I originally posted this seven years ago. I say it’s not only accurate, but good advice.
Of course, it is generally ignored or the subject of all manner of excuses.
Something to think about.
We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions. Those who are financially prudent will most likely enjoy success, even if events don’t always go their way.
QUINNSCOMMENTARY 
Gotta disagree with “It’s entirely possible to become rich, even if
your household income is well below average.” If you are trying to live on minimum wage, raise a family and have limited resources (financial education, supports from family or institutions, health issues) one would find it neqr impossible to become wealthy or rich.
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so so true
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And, there’s the key.
Too many people pitch the 401k or the IRA for retirement preparation alone. And, for those just starting out, who wants (can afford to) save for “retirement” – a distant, unlikely, improbable event.
However, done right, participation in the 401k and IRA, along with the Health Savings Account (HSA), are the foundation not only for retirement preparation, but, for younger Americans, more importantly, for wealth accumulation and financial resilience – the 401k can provide liquidity without leakage along the way to and throughout the rest of life, the Traditional IRA can often be rolled over to a 401k (now or in the future), the HSA enables accumulation of assets to cover any potential medical out of pocket expense.
Pitch those features as creating the Bank of Quinn, or the Bank of James2 I used them to create the Bank of BenefitJack, and taught my children, at a very early age, about Ben Franklin Child IRA accounts (today, available via a transfer of funds from an IRC 529 account).
Few of us are successful entrepreneurs, few of us can make it self-employed. But, thankfully, there are some and they offer employment (with wages and benefits) to the rest of us.
And, some of the rest of us have the discipline to pave the way for our children, long after we are dead and gone.
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401k is many things, but liquid is not one of them – with the exception of a loan, if permitted, but it has to be paid back upon leaving a position or it will be a withdrawal.
Otherwise, you can roll a 401k to an IRA, but I don’t believe you can roll an traditional IRA to a 401k. You can transfer a 401k from one plan to another, if permitted by the particular plan rules.
I concur on the HSA. I’ve had one for 10+ years.
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“401k is many things, but liquid is not one of them – with the exception of a loan, if permitted, but it has to be paid back upon leaving a position or it will be a withdrawal.” No, not necessarily. Long past time for all 401k plans to enter the 21st Century. 30 years ago (1995), we amended my 401k plan to remove hardship withdrawals and to change the plan loan functionality to match the 21st Century – electronic banking. Most American workers not pay at least one bill each month by electronic bank transaction. So, if you separate, and your plan has been updated to the 21st Century (payroll deduction is so 20th Century), not only can you continue to repay an outstanding plan loan with transfers from your checking account, you could also initiate a new plan loan.
Otherwise, you can roll a 401k to an IRA, but I don’t believe you can roll an traditional IRA to a 401k. Yes you can if the plan allows rollovers. Rule change by EGTRRA 2001 legislation. However, you cannot transfer a Roth IRA to a 401k plan.
You can transfer a 401k from one plan to another, if permitted by the particular plan rules. Yes. However, if your account balance > $7,000, you can keep your assets in the plan until distributions are required… or until you have access to a 401k plan that accepts transfers.
Happy to help you try to convince your 401k plan sponsor that it is long past time to update the plan loan processing for the 21st Century – electronic banking, line of credit structure, behavioral economics prompts designed to facilitate loan repayment (leakage avoidance).
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Jack,
You are correct in that some plans allow the features you point out. It is possible that mine does as well, but that I’m working from out of date information.
I appreciate the offer, but I’m not concerned about my current plan (Fortune 100 company with Fidelity) not being on the cutting edge. My retirement horizon isn’t that far out.
I’ve always rolled my 401k into my IRA. There would have been some advantages to rolling into the new employer’s plan. A higher balance for potential loan purposes may have saved me from taking an couple of IRA withdrawals (with the income taxes and 10 % penalty).
I’ve contributed to a 401k for almost 35 years and never left any company match on the table. My IRA and 401k should ensure a fairly comfortable retirement (fingers crossed). My current employer has a pension (5 % of salary, cash balance plan), but I expect I will take a lump sum rather than an annuity when I retire.
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Since I am now old enough to see offspring grow into middle age, I see something similar to this with guys my son used to pal around with in middle school and high school. I am amazed at the wealth some of these guys have accumulated. Not necessarily through saving and investing but through entrepreneurial pursuits. I can think of 5 or 6 off the top of my head who are multi millionaires through businesses they have started or bought into and grown. None of them are older than their mid forties.
I met all these kids at one time or another from the time they were in youth sports in elementary or middle school and I couldn’t have predicted who would be successful or not but some have really shown they had the foresight and ability to do it. I include my son in the same class although he has moved up through the traditional saving and investing route while being employed and he and his wife are each in the six figure salary and income bracket along with side hustles like rental real estate. So yes I would say there is opportunity out there and I hope it stays that way.
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