Building Your 401(k) Strategy
Five Steps to Consider
February 18, 1999—Employee-contribution plans have
quickly become the retirement benefit of choice for many American corporations, but have
you checked to ensure that your plan is working most effectively for you? Westcore Funds,
a Denver-based 100% no-load fund company, encourages you to become a proactive planner for
your retirement future. The following five steps will provide you with some suggestions to
measure the effectiveness of your current 401(k) strategy or assist you in your efforts to
create one.
Start Your Plan. The
first step in amassing your retirement nest egg is to get started. Finding reasons to
postpone your savings come easily-maybe you think you are too young to worry about
retiring or maybe you feel you should be spending your money on things you need today-yet
the longer you contribute towards your retirement equals the more time your assets have to
grow. Plus, many employers provide some level of matching for every dollar you contribute
to your plan. By not participating in your 401(k) plan, you are giving up the money your
company is willing to contribute towards your future golden years.
Understand Your Options. Your
next responsibility is to read all the information your company provides regarding how
your 401(k) operates and the investment choices available to you. Many times your plan
administrator will hold educational seminars or be available to sit down with you on an
individual basis to answer your questions. Don’t hesitate to ask for a deeper
explanation in confusing areas or for more information when you need it.
Select Your Investments. After
you learn about the options available to you, it is time to apply these investment
vehicles to your specific retirement planning needs. Factoring in the number of years
until you want to retire and your tolerance for risk, you should be able to find
investment options that can help you reach your goals. Some additional things to keep in
mind when determining where to allocate your 401(k) dollars are:
Don’t overload your portfolio with company stock-you
may want to put some of your retirement dollars in this area, but don’t throw all
your eggs in one basket. By using all or most of your money on company stock you are now
dependent upon one source for both your employment income as well as your future
retirement dollars.
More is sometimes less-along with placing too much money in
one area, it isn’t recommended to spread small amounts over a large number of funds
or vehicles because you aren’t sure which one is best or you think you are
diversifying your portfolio. Read each fund’s objective and style and be selective
with where you place your money. To help ride out market fluctuations, diversify by
selecting investments that cross asset classes, strategy styles, or vehicle types.
Determine Your Level of Risk. No one wants to lose the money that they have invested in their 401(k) plan, but
some risk may be needed for your portfolio to reach your desired goals. The good news is
that retirement planning is a long-term investment process and you should be able to
weather some market volatility. You need to determine whether or not you want to allocate
a portion of your investment dollars in more aggressive funds. In order to know what level
of risk your portfolio should contain, careful assessment of your personal investment
goals, your time horizon for investing, and your comfort level needs to be considered.
Monitor Your Progress. Most
employers send quarterly account statements for you to examine the effectiveness of your
investment choices. Carefully review how your investments are doing, but don’t get
nervous if your account has occasional fluctuations. If a fund or investment consistently
disappoints you quarter after quarter, then consider a possible change in your portfolio.
A few additional things to keep in mind are:
Know when to hold them-while it may be difficult to just
sit and wait for your investments to grow, many times the best thing is to demonstrate
patience and restraint. Constantly adjusting your portfolio can lead to unsuccessful
attempts at "timing the market." Monitor your fund and limit your changes (if
any are required) to once a year.
Keep a long-term, realistic outlook-while the market is
constantly changing, some investors may have never experienced modest returns or even
losses with their investments. It is important for you to remember that investing always
has some level of risk involved, but with a long-term objective and consistent investment
strategy you can typically survive the ups and downs of the market to reach your final
goal.
By actively participating in your employee-contribution
plan, you are acknowledging the responsibility over your finances for your future years.
Those individuals who don’t take proactive measure are not less responsible, they
just end up being less prepared.
At Westcore Funds, better research makes the difference.
The 100% no-load Westcore Fund family, based in Denver, Colorado, consists of five equity
funds, three bond funds, and a non-proprietary money market fund. For more information
about Westcore Funds, or to obtain a prospectus containing more complete information
including charges and expenses, please visit us at our web site, www.westcore.com, or call
us at 1-800-392-CORE.
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Please read the prospectus carefully before you
invest or send money. Past performance is not indicative of future results. The investment
return and principal value of an investment in the Westcore Funds, as in any other fund,
will fluctuate so that an individual investor’s shares when redeemed may be worth
more or less than their original cost. Westcore Funds are distributed by ALPS Mutual Fund
Services, Inc., member NASD. Not intended as investment or tax advice. Please consult a
tax professional for greater detail about your personal situation. |
