Tips To Maximize Your 401K

Financial expert Aaron Maguire has some important information regarding 401k's and how to avoid certain pitfalls.

Let's start with the basics: What is a 401k?

A 401k plan is a retirement vehicle that allows you to save money, pre-tax, through your paycheck.

It is one of the most efficient ways to save for retirement.

For 2007, the maximum, annual contribution limit is $15,500 and there is a $5,000 additional "catch up" provision if are over the age of 50.

Most companies offer a 401k as a benefit.

Many companies will offer a "matching" amount up to a certain percentage, for example:

50% match up to the first 5% of your contribution, take advantage of this!!

What do you do if you still have a 401k at an old job?

Most times you can roll this account to your new 401k

You can also roll this account to an individual retirement account, IRA

You could "cash out" your old 401K, however, the amount you cash out will be taxed as ordinary income and the IRS will impose a 10% penalty on the amount of the cash out.

Should the money be invested more aggressively since it is for retirement?

This is where people make a lot of mistakeS: don't load up on your company stock, remember Enron?

You must diversify your portfolio based on your risk tolerance

Review your portfolio quarterly

Have the financial consultant handling your 401k, print out an investment analysis on a periodic basis to make sure you are well diversified.

For more financial related information visit www.reliancewealth.com or e-mail Aaron with questions you might have.