If your account is valued daily or monthly, you can change your allocations only once a day or once a month.
When you change jobs, you can generally leave your retirement account balance in the 401(k) plan. You might want to maintain a 401(k) plan with a former employer if the plan has especially good investment options, low costs or contains company stock.
Financial advisors often recommend using the following formula to determine your asset allocation: 110 minus your age equals the percentage of your portfolio that should be invested in equities, while the rest should be in bonds. But think about your investing horizon.
Age: 51 to 55 -- 70% in equities and 30% in fixed income. Of the equity portion, 40% invested in large cap.
Here are five ways to protect your 401(k) nest egg from a stock market crash.
Withdrawing your retirement money at 28 is like creating your own personal stock market crash, even if the stock market soars. You'll pay a 10 percent early withdrawal penalty on money you take from your 401(k) plan, plus any Roth IRA earnings you touch.
Bond Funds
Federal bonds are regarded as the safest investments in the market, while municipal bonds and corporate debt offer varying degrees of risk. Low-yield bonds expose you to inflation risk, which is the danger that inflation will cause prices to rise at a rate that out-paces the returns on your investments.
Since your 401(k) is tied to your employer, when you quit your job, you won't be able to contribute to it anymore. But the money already in the account is still yours, and it can usually just stay put in that account for as long as you want — with a couple of exceptions.
If you miss the 60-day deadline, the taxable portion of the distribution — the amount attributable to deductible contributions and account earnings — is generally taxed. You may also owe the 10% early distribution penalty if you're under age 59½.
Moving 401(k) assets into bonds could make sense if you're closer to retirement age or you're generally a more conservative investor overall. But doing so could potentially cost you growth in your portfolio over time.
That being said, although each 401(k) plan is different, contributions accumulated within your plan, which are diversified among stock, bond, and cash investments, can provide an average annual return ranging from 3% to 8%, depending how you allocate your funds to each of those investment options.
What should I do with my 401(k) when I retire?
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