How to Take Control of Your 401(k)

Retirement plans can be confusing. Here's how to start making sense of a 401(k)

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Scott Holsopple

 A recent survey by Charles Schwab of 1,000 401(k) participants said that 52 percent of those polled find their 401(k) plan more confusing than their health insurance benefits. That's pretty impressive, given that I don't think I know anyone who claims to understand their medical coverage. Fifty-seven percent desired an easier way to choose their 401(k) investments.

Despite the bad press the 401(k) plan sometimes receives for its complexity and for requiring plan participants to become investors whether they want to or not, the fact remains that it is a great way to save for retirement. For many people, it's their only retirement savings vehicle. Sure, if you don't have much interest in investing and finance, you might find it confusing to manage your account — but it's up to you to do something about it.

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Being a 401(k) plan participant requires you to take charge of your retirement saving and investing, so don't let confusion or uncertainties leave you on the sideline. Instead, here are five things you can do to step up:

  • Embrace the power and control you have, and think hard about how to use it. Spend some time seriously thinking about your retirement saving and investing needs. Jump on some educational websites and do some reading to familiarize yourself with basic investing terminology and the types of investments to which you have access.
  • Take action by creating a retirement saving and investing plan. Outline the amount you plan to contribute now and in the future in order to reach your retirement goals.
  • Take advantage of your 401(k) plan's features. Many plans offer ways to maximize your participation such as an employer match, educational resources and advisory services that can help you pick the right funds to support your retirement goals.
  • Check to see if your plan offers an auto-increase contribution feature, which automatically increases your contribution rate by a small amount each year (or more frequently, if you like). If your plan doesn't offer auto-increase set up calendar reminders and increase your contributions yourself. Either way, you need to save as much as you can and regular contribution increases can help you get there.
  • Once you've established your strategy, stick to it. Paying too much attention to market fluctuations can cause some investors to run scared. A long-term view is what's needed, rather than concentrating on your account balance on any one day.
  • The 401(k) plan might not be perfect, but you stand to gain a lot when you take advantage of being in the driver's seat — just a little know-how can make a big difference when it comes to your 401(k) and financial future.

    Scott Holsopple is the president of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal.