The Big 401k Picture
You need 401k advice. Years ago almost every employee in every company received a pension through a company paid pension plan. People stayed on one job for their entire career and companies felt it was their duty to provide this type of loyalty after retirement as well. The major benefit of having a pension was that the employee didn't need to contribute. It was a gift. Then life changed and so did corporate America. Companies still were willing to help you after retirement, but they looked for other vehicles to do it. And so came the 401k plan.
Its popularity spread quickly. Employers liked the idea that they weren't the ones funding the accounts; the employees were. They had less responsibility with 401k's because, unlike pension plans, they had no access to the money. All they needed to do was select a brokerage house and hand out paper work to the employees to begin the account. Even though companies could voluntarily contribute to the employees' plans, many did at the beginning and then changed their minds when the economy collapsed recently.
The law allows employees to invest a maximum of $15, 000 a year. It doesn't matter how much they make. These funds are comprised of mutual funds of varying degrees of safety, and you can choose which ones you'd like to invest in. Keep in mind that you can only invest in what the brokerage firm sponsors.
Not all 401k's are created equal, and it's for this reason that you really need to know what you're doing as you make your selections on sign up day. Any help that the brokerage firm offers will be provided by salespeople on commission who will be very partial to suggesting funds that may have a poor track record and aren't expected to perform well going forward. Get some outside advice before making a commitment.
Since your contributions are from pre-tax dollars, you will be taxed and suffer an IRS imposed penalty should you withdraw money before age 59.
Last but not least, don't forget to roll over your 401k if you leave your job. You can put into either a Roth IRA or another 401k. Get some impartial financial advice before doing anything, though. - 23162
Its popularity spread quickly. Employers liked the idea that they weren't the ones funding the accounts; the employees were. They had less responsibility with 401k's because, unlike pension plans, they had no access to the money. All they needed to do was select a brokerage house and hand out paper work to the employees to begin the account. Even though companies could voluntarily contribute to the employees' plans, many did at the beginning and then changed their minds when the economy collapsed recently.
The law allows employees to invest a maximum of $15, 000 a year. It doesn't matter how much they make. These funds are comprised of mutual funds of varying degrees of safety, and you can choose which ones you'd like to invest in. Keep in mind that you can only invest in what the brokerage firm sponsors.
Not all 401k's are created equal, and it's for this reason that you really need to know what you're doing as you make your selections on sign up day. Any help that the brokerage firm offers will be provided by salespeople on commission who will be very partial to suggesting funds that may have a poor track record and aren't expected to perform well going forward. Get some outside advice before making a commitment.
Since your contributions are from pre-tax dollars, you will be taxed and suffer an IRS imposed penalty should you withdraw money before age 59.
Last but not least, don't forget to roll over your 401k if you leave your job. You can put into either a Roth IRA or another 401k. Get some impartial financial advice before doing anything, though. - 23162
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posted by X - Men @ 4:11 AM
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