Do you want to make the most of your 401k? Then you've come to the right place. This article from ABC News gives several tips on how to make the most of your 401k. It starts with one basic key of retirement investing:
Next to deciding how much money to save for retirement, the most important decision a worker can make is how to allocate assets among stocks, bonds and money market mutual funds.
I'm not sure I'd rate asset allocation right after deciding how much to save (time and expenses might be ahead of it), but it's certainly important.
But it turns out that investors don't really like to (or maybe don't understand how to) manage their asset allocation (and adjust it annually when it gets out of whack). This piece gives a bit of advice on how to make the appropriate changes so that anyone can make sure the split is the one that works best for them:
How savers should determine their asset allocations depends on two things, time horizon and risk tolerance, said Catherine Gordon, a principal with Vanguard.
In short, if you have a longer time horizon and higher risk tolerance, you should weight heavier towards stocks. If you're going to need the money fairly soon and don't like risks, you'll need a greater weight in bonds. To get specific advice, you can view asset allocation calculators on websites of major fund companies like Vanguard and Fidelity Investments.
The article notes a lot of extra variables you'll want to consider to make sure you have the right mix. In addition, you may want to check out the following posts to get additional information about managing your investments and retirement:
- Why I Like Index Funds
- 5 Mistakes Investors Just Can't Afford
- Getting Rich is Simpler than You Think
- Key to Retirement: Sticking to It
FMF recommends Emigrant Direct.
One thing I have to remind myself is my 401(k) is only one part of the picture, and in determining asset allocation, I should consider all investments.
Posted by: Flexo | March 16, 2006 at 09:30 AM