Fern Alix LaRocca - The 401K First Aid Kit: Stop Your Portfolio Bleeding and Get Back to Financial Health

The401K First Aid Kit

Revised 2016

by Fern Alix LaRocca CFP EA

Copyright 2016 Fern Alix LaRocca

Smashwords Edition

Smashwords Edition

Copyright 2016 Fern Alix LaRocca

All rights reserved. No part of thispublication may be reproduced or transmitted in any form or by anymeans, electronic, or mechanical, including photocopying,recording, or by any information storage and retrieval system.

Published by:

Advanced Financial Designs

Website: http://www.wholeheartedway.com

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People are fearful about looking at their401K statement. They would rather not know of losses in theiraccount. Plan documents are usually filled with legalese thatpeople cannot understand. It is hard to choose investments fromplan sponsors when you dont know how to evaluate your investmentoptions.

I plan to change all that. With thisinformation, you can learn why you should contribute to a 401k planand all the benefits that you get from your contributions. There isalso a step by step guide on how to choose your investment options.After you read this, you will want to look at that statementbecause you will know what to do next. You will want to plan foryour future and look forward to getting back to financial health.The stress will be removed from making this financial decision.

I am a Certified Financial Planner with over 25years of experience in helping individuals with their personalfinance decisions. I wrote this eBook to guide you to a betterunderstanding of the 401K plan and to give you the confidence tocontribute, invest and monitor your 401K plan to build wealth. Thefinancial industry makes it hard. I make it simple.

Lets get started and stop your portfoliobleeding, so you can get back to financial health and wealth.

Fern Alix LaRocca CFP EA

Wealth Coach
WholeHeartedWay

Table of Contents

Deferred compensation plans like the 401K areideal retirement savings accounts because the money that youcontribute comes directly out of your paycheck, which makes it veryeasy to save.

Ms. A has trouble saving. She spends a lot oftime looking for bargains at Macys. By signing up for her 401K,money is taken out of her paycheck and put into the plan before shecan spend it. It is an easy way for her to save.

There are also tax savings and tax deferralfeatures that will help your money grow fast.

Tax savings means that you contribute to theaccount with money that you have not paid tax on.

Tax deferral means you dont have to pay taxeson the earnings in the account so the account grows faster.

The first secret to maximizing your 401K is tocontribute as much money as you can every year.

WOOHOO! A maximized 401K plan willsupplement your Social Security when you are older and financewaiting all that play time youve been for.

Mr. B is tired of working at the same companyfor 20 years but has also contributed to his 401K each year. He islooking forward to monthly income from his 401K and social securityso he can play plenty of golf.

My employer automatically enrolled me in a 401k. Isthat legal?

Yes. Many employers are automatically enrollingemployees in a 401K because so many workers are overwhelmed withthe choices that they dont enroll. You can always opt-out ofcontributing to the plan.

With all of the medical advances, people areliving longer. That means you will need more money to sustain youas you age. You have worked hard all your life, now you need yourmoney to work for you. A 401K plan will be able to give you anincome that will supplement your Social Security benefits and otherretirement plans so you can afford a lifestyle equal or greater tothe one you had while working.

WOOHOO! Income from a 401K plan in additionto other retirement plans can give you a comfortable lifestyle inyour senior years.

Because you dont want to live on SocialSecurity alone when you are older, contributing as much as you canand letting the funds grow over time will give you an asset thatcan provide an income stream for the rest of your life. Many peopleliving on Social Security as their only means of income wish theyhad a second check coming in the mail every month.

When Mrs. C wants to visit her grandchildrenevery year for Christmas, her social security income isnt enoughto pay for the trip. Because Ms. C contributed the maximum to her401K every year she was eligible, she can afford to withdraw somemoney to pay for the trip every year.

To see justhow screaming fast your money can grow in a 401K plan, use thisfree 401K Savings Calculator http://www.bloomberg.com/personal-finance/calculators/401k/ . I receive no compensation from the folks atBloomberg to recommend their calculator.

Most people shy away from contributing to a 401Kplan because it is for long term savings. They are correct. Youshould have emergency fund, proper amount of insurance and a goodestate plan before you start to save for retirement, or the day youplan to stop working.

Why shouldnt you just plunge in? A 401K is forthe long term. It is for saving for retirement. It isnt for adishwasher replacement or emergency repairs on the roof. You dontwant to be breaking into long term savings for short term expenses.There are other options to save and invest for emergencies andshort term goals. A 401K, however, isnt one of them.

Why should I continue to put money in my 401K?

You want to maximize the balance in your accountso that it can provide an income for you later in life, once youhave stopped working.

Why should I plan now? Cant I wait till I amolder?

You plan for your vacation. You plan your careermoves. You plan for the arrival of your first born. All of thoseevents happen in the future, so why shouldnt you plan for yourretirement? Retirement isnt about planning for your demise. Itsabout planning for that day when you decide that you dont want towork anymore and you want your money to provide an income toreplace your lost salary. Thats a good thing to look forward to.According to experts, for every $100,000 in your 401K account youcan expect approximately $333 a month in income for the rest ofyour life (assuming a 4% withdrawal rate.)

Is it too late to start contributing later inlife?

No. You should start as soon as you are able.Even though you may get a smaller amount of income from your 401Kin the future, you can work longer or work part-time to supplementyour income needs.

I dont plan to retire. So I dont need tocontribute to a 401K, right?

Wrong. There will come a day when you may findthat you are physically unable to work, or your company hasdownsized or gone out of business. You will wish you hadcontributed all those years to your own 401k. It happens. Takeadvantage of contributing to your 401K plan while you can. Congresscan change the laws at any time. You may not have this opportunityforever.

Who should contribute to a 401K plan?

Anyone who is eligible! Thats how good it is.You can contribute up to the maximum of $18,000 in 2015 and 2016.The amount increases with a cost of living adjustment each year(COLA). If you are 50 or older, you can contribute an additional$6,000 each year and that also is adjusted.

But you need something that is very importantbefore you contribute to your 401k plan: you need an emergencyfund. A 401K plan is meant for retirement so it is a long termsavings account. If you try to access funds from this plan beforeyou are age 59.5, the penalties are severe.

WOOHOO! Maximizeyour 401K plan by not taking the money out until you are eligibleto do so without penalty!

About 15 percent of 401(k) participants takemoney out of their 401K before theyre ready to leave theworkforce, according to a new Government Accountability OfficeReport. This report highlights the difference between someone whotakes money out of their plan and someone who doesnt.