Top 3 401(k) Considerations

Back to my 401(k). Sorry to go back to this, but I really want to understand what is happening with that money! I want to be sure that I am making the right decisions as far as how much i'm contributing and what my contributions are being invested in. With that in mind, today I sat down and went through the whole thing. I took the time to log on to the account that holds my investments and shows me the growth thus far. If you haven't set this up yet, I suggest you do it. I hadn't looked at it for 6 months and it has really started to add up! $$$ in the bank, now that's what I like to see!

What are you investing in?
Most 401(k) plans have a few specific funds that you can invest in. You can put 100% into one fund or spread it around into a few different funds. My 401(k) has bond funds, growth funds and value funds, as well as funds that are specifically tailored to your needs based on the year you plan to retire. This for me was the easiest way to go and was what I started out with. But recently I decided to switch it up a bit and put my money into a few of the other funds. I'm spreading it around a bit to see what happens. By keeping tabs on my YTD return percentage I can track my progress and see if I was better off letting the professionals handle it when it was in the retirement year specified fund.

401k vs. Roth 401k
Some companies, like mine will also give you the option of a regular 401(k) and a Roth 401(k). You should conduct your own research on these two terms but i'm going to break it down very simply here.
A regular 401(k) comes out of your paycheck pre-tax. This means that your taxable income is lowered and thus less taxes to pay. At the time of retirement, you will pay taxes when you withdraw the money according to your tax rate at that time.
In a Roth 401(k) you pay taxes on your contributions upfront, which means that you don't lessen your present tax burden. However, at the age of retirement you won't pay taxes on your withdrawals.
Its like a now or later sort of situation.

How much?
My company has a 4% match so i'm contributing that much. I can't see passing up free money! Since i'm trying to get out of debt, I only contribute that much but once I free up more of my monthly income I plan to increase that %.

As always, always do your research and consult with a tax professional before you make any major decisions about your retirement and finances.

Send me a message. Did you love the post or hate it? What would you like the next topic to be? Don't forget to follow me on Twitter @financegirl