Important Questions to Ask Regarding 401K Plans
For someone who is entirely depending on the 401K plan for his/her retirement, it must be known that extreme care must be practiced. This is because of the effect that the economy and stock market will have on this retirement plan. In the U.S., this is the top most option for retirement funds among many.
This was the alternate for the traditional pension plans that many have utilized before. So how do you know if your 401k plan will work for you? You should ask yourself some questions because the answers will reveal what you need to know. Here they are:
First, find out if the plan you have has a match with an employer or company. This is not really mandatory among employers and they are not obliged to match the contributions of the employees.
So when you do find a plan that does match then you know you got the best. This is said to be the key to knowing if your 401K plan has quality. With this missing, an individual may find it difficult to get a savings plan that can guarantee security. As the match is mentioned, you then have to ask the question - what level is the employer match? Experts state that the normal match is around $.50 on the part of the employer and that for every $1 contribution from the worker. So that means it's a fifty-fifty share. For you to get the full match of plan, you should be responsible and diligent in giving contributions regularly. Because the more the contribution then the bigger your savings become, the more you are storing for your future and the more secure you can be. Is there the option for stocks, mutual funds, bonds and so on, in your 401K investment plan from the 401(k) Help Center?
If you want to have a long-term plan the best option is one that has index funds; just the same it will get you to save in the process too. Always go for the experienced firms who have already made a name in the industry because they assure you of lower expenses. Your money is assured to go where it should be. You don't have to worry over unnecessary fees and charges that are only adding up to your expenses rather than going straight to your money nest. According to researches this proves to be more than right - index funds performs the better than managed funds.
So that should be what you should be asking early on. Does your 401K plan provide the option for index fund? If not, then you are falling short by a great deal.