However, you will rest easier once you have that knowledge. There is really no reason why we should not all use Blooom to help eliminate k fees. Can any of us honestly say that we enjoy paying fees when that money could be helping us to reach retirement goals sooner? I definitely cannot and if you are still reading this then I doubt you want to give away your money to fees. It is extremely important to be knowledgeable about your retirement plans and accounts.
If you are not already familiar with the details of your k plan, then now is the time to educate yourself. In addition to learning more about your k plan, take a closer look at the other retirement planning tools that you have in place.
You may have a variety of other investments that are intended to fund your retirement including older k and IRAs. Make sure that these accounts are also being maximized by reducing the fees and checking out the other fine print.
It is very possible that you could improve your return rate in these areas too. Fee slashing is a great way to help improve the health of your retirement accounts, but the most important aspect of your plan should be your accumulation of financial knowledge.
Financial literacy cannot be understated. The more you know the more effective you will be when it comes to planning a solid financial future. You may think that learning about personal finance will not help you out in the end, but education has proven to help improve k performance. A study showed that individuals with financial literacy had a higher average return on their k plans than less financially literate individuals.
You will be saving for retirement over the course of 25 or 30 years, imagine the amount of money you can save with the combined efforts of fee slashing and a basic knowledge about your finances. The difference could make a huge impact on your life!
It is worth investing the time and energy to accumulate knowledge and create a strong financial future for yourself and your family. The idea of becoming financially literate may sound daunting, but it is much easier than you think. Just start with learning the basics. The resources to learn are already available; you just need to set aside some time to use them.
You do not need to become an expert on personal finance but you need to learn to utilize the tools available to build the best possible future for yourself.
One of the first tools you should check out it Blooom. Use their free analysis and advice to start cutting away the hidden fees that you might not otherwise be able to find.
Remember, many of these huge investment companies are looking to build profitable businesses for themselves. The fees they charge you will help them to reach their goals, but it will not help you reach your goals. Only you are responsible for building your best financial future. Look out for your best interests and do not fall prey to hidden fees that will literally steal your future away without you even noticing.
All this advice might seem overwhelming, but the plus side is that you are already on the right track. By simply reading this article, you have shown to yourself that you do care about your financial future. Since you care about your future, you are willing to put some time into learning the important basics of finance. Learning about money may not seem to be the most glamorous way to spend your time. We all have busy lives, but keep making an effort to improve your financial literacy.
You might be able to completely transform your financial future for the better by simply improving your basic finance skills. So keep improving your knowledge and put what you learn into action. Then, stay the course. How your k account performs depends entirely on your asset allocation : that is, the type of funds you invest in, the combination of funds, and how much money you've allocated to each.
Investors experience different results, depending on the investment options and allocations available within their specific plans—and how they take advantage of them. Two employees at the same company could be participating in the same k plan, but experience different rates of return, based on the type of investments they select.
Different assets perform differently and meet different needs. Debt instruments, like bonds and CDs, provide generally safe income but not much growth—hence, not as much of a return. Real estate available to investors in a real estate investment trust REIT or real estate mutual fund or ETF offers income and often capital appreciation as well.
Corporate stock, aka equities, have the highest potential return. However, the equities universe is a huge one, and within it, returns vary tremendously. Some stocks offer good income through their rich dividends, but little appreciation. Blue-chip and large-cap stocks—those of well-established, major corporations—offer returns that are steady, though on the lower side.
Smaller, fast-moving firms are often pegged as "growth stocks," and as the name implies, they have the potential to offer a high rate of return. But of course, what goes up can go down: the greater a stock's potential for aggressive growth, usually the greater its chances of big tumbles, too. It's called the risk-return tradeoff. Your asset allocation should be determined based on your specific appetite for risk, also known as your risk tolerance , as well as the length of time you have until you need to begin withdrawals from your retirement account.
Investors with a low appetite for risk are better served by placing investments in less volatile allocations that could result in lower rates of return over time. Conversely, investors with a greater risk tolerance are more likely to choose investments with more potential for higher returns but with greater volatility.
However, the volatility within your account may also be much greater. Typically, an individual with a long time horizon takes on more risk within a portfolio than one who is near retirement. And it's common, and prudent, for investors to gradually shift the assets within the portfolio as they get closer to retirement. As a one-stop-shopping way to accomplish this metamorphosis, target-date funds have become a popular choice among k plan participants.
These mutual funds allow investors to select a date near their projected retirement year, such as or Funds with a further-out target date focus investment allocations in a more aggressive manner than funds with a near-term target date. Rates of return on target-date funds vary from company to company, but these one-fund allocations offer a hands-off approach to asset allocation within a k.
But if you want a sense of how your portfolio is performing, you can, and should, make comparisons. Specifically, you can compare the investments in your account to other mutual funds or ETFs that invest in similar assets corporate bonds, small-cap stocks, etc. You can also see how a particular fund is doing compared to an overall index of its asset class, sector, or security type.
This article will explain these points in-depth so you can aim for the best returns from your k. We can also assist you in finding a financial advisor. This professional can help you create a personalized retirement planning strategy. Every k plan is different.
Meanwhile, some investments perform drastically better than others. To grasp what you can expect from your k plan, you need to understand some key points. Your plan may offer a vast investment menu with plenty of funds to choose from. But no matter how you build your k portfolio, you should make sure its asset allocation aligns with your risk tolerance.
It should also reflect your time horizon. This represents how much time you have between now and your expected retirement date. Some financial planners believe those with long time horizons have time to weather market volatility.
They could thus concentrate more on growth-focused, albeit volatile, investments like equities. On the other hand, those closer to their golden years may want to protect the savings they already have.
This tends to produce the best average returns over time by reducing your investment costs. You'll get the best k rate of return by being consistent and not changing your contributions based on short-term stock market performance. Your ideal asset allocation depends on your age, your target retirement date, and your overall risk tolerance, which is the amount of risk you can comfortably handle. If you have a long time horizon and high risk tolerance, you'll want to invest heavily in stocks.
Investing more in bonds is recommended as your retirement date gets closer , or if you have a low risk tolerance. Investing primarily in stocks usually produces higher average k returns, but it also increases your risk of losing money, particularly in the short term. However, if you invest too heavily in bonds, particularly at a young age, you may not achieve the returns you need to hit your retirement goals.
The average k plan offers eight to 12 investment options, and mutual funds are by far the most common. Looking for funds with the lowest expense ratio can boost your returns. Another common type of mutual fund you'll find in k plans is target-date funds.
You choose a target retirement date, and the fund automatically rebalances to bonds and cash equivalents, such as money market funds, as that date approaches. You get greater stability, but that translates to lower average returns the closer you get to retirement. Higher fees mean that less of your money is actually invested, which of course lowers your returns. Even seemingly small fees can have a big impact.
Paying a 0. When you invest a lump sum of money, calculating the average annual return is simple.
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