Does Your 401(k) Offer An “In Service” Distribution?

For Generation X clients, the majority of their retirement savings are in the company 401(k).   While you do have a multitude of options of what you can do with your 401(k) if you leave your employer, often people feel like they are stuck if they stay with the same employer for a long period of time.  This is especially true with larger companies as most of those plans offer a limited number of investment choices and several target retirement funds.     I’m amazed that many people I sit down have never heard of whether their company offers an in service withdrawal or an in service distribution which can give them greater investment control of their 401(k) assets.    Since we have had two major market meltdowns over the past 12 years, 401(k)’s offer limited power to help you risk mitigate against a market crash.   This is why you need ask your employer today, do we offer an in service distribution? So, just ...

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Personal Finance 101 – Retirement Planning – Types Of Retirement Investment Vehicles

Last week in Retirement Planning 101, I discussed what kind of assumptions you can use to figure out the island we call ‘your number’.  Once you figure out your number, there are really two very important ships that will get to that number.  First, how much money do you need to save on a monthly basis to get to your number?   Second, what rate of return on an after-tax basis do your assets need to earn to reach the retirement number?  This week, we will review some of the vehicles you can use to work toward your retirement goal. Employer sponsored retirement plan (401(k), 403(b), 457) – Most employers whether they be companies, schools, hospitals, or government agencies will have a retirement plan they sponsor that allows you to save for retirement.  The 401(k) plan is probably the most widely known of all of these plans.  401(k) plans allow employees to put away dollars on a pre-tax basis into an ...

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Is A Roth 401(k) Right For Me?

Since 1997, Roth IRA accounts have been around as an investment vehicle. In the past several years, participants at many work places have been offered the opportunity to do a Roth 401(k). Readers have e-mailed me over the past year about whether or not the Roth 401(k) is a good idea. The Roth 401(k) follows many of the same rules as your current Traditional 401(k). There are two very large distinctions between doing a Traditional 401(k) and a Roth 401(k): 1) How contributions are taxed – In a traditional 401(k) plan, all of your contributions will be put in your plan on a pre-tax basis.  Thus, your reportable w-2 income at year end will be lowered by the amount of Traditional 401(k) contributions that you make over the course of the year. In a Roth 401(k), your contributions will be taxed now and put in your plan on an after tax basis.  Thus, you will have no change in your ...

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401(k) Charges Are Coming To A Theater Near You

New rules about 401(k) charges finally surfaced from the Department Of Labor last month.  Since 401(k) plans have become one of the largest assets owned by U.S. households today, the whole idea behind these rules are to help consumers have a good idea about the fees charged in these retirement plans. Beginning January 1st, 2012 your statements will have a whole new look laying out most of the fees and charges in plain language. The new regulations will affect about 483,000 retirement plans and 72 million workers who will be able to gain a better feel about what they are paying for in the plan.  (source: www.miamiherald.com) The details may be able to help investors fill a big void because many people don’t know about the litany of fees that may be charged against their 401(k) account for recordkeeping, investment advisory, brokerage, or other administrative services. Sometimes, as many as 6 to 8 indirect fees and expense can be charges ...

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What Tax Deductions Could Go Away In The Future?

All of us know that the United States is in a massive federal deficit. Most pundits on television are letting us know that taxes in some way, shape, or form will have to up. That seems reasonable. Any business that is losing money will eventually have to cut expenses, and figure out how to generate more revenue. We couldn’t cut expenses near enough to solve our problem, so the certainty of some form of increased taxation is an inevitability we will face in the future in my opinion. The one thing that I don’t hear much talk about is that increasing taxes isn’t the only way to generate additional revenue, but you could certainly choose to reduce overall tax deductions that we take today as another source for increasing additional revenue. According to a recent study done by the Joint Committee On Taxation (source: Fiscal Year 2010 Budget: Analytical Perspectives. OMB./Table 19-3), here are the top 5 potential sources of ...

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