The way they make their money:  bank account fees.

Fees can come in all styles.  To a certain extent it’s a politics game that banks play, masking their fees with fine print, misleading sales pitches, and dishonest sales people.

Although there’s virtually any number of fees that your bank can assess you for any given reason, there are a few straightforward, common ones.  For example, if you take out a checking account with a major bank, they’re likely going to charge you a monthly fee.  Most of the time these fees are small, falling in the $9-20 range, but in today’s industry you don’t even need to settle for something like that.

Regional and local banks or credit unions tend to forego such fees.  They want local business, so they even sometimes allow you to sign up with no fees.

That’s where more secretive fees come into play.

It’s sort of a no-brainer that banks charge over-withdrawal fees.  If you accidentally spend up more than what’s in your account, you’re looking at a fine from anywhere from $20-$50 depending on the bank.  Similarly, there might even be a bounced-check fee that’s a higher penalty.

If you use your card at an ATM for another bank, you’re going to get a double-fee.  And that’s something most people overlook.  The ATM’s going to charge you a fee flat-out for using a machine that’s not on your network.  But then a few days later when the charge goes through on your account, your bank is also going to charge you a fee for using a foreign ATM.  Usually, these are only between $2-4 but it also means that you end up spending $5-10 just to take money out of your own account.

None of these fees are secretive and most people who have a checking account are aware of this.

However, if you also have a savings account, you might want to look at the fine print.  Most savings accounts are set up in such a way that they need to have a minimum balance.  If you go below this balance, you get a fee that’s usually some kind of flat-rate.  Similarly, if you have a savings account, you’re only allowed to withdraw from it a certain amount of times per month.  If you go above this amount, you’re going to face some kind of fee and you might even have your savings account aborted all together and converted into your checking account.

Because there’s controversy surrounding overdrafts on some checking accounts (specifically those which are linked to a savings account through the same bank) there’s new legislation that goes into effect this year preventing banks from charging certain fees or block you from linking your checking and savings account.

Similarly, this new legislation bars some forms of maintenance fees, upkeep fees, and annual fees.  Whereas an annual fee is common with a credit card, and there are some monthly fees imposed on checking accounts, additional annual fees are mostly done away with.

Some banks might charge to use their online service.  In other words, you’ll have to pay to access your account online.  However, this has become increasingly less common over the years and isn’t something you’re bound to find, necessarily.

The bottom line is that if you have an account with any major bank you’re likely going to experience at least a monthly fee on a checking account and you’re lined up to deal with fees serving as penalties for not following their guidelines.  It’s worth it to make sure you fully understand this from the beginning before you get involved with a certain bank.

The national averages for the annual interest rates on savings accounts are not very high. Most are below 0.5%. So the HSBC Advance online savings account is quite the bargain. It has the following features:

1.1% annual percentage rate

At about 5 times the national average this is a great increase even if the interest rate itself is still low compared to historical averages.

No regular monthly fees

Monthly fees quickly eat up your interest payments with the current low interest rates, so it is good to find an account without fees.

Low minimum deposit

The HSBC Advance online savings account only requires $1.00 to open.  So what are you waiting for?

No transaction fees

There are still fees for orders such as stop payment orders. Read the fine print before you open an account so you are aware of what charges may occur.

FDIC insured

Currently FDIC insured accounts are guaranteed up to $250,000.

Fast application process

You can apply online within minutes.

Established bank

HSBC bank has been around for over a century. In the current climate of failing banks, it is nice to know your bank has a good track record.

Online banks have been around for about a decade now. Unless you have your heart set on walking into your local bank branch to deposit money, they are very convenient. Taking away that local temptation to withdraw money, will also give you an edge in increasing your savings. The best way to increase a savings account balance is to deposit money regularly and then consider it off limits.

Of course, there are still convenient ways to access your money. You can link your HSBC Advance online savings account to any number of checking accounts at any bank. You can also withdraw money at any  ATM machine. This will come in handy when you are ready to withdraw the money for the purpose you saved it for. Just remember, this is a savings account, not a checking account. If you want to take advantage of that increased interest rate, you need to keep your money in there for as long as possible.

In my experience, accounts such as the HSBC Advance online savings account offer great annual interest yields in better economic times too. Since the overhead costs are a bit lower than for the brick and mortar branch locations, the consumer gets a slight benefit. It is never a huge increase, but if you save steadily, it will make a difference. On $10,000 just a tenth of a percentage point adds $10 in interest to your account. For the HSBC Advance online savings account the difference is about eight tenths of a percentage point right now.

Overall, this account has some great features, so when you are ready to add a savings account, keep this one in mind as you compare your options. Personally, I have found online savings accounts to be an excellent tool for my savings portfolio. The only drawback I have found is that when you do not access the account frequently, there is a tendency to forget the passwords you set up. So make sure, you have simple answers to those security questions everyone establishes these days.

You may wish to have your money directly deposited into your savings account if you are using FNBO Direct. The FNBO Direct routing number is 104000016. With this number and your account number your employer can set your paycheck up for direct deposit. Since FNBO Direct is an online bank that is definitely the way to go rather than having to send your paycheck in the mail to have it deposited. Not having branch offices available is the main drawback of an online bank. Otherwise, online banking is very convenient. A few clicks of the mouse and you can check your account balance, pay bills, and transfer money to another person.

You can find a FNBO Direct review at http://www.moneybluebook.com/review-of-fnbo-direct-high-yield-savings-account/. It can be hard to find reviews on online banks. Many reviews online were written several years ago when the financial markets had not dropped so far down yet. Back then it was far easier to look at an interest paying account and consider it high yielding if it was paying 5%. These days even 1% is considered high yielding. You may not be able to purchase the same amount of  goodies with the money you earn today but you are still receiving what is considered a high interest rate when you look at the FNBO Direct rate.

As with any online business be on the lookout for any scam associated with a website. Do not assume a business is legitimate unless you get it in writing. Even then, be careful. Online savings accounts with no minimum balance are a great tool  for letting your children experience managing an account. The only hard part is getting the start up capital. Let them experience having to wait a few weeks to see their money deposited.

Patience is a hard trait to teach but at least you can teach them how to manage their expectations. How many 5 year olds do you know that have the patience to check on their investments in case something unexpected happened to their investments. Many adults still don’t have the required patience.

Banks try all sorts of promotions to entice you to become their customer. Currently the wave of incentives is in full-swing and you can easily get a promotional gift from any bank you choose. Gifts range from additional cash to be deposited a few weeks after the first use of the card, over toaster ovens to high performance water bottles. Keep in mind that children are not eligible for credit cards so withdrawing any money from a child’s account is fairly difficult. Make sure the child realized this before opening an account.

The FNBO Direct savings account seems to be a great training tool. Put aside an amount of money you may need to remain flexible such as your grocery budget or emergencies that need instant access to cash. Take the rest of your funds and distribute them among the various accounts you have set up for the purpose. This method will effortlessly streamline your funding issues. With interest rates as low as they currently are, savings accounts work better as budgeting tools than as savings tools.

I opened an account with them several years ago when they offered one of the highest interest rates available on savings account. The account was called the American Dream Savings account. Along with the decrease in interest rates since then, Emigrant Direct has also lowered their interest rates. It is still on the higher end of interest rates but when you are looking at less than 2% interest, it is not very impressive. Certainly a far cry from the greater than 5% interest rates they were paying when they started out.

The Emigrant Direct Credit Card is available along with any Emigrant Direct account. They offer an Emigrant Direct Mastercard. I have not tried these but according to their website, www.emigrantdirect.com, it is available with a low introductory APR on transfer balances. I am somewhat skeptical of this since I can’t find this rate listed anywhere and their so called high interest savings account currently pays 1%. Since when did 1% become a high interest rate? In order to earn the 1.4% cash back on your purchases, you have to maintain an average balance of $10,000 in your American Dream Savings account. Not a great deal in my opinion.

Over the years I have had my account, Emigrant Direct has made a number of improvements to their product. Online transfers to accounts at other bank institutions are simple once you have the account linked to your Emigrant Direct account. The delays in transferring money are compatible to other banks. In most cases my money transferred faster using Emigrant Direct than other online accounts.  Having had a savings account with them, I have been pleased to find that I have always received the documents for tax preparation on time.

Finding the Emigrant Direct routing number can be a bit tricky. It is 226070319. So setting up direct deposits isn’t that difficult with the routing number and your account number. You may have a slight problem with the bureaucracy involved in having an accounting firm set up direct deposits of your paychecks. Generally, when depositing into a savings account, they like to receive a signed letter from the bank listing the routing and account numbers. Not an easy thing to obtain with Emigrant Direct’s online banking.

They have added more levels of security to their login system over the years. I wouldn’t be surprised if they added more as the years go by. After all, the thieves aren’t resting. Emigrant Direct currently offers certificates of deposit paying 2.5% APR. This isn’t great either. They started out with very attractive interest rates but have not been able to maintain them. At this point, I just keep my account to hold a soon to be spent amount of money simply to keep it separate from other funds. The Emigrant Direct account is still good at that since there are no account fees.

To find more Emigrant Direct reviews check http://www.mybanktracker.com. Most reviews on Emigrant Direct are several years old which isn’t surprising since that is when they were actually attractive.

Emigrant Direct competes with other online banks such as ING. They are not considered to be among the top ten players in the Internet only bank group.

The banks may compete with each others for customers, but they’re more than willing to cooperate with one another when it serves their interests.  ChexSystems is a perfect example.

The banks want your money, but they don’t want you to open account if you’re likely to close the account with a negative balance or otherwise abuse your banking privileges.

ChexSystems is a service utilized by banks to determine the level of risk they may be facing if they allow someone to open an account.  When people do owe the banks money, have a history of NSF problems, have been involved in fraud or have otherwise engaged in behavior that raises red flags, member banks report the situation.  That makes your banking history available to other banks, who will look at the data when deciding whether or not to provide you with an account.

Being on the Wrong Side of ChexSystems

If you’re ChexSystems report contains the “wrong” kind of information, banks won’t allow you to open an account.  That information stays on your record for five years, so you can end up in “bank limbo” for a  long time if your report isn’t clean.  Trying to live a normal life without a bank is tough, so you don’t want to end up on the wrong side of ChexSystems.

It’s not just a matter of not being able to open a new account.  In some cases, a negative ChexSystems report from one bank can result in another freezing or closing your active account.  It’s also worth noting that some banks will allow you to open an account prior to running the report.  If they later find out that you have a bad report, they can shut down the account.

What Does ChexSystems Think about You?

You might be wondering exactly what’s on your personal report.  After all, it makes sense of have an idea of whether a bank may turn you down for an account.  You may also want the information to clean up messes you have left behind.

You’re entitled by law to a free copy of your report once every twelve months.  Additionally, if you’ve been turned down for an account, you can order a free copy of your report from ChexSystems within sixty days of the decision.  The request process is simple and surprisingly convenient.

Dealing with a Negative ChexSystems Report

If you’re having problems related to a negative ChexSystems report, there are a few things you can do.

First, if the information on the report isn’t correct, you can dispute it.  That may lead to a fixed report and a regained ability to secure a bank or credit union account.

Second, you can take action to resolve the negative items on your report.  If you owe money on an old account, for instance, you can go back to that bank and make good on the amount owed.  This will (or sould) result in the negative information’s removal from your report.  That’s why it’s a good idea to get a copy of your report if you’ve been denied an account–going back and cleaning up your past mistakes is usually the best way to fix things.

Third, you can try to search out a bank that doesn’t rely on ChexSystems when making its account decisions.  Based on the number of websites claiming to have lists of banks that don’t use the service, you’d think that finding one would be easy.  It isn’t.  Most banks and credit unions do use the service.  Those who don’t usually use alternative systems that may have the very same information.

Fourth, some banks offer “second chance” or “fresh start” accounts to those who have poor reports.  They’ll allow you to open accounts with stricter-than-usual requirements.  Most don’t immediately provide check writing privileges, but in many cases, you can “earn” your way into a standard account if you demonstrate the ability to bank responsibly.

That’s a good question and it deserves some attention.  We recently discussed the contribution limits for 401k plans.  While the caps may be a lofty goal for some of us, others just won’t find them high enough to handle the level of contribution they’d like to make.

For some of those people, there may be an alternative.  Under the right set of circumstances, it is possible to contribute to both accounts.  If you’ve got more to invest than your 401k will allow and you qualify for a Roth IRA, you certainly can contribute to both accounts.

The trick is qualifying for the Roth IRA.  In order to open a Roth IRA, you need to have earned income–at the same time, however, your income must fall under certain limits.  Plus, the amount you’re allowed to contribute will be based on your income.  If you earn too much, you can’t fund an IRA.

You’re probably seeing why answering “can I contribute to both a 401k and Roth IRA” is sticky. It is possible.  However, it will require a very specific set of circumstances.  You’ll need to make enough that you’re maxing out your 401k while not making too much to qualify for the Roth.  That’s a situation that’s not all that common and is even more rarely acted upon when it does occur.

However, it is possible.  It may also be a pretty good idea.

William Perez outlines four reasons to take advantage of both accounts, if you can.

First, and most obviously, it gives you a chance to save more money with tax benefits than you otherwise could.

Second, your 401k plan may not allow you to invest your money where you’d like.  You may have bond, CDs or mutual funds you’d like to purchase that aren’t part of your existing plan.  You can sink your money into those options via the Roth IRA.

Third, Roth’s offer some additional flexibility in terms of retirement planning.  Many people may find it valuable to have both a 401k and a Roth IRA when planning their golden years.

Fourth, you never can tell what will happen with tax rates in the future.  Socking away that extra money now–in a tax-deferred account–may be a good idea.

I’d add a fifth reason to the list:  You never know what’s gonna happen, so you might as well save more money rather than less.  Considering the tax perks of a Roth IRA, you might as well put the money aside if you can.  As long as the contributions aren’t stifling your ability to live comfortably, there’s no reason not to do it.

BestIRARescue has an interesting rundown of a hypothetical person who  qualifies to contribute to both accounts.  Their fictional Michelle does much better for herself in the long run by contributing to both.  They conclude:

Each retirement plan has its pros and cons. As long as Michelle is financially able to contribute, she can contribute to both a 401(k) and a Roth IRA. Both of these accounts are critical to the proper planning for retirement. Again, it is never too late to begin saving. Michelle has realized the importance of retirement planning and savings and she knows that the more she saves now, the more she will have available when she retires. IRA and retirement plan investing are very important tools. As long as Michelle continues to be able to contribute to more than one type of retirement account, she should. It may seem like a long way off, but retirement comes quickly, and the better she prepares and saves now, the better her financial situation will be later in life.

Based on that example, Michelle isn’t wondering, “Can I contribute to both a 401k and Roth IRA?”–she’s happy doing it!

They may be facing an unforeseen crisis or what they believe to be a too-good-to-miss opportunity.  Regardless of the reason, they’re tempted to tap that tax-deferred retirement account long before they turn 59.5 years old.

Assuming you’re with the employer who’s set up the account and don’t plan on leaving your job soon, your options with respect to withdrawing funds from your 401k may be limited.

Before we dig into the details, you should realize that this a general perspective on the issue.  If you want a flawless answer to “Is withdrawing money from my 401k possible?”, you’ll want to consult with your specific plan’s rules and administrator.

Okay, now that we have the caveat out of the way, let’s talk about the two ways you can get your hands on your 401k money.  The first is via a hardship withdrawal..  You see, 401k’s are wholly intended to serve as retirement accounts, but there are often provisions to allow access to funds in case of dire emergency.  If you’re in a real pinch, you may be able to get money out of your 401k that way.

However, it isn’t like stopping by the HR office and getting an envelope filled with cash.  You generally need to substantiate the need (which must comport with the hardship standards of the plan) and can only take out the money necessary to cover the need.

That decision has some massive negative repercussions, too.  As SmartMoney explains:

If you really want to do serious damage to your retirement goals, consider taking a hardship withdrawal. You’ll have to pay income taxes (which run as high as 35%) on the money as well as a 10% federal penalty for early withdrawal.

Also, plans prohibit you from contributing to your account for six months after you make a hardship withdrawal, which may deprive you of receiving company matching funds. All told, withdrawing early with no good reason to do so is about as financially self-destructive as it gets.

Obviously, cashing out via a hardship claim isn’t a pretty solution.

There is another way to get money from your 401k.  You can borrow it.

Usually, you’ll be restricted to borrowing less than $50,000 from your account and no more than half of your  401k’s total value.  Even though the law allows for these loans, it still keeps the account’s status as a retirement funding vehicle at the forefront.

AXA Equitable describes what happens when you loan yourself money from your 401k:

Typically, you have to repay money you’ve borrowed from your 401(k) within five years by making regular payments of principal and interest at least quarterly, often through payroll deduction. However, if you use the funds to purchase a primary residence, you may have a much longer period of time to repay the loan.

Make sure you follow to the letter the repayment requirements for your loan. If you don’t repay the loan as required, the money you borrowed will be considered a taxable distribution. If you’re under age 59½, you’ll owe a 10 percent federal penalty tax, as well as regular income tax on the outstanding loan balance (other than the portion that represents any after-tax or Roth contributions you’ve made to the plan).

Obviously, if you need to choose between taking out a hardship withdrawal against the balance of your 401k and borrowing against it, the loan is the better option.  Taking out the loan isn’t without its downside and if you’re in a real bind, you need to seriously consider your ability to repay the loan to avoid fees and taxation.

Depending on your specific circumstances and plan, you may have other options.  For most people who are still with the employer who administers their 401k, hardship withdrawals and loans are the two ways to tap the account.

People see that bulging 401k balance and realize that it’s enough for that home down payment–a down payment they may not otherwise be able to cover–and the mental gears start turning…  Hmmm…  Maybe I can use a chunk of my nest egg to buy this property…

Well, the short answer to the question is, “Yes, you can use your 401k to buy your house.”

Of course, you can also use the money in your 401k to buy new clothes, a boat, a stake in a minor league baseball team or a stack of lottery tickets.  Your 401k money is your money.  You put it in there and you can take it out.  You can spend it on anything you’d like.  That includes using it to make a down payment on a home.

The bigger (and more important) question is whether you should use your retirement set aside as a means making that down payment.  Even if that’s not what most people asking the question want to know, it is what they need to know.

The answer to that more important query?  No.  In most cases you should not use your 401k to buy a house.

Here’s why.

First, it defies the entire point of having the 401k in the first place.  You set up the account and have funded it in order to prepare for your eventual retirement.  That’s why it’s there.  That’s why the tax implications are set up the way they are, too.  The whole reason you’ve been diverting payroll into your 401k is to provide for your golden years.

If you’re thinking of turning your back on that objective to make a home down payment, it’s a sign that you are thinking in the short-term (getting the house right away) instead of maintaining your smart long-term commitment.  A little patience and an exploration of other ways to cover that down payment make more sense.

Second, if you yank that dough from your 401k, you’re going to experience the punishment that goes along with impatience.  As mentioned, 401k’s are designed to facilitate retirement earnings.  If you start pulling out money for purposes unrelated to that objective, you’re not going to get taxed on the proceeds.  You’re also looking at paying penalties, too.

The government has set up tax incentives for saving until retirement because that’s what they want 401k’s to accomplish.  A 401k isn’t a savings account.  If you want to soak up the advantages associated with the account, you need to treat it like a retirement account.

Withdrawals are an obvious no-no.  Borrowing against the money in your 401k can be just as bad.  401kPlanning.org notes:

With a hardship withdrawal you will pay taxes, penalties and forgo future earnings on the money you withdraw. A 401k loan is less costly – you forgo earnings amount borrowed – but still quite risky in the context of your overall financial and retirement plan. A major risk with borrowing from your 401k is the risk of job loss. If you lose your job, or change employers, you generally must pay back the loan in full within 60 days. Otherwise, the loan is treated as a withdrawal and subjected to the same taxes and penalties.

Third, you may have better options available.  You may be able to use a second mortgage and/or mortgage insurance to get the home with a reduced down payment.  If that won’t work, you might want to do the most sensible thing possible–saving up the money for the down payment.  There are other options, too.  In fact, BankRate has a nifty list of 10 ways to make that down payment.  One of them may provide you with a way to make things happen that won’t require screwing up your 4o1k.

So, that’s the bottom line.

Can I use my 401k to buy a house?  Definitely.

Should I use my 401k to buy a house?  No.  Probably not.

When push comes to shove, 401k’s exist for a specific purpose–to save for one’s retirement.  When you start trying to use them for other reasons, you’re probably going to be disappointed with the results.

INVESTMENT MAY BE BACK IN STYLE!

Okay, investment never went out of style with many of us.  For some, though, the massive drop in stock values during the recession led them away from stock, stock options and futures investing.  When you watch your 401k lose half of its value in a matter of weeks, it’s hard to get too thrilled about buying stocks, after all.

Well, based on recent numbers and some bullish predictions, it looks like buying stock and options will be more attractive to many of the “once bitten” people in 201o.  The stock market rallied like crazy in 2009 and things could continue to improve.  MSN’s Charley Blaine notes:

Predictions for 2010 are fairly wide. But, using the S&P 500 as our proxy for the market, a 10% gain is possible if everything falls into place nicely.

While not everyone shares that enthusiasm, at least a few billionaires seem to agree.  Forbes asked a handful of honest-to-goodness billionaires to weigh in with their 2010 predictions and two of them offer very reassuring perspectives on 2010:

Time Square tycoon Leon Charney predicted a 12% return in 2010. John Catsimatidis, another American who made a fortune largely in supermarkets and gas stations, concurs, stating that the market has to go up and will probably double over the next seven years. The biggest surprise of 2010? “The market hitting 12,000,” Catsimatidis said.

I don’t know how anyone could guess overall market performance for a full year, but at least it sounds like a few people in the know are optimistic.  That’s very different from what we were hearing  just a year ago and it is a reason to believe that more people will be willing to test the market’s waters in the coming year.

If you count yourself in that group, you need to decide how you’re going to make your trades.  That leads us to OptionsXpress.

WHAT IS OPTIONSXPRESS?

If you haven’t heard of OptionsXpress, that’s not entirely surprising.  They’re a well-established, award-winning online brokerage with a loyal client base.  However, they don’t have an aggressive TV advertising campaign with a creepy talking baby.  OptionsExpress isn’t a household name–yet.

OptionsXpress has been around for a full decade now.  Wikipedia provides a nice overview of OptionsXpress:

OptionsXpress Holdings, Inc. is a retail, online brokerage firm, headquartered in Chicago, Illinois, that provides brokerage services for options, stock, futures, mutual funds, and fixed-income investments in the United States and internationally. Its browser-based technology provides trading tools, enabling retail and professional investors to identify, analyze, and execute a range of investment strategies.

There are plenty of online brokerages out there who could easily be described in similar terms (including the one with the talking baby).  What makes OptionsXpress stand out?  Let’s look at a few areas in which the company distinguishes itself.

EDUCATION, INSTRUCTION AND ASSISTANCE FOR CLIENTS

You may be a lot smarter than me when it comes to playing the market.  If you are an expert, you may not be as concerned with how effectively an online brokerage assists its clients.  However, that can be a big deal for the rest of us!  It’s also an area in which OptionsXpress really excels.

One review of OptionsXpress describes the overall approach:

This company understands what it is like to enter the world of investments without much prior experience. They provide you with the necessary tools to understand trading and become successful in your investing practices. The entire website is designed to be exceedingly user friendly with intuitive trade screens and a simple ordering process. You will learn your way around the Optionxpress website without having to spend an exorbitant amount of time educating yourself about their tools.

OptionsXpress focuses (as their name would suggest) on options trading more than most other online brokerages.  If you’re not up to speed on the options game, they’ll help prepare you.  Investing School notes:

In addition, the online broker also has the most comprehensive options education available for its clients that I have seen. From the very basics to advanced topics, OptionsXpress has very easy to follow videos that guide and teach you.

The various lessons and explanations are extremely helpful for new investors, but the part of the OptionsXpress system I really enjoyed was their virtual trading tool.  You can use their system and some “funny money” to learn the ropes without risking your nest egg.  The virtual trading tool is free for anyone with an OptionsXpress account.

WHAT DO YOU GET WITH AN OPTIONSXPRESS ACCOUNT?

You get a full-featured brokerage at your fingertips.  Don’t let the name fool you.  OptionsXpress does make life easier for options investors, but they offer a full range of services.  They do so while providing an account that’s competitive with others in the same market space.

All accounts include:

• free real-time or streaming quotes
• free broker-assistance on trades
• no-charge standard withdrawal/deposit options
• zero maintenance costs, regardless of your account’s balance
• no inactivity fees
• low options commissions
• free access to nearly 20 trading tools
• no minimum account balance requirement
• competitive fees for trades

In addition to a solid account, you also get impressive ease of use and access to some great tools.  OptionsXpress offers an intuitive, attractive, clean, easy-to-use interface.  It’s also customizable.  Obviously, you don’t want to overvalue aesthetics when choosing a brokerage, but ease of use should be a consideration and OptionsXpress does very well in that regard.

WHAT ARE OTHERS SAYING ABOUT OPTIONSXPRESS?

OptionsXpress is getting solid reviews across the board.

Investing School’s overview of OptionsXpress states:

With very low commissions and no inactivity and maintenance fees, it makes sense for me to keep the account open and trade options when there are opportunities show up.

The account is free and opening process as quickly as 5 minutes, why not?

Stock Trading Brokers says OptionsXpress is “Not bad.  Not bad at all,” as it concludes its positive review.  Exchange Traded Funds supplied a very positive review of the service which included great things to say about their customer service and support.

IvestorTrip lines up in favor of OptionsXpress, as well, stating:

We like OptionsXpress a lot. Their customer service and trading tools are at the top of the heap. Though their competitors sometimes offer lower commission rates, we think OptionsXpress makes up for the difference in customer service, trading tools, and additional investment services.

OptionsXpress is more like a mix between Full Service and discount brokerage: they provide full service broker services at a discount broker rate.

SWEETENING THE OPTIONSXPRESS POT

Right now, OptionsXpress is willing to give you $100 if you open an account.  Obviously, there are some conditions involved, but it’s a really nice opportunity to make more money (or to test the online brokerage waters with a little more security).  As My Money Blog states, “That’s a pretty sweet return on $500 in exchange for you trying out their service.”

You can get more info about the free $100 from OptionsXpress.

THE BOTTOM LINE ON OPTIONSEXPRESS

If you’re interested in trading options, there’s probably no better online brokerage choice.  If you’re planning to focus on other options, they’re still a very strong choice.  They’re reliable, stable and full-featured.  The virtual trader and other educational tools make OptionsXpress particularly attractive to non-expert investors.

Let’s get a caveat out of the way before we get down to brass tacks.  The advice offered in this post is not universal.  Different people confront different situations and have different needs.  Additionally, the advice may not be accepted as gospel truth by all parties.  As you’ve probably noticed if you’ve tried to dig up any investment advice, opinions vary like crazy.  Outside of “buy low, sell high” you’re hard-pressed to find any sentiment with which everyone agrees.

That being said, the tips we’re about to outline are generally agreed upon.

ONE:  GET INVOLVED!

If you have the option of funding a 401k plan, do it.  Don’t wait.  Don’t put it off until you feel like you have a little more money to toss around.  Fill out the form and start having some money deducted from you paycheck to feed that 401k.

A few years of sitting on your hands may not seem like a big deal, but it is.  Here’s a perfect example of why you’re better off starting now than waiting, courtesy of Liz Pulliam Weston:

Here’s an illustration: A worker who puts aside $4,000 a year starting at age 25 could have a nest egg worth more than $1 million at 65, assuming 8% average annual returns, which is reasonable given the long-term historical gains from a balanced portfolio of stocks and bonds.

If that worker delays investing for just 10 years — because she doesn’t understand the importance of starting early, or she’s confused by investing or by her company’s 401k choices — her nest egg is reduced to just $453,000. In other words, her retirement fund is less than half what it could have been.

Remember, your contributions will be compounding interest from day one until you pull funds from the account.  The sooner you start feeding the kitty, the better.  Becoming active is probably the most important piece of 401k plan advice you can receive.

TWO:  PUSH IT TO THE LIMIT

When it comes to the amount of dough to put in your 401k, “the more the merrier” comes to mind.  There are a few reasons why you should be doing your best to max out your annual contribution:

• The aforementioned long-term value of compounded interest on funds deposited.
• The fact that many 401k plans feature employer matching, which means you’re getting “free money” in the account based on your contributions from your employer.
• The tax value of the 401k.  Your contributions aren’t taxed and the tax liability associated with cashing out once you hit your golden years are also much more attractive than those attached to other investment options.

THREE:  LEAVE IT ALONE!

Once you have money in your 401k, don’t touch it until you reach retirement.  Having a growing nest egg may create some level of temptation, but the tax implications of early withdrawal should temper your lust to spend it.  Additionally, you’re not just decreasing your immediate balance.  Those yank-outs are also chopping down your interest earnings for years to come.  There are ways to borrow against your 401k without penalty, but only utilize these options if you’re sure of your situation, what you’re doing and don’t have a better choice at your disposal.

Those are three core pieces of 401k plan advice for novices:  Use it.  Fund it.  Leave it alone.

Following that advice won’t prevent you from following any great, more advance 401k plan advice, either.  It’s entirely consistent with most retirement investment strategies.