Archive for July, 2013

The Dangers of 401(k) Loans

Wednesday, July 31st, 2013

This informative article by Emily Brandon from Money Retirement at US News provides some helpful facts about having a 401(k) loan and the dangers that may accompany doing so.

It’s sometimes necessary for workers to borrow money from their 401(k) plan to pay for an emergency expense. Retirement savers are generally permitted to borrow as much as 50 percent of their vested 401(k) balance up to $50,000. However, it’s best if you use a 401(k) loan only as a last resort. Here’s why you should be cautious about taking a 401(k) loan:

[Read: 10 Trendy 401(k) Plan Perks.]

You may not be able to borrow much. Most, but not all, 401(k) plans permit loans. When they are allowed, you can borrow $50,000 from your 401(k) plan if you have a vested account balance of $100,000 or more. If you have less than that, you can only borrow up to half of your account balance. For example, if your account balance is $40,000, the maximum amount you can borrow from the account is $20,000. The amount you are eligible to borrow is further reduced if you had an outstanding loan from a 401(k) plan in the previous 12 months.

Most people borrow a small amount from their 401(k) plan. Fidelity says 10.6 percent of their 12.3 million retirement plan participants took out a new loan in the past year, borrowing an average of $9,000, and 22 percent have outstanding loans. The 18 percent of Vanguard 401(k) participants who had an outstanding loan in 2012 also owed an average of $9,000. (more…)

Retirement accounts: Are you contributing the max?

Tuesday, July 30th, 2013

Ray Martin of CBS News, explains how to contribute the maximum to your retirement or tax-advantaged savings account.

(MoneyWatch) People often ask how much they can contribute to an IRA, 401(k) or other type of retirement or tax-advantaged savings account.

Since we’ve arrived halfway through the year, now is a good time check your year-to-date contributions to see if you are on track to contribute the maximum allowed to your retirement accounts.

If you want to contribute the maximum to your tax-advantaged accounts, you need to know the limits for 2013. Since the annual contribution amount varies by account type and age, here’s some information to help you keep it all straight:

401(k), 403(b) and 457 plans

The annual limit on contributions for 2013 is $17,500. Also, if you are age 50 or older this year, you can also make additional contributions into these and other tax-advantaged savings plans and accounts. If you fall into this category, you can contribute an additional $5,500, for a total annual contribution of $23,000.

Self-employed 401(k) plan

The self-employed can also set up and fund their own 401(k) profit-sharing plan, which allows for the same type of contributions mentioned above. In this type of plan, which is easily set up at any major brokerage firm, you can also make an additional contribution that is a percentage of net profit (the profit-sharing component of the plan). For an individual who declares about $75,000 net profit from self-employment, the total pretax contribution is about $31,000 for 2013. For those 50 or older, the contribution amount is about $36,500. For the self-employed who are age 50 or older and make a profit of $180,000 or more in 2013, the maximum pretax contribution is $56,500. (more…)

Orphaned 401(k)s: Are You Leaving Money on the Table?

Tuesday, July 30th, 2013

Kevin Cimring wrote an article for Fox Business online on the four reasons why you should regain control over orphaned 401 (k)s now.

The average American holds more than seven jobs in a lifetime, and all too  often, workers neglect their 401(k)s as they move from job to job.

Fifty percent of American adults who’ve participated in a 401(k) or  equivalent retirement plan left their “orphaned” account at a previous employer,  according to an ING Direct USA survey.

Leaving 401(k) accounts when moving to a new employer means you are not  making the most of the savings you’ve worked so hard to accumulate and are  essentially leaving money on table. Yet, millions of Americans do this all the  time.

Here’s four reasons why you should regain control over orphaned 401(k)s  sooner rather than later:

No.1: Out of Sight Out of Mind

The ING survey also shows nearly a quarter of the 50% of workers who reported  orphaning a 401(k) left between $10,000 and $50,000 in these accounts. An  additional 11% claim to have no idea how much money was left in those accounts.

By not rebalancing and monitoring fund choices or shifting to a more  conservative mindset as you approach retirement, you are increasingly stuck with  investments that may not meet your current needs, age, risk tolerance and  overall circumstance.


4 Ways Women Should Prepare For Retirement

Friday, July 26th, 2013

Great article from the  July 26, 2013,  Wall Street Journal Market Watch online edition on the steps women should take to prepare for retirement.


Women have a unique set of retirement planning needs. Often, they are caretakers to family members and tend to live longer than their spouses, which requires careful retirement income planning to make their money last.

It is important for women to educate themselves about their options and take control of retirement planning.

According to WISER- Women’s Institute for a Secure Retirement, some of the top challenges facing women retirees:

  • Half of all women work in traditionally female, relatively low paid jobs without pensions Women retirees receive only half the average pension benefits that men receive.
  • Three out of five working women earn less than $30,000 per year. Three out of four working women earn less than $40,000 per year.
  • Over a lifetime of working, women earn an average of 77 cents for every $1.00 earned by men – a lifetime difference of over $300,000.

Taking the time to research what you’ll need for retirement and taking charge of your retirement income planning is critical to achieving retirement security.