Common 401(k) Mistakes People Make

Common 401(k) Mistakes People Make

 

 

There are many pitfalls when it comes to investing for your retirement. Unfortunately, a good many of these mistakes center around the 401(k), which can be a tremendous boost to your retirement plans when appropriately used to build your portfolio. The problem is that the mistakes are often the only things we hear when it comes to retirement plans and investing. I suggest beginning with the errors so that we can move along to better information and advice soon.

 

 

The first and perhaps largest mistakes that people make when it comes to 401 (k) is not signing up. Yes, you heard that right. What people do not understand is that this is something your employer offers so that you can have some security for your future. It is a manner of saving money for your future that shouldn’t be overlooked or taken for granted. Even a bad 401 (k) plan is better than no 401 (k), and with strict regulations, those are few and far between. More importantly, if your company offers to match the funds in your 401 (k) plan not taking them up on that offer is tossing money in the garbage can.

 

The next big mistake when it comes to your 401 (k) is risking too little. Rewards begin with risk. If you aren’t taking any chances with your investment, then you are by and large throwing money down the drain. In addition to that, it is nearly impossible to meet your retirement goals without taking some risks, and some hits along the way. It doesn’t mean you should be reckless but along the way you are going to need to make some calculated risks to receive the bigger payouts that most of us hope for when investing in their retirement funds.

 

They are risking too much. There are many risks involved when investing in the stock market. There are a few that deserve a little more mention than others. First, stocks present a relatively significant risk, particularly to the uninitiated. While it is true that great rewards are most often the product of great risks you do not want to risk the bulk of your retirement by investing it all in stocks.

 

 

Another thing you want to avoid doing if possible is investing in your company stock. We’ve seen too many lives destroyed when companies go undertaking the financial stability of their employees along with them. Many companies offer incentives to employees for investing in their stock, which may be tempting but I recommend spending as little as possible in your company stock whenever possible as this could lead to problems down the road.

 

Finally, borrowing against your 401 (k) is the worst thing you can do. There are so many ways in which this could go wrong, and the penalties for this are more than a little prohibitive. They are designed to be that way so that you will use the funds for their intended purpose. If you have no other option is the only way I would recommend borrowing against your 401 (k), and I would seriously consider selling a kidney before doing that.

 

When it comes to your financial retirement, 401 (k) mistakes can be far more costly than you may realize. Avoid common mistakes, and you will have an enjoyable retirement.

 

We hope this information was beneficial. You can have anything you want if you are enthusiastic about putting in the time, effort and plans to get to your goals. Discover the secrets why the rich stay rich and the poor stay poor. Click Here to view a video with more life tips!

 

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Which Retirement Plan is right for You?

Which Retirement Plan is right for You?

 

So many people find the chore of planning their financial retirement future confusing? If you are one of those this article is dedicated to explaining the differences between a 401 (k) plan and an IRA (Individual Retirement Account). There will be many terms you will come across during your research that will be somewhat confusing until you get the terminology down. The path to financial doesn’t have to be as complicated as we tend to make it.

 

 

I would like to take this opportunity to encourage you to seek the guidance and advice of a professional financial planner. The resources and knowledge that a competent financial advisor can share with you will be invaluable when it becomes time to make the decision that will affect how your retirement savings are put to work for your retirement. We go to a mechanic for mechanical advice (at least I do) so it only makes sense that we would go someone who has trained in financial matters for financial advice.

Getting back to business, when it comes to financial retirement planning you should find that both IRAs and 401 (k) plans have strengths and weaknesses. There are also limitations as to how beneficial they can be when used in combination with one another as well as their own limitations. Every benefit that aids you in taxes and retirement should be considered carefully before leaping.

 

 

Let’s first look at the 401 (k) plan. This is a plan that offers a few benefits that are much preferable to many over other retirement plans. The first thing you might want to consider is that you can invest up to 75% of your salary or a maximum of $18,500 per year (as of 2018). Of course, that is assuming that your employer doesn’t have limits on how much you can invest. The money invested in your 401 (k) account is pretax money so it lowers the amount of taxes you are paying out of each paycheck. Many people also find that because the money is taken from their checks before it arrives it is far less painless to part with. As someone who has closely watched taxes, FICA, and Fido get my money for years I can say that it is no less painful for me, but some find it comforting and that is a real benefit.

Finally, and perhaps the most important thing to consider is that many employers will match a percentage of your contribution up to a certain amount each check. As an employee, this is a boost to your investment that is well deserved and hard earned. I hope you appreciate the implications it has on your future earnings. You should keep in mind that the penalties for accessing these funds early are harsh indeed in order to discourage this practice from occurring. Take care that you do not over-invest in these funds to the point that you will need to access them in times other than dire emergencies.

 

IRAs are another creature altogether. You will find much stricter limitations on IRAs than on 401 (k) plans to begin with the fact that if your employer offers a 401 (k) you must make very little money in order to qualify for the tax deductions that this retirement fund generally allows. The maximum yearly contribution for your IRA will be $4,000 or 100% of your annual income; whichever is greater up until the age of 49. Once you’ve reached the age of 50 you can invest an additional $1,000 to your fund. The other major drawback when it comes to an IRA is the fact that you must begin receiving payments at the age of 70.5 from your account. You will also be heavily penalized if you make an early withdrawal from these funds.

 

Make sure you discuss the pros and cons of a 401 (k) plan versus a Traditional IRA plan before you make your decision.

 

We hope this information was beneficial.  You can have anything you want if you are enthusiastic about putting in the time, effort and plans to get to your goals.  Discover the secrets why the rich stay rich and the poor stay poor. Click Here to view a video with more life tips!

In closing, we invite you to share your comments on this and our other posts. If you find the information useful, please Like & Share us and subscribe to this channel for an update as we reveal new strategies. Remember to keep an open mind and Shift 4 Freedom.