At Investing Daily, we have grown increasingly concerned with the national trend toward underfunded retirement plans. As a service to our readers, for the next few weeks we'll send you a complimentary series of focused briefs to get you thinking about new ways to maximize performance both inside and outside of a structured 401k or similar plan. We hope you'll find these briefs useful … if they are not applicable to your situation please click here to stop receiving the series. – The Editors
Welcome aboard the inaugural issue of our weekly e-zine, Your 401k Path To Riches.
Hey, it’s no secret that a 401k plan can make or break your Golden Years, so a path to wealth is exactly what you need if you intend to become a 401k millionaire.
With this weekly e-zine, you’ll have a time-tested GPS system specifically designed to build wealth, protect your assets, manage investments and withdrawals, and set the stage for a seven-figure retirement when you’re ready to retire—on your terms, and on your timetable. You'll also gain access to a "Permanent Portfolio" designed specifically for your unique retirement planning needs.
Born from decades of shrewd market research, Permanent Portfolios are built to protect you against all economic possibilities while also delivering the gains you need to meet your retirement goals. Market cycles are inevitable, and Permanent Portfolios are ready to take advantage of them.
To meet your goal of becoming a retirement millionaire, every week we'll bring you creative tips, strategies, and rules of the road for 401k investing. We'll also kick some tires and conduct investment analysis on the mutual fund and exchange traded fund (ETF) markets, the primary engines of the $3 trillion 401k plan market.
Five Key Building Blocks to Becoming a 401k Millionaire
Where do you start when wrapping your arms around a retirement p! lanning market of that size? With five key tips we'll be revisiting time and time again—the building blocks of your newly rebooted seven-figure 401k plan.
Above all else, if you can manage to infuse your 401k portfolio with these basic tenets, you'll retire with more money in your retirement plan than you ever thought possible.
1. Start Early (Or At Least Early As Possible). There's no substitute for getting a good start on your financial future. All the studies on the subject conclude that the earlier you get going with your 401k, the more money you'll have in retirement. That's because the earlier you start, the earlier compound interest goes to work for you.
2. Max Out. 401k's provide a multitude of benefits for investors. One of the most beneficial is the plan's tax-advantaged status. In short, the more you contribute to your 401k plan every year, the less you'll pay in taxes to Uncle Sam. Then there's the obvious advantage of maxing out and investing the legal limit in your 401k. The more money you invest, the more your company might match, and the faster you'll become a 401k millionaire.
3. Learning is Earning. The value of good investment research is priceless. And the value of knowing enough about your 401k to become the master of your financial future is crucial. Read all you can on finance and investments, and make sure you read every word of the 401k packets, brochures, and memoranda that come your way from your employer each year. The payoff for spending an hour or two a week boning up on the ways of Wall Street is potentially huge, particularly because 401k's are starting to expand and go global. Don't be left behind.
4. Be Aggressive. Extreme prudence is the proper course if you're an airplane pilot or a brain surgeon. But it's a drawback for 401k investors. Studies show that to beat inflation and to make your money grow faster, a good chunk of your plan should be earmarked for higher-performing stock funds. That doesn't me! an you sh! ould be reckless. There's no rule that says you have to put money into Portuguese debentures because your buddy in accounting did. But if you stick to conservative investments like bonds or, worse, bank savings accounts, your chances of becoming a 401k millionaire are virtually nil.
5. Keep the Money Working. Over the years I participated in other profit-sharing plans. When I left those companies, I was given the option of taking the cash and rolling it over into another tax-deferred investment plan like a 401k or Individual Retirement Account (IRA) or taking the money in a lump sum and using it as I wished. The latter is a bad move and here's why: the government wants you to roll the money over and they've set up expensive traps if you don't.
The IRS can take up to 20 percent of your retirement plan assets away from you if you elect to take a lump sum payout when you leave a job. If that's not grim news, consider this: the IRS will also tax you on the capital gains your money has earned while participating in the plan. When you sell an investment for more than you paid, your profit is called a capital gain. It can be taxed at a rate as high as 28 percent of your earnings.
I'll cover 401k and IRA rollovers on a regular basis in the 401k Millionaire, and in Your 401k Path To Riches, as well as the folly of taking loans out against your 401k. You'll see why keeping your money working in your 401k isn't just your best option, it's your only option.
Those are my five rules for 401(k) investment success, and they're the building blocks of the 401 Millionaire.
If you take these five tenets to heart, and let the twin miracles of the stock market and compound interest take care of the rest, you'll be a 401k Millionaire much faster than you ever dreamed possible.
I'll go into more detail on my five rules of 401(k) going forward—everything else on your wealth creation journey is based on the five rules you just read above.
As the ancient C! hinese sa! id, "Every journey begins with a single step."
Consider this your first step on your way to becoming a 401k Millionaire.
Brian O'Connell is an investment analyst at Investing Daily and the editor of the 401K Millionaire. An ex-Wall Street bond trader, he has appeared as an expert financial commentator on CNN, NPR, Fox News, Bloomberg, CNBC, C-Span, CBS Radio, and many other media broadcast outlets, and is the author of two best-selling books on retirement investing.
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