In observance of National 401(k) Day, we’ve compiled three unique 401(k) “hacks” – simple but clever tips for managing your retirement savings more easily and efficiently.
Use these hacks and you may find that you’ve simplified your life and placed yourself more squarely on the path to financial wellness.
Hack #1: Consolidate Your Retirement Savings in Your Current 401(k) Plan
To keep “National 401(k) Day” from turning into “National 401(k)s Day” – consider consolidating your 401(k) balances with previous employers into your current-employer’s plan. Moving your retirement savings forward when you change jobs can save you time & money and will greatly simplify your retirement planning.
Research also shows that you’ll be less likely to cash out a consolidated 401(k) account with a higher balance.
According to the Plan Sponsor Council of America’s (PSCA) 60th Annual Survey, almost 94% of plans will accept a rollover contribution (“roll-in”) from another qualified plan. Check with your HR department to make sure that your plan accepts roll-ins.
Hack #2: Review Your Account Data, Specifically Address and Beneficiary Designation, for Accuracy
This hack maintains up-to-date contact and beneficiary information for your 401(k), preventing bad outcomes down the line, as you change jobs and relocate.
First, validate that your information is correct in your current, active 401(k) plan. This step is often overlooked, but it pays to check, as 401(k) recordkeeper can incorrectly enter data from your enrollment forms, or may use old data provided from the company’s Payroll system.
Next, if you’ve changed jobs and have left behind 401(k) balance(s) with one or more previous employers, refer to Hack #1 above.
Finally, if you choose not to consolidate a balance below $5,000, make sure that your contact and beneficiary data is current for all 401(k) accounts. This is particularly important if you have a 401(k) account with a balance of less than $5,000, as your prior employer could automatically roll over your 401(k) savings to a safe harbor IRA without your knowledge if your address is incorrect.
Hack #3: Consider Dollar Cost Averaging Into Cash
If your 401(k) has benefitted from market gains, but you’re concerned about sudden market shifts, then this hack is for you.
You may have heard of dollar cost averaging into the equities market to mitigate sudden market corrections. This strategy works the other way as well. If your equity exposure is a little high, but you are concerned about timing a rebalancing move that sells equities, you can always direct new contributions into cash to slowly move your asset allocation to a more conservative position.