This months Consumer Reports magazine has a cover story about how to increase your returns when owning a 401-k (or any) retirement account. It’s pretty simple: cut fees and expenses.
Cut Management Fees
The sad truth is that far too many people create savings plans for their retirement years, without paying attention to expenses. It seems reasonable for us to trust that our employers, looking out for our best interests, would provide access to a plan that treats investors fairly. Alas, that is not the case.
If you have a savings plan — and I surely hope that you do — then take the time to learn exactly how it works.
–If you own mutual funds, consider switching to
–low-cost index funds
–low-cost exchange traded funds (ETFs) that come with passive management
–if you own index funds, be certain that the fees are low (i.e., Vanguard)
–if your savings are all in company stock, consider diversification.
–if you get to buy stock commission free and at a discount, continue to buy the shares. But periodically sell some (or all) of those shares because you do not want to be depend on the success of one company for both your employment and retirement savings.
–No matter where your retirement funds are invested, speak with your human resources department and consider each of your investment alternatives. Do not choose investments that charge higher fees. Even 0.5% per year makes a big difference in the value of your holdings over a 30-year career.