Did you Have Better Plan more than 401k contributions.

Did you Have Better Plan more than 401k contributions.

It is becoming more common for retirement plan sponsors to offer separate accounts within their retirement plan. These are often called optional or self-directed accounts.

Typically this means the plan provider has an agreement with another institution that offers more comprehensive brokerage services that allows plan participants to open a separate account to invest part or all of their 401k contributions 403(b) assets.

So what this means is that you are able to continue your salary deferral and rather than only having the 10 or 20 investment choices typically available to you there are ultimately all of the great index and no-load funds you have grown to love now at your disposal.

Generally there is a small catch to these 401k contributions accounts.

1. It isn’t likely to be free. Most of these accounts carry with them an annual fee to maintain the account. I have seen fees anywhere from $10 to $50 annually. This may not be much of a concern considering the money you are likely saving in fund expenses.

2. Catch is that these accounts typically do not allow for investments in every fund company or even individual stocks. While they do typically include all of the large fund companies and most funds you have heard of you want to be sure you check with the provider to ensure you have the investment choices you are interested in available to you.

If your 401k contributions employer’s plan doesn’t have the best options available it may be worthwhile to check with your plan provider to see if this is a feature available to you. What I wouldn’t do is simply stop by your HR department to check for this information.

Generally the HR people only cover the vary basics regarding the plan unless you have a dedicated on-site representative for the plan. Check your statements or online for an 800 number and see if there is a way to talk to someone regarding your plan options specifically.

Even if you know this 401k contributions was not offered when you were hired a few years back it is still wort hing checking into. They may have added this benefit since then, yet it is unlikely they sent out a letter to everyone promoting the feature. At best it was in the fine print on one of your quarterly statements.

How much money Rollover Into New Employer’s 401(k)

How much money Rollover Into New Employer’s 401(k)

If you find new employment and they also offer a retirement plan such as a 401k or 403(b), in most cases they will allow rollovers into your new account. But is this a good idea?

The benefit of rolling into your new employer’s 401k saving plan is that it doesn’t matter how much money you have since there are generally no investment minimums on the fund options.

If your rollover isn’t that much, you may find that you don’t have enough money to properly diversify your money with a particular mutual fund company.

In some cases, you need a minimum investment of $3,000 just to invest in a single mutual or index fund at a fund company.

If your 401k saving plan balance is low, say $5,000, it will be harder to diversify that money than if you were to move it into the new 401k saving plan where you could spread the money out regardless of how much you have to invest.

Aside from that primary benefit, there are also plenty of drawbacks. First, is that you’re losing a lot of flexibility.

Remember, these are employer-sponsored accounts, so as long as you’re an active employee, you’re bound to that plan and its rules.

This means you’ll be stuck with whatever investment choices they offer, and will not have access to your funds again unless you want to take a loan (if it’s allowed) or you terminate employment.

In addition, a lot of 401k saving plan have relatively high fees. This is especially true for smaller employers.

You could find that you’re paying on average 1% or more for each investment when you could easily find a comparable investment outside of the plan for half that.

How to purchase with 401k debit card.

How to purchase with 401k debit card.

With the ReservePlus 401k debit card, people can simply carry their 401k contributions in their wallet or purse and swipe it whenever they want to make a purchase and have instant access to that money.

This is dangerous on so many levels. First, the time that it took to apply for a traditional loan gives people time to think twice about their decision.

If they know that they it may take a week or more to get the funds, they are not as likely to take the loan for instant gratification purposes.

With that money at their fingertips, it is easy to simply tell yourself that you’ll just use that 401k contributions money now and pay it back right away when the bill comes.

This is the same trap people fall into with 401k credit card spending problems where they want to make the purchase right now, and while maybe having good intentions of paying it off right away, find themselves dragging the payments out for months or years.

The second major drawback comes from the way repayment is handled–direct monthly statements to the employee.

While Reserve Plus cites this as a benefit, I have to disagree. If someone needs to borrow from their retirement plan in the first place, it is probably because they don’t have the money available elsewhere.

If that is the case, is it really likely that they are are going to have the money and discipline to continue making the monthly payments?

At least with a traditional loan the payments are withheld through payroll, so they have no choice but to make the payments.

Which option is better: A 401k contributions or your new employer's plan?

Which option is better: A 401k contributions or your new employer's plan? Assuming that your new employer offers a retirement plan that will accept rollover contributions, is it better to roll over your 401k contributions funds to the new plan or to a traditional IRA? Each retirement savings vehicle has advantages and disadvantages. Here are some points to consider: A traditional IRA can offer almost unlimited investment options; a 401k contributions plan limits you to the investment options offered by the plan it offers easier access to retirement funds than a 401k contributions and it can be converted to a Roth IRA if you qualify. 401k contributions may allow you to borrow against the value of your account, depending on plan rules. 401(k) offers more flexibility if you want to contribute to the plan in the future Finally, no matter which option you choose, you may want to discuss your particular situation with a tax professional (as well as your plan administrator) before deciding what to do with the funds in your 401k contributions.