*Note to readers: yes, we're kidding. Now on with our post…
Your 401(k) plan is (probably) cleverly designed to help you save
for retirement in a virtually painless manner. Since clarity and
security can be very dull, here are five simple steps you can
take to restore the thrill of the uncertainty to your retirement
Road to Ruin, Milestone 1: Opt Out
No greater blow has been struck against your future
unhappiness than automatic enrollment into your 401(k). You
cannot remain passive; to pave the road to ruin you would need to
actively opt out of your plan. Or if some participation is
mandatory, reduce your contribution to the bare minimum. But be
careful; some plans automatically increase your contribution each
year. Remain vigilant and reduce your contribution annually.
Road to Ruin, Milestone 2: Refuse Free Money
Sometimes undermining your future takes resolve. Your employer
likely offers you free money, called a "matching contribution",
to encourage you to add more to your savings. Typically, the more
you defer, the greater the match up to a maximum of 3, 4, even
5%. The lure of free money is powerful; the best approach may be
to never find out how to maximize the match.
Road to Ruin, Milestone 3: Be Wildly
You don't have to live by their rules. There are no guarantees
in investing, but there are certain general guidelines meant to
encourage success, such as taking on more risk when you are young
and being more conservative as you near retirement. Ignoring them
won't ensure failure, of course, but they may add an exciting
uncertainty to your retirement outcome.
Road to Ruin, Milestone 4: Retirement ATM
You may find, despite your best efforts, that you have
accumulated a substantial savings. (Or at least one that looks
substantial when compared to your checking account balance.) To
overcome this obstacle, ask yourself, "What am I missing out on?"
) Borrowing from your 401(k) like it's an ATM to join the
party can help you trade tomorrow for today.
Road to Ruin, Milestone 5: Keep Telling Yourself You
Perhaps the surest way to ruin your future is to throw away
your best asset: time. If you have managed to not save for
retirement, or have only accumulated a small "nest egg", pat
yourself on the back and remind yourself you have time. No sense
starting now - not if you want to ruin your future.
Legal Note: Our compliance department notoriously lacks a
sense of humor. They would like us to point out that the
above is intended ironically. It is the exactly wrong
advice. To be clear:
- Don't opt out. Opt in.
- Don't reduce your company match. Find out how to maximize
- Adjust your investment allocations as you age.
- Do not borrow or withdraw money from your 401(k) until you
- Start saving now.
You will find good advice on saving for retirement in
. Thank you.
Managing Director, is head of BlackRock's US & Canada
Defined Contribution Group.
You can find more of his posts