If you are new to 401k investing, you are not alone. There are many people in the same situation as you are; and a lot of times have no one to ask.
When 401k investing is new to you, it can be a bit overwhelming. You may not know all of the rules, or do’s and don’ts.
To help ease your uncertainties you have financial tools available to you. Familiarize yourself with these tools and 401k’s will be less overwhelming.
You can use your employer’s 401k pension manual as a reference tool. That manual should explain in great detail what rules & regulations you as a 401k employee must follow.
In addition to using the 401k manual as a resource, you should use the online 401k financial tool that most 401k plans offer. Check with your employer to see if they offer an online 401k tool.
If You Are New To 401k Investing:
Let’s review the financial tools that are available to you. These tools will help you become more familiar with your 401k plan and therefore make you a better investor.
Your 401k Pension Manual will include:
- Rules on basic 401k law.
- 401k loan options.
- 401k withdrawal regulations.
- 401k tax rules.
- 401k penalties for early withdrawals.
- Rules on hardship loans.
- 401k distributions.
Online 401k financial tools help with:
- Information about your 401k provider.
- Your 401k investment options.
- Instructions on how enroll in your companies 401k plan.
- If your employer will be offering matching.
- Basic investing techniques.
- Asset allocation techniques.
- The forms needed to rollover your 401k balance from your prior employer.
- Contact information for the 401k provider; maybe an 800 number or additional websites and email addresses.
The role of 401k Plan Advisers:
- A lot a 401k providers offer financial advisory services to 401k employees.
- These financial advisers can help put together a financial plan for you.
- They will review with you your time horizon.
- A time horizon looks at the number of years until you plan on needing the money you will be investing into your 401k account.
- The adviser will build a financial plan around your time horizon.
- The adviser will ask you about your personal tolerance to risk.
- There are no right or wrong answers, risk is a personal thing.
- You will be advised to build your portfolio around your personal tolerance level of risk.
- Risk tolerance will define what type of investments you should select for your 401k account.
- Do you like a lot of risk or does risk scare you. Would you prefer high risk stocks and mutual funds or are you more conservative? That’s your risk tolerance.
Your 401k pension manual, the 401k financial advisers and the online 401k tools all serve the purpose of making you into a better investor.
There are many different financial reference tools available, you just have to know where to find them. And then you have to follow through and take advantage of them. Learning how to invest well can be a life long process. You cannot learn how to invest well over night or just by reading one brochure or magazine.
As a new investor the best advice is to use the tools available, ask questions, do your homework and be patient with yourself as you learn and watch your portfolio go through its normal course of ups and downs.