Story Created:
Sep 10, 2007 at 8:54 AM CDT
Story Updated:
Sep 10, 2007 at 1:41 PM CDT
Saving for retirement through a 401k plan can be a confusing task. Our Financial expert Aaron Maguire has some important information regarding 401k's and how to avoid certain pitfalls.
1) 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!!
3) 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.
Question: Should the money be invested more aggressively since it is for retirement?
4) 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 information on this topic and other finacial related items, visit www.reliancewealth.com or e-mail questions to Aaron Maguire.
Saturday, Mar 29 at 11:29 AM Gloria wrote ...
Hello I would like to know how to deal with a 401k loan I took out last year and need to know what the penatlies are if I quit the job and not pay back the loan by the 30 days of my termination date?