Tags: jim cramer | cnbc | 401k | retire

CNBC's Jim Cramer: Avoid This Fatal Mistake in Your 401(K)

CNBC's Jim Cramer: Avoid This Fatal Mistake in Your 401(K)

(Dollar Photo Club)

By    |   Friday, 30 December 2016 07:13 AM

CNBC’s Jim Cramer is offering savvy investors one simple tip to avoid sabotaging your 401(k).

To be sure, you should contribute to a 401(k) if your employer offers it because most companies will match contributions to a certain point, which is like getting free money.

“However, there is a caveat to contributing to a 401(k), and that is what the money is used to invest in,” CNBC.com explained.

Investors should not use much of their 401(k) funds to buy stock in the companies that employ them, Cramer said on “Mad Money.”

Cramer said investing retirement money into the same company that pays a salary is not a good idea.

"You probably feel like you understand the company that you work for, and the excuse is that you're investing in what you know. I'm telling you, that excuse doesn't cut it," Cramer added.

When dealing with investing, regardless if it is a 401(k) or personal mad money, diversification comes before everything else. Never put more than one-fifth of funds toward the company that you work for, Cramer advised.

To be sure, there are many financial potholes for those trying to save for retirement.

Many company 401(k) retirement savings plans could use a swift kick into the 21st century, according to a recent report from the U.S. Government Accountability Office.

A number of longtime 401(k) plan designs fail to reflect a new, more mobile workforce and hurt employees’ ability to save, Bloomberg cited the report as saying.

Among the arguably outmoded practices: A requirement at some plans that workers be 21 before becoming eligible to join a 401(k), that employees finish one year of service before being eligible to join a plan and then wait another year to be eligible for company matching funds, and that employees wait up to six years before laying claim to all those contributions.
 

(Newsmax wire services contributed to this report).

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CNBC's Jim Cramer is offering savvy investors one simple tip to avoid sabotaging your 401(k).
jim cramer, cnbc, 401k, retire
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2016-13-30
Friday, 30 December 2016 07:13 AM
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