Keeping in mind that the withdrawals are generally fully taxable at your personal income tax rate, are there some particularly smart ways in which you can use the money to help your family or, possibly, a charitable organization?
To begin with, you need to understand that long-term investing involves accepting inevitable short-term price swings. You may not like seeing those sharp price drops, but it will help your outlook greatly if you can keep them in perspective.
It's probably safe to say that many of us are concerned about having enough money to cover our retirement years. In fact, some surveys have shown that we are more frightened of running out of money than we are of dying. What can you do to help alleviate these fears?
Of course, you wouldn't really forget about your 401(k). (It does happen, however – over the period from 2004 through 2013, more than 25 million people left at least one 401(k) or similar plan behind when they left their job, according to the U.S. Government Accountability Office.) But you will have to do something with your account.
But if you would like to send your kids (or grandkids) to college someday, you need to plan far ahead to meet the financial demands. And, as part of your planning, you also need to be on the lookout for all opportunities to help pay those sizable college bills.
Of course, you might think that, one day, you will simply sell your business and live off the proceeds. But selling a business isn't always simple, and there's no guarantee you will receive enough to pay for a comfortable retirement – which is why you should strongly consider creating a retirement plan now.
One way to start is by considering the various categories of mutual funds – and there are quite a few of them: Small Cap Growth, Large Cap Growth, Large Cap Value, Diversified Emerging Markets, Foreign Large Cap Blend and more – the list is extensive, and for many people, confusing.
For starters, you'll want to determine what financial independence means to you. Is it the liberty to meet all your cash flow needs? The freedom to retire comfortably, at the age you choose? The ability to set up the kind of legacy you'd like to leave?
During your life, you may take many journeys – one of which is the long road you will travel toward your financial goals. But even on this path you can benefit from a "GPS" in the form of your goal-oriented, personalized strategy.
About 36 percent of U.S. workers are now gig workers, according to a study from the Gallup organization, which defines the gig economy as one made up of a variety of arrangements – independent contractors, online platform workers, contract workers, on-call workers, temporary workers and freelancers.
In fact, the construction process is valuable for anyone to learn – and the same skills that go in to creating and mending physical objects also can be applied to financial projects – such as working toward a comfortable retirement.
To begin with, you need to determine if a loan is even available. You can only borrow from your 401(k) if you're still working for the company that offers the plan, but even so, you’ll have to check with your human resources area to determine if loans are allowed. If they are, you’ll want to weigh the pros and cons before taking action.