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How to Invest in a 401k


The term 401k comes from a specific section of our tax code that gives individuals the ability to contribute money to a retirement account, receive a tax deduction, and avoid paying taxes until the money is withdrawn. Following these guidelines, 401k investing has become a popular subject for many people interested in building up their accounts, particularly since you can begin investing for retirement in a variety of ways.

Keys to Investing in a 401k for Retirement

First and foremost, employers generally offer some sort of 401k plan for their employees. Look into your workplace’s policy because, in some cases, employers will match your retirement contributions dollar-for-dollar up to the first 3% of your salary. Free matching money is a no-risk return that can help bump up your retirement savings substantially. Additionally, you should make consistent contributions to your plan, even in times of economic strife. One of the biggest mistakes people make when 401k investing is that they stop contributing to their accounts when the market experiences a lull or drops, which can lead to missed opportunities as the market recovers. Instead you should be contributing to your account regularly and focusing on your favorite mutual funds, stocks, bonds, etc.

What’s more, you should focus on the expense ratio of any mutual funds you have in your 401k investing plan. Most experts recommend owning low-cost funds invested in a broad index, such as the Dow Jones or S&P 500. Above all, ensure that you are disciplined about contributing, because investing for your retirement is one of the most important investments you will make. InvestorPlace offers excellent resources for retirement and 401k investing, so check out some articles below to get started.

401k Investing