Why You’re Stressed About Your 401(k) — and How to Get Over It

401(k)s are a source of confusion and fear for many of us. Here’s what you need to know about them.

Better Investing

If you’re lying awake at night wondering if your 401(k) is properly invested, it’s not much comfort to know that millions of other Americans are probably losing sleep over the same thing.

Safely saving for retirement doesn’t have to be as complicated as we make it, however.


We “lack the confidence to effectively manage” our retirement savings, a poll by Charles Schwab concludes. It found, in a nationwide survey of more than 1,000 401(k) plan participants, that:

  • More than half (52 percent) find explanations of their 401(k) investments more confusing than explanations of their health care benefits (48 percent).
  • Fifty-seven percent wish there was an easier way to figure out how to choose the right 401(k) investments.
  • Nearly half (46 percent) don’t feel they know what their best investment options are, and one-third (34 percent) feel a lot of stress over correctly allocating their 401(k) dollars.

The crazy thing is, anxious investors are right. Our 401(k)s were never intended to be a primary path to retirement. They were developed in the 1980s for highly paid corporate executives to shelter additional investments from taxes – a supplement to their companies’ old-fashioned pension plans. Later, companies decided to offer them to employees in place of traditional pension plans.

Although 401(k)s may not be ideal, they’re what a large proportion of Americans have to work with. Here are seven ways to wring the most out of your retirement accounts:

1. At the very least, max out your employer contribution

Find out if your employer matches your 401(k) contribution and, if so, what the maximum contribution is. For example, if your employer matches your contributions dollar for dollar up to 6 percent of your $4,000 monthly salary, you’ll get $240 free in your account for the first $240 you save. If you don’t take advantage of your employer’s match, you’re throwing away free money.

Don’t stop there, though. If you can, add more to your 401(k). The maximum the IRS allows you to save in a 401(k) in 2015, if you are 49 or younger is $18,000. Add another $6,000 if you’re 50 or older.

2. Bone up on 401(k) investing

To start, watch this 90-second video primer for beginner investors. Your 401(k) allows you to choose among three types of investments:

  • Stocks: When you see the word “growth” in the title of an investment option within your 401(k), that’s a clue that stocks are involved. Stocks, basically ownership in a company, offer the most potential for reward, but they also present the greatest risk.
  • Bonds: When you see “income” as an investment option, you’re probably looking at a fund that contains bonds. While stocks are an “ownership” investment, bonds are “loanership.” You’re lending money to a company (corporate bonds), local government (munic ipal bonds) or Uncle Sam (treasury bonds). Bonds pay a fixed rate of interest, come due on a certain date and are backed by the company or government agency that issues them, all things that generally earn them the reputation of being safer and more stable than stocks.
  • Cash: When you see the words “money market,” you’re probably seeing a fund that’s basically a cash equivalent. Like a savings account, these funds don’t earn much, but the risk is lower than either stocks or bonds.

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  • Ted

    As long as my stocks are paying dividends and I don’t need a lump sum payout, I’m not concerned about a market downturn as I approach retirement. In fact, I’d like to see a correction for some final contributions to my account.

  • Kent

    Don’t put anything in bonds. They only have one way to go with the artificially low interest rates. Even cash is better than bonds.
    One good thing, 401K’s are yours. Everything on your statement belongs to you. I’ve experienced several companies reneging on their pensions. When dealing with corporate weasels, it is inevitable.

  • Georgia Wessling

    I never invested any of my 457b funds. It all went straight to savings. When I retired, the savings interest was 8-9%. It is now 1 1/4/%, which is better by far than most regular savings accounts. I only take it out annually and only the minimum. I had far less than 100k, I’ve taken out about 34k and my balance is only down by about 9k. I should have enough to go another 20 years and I am 78. So I am not worrying at all. Now, if I had to live on it monthly, it would be a different matter.

  • bclomptwihm

    My 401k doesn’t matter. I had to take it all out, over $200,000, to cover out of pocket medical expenses thanks to Obamacare.

    My wife lost her job and our Healthcare went up about 700% because of ObamaCare. The employer cut her and a bunch of others back to 20 hours per week and no benefits due to the horrendous costs piled on large employers. They gave everyone the option of taking a layoff, which she took. Meanwhile those that were left had their workload doubled with no pay increase

    I tried to just pay the “no insurance” fine and get catastrophic coverage – we can’t get catastrophic coverage because of pre-existing conditions. So much for that promise.

    So now we’re stuck with an Obamacare policy that has gone from $300 a month to $2500 per month that won’t pay a dime until we pay $12000 out of pocket.

    And whatever you do, don’t get Hepatitis C – you’ll pay $24,000 per month between the premiums and the out-of-pocket costs because, as decreed by the Death Panel, they will only pay 40% of the cost of the high end Hep C drugs.

    If a private company did all this the head of the company would be in jail right now. Everyone involved with Obamacare should go to prison and never get out.

    • “I tried to just pay the “no insurance” fine and get catastrophic coverage – we can’t get catastrophic coverage because of pre-existing conditions. So much for that promise.”

      This is a false statement. Obamacare specifically mandates that preexisting conditions cannot be used to deny coverage. If you failed to get coverage, you ignored what the law is intended to prevent: encountering a catastrophic illness without insurance. What you apparently ultimately got was catastrophic coverage: insurance – that’s what insurance with a $12,000 deductible is.

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