ReadOns.com | Discover New Blogs Daily

5 common mistakes people make with their 401(k) plan

“A penny saved is a penny earned” is an age-old but evergreen proverb. And schemes like the 401(k) help one save strategically for their retirement. Provided by one’s employer, this scheme reduces one’s taxable income, but with the traditional 401(k), withdrawals from the fund after retirement are taxable. In contrast, with the Roth 401(k), there are tax reductions from the income but not from withdrawals. However, one should avoid certain mistakes as a 401(k ) user.

Common mistakes people make
Here are a few common mistakes people make with their 401(k) plan:

1. Not knowing about the different types of 401(k) accounts
As mentioned before, the traditional and Roth 401(k) are the accounts one has under this scheme. In the traditional scheme, one isn’t taxed on their income, but the amount withdrawn after retirement is taxable. In contrast, in the case of Roth, one incurs taxes from their income but not during withdrawals. Each strategy has its pros and cons, and account holders should be aware of these before shortlisting either.

2. Withdrawing early from the 401(k)
With 401(k) accounts, it’s always a good idea to be patient with the returns. If one withdraws before the age of 59.5, they face a 10% penalty, over and above the income tax on the distribution. Even if a plan doesn’t involve such a penalty (which is uncommon), one might miss out on any additional returns that can be earned from one’s investments. So, waiting before withdrawing from the 401(k) is always better.

3. Not understanding the fee breakdown
Understanding what fees one pays when holding 401(k) accounts is important. The fees typically include the expense ratio and administrative fees. Usually, 401(k) plans entail a 1% fee, which means that one would pay $10 for every $1,000. Understanding such fees ensures that one knows where one’s money is going so that there is no financial crunch later.

4. Not waiting in the company till one gets vested
In any company, when an employer matches the employee’s match in a 401(k) plan, the vesting period is when one needs to stay at the organization before one can keep the entire match. In some cases, this period might last for even three years, but the amount accumulated at the end is quite high, which makes it a rewarding investment option. Conversely, if one quits the company before this period ends, one loses the opportunity to earn the employer’s contribution. In these cases, employees only keep their contributions.

5. Maintaining the same contribution amount
It is important to increase one’s contribution gradually when it comes to 401(k) because investing the same amount even as time passes limits one’s investment returns considerably. So, it’s a good idea to increase the amount strategically every time one earns a raise at work or receives a reward amount.

Popular Reads

11 useful tips for anxiety management

Nearly 84% of participants in a particular mental health survey were said to have some form of anxiety. The severity of symptoms did vary from person to person, but the fact remains that we live in a world where almost everything is a potential trigger for anxiety. And living in denial about having a psychological trigger only worsens the problem. Luckily, it is possible to manage anxiety by following the suggestions recommended by experts. Identify the triggers Anxiety is mainly triggered due to an event or episode where one finds themselves in a difficult position. It could be something that puts a person out of their comfort zone. Doctors advise people to identify these triggers and avoid them. Any comment, action, or situation that did not work out in favor triggers anxiety. So, make a list of such events and instances and ignore them the next time something happens related to that event. At the same time, try to remain positive as it can help strengthen the mind to manage anxiety better. Keep busy Distraction is one of the simplest ways to prevent a panic or anxiety attack. You can perform simple chores or indulge in a favorite task to stay physically and mentally occupied for a few hours. When the mind is occupied, there is hardly any scope for negative thoughts to trigger unnecessary overthinking. Some creative activities to boost cognitive performance include taking a walk, painting, drawing, listening to music, meditating, praying, and reading. You can opt for any of these to stay busy. Try mindfulness techniques Deep breathing and mindfulness techniques have helped thousands overcome their fear or anxiety time and again. Focused deep breathing is a method where one inhales for four counts and exhales for the same duration; this is practiced for minutes. It helps lower heart rate, which, in turn, calms the mind and body.

Atrial fibrillation – Causes, symptoms, and management tips

The human heart is susceptible to several health complications, including atrial fibrillation (AFib). The condition is the most common type of treated heart arrhythmia, which is a term describing when the heart beats unusually slowly, fast, or irregularly. AFib is estimated to affect between 2.7 million to 6.1 million individuals in the country. An individual with the complication experiences irregular beating in the heart’s upper chambers, affecting blood flow, leading to health complications. Causes Irregularities in the structure of the heart are the most common cause of atrial fibrillation. Sometimes people may develop the condition without any known heart damage or problems. Risk factors like age may also contribute to the development of atrial fibrillation. Other potential causes of the phenomenon include a heart attack, sick sinus syndrome – issues with the heart’s natural pacemaker, coronary artery disease, congenital heart defect – A heart defect that an individual might be born with, high blood pressure, lung diseases, heart valve problems, use of stimulants, including certain prescriptions and caffeine, physical stress caused due to pneumonia, other illnesses, and also surgery, sleep apnea, overactive thyroid (hyperthyroidism), metabolic imbalances, viral infections, and complications due to earlier heart surgery. Symptoms A person who develops atrial fibrillation may not notice symptoms, and the condition is detected only after a physical examination. But some people experience signs and symptoms before a diagnosis. A few common symptoms of AFib include being unable to exercise to one’s full potential, feelings of weakness, throbbing pain in the chest, lightheadedness, shortness of breath, dizziness, palpitations and sensations of a fast, fluttering, or pounding heartbeat, and feeling extremely fatigued. Therefore, the symptoms of atrial fibrillation differ from one person to the other. Occasional symptoms (paroxysmal atrial fibrillation) Here, a person may experience something that lasts from a few minutes to a couple of hours.

Macular degeneration – Types, causes, and remedies

Macular degeneration is a condition that affects a person’s vision and develops as people age. This progressive eye disorder involves the deterioration of the macula, which is a part of the eye’s retina. It is a leading cause of vision loss in older adults and may develop in one or both eyes. This condition is of two main types – dry and wet. Read further to learn about the disorder, its causes, and its types. Dry macular degeneration People are more likely to have dry macular degeneration than wet form. It is also less severe and develops when tiny yellow protein deposits under the macula. These deposits dry and thin the macula, causing gradual central vision loss while the peripheral vision remains intact. In the advanced stages, the dry form can progress to the wet form. People with dry macular degeneration need to test their eyes daily at home using an Amsler grid. One must consult a health expert immediately if any vision changes are observed. Wet macular degeneration In this condition, the blood vessels grow beneath the retina and macula and cause blood and fluid to leak into the retina. This build-up of fluid results in scarring, leading to permanent loss of central vision. The wet form can cause a sudden change in eyesight resulting in a severe loss of centralized vision when left untreated. People with wet macular degeneration may require repeated treatments. Symptoms Macular degeneration may not cause any symptoms during the early stages. However, as the condition progresses, it can cause distortion and blurry vision. It can result in difficulty reading, driving, and identifying colors. Macular degeneration occurs mainly in people aged over 50. Blurred vision Dark, blurry areas appear in the center of the vision, leading to increased blurriness in reading printed words. Visual distortion The person may experience visual distortions, such as straight lines that look wavy or crooked, and objects may appear distorted.