What Is 401K? How to Get the Best Result?
By Saghir Ahmed Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
Those who seek advice do so to better their future. People who get professional advice about their 401(k) save more and have a better chance of meeting their goals. Yet few people seek out that help. For instant, 74 percent of people aside, most workers were also ignoring the free tools made available to them: Sixty-four percent say their plans offer a retirement income calculator, but only 38 percent used it. Similarly,59 percent of participants had access to tools that could help them figure out how much income current savings would provide once they were in retirement, but only 37 percent used them.
People spend twice as much time shopping for a new car or planning for a vacation compared to the time they spend on researching their 401(k) options. And even when they have the options of getting help with those decisions, they rarely take advantage of the opportunity. This is despite the fact that 70 percent of them say they would feel more confident about their decision if they could get financial help. Only 39 percent said they were comfortable making those decisions on their own.
We need to spend more time planning, doing research and our homework. This will pay you late and you will have a wonderful time, enjoying your grandchildren and great grandchildren if you now spend time planning the most important part of your life, which many do not. Yes, we do have time; we need to plan.
Planning at young age when you first start working will bring you happy results. Today all information is available on the web. The best course is to discuss your plans with professionals and seek advice, it will be the best money spent. There are many options available. You must research to see what is best for you. In addition to saving more, people who get advice with their 401(k) s are also more diversified. People with guidance invest in mutual funds compared with people who don’t get advice.
They are also more likely to stay the course and avoid portfolio changes when markets are volatile; this is key. So what would it take for people to ask for help? Not surprisingly, the biggest life change, by far the one that pushes them to think seriously about saving, is about getting close to retirement. Other major life events such as starting a new job, getting married or having a child, barely have the same impact.
But many advisers say that those are the kind of events that should be encouraging people to revisit their retirement plans and be sure they are on a path to meet their goals. People should be maximizing the level of advice and guidance step along the way rather than waiting until the last five years, when it really could be too late.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investment. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
