Published On: Thu, Apr 3rd, 2014

How Can I Invest With a 401K Plan?

Investing in a 401K is the best way to secure your future and have a snug retirement plan in place for when you stop working. Each year a report on How America Saves is released by Vanguard. According to research by Vanguard, Americans save an average of 7% in their employer retirement plan.
For most workers, that will not be enough to support a healthy retirement income. A savings rate of 12-15% is needed and there are still about 32% of workers that have not elected to begin saving at all in their employer plan. Even though the economy is still not what it used to be, investing in your employer sponsored 401k plan is one way to help secure your retirement.

how can I invest with a 401k

Experts suggest that you invest in your 401K account because, with today’s rising costs, the Social Security benefits you receive may not be enough to cover your bills. There is no guarantee that Social Security benefits will still exist in the near future; so a 401K will make a great nest egg for retirement.

Avoid setting your goals based on what is going on in the here and now. Instead, aim to set long term goals, because that is what long term investment is all about.

Many people are bad about living in the here and now, never thinking about tomorrow. Investing in a 401K plan, and keeping up with that investment, is an easy thing to do. If you have the option then it only makes sense to take it.

Your future and the future of your family may very well depend on it, in these harsh economic times. Contact your employer today to see if they offer a 401K.

Many employers also offer a company match. With an employer match, you can easily save the recommended 12-15% for retirement.

Investing options in a 401k plan are typically limited to mutual funds. Often if you do not choose an allocation of mutual funds then your account will be either cash or automatically invested in a target date mutual fund. A target date mutual fund is not customized to your specific needs so it is important that you understand how to choose the appropriate mutual funds for your 401k plan.

Wondering how you can use mutual funds in your 401k investing portfolio? In the video below, on Young Finances TV I provide an explanation on mutual funds.

How about you? Have you taken advantage of your employer’s retirement plan options?


About the Author

- LaTisha Styles is a motivational speaker, millennial money expert, and spokesperson specializing in simple finance for millennials. LaTisha is the producer and host of Young Finances TV, a weekly series featuring funny, insightful videos on the basics of personal finance. LaTisha has been quoted in Forbes and Mainstreet, featured in The Economist, and mentioned in US News as a top personal finance expert to follow on Twitter. You can follow LaTisha on Twitter for daily millennial money tips to budget, invest and achieve success!

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Did you know?

African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.

Source: Prudential’s 2013 "African American Financial Experience" study