Three questions to ask to get your 401(k) plan on track

Now’s the time to get your 401(k) retirement savings and investment strategy on track. That means setting goals, making a plan, and sticking with it.

Three questions you should ask about your 401(k) plan

1 Am I saving enough?

How much is enough? A good way to answer this question is with a contribution calculator. Using your age, income, current balance, what state you live in, and how much income you want in retirement, a calculator like this one can tell you how much you’ll need to save to retire by age 67. By changing your expected retirement income, you can also explore the trade-off between saving more today and living more comfortably in retirement.

If you’re coming up short, start saving more now. Long-term saving is powerful because it allows something called compound earnings growth. This means that when your money earns interest, the interest earns interest, and that interest earns interest. Over time, the interest (the earnings) grows (compound) and can make a real difference the longer you can leave your money invested. 

For example, saving $50 per month for 20 years and earning 5% on your savings will get you to almost the same goal as saving $135 per month for 10 years. You can also use this calculator to see how compounding works. Saving early costs less. 

2 Am I investing my savings in a way that makes sense for me?

Just saving money usually isn’t enough—it should also be invested so that it can grow. But most investments don’t come with guarantees, so you'll need to spread your balance out among different kinds of investments. This is called diversification.¹ If you need guidance, personalized investment advice can help you choose a diversified mix of investments that’s right for your retirement goals and tailored to your feelings about risk. Many 401(k) plans offer personalized advice, in some cases without additional cost.

3 Am I taking advantage of everything my 401(k) offers?  

A lot of 401(k) plans allow you to automatically increase your contribution rate and fine tune your investments. Ask your 401(k) provider what automatic saving and investment features they offer and how you can use them to turn your goals into a plan. 

Help to protect your 401(k) plan from financial emergencies

About 30% of Americans surveyed by John Hancock are just one bad financial break away from hardship.² Financial emergencies make your 401(k) vulnerable to potentially harmful loans, early withdrawals, and reduced contributions, and they can derail your retirement plans. 

To protect your 401(k) plan from collateral during a financial emergency, consider an emergency savings account. A good rule of thumb is to put several months of expenses in a low-investment-risk account, such as a bank account or money market fund, so you’re prepared when financial emergencies happen. 

Like retirement savings, emergency savings can be made automatic. You can do this with your own bank accounts, and some retirement plan providers even offer access to automated emergency savings accounts. Ask your provider how they can help you prepare for financial emergencies and protect your 401(k) from unexpected expenses. 

Now's the time—get your 401(k) plan ready for your retirement 

Saving enough for retirement and investing those savings properly requires planning and following through. Using financial tools for planning and autopilot for your retirement and emergency savings can help you meet your goals. So don’t delay—log on to your 401(k) account or contact your provider and get started.

Diversification does not guarantee a profit, or eliminate the risk of loss. John Hancock sixth annual financial stress survey, John Hancock and Greenwald & Associates, June 2019. A survey of more than 3,500 workers to learn more about individual stress levels, their causes and effects, and strategies for relief.

The content of this post is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.

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