401(k) Management: The Foundation for a Golden Retirement

401(k) Management: The Foundation for a Golden Retirement

The most common retirement plan offered by employers is the 401(k), which puts a portion of your paycheck, often along with an employer-sponsored incentive in the form of a percent match, into an account. You can set this account to a target date fund, or you can take a more aggressive approach and manage the allocations of those funds into a variety of investment products.

Boosting your knowledge of 401(k) foundations and options will allow you to get more out of it and set you on a successful path to retirement. Below are some tips to help you manage your plan with more savvy and greater ease.

Target Date Fund

This is the “set it and forget it” approach to a 401(k) plan, which allocates savings to the target date fund with the date that corresponds to the year closest to the year you reach age 65. With this low maintenance approach, the fund automatically adjusts as you get closer to retirement.


If you choose to take a more active role in managing your plan, you will need to perform routine maintenance on your 401(k). For example, you might have 80% in stocks and 20% in bonds at one point, but as different assets move up or down in value, you may have to buy or sell assets. Your plan’s website usually provides the option to automatically rebalance on a quarterly or annual basis.

Contribute the Max

If your employer matches your contributions up to a certain point, contribute at least up to the point where they stop matching the funds. After all, it’s free money just for participating in the program.

An Active Approach

When you choose to take a hands-on approach to your 401(k), your investment options might include money-market funds, bond and stock mutual funds, target-date funds, and your employer’s stock. It’s important to choose a mix of investments that will help you meet your financial goals (i.e. How much do you ultimately want to acquire in your nest egg?).

A Warning on Withdrawals

You may be able to take out a loan on your 401(k), but is that a good choice? Typically, a loan will have to be paid back in five years, with interest. Financial advisors commonly warn against this because of the risks involved. Aside from the potentially long-term effect of shortchanging your retirement savings, if you move to a different company or lose your job, the loan will be due almost immediately. And if you can’t repay it, you’ll be taxed, and slapped with a 10% penalty for early withdrawal.

Multiple Income Streams

Keep in mind that a 401(k) should only be one piece of the retirement puzzle. Your home and other assets, funds from a side hustle, and other investment accounts like an IRA might be additional pieces that make a complete picture of your financial future. Spreading your assets over multiple income streams will yield better returns and set you on the path to living golden in your retirement years.

If you have questions or would like to talk about how to take steps to prepare for retirement and maximize your 401(k), please contact me at rob@brammerandyeend.com.