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5 Questions Investors Should Ask About Their 401k Plans

By U.S. News & World Report

New hires have plenty of questions and concerns when they’re just starting with a company, and that’s all for the good. But at the top of the list should be your 401k plan, and how that benefit will be maximized during your tenure at your new company.

No doubt, U.S. companies want to help educate their employees about proper retirement savings planning. According to the investment consulting firm Callan, 84 percent of U.S. employer retirement plans “offer investment guidance and advisory services.” Additionally, four out of five companies engage a consultant to help both the company and its employees get the most out of their company retirement plans.

[See: 10 Smart-Beta ETFs That Will Help You Get Your Alpha.]

Unfortunately, investors don’t seem to be up to par. A 2017 study by The American College of Financial Services in Bryn Mawr, Pennsylvania, shows that 75 percent of respondents failed a 38-question quiz about retirement plans, with an average score of only 47 percent (60 percent represented a passing grade.)

That’s a big problem, especially as more workers get ready to retire. “Over the next 12 years, an estimated 10,000 baby boomers will reach age 65 every day,” says David Littell, retirement income program co-director at The American College of Financial Services. “More and more Americans are retiring, but so few understand basic facts and strategies when it comes to ensuring that their retirement is a comfortable one.”

Being less than knowledgeable about your contributions can lead to costly mistakes, such as borrowing from your account and paying higher fees, and ultimately result in less money when you reach retirement.

[See: The Best ETFs Retirees Can Buy.]

Don’t let that happen to you, especially if you’re a new employee just starting on the job. Use that “newbie” status to ask a few key questions that can help make you a smarter investor, and move you much closer to a beneficial and profitable investment portfolio. Start with these questions:

What are my plan vesting dates? One question new hires should ask is what is the vesting period on their 401k account, says Ryan Bayonnet, a money manager at Ohio-based Hyland Financial Planning. “A vesting period is the amount of time that an employer mandates you must work for their company before you are able to leave with the employer match that they place in your 401k,” Bayonnet says. Employees should know “a vesting period can be immediate, deferred a few years, or a schedule where part of their contributions vest each year until you are 100 percent vested,” he says.

What about company matching? New hires should ask employers (start with human resources) if the employer matches employee contributions and if the match is dollar for dollar, or based on another formula, says Stephanie Genkin, founder of My Financial Planner in New York. “I see many companies offering 50 cents on the employees’ dollar up to 6 percent in my clients’ 401ks. Employees want to make sure they contribute enough to get the employer match.”

Do I have access to an automatic rebalance program? Larger plan providers will usually have information on their websites that will allow you to set up parameters that will trigger an automatic rebalance, says Kevin Michels, a wealth manager at Medicus Wealth Planning, in Draper, Utah. “This feature works great because it allows you to responsibly put your 401k plan on autopilot.”

Do I have access to advice? Some plans will hire an advisor that will meet with you individually and help you determine how to invest your account, Michels states. “However, before working with the advisor, make sure you vet them and ensure they are competent and working as a fiduciary.”

What are my plan fees? The last thing you want to do is to overpay in fees, says Evan Lavoie, a wealth expert at Blue Sail Wealth Design, in Irvine, California. “It can drastically change what you end up with over time, asset-wise.” By federal law, your plan administrator must provide participants a quarterly plan statement that includes a thorough fee disclosure, he says. “Ask about plan administration and investment fees and expenses — how much are they and are there ways to cut those costs down?”

[See: U.S. News & World Report’s 10 Top-Ranked ETFs.]

Getting answers to these key plan questions gives a new employee a leg up their individual retirement plan. Always remember, an informed retirement investor is likely a successful retirement investor.

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5 Questions Investors Should Ask About Their 401k Plans originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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