Account holders should regularly check their 401(k) balances to ensure that investments are performing as expected, advises the Financial Industry Regulatory Authority. When necessary, investments in an account should be reallocated or rebalanced to assure optimum returns, explains Financial Samurai.Continue Reading
Regularly checking the performance of a 401(k) and adjusting assets to ensure optimal growth are essential, as the instrument plays a critical role in assuring financial security after retirement, notes FIRA. The performance of a 401(k) solely depends on the choices of individual account holders. Account administrators cannot determine the outcome of a 401(k) account; their roles are limited to keeping records, generating reports and executing transaction requests from account holders, explains FIRA.
Account holders should check their 401(k) balance at least twice every year, advises the Financial Samurai. These checks should not be limited to ensuring that assets are performing optimally; they should also be used to assure that asset allocations are in line with the account holder's risk tolerance.
The performance of a 401(k) is also affected by the type and level of fees charged, warns FIRA. These include administrative fees, loan fees and investment management fees. At 0.02 percent to 2.5 percent, investment management fees typically make up the largest proportion of all fees charged to a 401(k) account. Account holders should carefully consider the impact of such fees when adjusting assets. Unnecessary asset adjustments should be avoided, warns FIRA.
401(k) balances can be checked online or by calling or faxing an account administrator, explains The Nest.Learn more about Financial Planning
Account holders can get early withdrawal penalties waived for a 401(k) by taking out a loan on the account or arranging for fixed payments for at least five years, reports CNN Money. Although hardship withdrawals do not qualify for a penalty waiver, some exceptions apply, states the IRS.Full Answer >
Account holders can withdraw money from 401k plans when they reach age 59.5 years, retire early, become disabled, die or have qualifying financial hardships, states the IRS. Participants must begin distributions by age 70.5 or face penalties, unless they are employed by a company they do not own.Full Answer >
Account holders calculate taxes and penalties for early withdrawals from traditional IRA accounts by adding standard income tax plus a 10 percent penalty tax for the amount of the withdrawal, reports the IRS. The 10 percent penalty tax is waived if the withdrawal qualifies as an exception.Full Answer >
Account holders can withdraw contributions to Roth IRAs whenever they want without penalties, but withdrawals of investment earnings before age 59 1/2 are subject to tax and penalties unless they qualify as exceptions, reports CNN Money. Amounts converted from other IRAs can be withdrawn penalty-free after five years.Full Answer >