Retirement and 401K Advice

As you near your senior years it is inevitable that you think of retirement. Having been employed you have your 401K retirement account that your employer automatically enrolled you in.   In view of the fact that the company was administrator of the fund, you trusted its best judgement in investing the funds and make the money grow.  It would likewise serve their interest to make sure that the fund earns its potential income because they also had a stake in it. The company similarly invested in the account their employer's share of 25% of your share.   Seek 401K advice was farthest from your mind. With your nearing retirement age you begin to wonder whether the income from your retirement fund is sufficient to cover the cost of inflation.  Your401K investments should be able to do this in order for you to sustain the lifestyle you have become accustomed to. 

It seemed wise at that time to leave your money in the 401K account.  After all, you were benefiting from the advantage of not having to pay for income tax on your contributions.   Because retirement was far off then, you did not have to worry about the taxes you had to pay when the time came for distributions.  Now it is time to for you to get 401K advice.

There are countless consultants who offer 401K advice on the various aspects of your retirement account.  They can give out 401K advice on investments which can be valuable because normally you have a say on what financial instrument your fund will be invested in - stocks, bond, the money market or a combination of these.  Finding the best mixture will allow your money to take full advantage of its income potential. A fee charged for providing 401K advice varies depending on the type of service you require as well as the amount of your plan.  

If your funds have been heavily invested in stocks, the value of your retirement plan will probably be less than you initially expected because the stock market did not do very well. However, restrictions of the plan does not allow you to withdraw from 401K unless you are terminated from service, you die or have reached the retirement age of 59 1/2 without penalties. But since you own the account, you can withdraw from 401K before the prescribed age for any valid reason i.e. the purchase of your first principal residence, large medical expenses, payment of house amortization to avoid eviction, etc., but you have to pay income taxes on the distribution at the time of withdrawal. If the basis for the withdrawal is not valid, then additional taxes will be imposed on top of the income tax. In such cases a 50% penalty is imposed in the amount of disallowed early withdrawal.

However, the Roth version of the 401K was introduced in 2006 allowing participants of the 401K to designate all or part of their account into Roth 401K accounts.   The Roth version is different from the traditional 401K in the treatment of taxes.  The traditional 401K allows for tax-free contributions but distributions will be taxed as ordinary income.  In contrast, in the Roth version taxes are paid on your contributions but your withdrawals upon retiring will be tax free.  The decision to convert into the Roth 401K can be one of the 401K advice you ought to seek and so much more.