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Avoid Retirement 401(k) and Tax Mistakes

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With tax season in full swing we as tax payers, and especially those who are thinking about retirement, should be aware of some mistakes we might make when filing tax advantage accounts such as 401(K) s and others. Here are some mistakes people tend to make and tips to avoid these common mistakes.

Not taking your employer's match on your 401(k) is a huge mistake. They will match the amount you contribute each month, and by not taking the match you are basically walking away from free money! If the option is present, take it! Make sure that you are putting the amount in your retirement account that your employer will match.

Sometimes retirement accounts offer high yields which seem appealing to anyone. However, be aware of the fees that might come along with these accounts. The best option is to compare the account fees on the high yield accounts to the lows yield ones and see which one has the best value in the long run.

A lot of people in their 20s and 30s, between jobs, decide to cash out their 401(k) s. You should not. Every time you cash out your 401(k) you still pay taxes on them, and on top of that a 10 percent penalty over and over on your savings. You can roll over 401(k) from job to job, which will build savings.

Saving for retirement means more tax advantages. One way to collect on these advantages is to continue to save and keep reducing your taxable income so that your retirement savings can grow and therefore taxes can be deferred.

Borrowing from your 401(k) is not the worst thing in the world, however, if it can be avoided don't take money from it. By taking money from this account, you will be set back a few years on savings.

Retirement might be a confusing time in peoples' lives, however, by being aware of options and advantages, you can save a lot toward retirement and start your retired life on a stable financial foot.

We at Timothy J. Sierra Attorney at Law would like to state that our blog posts and links, on our web page or any other social media outlet, to any other web pages are not intended for legal advice. We are not responsible for third party website information. If one is in need of legal advice please contact an attorney directly.

Work cited:

Top tips to avoid major retirement pitfalls (Tampa Bay Times)

http://www.tampabay.com/news/business/personalfinance/top-tips-to-avoid-major-retirement-pitfalls/2219496

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