RETIREMENT PLANNING » IRA & ROTH ACCOUNTS

Those who are lucky enough to receive a 401k plan as part of their employee benefits must experience mixed emotions regarding the money on deposit. On the one hand, the benefits of having a 401k are overwhelming and will come in very handy in retirement. On the other hand, there is an account in your name, with your money and you need to keep your hands off it until the age of 55. Ultimately, the temptation may be too great to resist and because of that, 401k debit cards are popping up as a way to access the money invested in a 401k plan.

How 401k Debit Cards Work

Some 401k plans provide their depositors with debit cards directly linked to the retirement funds. The process of accessing the money via a 401k debit card is similar to the process of getting a loan against an existing 401k deposit. The depositors must first apply for a loan against their 401k assets and the company's plans must approve their request before the money will become available through the card.

Reserve Solutions

One such program,ReservePlus,offered through Reserve Solutions, comes complete with many benefits that may make using these resources for a loan a great idea. Some of the rules unique to the 401k debit card program through Reserve Solutions are:

• When it becomes time to repay the loan, you can pay off more than the minimum and pay down your debt at a faster rate than traditional 401K loan arrangements
• Once a payment schedule has been established, you can still repay on the original schedule even if you are no longer working for the company that issued the 401k plan benefit
• The money on deposit in the 401k will continue to earn returns until it is physically withdrawn with the 401k debit card

When it comes to borrowing against your 401k, there can be significant tax penalties and future retirement issues if the money is not repaid as scheduled. If your company provides you with a 401k debit card, before you accept the terms of the loan, you should exhaust all the other means necessary for a loan option. It is usually best to leave retirement money in place until the actual age of kicking back switches into gear.

What if someone offered you free money?

Your boss may be offering you an automatic spike in your pay and you may not even be taking advantage of it. If you are with a company that offers a matching contribution of any amount towards your 401k contribution, you need to take advantage of it as it can add up to additional and significant amounts of cash by the time you are fully vested and ready to retire.

Employee Contributions

To ensure that you take advantage of that perk to its fullest potential, make sure you make at least an equal amount of contribution to the company's maximum. For example, if your company offers a 50% match on the dollar to up to 6% of your contributions, make sure to contribute at least 6% to get the full benefit and every last dime they are willing to part with.

When it comes to deciding on the investment allocation of your portfolio, you must diversify wisely. Your money should be in a mix of higher risk investments to hopefully generate enough money to beat out the average rate of inflation of 3% and some safer investment to provide you with some assets if the high risk investments decline in value. If offered, you can mix up those allocations with a bit of company stock, but do not put all your money into that one choice.

Penalties for Early Withdrawal

401k plans will be strongest if left alone and not cashed out or borrowed against. By cashing out a 401k plan, you will be subject to not only a 10% early withdrawal penalty from the IRS but also to the 20% federal taxes that the company will pass through to you. By borrowing against your 401k, you also risk devaluing your retirement portfolio.

Even in trying times there are ways to make your 401k work for you and not the other way around. By taking wise,cautious and decisive steps you can empower yourself to take full advantage of your 401k investment plan.

After years of working for your company, you are off to pursue new opportunities in the form of your own business. The time working for the company was not bad as you made friends, contacts, gained valuable experience and amassed a tidy sum in your 401k plan. As you are preparing for your exit...

It is no secret that the current state of the economy is a bit off-kilter from its recent past. Almost every sector is experiencing economic downturns. Depending on how your 401k assets are allocated, you may be noticing a personal decrease of your own. Those who are fortunate enough to get the...

Despite the best of intentions, 50% of all marriages end up in divorce. Often, the effect is devastating on a variety of levels including the household finances, the emotions of spouses and their children, friends and relatives. A divorce is not as simple as just dividing up the music collection...

Investment instruments come in a variety of shapes and sizes, and it can be extremely difficult not to feel overwhelmed by the full array of options. Many companies offering 401k benefits to their employees help to streamline the process by choosing one 401k management company to select the...

Suze Orman is probably shooting out expletives at every turn with recent news that nearly half of unemployed Americans are withdrawing funds from their 401(k) plans. Experts spend a lot of time advising workers not to touch the funds because they take away from much needed retirement at the end...

Saving for your retirement is critical. One of the most popular retirement savings and investment vehicles available is the 401k fund.

As a retirement savings plan, the 401k is a true favorite. If you have a 401k plan that is offered by your company and you decide to leave your job, you may not...

When everyone starts feeling the pinch of a failing economy, 401k's are longer safe. Whether you are experiencing the loss in thousands or tens of thousands, it is times like this that people may panic and try to abandon the sinking ship that they used to call their "retirement portfolio."...

Workers contributing to their 401ks will be happy to know that their contribution limit won't change this year. Typically, the contribution limit adjusts to the conditions of the economy. Since the economy is in a deflated state, economists thought the IRS might lower the limit for 2010....