September 12, 2013
When investing in your company retirement plan (401k,403b,TSP,457), what questions should you answer BEFORE investing?
When investing in your company retirement plan (401k,403b,TSP,457), what questions should you answer BEFORE investing?
Do you think you pay more taxes now than you will in the future? Or vice versa?
That is one important question, Katherine. Pay more taxes later, choose the Roth version if it is offered. Pay more taxes now, select the traditional version. Here are a few more questions that should be considered.
Where does my money initially go when I start the account? Usually a money market or short term bond fund.
Does the company offer matching money? Many companies offer a full match on your first 3% and then 50 cents on the next 3%. This is FREE money, go get it!
What is the vesting period (when the matching money becomes yours)? This usually runs around 5 years and many times it provides you access to 20% per year until you reach 5 years and then it is all yours.
What investments do I have available to me? Look for broadly diversified index funds or target date funds that fit your time horizon.
What is the expense ration on my choices? Index funds are consistently the low price option. Focus on an expense ratio below .5% and preferably below .3%.
Focus on answering these questions and then ACT. Your financial future is at stake!