Savvy Retirement Planning Is In The Details
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We found an interesting article by Suze Orman on Yahoo! Finance relating to potential issues to consider when investing your retirement assets. Here is a link to the complete story, but here is the “cliff” notes version of issues to worry about:
1. Many employees still invest a considerable portion of their 401(k) assets in the stock of their employer–Remember to DIVERSIFY!!!!
2. While auto-enrollment in 401(k) plans is becoming more popular, employees are still investing too little (1-2% of salary) in these plans. In many instances, this low percentage investment is not enough to qualify for matching employer contributions to the 401(k) plan. Even though you’re automatically enrolled in your 401(k) plan, the plan should not be on auto-pilot. Remember to periodically review your investment amounts and underlying investment allocations. You should do this every 6 months to make sure your strategy in on track.
3. Lifecycle funds are becoming very popular, but according to Suze, this strategy may result in your portfolio allocation being too conservative for age. Again, this is something that your should continue to monitor to make sure that the allocation is appropriate for your age and retirement goals.
4. Many investors continue to select actively managed mutual funds vs. indexed funds although over the long term managed funds have a difficult time matching the performance of index funds. Suze points out that less than 1/3 of the actively managed large cap funds beat the S&P 500 index over the past 5 years. Check to see if your 401(k) investment options include index funds.
To help you evaluate your retirement planning strategy, please visit Soundview Financial’s Retirement Savings Guide for helpful articles, tips and guides.
