11 Things You Should Never Do With Your 401k

Learn how to keep your 401k plan on track for retirement.
  • BertaD

    Do not invest in your own company at all. The stocks you have should be in an index fund. The mix of stocks and bonds depends on your age. It continues to amaze me that even after all the upheaval people still invest too heavily in their employer’s stock. Don’t do it!

    • KwitBitchen

      Why do you say not to invest in one’s own employers company stock?

      • Joshua Leonard

        If your companies stock falls drastically, you risk losing your job and your investment. Scary stuff right there.

        • Greg Smith

          Happened at Niagara Paper Mill. 401k employees almost went belly up when plant closed.

        • Timothy Case

          This also Happened to Enron employees. There was lots of encouragement to invest in their stock and, for a time, they were leading the pack on growth & returns. However it was a fraud. When the fraud was revealed, the employees lost their jobs and found that their 401Ks were full of worthless Enron stock. 🙁

          • George V

            That’s because the Enron employees believed and drank the kool aid . They had no diversity in their portfolios. They also bankrupted an energy company that they bought and all the employees had to take Enron stock in return! Jeff Skilling should never see the light of day again!

        • LKR

          Very true. But also evaluate risk/reward. A previous employer offered company stock in a 401k plan at a 30% discount off market price – where else can you get an instant 30% return? I would hold it for the required 1-year then trade it for an index (or lifecycle) fund, ultimately keeping it under 10% of my 401k. It is risky since both your retirement and employment are tied to a single company, but it might be worth risking a small portion of your total 401k… determine your own risk appetite / comfort level. Buyer beware!

        • You just can not risk all your money, a small percent should be ok

      • You’re already invested in your company by relying on it for an income. I read that you shouldn’t go deeper than 30% of your portfolio. Even then you should still treat it like any other investment, using publically available information about the financial health of the company to monitor your risk.

        I know a guy who worked for a dotcom startup and was all in on his investments in it. He was a millionere. He saw that the dotcoms were over valued and knew it was time to get out but stayed in one day too long and lost every penny. He had also leveraged it in some way for a trip to Hawaii just before the crash that got him into tax trouble and made payments to the irs for many years.

  • Nakia Griffin

    So overall do you borrow money from yourself or from the retirement plan. Plus how many loans can be obtained at 1 time?

  • I would rather borrow from my own 401k than the bank! What do you think?

    • It’s a tradeoff.
      First of all, depending on your investment choices, your probably better off leaving the money invested.
      Second of all, paying off the 401k loan will not improve your credit rating. Think about it, you have a loan that is payed on automatically, before you see your pay, so you have no late payments, and no defaults unless you lose your job…but you still get no improvement to your credit rating from it. However, you don’t have to apply for the loan and your current credit rating is irrelevant to being able to get the loan.
      I’ve borrowed from mine several times. I wish I didn’t have to, but my poor habits at making payments on loans, my irregular employment history through the years, and my lack of respect for the importance of a credit rating made 401k loans a necessary evil. I also got started late on my retirement savings. I’m 52 years old and have about 30k, and 11k borrowed, I don’t own a home, I drive clunkers, and my credit rating is in the low 600s. I have a lot of work to do.
      Better to leave the money in, tighten your belt, make what you have work, build your credit with small, cash-secured loans, only buy what you need instead of what you want, and save, save, save.

      • You made some good points, I guess it would depend on your situation.

  • LAJ

    I have a 401K with my employer and contibute 10% to it. It’s now at about 100K. My husband has a Roth IRA with his employer – he makes less than I do and has about 20K in it. We recently had to relocate for my job and now have a 10 year mortgage and no other debt. In 10 years I will be 65 and he will be 69. Our credit score was the highest our bank has ever seen. I want to add some diversity to our retirement funding but don’t know what to invest in. Gold or silver or ?? Do you have any advise for us?

  • ropi

    I use money from my ira account.I have been buying propietis in foreclosure its. Generaitin more money than keeping my money in my ira account. I rent them . I think. It’s. A good. Idea