Investing in a employer sponsored 401K. What to do?

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Investing in a employer sponsored 401K.  What to do?


Investing in a employer sponsored 401K.  What to do?

ric dalberri, founder,

If your employer offers a 401K and will match a percentage of your contributions, you better grab hold of that offer and DON’T LET GO.

Some employers offer a matching contribution up to a certain percentage of your salary.  In today’s economy, this may become rare.

If your employer will match your 401K contributions up to 6% of your salary, you should, NO, YOU SHOULD ALWAYS contribute at least 6%. That’s equivalent to a 100% return on investment. There is no where else in the world you will get that ROI (return on investment). If someone offers to have you invest with them and they say you will get back that kind of return, RUN FORREST, RUN!

It would take years in an IRA to achieve that same 100% return.

In most companies that offer a company-provided 401K, you are limited to choosing among the investment choices, typically mutual funds that the plan offers.

Since you’re bearing all the risk, it’s important that you choose wisely. You do have control over which types of investments to use. Always be sure of your risk tolerance.

Target date funds will align with retirement dates such as Target 2020, Target 2025, etc. These funds invest more conservatively as you near your retirement date.

Index funds are style specific, low cost and track the performance of various indexes, such as the S&P 500, Russell 2000 or the EAFE. Avoid all funds that hit you with a sales charges AND, you will NEVER invest more than 10% in company stock, period.


As always, seek professional advice with a C.P.A., Tax Attorney, or a C.F.P.


Happy trails to you.