Often the withdrawals are for depreciating assets, like a car, etc. Consider the 401(k) account monies as untouchable. Avoid the temptation to access those funds and, in the long run, you’ll be glad you did.
Mistake 6: Ignoring Your Account
Pay attention to your periodic statements. Monitor the fund choices, their results, etc. Have a plan! There should be quarterly or semi-annual meetings held to discuss the plan. At a minimum, use that time to monitor your investment allocations, etc. Consider making changes when appropriate. Take action!
Mistake 7: Obsessing Over Your Account
Don’t micromanage! Don’t be “that guy,” the one who checks his account daily, worrying that values dipped this week, this month, etc. These are long-term programs. Treat them as such. Don’t try to day trade or follow every newsletter that has the “secret.” Develop a good strategy on how to handle your account’s investments and stick with it, making changes as needed.
Mistake 8: Not Rolling Over the Account Balance
In today’s society, many people will have worked for multiple companies by the time retirement comes around. If we took out our 401(k) plan and spent part of it every time we left one employer for another, there'd be nothing left for retirement. Don’t fall into that trap. When leaving one company, roll your 401(k) balance into the new employer’s plan. If the new employer’s plan doesn't allow for it, then roll it over to an IRA account. Just don’t take that money and spend it!
When it comes to your 401(k) plan, use common sense and discipline and give some thought to the future. Prepare for the inevitable and do so wisely.
Note: This discussion is not intended as tax advice. The determination of how the tax laws affect a taxpayer is dependent on his particular situation. A taxpayer may be affected by exceptions to the general rules and other laws not discussed here. You are encouraged to seek help from a competent tax professional for advice about the proper application of the laws to your situation.
William H. Black Jr. has been in the pension-administration business for 34 years. His firm, Pension Services Inc., administers defined contribution and benefit plans and employs an ERISA attorney, an enrolled actuary and a complete clerical staff. He is a speaker and author for several industry journals and has appeared on financial radio shows to discuss retirement and financial matters. To reach him, e-mail firstname.lastname@example.org.