Current Thinking

2015: Time to Get Serious About Your Retirement

A blog by Richard Rausser, CPC, QPA, QKA, Senior Vice President

The end of a year is always a good time to take stock of one’s life: Not only what we’ve accomplished over the past 12 months, and where we currently are … but also what the future holds. For that reason, I thought that some suggestions about retirement were in order as we get ready to greet 2015.

  • First, and most importantly: If you are not already enrolled in your company’s 401(k) plan, stop everything and join it immediately! Don’t continue to miss opportunities to save. And, if your company offers a matching contribution, be sure to set your contribution at least high enough to qualify for the maximum in matching funds.
  • Increase your 401(k) plan savings rate by 1 or 2 percent. This is always a good idea to try and achieve annually; while the impact on your take-home pay is negligible, that extra percentage point or two can really help boost your account’s balance years from now, when it really count.
  • Rebalance your 401(k) plan investments. The various market segments reacted differently during 2014: When this was written on December 9, the stock market’s year-to-date total return was over 13% (S&P 500), while most bond indexes were up by less than that. Resetting your asset allocation will bring your portfolio’s weightings back into balance.

Remember: Simply splitting your portfolio evenly between various markets is rarely a good idea, since $1 earning 13%in stocks is obviously outperforming $1 earning 5 or 6% in bonds. Properly balancing your portfolio by weighting how much money to put into different asset classes is a way of diversifying your portfolio and rebalancing helps to follow the “buy low, sell high” model, and will help protect you against risk by being less exposed to an asset class that may now be overweight in your portfolio.

  • As an alternative to the above, if studying and learning how different investments work — something you are probably not interested in if you do not work in an investment-related profession — simplify your investment life and use a Target Date Fund or a Model Portfolio.
  • Don’t forget about an old 401(k) from a previous job, if it exists. Rolling it into an IRA, moving it to your new plan — or even just leaving it alone — are all better options than cashing it out for some spending money, given the various taxes and penalties you may face for early withdrawal.
  • And speaking of cashing out: The temptation to take a loan from your 401(k) may be great, especially during the holiday season. But you are playing with fire if you are unable to resist that temptation.
  • Lastly, strive to examine your portfolio at least once a year; New Year’s Eve or Day is usually a good time to do so, when your office is closed and you can concentrate fully on your retirement funds.

And as far as enrolling in your company’s 401(k) if you haven’t already … well, when you return to the office, immediately ask what the earliest date is for enrollment. Further delaying this is simply costing you money.

 

About the Author

Richard Rausser

Richard W. Rausser has over 25 years of experience in the retirement benefits industry. He is Senior Vice President of Client Services at Pentegra Retirement Services, a leading provider of retirement plan, fiduciary outsourcing and institutional investment services to organizations nationwide. Rausser oversees the consulting, marketing and communications, non-qualified plan and BOLI business development and  actuarial service practice groups at Pentegra. He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.




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