5 tips to revitalize your retirement, 401(k) plan

If you feel your retirement plan is underperforming, it could be time to take some specific steps to fix things up.

A recent study from Schwab Retirement Plan Services found that “saving enough money for a comfortable retirement is the most common financial stress inducer for people of all ages.” Forty percent of survey participants stated that building adequate retirement savings was more stressful than the prospect of losing a job. 

If you feel your retirement plan is underperforming, it could be time to take some specific steps to fix things up.


To get you motivated, we reached out to finance and investment experts for effective strategies to turbo-boost those flatlining 401(k) plans. Here’s a look at what they said:

Kick it into overdrive after you hit 50.

The more cash you steer into your 401(k) plan, the more money you have working for you toward your retirement. That’s important, as compound interest builds more retirement wealth with more money in your 401(k) plan. When you turn 50, consider making catch-up contributions.

Catch-up provisions enable plan participants who hit the 50-year-old mark before the calendar year is over to contribute extra “catch-up” 401(k) plan contributions on a pretax basis. In 2016 and 2017, for example, you could contribute an additional $6,000 to your 401(k), on top of the  standard contribution limit of $18,000.

Don’t get too conservative when you near retirement.

The older investors get, the more conservative they may want to become with their retirement investments. But that could be a mistake, as Americans live longer and healthier lives and could need their nest eggs to last for decades beyond retirement. Studies show that investors who steered $100,000 into the Standard & Poor’s 500 stock index in 1987, would have earned over $1 million 25 years later. But a similar investment in the Barclays U.S. Aggregate Bond Index would have only accumulated $560,900, according to The Wall Street Journal, citing data from Morningstar.

Yes, stocks do represent a higher risk than bonds — the S&P 500 fell by 38% in 2008 — but historically, stocks make up the loss, and then some. Of course, if you are within a few years of retirement, it could be unwise to invest your entire portfolio in riskier stocks. Speak with a financial adviser who can help you determine the right mix of investments for your age, risk tolerance, and time horizon.


Keep a sharp eye on expensive fees.

Make sure the funds you are selecting are low cost. Excessive fund fees — anything over 2%, especially — can really drag down your long-term returns. According to a 2014 study by the Center for American Progress, the average American career professional loses $70,000 due to excessively high 401(k) plan fees over the course of their working years. Aim for low-cost exchange-traded funds, or index funds, which track major investment benchmarks, like the S&P 500, and offer management fees of well under 1%.

Get professional advice.

Too many people go it alone with their retirement plans. After all, planning your retirement involves a lot more work than choosing the right funds in your 401(k) or IRA. An adviser can help you make choices and stay the course until you reach the finish line.

The good news is that hiring professional help doesn’t mean you necessarily have to fork over a percentage of your investment returns forever. There are low-cost alternatives to traditional financial advisers. You could hire a fee-only planner who charges on an hourly basis, or seek out services like Betterment or Wealthfront, which offer retirement investment advice at a fraction of the cost of traditional investment advisers.

Learn when to do nothing.

When it comes to investing for long-term goals like retirement, it can be a mistake to tinker too much with your strategy — even if it feels like your balance is barely budging. 

There’s a lot to be said for the vaunted “buy and hold,” long-term investment model. With this model, 401(k) savers (ideally working with a good money manager) choose several appropriate, low-cost mutual funds that fit their risk profile, their investment goals, and their asset allocation needs, and let the funds grow without worrying what the stock market is doing. Time and the miracle of compound interest are great retirement portfolio builders — if only 401(k) savers would leave them alone to grow, without buying and selling in an effort to time the markets.

MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.


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