retirement

How to manage your retirement plans right

How to manage your retirement plans

Retirement plans come in all shapes and sizes, and with varying options. It can be easy to brush your 401(k) statements aside, but it's a mistake to assume that your retirement is secure just because you have a plan in place. Whether you're in your 20s or 50s, it's important to consistently evaluate your plan and take steps to safeguard it for the future.

Contribute the right amount

How much participants contribute to their retirement plans depends on their age. Financial planners generally advocate saving as much as possible. Those in their 20s should shoot for contributing 10 percent of their income. The 30s age group should aim for 15 percent, while the 40s should contribute 20 percent. Those in their 50s who haven't saved anything should contribute the maximum amount. Including catch-up contributions, that maximum is $22,000 per year.

Regardless of your age, be sure to get the full match from your company for your 401(k), and count it toward your contribution amount. For example, if your company matches 3 percent of your income, then you should contribute 12 percent if you're in your 30s to make an even 15 percent when planning retirement.

Spread out your funds

It's not unusual to be perplexed by all the options in your 401(k) retirement plan. Don't make the mistake of picking funds without understanding them. Spread out your risk by choosing four or more fund options. Choose small, mid-size and large-cap funds, plus a bond fund for stability. Investing in a foreign stock fund also helps to diversify your portfolio. As a general rule, subtract your age from 100 to get the percentage amount that you should invest in stock funds. Check out Bankrate's asset allocation calculator to create a balanced portfolio.

Perform regular maintenance

Even though you may have spent a lot of time meticulously choosing your funds, you still need to check your plan quarterly. If you don't, the market could adjust your portfolio in an undesirable way. Check and tweak your portfolio as needed, at least on an annual basis.

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