Your 401K retirement plan may not be perfect, yet it's one of the best ways to lower your income for tax purposes and grow money tax free.
But
ConsumerWorld.com and Moneywatch.com say many of us are making some big mistakes with those plans.
One example is not using the company match.
Okay, your employer may have dropped that as 11 percent did. But if your employer kept the match, take full advantage. This money really is free.
Investing in your employer is another matter. Never invest more than five percent in the company where you work.
Diversification is the key and too many people have lost big when their company tanked.
If you're leaving a company, don't cash out. That will cost you a 10 percent penalty if you're under 55, and it's taxed as income.
Instead, roll it over into an IRA.
Re-balance your portfolio constantly.
As risks change as you get older, so should your mix of stocks and bonds.
And keep an eye out for what's doing well. Consumer World says if you re-balanced last year, you would have been selling treasury bonds near an all-time high and this year, adding more exposure to stocks which started to rally.
Also, as you re-balance, don't get stuck with lousy stocks.
The test is if you wouldn't want to buy the fund initially today, you probably shouldn't own it anymore.
Consumer World has a full list of 401K mistakes.
