how can I make the most of my 401K?

Question

I signed up for a 401K with my company over a year ago. I put $100 a month in it, and I have liked seeing that grow, but I am ashamed to admit that's the extent of my knowledge regarding my 401K. What should I be doing?
Also, is it really bad to take money out of my 401K to use as a down payment for a car?

Answer 1

Don't kid yourself. If you borrow money from your 401k to buy a car you aren't paying a down payment. You just borrowed from a different source at a higher interest rate and likely at a shorter term (max is 5 years and interest rate is prime plus 2).

Can't take a distribution from your 401k unless it's a hardship and you wouldn't want to anyways. For every 10k you take you cost your retirement 125k or so...I don't think your car is worth that much...especially since it's a depreciating asset.

You're doing good in putting money into your 401k. Think about upping it now while you're young....The more that you put in now the earlier you'll be able to retire. And only take it out if you have extreme emergency....not to buy anything (even a home). The only reason I would take from a 401k is to bury a family member or for medical expenses incurred for my spouse or kids.

Answer 2

Anything you borrow against you do still have to payback.
if you just take it out you will be taxxed (a whole bunch)

If you use it for a down payment you may end up paying interest twice ... Don't touch the money just get a loan
Dealerships are pretty much knocking on doors trying to sell
new or used cars.. Take a chance and go talk to a Dealer.

and your company should have a financial ad-visor/consultant working for you and your 401k
ask your boss or dig out and read the little book they gave you. And check what percentage you should be depositing
for your age and if there is a company match.

Answer 3

you're doing the right thing but putting in $100 a month that's great. Company manages it for you so you don't have to do much. DO NOT TAKE OUT FOR YOUR CAR! You will be penalized BIG time. you will have to pay back all the taxes you saved and then pay a large penalty fee. Save it now because later on in your life you won't be able to. Save as much as you possible could. Remember what is more important a car or retiring when you want to. Even borrowing against it horrible, you have to pay it back with after tax money (double taxation) and you lose out on the interest.

Answer 4

The first thing I can see is that you did not listen when your employer explained his 401K program to you. What you should be doing is educating yourself in the program.

You will find that you can not take money out of your 401K to make a downpayment for a car. You will also learn that you will pay a substantial tax penalty if you take a disbursement before you reach the age of 65.5 years of age.

Answer 5

401k is a retirement account, to be used when you are no longer working. So, let it grow! If you are strapped for cash, you may want to reduce the amount you put in each month, but don't if you can avoid it. Yes, it is bad to take money out of your 401k. You will get taxed, and a penalty will be assesed. Like I said, this is an account for your retirement. Keep putting in money, and choose your accounts wisely. You should have a pretty good nest egg when you do retire.

Good luck.

Stevo.

Answer 6

you don't have to do anything...just let it grow........I know if you're 100% vested, you can borrow 1/2 the amount.....then you pay yourself back with a payment plan...you choose...the $ comes out of your paycheck.........if you're not 100% vested, I wouldn't take any $ out.......you'll have to pay tax and penalties, and it's not worth it.......in the future, if your a first time home buyer, you can take $ out for a down payment without the tax and penalties.......I wish I would have known that !!

100 a month is an excellent amount to be investing .. good for you !!!!!!!!!!

Answer 7

dont take nothing out or borrow you get penilzed for it and you lose money

Answer 8

Vegas baby!!! :)