The 5 C’s of Retirement: Strategizing your 401(k)

By: Garrett Shinn, CPA

In recent years, 401(k) plans have become one of the most common retirement plans. These plans are offered through your employer, yet require you, the employee, to choose your investment options and bear the risks of the investment. Accordingly, you should strategize early-on so that you can earn the largest possible return on your investment. You can begin to form your strategy by following the 5 C’s of retirement below

Contribute: You should plan the amount of your contribution based on your retirement date and risk aversion. You can input these factors into the projection calculators that many plans offer. Also, consider whether your employer will match your contribution.

Compose: Most plans offer a variety of investment options such as stocks, bonds, balanced funds, and target-date funds. You should compose your portfolio based on your risk-aversion and the time left until your retirement. Other factors, such how much you have saved elsewhere, are important considerations as well.

Calculate: Depending on the composition of your investments, you may face additional fees. Some investments require management, and therefore have an additional cost. Calculate the effective return that you receive and consider whether this return is high enough to justify the extra fees.

Check: Once your plan is set up, make sure to check back on your investment periodically. Depending on the economy and the return you receive, you may benefit from adjusting your plan as you go.

Consult: Due to the many factors involved with your 401(k), you may benefit from consulting a professional. Your accountant can help you with both tax and strategic planning, which will ensure that you reap the greatest benefit from your 401(k) plan.

If you follow these 5 C’s, you can form the foundation for a solid strategy towards a prosperous retirement.

If you have any questions, please contact the Shinn & Co team at info@shinnandco.com or call 941.747.0500.