What Should You Do With Your 401K?


It’s hard to know what to do with your savings, especially your 401K.

So many of us are just stoked to have a job that we haven’t even given much thought to retirement funds or a 401K plan. After all, most of us have rent, food, insurance and shoes to pay for–who has the time to worry about our lives at 65 when our lives at 25 are already pretty tough?

But that doesn’t mean ignoring a 401K option is a good idea … maybe.

If you have a 401K, you have a few options: You can actively invest and allocate your funds, or you can leave it well enough alone. So which should you do?

That depends on you. If you’re good at keeping up with, predicting and reading the markets and investing, it may be within your best interests to play around with it. However, if you’re not keen on all that? Relying on luck is dangerous, and it’s probably safest for you to set up your 401K (especially if your employer matches your contributions) and leave it alone. There’s a much larger risk associated with moving your money at the wrong time than there is with leaving it be.

Which is awesome, because I’m really lazy and I can’t do math.

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    • Ginger

      This is horrible advice. I am hoping this is sarcastic.

      You should contribute to your 401(k), at least to a minimum employer matching – or you’re leaving free money on the table. Invest it in a target date fund if you don’t know what you’re doing. Make sure the expense ratio is below 1%. Or, check out MarketWatch’s “Lazy Portfolios” and follow the allocation of one of those.

      Use dollar cost averaging – contributing the same amount every month to help ride out the market. When the market goes down, you’re getting more shares at a lower price – it’s like a clearance sale on stocks!

      Not difficult. Contributions to a traditional 401(k) will help lower your taxable income for the year as well. Your money will be taxed when you withdraw it.

      If you have a Roth option, even better. You won’t get the tax break now, but you won’t owe any taxes when you withdraw the money.

      And you’ll feel better much when you’re older that you paid yourself first and your investments grew with compounded interest than any pair of shoes will make you feel now.