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.
Answers | 7
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.
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.