The aging of the population and the potential failing of social
security has brought the subject of saving for retirement to the
forefront for many people. There are many avenues available to
acquire the nest egg that we will need to survive on during our
golden years. IRA's, mutual funds, annuities and 401(k)'s are
just some of the options to research as we prepare for our
future.
With all of these choices, the 401(k) is the most popular. The
popularity of the 401(k) is due in a large part to the fact that
many employers not only offer this option, they also match a
certain percentage of your contribution. The amount that
employers will match varies from as little as 25% to as much as
100%, although the number of employers that do not match at all
is, unfortunately on the rise. Another outstanding benefit a
401(k) offers is that the contributions made by you as an
employee are made with pre-tax monies.
A 401(k) plan is also very flexible, giving you choices in
regards to your investment strategy. There are some tried and
true methods for investing in a 401(k) that depend upon your age
at any given time. For example, a young person investing in a
401(k), whether the employer matches or not, has time on their
side. This person can invest aggressively, if they feel
comfortable doing so. The market will have ups and downs, but
the younger the investor the more time is available to ride out
these fluctuations in the stock market. As the investor nears
retirement, it would be prudent to change the investment
strategy to a more conservative approach. This will, in theory
make investing money "safer." but still more profitable than a
traditional savings account.
In the past, only larger companies were able to offer their
employees a 401(k) plan for retirement. A 401(k) retirement plan
was simply not an option for the self-employed person.
Thankfully, this is not the case in today's marketplace. Today
there is a plan called Solo 401(k) or individual 401(k). These
plans allow business owners with no employees, with only
partners or a spouse to set up retirement plans that are very
similar to the traditional 401(k) offered by larger, more
established companies.
If you leave an employer that you have a 401(k) plan with, you
don't need to leave your retirement investing in their hands.
You have the option to do a 401(k) rollover, and it is highly
recommended that you take advantage of this option. By rolling
over a 401(k), you keep control over your investing options, as
you should. When a rollover occurs, the money that is in the
401(k) is rolled all together into an approved investment
vessel. These include programs such as a SIMPLE IRA, a SEP IRA
account as well as another 401(k) to name a few. It is best to
speak with a financial advisor who can help you to accurately
weigh the pros and cons of each type of investment opportunity
that is available to you.
What is almost never recommended is to take out the 401(k) money
either all or in part. This is because there will be a 10%
penalty on the portion that is withdrawn, if the withdrawal
takes place before the age of 59 ½. When a rollover is chosen as
a way to deal with accrued 401(k) investment, it should be done
as one transaction to avoid any of these penalties or fees.
If you are looking for an investment tool as a way to save for
retirement, the first place to look is your employer. Get all
the facts from them, find out what they contribute, how much
your are allowed to contribute and then speak with a good
financial advisor as to what steps to take next.
About the author:
Linda Moore writes on a variety of subjects including home
ownership,family matters,personal enrichment,protecting your 401
K Retirement nestegg and Retiremen
t Annuities
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