When it comes to planning for retirement, one of the most common methods that most employees use to save money is the 401K plan that their employer provides them with. While this may seem like the best choice when it comes to saving for retirement, many do not realize that there are other retirement investment plans out there that can help them better achieve their retirement goals. Before you blindly put all your faith and your retirement future in your 401K, here are a few of the hidden problems associated with your 401k retirement plan that you employer is unlikely to tell you about.
One of the most common problems with this type of retirement plan is you have no real control over where your money is invested. Keep in mind this does not mean the funds, or stocks that you choose to invest in, it actually means the investment company that your employer has decided to partner with. If you have ever done any research online, you are probably well aware that there are a wide range of companies that are looking to help you reach your financial goals, and like you, your employer also has a certain set of goals. They are well within their rights to change the plan issuer, and any changes they do decide to make are commonly in the best interest of the company and not necessarily your retirement savings goals. Whenever possible, consider rolling your funds into an IRA, at least that way you have better control over what is done with your retirement funds.
Another issue with a 401K plan is that it is tied to a specific employer. While this may not be an issue if you plan to stay with your employer until you retire, it can pose an issue if you choose to leave your employer for a better position at another company. In order to retain any funds you have contributed to your 401K you need to do a rollover into either the 401K plan with your new employer or an IRA of your choice within 60 days of leaving the company. If the rollover is not completed within that time frame you run the risk of being charged penalties for early withdrawal and being taxed for the funds you received. Some employers may allow you to keep your 401K with the company after you leave, but you will not be able to make additional contributions to the plan unless you roll it into another account.
Lastly, the selection of investment options tends to be more limited with a 401K plan than with other retirement investment accounts. Depending on who hosts the plan, you probably will have a limited amount of mutual funds to choose from which are commonly made up of a bunch of different stocks whose success, or failure will directly relate to whether your retirement funds grow or shrink. And if your employer happens to change providers, there is no guarantee that the new provider will offer the same mutual funds as the last one did, as each provider tends to have its own type of investment options that can either make or break your retirement goals. Also know about gold iras here.
These are just a few of the hidden problems with 401K retirement accounts. Plans are tied to an employer, and come with a limited selection of investment options, that can make it hard to reach your retirement savings goals. Whenever possible, it is in your best interest to roll your 401K funds into an IRA account in order to have better control over your investments so you have a better chance at meeting your retirement goals, ensuring a comfortable lifestyle long into your retirement years.