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As a retirement plan sponsor, you commit to annual (at a minimum) employee education sessions. One topic that should be covered during your sessions is successful 401k investing concepts.

Successful 401k investing includes:

  • Regular savings. Participants should not vary their contributions based on market or economic activity and should plan on contributing to their 401k plan for their entire careers.

  • Increasing contributions. Participants need to average 15% in annual additions into their 401k plan accounts. Most won’t be able to start contributing at this level and will need to increase their contributions gradually. Increasing contributions can often be done painlessly any time participants receive salary increases.

  • Investing appropriately. Every participant needs to understand his/her risk tolerance and select investments in the plan that are appropriate. The litmus test on whether a participant is invested in risk appropriate investments occurs when markets fall. Participants should not be stunned by the change in value of their investments during a market decline. If they are, they have elected an allocation that is too aggressive.

  • Re-balancing annually. Participants who are not invested in managed accounts (such as target date funds) need to re-balance their accounts back to their investment elections once per year.

Participants should never:

  • Day trade their accounts. Retirement accounts are long term investments, not speculative capital.

  • Stop contributing. Ever. Some participants stop making contributions when the markets fall. This is the best time to be buying mutual fund shares and is a key component of the dollar cost averaging strategy.

  • Market time. Participants should never respond to market events by reallocating their accounts in a way that appears, at the time, to take advantage of these events.

  • Take a plan loan. Successful 401k investing includes avoiding bad investments. Arguably the worst possible investment a participant can make is a plan loan. Taking a home equity loan is a much better alternative.

Consider including a section on successful 401k investing in your next employee education session.


About the Author

Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton has over 30 years of retirement plan consulting and administration experience and has provided consulting services to many Fortune 500 companies including: Aon Hewitt, Apple Inc., AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Car Company, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to 401(k) plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or or visit the firm’s website at: Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.