Tips for 401k Investing During a Recession

When the economy is in a recession, it may be difficult to plan for long-term savings and find ways to secure your financial future. For many people, the 401k plan is a primary and only source of retirement savings, and it can be distressing to think that these funds will not be available when the economy slides.

However, there are several things you can do to secure your 401k funds for the long term. Here are some important tips for 401k investing during a recession:

1. Keep making contributions to your 401k. It can be tempting to cut off your 401k contributions  when the economy reaches its low points, but you need to make your investments a priority. Keep on making contributions to your account so that it can grow, even if it’s a small amount. Your investments will continue to grow, even at a slower rate.

2.  Don’t cash out your retirement account. When the economy reaches a low point, many people panic and become pessimistic about their financial future. It’s at this point that some people begin to withdraw money from their 401k. Doing this will cost you, and you will be putting yourself at a financial disadvantage for the long-term. Do whatever you can to leave your 401k untouched!

3. Consider reallocating your investments. It’s important to take a close look at your accounts and review market performance on a regular basis. During a recession, consider sitting down with your investment advisor or financial consultant to determine how your funds are currently allocated. You may be able to reallocate your funds to less risky stocks and invest more in secure bonds, and protect your account.

4. Consider the risks. Determine the level of risk you are most comfortable with, and evaluate the total monetary value of your retirement fund as it stands today. The return on certain types of stocks will vary considerably depending on how long they remain in your investment portfolio. Sit down with your financial advisor to take a close look at what type of return you can expect, and consider what your risk tolerance is for each type of account.

Contributing to your 401k when the economy is in a recession is still a top priority, but it can be tempting to withdraw money from your retirement accounts. Consider these important tips when you are evaluating your financial status during a recession, so that you can make the most informed decision and protect your investments.

Tags: 401k advice, 401k tips, roth 401k

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

Roth 401k Limits for 2010

The Roth IRA account is a type of qualified retirement account that has a slightly different structure than a traditional individual retirement account (IRA). Roth 401k limits change from year to year, and in 2010, the contribution limits have changed only slightly since the previous year. Roth 401k limits are determined by several factors, including your annual income, current age and your filing status. Here’s what you need to know about the Roth 401k limits for 2010:

2010 Roth 401k Contribution Limits

The contribution limits for a Roth 401k account have not changed from 2009. This means that you can make an annual contribution of $5,000 if you are under the age of fifty, and an additional contribution of up to $1,000 per year if you are over fifty years of age.

2010 Roth 401k Income Limits

Single individuals contributing to a Roth 401k account in 2010 are subject to an income limit upwards of $120,000 per year. Married individuals who are filing their taxes  jointly can contribute $5,000 to a Roth IRA if they have a modified adjusted gross income that is below $167,000. If the married couple’s modified gross income is between $167,000 to $177,000, they can contribute an amount less than their full 401k income limit. Couples who have an income that exceeds $177,000 are not eligible to contribute to a Roth 401k in 2010.

2010 Roth 401k Catch Up Limits

In 2009, the annual contribution limit was $5,000 and the catch up limit was $1,000 for all account holders. In 2010, the annual contribution limit and catch-up limits are the same, but the limits are expected to increase by $500 to $1,000 for the following year because of inflation.

2010 Roth 401k Withdrawal Policies

Individuals who wish to make a withdrawal from their Roth 401k account in 2010 can do so without penalty at the age of 59 ½. They can also withdraw from their account and not pay any taxes on the income if they are 59 ½ years of age and/or meet some other qualifications. Roth 401k account holders who withdraw before the age of 59 ½ will be subject to withdrawal fees, high penalties and will be responsible for paying taxes on the income.

Many Roth 401k withdrawal policies and account limits change from year to year, while others stay the same. If you are considering making changes to your 401k account in 2010, make sure you are aware of all of these limits and requirements so that you can make the most informed financial decisions.

Tags: 401k advice, 401k tips, roth 401k