We needed to cash in my husbands 401(k) a few years back and are starting over. How can we get the most out of it for our future?
He is 40 years old now, and 2 years in on rebuilding.
Invest in Real Estate. If you invest in real estate now, then by the time he turns 62 you can do a reverse mortgage and either live off the equity, or at least not have a mortgage payment. Just have to pay taxes and insurance. But it's a great alternative if you don't have a 401(k), or other retirement plan. | 11.02.15 @ 19:56
Hello Trish, if your question is how to get the most out of your 401(k) rebuilding the answer is for your husband to max out his contribution and max out any match offered by his employer. Your choice of underlying investments should reflect the time you and husband have until you will retire - 30 years if planning on retirement at 70. If you are asking how to get the most out of cash you have remaining you need to look at your overall income, savings, emergency fund, and portfolio and determine how to best invest as much as possible (after establishing an emergency fund so you will not have to cash out a 401(k) plan early again) as soon as possible as there is no substitute for growth in value over time. We use a very sophisticated software tool to aggregate all your investments and the variables of your financial life to ensure you are on the best path to fund your future financial goals. We also use a decision-making simulation tool so you can see the likely result of various investment allocation strategies. | 11.02.15 @ 21:19
Hello Trish, The best way to make the most of any investment is use a diversified portfolio which includes most of the major asset classes. Over concentration in any asset class increases the volatility of the portfolio and there is no asset class which isn't subject to declines as well as increases in price. The first thing you need to do however is to determine what you are asking the 401(k) to do (what is the goal) that will in turn determine the types of investments that will work the best. The most important thing is be disciplined and continue the investment over time.
| 11.03.15 @ 19:13
Trish, if you had to cash out your 401(k), do you think that was a one-time thing or might you need access to capital again in the future? I would caution you against maxing out your 401(k) if that will leave you without the liquidity you may need along the way. Also, if your reason for contributing to a 401(k) is the belief you will be in a lower tax bracket in the future, don't be so sure. Tax rates are at all-time lows. You have to determine for yourself if you are confident that you will be in a lower tax bracket in the future. If not, you might want to consider paying taxes now on part of your portfolio that will enable you to have tax-deferred growth and a tax-free income stream. I would strongly encourage you to work with a financial advisor who can look at your complete financial picture and help guide you in developing a plan that you are comfortable with. | 11.03.15 @ 19:50
As you can see there is no one single answer. Each of these responses has merit and may be the right solution for you and your family, but which one? That’s the real question. I would say to get the most out of your future, you have to plan your future. Regarding the 401(k), contribute as much as you can, at least to get the maximum employer match if there is any available. If there is a concern about needed to get cash out in the future, look into the ability to take a loan on the 401(k). The funds are repaid from direct payroll withdrawals and you earn a portion of the interest. Depending on the stability of your husband’s job, be careful of this strategy.
As far as what to invest in; as long as you and your husband have a time horizon of greater than 10 years, you can stand to be more aggressive (than less aggressive) in your allocation. I would suggest you contact your 401(k) provider and ask about the different allocations of the available investments. Wells Fargo (https://www.wellsfargo.com/investing/retirement/tools/risk-tolerance-quiz/) and Vanguard (https://personal.vanguard.com/us/FundsInvQuestionnaire) have a basic online risk tolerance questionnaire that can help you determine your allocation level. This a good starting point for determine how to invest the 401(k) funds.
The true key to getting the most out of your financial planning is management of the plan. The best advice I can give is to find an adviser that you and your husband are comfortable with and trust to help you make smart financial choices. | 11.03.15 @ 22:56
We all may have opinions, but not one fits all. Simply put, just make sure he is taking full advantage of the company's match "FREE MONEY" hard earned only if you are contributing the most necessary to receive. At your ages, as mentioned from the sharp minds above, work with an independent financial advisor who will assist you and your family with this and the many other important financial decisions your future financial success will demand along your journey, enjoy the moments and make today a day of action. | 11.04.15 @ 01:46
The first thing you'll want to do is repay it ASAP!
If he loses his job, or better yet offered a higher paying one and the money borrowed isn't paid it will be subject to early distribution penalties!!!
Then look to properly allocate your investment to reduce volatility and continue to make additional contributions at least up to the point you are taking full advantage of any match.
Adjust your cash flow and either reduce spending Now or in Retirement.
Don't try to speculate a single investment like 100% Real Estate, especially given the long term low yields. Your best focus should be repay, or refinance, then increase your earnings by getting a better job or 2nd carrier. | 11.04.15 @ 05:11