Tips for Keeping Your 401k in Good Shape in the New Year

If you’re ready to improve your financial situation in the New Year, make sure you don’t neglect the value of your 401k. Your 401k account is a very valuable asset and can help to set you on the path to a comfortable retirement. Saving for retirement doesn’t have to be too much of a struggle when you get your finances in order and make sure you’re being consistent with your contributions. There are also several ways you can keep your 401k in good shape throughout the year. A little planning and budgeting is all it really takes to maintain a healthy retirement account

Here are some essential tips for keeping your 401k in great shape in the New Year:

1. Take advantage of employer contributions. Make sure you’re making the most of your employment benefits by participating in a company-sponsored plan right away. The sooner you start contributing to your 401k, the more money you will have available through an employer match. Employers do have limits on how much they can contribute, but they will be able to offer a generous amount as part of your benefits package.
2. Don’t touch those funds. While it may be tempting to withdraw from your retirement account when you’re faced with an emergency situation, you’ll miss out on some very significant tax benefits. Remember that all of that money isn’t taxed until you pull your money out, so your investment is much more valuable in this tax-free account than a regular savings account. Avoid tapping into this account at all costs so you can make the most of your investment come retirement time.
3. Contribute more this year. If you haven’t been contributing the full amount possible towards your 401k, make this the year that you maximize your contributions. Find out what this year’s contribution limits are and plan to make generous contributions to your account throughout the year. Having the funds directly deposited from your paycheck will make it easier to save this money because you won’t have to make the extra deposit yourself. Just ask your employer to take the money right out of your paycheck so you are only left with take-home pay.

Keeping your 401k account in great shape may take some effort, but your hard work will pay off. Make the most of employee benefits and make sure to leave this account alone for as long as possible to get maximize the rewards.

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Important Tips for Managing 401k Fees

If you are contributing to a 401k or you are eligible to receive employer contributions to a 401k account, it’s important to educate yourself on the types of fees involved. Many 401k plans are subject to several types of fees, including investment management fees, trust custody fees and administrative fees. You can’t avoid paying these because they are taken right out of your account, but you can find ways to offset some of the fees and costs.

If you are participating in an employer-paid 401k plan, your employer will usually absorb the cost of administrative fees because these fees are imposed to manage and maintain your account. Here are some important tips for managing your 401k fees:

1. Monitor fees when you leave your job. If you do end up leaving your company that made contributions to your 401k plan, make sure you know who is responsible for paying the administrative fees going forward. Most companies will not pay for administrative fees when the employee leaves their job, so you will end up paying a little extra in order to maintain your account.

2. Take a close look at investment fees. Investment fees are the biggest component of most 401k plans and are deducted from your investment returns. Your account may be subject to sales charges or sales “loads” and commissions that are paid out based on the number of shares bought and sold on the account. Other investment fees include front-end load and back-end load fees, Rule 12b-1 fees (usually imposed on mutual funds), target date retirement fund fees, collective investment fund fees and charges on variable annuities. Make sure you have a good understanding of what these fees are and consider shopping around for lower rates to get the most return on your investment.

3. Review your account statements thoroughly. All of the fees and a breakdown of all fees on each account will be posted on your account statement. Take a close look at the paperwork you receive in the mail or online so that you are aware of the total fees you are paying each month and year. Remember that there are a number of different factors that can impact fees and expenses of your 401k plan. You could be eligible to receive lower fees if you have more assets. Costs can be subsidized if your 401k plan and other services are offered through a bundled program.

Taking some time to learn about 401k fees can help you make some wise investment decisions. Use these tips to manage your 401k plans better and ensure you are getting the highest possible return from your investments.

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5 Steps to a Healthy 401(k) Plan

401(k) plans offer a number of benefits and can help you build up that all-important savings cushion you need for retirement. If your employer is contributing to your 401(k) and you are being consistent with your own contributions, you can build up a healthy savings account and look forward to a comfortable, stress-free retirement.

However, there are several things you need to do to make sure your 401(k) account stays healthy. Here are just five steps to a healthy 401(k) plan:

1. Be aware of your rights. You can start contributing to your 401(k) plan after one year of being with your employer. Take some time to learn about your rights as an employee and the benefits you are eligible to receive after one year of employment.

2. Automate your 401(k). Set up an automatic transfer of your contribution after each paycheck so that you don’t have to take the extra steps to make an actual deposit into the account. Automating your contributions can make it much easier to just “set it and forget it”. You’ll be able to build up that 401(k) account without having to think about it each time you receive your paycheck.

3. Take advantage of employer-matching. Check with your employer’s HR department to learn about your benefits and find out if you are eligible to receive an employer match for all contributions. Many corporations and some small business owners do match employee contributions, and this can be a great benefit for you in the long-run. Remember that these contributions are completely tax free, so you are essentially getting a “tax free raise”.

4. Don’t borrow from your 401(k) when you’re strapped for cash. If you’re running low on funds and need cash fast, don’t borrow from your 401(k) account. You will be paying a price for taking out this loan and will have to pay a penalty for withdrawing from the account. If you do end up leaving your job that is paying for some of your 401(k), you will have to pay the penalty and taxes on the withdrawal, unless you repay the entire amount in full.

5. Contribute up to the maximum amount whenever possible. You are permitted to contribute a certain amount each year and the IRS adjusts this limit on a regular basis. Make sure you know what this amount is so that you are contributing up to this amount year after year. Remember that none of those dollars will be taxed, so it is in your best interest to contribute as much as possible up to the contribution limit.

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Easy Ways to Strengthen Your 401k Accounts

You probably already know how important it is to save for retirement, and when you’re doing your best to build up your 401k account, you can improve your financial standing by making a few key decisions. Strengthening your 401k accounts will help you maximize your investment and ensure that you have a solid amount of funds available when you retire. Here are some easy ways to strengthen your 401k accounts:

1. Keep on contributing no matter what the economy looks like. Many people make the mistake of stopping or reducing their contributions to their 401k during a recession or economic downturn, but you don’t have to be fearful about investing during turbulent times. You may have lost some of your investment, but it’s important to keep on contributing and “ride out the storm”. In most cases, a recession makes it a great time to buy, so if you have the funds available, consider expanding your portfolio and making larger investments – and look forward to a higher return.

2. Understand your risks. If you are within a few years of retirement, make sure you understand the risks involved with withdrawing from your account and overinvesting. Consider how your actions now would affect an account you have spent decades to build. You can learn more about this by talking to a financial advisor.

3. Be patient. Don’t expect too much too soon from your 401k. Take small steps to build a solid account and invest in the lowest-risk investments as you build so you that are not vulnerable to market turbulence. Be patient as you watch your investment grow and you will get the highest returns on your investment.

4. Don’t borrow from your 401k account. Even when times get tough and you are low on funds, don’t make borrowing from your 401k account an option. Protecting your account should always be a priority, and you need to find other ways to stay ahead financially if you want to make the most of your long-term investments. Take the time to review all of your financial options when you need financial assistance so that your 401k account remains untouched.

5. Learn about your 401k fee structure and options. Sit down with a financial advisor to learn about the fee structure of your 401k account and review your options for investments. Find out if you are paying excessive service fees, and consider shopping around for better account options. Your financial advisor can introduce you to several plans that meet your objectives at the lowest possible cost.

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Easy Ways to Rollover Your 401k When Changing Jobs

When you change employers, you will need to take advantage of your previous and future employer’s 401k rollover options to successfully move your funds from each account. You may have the option to stay with the same type of 401k retirement plan as your previous company, move everything to an IRA account, or transfer the funds to another type of qualified retirement account, such as a Roth IRA.

There are several things you can do to make this transition as smooth as possible. Here are some easy ways to roll over your 401k account when changing jobs:

1. Determine what your new employer’s roll over process is. If you plan on staying with the same type of account, you may be able to simply sign documentation that authorizes your new employer to make the switch. In other cases, the process may be a little more complicated. Find out what you new employer’s roll over process is by contacting the Human Resources department.

2. Consult with a financial advisor. It may be in your best interest to meet with a financial advisor to discuss your options before making the move. A professional financial advisor may be able to review your accounts and explain what the benefits are of changing to a different retirement plan or account.

3. Don’t withdraw any funds during the transition. Withdrawing from your 401k will cost you a significant amount in penalties and fees. Don’t agree to accept a withdrawal check from your employer or you risk heavy taxes and high penalties. The best thing you can do is to simply initiate a transfer.

4. Shop around for rates and options. When you are going to initiate a roll over, consider the best value for your investment. Review your options in Roth IRAs and other qualified retirement accounts so that you can make the most informed financial decisions.

5. Learn all the details about your new employer’s sponsored 401k plan. Meet with the company’s Human Resources department so that they can go over all the intricacies of their sponsored plan, and explain how and when your contributions are made. Obtain a copy of this benefit in writing so that you can discuss your options with your own personal financial advisor or accountant.

Changing jobs can be stressful, and you will need to make some informed decisions about your existing 401k account. Use these tips so that you can easily manage the roll over process during the transition.

Tags: 401k account, 401k rollover, retirement plans, roth 401k