May 11, 2006:
Congress Reaches an Agreement on Tax Increase Prevention and Reconciliation Act of 2005
Making Decisions on 401(k) not Rocket Science
May 8, 2006
Next, choosing your specific investments becomes a simple endeavor. In a typical plan, you'll have a choice of one or more U.S. stock funds, international stock funds, bond funds and money market funds.
Within a given category, such as U.S. stock funds, compare not only the historic performance of each investment option but also the ongoing operating expenses each fund levies. Avoid funds with high operating expenses.
Some 401(k) plans don't have good investment options because the plan was poorly designed in the first place. The tax benefits still make contributing generally worth your while. However, voice your displeasure to your benefits/human resources department. It's your money and financial future at stake; no one will care about it as much as you will.
The greatest danger with 401(k)-type plans is not that you will invest the money incorrectly, but that you won't invest in it at all. The good thing about the old pension plan is that you couldn't choose not to contribute. But 401(k) plans depend on your discipline. You ultimately decide how much to tuck away.
Put as much money into your 401(k) as you can. By contributing into one of these plans, you not only build your retirement nest egg but you also reduce your tax bill.
