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5 Ways You Can Screw Up Your 401k

Don't mess up a good thing. Stay in the clear with these tips.

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There are all sorts of creative tax loopholes out there for savvy investors to exploit, and over the years I’ve looked at (and even tried) plenty of them. But the truth is, you don’t have an army of fancy Ivy League tax lawyers to massively lower your federal income tax bill. The single best tax shelter out there happens to be one that is available to the vast majority of working Americans: the humble 401k plan.

5 Ways You Can Screw Up Your 401k
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(If you work in the public sector or a nonprofit organization, a 403b plan is for all intents and purposes the same thing.)

The 401k plan is the only investment vehicle I’ve ever seen that offers instant, tax-free “returns” of 100%, via employer matching. And depending on what federal tax bracket you find yourself in, you can get instant “returns” of 10% to 39.6% due to the tax deferral.

That’s real money, to say the least.

And all of this assumes your 401k contributions and matches sit in cash. We haven’t even touched on actual investment returns yet, fop good reason. A well-constructed mutual portfolio might return 8%-10% per year if you’re lucky, which isn’t bad, of course. But it pales in comparison to the matching and tax benefits.

The humble 401k plan is a veritable money-printing machine. Yet it can be remarkably easy to make a mess of things and kill the goose laying the golden eggs. Today, we’re going to look at five potential ways to really screw up a good thing.

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Article printed from InvestorPlace Media, http://investorplace.com/2017/05/5-ways-you-can-screw-up-your-401k/.

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