10 401k facts everyone should know

Here's how to make the most of your 401k plan.

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VIDEO ON MSN MONEY

62Comments
Jul 16, 2014 10:19AM
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did you hear about the flasher who was thinking of retiring? he decided to stick it out for one more year.
Jul 16, 2014 1:34PM
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Not sure why so many are against the 401k option.  It has tremendous benefits.  You do not have to withdraw until age 70.5 and the minimum required withdrawl is around 3.6% at age 71.  This means a one million dollar IRA only has to withdraw around $36,000 at age 71, leaving over 95% of the account to grow tax deffered.  Upon death, the children can open up a stretch IRA and withdraw over their life expectancy.  The DOW is at 17,000 - massive wealth creation has occurred to those who contributed steadily to the 401k over the past generation when the DOW was under 1000 in 1982.  This massive wealth accumulation gets tax deffered tax treatment and the children can continue to keep the tax deferral going by only withdrawing the minimum.  
Jul 15, 2014 8:41PM
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17,500 & 5,500 are the deductible amounts that may be contributed for '14...contributions greater than that are post 86 after-tax contributions.  Deductible limits are raised every so often.  Check your plan...and, of course while checking your plan, check out other options outside your 401(k)...


If rolling past employer 401(k) amounts - safest option? Trustee to trustee rollover.  Avoid touching any check and subjecting yourself to completing the transaction within 60 days.  Hefty penalties are easily avoided using trustee to trustee.

Jul 20, 2014 4:43PM
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If someone does not save for their retirement, they are jealous of those who do. The criticism of 401Ks sounds like sour grapes. $50 dollars a week saved before taxes is equivalent of less than $5 a day of spending. The secret is in deciding what belongs on the need list and what belongs on the want list. You need food, clothing and shelter, but what you eat, what wear and where you sleep are choices!

Jul 16, 2014 10:13AM
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Depending on when you do this/that TR ROSE,...??


You can "roll" your 401K out into what's called a "Rollover IRA"..THERE ARE NO PENALTIES.

And most providers or trading houses take care of all paperwork or transfers for "FREE" or almost free...(yes I see, someone already mentioned trustee to trustee) That is correct.

That's usually after you retire or leave a company or move on to another Company..

DO NOT TRANSFER to another 401K in new company...Get it out.

There may be other stipulations and timeframes (dates) that you have to meet...

But try to do all of it, without paying taxes or penalties...Get GOOD ADVICE on the pitfalls.


Check all the rules of your Company or your 401 for vested rights, withdrawls etc.

I think if you retire in the same year, you turn 55, you might be able to pull 401K out without penalties...OTHERWISE you have to wait until age 59 1/2.


Whatever you do try not to give back any matchings, pay taxes, or penalties OR do anything RASH....Check all RULES first....You earned it, work on KEEPING it...Get ADVICE or read.

Jul 20, 2014 9:13PM
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My Father, who turns 88 next month, said to me once, son, the Government told us to save our money for the last 70 years and we did. Now, they don't pay squat for interest, and they give away all they ever took in for taxes and then some. Now, there is no incentive to save, seeing inflation goes unchecked, and the Government is too deep in debt and can't raise interest because 75% of all taxes would be needed to pay it if rates went up to only 6%. Now, if you can't keep up with inflation, what is the next best thing? Land, food, and ammo. The Stock Market is a trash can full of paper waiting for a match.
Jul 20, 2014 4:10PM
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I have decided that when I retire in 8 years after working all my life since the age of 11 that if I run out of money, I will go on welfare just like the rest of the free loaders. When I die I will go knowing that I contributed something to this country. This is one thing our current president will never be able to do. Must be nice to have the golden spoon but yet act like you're going to help other people. Community Organizer at his finest!!!!
Jul 20, 2014 9:54PM
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Slide #7 talks about how to avoid the early withdrawal penalty. Also check out IRS Rule 72(t) to avoid early withdrawal penalties.
Jul 16, 2014 3:32PM
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Watchout for fees. Even a 1% annual fee over a 40yr period will eat almost 20% of your 401k. To get the exact number:

 

1) Multiply your annual fee be 16.64

2) Multiply answer from (1) to your final/projected amount

3) That is how much you paid in fees that should have been your money

 

Ex:

1) 2% fees X 16.64 = 33.28

2) $500k final amount X 33.28% = $166,400

3) You paid or will pay over $166k in fees over a 40 yr period on an account that finishes at $500k

Jul 16, 2014 11:14AM
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Just keep it up Mr. Cody;   MSN wouldn't be any fun without you, yuk, yuk, yuk.
Jul 28, 2014 2:37PM
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What  one-hour 401k seminar?  I've never been to one. I believe a lot of us just blindly go along with our employer's 401k plans and hope they are being managed well. Maybe most people wise up as they get closer to retirement, but most of my co-workers (under 40 yrs old) seem to just shrug their shoulders.

 

If the seminar the article is referring to is one that is not employer sponsored; i.e.: i gotta go find one on my own. Then shame on me for not finding one. I don't see them advertised in my home town.  Besides, is it really worth the expense of taking time-off from work and paying my own travel expenses to go to a one-hour seminar?  Heck, given the complexities of investing, I don't even think a week-long seminar would cut it.  After all, It takes economics, business, and law degrees to understand this system does it not?  If it doesn't, sign me up. I'll be your investment manager!

 

Even if you sacrifice your "Television Time", after working a 10 hour day, to read the information you're given concerning your 401k, it is vague at best. It is difficult to formulate good questions when you don't really understand one thing your given.

 

I think the system is designed such that the people who manage it make a lot of money off of people who have to learn the system the "hard way".  The article points out the fees associated with 401k plans. The fees don't seem like much when you see 1 or 2% but, as this article infers, a lot of people may not realize that low low fee adds up over 40 - 50 years. This is one example of the "hard way", but it is not going totally break your retirement, only hurt it a bit. What other investment information will we have to learn the "hard way"?

 

Reading books by various authors on the subject will only shower you with investment strategies that may not even be relevant by the time you read them. Even if they are relevant, the markets are dynamic, always changing. So it appears that investing is a gamble where the only winners are the ones who collect the management fees. Those fees don't vanish like your 401k can.

 

Even if I had gone to a seminar, One hour hardly seems enough.  If it were enough, this article would not be necessary. Also, If I were a savvy investor, what does it matter? All it takes is some joker on wall-street to play fast and loose with our money.  We have all seen, and many have had to experience the pain of such risk taking by those we pretty much have to trust with our money. What real choice do we small-time investors have?

 

What to do?  Thanks to cost of living increases happening so frequently, saving your money in a coffee can will not get you through retirement unless you can stash away $5000 -$10,000 a month from the time you start working at McDonalds at the age of 16.

Jul 16, 2014 5:07PM
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Wow.  All those words being typed, and not a thimble of intelligence to show for it.  It's like a vacuum in there, with no input or output.  Just a bunch of no-brainers, patting each other on the back.  Garbage in - garbage out.  It's depressing.  Come on, people.  You're better than that.

Jul 16, 2014 4:09PM
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We were able to hang in there nicely today; manipulators leaving the floor in a foul mood, too bad for them....They thought it would be another yesterday, glad it wasn't, buyers did their thing, now lets hope we can follow this up tomorrow....Easier said than done.
Jul 15, 2014 9:32PM
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We have a president that knows how to bounce a ball but has no balls!
Jul 28, 2014 12:19PM
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No ! KNOW THIS ABOUT YOUR 401k !

The MONEY MONGER ONE PERCENTERS are just USING YOUR 401k FOR THEIR BENEFIT !

Take ALL your 401k OUT NOW ! Pay the EARLY WITHDRAWAL PENALTY, which there NEVER EVER should have been to start with, and INVEST IT LOCALLY where you & you alone can keep a close tab on it. The corrupt Republican corporate MONARCHY STOLE YOUR GUARANTEED PENSIONS and gave you THEIR "INSURANCE POLICY 401k" THAT PROTECTS THEM IF THEY FAIL......AND THEY ARE FAILING RIGHT NOW !

Don't waste any more time, TAKE IT ALL OUT NOW before the coming DEPRESSION at the end of the year !!!!

Jul 16, 2014 10:52AM
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The similarities are unreal, are we on Wed or Tue all over again? Manipulators called for the selling to start at 1045 hrs...So similar to yesterday; they are taking over on and off the floor and of course dropping all indexes....Be very careful folks, cheaters on a mission once again today...More later.
Jul 16, 2014 1:57AM
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What you should know in a 401K from my experience:
 Don't invest heavily in the stock traded funds when they begin to be overpriced.  
You do have options of not going into bonds too.
Most 401Ks have the option of a short term reserve which is essentially CD's and cash. You can't lose your money, there is no up or down movement. Might be required to hold the money for 3 months before cashing out of the funds to something else. And these short term reserves do provide even now a good 1.5% to 2.5% return. Its good because its better than savings and CDs.

Still contribute, but you may find it better to put some in a short term reserve so you keep your matching contribution. Instead of waiting 5 years to regain those matches after it being erased. 
Then when it crashes, you can go back and buy cheap... the concept of buy low, sell high.

Anyways, back in 2006ish I thought I had to be in a fund that was either stocks, bonds, or a mixture of those. You don't. You can put it into short term reserve to buy these other funds at a later date.
Just thought that would be useful information. 
I didn't feel good when my matching contributions were poofed away. I don't intend for that to happen again. But I also don't want to miss out on the matching, since I have no alternative being how my company no longer offers a pension.  Need whatever benefit is offered. Just need to make sure I hold onto the matching contributions.  And I think regaining break even with matching contributions by sitting on them for 5 years I just lucked out. I think the next crash will probably not rise so quickly. Will mimic more of Japans stock market next time around. But at least I'll have bought in on that at the muddle flat price to begin with and cross my fingers re invested dividends make up for flat pricing. 
Jul 16, 2014 6:14PM
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Yup.  made 400 dollars today .  Rather have Bush at 7000 DOW and my guns.
Jul 16, 2014 1:33AM
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If you work for a company that offers a 401k,  you are vested after 5-10 yrs working for that company. Some companies offer a match of funds up to 6% max but general is usually around 3%. If at all possible use the MAX funding for your 401k from your company.  You are limited to when you can take a withdraw from funds, age is 59 ½.  A 10% penalty is taken before that age is reached.
Check with your company for more details.
Jul 16, 2014 6:43PM
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 401k? is that short for four hundred and one boxes of kelloggs k?  sorta like pi?
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