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401k Strategies for Retiring in Style - 401k Videos

(October 6th, 2008)

If you want to retire in style, you are probably not banking on relying on Social Security. Kwei Battles, a 401k Investor featured in the video invests in a 401k, Roth IRA and some personal investments. This video gives basics tips on how to plan out your 401k retirement plan & strategies you can use to avoid common pitfalls and have a successful retirement. The most common tips are, beware of company stock and do not put all your eggs in one basket, keep your investments simple and to a maximum of 5, and review your investment portfolio every now and then (this could be every quarter, annually or even every month - if you have the time).

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Video Review

Commentator: And you've got to do more than just put money aside. You've got to figure out, where to put it!

Kwei Battles: American Bank, Washington Mutual are some of my banks. I have my money divided into 5 categories.

Commentator: If you feel a little uncomfortable about your company's retirement plan, here are a few basics.

i) Beware of Company Stock: If your company offers its own stock as an investment option, just say no. That's too many eggs in one basket.

ii) Keep your plan simple: You don't need more than a few investments. Along with bond and money market funds, almost every expert suggests putting some money in stocks. But how do you decide how much? Here's on rule of thumb:

100 - Your Current Age = Stock % (Put this percentage of your money in to stocks).

Divide what's left over between money market funds & bonds.

iii) Review your account every now and then and make adjustments as necessary. This could be every quarter or every year.

Stacey Johnson (CPA): There is one more thing when it comes to retirement plans, fees! Watch out for the next video set for more information on 401k fees!

 

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401k Interesting Facts

-> Roth 401k is voluntary for employers. In order to offer Roth 401k for their employees, employers have to set up a tracking system that segregates Roth assets from the company's existing plan. This tracking system is expensive to build and maintain, and employers may not choose to do it at all. If so, your employer will not be eligible to offer Roth 401k.

-> Upto $10,000 can be withdrawn from a Roth IRA without any penalty if the owner wishes to purchase a home or principal residence. The home must be purchased by either the Roth IRA owner, his spouse, ancestors or descendants. Also, the Roth IRA owner must not have previously owned a home for atleast 24 months.

-> Roth 401k Works Best if:

- The federal government increases taxes over time
- You are a high income earner who has a compensation cap on Roth IRAs (maximum compensation cap of $225,000 in 2007)
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- You are a young investor and need more time for your account to grow across various investments such as mutual funds, stocks, commodities, etc.
- You are in a lower tax bracket now and will be in a higher tax bracket upon retirement.

401k Contribution Limits

2005 $14,000 $18,000
2006 $15,000 $20,000
2007 $15,000 $20,500
2008 $15,500 $20,500

Roth IRA Contribution Limits

2002 $3000 $3500
2003 $3000 $3500
2004 $3000 $3500
2005 $4000 $4500
2006 $4000 $5000
2007 $4000 $5000
2008 $5000 $6000

Simple 401k / IRA Contribution Limits

Year
Annual Contribution Limits
2002 $7000
2003 $8000
2004 $9000
2005 $10,000
2006 $10,000
2007 $10,500
2008 $11,000

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