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If You Think You Understand Retirements, Then Read This

Help in Understanding 401k Plans. Picking the right 401k plan is a very important step in the right direction when entering into the business world. You need to be careful with 401k’s, because there are numerous ways you can mess up your 401k. Some of these things include not investing properly or buying when you should have sold, which can be devastating. Rules like this apply to those who are experienced and those who don’t know what they’re doing. Hopefully we can help you identify some of the ways that you can avoid mistakes people make when running their 401k. The first ways people can mess up is to not take advantage of their employers 401k plan. There are very few disadvantages to these type of employer 401k plan. Not using these plans can hurt you in the long run. If you do take advantage of these plans make sure you invest enough so the employer will match or you’ll miss out on a lot of money. When you don’t take advantage of the full amount given by your employer you’re essentially missing out on free money, which isn’t wise. Sometimes people don’t meet the amount because they’re afraid they can’t afford the added expense, but it’s not much. They don’t seem to understand that it’s usually only a few extra dollars a month, so it’s worth it. One of the other big mistakes people make is not taking enough risk, or none at all. It’s understandable that people don’t want to risk their money, but when it comes to long term investing these risks usually pay off better. It’s never wise to take too many risks, or too big of a risk. Understand that there needs to be a middle ground between risk and conservative. Make wise decisions and follow the market to ensure that the risks you take are the right ones.
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A big mistake that a lot of people make is investing too much of their 401k money into their company stock. One of the best examples of this is what happened to Enron when they went bankrupt. When this happened a lot of their employees lost practically their entire life savings and retirement funds. You really should keep around 10% max in your own companies 401k stock. You also need to avoid taking loans out on your 401k as it’s generally not a wise idea. If you happen to fail in paying off the loan you can lose your entire 401k and that’s devastating. It is highly recommended that you avoid this because the cost is too high. One finally mistake that people tend to make is cashing out their 401k when they leave their job. You can possibly take on large fines and the amount is taxed when doing this and you lose the interest that you would have made if you left the 401k alone. If you avoid these common mistakes you should be alright in the long term.The Key Elements of Great Plans