Everyone seems to be talking about 401K savings plan.
Did you know that tax is the greatest barrier when it comes to accumulating a
significant amount of money? Tax is apparently the greatest enemy, whether you’re
a salaried employee or self-employed.
This is where 401K retirement plans comes in handy. This plan allows you to significantly grow
your wealth in a tax-free environment. You want to retire as early as possible and still keep your
401K contributions safe. This can however be challenging,
as you risk ruining your own retirement in case the stock market performs poor
on the same year you were planning to retire. The following are 401k early
retirement tips that you need to observe to avoid such risks.
Plan carefully by considering a self-directed 401K. This will enable you to choose
where you actually want to invest your money. Take control ad refrain from
taking advice from other people apart from independent advisors who are not
party to the 401K industry.
Consider investing certain amount of your 401K account in real estate. Real estate has always emerged the winner in
the long run, and more so today the prices are very low.
Avoid taking mutual funds in favor of real estate. 401K industry has a good number
mutual funds and stocks that are really in bad state. This is actually the
reason behind the bad stories you’ve probably heard about the failed 401k retirement
It is wise that you hire a professional advisor in a case you decide to consider
mutual funds and stocks. The advisor will check them for you. Though hiring a professional
advisor may appear expensive but believe or not, that $500 consultation fee may
save you a lot or give you a huge returns of thousands of dollars. That’s
exactly what the 401K early retirement plan offers you.
Avoid early savings. Time is money and the growth of compound interest is based on
the time factor. Always have inflation factor in your mind. For you to fund your retirement properly, you
have to price in at least 3% annual inflation rate.
What does this exactly mean? It simply means that if the living cost today is about $40,000, then in a 20 years
time it will move to around $72,000 and above. You will surely have a lot of
money in your 401K account by then but you need to ask yourself what the buying
power will be by then.
Roll over an IRA so as to get around the early withdrawal penalty fees usually
charged with the 401K accounts. Alternately, you can check the possibility of
you taking advantage of loan rules associated with the 401k and withdraw money
in loan form.
Successful management and funding of an early 401K retirement
plan is a worthy path towards realizing your financial success. Just like any
other venture, it comes with a number of pros and cons.
Yes, it can really pose risks if wrong decisions are made. Generally, 401K savings are great,
with more advantages than disadvantages. The truth of the matter is that there are both pros and
cons in the plan. However the merits surpasses the demerits and the biggest advantage
of the 401K is the tax differed growth that it offers. Consider pursuing a self-directed 401K
savings and just follow the above mentioned tips to avoid a number of risks that
are associated with the plan.