BizTimes ON THE MONEY: Align Your 401(k) Plan With Your Investment Portfolio, by Julie Ellenbecker-Lipsky
This article can also be read at BizTimes online: http://www.biztimes.com/news/2011/7/22/on-the-money-align-your-401k-plan-with-your-investment-portfolio.
BizTimes Milwaukee ON THE MONEY:
Aligning your 401k Plan with your Investment Portfolio
By Julie Ellenbecker-Lipsky, CFP ®
Ellenbecker Investment Group
Published July 22, 2011.
One of the most common mistakes investors make is investing your 401k plan independently from the other investment accounts in your portfolio. The 401k plan often is treated as an “out-of-sight, out-of-mind” investment even though it is typically the largest place investors deposit each month. Many investors just add money into the plan that was created when they first were eligible to contribute and do not pay attention to how that account fits in to the overall retirement plan as it grows.
There are a few things to consider when evaluating your 401k:
First, look at all your assets as one portfolio. Don’t underestimate the importance of your 401k plan in the big picture of your total investment portfolio.
Second, include your spouse’s 401k plan in your investment asset allocation. Many 401k plans offer the same menu of investment choices. Coordinate your plan with your spouse’s to take advantage of the best possible offerings in each of the company sponsored plans.
Third, invest your 401k plan along the same investor profile as your other investments – Make sure to be aware of your risk tolerance, time horizon and overall investment goals when selecting investments.
Next, ask your financial advisor to evaluate your company sponsored 401k and help you model it in alignment with the rest of your investments. There are many advisors and programs that allow you a third-party recommendation on investing your 401k so that it works best for you and your overall plan. You don’t need to only rely on your plan administrator or plan advisor for information.
Lastly, be sure to monitor your 401k plan as often as you monitor your other investment accounts. Active monitoring and rebalancing is important to keeping your 401k plan in alignment with your personal financial plan. Be willing to modify and rebalance if necessary. Often the 401k plan is the best place to rebalance because you don’t have to be concerned with tracking cost basis or paying tax on capital gains.
Overall, it is important to consider your 401k plan as an investment in your future. Continue to fund it, pay attention to any changes that arise, coordinate it with your other investments and focus your efforts on choosing the best available options. The time and energy you put into creating a good investment plan with be well worth it upon retirement.
Securities and advisory services offered through SII Investments, Inc. Member FINRA/SIPC & a Registered Investment Advisor. Elllenbecker Investment Group and SII Investments are separate companies.