401(k) - take advantage of new rules By: Rex Truman 401(k) - take advantage of new rules With a change in the laws, there never was a better time to start a 401(k) retirement fund. In fact, you may find that you have already started one, because under the new law, your employer can put you into a 401(k) retirement fund automatically. If that happens - or has happened - to you, you might not pleased at first because some of your salary will be deducted to pay it. But believe me, any investment for your retirement is a good investment - and if you have not started one, do so today. It is that simple. Other changes in the law are that the Roth 401 (k) is now permanently available. The difference between a Roth and ordinary 401(k) retirement fund is that you invest out of taxed income, but with withdraw tax-free. With a 401(k) retirement fund, you get tax relief on your investment, but get taxed when you start to withdraw from it. 401(k) or Roth 401(k) Which is best? That depends on your situation, and it is best to discuss this with a financial adviser - but make sure you find a good one. You are likely to do better with a Roth 401 (k) if you are a high earner and will pay a lot of tax on your retirement income - but this may not be the case for you. It depends on your tax payments now and expected future tax payments. Once you have set up a 401(k) retirement fund, you need to take some interest in it - this will repay you handsomely. Most people just put their money in one fund, and forget it. Then, 30 years later they might find it has not grown as much as they expected. Review your funds annually To avoid this happening to you, review your fund or funds every year. If you are unsure how to do it, find a good financial advisor - one who puts your interest first. You need someone who will spell out the fund charges, compare them, and recommend you invest in more than one fund. It is never a good thing to put all your eggs in one basket, and this is very true of investing for retirement. Whether you use a financial advisor or not make sure you do review your 401(k) retirement fund each year. Also remember that if you use a financial advisor he or she gives you a service they will charge for it one way or another, and you need to know how they are charging. It may be coming out of commissions - not a good way - or they may charge you a fee. You do not need a financial advisor if you are happy to keep up to date with mutual funds and investment - it is not so easy to learn. Disclaimer The information on this web site does not constitute an offer in any way. It gives general information, but is not financial advice. The aim is to help you decide what to do about your retirement plan, and the importance of saving for retirement. You should consult a retirement planning adviser with a proven record before setting up a retirement plan. 401 Changes-Retirement

 

Who Should  Start A Roth 401k?

1.   You're relatively young and plan to keep the money invested for a long time.

2.   You're in a low tax bracket today, or feel that tax rates will be higher in the future.

3.   You've always wanted to contribute to a Roth IRA, but your income has consistently been too high for you to put money into one.

4.   You want your heirs to keep as much of the money they inherit from you as possible, since they won't owe income taxes on distributions received from Roth 401k accounts. (However, the amount they inherit from you might be less since you've paid higher taxes in years you contributed to a Roth 401k).

You don't rely on the tax savings realized on your current contributions to your Roth 401k or 403b account to meet your household budget.

 

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