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As shipping companies continue to phase out defined pension plans for an ever increasing number of mariners, the 401k has become the cornerstone of many American seafarers’ retirement plan. Unfortunately, success is not guaranteed with these plans and mariners need to take the following steps to maximize the performance of these accounts.
If you’re not enrolled in your company’s 401K program you need to as soon as you’re eligible.
Get Your Company’s Match
If your company matches contributions up to a certain percentage of your salary you need to contribute at least enough to get the full match. This is free money that you are otherwise giving up. Most financial advisors recommend saving at least 10-15% of your income towards retirement.
Become Familiar with Your 401K’s Website
If your computer skills are lacking, consult a coworker who is familiar with your 401K provider’s website. More than likely he or she can show you most of the basic functions that you will need to perform such as checking account balances, switching investments, changing contribution levels, exc. Many companies including Fidelity and Vanguard are more than happy to walk you through their websites if you call them.
Choose Solid Investments
Most 401K plans offer at least a couple solid mutual funds from which to choose. When deciding on a particular fund, compare the 5 and 10 year track records of each and use that as a guide. If you need more help in choosing which fund is right for you, check out (Morningstar.com) and (finance.yahoo.com) for reviews of each fund. Never hold more than 10% of your accounts value in a single companies stock (Remember what happened to the Enron Employees).
Leave Your Investments Alone
You may hear about your coworkers trying to “Time” the market by pulling their money out of stock mutual funds when the market goes down. Financial experts warn that this method is seldom effective.
Never Cash Out Your 401K
If you leave your company, do not be tempted to cash out your 401K. Not only will you be charged regular income tax on the proceeds but you will also be assessed a 10% penalty by the IRS if you are under the age of 59 ½. Instead talk to a financial services company such as Vanguard, Fidelity, or T. Rowe Price, about a “direct transfer rollover” into an Individual Retirement Account.
Capt. Ben Dinsmore is a Master Mariner currently sailing a chief mate on an oil exploration vessel in the Gulf of Mexico. He is author of the personal finance blog www.treesfullofmoney.com.
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