Class #17 Exercises: Maximize my 401k!

Exercise #1: Will you commit to saving your future raises? Feel free to elaborate on why or why not.



Exercise #2: Are there low-cost, low-turnover funds in your 401(k)?



Exercise #3: Are there Index funds and/or Vanguard funds in your 401(k)?



Exercise #4: Do you have small-cap or mid-cap, value and international funds in your 401(k), or are all the funds pretty much the same?




Exercise #5: Is it possible within your 401(k) plan to put together a fairly low-cost, diversified portfolio?




Exercise #6: If the answer to Exercise #5 is no, then maybe your best bet is to use the target retirement or balanced fund options in your 401(k) plan. Most plans have some sort of “all-in-one” option that is a fund-of-funds. In other words, you have several funds inside one big fund. If you have that option, can you look up the funds inside your funds of funds? Are those funds fairly low-cost and diversified?




Exercise #7: Even if your 401(k) plan is less than ideal, it is still probably worth it to use the plan for the tax benefits. And it is definitely worth it to get the match, if your company offers one. However, once you leave the company, there is no reason to leave your money in 401(k) plans that are too expensive or that lack diversification. Do you have 401(k) plans that you have never rolled over into an IRA?




Exercise #8: If you do have former 401(k) plans, now would be a good time to roll those 401(k) plans tax-free into your own IRA. That IRA can be invested however you’d like. So this exercise is just a simple suggestion. Start up your own IRA and roll over your former employer’s plans into that IRA.


By the way, requests to analyze 401(k) plans (and their similar cousins, like 403(b) plans) are the second most common requests we get here. (The most common request is an analysis of whether or not the person is saving enough.) So feel free to ask about your plan!

If you’d like to talk about your answers, feel free to email
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