401(k) Withdrawal

Like the IRAs, you can start withdrawing money from your 401(k) at retirement age of 59 ½ and you must start taking it out by age 70. There are hardship clauses that let you make early withdrawals without paying penalties; disability is one. If you become completely disabled, you can withdraw early without penalty, or if you are over 55 and have been laid off. Upon the death of the 401(k) holder, the beneficiaries of one's 401(k) will be expected to pay tax on the fund.

Many 401(k) programs will allow you to take out loans for things like education or home purchase on the

account and pay them back with interest over a certain period of time. The interest goes back into your account so you don't lose a thing. As long as you keep your job, you normally have 5 years to repay loans, but if you leave the job you have to make the repayment in 30 days, or there are mandatory penalties. Most employers have exceptions for things like medical expenses, emergency mortgage payments or tuition for college.

If you have a minimum of $1,000 invested and you leave your job, you can leave your money in the 401(k), you call it over to a new 401(k) of a new employer, or you can convert it to an IRA. You could cash out, but you might be charged nasty fees, penalties and taxes, so find out what it would cost before taking that option; it may not be worth it.

Don't just trust your company's HR department to decide for you when it comes to choosing the investments for your 401(k) (or 403(b), for that matter). Sometimes, companies make bad deals with brokerages that offer extra "services" to employees but charge big fees too. Make sure you know everything your plan has to offer and then act like a smart investor. Limit fees and additional charges, take what's free and ignore "offers" that are going to cost you money. Use a financial calculator for planning how much you want to invest at any time and what you can expect to have in a certain number of years. Predicting your goals will help you keep the mind set for reaching them.

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How to stick to a household budget
and have extra
money for investing

1. Customize your budget with your current needs, wants and future goals in mind.

2. Try to think if your budgeting plan as a "spending" plan rather than penny pitching.

3. Sit down and rationally discuss budget goals and spending limits with your spouse. You are bound to disagree somethere, but it important to take the time to find common ground.

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