Is there a way you can lose your 401k? Like if you ... - Roth IRA News

Yes, there are ways to lose this money ? however, it is a GREAT investment. Here are some things that can happen:

-the investments you select go down in value. 401(k) plans offer a variety of investment options at a variety of risk levels. When you are young, you typically take more risk because you have more time to bounce back from any investment downturns before you retire. As you age, you get more conservative. The way to avoid this is by reading the investment info and checking the performance record of the fund(s) in which you plan to invest. Most plans have an investment counselor who can help with this for free.

-you withdraw funds from the plan and don?t reinvest them appropriately. Withdrawing 401(k) funds before age 55 1/2 will incur a 10% penalty. Plus, you don?t pay taxes on those funds when they are deposited, so the IRS will withhold 20% to pay the taxes when you withdraw the funds. If you leave the company and take a lump sum payout, you stand to lose 30%. The way to avoid this is to roll those funds into a new company?s 401(k) plan, or into an IRA.

Now let?s look at the upside:

-any financial counselor worth their salt will tell you to start a 401(k) as a first investment, and to start it as early in life as possible. Because interest is reinvested in the plan, you stand to have a nice nest egg at retirement. Most k-plan investments are diversified enough to dimish risk, and historically the stock market has outperformed other investments.

-then there?s the ?free money? angle. Most k-plans offer some sort of employer match. Yes, they give you money, for free, deposited into your plan account. The catch is that you may have to stick around for more than a year or two or you may forfeit some of that match money. Every plan is different, so ask. Even if you forfeit the company match, it?s still boosted your principal, and thus your compound interest level, and you?ll still get the $$ that you put into the plan when you leave.

For more on k-plans, visit any of the large brokerage websites and look in their research sections ? e*trade, merrill lynch, fidelity, t. rowe price, oppenheimer, etc., all offer k plans.

Happy investing.

Source: http://rothira.solve-up.com/roth-ira/is-there-a-way-you-can-lose-your-401k-like-if-you-quit-are-fired-the-company-closes-or-goes-bankrupt/

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