401k

What should you do if you’ve got extra money or get an inheritance?

There will be times in your life when you will earn more money than you need to live or maybe you run into inherited money. What should you do with this extra money? Here are a few things that you can do with that extra cash:

• Pay off any unsecured loans or credit card cards that you hold. Credit is very expensive. Credit cards are the biggest source of unsecured loans in the World today. Credit card companies charge you different rates of interest on different types of money. Cash from an ATM taken with a credit card is a lot more expensive than ordinary shop purchases. Credit cards take your repayments towards shop purchases first and then only later towards the cash withdrawals so that you pay the maximum interest possible for the longest time. Getting a credit card with zero percent interest on balance transfers is always a smart move. There are many deals around so check my credit card reviews, why pay more than you have to?
• Build an emergency fund so you don’t have to use credit when something bad happens. A rule to use would be to reserve as much cash as you would need to live if you were to become unemployed tomorrow. A professional may need 12 months worth of living expenses in order to find a job. A factory worker may only need 3 months of living expenses, as they can find a job faster (this may no longer be true though). Also, set aside an emergency stash for car or home repairs on top of living expenses to cover the time it would take you to find a job.
• Build up your equity in your home and pay down principal. Once you have accomplished paying down high interest unsecured debt, the second step is to build the equity in your home. If you’re considering purchasing a home soon or in the future, push yourself to put down the maximum down payment that you can afford at the time you buy your property (as long as credit card debt is paid off). Avoid including arrangement fees, legal fees or Realtor fees in your mortgage, try and negotiate to have the seller pay for these. Mortgages interest can cost you huge amounts of money over the lifetime of your loan. Whenever you can, pay more than your monthly payment minimum, as most mortgages are front end loaded with interest. This means if you’re in a 30 year note, most all payments in the first half of the life of the loan will be applied to interest, not principal. To build equity outside of property value increases, take surplus money that you come into and pay down your mortgage principal (after credit card debt is paid off). Check out your loan options as well, for example, some mortgage payments can be made on a a bi-monthly repayment schedule, helping you pay down principal faster. There’s a huge difference in interest paid between 30 year and 15-year mortgages, and you can save a small fortune in interest without a significant increase in payment.

• Maximize your 401(k) and or other investments after you’ve paid down debt. When you change jobs, don’t touch that 401(k) retirement fund either. Roll the balance over to an IRA and keep it invested. If your employer is giving you money in the form of matching contributions in a 401(k) or similar, be sure to take advantage of it. Quite often, people use the excuse that they don’t like the investment company offered by their employer, but you can more than make up for any poor selections or returns provided by your company selections with the matching dollars you’ll get, even if that means sticking your dollars in money market funds. At minimum, maximize your contributions to maximize their match.

Instead of taking your extra money and buying toys, boats, TVs or new cars, take that money and pay off debt and start investing. Not only will you save paying thousands of dollars in interest, you can start making your money work for you, instead of always working for your money.

401k retirement planning is simply a must

Now is the time to plan and review your needs to ensure your portfolio is properly positioned.

Many people are just getting up the nerve to look at their 401ks or other retirement plans, in light of the recent economic rebound. Hopefully, you didn’t pull your money out when the market was at its bottom, rather you were buying more or had already positioned your portfolio with more bonds if you were near retirement – and the recession didn’t affect you as much as others more heavily weighted in stocks.

With the market nearing 10,000 again, the possibility of a double dip recession is not out of question – in fact, many are arguing it’s inevitable. Thankfully, many of the big dogs of the investment world, like Warren  Buffett are brushing it off.

This brings up a good point though – as now is a better time to to reposition yourself if need be. Have you looked at your 401k retirement plan or other plans such as your IRAs lately? Have you reviewed your retirement goals and checked again that your retirement plans are on track? If you started your 401k retirement plan as soon as you were able and took advantage of it’s benefits then it can be a very substantial nest egg’ for you when it comes time to stop earning a regular salary. The timing of your retirement and the economic background performance, particularly of the stock market, will be influential on your retirement plans. But this just makes it all the more important to regularly review your potential money status at retirement.

Too many Americans live day to day, paycheck to paycheck, and put off starting 401k contributions. Too many Americans change jobs, cash out their retirement plans (sometimes forced to when laid off) and take years before restarting 401k contributions with a new employer.

Stock markets, despite being subject to boom and bust, have appreciated considerably over the long term. So again the benefits of starting contributions to a 401k retirement plan as soon as possible and continuously keeping up with them are plain for all to see. But at the same time, it’s not enough to just dump money in and forget about it. As you age, your investments should be changing.

If you are not in a position to contribute to a 401k then a traditional or Roth IRA will allow you to sock away even a few hundred a year, until you are in a better position to put money away every paycheck. Keep in mind, with an IRA, you do not have an employer matching your savings contributions and it is all the more important that you work on your retirement plan and update it annually or with each significant life change.  The very least you should do in terms of retirement planning is to understand the value of IRAs and take advantage of the government’s desire to encourage you to look after yourself in your old age. IRAs allow you an option to invest over and above what your 401k plan may allow.

A Roth 401k is very similar to a Roth retirement plan. You make your saving contributions after you have paid tax on your earnings. So whether this is the right retirement income generator for you, depends upon your tax bracket and the timing of your retirement, both of which you need to keep under regular review. The earlier you start the less stress you will feel come retirement age. The earlier the better, begin planning and saving for your retirement. It is never too late to start to get started and build a portfolio to meet your needs.

401k into IRA; The rollover process explained

401k to IRA can be a rather simple process if you follow the easy steps provided below in this article. Moreover, we will discuss the advantages and disadvantages to a 401k to IRA rollover.

But first, let us provide a background as to why one might choose to move from a 401k into an IRA; There are numerous reasons why people should consider rolling over their 401k into a Roth IRA or a traditional IRA, likely because they have either lost their job, switched jobs, or moving onto retirement. Below are the reasons why it makes sense to move that 401k into IRA:

• With your old 401k your options are limited to whatever the company allowed. Moving a 401k to IRA allows you complete and instant flexibility with regards to your money.
• It really doesn’t make sense to be bound to a small set of the market, a 401k to IRA allows you access to numerous options you didn’t have. Consider this: Typical companies only provide one investment company in which to use and they typically have no more than 15 to 20 different funds to pick from – if there are better options out there it wouldn’t make sense to stay tied to someone that doesn’t offer the best service. Don’t let someone tell you what to do with your money by limiting your options to a small set of funds or bonds or the like.
• Most employer plans don’t allow you to buy individual stocks, whereas an IRA provides that flexibility.
• If you were to decide to simply rollover your 401k into another 401k with your new employer, you won’t necessarily be able to take advantage of being able to control your money – as once again you will be limited by your new employers rules and policies.
• If you were to simply leave the money with the existing plan sponsor, there maybe restrictions as to your ability to continue and contribute to the plan. If you’re retired it may not matter to you, but if you’re moving onto another job – or even looking for another job – it only makes sense to move that 401k into IRA and take control of your money immediately. Not to mention, you may have the ability with a 72t to make extended regular withdrawals, penalty free from an IRA, which you can’t do with your 401k.

Now, it would be a lie if we didn’t explain to you that there are certain disadvantages to moving a 401k into IRA, and they are as follows:

• Most 401k plans allow you to borrow from your accumulated assets, while you do not have that option if you put your 401k into IRA.
• You may not be able to hold onto that company stock that you’ve accumulated and you may be forced to sell it.

Now, if you’re convinced that moving your 401k to IRA investments is a good idea, you can take the following steps to get the ball rolling:

• Contact  an investment company such as Vanguard, Fidelity, or even contact your local bank to see what options they provide.
• Open an IRA and choose which funds to allocate your 401k proceeds to.
• Then your plan sends the assets over.

The process really is that simple.  It’s clear to us here at 401k Maze, the pluses out weigh the minuses when it comes to rolling your 401k to IRA.  It only makes sense to weigh your options and decide what is right for you, whether that be leave your money sitting where it is (which we don’t recommend in most instances), or move that 401k into an IRA and take back control of your money – we feel you are leaving money on the table by leaving your money with an former employer. The fact is, the major reason for participating in their plan to begin with was to take advantage of the matching contributions – not necessarily to take advantage of their investment options. don’t wait another minute, the fact is, you’re probably losing money by doing so.

Bankruptcy 401k; how will your bankruptcy affect your retirement

So many people are upside down right now on their home loans (1 out of 5 households), meaning they owe more than their home is worth, that many people are considering bankruptcy. Furthermore, they’re asking the question when considering bankruptcy, will I lose my retirement funds in my retirement plan (such as a 401k, 403b, 408, 408A, 414, 457b, ira – both roth and traditional, and also including 529 plans and coverdell)?
The good news is no, in most every case you will not have to forfeit all of those retirement dollars you’ve been saving – they are considered exempt in most every case in both chapter 13, and chapter 7. There are limits however, of how much is exempt, however most of us don’t need to even worry about this. The fact is, each spouse retirement plan is protected to the amount of $1,095,000.

Now, this same protection is not provided to those whom have built their retirement portfolio’s under fraudulent premises, let’s just hope that’s not your case.

I hope this stops some of your fears, and this can make you breathe a sigh of relief. For more articles like this to be delivered directly to your inbox, sign up in the top right corner! It costs nothing and will likely help you save money!

What Can I Do With My 401(k) If I’ve Been Laid Off?

It’s a complex World isn’t it? They say the recession is global now and that means you are not alone when laid off. So don’t take it personal but do take a key decision on your 401 (k). Basically you have 3 options.

1) Do nothing and leave your 401(k) funds in your ex-employers plan.
2) Take the money and run.
3) Roll your contributions over into another qualified individual retirement account (IRA).

If your employer gives you the necessary information to properly choose your options, then good! If he doesn’t however, be sure to call the fund administrator and get the facts.

A really important thing to know is whether you are fully ‘vested’. The money you paid out of your monthly salary is always yours, but your employers’ contributions will depend on your tenure. If you’ve been at this workplace for years rather than months then you’re most likely 100% vested.
Lots of people take option 1 and leave their 401(k) with their ex employer fund because it is the easy thing to do. However it is probably not the wisest course of action. Your former employer will no longer want the trouble and costs of administering your account. You may be billed for it. You will no longer be entitled to the support of the fund administrators. You will not be able to take out loans against your 401(k) either. Finally there is always the danger that you may lose track of your account, especially if you move a long distance away.
There is a big penalty to pay if you take the cash from your 401(k) account. Your employer will automatically take 20% for the IRS before sending you your check. Failure on your part to place your funds into another qualifying IRA within 2 months of withdrawing will also make you liable for tax and a 10% early withdrawal penalty. Only people older than 59 years and 6 months are exempt from this.
So in truth option 3, rolling over to a new IRA, is the best option. You will be required to make up the 20% deduction but you can get this back through your next tax return. If you are fortunate enough to find another job more or less immediately you can do a direct rollover from your old 401(k) to the new one. Simply notify your old employer of the address and they will forward a check without fuss, taxes or withholding charge.
If you are not so fortunate and have to find an IRA you will have to take an ‘indirect’ rollover. The check made out t o you for 80% of your entitlement. I.e. minus 20% withheld by the employer and now with the IRS. You can reclaim this amount but you are still subject to the 10% early withdrawal penalty and taxes.