Why Is It Important To Rollover Your 401k
If you start a new job with a new company you are now faced with the task of what to do with your current retirement funds. You have a few options such as leaving the investments with your previous employer, cashing out or rolling over to a new 401k or IRA. While you should take the time to get 401k rollover info and weigh your options, today were going to talk about leaving your money where it is.
There are some benefits to leaving your current 401k savings where it is. One reason to leave it with your previous employer is perhaps you like your previous companies investment options. You may have looked over your new employers options and not find them up to par with what you currently have. You can leave your investments in tack until you find a better solution.
Maybe you are just unsure of what your next move will be. Rather than cashing out your 401k, which is certainly the last option you should choose, leaving your money with your current employer while you figure out your next investment options is a wise choice. This way you avoid any penalties from cashing out and you do not face the 60 day window of reinvesting the money into a new account.
However, here are a few reasons as to why it is important to eventually rollover your retirement funds to a new account. First off, depending on how many positions you have held over the years you do not want multiple 401k accounts all over the place. This makes it very hard to keep track of. Secondly, you are no longer able to mak contributions to your old plan and you will not be able to take any loans against your 401k either. You may also be responsible for paying any account maintenance fees.
While leaving your money with your previous employer is a good temporary solution, you should not make it a permanent one.
Filed under Uncategorized | Comment (0)Buy Annuity or Mutual Fund
Buy Annuity or Mutual Funds
A popular form of annuity is the life annuity. This annuity is purchased by making routine monthly payments until a given date and then the annuity will pay you back monthly until you die. Obviously the numbers are worked using standard life expectancy, risk, earnings from the money put in, etc to come up with a number for you to be paid. There are two significant problems with this strategy. The insurance company has to make a profit, so it’s going to reduce the amount it pays you back whether you buy structured settlements online or through a broker. The really bad factor is if you die early, you don’t get any more money or do your descendants.
The Case for Mutual Funds
Most people will never invest enough into their retirement accounts to max out their potential. For most people this is around $20,000 a year, or $1666 a month. I know I’m not maxed out yet either. Because of this almost all the tax advantages possible with annuities can be had with mutual funds within your retirement accounts. Once you hit the point in life where you would of wanted your annuities to start paying you back you simply start withdrawing 5% of your total account balance. Now you payments that will last you as long as you live with one kicker. The money exists when you die to give to whomever you want. Also, while growing you’ll be earning a much higher rate of return that the annuity will pay you. You can verify this by checking the guaranteed rate of a variable rate annuity. If you hold a variable rate annuity for 5 – 7 years they’ll guarantee a 5 – 8 % rate of return. That’s because they know they’ll earn that much with mutual funds as opposed to when you buy structured settlements.
The Difference is Discipline
Why many feel they do better with an annuity is because they are told what they have to pay every month to get where they want. A mutual fund or retirement account allows you to get sloppy. No one is going to call and demand their payment from you. If you really want to have the great life in your retirement years you have to be disciplined. You are able to do it with your kids, work, and hobbies you love; you certainly can control your money. Play with some online financial calculators, find out how much money you need to pay yourself (which probably won’t be too different than the annuity payment) and start doing it.
Filed under Uncategorized | Comment (0)401k Retirement Plan Options
If you have a 401k retirement plan, then over the last few years you have probably seen it take quite a significant hit as the stock markets have performed badly. Fortunately however, the world’s equities markets now seem to be going through something of an upswing. So is there anything you can do to ensure you make the most of this and retire at the age you want to, with adequate retirement income?
Well, first of all, how familiar actually are you with your 401k? I would hazard a guess that only a small percentage of people who have retirement plans actually know where their funds are being invested and what kind of investment strategy the plan is following. Is it invested in global equities or US equities only for example?
Another thing to consider is who is actually responsible for administering the plan and are they taking a diligent approach to get the best return on your investment? If it’s an employer-sponsored plan, talk to your HR dept and find out whether they keep a close eye on it. After all, if the plan is performing badly, all the employees of the company will be affected (including the HR dept!) not just you.
Think carefully however before you considering a 401k rollover to an external plan. The chances are you could lose your employer contributions, so the performance would have to be substantially better over the long term to make it worthwhile.
If the plan is performing particularly badly, and if you are in need of short term cash, you could always consider taking out a 401k loan. Again though, be careful because there could be tax implications to doing this.
Whatever you do regarding your 401k plan, think long and hard first. This is your retirement income you’re playing with, so you don’t want to take too many chances.
Filed under Uncategorized | Comment (0)