3 reasons companies should change 401(k) providers

By John Horner

The 401(k) has evolved into one of the most popular retirement accounts in the market today. This type of retirement account is provided by employers as a benefit to their employees. If your company offers a 401(k), there are definitely a lot of providers out there to choose from. In some cases, it may be to your advantage to change to a different 401(k) provider. Here are three reasons that you might want to switch to a different 401(k) company.

High fees

One of the best reasons to switch to a new 401(k) company is due to high fees. All investment companies charge some kinds of fees, as this is how they make their money. While you should come to expect some fees, you don't want to give away too much of your retirement money. Retirement plan providers can charge for a number of different things. For example, they might charge an annual fee just for having an account. Some providers charge so much each time you buy or sell shares in your account. There are all kinds of fees that you could incur, and when a company realizes that it's paying too much, it's time to consider other options.

Limited investment options

Another reason that you might want to consider switching to another 401(k) provider is because it offers very limited investment options. Many 401(k) providers only offer a few mutual funds to put your money into. If you like to have more options, this type of account simply isn't going to cut it. Some brokers offer access to stocks, bonds, mutual funds, exchange-traded funds, and other investment opportunities. If you like to have variety in your investments and your employees appreciate it as well, it is time to switch to a new provider. Some providers keep their investment options in a very limited range, and it can be problematic to investors.

Poor service

If your 401(k) provider doesn't offer good customer service, it's time to look at another one. Generally, you can tell if your 401(k) is having issues if you get a lot of complaints and comments from your employees. They are usually the best ones to tell you if something is going on. They will be contacting the plan managers when they have questions, when they want to alter their portfolio allocation, and when they need to take out 401(k) loans. If they're having a lot of problems, this can reflect negatively on you as an employer in the long run. It can also hurt your chances of reaching your own goals with your retirement plan if you participate in it. Ideally, you should have a provider that offers great customer service and is always there to help you. Your retirement isn't something to toy with, and you should find someone who cares about it as much as you do.

Your 401(k) is one of the linchpins of a successful employee benefits package. Take the time to get it right even if it means that you're going to have to do a little bit of extra paperwork. Taking a little bit of additional time will be well worth the investment that you make. Just make sure that you do your homework in choosing your next provider.

About the author: Having worked in financial services for more than 14 years, John Horner has been able to provide many useful tips and facts about finances for his readers. John has also contributed to finding the best finance schools for others who would like to get a quality education to get started with their career in finance.

Image attribution: Tax Credits' photostream; CC BY 2.0

The benefits of converting part of your 401(k) to gold

By David Matthews

Using your 401(k) funds wisely will allow you to have the most ideal retirement possible. After a few successful investments you could earn enough profit to make a down payment on a beautiful property and take an amazing vacation as soon as you’re able to walk away from your job. On the other hand, if you leave your 401(k) funds untouched and let them depreciate along with the value of the dollar, you’ll probably have a lacklustre retirement, living month to month off of a substandard income that isn’t much better than the revenue you were generating as part of the workforce. Make your retirement worth the wait by taking advantage of the following 3 benefits of converting part of your 401(k) to gold.

Cashing in on the Gold Boom

As the global economy continues to struggle more inventors are buying gold to safeguard their assets, resulting in a higher demand. Mining companies are expanding their operations in order to keep up with the supply, increasing their cost of operations, and since gold is finite resource the supply is ever-dwindling. Rising demand and decreasing supply is contributing to gold’s continual rise in value and is setting up a situation that will probably make thousands of smart investors very rich. If your current 401(k) plan with your employer allows for gold investments you can initiate the process very easily. If not, all you need to do is open an IRA and rollover some of the funds in your 401(k) into the new IRA account to begin investing.

Increased retirement funding

At the moment your 401k fund is a bit like a fireplace mantle, it is sitting there collecting dust until you’re able to use it. If you choose to withdraw it early you’ll have to pay a 10 percent early withdrawal fee, and you’ll also have to face other taxes and penalties depending on the situation. However, you can choose to put those funds to good use right now without withdrawing them by investing in gold and capitalizing on the inevitable gold boom. Imagine being able to buy whatever you want and living like you’re permanently on vacation! This is the type of lifestyle you can have during retirement if you take advantage of the gold boom and buy a large amount of gold before the price peak occurs during the next decade.

Portfolio protection

Instead of investing in risky instruments like stocks, exchange-traded funds (ETFs), or mutual funds, consider the advantages of securing a portion of your retirement investment portfolio by purchasing gold with it. Once you have the gold bullion in your possession, or stored in an online holdings account, you can be sure that those assets will not depreciate over time. In fact, your funds will most likely continue to grow until the price of gold peaks between 2015 and 2020. Essentially, investing in gold lets you protect your retirement form mediocrity by safeguarding a percentage of your portfolio from depreciation and facilitating optimal returns.

David Matthews is a 401(k) investment specialist and retirement advisor who conducts market analysis and writes for Gold-401k.org.

Social Security's unknown future and 401(k) investing

One of the great political questions of our day is whether or not Social Security can be saved, and if so, how?

 

There are many competing voices in the press, from financial advisors, the elected officials on Capitol Hill, and other politicians, about what is the best solution for the ills that plague this government institutionalized program that began under President Franklin D. Roosevelt. It is crisis time for many Americans who depend on their monthly disbursements, and all they want is a reasonable and sustainable solution that will guarantee them that the money they were forced to place in this system actually returns to them.

 

What was Social Security supposed to provide?

Many millions of Americans rely on social security benefits to meet their monthly financial needs, and most aren’t swinging from grand chandeliers in palaces of gold. Social security was never intended to be the sole providers of retirement income. In the past, family members, churches, and communities banded together to take care of the aged members of society.

Over time, since the Great Depression, the government saw and took an opportunity to tell people that they were unable to save, invest, and provide for themselves.  Instead, the government would take part of their income and sock it away until one turned 64 and they then would get their money back in monthly increments. This is not an investment but a taxation, mind you. Congress has used this money for years for other purposes, radically depleting the social security account our nation is supposed to maintain. Both major political parties have varying solutions to the problem without confessing that they are the problem. It has become a piggy bank that simply does not get repaid. “Just print more money,” seems to be their mantra.

 

Affect of the Babyboomers 

Now with our aging population, suddenly concerns about the veracity and sustainability of social security have come to the forefront of political talk and rightfully so, our population is worried.

For many who have seen their 401(k) accounts melt away in the radiant remains of the current economic downturn, their government check each month has increased in value and importance to them. New strategies have had to be employed as worry and fear about being able to continue a certain quality of life have run head on into the reality of their former dreams and goals about retirement.

 

Hope is still alive

Still, opportunities exist for those who are seeking to rebuild their 401(k) so they are able to still fulfill their retirement dreams and goals, but it will take finding the right financial advisor. Rock Hill retirement planner Matthew Griffin suggests that relying on your company’s 401(k) manager is not wise because their job is not to help you plan for your future and they typically are not investment experts.  This new era requires a steady and sober approach to the marketplace if one is to rebuild their accounts and get back on course. He also suggests that people under 40, who still have more time to rebuild than those who are older, should not allow that extra time to make them unworried.

Griffin suggests you take hold of the freedom we have to be more in control of your economic future, especially since social security may not be around by the time that age group retires. It is less about being aggressive in the marketplace than being wise with your future. Let your money work for you. Regardless of what plan Congress finally decides on, social security will never match private sector growth (or the potential of its losses) but with a little help from a financial advisor, you can climb the mountain of your future goals with confidence and hope. 

Revenflo Web Team: A team of SEO writers dedicated to making the internet a better place

Financial instruments and accounts that provide protection from creditors

Creditors are limited by laws that protect consumers even if those consumers are late on their bills or are sued for liability compensation. Examples of these laws are state statutes of limitations, and federal credit protection laws such as the Consumers Credit Protection Act.

Despite consumer protection from creditors, these laws do not necessarily protect individuals from liens or seizing of assets by the Internal Revenue Service (IRS) or from specific court rulings.  Having said that, several types of financial instruments and accounts protect consumers from creditors allowing an opportunity to keep retirement savings safe from difficult financial situations. 

Homesteads 

Homesteads are a type of property rather than a financial instrument, but they can also provide financial safety from creditors according to The Coleman Law Firm. Moreover, the Coleman Law Firm states the Homestead exemption provides asset protection for land 160 acres or less in size. The following state exemption chart at Creditor Exemption outlines which states allow homestead exemptions. 

Insurance

Both Ginger Applegarth of MSN Money and Attorneys at Law Unrah, Turner, Burke and Frees appeal to cost effective insurance solutions to asset protection. Namely, auto, and homeowners insurance are able to protect assets from liability lawsuits for less than asset protection insurance and in terms of creditor claims, term life insurance also provides more cost effective financial security. However, it is probably a good idea to keep in mind life insurance financial protection is limited. This limitation is elaborated by Gideon Rothschild and Daniel S. Rubin of Moses & Singer LLP.  For example, although Title 11 of the U.S. Code does protect assets from creditors, the focus is beneficiaries or dependents and not owners.

Trusts

Trusts are a type of legal entity used in estate planning and are often considered financial instruments used to protect assets. Cornell University Law School  describes Trusts as right to property via a fiduciary relationship i.e. not ownership but retention of rights of ownership. Several types of trusts exist, and according to Estate Street Partners, LLC an irrevocable asset protection trust combined with a limited liability corporation provides 'fortress' like asset protection. Several kinds of Trusts can be used for protection according to the Law Offices of Janet Brewer Moreover, of those discussed are Qualified personal residence trusts, irrevocable life insurance trusts and inter-vivos qualified terminable interest property trusts.

IRAs

Individual Retirement Accounts or IRAs are another financial instrument that protect consumers from creditors. However, according to the New York Times,  in the event of bankruptcy, funds in an IRA are only protected up to one million dollars with the exception of rollovers from corporate retirement plans. The New York Times also refers to difference in state law exemption amounts for non-bankruptcy lawsuit protection. In other words, how much monetary protection provided by an IRA varies between states for creditor claims not associated with a bankruptcy filing. 

Pensions

Defined contribution plans such as 401(k)s and 403(b)s are protected by the Employee Retirement Income Security Act (ERISA). However, according to Executive Capital Resources, these types of accounts are not protected against Qualified Domestic Relations Orders (QDROs) which are judicial claims against retirement assets during events such as divorce proceedings. Moreover, according to the Wall Street Journal, a kind of 401(k) called the Solo 401(k) is not protected from creditors in every states.

Key tools used In estate planning

Estate planning does not have to be a daunting and expensive ordeal involving endless attorney, accounting and financial planning fees. A key in keeping estate planning cost effective and simple is to separate what is needed from what is not in an estate plan. Many times complicated trusts and financial instruments are not necessary, but even when they are it does not have to be a maze of confusion. 

A good place to begin estate planning is assessing the size or total value of the estate; this includes tax deferred retirement accounts and will determine whether or not specific financial instruments are needed to bypass Federal Estate Tax.  For example, real property such as homes and land are potentially subject to both estate and inheritance tax depending on the value and the state in which the property is located. However, by using a qualified personal residence trust, the total estate value can be reduced according to the CPA Journal Online. 

Retirement  

Defined benefit plans such as employer pensions and defined contribution plans such as 401(k)s can be used to defer taxes on retirement income until it is withdrawn. These tax benefits allow estate owners to manage retirement income to optimize taxes paid to the Internal Revenue Service. These benefits extend to beneficiaries if they roll over the inherited retirement account to the appropriate account. According to Schwab, a number of retirement accounts can be rolled over into Inherited Individual Retirement Accounts without tax penalty. 

Trusts 

Trusts are financial instruments that protect assets from taxes and designate distribution of estate assets in particular ways determined by the trust and its terms. Numerous types of trusts exist for various purposes such as guaranteeing money for grandchildren, and establishing a foundation upon death. In any case, when a trust is necessary discussing the options with an accredited estate planner such as an insurance agent accredited through the National Association of Estate Planners & Councils might be cheaper than an attorney or accountant with the same estate planning qualification. 

Wills

A Will is a key document probate courts use to allocate assets per the State Bar of California. These documents define trustees and verify beneficiaries for assets within the state's jurisdiction i.e. non-protected assets.  Different types of Wills exist so be sure to review them to identify which is best for you.  Be sure that the terms of other financial instruments such as trusts are conducive to the terms of the Will or this can hold up probate proceedings. The University of Maryland University College and The Porter County Communication Foundation have useful checklist s of information to include in a Will. 

P.O.D.  

Payable on death accounts are an easy way for account beneficiaries to avoid probate. It is a simple matter of going to a financial institution and filling out the appropriate forms. These types of arrangements only apply to FDIC insured accounts, but similar arrangements can be made with non-insured accounts in some states according to Kiplinger. For example, a brokerage account can also carry  similar terms in those states. 

When traditional investing strategy doesn't work

Traditional investing is good for individuals with demonstrated skill in high demand fields, and who have stable incomes with benefits protected by the Employee Retirement Income Security Act (ERISA) and insured the Pension Benefit Guaranty Corporation (PGBC). Employer retirement plans like 401(k)s, 403(b)s, 457(b)s etc. work when there's a reasonable probability of becoming vested in your career, and when the investments via those financial instruments are well guided and managed.

If you are among the 16.2 percent of Americans in the workforce as defined by the Bureau of Labor Statistics (BLS) who are either unemployed, or underemployed chances are an adjusted investing strategy is more suitable if you can find money to invest. The bottom line here is investing at all, yet alone via traditional investing strategy will be challenging. For this reason, investing isn't necessarily a realistic activity, something financial claptrap tends to avoid stating.

Instead of worrying about building a retirement fund or relying on an antiquated retirement system to solve your future financial needs, work with what you do have in the present, time. Time is arguably more valuable than money as 'time' is what is generally needed to accomplish an array of human activities. Without time money is useless but without money, time is not useless. How you use your time determines what will happen to your finances.

Why 401(k) plans with index funds can benefit employees

The New York Times reports 401(k) plan administrators are reluctant to incorporate index funds into their 401(k) plans. This is because the fees generated by mutual funds provide more income for fund managers. This may be a violation of fiduciary responsibility however, and disadvantage employees. There are multiple benefits to 401(k) retirement plans with index fund options can offer, this article provides a few of those reasons.

Complete article link: http://www.helium.com/items/2157731-reasons-401k-retirment-plans-should-invest-in-index-funds

How to request a hardship loan against your 401(K)

Qualifying for a hardship loan against your 401(k) requires literal hardship similar to Government requirements for poverty assistance. In other words, the financial hardship must be real and not a mere inconvenience resolvable through sale of assets, commercial loans, other retirement plan distributions, savings etc.

In regard to the specific 401(k) plan, the hardship loan availability must be either available or not-available in an impartial manner to all those who may or may not qualify for the loan i.e. the 401(k) administrator does not have to grant the loan, if it is not within the consistently and fairly applied terms of the loan.

Only certain expenses and amounts of expenses qualify for hardship loans. These expenses are outlined in section II of this article and do not include all funds within the 401(k) such as income produced within the 401(k). If you do qualify for a hardship loan against your 401(k) and your particular 401(k) plan allows it, you may take the steps necessary to request a hardship loan with a reasonable chance of having that loan approved. This article will also discuss those steps in section I.

• Steps for requesting a hardship loan against your 401(k)

After referring to section II of this article, and its related sources, you may find you qualify for a hardship loan from your 401(k). Several steps are required to request a hardship loan and involve contacting the appropriate person(s), completing necessary paperwork, documentation of hardship and receipt of funds. Essentially, those steps are as listed below:

Step 1: Review conditions of the 401(k) itself
Step 2: Determine whether or not you qualify for the loan
Step 3: Contact the 401(k) Administrator
Step 4: Complete financial hardship documentation
Step 5: Submit paperwork for consideration

Your human resources department and/or 401(k) administrator can answer specific questions regarding the qualifying amount of the hardship loan as specific criteria also exist pertaining to available funds. These criteria are also available for your review in the regulation referred to in the following section. The aforementioned person(s) may also assist you in completing the loan application process.

Since there are legal ramifications regarding receipt of hardship loans against your 401(k) if you don't qualify for the loan, the 401(k) loan administrator will likely require significant documentation of your hardship to avoid and reasonably demonstrate compliance with the 401(k) regulation. For example, copies of tax returns, account statements, living expenses such as utilities, and medical bills may be requested.

• Rules of Hardship: Qualifying for the loan

Hardship loans against 401K's are regulated by Title 26, Chapter 1, Sub-Chapter A, part 1.401(k) of the U.S. Code. Section (D)(3)(iii) outlines the specific definition of hardship that qualifies for a hardship loan against your 401(k). Hardship is defined by this Federal regulation as including the following. However, for the financial hardship criteria to apply, other sources of financing for the same may not be available, and the cost of the financial hardship may not be more than the funds available through the 401(k).

Financial hardship criteria

• Approved medical expenses
• Primary home acquisition expenses
• Educational expenses
• Residential necessity
• Funeral expenses
• Qualifying home repair costs

As mentioned in the introduction of this article, to qualify for a hardship loan against a 401(k) retirement plan requires literal hardship as defined by U.S. Statutory law. Another requirement of the hardship loan is that the hardship loan should not aggravate, create or the financial need by creating greater hardship through resolution of the expense. In other words, the loan itself must not create need. The rules of hardship also extend to immediate family such as spouse and individuals considered exemptions on U.S. 1040 Tax returns.

• 401(k) hardship loan tips

To better facilitate your application for a hardship loan against your 401(k), it may be helpful to be prepared for the process and familiar with the requirements. For example, if using a home purchase as a reason for hardship, it may be a good idea to make sure the amount needed for the purchase does not exceed the amount available through the loan. Doing otherwise could prove time consuming and difficult as both the mortgage application process and 401(k) hardship loan application process may be otherwise denied. The following tips may be useful when preparing to apply for a 401(k) hardship loan:

• Determine required amount of funds needed
• Assess funds available through the 401(k)
• Properly document hardship by assuring non-ownership of asset
• Review the proper section of U.S. Code Title 26, Chapter 1
• Read 401(k) account terms and statement(s)

After completing the steps contained in this article, you should in theory be better prepared to understand and carry out the 401(k) hardship loan process, or be aware of whether or not this is the right option for you. Your employer and/or 401(k) administrator should be contacted in order to gain more specific information about your particular 401(k) as terms of the 401(k) such as availability of 401(k) hardship loan availability can vary.

Sources:

1. http://www.irs.gov/retirement/article/0,id=162416,00.html
2. http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&tpl=%2Findex.tpl

Guide to personal finance: Money mangement tips

Personal finance is the managing of individual and/or household monetary circumstances and goals through use of financial instruments, methods and rules. Personal finance can be divided into a number of categories that form a comprehensive financial model that utilizes income, debt management, investment, and financial planning to achieve a more efficient, cost effective and optimal use of personal finances.

Since everybody's financial situation and aims tend to be different, personal finance applies conventional and unconventional money management methods with lifestyle objectives, short-term and long-term plans. Some of the areas of personal finance include the following:

• Budgeting
• Tax planning
• Investing
• Retirement planning
• Financial recordkeeping
• Cost management
• Estate planning

Budgeting

Budgeting is an important part of personal finance because it allocates income and "liquid" financial assets into allocations that allow an individual or family to meet multiple financial needs. For example, a typical household will have expenses, limited income, savings, insurance needs and retirement plans. To properly accomplish and attend to these financial tasks, a budget can be made use of.

A budget is a time-coordinated application of money to various uses with limitations. In other words, through a budget, money is pre-allocated to various monetary ends for the purpose of better applying that money. Preparing a budget can help reduce debt, build savings, maintain credit ratings and financial order to one's life. Budgets can be weekly, bi-weekly, monthly, annual or a combination of times where finances are accounted for and utilized in different ways.

Tax planning

Tax planning is an important part of personal finance because when properly done, tax savings and retained income can be maximized. For example, contributing to an IRA lowers total taxable income and defers taxes until retirement when total income may be lower for a net gain in tax savings. There are many tax savings techniques and methods that can be applied through deductions, tax filing status, exemptions and knowledge of tax rules, mechanisms and code.

Tax preparers and/or accountants can be helpful in proper tax planning and may be worth consulting before major financial decisions are made that are likely to impact one's income, inheritance, property, capital gains or other tax. Adequate application of tax methods may be useful in growing tax free income, and wealth building whether it be individual or family wealth.

Investing

Another key area of personal finance is investing. When done correctly, investing can not only be done tax free, but grow one's wealth through allocation of money into financial instruments. There are many ways to invest and these methods depend on personal financial goals, risk tolerance, age, available investment products, investment plans and services. Investing takes capital, research, time and patience and possibly the advice of a financial planner and services of a broker.

Depending on the investment goals, investment know how, and types of financial instruments invested in, financial services may or may not be necessary. Investment income is ideally not needed until a future point in time so that it may fluctuate in value without obstruction to the long term financial goals. In the case of low-risk and/or short term investing, money should also be allocated for these purposes and not needed.

Retirement planning

Eventually most people need to retire, and this can be facilitated by a retirement plan. Most financial advisors will say the earlier one develops and implements a financial plan, the better. The reason this is so is because more time allows an individual to save less each month to attain a long term retirement goal assuming the same yield on savings for two separate time horizons.

Examples of retirement planning include, 401(K), 403(B), IRA, Pension plans, property investments, trust savings, life insurance policies with cash value etc. Government social security may be part of a retirement plan but due to uncertainty regarding availability of social security due to an aging population, the security of these finances may be somewhat questionable in some countries. For this reason, having a self-guided, employer or other type supplemental retirement plan may improve one's financial retirement prospects.

Financial record-keeping

When budgeting, tax-planning, investing etc. good record keeping can not only help one know how and where money is going, but assists in facilitating these objectives more expediently, and can help with making adjustments to one's financial planning and personal finances when necessary.

Good financial record keeping can also help when applying for loans, filing for taxes, and accounting for cash flow or disputing charges. Strong financial recordkeeping is a tool of financial planning that spans across several areas of personal finance and organizes monetary management potentially saving time and lowering money related complications. Financial recordkeeping can be accomplished through financial software, or an individually customized financial records system.

Cost management

Cost management includes loans, credit cards, living expenses, bills, and any debt an individual and/or household incurs during a given time. Effectively managing costs of living includes debt management and is essential to keeping control of spending and staying within a budget. Costs are the single biggest way to render a complete financial plan ineffective as they can eat up and eliminate income and savings and potentially hamper or greatly reduce non-cost elements of a financial plan.

Cost management can be developed through mindful spending, adherence to a budget, lowering of expenses and reducing of debt and debt interest levels. Keeping debt under control, eliminating debt and/or reducing debt/income ratio are ways to manage costs. A quality cost management strategy can greatly improve a financial plan and one's personal finances in the short-run and long-run scenarios of managing money. Many tips, services and techniques exist to assist in cost management and becoming familiar with these methods may involve research and/or the use of financial services.

Estate planning

For the wealthiest of individuals with net worth in the millions of dollars, estate planning can be quite useful. Successful estate planning can lower taxes, grow income and assets, and legally protect money from lawsuits, estate taxation and inheritance tax through the use of financial instruments such as trusts, insurance policies, and retirement vehicles in addition to legal tools such as wills, family corporations and living trusts. Enlisting the assistance of accountants, attorneys and/or financial planners may be worthwhile especially when large amounts of money are involved as in the case of some estates.

Effective estate planning can help maintain fiscal privacy, protect finances, and legally avoid taxation. Estate planning may also incorporate retirement funds, health management savings, investments and insurance policies and may consist of a combination of financial strategies, financial instruments, tax techniques and legal mechanisms. For these reasons, estate planning has the potential to be complex and/or elaborate but may also end up improving one's personal finances significantly

To summarize, personal finance is the conjunction of personal goals, financial regulations, legal and tax environment with financial instruments, mechanisms and techniques. The objective of personal finance is to manage money effectively and this may include growing money, preparing for retirement, saving, managing costs, achieving lifestyle objectives, and protecting one's money and self through financial means.

Personal finance is a cornerstone of life management and quality of life because it helps facilitate life objectives and quality of life through the effective management of money and aspects of life affected by money. There are many sources of information, services and tools available to persons seeking to improve their personal finances, and these tools include online literature, financial services, financial plans, software and equipment.

The practice of personal finance may change over time as one's financial aims and/or the nature of the economic, financial and legal environment changes. Consequently, personal finance is not always a static practice and involves continual awareness and diligence to financial means and goals.