I have to pick a 401K plan for work and I don't which plan to pick that has the lowest risk and the best retur

Question

I don't want to have to take a lot out of my check (maybe one and a half to two percent). And the last time I participated in a 401K I lost money. What should I do. My company is making this mandatory.

Answer 1

Lowest risk and best return just don't go together.  Since you didn't give your options I can just give you some general advise.

If one option is company stock don't put more than 10% into that category.

A balanced portfolio balances risk with potential return.  Yes there will always be downturns in the markets, but over the long term you should see an acceptable return.  Here is a suggested portfolio.

Common stock funds     20%

Small Cap stock funds     20%

International stock funds     10%

Bond funds or Government Securities funds     30%

Fixed Income funds     20%

Answer 2

May I suggest that you go to your HR department and have them run the numbers.  It may be that by saving more than 2%, possibly even the full amount, you may not negatively impact your take home pay.  When I first started my 401(K), I had 12% taken out for my contribution and my take home pay actually went UP.  It was only $0.38 per week, but it did go up and I had the money in an account with MY name on it instead of the money going for income taxes.  

While you may have lost money in your 401(k) in the past (as did we all) there has never been a 10 year period where the stock market has lost money, not even in the Great Depression.  As long as your time horizon  is longer than 10 years a growth stock mutual with a good track record and an index fund should pay very good interest over time.

Answer 3

If you are concerned select a money market fund.  I didn't know the employer could make it mandatory

Answer 4

The IRS allows employers to automatically enroll their employees for 401k contributions. You can decline at any time.

However, you should still contribute. You'd be surprised how much difference 1-2% will make. Plus, you need to buy groceries when you retire, right?

The second link will give you an idea of how much you will need to retire comfortably.