The Big 401k Picture
Your grandparents probably had pensions. They worked in an era where their loyalty was rewarded even after they retired. Almost every company had a pension plan and almost every employee was able to take advantage of it because they kept that job forever. Heading into the 1980s, they all but disappeared. Companies no longer felt obligated to their employees. But you need 401k advice to invest. Employees changed job because there were now more jobs to go to. As pension plans became history, the 401k emerged as a successful replacement.
This type of retirement plan became very popular very quickly. It was an added benefit companies in that they didn't need to do anything other than select a brokerage house to manage these accounts. Most companies that weren't unionized elected to offer these plans to employees, and many of them even had plans where they would contribute right along with the employee, sometimes doubling the investment. However, this is optional and no company is obligated to contribute on behalf of any employee. Many companies either stopped, never did, or reduced their contributions significantly.
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.
Even though the concept of a 401k is attractive, not all plans are worth the investment. Many employees choose not to participate in their company's plan because after doing some research they may find that the funds (mutual funds) have not performed well.
When you do contribute to a 401k, you are using pre-tax dollars. If you need to make an early withdrawal (before age 59), therefore, you will be penalized and taxed at your regular rate.
When the time comes to leave your company, don't forget to take your 401k with you. Get some professional financial advice on rolling it over into another 401k or a Roth IRA. - 23226
This type of retirement plan became very popular very quickly. It was an added benefit companies in that they didn't need to do anything other than select a brokerage house to manage these accounts. Most companies that weren't unionized elected to offer these plans to employees, and many of them even had plans where they would contribute right along with the employee, sometimes doubling the investment. However, this is optional and no company is obligated to contribute on behalf of any employee. Many companies either stopped, never did, or reduced their contributions significantly.
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.
Even though the concept of a 401k is attractive, not all plans are worth the investment. Many employees choose not to participate in their company's plan because after doing some research they may find that the funds (mutual funds) have not performed well.
When you do contribute to a 401k, you are using pre-tax dollars. If you need to make an early withdrawal (before age 59), therefore, you will be penalized and taxed at your regular rate.
When the time comes to leave your company, don't forget to take your 401k with you. Get some professional financial advice on rolling it over into another 401k or a Roth IRA. - 23226
posted by X - Men @ 11:31 AM
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