For nearly 30 years now, the 401(k) plan has become one of the most popular savings vehicle in America. A 401(k) plan (named after a section of the tax code) allows employees to set aside a pre-tax portion of their salary in the form of cash or company stock -before taxes are taken out.

Investing in a 401(k) independent retirement account is certainly a great way to save for your retirement. Doing so not only results in immediate tax savings on the money so invested, it also helps you defer taxes on those savings until your date of retirement. A matching contribution from your employer only further sweetens the pot. The best of all, 401(k) leaves you -the employee -in the drivers' seat.

Considering that not all 401(k) retirement plans are created equal; it is important to ask questions, to study the fine print, to stay current and fully informed of the status of your 401(k) account, and be watchful of potentially unauthorized use of your 401(k) funds. Hopefully, your 401(k) allows you flexible investment options, matching contributions from your employer, and possibly a loan or a hardship provision. It would be highly advisable that it does not require that a significant portion of your investment portfolio has to be made up of your employer stocks. You may also want to investigate if your 401(k) retirement plan allows you to transfer money from your former employer(s) 4021(k) plans, entitles you to investment advice, or offers any annuity options.

It is imperative that you monitor your 401(k) account very closely -especially when it comes to your changing asset balance, any hidden administrative costs, human errors, and/or possible mismanagement of your account, or any misappropriation of your funds. If usually helps to ensure that:

• Your Investment Risks Are Within Acceptable Limits: The money that you have socked away in your 401(k) account are best invested such that not only the resultant gains are in line with your retirement goals, but the collective risk-threshold of all your investments is also well within your comfort zone.
  
• Your Expected Yield and Risks Are Well-Balanced: It is important that your investment choices not only mirror your savings/retirement goals, but also your risk-threshold.
  
• Your Plan Provides You Flexibility You Need: If you current plan does not allow you to tailor your investment portfolio that is better aligned with your own unique needs, consider switching to a 401(k) plan that allows you to custom design your very own portfolio -if you can.
  
• Your Investments Are Diversified: Regardless of how strongly you may believe in your employers or in a few select hand-picked companies that you really like, it is generally not a great idea to polarize your investment in any single company any more than 10% to 20% of your total 401(k) plan. Doing so is simply too risky -plain and simple. If you are still not sure about this, think Enron. Similarly, do not let your investment in any single category to grow more than 20% of your 401(k) plan -whether it is technology, health, or financial services. Doing so is way too risky -even if you have a very high risk-threshold.
  
• Your Costs Are Reasonable: Often 401(k) plans have hidden/latent costs that may not be readily discernable. If the annual administrative costs associated with your 401(k) are any more than 1%, you should be looking for better options.
  
• There Are No Errors, Omissions, and Inaccuracies: Often they are indicative of neglect, misuse of your 401(k) contributions by either your employer, or those entrusted with the management of your 401(k) plan.

Whether you are a Conservative or Low-Risk Investor, a Moderate or Medium-Risk Investor, or an Aggressive or High-Risk Investor, it is in your best interest to diversify your investment portfolio, contain the collective investment risk to be well within your own risk-threshold, watch out for any errors/inaccuracies in your 401(k) statements, and to do every thing you can to contain the administrative costs associated with your 401(k) plan to a level that is well within the industry norm.