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Keeping your nest egg on track
Americans' confidence in their ability to afford a comfortable retirement has dropped to its lowest level in seven years.
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| For more information on managing your largest investment, check out Gerri Willis' "Home Rich," now in bookstores. |
NEW YORK (CNNMoney.com) -- Here are some top tips on how to keep your retirement on track.
You need to figure out how much you'll need. Some experts say that you should take your final salary when you're about to retire and times that by 10. So, if you're final salary is $80k, you'll need $800,000 in retirement.
That might seem like a lot. But keep in mind, you need to account for how much you've already saved, how much you're saving, what your costs may be in retirement and how your money is invested.
You should also check out CNNMoney.com's retirement planner or bankrate.com to ensure you're on track. Enter your income, your savings information and any other investments you have. The web site will show you how likely it is that you'll be able to reach your goals. What will it take to get there? You can ask your 401(k) plan sponsor to do a quick calculation on how much you should be putting a way each month.
Do not adjust your 401(k) allocations to favor more conservative investments. Short-term market moves and downturns are completely normal. You do need to check up on your portfolio and examine what kind of investments you have and how they're doing. But don't stay on the sidelines or stop investing in stocks altogether. Even if you are close to retirement, you want to have some of your portfolio dedicated to stocks. If you don't, you'll run the risk of outliving your money.
Fees can really eat into your returns. Look for the expense ratio for your funds. This is the actual amount that a fund takes out of its assets each year to cover expenses. According to Morningstar, the average expense ratio of a balanced fund is about 0.9 basis points. So, if you have 10,000 invested, deduct fees of about $900. But remember, you also want to focus on the return and the quality of the fund. If you have any questions about the fees in your fund, call the plan administrator.
401(k) fees have recently come under congressional scrutiny. Hearings last year were held on whether these fees are too high and hard to find or hidden. There's a bill sponsored by Rep. George Miller that may go to vote in the Education and Labor Committee shortly. This bill would call for greater transparency of fees and call for more disclosure of potential conflicts of interest.
You shouldn't be paying more than 1.5% a year in 401(k) fees says Rick Meigs of the 401(k) Help Center. And keep in mind, expense ratios in target retirement funds are even higher than other kinds of 401(k) plans. If you don't know what fees you're paying ask your plan administrator or your HR representative.
The bottom line here: the keys to retirement success are asset allocation, long term investment horizon, and low fees. 
