{"id":525,"date":"2016-01-28T09:00:03","date_gmt":"2016-01-28T14:00:03","guid":{"rendered":"http:\/\/www.investmentzen.com\/blog\/?p=525"},"modified":"2023-02-18T16:55:02","modified_gmt":"2023-02-18T20:55:02","slug":"9-ways-to-make-your-401k-suck-less","status":"publish","type":"post","link":"https:\/\/www.investmentzen.com\/blog\/9-ways-to-make-your-401k-suck-less","title":{"rendered":"9 Ways To Make Your 401k Suck Less (401k Tips & Advice)"},"content":{"rendered":"

I<\/span> love 401(k)s. I love 401(k)s! I love 401(k)s!! One more time\u00a0in big font for emphasis:<\/p>\n

I love 401(k)s!!!<\/h2>\n

<\/h2>\n

I put my money to work\u00a0in many investment vehicles\u00a0including a Roth IRA<\/strong> and peer lending<\/strong>, but 401(k) contributions always come first<\/strong>.<\/p>\n

A 401(k) allows you to save loads of money for the future in a tax efficient manner. If you’re lucky, your company may even match part of your contribution.<\/p>\n

\"401k<\/p>\n

As great as 401(k)s are, they are not perfect. There are tricks to maximizing the value of your 401(k) and some pitfalls you need to know about. One of these pitfalls almost cost me\u00a0$500,000<\/strong>.<\/p>\n

However, if used correctly and given enough time,\u00a0a 401(k) has a good chance of turning you into a millionaire<\/strong>. And who doesn’t want to be a millionaire<\/a>?<\/p>\nIf used correctly and given enough time, a 401k has a good chance of turning you into a millionaire. <\/a><\/span>Click To Tweet<\/a><\/span>\n

401K Tips & Advice To Build Your Million Dollar Stash<\/h2>\n

1. Get the full match<\/h3>\n

If you were walking down the street and saw a hundred dollar bill lying there on the sidewalk, would you pick it up?<\/p>\n

Of course you would! Leaving it there would be painful<\/strong>.<\/p>\n

However, many folks leave thousands of\u00a0dollars behind<\/a>\u00a0by not contributing enough to get the full match from their employer.<\/p>\n

If your company offers a match, contribute at least enough to get the full amount. I will not take ‘No’ for an answer on this one. If you’re not getting your full match, you’re turning down free money<\/strong>. Take it!<\/p>\n

2. Be aware of\u00a0the fees<\/h3>\n

Over the long term,\u00a0fees can eat at your returns like a gang of hungry Komodo Dragons. I had always read about fees, but dismissed them: “A little percentage difference won’t hurt me!” I thought to myself.<\/p>\n

I was wrong. Very wrong<\/strong>.<\/p>\n

A couple years ago, I signed up for a free service called Personal Capital that helps track your investments. One of the fabulous features of Personal Capital is its\u00a0Fee Analyzer<\/a>.<\/p>\n

When I first ran the Fee Analyzer against my own portfolio, I nearly fell out of my chair. It told me that I’d pay $594,993<\/strong> in fees over the next 26 years:<\/p>\n

\"before\"<\/a><\/p>\n

I moved my investments around and reduced my potential fees to less than $100,000<\/strong>:<\/p>\n

\"after\"<\/a><\/p>\n

Remember that pain you felt about not picking up that $100 from the sidewalk?<\/p>\n

Imagine how I would have felt if I learned that I paid an extra $500,000<\/strong> in fees. Keep in mind those fees are only until the age 65. I plan to live a lot longer than that.<\/p>\n

I’d highly recommend signing up for a FREE account at Personal Capital<\/a> to take advantage of their 401k analyzer. It might just save you $500,000 dollars (or more).<\/p>\n

If you take action on just one piece of 401k advice after reading this article, this is the one.<\/p>\n

If you’d like to learn more, the father of the low-fee index fund, Jack Bogle, wrote a great book on investing and fees called the The Little Book of Common Sense Investing<\/a>.<\/p>\n

3. Evaluate your 401(k) investments\u00a0annually<\/h3>\n

Most companies change their 401(k) investment options regularly. It’s worth revisiting your investments every year\u00a0to make sure that your employer hasn’t added better choices.<\/p>\n

Also make sure that your investment mix is aligned with your goals. For example, if you’re approaching retirement, you should consider moving money to more conservative options. Learn how to keep track of your portfolio’s risk factors in our Ziggma review<\/a>.<\/p>\n

What I did<\/strong>: When I saw the results of the Fee Analyzer, the first thing I did was log into my 401(k)’s dashboard to see what I was invested in.<\/p>\n

I learned that one of the funds I had significant money in was taking 2% per year, a very high fee relative to the average<\/a>. Arrrrgh! The option that I moved it to had a fee of about .7%, not nearly as low as some index funds, but a significant improvement.<\/p>\n

4. Consider a rollover<\/h3>\n

Once you leave your job, if you have at least $5,000 in your 401(k) account, you may leave the money there. However, this isn’t always the best idea. If your choices consist\u00a0of poor\u00a0funds or your ex-employer\u00a0charges maintenance fees, you’ll be able to do better with an account at\u00a0a provider like Vanguard.<\/p>\n

The process isn’t difficult. I’ve rolled 401(k)s<\/a> over many times and the company you’re rolling into will guide you through the process.<\/p>\n

Tip<\/strong>: You must<\/span> make sure that the check from your old 401(k) is not\u00a0made out to you. It must be made out to the company you’re rolling it over to. Again, don’t let this worry you as your new account\u00a0holder will guide you through the process.<\/p>\n

What I did<\/strong>: To further reduce my fees, the day I quit my job with the costly\u00a0funds, I started the rollover process. Within two weeks, I had everything\u00a0moved into sweet, low fee index funds.<\/p>\n

5. Poor investment choices are not an excuse<\/h3>\n

I’ve heard people say that they don’t contribute to their 401(k) because the fund choices are poor. While this may be true, contributing to a 401(k) is almost always worth it for the tax savings alone. Every dollar you contribute is a dollar you don’t have to pay income tax on.<\/p>\n

Remember, Uncle Sam invented this! Uncle Sam wants you to save!<\/p>\n

Here is\u00a0a simple example with a 401(k) saver named Jeff\u00a0<\/strong>where I’ll assume the following:<\/p>\n