Investigate Your 401(k) Status: Are You Adequately Prepared?

In the realm of retirement planning, the 401(k) has emerged as a crucial tool for many Americans. This article aims to provide a concise yet informative guide on maximising your 401(k) potential, based on the latest insights from financial experts.

Firstly, it's essential to understand that everyone's financial situation is unique, and what works for one may not be suitable for another. However, one general rule of thumb is to save 15% of your salary for retirement, including the employer match, if available.

Regularly reviewing your 401(k) balance, contributions, and performance is essential for staying on track with your retirement planning. Lisa Featherngill, national director of wealth planning at Comerica Wealth Management, emphasises the importance of this practice, while Eli Taylor, private wealth advisor at U.S. Bank Private Wealth Management, recommends using retirement calculators to check if your savings are on pace with your goals.

The health of your 401(k) is paramount, and understanding your investments is key. Educational resources offered by 401(k) providers can be invaluable in this regard. Asset allocation has a significant impact on the rate of return, and it's essential to ensure it matches your risk tolerance and time horizon until retirement.

If you find that a fund is not keeping up, it's advisable to explore other options. If a fund one owned has been replaced with a different fund, it's important to review the options to ensure your account investments are comfortable. Longer-term performance (at least three years) should be considered when determining a fund's performance.

For most Americans, the retirement savings target is around $1.26 million. Increasing 401(k) contributions or exploring investment options with higher growth potential can help if your savings are falling behind. If you're aged 50 or above, you're eligible to make "catch-up" 401(k) contributions, with an additional limit of $7,500 for 2025. Super catch-up contributions, available for taxpayers aged 60 to 63, allow up to $11,250 in contributions.

It's also crucial to monitor 401(k) fund fees to prevent them from impacting account performance, especially for smaller companies where fees may be larger. Fidelity's recommended retirement savings amount by age serves as a benchmark for comparison.

Lastly, remember that 401(k) beneficiary designations override a will, so it's crucial to keep them updated, especially during life changes like marriage, divorce, or the birth of a child.

In conclusion, managing your 401(k) effectively can significantly boost your savings and contribute to a secure retirement. Regular reviews, understanding your investments, and staying informed about changes in your fund lineup offerings are all key to success. Happy retirement planning!