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About Retirement Calculator, Inc.

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How to Invest in 401k

How to Invest in a 401k

When you look for advice about how to invest in a 401k, you will find that there's a great deal of information to be found. You will be able to find information from your employer about how to invest in a 401k if your employer sponsors a 401k plan, however those details won't tell you whether you should choose fixed funds, mutual funds, money market funds, bonds, stocks or even international funds. In other words, you will get a sense of the basics of how to invest in a 401k, but there will be a lot left for you to discover.

For example, when it comes to how to invest in a 401k, you will find that you need to take a closer look at how much risk you are willing to put into your investment strategy. If you are unwilling to take much of a risk, you are likely to stick with investing in fixed funds which won't leave you in a position where you are likely to lose everything, but they are also unlikely to put you in a position where your savings will multiply (low risk often equals low growth).

However, in order to really have a strong sense of how to invest in a 401k, you need to know not only how much of a risk you are willing to take. You need to know how long you will be saving for and investing in your retirement. You will need to know more about other accounts that you have in addition to your 401k. You will also want to be sure that you have a way of choosing the investment strategy that it right for helping you to accomplish your goals.

One tool that will help you to evaluate your savings and investment strategy when you are trying to figure out how to invest in your 401k is the retirement calculator that you can download on this page. With it, you will be able to take a look at all of your accounts, including your 401k. Specifically, you will be able to use the retirement calculator to take a closer look at each of the investment options your 401k plan offers to see how they are projected to perform.

A second great help when you are learning how to invest in a 401k is talking with a financial advisor. Therefore, when you download the retirement calculator, your contact information will be forwarded to a financial advisor in your area who will contact you to see what questions you have and will help you to answer them. By learning more on your own about how to invest in a 401k and by talking with a professional who helps people like you to make investments in their futures, you can be sure that you develop a plan that will help you to reach your financial goals.

Whether you are willing to risk little or you feel confident about taking a gamble with higher risk investments that you have researched, the right tools and the right advice are essential for making the right decisions for your 401k and other retirement savings and investment accounts.

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Do You Know the Answers to These Important Retirement Questions?

• Are you retired or thinking about retiring?
• Do you have enough money to comfortably live throughout your retirement years?
• Would you like FREE face to face advice or retirement consulting from a trusted local financial advisor?
• Are you looking for help to achieve your long-term financial goals?
• Would you like to learn more about Annuities, 401's, Life Insurance and Long Term Care?

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Analysis of the Economics of Early Social Security Withdrawal

Robert J. Phillips
Chief Retirement Consultant

Deciding whether or not to take the early withdrawal of social security at age 62 can be difficult. If you need this income at 62 to fund your retirement the decision is fairly straightforward. Take it early! On the other hand, if you have another source of revenue to fund your retirement your decision will be primarily based on lifestyle, health and investment preferences.

Several factors can affect your decision. First is your life expectancy. If you are in good health and have a family history of living beyond 90 then waiting for full benefits may be best. Two other factors impact this decision. First and most important is the value of money or your expected return from your investments. If you are using other investments instead of social security to fund your retirement you should use the rate of return of these investments as your value of money. There is another way to look at the value of money. If you do not require the social security money to live, you can invest the distributions for the future. The rate of return of this investment is your value of money. If your investments will make larger returns such as stocks this would favor taking the early withdrawal.

The last factor impacting your decision is inflation. Social security includes an annual adjustment based on inflation. You cannot control this variable but you should be aware of its impact. If future inflation is significant it will favor a later full distribution

FREE Social Security Calculator:

We developed a calculator to assist in analyzing the impact of taking early benefits at age 62 or waiting for full benefits at age 66 to 67 depending on the year you were born...If you were born in 1960 or later your full benefits will begin at age 67 and your reduction for early benefits at age 62 will be 30%. If you were born between 1946 and 1960 your full benefits begin as early as age 66. We have included a chart that summarizes information.

To use the calculator you need to input your year of birth. You also need to input a value of money up to 10% and a projected inflation adjustment. The calculator analyzes income generated over time from both the early and full benefit investments. It calculates the age at which full social security will catch up and breakeven with the early withdrawal. If you were born before 1960 your breakeven age will be impacted by the year you were born. An early breakeven age favors waiting for full benefits.

The social security calculator is not the final answer whether to take an early withdrawal but it does give you additional economic data to assist in that decision. Ultimately you must balance income, investments and lifestyle to optimize your enjoyment during your retirement years.