7 things you need to know about your 401k

Some 401k plan tips are less widely known than others. Here are a few you may not have heard of.

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VIDEO ON MSN MONEY

92Comments
Jun 24, 2014 4:29AM
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My company is just starting to restart our 401-k, and it's restarting with a boom, their paying up to 100% for up to 3 % invested and 50% after that @ 4 and 5 %, I'm @ age 55 and I've never had one so I also see where I'd be a fool not to take advantage of this,..... but having looked at this in a realistic way, it's not gonna be much to it , I don't even have a retirement plan of any kind, and no hope of really doing anything about it except this and maybe winning the lottery, ( Fat chance that happening) I suppose some money put away now is better than none at all, but it just seems so futile to me to struggle the next ten years if I make it and that's all I have to show for it,...I'm sure theirs someone out there that understands what I'm saying here.
Jun 24, 2014 5:13AM
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Number 2... My plan's "target date" funds have extremely high fees because they're a mix of actively managed (i.e. large commission) funds.  I'm better off sticking with ultra-low-fee index funds and keeping 95% of the fees for myself.

Number 5 defeats #1.  If you roll it over into an I.R.A., the money becomes vulnerable to creditor claims. No, thanks, I'll just leave my money in the 401(k) and draw from it directly.

Jun 24, 2014 9:02AM
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Never, never again...and #5 suggestion to lose your home to foreclosure, rather than take money out of your 401K is the most inane suggestion I've ever read!  In his early 50's, my husband became seriously ill and was out of work for 2 years.  I worked, but was hardly the "bread-winner".  In order to save our home, pay utilities, make car payments, insurance, et al we had to withdraw all our 401K savings over that 2 year period ($100,000).


We were hit with the penalty fees and income taxes at astronomical rates and wound up with $70,000-$80,000).  Sounds like a lot for 2 years, but that was HALF of what we were used to and our expenses reflected what we were used to earning.  We got through, saved our home, cars, and kept the bills paid.  The house and cars are is now paid off.  The house value is DOUBLE what we had in the 401K.  A much better "investment".


The government PENALIZES those who don't arbitrarily declare bankruptcy and feel honor-bound to pay creditors what they owe.  Apparently, this author feels you shouldn't be responsible for your debts, as well.


We would have been better off to take every dime we saved over the years and just put it in a savings account.  Then, when bad things happen, the money is YOURS...not the government's.  That's what we're doing now.  As I said...NEVER, NEVER again. 

Jun 24, 2014 12:02PM
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Has anyone else noticed that the writers for MSN Money have spent the last 10 years telling us to move our 401k's to an IRA after leaving an employer. Now they are pointing out all the reasons why this was a bad idea. Maybe they should have made these points in the past rather than waiting until after people have transferred their 401k.
Jun 24, 2014 8:29AM
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Number 4, (IRC code 72(t)(2)(a)(v) ) is one many overlook as brokers push them to rollover their 401k. Educate yourself on the withdrawal rules.
Jun 24, 2014 12:51PM
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One thing missing from this discussion is be aware of ALL the fees.  The Target retirement funds are particularly nasty.  Target funds charge a fee, the mutual funds that are bought and sold within that target retirement fund also have their fees - so you are getting hit by 2x the fees.  Watch out!
Jul 1, 2014 2:40PM
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1st you should know is that you should not keep your 401k in a jar on top of your desk at work.
Jun 24, 2014 4:59AM
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i never enrolled in 401k before on jobs until recently. i have five percent coming out before taxes and ten percent after taxes. i dont know much about it and wondering that is a good start or if i should dial back some. last week was the first check they took money out, $55 before and $113 after tax.  my remaining check after insurance and other deductions was $500 for the week. i think i can still support my family on that a week. what advice for somebody new to this?
Jul 2, 2014 8:59AM
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Hey you dopey liberal obama supporters......here is a cut and paste....from a Drudge Report article...is this the kind of government you signed up for?....Is this the kind of thing you support?

 

A government-contracted security force threatened to arrest doctors and nurses if they divulged any information about the contagion threat at a refugee camp housing illegal alien children at Lackland Air Force Base in San Antonio, Texas, sources say.

In spite of the threat, several former camp workers broke their confidentiality agreements and shared exclusive details with me about the dangerous conditions at the camp. They said taxpayers deserve to know about the contagious diseases and the risks the children pose to Americans. I have agreed to not to disclose their identities because they fear retaliation and prosecution.

Jun 24, 2014 11:14AM
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The special provision in 401K plans is for people who turn 55 in the year they leave their employer, not necessarily after they turn 55. You can actually be 54.
Jun 24, 2014 12:03PM
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The "72t" provision that allows penalty free withdraws after 55 but before 59 1/2 needs to be changed!!! It requires that you make the same withdraw for 5 years time EVEN if you only need $$$ for a single year extraordinary expense and don't need 5 years worth of funding. THIS STINKS!!! If you can prove that you are truly retired and have no earned W-2 income for any year after 55, withdraw of IRA/401/403 etc. funds should be penalty free!

 

Write your worthless representatives in Congress and advocate for this change! It could make a big difference in tax savings some year if you're able to retire early!

 

Also, if you go to a "sales pitch" by anyone who claims to be a financial advisor/retirement planner, ask them about 72t strategies for retirement, and if they give you a blank, enjoy the meal and run in the other direction!!!

Jul 2, 2014 3:56AM
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Put your money into REAL PROPERTY.....
Jun 24, 2014 12:40PM
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#4 IS WRONG! You CAN take SEPP from your IRA - I've done it.

Originally, one could only apply SEPP to IRA but the rule has been amended to include 401(k) money as well. You CAN apply SEPP to IRA anytime, you can only apply SEPP to 401(k) so long as you leave service on or before age 55.

It's all outlined in Internal Revenue Code (IRC) Section 72(t)(2)(A)(iv)

You're welcome.
Jul 1, 2014 3:10PM
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delru ..   I believe you misunderstood what was being suggested..  To save your home under those circumstances is quite understandable..  Following the comment regarding using 401K money to avoid foreclosure,  it goes on to say,  "in case of future bankruptcy"..  What you did was a life saver, the suggestion only refers to the "possibility" that if the money is used outside of retirement - - it could be lost.. 
Jul 1, 2014 5:40PM
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I like my retirement options, the 403b.  It is two better than my spouse's chincy little 401k.
Jun 24, 2014 11:05AM
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The bad aspect of a defined contribution plan is we will NOT know when we will die so how can we plan for a retirement?  DUH?
Jun 24, 2014 11:13AM
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Well....sheep love ploys fm the so called "money managers"....drafted w/a lot of technical mumbo jumbo....whe the only purpose of all that yap is to shake you into believing that they can do better than you.....and they usually....get your money.
Look at New York's skyline....all the big , tall fancy skyscrapers...all built with the pension plan moneys .....of the sheep.....jejejeje
Jun 24, 2014 10:51AM
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Make your own plan.....the so called retirement plans are but the bank's ploys to snare your savings with the excuse that they'll manage them for you....to manage your moneys....no one better than yourself!!
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