Q&a For 401(k)

By Sharon Naylor

May 20, 2016 5 min read

As you near retirement age, you're likely thinking about your investments, especially your 401(k). And you likely have questions. Robert Gustafson, a Certified Financial Planner, first warns you not to panic when the curtain to retirement draws open. "Many people make a big mistake in cashing out their 401(k) when the market has dipped or when those foreboding financial reports on the news and online deliver less-than-encouraging news," says Gustafson. "We're a country that has been through a lot of financial ups and downs with wars and recessions, and there will always be dips in the market resulting in dips in financial portfolios." Riding out those dips, and not giving into your emotions is, Gustafson says, important to securing a stronger financial future during your retirement.

That said, Gustafson answers some of the top Q&As related to 401(k) investment plans:

*Is it too late to start a 401(K)?

"It's never too late," says Gustafson. "Everyone should have or start a 401(k,) since it's a great way to invest tax-deferred on pre-tax amounts." Of course, if you started your 401(k) when you were in your 20s, you not only have years of your investments earning interest, even with market dips affecting your totals in the short term, you also would have more years to make up for any mistakes or market changes. Still, people are living longer, thanks to advances in medical testing and treatments, plus healthy lifestyles, which means that they could potentially live for decades after their retirement date. You'll need money to live on during those years, and a 401(k) started or strengthened now will help with your financial goals. "If you're lucky, you can potentially match your 401(k) investments,' says Gustafson.

*Do I need a financial planner?

Investment information found online can be helpful, but a Certified Financial Planner knows more about the intricacies of investments, as well as evolving tax laws. They can also assess your particular 401(k) to better guide you in investing that will be best for your goals. Gustafson points out another big benefit of having a financial planner to help you: "A financial planner is a disinterested third party who can help you tame your emotions when financial reports scare you, so that you don't make an expensive or devastating knee-jerk mistake in cashing out your investments." Financial advisers are experienced in riding out shifts in the market, so they can provide reassurance as they help you.

*What should I ask my financial planner about my 401(k)?

"Ask about any special investment options in your plans," says Gustafson. "And definitely ask about the fees, because some fees can be very problematic, costing you more money." At the time of your retirement, you'll want qualified, professional advice about rolling over your 401(k) or integrating your 401(K) plans. In your retirement years, you may become widowed or become a widower, so your financial adviser can explain your options regarding the handling of your spouse's 401(k) plans as well as your own. "In any relationship, opposites often attract," says Gustafson. "One of you may have been a saver, and one a spender, so your individual plans may be very different. When you acquire your spouse's perhaps heftier 401(k), you may need extra help in managing your next steps.

"Look at your 401(k) plan as if it's part of your overall investment portfolio when you're trying to allocate your 401(k)," says Gustafson, who adds that a healthy retirement portfolio combines several investment plans to maximize investments over the course of your retirement. "Again, if you invest at an earlier age, you have more time to make up for any investment mistakes. There is also more risk when you're older, because your assets are likely higher when you're at a later age." So a qualified financial adviser will become a valued partner in navigating the murky waters of your investments.

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