How to Analyze and Select Funds in Your Empower 401(k): A Step-by-Step Guide
Choosing the right funds for your Empower 401(k) can significantly impact your retirement savings. With numerous options available, it can be challenging to know where to start. This article will guide you through a systematic approach to analyzing and selecting the best funds for your needs.
Step 1: Understand Your Goals
Before jumping into fund selection, determine your retirement goals:
- Time Horizon: How long until you plan to retire? The longer your timeframe, the more risk you can generally take on.
- Risk Tolerance: Assess your comfort level with fluctuations in your investment. Are you willing to take on more risk for potentially higher returns, or do you prefer stability?
- Income Needs: Consider what income you may need in retirement and how your investments can help meet that need.
Step 2: Familiarize Yourself with Fund Types
Understanding the types of funds available in your Empower 401(k) plan is crucial. Common categories include:
- Stock Funds: These funds invest in shares of companies and offer potential for high returns, but they also come with higher volatility.
- Bond Funds: Generally considered safer than stocks, these invest in government or corporate bonds and provide income through interest payments.
- Target-Date Funds: These are designed to automatically adjust the asset allocation as the target retirement date approaches.
- Index Funds: These funds replicate the performance of specific market indexes and tend to have lower fees.
Step 3: Access Your Empower 401(k) Account
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Log In: Start by logging into your Empower account. If you don’t have an account, you’ll need to set one up.
- Navigate to Investment Options: Locate the section of your dashboard that discusses your investment options or fund choices.
Step 4: Analyze Fund Performance
Once you have access to your fund options:
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Review Historical Performance: Look at the fund’s returns over various timeframes (1-year, 3-year, 5-year, and since inception). Keep in mind that past performance is not a guarantee of future results.
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Compare Against Benchmarks: Check how the fund performs against its benchmark index (e.g., S&P 500) to gauge relative performance.
- Risk Measures: Consider metrics like standard deviation (volatility) and beta (market sensitivity) to understand how the fund has reacted in different market environments.
Step 5: Evaluate Fund Costs
Costs can erode your returns over time, making it essential to understand the fees associated with the funds:
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Expense Ratios: Look for funds with lower expense ratios, as high fees can diminish your overall returns.
- Load Fees: Determine if the funds have sales charges or loads, which can increase your investment costs.
Step 6: Research Fund Management and Strategy
Delve into each fund’s management:
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Management Team: Research the experience and track record of the fund managers. Stability and experience can be indicators of effective management.
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Investment Strategy: Read about the fund’s investment philosophy and approach. Does it align with your investment goals and risk tolerance?
- Turnover Ratio: A high turnover ratio can lead to higher taxes and fees, so consider funds that maintain a balanced approach.
Step 7: Diversify Your Portfolio
Diversification reduces risk by spreading investments across various asset classes. Aim for a mix of:
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Different Asset Classes: Including stocks, bonds, and cash equivalents.
- Geographic Diversification: Consider including international funds to take advantage of global markets.
Step 8: Make Your Selections
With all the analysis completed:
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Select Your Funds: Choose a combination of funds that align with your investment goals, risk tolerance, and time horizon.
- Allocate Your Contributions: Decide how much of your contributions you want to allocate to each fund. This can be adjusted as you see fit.
Step 9: Monitor and Rebalance Regularly
Your situation and the market will change, so it’s essential to:
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Review Performance: Regularly check how your chosen funds perform.
- Rebalance Your Portfolio: Adjust your allocations periodically to maintain your desired risk level. For example, if stock funds have grown significantly compared to bond funds, you may want to sell some stock fund shares to buy more bonds, maintaining your targeted allocation.
Conclusion
Investing in your Empower 401(k) is a crucial step toward securing your financial future. By following this step-by-step guide, you can methodically analyze and select the funds that best meet your retirement goals. Remember, it’s always wise to consult with a financial advisor if you feel uncertain about your investment choices.
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excellent video, now I know how to make changes to my 401k portfolio, thank you, thank you.
can you please make a video on how to withdraw funds from your empower account
Hey i have a question when i log into my empower retirement app, it shows N/A for my annuity plan balance. is that just a glitch or what should i do
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
To achieve a secure retirement, aiming to save at least 15% of your income in a 401(k) is advisable. Online tools can assist in calculating the best savings strategy for you, considering factors like age and income. Consistently saving this percentage can help build your retirement fund effectively, thanks to the benefits of compound interest.
Thank you
Fantastic video. Thank you. Would you update for current investment options in Empower? Some of the options you are going over, are not available. Thanks in advance. !
They refuse to be responsible for there security problems keep referring you.Never doing anything about there problems damage done to 401 k investments.
How come your account hast many more options than mine? I can only invest in maybe 20 options.
empower's roth conversion tool totally blows. no matter what input i enter, it shows me varying amounts that i will be "ahead". obviously it boils down to taxes paid now vs later. seems they're trying to push business by convincing everyone the answer is always to do a conversion now
I’ve had my empower account on “coast mode” for a few years now. Would you recommend transferring or is there some detriment to transferring to new funds vs. only changing future contributions?
I chose the moderate approach. It has a variety of the blue chips. I was seeing that I can increase where I want more of my money going into. Which ones do you recommend right now? Or, is it the same as in the video?
Youre video was very helpful.. Wish my empower gave me those options I can only choose between a few stocks and bonds I don't necessarily care for like security backed mortgage and cohen and sheers real estate.and some others like that. no total market or anything. I actually had to open up a 2nd roth in fidelity investments to have more options. I thought about "consolidate" or "rollover" whichever term it is, them together but since its through my job I think its best to keep them separate and invest in fidelity roth once a week myself.
Love your video THANK YOU! Let's see if you are still reading comments on a 8-month-old video LOL. I have an Empower defined contribution plan through my work (I assume this is similar to a 401k?). I'm within 10 years of retirement and thinking about more conservative investments, like bonds, but I see that the three available bond funds (VBIMX, TIHYX, WAPAX) all seem pretty terrible. Why is that? Or am I reading them wrong. Treasury bills, I bonds and CDs all seem to be pretty strong right now so I assumed that the bond fund options should be doing better than they are. Would love your thoughts. Thanks.
Is it wise to change my allegations during a down year like we're having
Is the app different? Do I need to be on desktop because I'm not getting those investments options in mine
So far I got T. Rowe Price Retirement I 2050 Fund I Class for the pass seven years. Is that one okay or do I go with a blue growth chip?
Hey you think you can help me!! I made my account and accidentally clicked on “help me choose investments” I just want to be able to delete all the investments I don’t want to invest in anything from empower at the moment
This was great. Would love more videos specifically tailored to Empower.
When comparing funds in Google Finance, why do you choose the five year over the max? I'm curious if the plan is to keep funds into a selected fund, why not base decisions off the max versus past five year and would like to understand your logic. I've got one clear winner and two funds which swap in performance when compared over five years then over their max. Would you select the higher performer in the five year who performed less well over the full history?
Amigo creo k hablas español si no me equivoco, como puedo chekar cada ves k me pagan cuanto aumento en mi balance del 401k, vam dos chekes k agarro y eh aportado mas dinero del k me aparece k eh aportado…ejemplo eh aportado 1000 y me aparece nomas 300 extra de la cantidad k tenia antes..y kisiera saber si ay alguna manera de chekar cuanto era el balance y cuanto entro de mis contribuciones en cada transacción …gracias.
I thought this video was full of information. Thank you. I have Empowering, however, doesn't look like the one in your video. No matter, generally looks the same. First question, can you post the stock codes that you had set up in Yahoo and Google finance? Second, at work we 'over-evaluate' our retirement in Empowering. Just what we do. We aren't day trading, however, we do more our money around. My question is, when is the best time to move money to gain the most money. Example, currently the day and monthly stocks that I can see are in the negative. So we all moved our money into the stable fund. Some of the funds are starting to show positive movement, however, significantly in the negative. If I move money out of the stable fund, into a fund that shows -10%; then the fund adjusts to 0% (just as an example) will I see on that money only a 10% gain? or does the stock need to be greater than 0% before you money will be in the 'gain' or 'positive' value? Again thank you for your video.
You Are Fantastic!! Thank You!!
Roth 401k or traditional it's employer
Stay away from this company they do not care about you.
Why am I not seeing the same funds available? Does my company decide what funds are available to me?
A few weeks ago I made a video about why I loathe target date funds. They simply do not make sense for many people. How do you expect that million of investors have the same needs, risk profile and tolerance? Of course it's better than not being invested or just gambling your money on penny stocks but I see them mostly as a place to park money until you build up your confidence as an investor.