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If you’re going to have a 401(k) it might as well be a good one. In fact, it might as well be best in class. After all, why should you settle for less when it comes to your nest egg?

Saving for retirement has been an important topic for a long time.  Early this century you contributed a portion of your paycheck to the pension in your working years with the promise to get a paycheck after retirement.  With some poorly managed pensions and the market not cooperating in some years, they have been used less frequently and some companies no longer use them.
 
Now we have the 401(k). The main difference between a 401(k) and a pension is there is less responsibility for your employer and more you. For most 401(k) plans, you are responsible for all the critical decisions: including choosing the right investments, deciding whether or not to rebalance your allocation, and the list goes on.

Let's face it, finances are not everyone's cup of tea, but we need to take action and stop making mistakes that hurt your 401(k) savings.

    1. Learn to live with 85% of your income. Not a big deal right? Well, most of us will say that we can get by no problem, but if someone asks us to save 15% of our income we panic. Make an effort, increase it until you reach that number. If you are not saving that amount there is a good chance you are off track for a retirement that is comfortable.

 

    1. Take advantage of the automatic increase. This is a new feature on some of the newer plans.  When you enroll you can choose to automatically increase your savings by a stated percentage every year, rather than pulling the band-aid in one stroke it will slowly come loose without you noticing.

 

    1. Wolf of Wall Street wannabe. STAY AWAY FROM IT.  Stop looking at your 401(k) screen and trying to figure out how to beat the market and get better returns. That's not your job, so let the investments do their job. You need to see the long run and understand that you are not there for the weekend

 

    1. Your 401k is not a bank. Taking loans from your 401(k) is not a good idea for one, many of the plans don't allow contributions while a loan is outstanding, and you are also dragging the performance of your savings down.

 

  1. Don't lose it. Your 401(k) is covered by many rules and regulations and will not disappear into thin air. But you may lose it in the sense that you don't know where is it.  After many jobs and keep it in close proximity. 

This is the time of year we all make resolutions that mainly we don't do, but hopefully this year you pick your personal finances as one of the few you will complete.  Remember, if you don’t save toward retirement today, you'll have a smaller paycheck in the future.

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