401 K???

[quixotron]

Hello guys. My company instituted a 401K program. Its automatic, I see deductions like 40 bucks or something every check. What is 401K? o you guys advise it? should I cancel it? what happens if I work for another company???

i'm only 25 yo. I dont know this $hi+!!! Maybe i should contact my HR dept.

Thanks.

 

[dknguyen]

Google makes it sound like a pension plan:
Employees: Benefits FAQ
**broken link removed**)

So I would think you do not benefit (or get it back) if you work for another company.

 

[jpanhalt]

There are two common types of plans: 401(k) and 403(b). You can have one, both, or neither. They are retirement plans. There are other types of retirement plans as well, including plans in which the employee makes no contributions. The latter are losing favor as our economy tightens, and employers need to compete internationally with companies that do not have retirement plans (compare General Motors to Toyota).

The 401k is a savings plan. You do not pay taxes on the money you put into it nor on its earnings. It is invested. You have some control over how it is invested. You get 100% of it, if you change employers (almost always, you leave it in the plan and simply take the plan with you). You pay regular income taxes on what you withdraw after retirement. You don't need to be retired to draw on it, but there are penalties based on age for drawing on it early. The amount you can contribute per year as tax deductible is limited by law. It's a good deal and the only reason not to contribute is if you absolutely need the money for essentials.

The 403b is employer subsidized retirement savings. The amount of subsidy varies by employer. Some match one to one or more. It is also tax advantaged. Many employers have a vesting period. If you work less than the vesting period and leave, you lose the employer's portion of the contributions. You never lose what you contribute, unless the investments that you chose go down in value.

All employers have advisors for this area, and you should see one.

John

 

[Leftyretro]

Hello guys. My company instituted a 401K program. Its automatic, I see deductions like 40 bucks or something every check. What is 401K? o you guys advise it? should I cancel it? what happens if I work for another company???

i'm only 25 yo. I dont know this $hi+!!! Maybe i should contact my HR dept.

Thanks.

As already stated by the above posters, this is a good deal for you. You are not having to pay taxes on the earned $40 nor on any interest it earns until you actually start withdrawing it, usually starting at age 59 1/2. Think of it as forced savings that's tax deferred.

What you should ask your HR department about is how and what your money is invested in. Many companies allow you to specify what it's invested in while others only allow a single or limited choice, such as company stock.

If you are allowed choices you really should seek advice as to the best course for yourself and family as far as risk/reward strategy. Typically one can accept a little more risk when young and later switch to more conservative choices as one nears retirement age. By all means study and seek advice from more then one source when selecting investment choices.

Many companies also add some of their money to your contributions each pay period and if that is the case, you are leaving free money off the table if you elect out of a company sponsored 401K plan, which I'm sure you can if you really can't afford the $40 and don't care about your future retirement security. Your HR department should be able to explain all this to you, I'm surprised they didn't mail you the information prior to starting the deductions.

The fact that you are young is all the more reason to start now and never stop the contributions. Even a conservative investment strategy with enough time compounds to a wonderful and secure retirement plan. The money remains yours even if you change companies, it just gets converted to you as an individual IRA account.

Good luck

 

[quixotron]

Thanks alot guys. My company did a onceover at orientation. I also did receive a letter stating my personal benefits and savings plans. i just opened it and skimmed it, but i definitely have to read it.

 

[HiTech]

Since you are 25 and have many years of employment ahead of you I would suggest that you place that 401K on the back burner and go for higher divident investments. I invest heavily into risk stocks and bonds and although with the present state of the US economy, I have taken a bit of a downward hit, the big picture is what I look at. Overall, my returns have been very good to very, very good. So I ride out the waves, much like a roller coaster, not panicking when recession is near or occuring. It usually returns to normal and then some. If you have extra cash to invest, make it work for you faster than most 401K can do. You'll never retire comfortably from the standard 401K package.

 

[quixotron]

Since you are 25 and have many years of employment ahead of you I would suggest that you place that 401K on the back burner and go for higher divident investments. I invest heavily into risk stocks and bonds and although with the present state of the US economy, I have taken a bit of a downward hit, the big picture is what I look at. Overall, my returns have been very good to very, very good. So I ride out the waves, much like a roller coaster, not panicking when recession is near or occuring. It usually returns to normal and then some. If you have extra cash to invest, make it work for you faster than most 401K can do. You'll never retire comfortably from the standard 401K package.

Right. I was considering investing in technology, energy and artwork.

For technology, I was considering investing in RFID companies. thats a big field, plenty of applications and it hasnt been fully implemented yet. As for the commodity sector, I was considering corn and switchgrass. they are the main ingredients for ethanol.

For artwork, I was considering buying old but super-good condition comic books. i know some of those can fethc thousands of dollars at auctions if they are in mint condition or so.

What about you guys?

 

[HiTech]

Personally, I would forego the comics investments since you need a specialized customer to sell them to. The same with coins, stamps and the like. I'd invest in gold.silver/platinum and those promising technology start-up companies. RFID is big and that's a good area to start with. I just attended an RFID Conf. a couple of weeks ago and I never knew the field was so evolved. It's certainly not going away! You can thank WalMart and McDonalds for a good part of that one!

For quick cash I recommend you buy property that's up for deliquent tax sale. I've done that in the past, carefully selecting what property to buy so I could turn it around for a quick resale with minimal investment. I bought 1/2 acre of land with a condemned home on it for $5000. Had the local fire dept. perform their "practice" burn to the structure, cleaned up the debris and then sold it for $13,000 in 1 months time!! Same with a nice home... purchsed at $36,000 and sold it for $86,000 w/ a $10,000 in improvements--- a nice tidy profit! Just make sure it's something that you can dump fairly easy considering today's economic slump. Used mobile homes are cheap to buy and you can rent them out or re-sell them as well. Go slow and careful at it and you should come out ahead each time.