5 Mistakes To Avoid With Your First 401(k)

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

There is certainly a lot that comes with starting a new job - adjusting to a new work schedule, meeting new people, traveling to a new place, and learning new skills. But aside from the obvious things you'll do and learn about in your first few days in the office, there's one topic that all new employees (especially millennials who are new to the workforce) need to inquire about - the company's retirement plan.

If you recently started a job where you'll be contributing to a 401(k) plan for the first time, below are a few mistakes you'll want to avoid in order to get the most out of your efforts.

1. Not contributing enough for an employer match.
Some companies are generous enough to offer an employer match, meaning that they'll contribute a certain amount of money to your retirement account so long as you do. If that's the case, absolutely take advantage of it - it's almost like getting free money if you really think about it! Since you'll likely have to contribute a certain amount to be eligible for a match, make sure you ask about the specifics before you submit your contributions.

2. Not knowing how long you need to be employed to receive the full benefit.
Just because your employer is contributing to your plan doesn't mean you're eligible to keep that money right away - there's usually a specific amount of time that you must be employed in order to become fully vested in the plan. That said, if you know you won't be at your current job forever, at least make it a priority to stay there until the time where all of your savings officially become yours.

3. Changing investments too frequently.
The market is going to change and your savings are going to fluctuate. And since this is so, you're better off not checking your account every time you get paid - if you do, you may be disappointed with short-term results and be encouraged to change your investments when you really shouldn't. Instead, make a schedule for when you'll check your account balance and stick to it - maybe once a quarter, once every six months, or perhaps even just once a year.

4. Failing to ask questions.
As a first time full-timer, you may not know too much about investments and that's absolutely okay. However, you shouldn't let a lack of knowledge sabotage your retirement savings efforts. If you aren't sure about the different investments offered by your plan and/or don't know how to allocate your contributions, seek the advice of a financial planning professional.

5. Cashing out before your time is up.
Unless you qualify for a hardship withdrawal, there's no reason why you should be taking money out of your 401(k) plan before you reach full retirement age. Even if you're leaving a job, there are ways that you can have your savings follow you and roll over into a new plan - all you have to do is ask about your options. When you cash out before you're truly eligible to, you'll subject yourself to various tax penalties and ultimately, lose earnings.

All that said, do you still have questions about how to approach a 401(k) plan for the first time? For access to advisors that have all of the answers you need, contact us at (516) 932-5130 or email info@americaninvestmentplanners.com to set up an appointment with the team at American Investment Planners LLC.