Retirement will be here before you know it, and you want to be sure your money is invested, and you are well taken care of, ahead of time. Start thinking about your retirement early, read and understand your investment options, and ask plenty of questions.
Here are 4 quick tips to think about now!
1. Don't max out your retirement account at your job. I'm not saying don't contribute. Any time you have a pre-taxed account, please contribute. So yes, please contribute. But you don't have to completely contribute the entire max amount. You need to take advantage of the company match, which is free money. Never pass up free money, however, by contributing all the way up to the maximum amount allowed, you are tying up a lot of your money for too long. Remember, you can't touch the money you contribute to your company retirement account, without a serious early withdrawal penalty, for a very long time. You should seriously consider only contributing up to the company match, and invest the rest in a more liquid asset class that doesn't carry early withdrawal penalties, such as good growth stock mutual funds, ETF's, or index funds.
2. Be sure to check the investment options in your jobs retirement plan. Proper allocation is extremely important for strategic long term growth. Don't get caught being too conservative, or worse, unaware of how your money is distributed inside your jobs retirement plan! You need to check the investments that your companys retirement is invested in as soon as possible, and re-allocate as necessary. If you are in your 20's and 30's, you can afford to be a little riskier, but if you are older, you may want to be a bit more conservative. Do your homework!!
3. Never borrow money from your retirement account. NEVER! If you are laid off or quit your job, then the entire loan is usually due to be paid back in 60 days. The last thing you need when you leave your job is that type of debt. If you can't pay the balance, the IRS considers the loan a distribution, so then you're facing income taxes and a 10% early withdrawal penalty. Not worth it.
4. Whenever you leave your current job, have your balance of your retirement account transferred to your new job. Do not allow your current company to cut you a check. You will pay up to 40% of the money you've been saving for years, directly to the government in early withdrawal fees. That is a killer. Be 100% sure your money is "transferred", which is also known as a "rollover".
Happy Retirement!
