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5 Mid-Year Tuneups for Your 401k

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Focus on and take control of your retirementMost of us tend to put our retirement plans on automatic. It’s much easier to just have the money automatically taken out of your paycheck, and have it put into your 401k (hopefully with a match).

Just leaving your 401k on auto-pilot, though, can be problematic in the long term. While you don’t want to completely change your investing strategy without serious thought, you should assess your portfolio regularly to make sure things are on track for a successful retirement. Sometimes you need to tweak things a little bit.

Here are 5 mid-year tuneups for your 401k:

1. Review Your Fees

Your first step should be to review your fees. Over time, fees can really erode your wealth. Check into your options. If your employer’s plan allows you to choose from a variety of different investments, try to find something with lower fees. There are a number of low cost funds, and if your company doesn’t offer them as options, consider asking your plan administrator to add more investment choices.

2. Rollover Your 401k

Is your 401k still with your old employer? If so, you might want to do a transfer. Rollover your old 401k to your new employer so that it’s easier to manage. This is especially important if your new employer offers better options. While you’re at it, you can also consider rolling your 401k to an IRA.

3. Increase Your Contribution

Are you maxing out your retirement plan contribution? Go through your finances and figure out whether or not you can add more to your 401k. Depending on the options provided, you might be better off concentrating on your IRA first, but if there are solid options in the 401k, you can consider upping your contribution. At the very least increase your contribution so that you get the full match.

4. What about a Roth?

Not too long ago, Congress introduced the Roth option for the 401k. It has the same tax benefits that come with a Roth IRA, but without the income restrictions. Evaluate your situation, and find out if your company offers a Roth option for the 401k. If so, consider whether or not it makes sense for you to make use of a Roth. Your money grows tax-free, meaning that when you withdraw it, you don’t pay taxes on it. You pay taxes now, to avoid paying them later. If you think that your taxes are likely to be higher in the future, this can be a way to avoid the increase.

5. Rebalance Your Portfolio

Don’t forget to rebalance your portfolio. Investing and retirement experts point out that asset allocation is one of the most important points of a successful investment portfolio. Consider whether or not you need to make some adjustments to your portfolio in order to arrange a more favorable asset allocation.

You can also evaluate whether or not your portfolio is still helping you meet your retirement goals. If it’s not, tweak your portfolio so that it better reflects your efforts to secure financial freedom during your retirement.

(Photo: s_falkow)

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