Tips for managing your 401 (K) account
Does the thought of looking at your 401 (K) account make your head spin? Considering how much of their retirement funds many have lost, the idea of facing 401 (K) accounts head on can be nauseating.
Alas, you can’t — and shouldn’t — put off the inevitable. One of the biggest mistakes people make is turning a blind eye to 401 (K) funds. Instead, it’s as important as ever that you’re actively engaged.
Here are some important tips from Dallas Morning News personal finance writer, Pamela Yip. Here’s an excerpt:
Diversify your investments – Spread your investments across the major asset classes such as stocks and bonds to reduce the risk that a significant drop in either one of these areas will devastate your entire investment portfolio.
It’s also important to diversify your money within asset classes.
For example, large-capitalization stocks tend to be less volatile than small-capitalization stocks.
Bonds vary as well, with corporate bonds more aggressive in their growth and earnings than those issued by the U.S. government.
Don’t fall in love with company stock – You shouldn’t have more than 20 percent of your retirement money in company stock, especially if you’re close to retirement. If the stock goes bad, you won’t have much time to recover.
You can reduce your 401(k) holdings in company stock by selling it and reinvesting the proceeds within your 401(k) without penalty.
For more tips on managing your 401 (K) account, click here.
How do you prepare for your retirement? A personal finance expert walks you through the steps at every stage in life, from your early 20s through your 70s. Read more here.