Building A Better 401(k)
Kiplinger's Personal Finance|September 2019

Funneling all your retirement contributions into a targetdate fund isn’t always the best strategy.

Sandra Block
Building A Better 401(k)

In this era of do-it-yourself retirement planning, your quality of life in retirement will probably depend on how much you’ve stashed in your 401(k) or similar employer-sponsored retirement plan. Fortunately, a raft of plan enhancements, ranging from automatic enrollment to set-it-and-forget-it portfolios, have reduced the risk that you’ll misuse this valuable asset. But that doesn’t mean you can’t do more to get the most from your plan.

Hands down, the most effective way to increase your plan’s performance is to divert as much as you can from your paycheck. Your savings will grow even faster if your employer offers a company match—on average, employers match 4.7% of pay—which is why it’s critical to contribute at least enough to pocket that free money.

But once you’ve established a savings routine, you have to figure out how to invest the money. One option that’s increasingly popular with 401(k) plan participants is a target-date fund. With these funds, you select a year that’s closest to the year you think you’ll retire and let someone else manage your mix of stocks and bonds. As you get closer to retirement, your allocation of stocks and bonds will gradually become more conservative. Half of 401(k) plan participants invest at least some of their money in target-date funds, according to the Investment Company Institute.

Jonathan Leung, 25, a software engineer for Amazon, opted for a target-date fund when he signed up for the company’s 401(k) plan in 2017. The fund invests 90% of his savings in stock funds and 10% in bond funds. Vanguard, which administers his plan, offered other options, but “I wanted my plan to be on autopilot,” he says. Leung initially contributed 4% of his paycheck in order to qualify for the maximum company match, which is half of contributions up to 4%; after he got a raise, he increased his contribution to 15%.

Esta historia es de la edición September 2019 de Kiplinger's Personal Finance.

Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.

Esta historia es de la edición September 2019 de Kiplinger's Personal Finance.

Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.

MÁS HISTORIAS DE KIPLINGER'S PERSONAL FINANCEVer todo
MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS
Kiplinger's Personal Finance

MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS

He suffered grave injuries in the line of duty. Now he helps other veterans who have disabilities.

time-read
2 minutos  |
November 2024
DO YOU NEED UMBRELLA INSURANCE?
Kiplinger's Personal Finance

DO YOU NEED UMBRELLA INSURANCE?

A policy can protect you from financially devastating events.

time-read
2 minutos  |
November 2024
Navigating Finances as a Blended Family
Kiplinger's Personal Finance

Navigating Finances as a Blended Family

Money matters can get complicated when two families unite. Planning is key.

time-read
4 minutos  |
November 2024
BREAKING UP WITH YOUR BROKER
Kiplinger's Personal Finance

BREAKING UP WITH YOUR BROKER

Be aware of these challenges when you move your money to a new home.

time-read
5 minutos  |
November 2024
CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU
Kiplinger's Personal Finance

CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU

Consider your health care needs over the long term as you weigh costs and coverage.

time-read
9 minutos  |
November 2024
Keep Faith in These Stocks
Kiplinger's Personal Finance

Keep Faith in These Stocks

IN 1997, I coined the phrase “faith-based investing.” It has nothing to do with religion or with picking stocks at random.

time-read
5 minutos  |
November 2024
OUR ESG PICKS ARE THRIVING
Kiplinger's Personal Finance

OUR ESG PICKS ARE THRIVING

Despite an ongoing backlash, our favorite stocks and funds focused on environmental, social and corporate governance issues had a good year overall.

time-read
9 minutos  |
November 2024
MONEY MANNERS FOR THE MODERN AGE
Kiplinger's Personal Finance

MONEY MANNERS FOR THE MODERN AGE

The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.

time-read
8 minutos  |
November 2024
ELECTION 2024: POLITICS AND YOUR PORTFOLIO
Kiplinger's Personal Finance

ELECTION 2024: POLITICS AND YOUR PORTFOLIO

Who wins the White House matters—but only at the margins when it comes to your investments.

time-read
2 minutos  |
November 2024
YOUR GUIDE TO OPEN ENROLLMENT
Kiplinger's Personal Finance

YOUR GUIDE TO OPEN ENROLLMENT

With health care costs on the rise, it’s critical to select a plan that fits your needs at the right price.

time-read
7 minutos  |
November 2024