Rollover 401k IRA: Steps to take immediately

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Protect your 401k IRA is practical, quick guide to the 8 steps rollover 401k IRA participants must take immediately to manage their investments and any gains they have made so far:

  1. Pay yourself first.
  2. Increase your contributions
  3. Take full advantage of matching contributions
  4. Know how your plan works
  5. Become an informed investor
  6. Use the six concepts of successful investing
  7. Understand your investment vehicle choices
  8. Build a core investment portfolio

Step 1: Pay yourself first

When asked why participants aren’t contributing to their company 401(k) plans, the most common answer is “Because I can’t afford to.” Unfortunately, for some people saving seems impossible: 10% is considerably more than they can afford, so they get discouraged and don’t save anything.

Step 2: Increase your contributions

This might seem obvious, but you can’t appreciate how important your contributions are until you see the consequences of not fully funding your 401(k). A few extra dollars going into your 401(k) now means a whole lot extra coming out.

Automatic dollar cost averaging takes the fluctuations out of the market. When you save in a 401(k), the same amount of money comes out of your paycheck each month. So, some months you’ll invest when the markets are up. Over time you should end up owning more shares at a lower price than if you had invested all your money at once. And, because your retirement account is growing through tax-deferred compounding, the more you put away, the faster it will grow. Remember the tortoise and the hare.

Step 3: Take full advantage of matching contributions

Don’t turn down free money! That’s what you’re doing if your company offers a matching employer contribution on a 401(k) or similar retirement savings plan, but you’re not participating. If you’re eligible, learn about the plan and your investment options and determine how much you should be saving to reach your retirement goal. Remember, an employee match is like getting a 100% return on your money!

Step 4: Know how you plan works

It’s important that you learn every angle of your plan and how to work it in your favor. What are the eligibility requirements and vesting schedule? What is a “key employee”? How do the distribution rules work? Are there loan provisions? Since only you know exactly how each of these plan elements affect you, the more knowledge you have, the better chance of success you have.

Step 5: Become an Informed investor

Don’t trade in and out of the market and get saddled with fees that chip away at your returns. Don’t simply default to investing for the short-term because you don’t understand. Plus, you’ll potentially miss out on gains that long-term investors enjoy with much less effort. Learn how to create your own personal investment plan for accumulating capital that can help you avoid investor panic and increase the possibility of achieving your financial goals.

Step 6: Use the six concepts of successful investing

There are six basic investment concepts that will give you the highest possible probability for success. Learn these and you will reap rewards that you never dreamed possible.

Effective diversification

Asset allocation

Asset class investing

Re-balancing

Compounding

Long-term Investing

Understand your Investment vehicle choices

Do your homework and learn about your 401(k) investment choices. You at least need to understand why and how things work. Don’t invest in anything that you don’t understand and establish reasonable expectations. The problem with the bull market is that it makes people think investing is easy and guaranteed; but, truly successful investors know and understand their investment options.

Step 8: Build a core investment strategy

A core strategy is the base or beginning structure of an investment portfolio that includes two or more asset classes other than cash. This term can apply to any kind of portfolio that uses fixed income as well as equity securities to reach stated investor goals. Most mutual funds use a core strategy in selecting their initial stocks within their portfolios, as outlined in the investment objectives. Core is the base, which all investment management strategies are built on. We’ll show you how to do it on your own.

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