VIDEO ON MSN MONEY
One of my 401k's was worth $50,000 invested in the second largest telco in the USA at the time. When it got down to $1,000 I was thrown out of my 401k by Merrill Lynch and the stock certificates sent to me. When they arrived they were worth 0 but I still had to claim $1,000 on my income taxes as income. No wonder Canada is now richer than the USA. Saving retirement 401k plan has 0 security. Bernie Ebbers(CEO) rots in jail & Sullivan (CFO) got away with minor punishment. Stock, property, cash and presious metal will see you through to retirement. Diversify and trust no one.
I'm just suggesting that plan administrators should be required to be honest with their participants. Before participants contribute to a plan they should be told that while the 401k is referred to as a retirement plan, very few people realize much of a benefit from it in their old age. Participants should also receive a disclaimer from the IRS apologizing for misleading them. The concept of avoiding taxation at today’s level so you can pay a higher tax rate on those dollars in the future is ridiculous. You are not likely to be in a lower bracket in retirement. If you want to pretend otherwise, help yourself. So what's the solution? Save and invest after tax dollars on your own, and realize that the financial services industry can never be trusted to look out for your best interests. They believe that wearing a tie exempts them from needing an ethical business model.
Wow, what a confusing and misleading article! First you tout the value of company matches which shouldn't be passed up and then you state that if fees are too high then consider retirement investing elsewhere. So go buy an IRA with no match and returns of next to nothing is basically what you are saying. It must be stated that most funds have fees of some sort depending on the type of fund and how much it is actively managed. For example an index fund may only have expenses of 17 basis points while a small cap fund may have expenses in excess of 100 basis points.
It also should be known that most corporate 401k funds are able to purchase institutional shares which carry lower fees than other types of shares. The bottom line is that providers must be paid for their services as well as fund managers. You wouldn't suggest that investment managers work for free, so it is up to the 401k fiduciary to ascertain whether fees are reasonable and fair. Disclosure of fees is being done now, so all participants will be informed of all fees and can make appropriate investment selections.
Although you got a thumb down Snook, some people arent too bright....I agree with you.
Way too many limitations in 401s and hardly enough choices to even spark interest.
Fees which are sometimes paid, by Corporations; May not be today?
Mutual Funds which have "very poor performance" in the last 10 years, because of Market conditions and "sickly performance" by Fund Managers...Which 95% of them didn't deserve a paycheck, let alone any bonuses....Same goes for Administrators "if they didn't attempt to protect your assets."
With a larger variety of stocks/equities and maybe additional Funds Mut/ETFs, investors might fare better...
Outside any "matching contributions", a 401 should have at least another hundred selections..
When in reality there are several, 7000-9000 choices for anyone else.
Then you have the capability of building your own fund, which we have been doing for about 15 years....And I will match our Performance against anyone else's.
Your first step should be to buy I-Bonds directly from the U.S. Treasury. No middle man fees and no federal income taxes until you cash the bonds. You'll get an inflation adjusted return, and you'll avoid the skim from the financial services industry (that's a beautiful thing). If your employer provides a match in its 401(k) plan, save at least enough to get it and invest in low-cost, broadly diversified index funds, like a total U.S. stock market index and total international stock market index. Limit your exposure to the stock market, however - it's little more than a casino now and, even if you do well in the market for years, you'll be in big trouble if it tanks as you're about to retire. The U.S. is about to get a painful demonstration that 401(k) plans do not properly prepare middle class workers for retirement, even if the workers do everything right (save a lot, diversify, etc.). MIddle class workers need pensions, but they'll have to fight greedy executives to get them. Good luck trying that without strong unions.
Read this Article over.....Before there were any comments added or personal experiences.
Pretty much thought it was a good thumbnail sketch of what to look for, in a Company's 401 plan.
And recommended others read it, if they were investing or saving in 401; Or changing jobs,retiring etc...
The biggest problem, is savers, investors,workers,and people nearing retirement; Just NEVER pay much attention to these types of saving vechicles or to IRAs...They just assume the people Manageing them are taking care of those worries...And until they retire....They don't care enough about what the bottomline is or was...
I highly recommend people educate themselves a little, do comparative shopping on the 401 vs IRA or consider both? If affordable?...And make sure all fees are in-line with the industry...
If they are not reasonable, move on or Opt Out..?
Pretty hard to turn down "matching contributions" and you shouldn't...But you also shouldn't be 100% in your own companies stocks, diversify and re-allocate once a year at least.
And when leaving or retiring from a Company, roll-over to an IRA as soon as possible, go with a larger trading house, that has low fees or trading charges only. I have been with Fidelity for over 30 years.
There is some very reasonable advice in the other comments also.......
I agree with MzAnnie0417. A lot of folks simply don't pay attention to their funds, and believe a mythical pot 'O gold will be there when they are ready to retire. I went through about half a dozen "expert" advisors, before just using common sense 101. Most of them are just salesmen showing you charts and graphs and talking diversified portfolio's. If your fund stinks, get another one. If your advisor stinks, fire them. The way a lot of 401's are set up these days, one really needs to watch the money in their working years. If it is tanking, you don't have to ride it to the bottom. It could take years to get it back to where it was. If your close to retiring, quit gambling, or you may be working until you drop.
Buy (Invest) in Low Cost Index Funds. They have low, low fees compared to regular Mutual Funds. Mutual Funds will fee you to death to where you can't grow your portfolio because of too many fees. If you can't buy Index Funds yourself like me via Scottrade then contact Vanguard.
Buy the book, "the Little Book of Commen Sense Investing by John C. Bogle. Mr. Bogle is the founder of Vanguard. It will change the way you invest for the rest of your life and you will a ton happier and richer.
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