Got a 401(k)? Here’s How to Figure Out What to Do With It

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I was pretty excited to accept my new job. At 29, I was finally taking a position with a competitive salary, respectable health coverage and a 401(k).

After ignoring the necessity for a decade, I was relieved at the prospect of finally making a sound plan for retirement.

I was also pretty intimidated.

Of course, I know it’s important to have a retirement plan. But when our HR rep started throwing out words like “investments” and “portfolio,” I shut down. I selected whatever options would end the sign-up process most quickly.

So now I have a 401(k), with a match from my company and money invested in… hmm.

I really have no idea what’s happening with my money — and I probably should. Sound familiar?

What’s Happening With Your 401(k) Money?

You understand the importance of setting up your workplace retirement plan, in theory. But once it’s done, you try not to think about it.

What’s actually going on with your money, and what does that mean for your retirement?

Simple as it may be to set it and forget it, the money you and your employer contribute to your 401(k) is being invested. That means it’s subject to fluctuations in the market.

And how those fluctuations affect your retirement fund is up to you.

Know Your Risk Tolerance

The first step to knowing what’s going on with your money is understanding what’s called your “risk tolerance.”

In finance, this means the amount of volatility you’re willing to allow in your investment portfolio.  Basically, do you want to put your money in a pot where it will stay at about the same value all the time, or one where it will fluctuate a lot — reaching higher highs and lower lows?

You might think you know your risk tolerance based on your personality. I’d call myself a risk-taker, because I was willing to quit my job, move across the country, travel and work for myself.

But being a risk-taker in one area of life doesn’t have to mean you want to be risky with your money. How do you determine the amount of risk you want in your retirement plan?

Learn Your Risk Tolerance With This Free Tool

When I signed up for my 401(k), I chose the “default” option. When you do that, your money is invested in a set of predetermined funds — an “investment portfolio.”

This portfolio falls somewhere on a scale from “conservative” — which mostly stays the same value — to “aggressive” — which has more potential to change in value over time.

The reason you probably prefer not to think about your 401(k) is, simply, it seems complicated. Investing seems like something for people with lots of money and access to expert knowledge.

I know it’s a bad idea to ignore retirement planning, so I found a tool that simplifies this complicated information. A company called FinMason wants to make smart financial planning accessible to everyone — not just those with the time and money to hire a financial adviser.

Instead of determining your risk tolerance relative to the risks you’re willing to take in other areas of life — which is what many financial advisers do — FinMason created what they call a “FinScore.”

Your FinScore is your risk tolerance ranking represented by a number from 1 (conservative) to 100 (aggressive). That number lets you know how much risk you should allow in your investments.

Here’s the tool I used to find my FinScore — and here’s how you could use it to make sure you have enough money when you’re ready to retire.

Note: Not sure which numbers you’re supposed to enter at each step? I’ve also included a step-by-step walkthrough below.


The Step-by-Step Guide to Finding Your FinScore

As you work through the tool above, use these tips to clarify any steps that stump you.

1. “I plan to retire in ___ years.”

Select “Calculate it for me” and enter your age and the age at which you plan to retire. If you were born in 1960 or later, expect to retire at 67 to receive full benefits.

2. “I would like a retirement income of $___ per year.”

Select “Calculate it for me” and type in your current income and expected raise per year. Typical raises fluctuate from year to year. The current average is around 3%.

3. “I expect $___ per year of my retirement income to come from Social Security and other sources.”

You can calculate your Social Security benefits based on your actual earnings record, or select “Calculate it for me,” and type in your current income and raise rate again for an estimate.

4. “I expect to contribute $___ per month to my savings and increase by ___% per year.”

List the amount of your paycheck you set aside each month for savings. This will include the percentage you contribute to your 401(k), plus any other funds you save regularly.

For example, I contribute 4% to my 401(k) and put another 4% into a bank savings account, so I save 8%. I don’t have a set plan to increase this, so for now I entered “0” in the second box.

Does your employer match your 401(k) contribution? Check this box if your employer matches. If you don’t know whether it does or not, or you’re unsure how much it matches, ask your HR rep.

5. “The current balance of my investments is approximately $____.”

List the balance you’ve already accrued in your 401(k) and other investments like a Roth IRA. Contact your HR rep if you don’t know where to find this information.

I’m just getting started, so I listed my balance as “0.”

6. Sample Portfolios

Next, using this basic information about your retirement savings, the tool will show you a couple sample portfolios, and how much money you stand to have at retirement, or potentially lose in a market crash, with each. I’ll talk more about what this means for you later in the post.

The tool will also show you how much you’d have saved by retirement with each portfolio and how that stacks up against the target and minimum savings you determined earlier.

In each round, you’ll see two of these sample portfolios, one riskier and one more conservative. Choose either “blue” or “green,” depending on which scenario best fits your retirement needs.

Choose the sample that appeals to you based not only on the best case scenario, but also on the worst. Does the “bad case” for a given sample meet at least your minimum savings needs?

7. Get Your FinScore

Based on the portfolios you choose, you’ll receive your FinScore. For example, mine was 62, Moderately Aggressive.

You’ll see a sample graph that shows how close that portfolio gets you to your target and minimum retirement savings.

This is a simple visual to help you see whether you current retirement savings plan is on track to help you achieve your retirement goals. The tool will offer a few quick suggestions based on whether or not your plan is in balance with your FinScore.

Based on my FinScore, I saw a chart that showed how much a Moderately Aggressive portfolio with my expected contributions would be worth when I retire at 67 (in 38 years).

401(k) screenshot

What to Do Once You Know Your FinScore

Knowing your risk tolerance will allow you to measure it against what’s going on with your 401(k). Then you can determine whether to make any changes.

If your retirement plan is in line with your FinScore, you’re in luck! Stick with it — but be sure to check back every few months to make sure that continues to be the case.

If you see there’s too much or too little risk in your 401(k) portfolio, take steps to change it. For example, based on my FinScore, I’ll most likely save the minimum amount using my current 401(k) plan. But I’m far from achieving the target amount.

To do that, I need to make adjustments to my savings and investments. I could contribute more to savings, I could invest more aggressively or find a balance of the two.

Determining and making these changes to your retirement plan could be as simple as speaking with your HR representative. They can give you a better understanding of the tools available to help you make decisions about your 401(k).

If you want more guidance but don’t have the budget for an expensive financial adviser, FinMason’s free tools can help you figure out your investments and understand how to make them work for you.

Your Turn: Did this tool help you better understand your retirement needs? What questions do you still have about your 401(k)?

Sponsorship Disclosure: A huge thanks to FinMason for working with us to bring you this content. It’s rare that we have the opportunity to share something so awesome and get paid for it!

Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post,, Writer’s Digest and more.