Getting the most out of your 401k plan

I am a small home business owner. I operate a carpentry workshop. I am looking for a 401k plan that can offer me good security and nice investment options. Is it possible to have a pocket-friendly yet a good 401k plan? — Alfred J. Ryals, 3912 Pleasant Hill Road, West Palm Beach, FL 33401

Alfred, what you are asking is definitely possible. In fact, it is completely valid as all you want is a flexible 401k that protects your savings without compromising on your investments. You have an option in the form of no-load mutual funds. With these funds, you can diversify your investments. So look for a plan that offers you an investment option in the form of no-loads mutual funds. However, it should also be cost-friendly and offer you good value compared with similar plans available in the market today.

You should look for a plan that works well for small business owners. One such great plan is available at http://www.401keasy.com/, where what you see is what you get. It is a low-cost plan with no hidden fees or asset-based charges. There are no hidden commissions as well. In addition to cost value, 401k Easy comes with no-load mutual funds and an array of unlimited options, which offers real value-for-money to small business owners. The 401k Easy plan is comparable with 401k offered by big companies. However, with 401k Easy, you get several bonus features too. You can compare prices for your peace of mind and find that 401k Easy is certainly a good plan.

While comparing 401k Easy with other plans do look for security features. At http://www.401keasy.com/, you will find that the plan has secure administration. It is an amazing feature for online businesses as it keeps your sensitive information secure. No one wants their information on retirement plan to leak out and 401k Easy ensures that your financial information stays confidential..

Also look for simplicity along with superior security features and excellent investment options. Check if demo versions are available for clients, which can help you understand the functionality of the 401k suite that you are interested in. It should be easy, simple, clutter-free and intuitive. Do keep in mind that you will need to update your account every month so you would want a 401k suite that is simple to use and is safe.

Getting the most out of your 401k plan

I am not in my best financial condition and might do better with extra monetary aid. I was wondering if my 401(k) account can be if any use to me presently. Can I borrow from it? Would it be advisable? – Howard Burgess

A bad financial condition and tighter lending regulations by banks may tempt you to withdraw money from your 401(k) account, Howard. However, it may not always be a wise choice. A 401(k) plan can allow you to borrow up to half the plan’s balance or $50,000, whichever is less.

Howard, you should consider the following things before withdrawing from your 401(k) account:

  • If you are terminated by your employer after you have borrowed from your 401(k) account, then you will have to repay the borrowed amount typically within 60 days. Any unpaid amount will be considered as a retirement distribution and it will be subject to income tax, probably along with a 10 percent penalty because of early withdrawal.
  • Contributions to your 401(k) account are pre-tax, but when you pay a 401(k) loan it will be repaid with after-tax dollars. Also, when you withdraw from 401(k) account during retirement, the amount will be taxed again. So, you will have to pay the tax twice in such a case.
  • Some employers may have a rule wherein employees won’t be allowed to contribute to their 401(k) account while they have an outstanding loan. It means that the balance of your 401(k) account won’t increase during that period. As you will not be making any pre-tax contributions, your total taxable income may increase.

As a 401(k) account is for your retirement savings and not for borrowing, you might want to have a look at other alternatives:

  • You can opt for a home equity loan when you have an equity in your house.
  • If you are facing a difficult situation, then you may be able to obtain a taxable withdrawal from your 401(k) account instead of taking a loan. In some adverse circumstances like medical costs, you may escape a 10 percent penalty due to an early withdrawal if you are less than 59 years old.
  • You can escape a 10 percent penalty due to an early withdrawal by exploring 72(t) withdrawals if you have an IRA. The withdrawal will still be taxable.

The interest rates on your 401(k) loan are less compared to the interest rates on personal loan obtained from banks. However, given the possibility of fines, double taxation, and missed saving chances, it will not be wise to borrow from your 401(k) account. Also, you may want to manage your 401(k) account with 401k Easy that makes the whole process simple for you.