401k and Federal Government

If you have been following the news, you would hear about federal government trying to protect banks and fund managers charging hefty fees as part of 401k mutual funds. In some scenario, it may be necessary, but it is not really warranted.

What is really needed from government is a change in regulation to allow people to invest their own money in the manner they feel it is appropriate (e.g. buying any stock from SNP 500 or top 100 bonds on top of standard offering). If such choice is available, many of them will be able to move from funds to stocks or bonds.

Consider bonus amount in 401k

At the time of calculating your 401k contribution,  please consider your bonus and other payroll incomes too.  Sometimes companies do convert some of that into 401k contributions (good for you) but you may reach your yearly goal faster than you needed to.

As an example: 

If you are making $1,00,000 and planning to maximize your 401k contribution for year 2015, you would need to contribute 18%. 

Let's say if you have a variable bonus of $20,000. That actually bumps up the amount you earn to $1,20,000, which means you need to bring down your contribution to 15%. 

If you keep your contribution at 18%, you are likely to reach that in 10 months - with no contribution from your paycheck in last two months (and likely, no contribution from your employer, unless they do a true match).