401(k) Strategies for All Generations: Monday's Retirement Scan

JUN 30, 2014
10:37am ET
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Our daily roundup of retirement news your clients may be thinking about.

How to get the most from your 401(k) at any age
Millennials can make the most out of their 401(k) plans if they start with a small amount and auto-escalate their contributions through time, hold a target-date fund in their portfolio, and roll over their old 401(k) into a new account when they resign from work, according to CNN Money analysts. For Gen Xers, shifting to lower-cost options when the balance gets big is a good move, while aiming at 17% savings and avoiding a 401(k) loan can also help clients max out their 401(k) benefits. Baby Boomers can boost their 401(k) contributions, plan to take up to 10% withdrawal of their plans when they are retired, and adjust their investment goals based on cash-out growth and overall costs in retirement, the analysts say. ††--CNN Money

Avoid this common and dangerous retirement blunder
The first mistake that many retirement savers make is borrowing from their 401(k) plans. They stand to lose any potential market gains during the years they pay for the loan, writes a financial adviser. Some clients also make the mistake of forgetting to roll over their 401(k) assets with their previous employer to a new workplace plan or a traditional IRA. Clients also need to keep their emotions in check and hold on to portfolios for the long-term regardless of market conditions to minimize investment losses, the expert adds. †--Forbes

Donít let kidsí tuitions rob your retirement
Parents should not fund their children's college education at the expense of their own nest eggs as health care expenses and other costs in retirement are on the rise, according to MarketWatch. They are advised to get scholarships or student loans, ask their children to help pay household costs if they move in, have a scheduled retirement date, and roll their 401(k) money to an individual retirement account to get more investment options and lower annual costs. Clients also are advised to appropriate assets in buckets for their short-, intermediate-, and long-term needs in their golden years. ††--MarketWatch

Should your 401(k) include 'alternatives'?
Many financial advisers caution 401(k) participants against investing in standalone alternative investments without guidance from a financial adviser, a clear policy statement, and an investment strategy for the long-term, according to an article in USA Today. Clients may consider alternatives if they go with target-date fun or of fund-of-funds. For those who want to proceed in such an investment type, they should understand that some alternative funds can bring in real value while there are others that are costly and yield low returns. ††-- USA Today

Are you making the big 401(k) mistake?
Many workers are contributing to their 401(k) plans without realizing that they're using their money to buy solely their company's stocks, which is "misguided" as they are supposed to diversify their investments, according to Jim Cramer. Retirement investors are highly exposed to risk if their portfolio is placed mostly in one company or one sector. Clients are advised to contribute as much as their employer puts on the table but ensure they invest their money in diverse stocks and other financial products, Cramer says. ††-- CNBC

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Comments (2)
I am very surprised that none of your "experts" mentioned that if they are 55, or in the calendar year when they will become 55, and the "separate from service" from the company holding their 401-k/403-b plan, then they should probably keep their plan alone, and not roll it over to an IRA, IF THEY THINK THEY MIGHT NEED ANY OF THE MONEY BEFORE REACHING 59 1/2. Distributions from IRAs before 59 1/2 are subject to the 10% penalty for early distributions, but 401-K/403-B plans do no have that restriction if you separate from service between 55 and 59 1/2.

dlzallestaxes@msn.com
Posted by DAVID L Z | Monday, June 30 2014 at 2:39PM ET
Jim Cramer made a good point. I would have also noted, however, that most companies match with their own shares, which increases the disproportionate investments. However, I would have also advised the readers that the NUA (Net Unrealized Appreciation) in the employer's stock gets extremely favorable tax treatment, and should be researched with the company BEFORE moving those shares anywhere.

dlzallestaxes@msn.com
Posted by DAVID L Z | Monday, June 30 2014 at 2:43PM ET
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