How To Keep Your 401K From Turning Into a 201K

So you may be wondering, what the heck is a 201k.  Is it some type of a brand new investment account?  In reality, it’s just a catchy new term that somebody has created to represent how a lot of individual investors feel after watching their 401k account balances drop by 25%, 35% and sometimes even 50% .

Now we all realize that the stock market is at the highest level it has ever been. But then, we have also heard from the experts that “what goes up must come down.”

As I attend and participate in many retirement seminars, the main focus of many of the CPA’s, CFP’s, money managers, etc.  is that a major stock market crash is just over the horizon.  So what in the world can we do to be prepared for the inevitable?

If you have a 401k account that you actively contribute to, do you at least monitor it?  If not, you should start.  Some financial experts recommend little monitoring, especially in short-term troubling times, but there are always benefits to closely monitoring your 401k account.  So, how can you?

Read your account statements.  401k’s are company sponsored programs.  Your company should have their own rules and restrictions. This includes how often statements are mailed out.  Some investors receive monthly or bimonthly statements.

On the other hand, others receive statements quarterly throughout the year. Always review your statements.  Too many individuals just toss them aside or throw them in the trash.  Not a good idea.

Use the internet.  Most employers have safe websites for employees to login and view information on their 401k account.  In fact, on this website you may be able to make changes.  You could possibly designate new stock, make the switch to bonds, or increase or decrease your employee contributions.  You may need to contact your employer to first setup an account before using this monitoring option.

Use the provided telephone number.  If you need to access your 401k information and have no way of doing so through your statement or the internet, this is the next best approach. Unfortunately, it is a very time consuming process, especially if you want detailed information on each stock investment.

It is best to use the phone to review the total saved in your 401k account or to learn about your recent profits or losses.  Since you do not have an account statement handy, ask your employer about who to call.

You now know how to monitor your 401k, but why should you?  What should you look for?

Your total contributions.  Each statement will show how much money you contributed in that specific period, like four months.  It is always good to invest.  If you can, increase your contributions.  If in financial distress, it is important to trim your budget.

If you cannot trim anymore and still need money, consider reducing your employee contributions temporarily.

Your employer contributions.  Many companies contribute to their employees 401k plans.  First, make sure you know how much your employer is supposed to contribute.  Then, review your statements to ensure it is correct.  If the amounts are different, do not automatically assume you were scammed.  It may be an honest mistake, but a mistake that you must first catch before it can be fixed.

Your stock performances.  If you invest in stocks, you will notice some changes.  It all depends on the market.  Right now, the stock market is at a all time high.  Don’t be surprised to see a major loss in the near future.  Most financial experts predict the market will start to start to make a correction.  You can wait it out if you wish or do more research.

Research the stocks you invested in.  Make sure it really is just a short-term bump in the road, not a long-term problem you are just realizing.

If you don’t like what you see, such as you losing money on stock, make a decision.  If you must, talk to a financial advisor.  In the year 2008, the stock market took a dive.  It was near record lows and 2009 didn’t look much better.  You may want to jump ship on an underperforming stock, but it may be best to wait it out.

Always consult with a financial advisor if you cannot make an informed decision yourself.

Read all attached documents.  Don’t just look at your 401k statement.  Some companies include updates with statements.  Are you now charged maintenance fees?

Is there are free seminar coming up where you can meet with financial advisors for free?  Information like this is typically included with account statements.  Never throw anything related to your 401k away without first reading.

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