Investing in an employer-sponsored 401(k) is one of the most beneficial approaches to prepare and save for retirement.  There are many ways in which an employee can be proactive to make the most of their investment, however, mistakes are also made that could harm the growth of a 401(k).  The following are 10 mistakes to avoid and what to do to make the most of your 401(k).
1. Not Investing in a 401(k)
Investing in a 401(k) is a great first step when saving for retirement.  If your employer has made a 401(k) available to you, take advantage!  Your contribution will be automatically made each pay period and because these wages are not included in your taxable income, you will pay less in taxes.
2. Not Starting Soon Enough 
Due to compound interest, the earlier that you invest in a 401(k), the higher your return can be in the long-run.  The funds you invest can each earn interest of their own, which can allow everything to grow more rapidly. Even if your savings are minimal in the beginning, you will still be in a better position than if you were to wait several more years to get started.
3. Letting Your 401(k) Run on Autopilot
Pay attention to your 401(k).  While your contributions may be automatic, your investments will highly benefit from being consistently managed.  Your 401(k) plan likely has default options; however, those may or may not be the best match for your risk tolerance level and long-term goals. Monitoring your fund diversification and re-balancing if necessary, can ensure that you are taking advantage of all opportunities as the market changes.
4. Making Decisions Based on Emotions
The market will inevitably fluctuate, but making an investment decision based on one particular cycle may not be in your best interest, as your 401(k) is a long-term investment.  Discuss any potential changes with a financial professional and let your personalized action plan, not your emotions, dictate your next steps.
5. Improper Asset Allocation
Allocating your assets in a way that aligns with your financial goals can set your retirement plan up for success. However, as the market moves, your investments may shift out of line with your initial investment strategy.  Re-balancing is a simple solution that helps to both manage risk and support growth in your funds. Many plans may even feature an automatic re-balancing tool which would allow investors to be more hands-off.
6. Investing Too Much in Company Stock
While investing in company stock may be part of your investment strategy, it is generally not recommended to dedicate a large percentage of your portfolio to this asset.  These assets are generally more unpredictable and can, therefore, increase your portfolio’s risk level.
7. Leaving Money on the Table
If your company offers a matching contribution, you are being given the opportunity to invest “free” money, which will help you build your retirement nest egg.  Ideally, you’ll want to contribute as much as financially feasible, even beyond the match maximum. However, a good place to start is to contribute at least enough to take full advantage of the match.
8. Borrowing From or Cashing Out Your 401(k)
Withdrawing funds from your 401(k) before age 59 ½ can result in large penalty fees and taxes.  Doing so would require that you pay back the 401(k) loan in a specified period of time, or it would be considered an early distribution. Cashing out your 401(k), in an indirect rollover, for example, could also subject you to additional fees and taxes.  In this scenario, because you technically have use of the funds before they are rolled over into your new 401(k) plan, it is required that 20% of the funds are withheld for federal income taxes.  However, you are still responsible for redepositing the full amount that was in your 401(k) within 60 days, or it would be considered an early distribution.
9. Abandoning Your 401(k) When you Change Jobs
When you make the decision to change jobs, don’t forget to take your 401(k) funds with you.  In general, it is recommended to either move your funds to your new company’s 401(k) plan or to roll them over into a traditional or Roth IRA.  Whichever option you choose, this will ensure that your investments are continuously being put to work for you.
10. Not Getting Professional Advice about Your 401(k) Investments
A financial professional can help you determine your risk tolerance level and long-term goals and allocate your portfolio accordingly. Additionally, he or she can alleviate concerns or point out a potential opportunity as the market shifts, ultimately helping you to earn more.   Contact Howard Capital Management, Inc. At Howard Capital Management, Inc. (HCM), we understand how important it is to work with someone you trust, that will create and deliver on a personalized plan which has your best interest in mind. By planning for your financial future now, you can make your retirement an exciting and smooth transition.


This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website LASS.102820 HCM.102820.50