Does It Still Make Sense to Save in a 401K? Ep # 152

Aug 10, 2020

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Welcome back to Retirement Starts Today! I have long been a proponent of saving in 401K’s, but will this article in Bloomberg make me change my mind? That’s the first article in the Retirement Headlines segment. We’ll also check out an article about the coin shortage and another about how hobbies can improve your financial fitness. Couple that with some listener questions and you’ll gain tons of financial insight. Listen in to continue expanding your financial knowledge.

Outline of This Episode

[1:22] Do 401K’s still made sense?
[6:58] Why are coins so difficult to find during the pandemic?
[8:55] How can your hobbies make you financially fit?
[11:10] A Roth conversion question
[14:00] How to describe real estate income in retirement

Do 401K’s still make sense?

The 401K retirement savings plan was authorized in 1978 and began to take hold in the ’80s. Many different employers take advantage of these types of retirement savings plans. Recently there was a Bloomberg article written that questioned whether the 401K still made sense to save in.

The author argued that today’s low tax rates and the high fees of many 401K’s make it an undesirable vessel for saving. He does make some interesting suggestions on ways to improve the 401K program.

Listen in to hear whether this article changed my opinion about 401Ks and what I think the best way to save for retirement is.

Why are coins so difficult to find during the pandemic?

Have you noticed the coin shortage? If you have been just about anywhere lately you have probably seen the signs on various stores and establishments about the shortage of coins.

I have been wondering why there has been a coin shortage during the pandemic until recently. My hometown newspaper, the Bismarck Tribune, published an article that helped me understand why. Listen in if you are curious why there has been a shortage of coins in circulation lately.

How can your hobbies make you financially fit?

I often tout the benefits of retiring to something rather than away from something. It’s much healthier to keep active with hobbies in retirement, but your hobbies are more than a way to simply keep you busy.

Hobbies can actually help you lower your stress levels. Hobbies can actually get you out of a negative mindset and help you to break away from financial stress. Have you noticed that your hobbies help you reduce stress?

Will I have to pay a penalty for a Roth conversion?

A listener is wondering about converting funds from a 401K to a Roth before the age of 59.5 He knows that he will have to pay taxes on the conversion but he was wondering whether he had to pay the 10% withdrawal penalty as well.

The good news is that you don’t have to pay a penalty for converting funds into a Roth. However, it is important to have money set aside for the tax liability.

Do you have a question for me? I love answering listener questions on the show, so please send in your questions!