How to boost 401k returns

How to boost 401k returns

How to boost 401k returns, This is the time of year when most of us are opening 401(k) and 403(b) statements. And we're probably a lot less grumpy than we were three years ago, because the markets have risen nicely for two years in a row.


But doing well isn't as good as doing better, and most of us can wring extra money from our accounts with only a little extra effort. Save harder; diversify better; watch expenses; stick to your plan. Here are seven common-sense steps you can take to fatten your retirement kitty.

Max out your contributions: Be sure to contribute enough to capture the employer match. "If you contribute 3% of your salary and your employer provides a matching 3% contribution, you have received an instant 100% return on your contribution," notes Pam Dolvin Poldiak, a financial planner in Roanoke, Va.
Beyond that, however, strive to contribute as much as the law allows. That's $20,000 a year if you're over 50, and $15,000 if you're not.

Step out on the limb a bit

Take the right kind of risk: The rules of risk are different in investing for retirement. The biggest risk of all is that you'll outlive your assets. So investments regarded as the most conservative, such as stable value funds and Treasury bills, should account for a very small percentage of assets.

Ronald Rogé, a financial adviser in Bohemia, N.Y., has six models around which he builds client portfolios. The most conservative is 40% equities and 60% fixed income. The most aggressive is 80% equities with the balance in bonds and cash.

An equity-heavy portfolio is more volatile than one tilted toward bonds, but if it's well diversified, those risks are reduced. "People assume they are diversified because they are in an index-type fund. But diversifying means being in different asset classes," says James Shagawat, a principal of Baron Financial Group in Fair Lawn, N.J.

Read more: moneycentral