Its 2012, What Do I Do Now? – Retirement Plans

by Fern LaRocca CFP®

in 401K

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There have been a seemingly endless number of articles and cable news segments about what you should do financially in 2011. Well its now 2011 and here are a few things I suggest on the retirement plan front.

401(k) Participants

· Take a look at your account. December was a good month for stocks; this may have caused your allocation to be too heavily weighted here.
· Did your plan change its investment offerings? Have you reviewed these new funds to see if they fit into your strategy? Typically if a new fund is offered any money that is left in the old fund is automatically mapped over to the new fund.
· When you review and rebalance your 401(k)account do so in the context of your overall financial situation. Consider outside investments such as old 401(k) plans, retirement plans, a spouse’s retirement plans, IRAs, taxable accounts, and the like. Ideally do all of this in the context of your comprehensive financial plan.
· If your employer offers access to direct, unbiased advice take advantage. If it is free or at least inexpensive what do you have to lose? Even if you are a do-it-yourselfer there is nothing wrong with a second opinion.
· If your employer offers advice via an advisor who stands to benefit financially based on where and how you invest, I’d think twice.
· Full disclosure, I am launching a service to provide fee-only, unbiased advice to 401(k) participants so I am hardly unbiased here.
· While Target Date Funds might be the “easy” choice, I’m generally not a fan. At the very least, look carefully at how the TDFs in your plan invest, how this allocation does or doesn’t fit with your goals and risk tolerance, and whether there is serious overlap with your outside investments.

Self-Employed

· Start or continue to fund a Solo 401(k). If this plan fits your situation it can be an excellent vehicle to accumulate retirement assets to help reap the rewards of all of your hard work.
· Contributions to a Solo 401(k) can be made pre-tax or a Roth option can be used.
· If you haven’t made a 2010 retirement plan contribution, consider funding a SEP IRA. Contributions for 2010 can be made up to the date you file your return including extensions.
· If your cash flow and income can support it, look into a Cash Balance Pension Plan.
· Various retirement plans for solo and small businesses have different attributes. Your best bet is to consult with your financial and/or tax advisor to see which plan(s) are best for your situation. Whichever plan you choose, make sure to fund a retirement plan for yourself in 2011. You work too hard not to.
-ROGER WOHLNER, CFP®

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