If your place of employment doesn’t offer pension plans, then saving up for your retirement is on you. Luckily, with the help of 401(k) plans, managing your future retirement finances is a lot easier than simply putting money aside in any old savings account.
But when it comes down to it, actually utilizing your 401(k) to its full potential is more difficult than it sounds. A such, a lot of Americans are projected to suffer financial burdens during their golden years.
There are many reasons why so many plans don’t live up to their full potential. Some of these might be on you, while other issues could be caused by your employer. Today, we thought we’d go over the steps you can make to make the best of your 401(k) plan before it’s too late.
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You can’t simply put money in your 401(k) and expect it to magically work in your favor, and this is something that many employees do not know. After all, the plan doesn’t work like a regular savings account, which is why you need to rebalance it regularly.
It all comes down to two factors, so you have to ask yourself what your risk tolerance is and what retirement goals you have. By deciding on those two factors, you will have a much easier time rebalancing.
In a situation in which the stocks have a 30% rally, you’ll end up overexposed to stocks when the next sell-off hits and will very likely be underexposed to other assets, such as bonds when they will rally.