“What’s a 401(k) plan and why would I need one?” Each of us has asked that question at some point in our lives. After enrolling in a company-sponsored 401(k), it is too often we move on with our daily routines and put our plans on the back burner. A retirement plan is designed to help you live comfortably when you’re ready to exit the working world and begin a new chapter in life. For some, retirement means peace by the beach. For others it means traveling, personal projects, or more time with family. However, neglecting your retirement plan in your younger years wouldn’t be doing it any favors. Which is why you should learn how to keep your 401(k) plan afloat when life and the market takes unexpected turns. 

Paddle Away with your Contributions 

Contributions are the main event for a retirement plan. While a well performing market will boost your investments, your contributions take your account to the next level. However, keep in mind monthly or yearly contributions feed your retirement plan, but proper allocation is another way to keep your 401(k) plan afloat by aligning your portfolio with your long-term goals. 

Make Waves with Proper Asset Allocation with Downside Protection 

Proper asset allocation is important to consider when striving to achieve  goal-based investment results. And rebalancing is important in maintaining proper allocation (which we recommend quarterly with the 401k Optimizer®). No one is a psychic in the financial industry, but there are multiple tools you can use to help guide you when investing.. Assuming your portfolio is a diverse collection of investments, your returns on each investment may be diverse as well. Not every investment will interact the same in the market, so overlaying all your investments with downside protection, like the HCM-BuyLine®, can potentially help you mitigate major loss during downturns like at the start of the Covid-19 pandemic.. One can only hope each investment will have a positive performance, so by keeping an eye on your investments, and adjusting them when necessary, you  give yourself another opportunity  to keep your 401(k) plan afloat in a tricky market. 

Swim Away From Debt, but don’t cut into your 401k to do so

Be aware of if you’re avoiding bills. Debt should be avoided altogether if possible, but in our current economy, it can be unavoidable and stressful. Though cutting into your 401k to pay down debt or tackle your bills may sound appealing, it’s not recommended for the main reason being the penalty fees you’ll pay (10%! Ouch.) Here are two methods to consider instead when tackling debt: the debt avalanche method and the debt snowball method. 

The debt avalanche method is just how it sounds, starting with the highest interest rate debt to the lowest interest rate. From a mathematical standpoint, this method really knocks debt off its feet. The avalanche method is like taking the highway over the backroads.

The debt snowball method is a bit of a slower process. It is when you begin paying off debts by starting with the smallest balance then working up to your largest balance. This is all regardless of interest rates. Oftentimes little debts can be left lying around like unmatched socks and dirty cups. Little by little, a little becomes a lot. The snowball method is the scenic route, and you get to achieve one small victory at a time.

Swimming away from debt is an all inclusive activity everyone should involve themselves in. No matter which method you choose, you should be cutting your debt away, even if it’s one small sum at a time. 

Drift into Retirement 

There are a handful of questions to ask yourself before you drift into retirement: 

• How much do I have in my retirement account?
• Are my debts paid off?
• When should I begin collecting Social Security?
• Where do I want to retire?
• What is my plan when I retire? 

These questions are only the tip of the iceberg in terms of planning for retirement. However, just know you can strive to keep your 401(k) plan afloat through contributions, proper asset allocation, rebalancing, downside protection, and by cutting down debt.. After all of that, know there are many advisors and tools available when you need answers to your questions, or when you’re ready to make a plan.