- Consider a Roth 401(k) option: In addition to traditional 401(k) plans, some employers also offer Roth 401(k) plans. Unlike traditional 401(k)s, contributions to a Roth 401(k) are made with after-tax dollars, and withdrawals in retirement are tax-free. This can be a great option for those who expect to be in a higher tax bracket in retirement.
- Take advantage of in-service withdrawals: Some 401(k) plans allow employees to take in-service withdrawals, which allow you to access your funds before retirement age without penalty. This can be useful for things like paying off student loans, buying a first home, or paying for a child’s education.
- Use a 401(k) loan for a down payment on a home: Some 401(k) plans allow you to borrow from your account for certain expenses, such as buying a home. This can be a great way to get access to funds for a down payment without having to pay taxes or penalties.
- Take advantage of hardship withdrawals: If you’re facing a financial hardship, you may be able to take a hardship withdrawal from your 401(k) without penalty. This can be a useful option for things like paying for medical expenses or preventing eviction from your home.
- Consider a self-directed 401(k): For those who have a high degree of investment knowledge, a self-directed 401(k) can be a great option. This allows you to have more control over your investment options and can potentially lead to higher returns.
- Use a Roth conversion ladder: If you have a traditional 401(k) and expect to be in a higher tax bracket in retirement, you can use a Roth conversion ladder strategy to gradually convert your traditional 401(k) to a Roth 401(k) over time. This can help to reduce your tax burden in retirement.
- Take advantage of catch-up contributions for employees over age 50: If you’re over age 50, you may be eligible to make catch-up contributions to your 401(k) plan. This allows you to contribute more than the standard contribution limit, which can help you boost your savings for retirement.
These advanced 401(k) tips can help you make the most of your retirement savings and plan for your future. Keep in mind that not all 401(k) plans offer these options, so be sure to check with your employer to see what’s available to you.