The 401(k) and the Individual Retirement Account are the cornerstones of any solid long term retirement savings plan. Both of these accounts have a number of different characteristics that can provide value that will yield significant results in retirement. But your 401(k) plan at work likely has some advantages over the IRA structure.
When you focus on building your 401(k) you’re greatly increasing the chances that you’ll be able to live comfortably off your own savings once you enter retirement. In fact, the best way to be able to rely upon your 401(k) account is to maximize it in the years leading up to your retirement age.
Here is some retirement advice to help you live comfortably of your 401(k) funds.
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However, borrowing against your 401(k) is generally a bad idea for several different reasons. First, when your account balance is smaller because of loan you’re not gaining from your investments. Second, borrowing can create a mindset that your 401(k) is a suitable source of funds for purposes other than retirement. In addition, if you leave your job before your 401(k) loan is repaid then you’ll be responsible for repaying the outstanding balance immediately, and failure to do so can result in significant tax penalties.
Finally, remember that your retirement planning doesn’t stop once you leave the workforce. Getting to retirement with a large nest egg is essential, but you also need to have a plan for an appropriate lifestyle during your retirement years. By maximizing your 401(k) balance in the years leading up to retirement you’ll have the best shot of reaching your goals.
Tags: 401K, employer match, retirement advice, retirement planning