Choosing a contribution level and reviewing the statement when it comes in the mail, is what most people do with their 401K plan. There are things you should know about your 401K plan and you should understand your policy completely, especially the fine print. There are some costly mistakes that could take away from your retirement stash that you may not be aware of. Before this happens to you, know about your retirement plan.
Most companies match dollar for dollar what you contribute to your 401K plan. Did you know that if you leave the company before three years is up though, you will not see a nickel of the companies money that they matched. Three and five year vesting periods with companies are declining though as they are not popular. It is good to know this ahead of time.
401K plans have loans available and its nice to know you can borrow. If you borrow and then are laid off or quit, the money has to be paid back immediately. This is a risk you take borrowing against your 401K plan. If you can’t repay the loan, you have to pay penalties because it is treated as you took an early withdrawal.
Leaving the company and have less than $5,000.00 in your 401K? Then you should be prepared to roll over your money. If you have more than $5,000.00, they have to let you leave it where it is. Be prepared to do what is necessary within 60 days as that is the time alloted.
Are you paying sales charges to buy the mutual funds that are in your 401K plan? If you do, you are loosing up to 4% of the money you are investing. This is not being productive for your money. You should ask your employer to change plans and tell them to use a no-load provider like Fidelity Investments.
There are so many plans that offer tax advantage plans, and they are pointless. Retirement plans are already tax deferred. There is no reason to settle for lower returns. Be careful and know about the plans you are about to engage in. If you plan on borrowing later down the line, make sure you have job security, long before doing something that could actually be harmful in the long run.
Know everything you can about the retirement plans available at your company and if you do not understand ask questions. Invest your money wisely! Know things that could possible take away from you in your 401K plan.