November often acts as a transition into many things: the holiday season, end of the year preparations, and winter’s arrival. This November will signal another transition for employees with a 401(k) plan: the transition from ignorance to knowledge. According to a recent AARP survey, 70% of all people aren’t aware that they currently pay fees for their company’s 401(k) plan. This November will change all that when, for the first time, investors will be able to see the amount they paid in fees for the previous quarter.
Many financial experts expect to see some backlash from most investors and even believe the fees will cause many people to withdraw from their 401(k) programs altogether and pursue other investment options.
Prior to the new Department of Labor regulations requiring employers to provide fee information, the only deductions most employees saw were attributed to market loses. The statements this November will contain a much different landscape. Unfortunately, as people transition from ignorance to knowledge, it can take even more time before that knowledge turns to understanding and comprehension. In order to help you with that comprehension, I have set out to answer the most common questions surrounding this fee disclosure and what changes this November will bring for you.
When we put money into our retirement accounts we do so for a specific purpose: retirement. All the money you have funneled into your 401(k) is supposed to buy you that dream retirement lifestyle you spent your entire life working toward. But unfortunately, more and more people are finding that life can throw them curveballs that, in turn, can throw off their financial plan. Often times, when people find themselves in a financial bind, they find it hard to ignore that shiny apple hanging in front of them in the form of their 401(k).
Far too often people are reaching out to pick that apple and borrow money from their 401(k). The reasons for their need varies from home purchases, to their kid’s college tuition, to a myriad of other financial emergencies. Most people who make this move know that it’s a “forbidden” action, but what many people don’t understand is why. What is the danger in picking that apple and borrowing money from your 401(k)? If more people knew the consequences, it would be hard to believe that many of them would make the same decision.
So what’s the big deal about borrowing from your 401(k)? What are those consequences that I as your financial advisor seem so concerned about? Here are just a few.