401K savings plans are great in general, and do have some advantages, but they also pose a risk if you make the wrong decisions. The greatest obstacle in accumulating significant amounts of money, for any purpose not just funding your retirement, is TAX! That’s right! Tax is your biggest enemy, either you are self-employed or a salaried employee, and this is where the 401K retirement plan comes in handy, it allows you significant wealth growth in a tax free environment!
But in order to retire as early as possible and keep contributions to your 401K safe, and not risk ruining your retirement in case the stock market does horribly bad, on the very year you plan to retire… just observe the following 401K early retirement tips:
- Plan carefully, consider a self-directed 401K, this allows you to choose where your hard-earned money will be invested. Be in control and don’t take anyone else’s advice unless they are independent advisors and not related to the 401K industry.
- Choose to invest a portion of your 401K account in real estate, real estate is always a winner in the long term, and particularly today that prices are rock bottom.
- Avoid mutual funds in favour of real estate, many stocks and mutual funds in the 401K industry are of really bad quality and that’s the reason for the horror stories we hear today about all these failed 401K retirement plans. If you do consider stocks and mutual funds it would be wise to pay a professional advisor to have them checked for you. Believe it or not, professional advise may seem expensive but a $500 consultation fee may end up saving you (or making you) tens of thousands of dollars which is what 401K early retirement is about.
- Start saving early, time is money and compound interest growth depends on the Early factor.
- Don’t forget about inflation! In order to properly fund your retirement you have to bear in mind that you have to price in at least a 3% annual inflation rate. This means that if the cost of living is around $40,000 today, in 20 years time it will be over $72,000. Sure your 401K will have plenty of money by then, but what will its buying power be?
- Consider rolling over to an IRA to get around the 401K’s early withdrawal penalty fees. Alternately check out if you can take advantage of the 401K’s loan rules, and take money out in form of a loan.
Everyone talks either against or in favour of the 401K savings plan, but let’s be realistic here, it has both pros and cons, the biggest advantage of a 401K is that it offers tax deferred growth, but in order to avoid the classic risks associated with the whole 401K industry, you really have to go for a Self-Directed 401K savings plan and follow the tips mentioned above.
Funding and managing a successful early 401K retirement plan is a little bit difficult but it’s possible and certainly worth it, why make the mistakes of others and contribute money into unbelievably bad investments such as doomed mutual funds? No one ever became rich by following the fashion and just doing the wrong investment decisions that the crowd always makes, you should stand up and take control of your life, starting now by taking control of your retirement savings plan and turn it into a real 401K early retirement plan.