Given the uncertain job market, it can be dicey to count on collecting your share. Instead, save for your future and maximize the tax advantage of contributing to the plan.
Mistake No. 3: Assuming your 401k can be invested for you alone because it is for your retirement.
If you are married, don't assume your investments are just for you. Many people choose investments without weighing what their spouse is doing or what other stocks or bonds they own. Retirement-planning software offered by many companies rarely asks how other family funds are invested.
Yet all of your savings will play a role in your future comfort. So at least once a year, you should put your investments and your spouse's together and make adjustments. If your spouse's plan has better international-fund options, your spouse could invest more heavily in those while you put more in bonds. If you haven't done this before, you may find it as much an exercise in trust as in investing.
Mistake No. 4: Investing too much in your company's stock -- even after Enron and Lehman Brothers.
Last year, just 17% of companies matched employee contributions with company stock, down from 36% in 2005, according a survey by Hewitt. In addition, employees today can usually diversify those shares at any time; in 2005, more than half of the plans didn't offer that flexibility.
Still, Hewitt found that when company stock was an option, 21% of retirement-plan holdings were invested in it, an exceedingly large allocation to a single stock.
If you have ignored your company-stock holdings, now may be the time to diversify. Vanguard recommends that your company stock not make up more than 10% of your retirement-plan money.
Mistake No. 5: Picking funds based on performance alone.
Stock and bond returns are largely unpredictable. But the one factor that is predictable is the expense rate. When deciding which funds to invest in, zero in on the ones with the lowest expenses.
The impact could surprise you. A recent Hewitt analysis found that cutting investment fees by 25 basis points, or $25 per $10,000 investment, could have the same effect as receiving an extra half-percentage-point match from your employer over your career.
This article was reported by Karen Blumenthal for The Wall Street Journal.
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