Most people know to take advantage of their employer's 401k match, since it's free money.
You need to know more.
Here are 5 simple ways to hack your 401k:
• Find out if your employer allows in-service distributions
You may not need to switch jobs to rollover your 401k. If you're unhappy with your company's investment options, consider an in-service distribution into a rollover IRA.
Maintain control over your investing options!
• Use your 401k to enable a backdoor Roth IRA contribution
There are limits to how much you can contribute to a Roth IRA.
But, if you have a 401k that allows roll-ins, you can roll your IRA into your 401k and then execute a backdoor Roth IRA transaction.
No more limits!
• Solopreneurs can set up their own 401k's
Solopreneurs and gig economy participants can get the same $61,000 contribution threshold from a Solo 401k and a SEP IRA (though a SEP limits your maximum contribution to 25% of your income).
• See if your employer allows a Roth 401k option
While Roth IRA contributions are limited based on income, there are no income restrictions on Roth 401k contributions.
You can stash away more money inside a Roth 401k vs. a Roth IRA ($20,500 vs. $6,000 for those under age 50).
• Higher fees ≠ higher returns
The higher the fees, the lower the return you receive in your 401k.
Over several decades, picking funds with lower expense ratios translates to more money in your 401k. That money then compounds to produce higher balances in retirement.
TL;DR:
• Higher fees ≠ higher returns
• See if your employer allows Roth 401k's
• Solopreneurs can set up their own 401k's
• Use a 401k to enable a backdoor Roth IRA contribution
• Find out if your employer allows in-service distributions
Now it's time to take action!
Too many people are complacent with their 401ks and blindly go along with whatever their employers have picked out.
Be proactive and stop putting your paycheck in someone else's pocket.
Here's to your retirement!
I'm posting a new thread about writing, business, or investing every day for 30 days as part of #ship30for30.
@dollarsanddata@BrianFeroldi writes for @themotleyfool and focuses on long-term investing and fundamentals. His excellent new book "Why Does the Stock Market Go Up?" is tailored to beginners.