Making The Right Decisions With Your 401(k)

July 30, 2020 / Eric Peterson /

Today’s Prep:

Are you wondering what to do with your 401(k)? How can you make sure this investment is set-up well to suit your needs? Let’s answer some of the most common questions regarding this popular retirement account.

Equipping Points:

When it comes to your 401(k) account through work, you may still have a number of decisions to make. On today’s episode of the podcast, we’ll run through several frequently asked questions so you feel confident in your decisions.

Should you take the advice that is offered either free or low-fee from the 401(k) program? Figuring out what to put money into is something that you can find several free resources on. During the accumulation stage, you want the cheapest way to do that and then pay fees later when you need to prepare for retirement with a financial planner.

If you can take a loan out of your 401(k), should you? While having no debt is the best option, borrowing from the 401(k) at least has the interest coming back to you. The key is paying yourself back. Consider the situation and what is really your best option.

When should you do a 401(k) rollover? Is there ever a time you should keep it in the plan even after you leave a job? What options do you have once you do a rollover?

If there is a target date fund, is this a good investment option? Target dates mathematically change once they get closer to a certain date from stocks to bonds. Target date funds are easy and change, but find out if they stay stagnant after reaching that target date. What is your allocation for your balance vs. your allocation for your contributions?

Finally, is it better to have a Roth or traditional 401(k)? Why would you pick one over the other? When are you paying taxes on those contributions and why does it matter?

Listen to the entire discussion or click on the timestamps below to get your FAQs answered.

1:04 – Is free advice worth taking?

3:10 – Is it a good or bad idea to take a loan out on a 401(k)?

4:45 – When should you do a 401(k) rollover?

7:00 – Should you use target date funds?

9:15 – Which is better: Roth or Traditional 401(k)?

Today’s Takeaway:

“If you can put money away now, pay taxes when tax rates are lower, and insulate it from all future tax increases. That’s the best investment you can do.”
-Eric Peterson

Related Resources:

Outdated Financial Rules

Financial Truth Bombs

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