Smart401k Blog

Photo Credit dflorian1980

It’s a new year. With 2012 underway, many of you have received retirement account statements or a notice to view your information online. (If you haven’t yet, you will soon.)

This provides the perfect opportunity to spend some time examining your investment strategy, and make sure you’re on track to reach your goals. This is also a good time to review appropriate benchmarks to see how your investments stack up.

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The end of the 2011 is nearly here, and that means many of us have started setting our financial goals for 2012. Included in your 2012 goals should be getting the most out of your 401(k), and to help work towards that goal, I offer up eight dos and don’ts.

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Photo Credit Just Jennifer

I think Halloween is one of the best holidays of the year. I like the horror movies and haunted houses that come with the season because it’s fun to be a little scared, but I don’t want my 401(k) to join in the season’s frights.

What could make a 401(k) scary? A 401(k) monster. It’s a Frankenstein’s monster of mistakes and inaction creating a 401(k) situation to horrify the bravest investors among us.

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Good news retirement savers! Starting next year, you’ll be able to contribute more to your work retirement plan.

The IRS raised the 2012 contribution limit to $17,000 for 401(k) investments, 403(b)s,  most 457s and Thrift Savings Plans. The $500 raise is the first lift to the limit since 2009. The reason for the increase is simple, inflation. The contribution limit, by law, adjusts for inflation and because we saw a rise in inflation, we see a higher contribution limit.

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In a recent discussion I had with some friends, someone asked, “Which has the greatest return – an IRA, a Roth IRA, a 401(k) or a Roth 401(k)?”

I’m happy to know my friends are taking a more active role in retirement planning, but this particular question doesn’t have an answer. And here’s why:

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Photo Credit Alan Levine

Recently I went on a quest to find a new gym. After some research, I found a place I thought was a good match. The winning gym was close to my home, relatively new and, most importantly, they offered a monthly membership for just $14.95.

The next day, I merrily drove to the gym and sat with account associate to sign up and hit the gym. But reading the fine print, I was shocked to see how various fees moved my monthly fee from $14.95 to an average of nearly $30 a month.

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You can feel it in the cooling of the air and see it in the decline of Sunday yard work, football season is here. And with football season comes, the increasingly popular, fantasy football. While preparing for this years’ fantasy football season, I couldn’t help but notice some of the same general strategies vital to fantasy football success can be used as a guide to creating an effective basic investment strategy for your 401(k).

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Many of you probably didn’t realize that this Friday, September 9, is national 401(k) Day. While this day may not require the sending of a Hallmark card to friends or loved ones, it does give us a chance to look back at the origins of the 401(k).

The story starts in 1978, when computers looked like this and “tweeting” was something only birds did.  An enterprising lawyer and benefits consultant, Ted Benna, was researching ways to streamline a cash-bonus plan for a client when he discovered a “loophole” in the U.S. tax code. This discovery allowed Benna to construct a way for employees to defer part of their pretax salary for retirement rather than have the employers defer retirement benefits. While that particular client passed on Benna’s suggestion, the basis of the 401(k) was born.

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We often get questions from clients wondering what type of retirement plan they have and how their plan is different from all the other plans out there. While it can get confusing, all of these plans are set up with the same basic idea in mind: give employees control over their own retirement savings. So let’s look at the more popular types of plans available for employees.

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Current economic uncertainty, tight credit standards and a difficult housing market are forcing more and more people to make tough financial decisions.  A study from the Employee Benefit Research Institute stated 34% of workers had reported tapping into savings in order to pay for basic living expenses within the prior twelve months.

Even with so many in need of financial support it was still a shock to read a recent Kansas City Star article stating one in five employees borrowed from their 401(k) in the form of a loan.  A 401(k) plan loan can be a quick solution to short-term cash needs.  However, it is important to understand the risks involved before taking on this type of loan.

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