You want to find out what type of investments you can invest in. A typical 401k should allow you to invest in just about anything you want, like stocks, bonds and mutual funds. However, there are more than a few 401ks that have a very limited choice of investments. If your plan doesn’t offer these, just get as close as you can. You can always quietly complain to your company’s top dogs to either swap the current plan administrator for one with more choices or suggest the current administrator increase their financial freedom plan selections. This will certainly help you achieve your financial goals.
Find out if they offer matching contributions. Hopefully the answer is yes. If not, a 401k plan is still a great deal. Find out what happens if you’re fired or if you leave the company. This is important. Sometimes you can leave your 401k with the company and just let it grow on its own. This may be a good idea, especially if your new employer’s plan doesn’t have a good selection of financial freedom plan investments. Other times you can transfer it into a new 401k at your new company or into an Individual Retirement Account using direct rollover. A rollover is both the one trick you could never get your dog to do and how you move money from one retirement account to another. The word direct means that you do not take possession of the money before moving it into the new account. Don’t take possession of the money, because if you do, you’ll pay taxes and perhaps penalties.
So you went to HR and did the paperwork for your financial freedom plan 401k. Now you need to decide what to invest in. The 401k is a retirement account, so we’re looking for long term investments. That means don’t be a wuss. Be aggressive. Most of the money should be in equity investments like stocks or stock mutual funds. And don’t be lured into purchasing your own company’s stock just because you work for them. The rule is that you should spread your risks. You already risk your paycheck on the firm, why your retirement, too? A much better choice would be an index mutual fund.
The big picture is these retirement accounts because they offer tax-deferred growth, deductible contributions, and even matching funds. Employer-sponsored retirement plans are often the best way to invest for retirement because they allow you to reduce your taxable income, your boss may match some of the money you contribute, and the money in these accounts is protected from taxes and is not taxed until it is taken out of the account. The catch is that the money must stay in the accounts until you reach age 59 and a half, otherwise you’ll be slapped with a penalty. Major corporations and nonprofits offer 401k and 403b plans respectively. Smaller companies offer the SIMPLE plan, and the self-employed should look into the possibility of setting up a Keogh or SEP plan.
http://www.financial-freedom-education.com/Most_Successful_Financial_Strategies.html
Together we shall win,
Adesegun Akitoye
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