doing retirement calculations, the more insulated you will feel from market changes. You'll get used to the idea that the market goes up and down, and there is no reason to panic on a down day.

5. Rebalance When Necessary

Our final tip for 401(k) day is a natural outgrowth of spending time with your money. That's to rebalance your accounts when necessary.

Sit down with your advisor every six months to a year to see how your accounts are performing. This will help you determine whether a more conservative or aggressive approach is necessary.

Have a Happy 401(k) Day Putting These Tips to Use

We know this is about having a Happy 401(k) Day, but really, every day should be 401(k) Day. Being mentally invested in your investments will help you feel more at peace and in control of your future.

Do you have questions about what your next step should be? Contact JMB Financial Managers today for a complimentary retirement plan check-up. 

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About the Author

Jack Brkich III, is the president and founder of JMB Financial Managers. A Certified Financial Planner, Jack is a trusted advisor and resource for business owners, individuals, and families. His advice about wealth creation and preservation techniques have appeared in publications including The Los Angeles Times, NASDAQ, Investopedia, and The Wall Street Journal. To learn more visit https://www.jmbfinmgrs.com/.

Connect with Jack on LinkedIn or follow him on Twitter.