Are you guys contribution to your 401K?

[SouthCaliDiva]

I read an article in Sunday's paper saying that "The 401-k is an experiment, and its successful outcome is in doubt. Education isn't working. We need to change the way the plan is designed and operates." I don't buy the argument about education not working though. I'm sure some HR departments may be slacking, but most will give you stacks of papers to review when explaining your benefits after your hired. If you don't already understand compound interest and dollar cost averaging, those materials will usually explain it. Even so, if you didn't understand, wouldn't you just ask? The article highlighted one woman who didn't understand what vesting meant. I wonder why she didn't just ask. All the statements I've seen show vested versus non-vested balances.

One of the experts, from Vanguard, suggests a solution would be to make the 401-k "autopilot." Basically, when you become eligible, your company would automatically enroll you at a 2 or 3 percent contribution rate. Then the rate would be automatically increased each year until the maximum is reached.

I personally would not like that because 2 or 3 percent would considerably reduce my net earnings. I wouldn't want someone else to be able to control that amount. And what if the company has such a poor match that I could do better by investing in something else (of course after taking any tax issues into consideration).

What say you?

[SouthCaliDiva]

http://www.post-gazette.com/pg/04159/327965.stm

By Michael P. Regan, The Associated Press



Tracy Yen's opinion of 401(k) plans soured when she was laid off from her first job and learned she hadn't been with the company long enough to keep the matching funds her employer had contributed to the plan.

"All that time I was thinking I had this much money, when all that time I didn't," she recalled. "I didn't understand what vesting was until that point."

The experience led the 28-year-old Oakland, Calif., woman to decide not to participate in the 401(k) plan at her next job.

That put her in the middle of a large group of young workers ignoring the chorus of financial planners who tout the employer-sponsored retirement plans as their best chance of enjoying a comfortable retirement.

To start with, only 41 percent of workers age 21 to 24 and 54 percent age 25 to 34 work for employers who sponsor retirement plans, according to the Employee Benefit Research Institute.

And of those eligible for 401(k) plans, some recent studies show that less than half of workers in their 20s participate.

Financial service firms have tried diligently to reach the younger generation and explain that choosing not to participate can mean turning down thousands of dollars in matching funds from their companies -- money that could grow exponentially by the time they retire.

Young workers give a variety of reasons for not participating.

A recent survey by Cigna Retirement & Investment Services found almost half of respondents 25 and younger said their opinion regarding savings had been influenced by global political instability and corporate corruption. Only about a quarter of baby boomers had the same response.

According to other studies and experts, some young workers don't see far-off retirement needs as urgent because they need every dollar they earn to pay living expenses, or to save for houses or cars. Some don't stay in the same job long enough to qualify, while others, such as Yen, simply are not educated enough about the workings of the plans.

Yen remembers being intimidated by the paperwork when she became eligible at her current job at Sterling Communications Inc., a marketing firm in Los Gatos, Calif.

"You don't necessarily know what all these letters and numbers mean," she said. Eventually, she changed her mind and began contributing after a representative from Manulife Financial Corp. "actually explained every blank on the form."

Some in the industry are skeptical that even this amount of hands-on education is enough.

"The 401(k) is an experiment, and its successful outcome is in doubt," said Wayne Gates, general director of market research and development at John Hancock Financial Services, Inc. "Education isn't working. We need to change the way the plan is designed and operates."

Gates and many others in the industry are advocating that companies choose plans which automatically enroll workers once they are eligible, then increase their contributions when the workers get raises and rebalance their plans as they get older.

So far, only about 14 percent of companies who offer 401(k) plans automatically enroll workers when they become eligible, according to research from Hewitt Associates Inc., a Lincolnshire, Ill., outsourcing firm that administers 401(k) plans for large companies.

Stephen Utkus, a principal at the Vanguard Center for Retirement Research, advocates an "autopilot" 401(k) plan, automatically enrolling employees at a 2 percent or 3 percent contribution when they are eligible, often after one year or some other milestone of service. Then the plan should automatically increase the rate contributed each year until the employee reaches the maximum level of contribution. The plan also should automatically put the participant into the appropriate lifestyle funds as he or she gets older.

"Even if a participant does nothing, they'll be on the right path," Utkus said, adding that employees still would be free to tinker with their contribution level and investment options.

About 10 percent of the companies with plans managed by Vanguard currently enroll workers automatically, he said, but none have yet offered the full "autopilot" plan. Utkus thinks that could change.

"We have a lot of employers who are thinking about this as a design. And I think that it could be the future of the 401(k)," Utkus said.

[mystkev]

I do not like the idea of an auto-pilot 401k, I believe that it is a personal choice whether or not someone wants to invest into their company's 401k.

I currently contribute to my company's 401k where before I did not, my company does not include an employer match b/c we also are pension covered employees. The only reason why I start contributing was so that I could lower my taxable income.

[CD]

:cool:

Two things I want to avoid:

Old and being broke.
Old and without a woman.


I know danm well I can get one out of two, without any effort.


On the 401 k tip, it's one way for the average individual to reduce their current income tax burden, and it's free money for those who's company offers an employer match.

I always sign up for the max whenever I switch jobs, that way I never feel the burden of saving.

I have my 401k heavily weighted towards equity and a little in fixed income. On the equity side I like to work the equity funds that are indexed linked with a split between domestic and international. On the fixed income side high yield is my preference.

[Pamalicious]

Non profit doesn't have 401K but I believe we have something else I am NOT contributing to. I need to start working on some kinda plan. Cause I'm gonna be BROKE, Sakinah gonna be at Community College and that's the way the cookie is gonna crumble.

I'll admit I am part of the group that just wasn't raised to be money conscious and it's something I have to try to change for Sakinah's sake. She got half good money genes in her from her frugal Father and his family. But I live in today day by day like everyone else in my family tree - - - unfortunately.

[CD]

:cool:


Mom told us, "something was better than nothing" or was it "A half man is better than no man" LOL!

Start with a little. You got to start some where.

[zuriyahe]

:cool:


Mom told us, "something was better than nothing" or was it "A half man is better than no man" LOL!

Start with a little. You got to start some where.



Very very wise words, CD.

And where have you been, bro?!?!?!?

[lovely]

:cool:


Mom told us, "something was better than nothing" or was it "A half man is better than no man" LOL!

Start with a little. You got to start some where.

a half man is better than no man...now that is funny..lol.

i put a very small amount into mine. i dont even look at the statements anymore....by the time im at retirement age..ill be able to live for a month or two finacially straight. :rolleyes:

[Juicey1]

Yes, I contribute. I don't want to be old and broke either.

I have actually been in mine twice. Once when we were buying our house and once when we got behind in house payments when they cut my husbands hours at work.

I vow never to go back in it again until I retire. At least I hope I don't have to.

[CD]

Yes, I contribute. I don't want to be old and broke either.

I have actually been in mine twice. Once when we were buying our house and once when we got behind in house payments when they cut my husbands hours at work.

I vow never to go back in it again until I retire. At least I hope I don't have to.

:cool:

That's how I got my first knot together to by my first house. I don't think I could have done it any other way.

Back in the day I wasn't discipline enough to save, better yet, I just didn't make enough money to save.

I have no intention of touching it now.

[HulaSista]

that was one of the only financial lessons driven into my head growing up was to make sure i had a good retirement plan. along with health and insurance benefits, i've seen the effects of not having these 3 things and REFUSE to not max out my option.

soon as i got a job where i could do that, i started up at the half way mark (so if the max is 20% i'd go 10%). each company, lucky for me, had the match, so, i'm straight. when i talk to my cousins, i am surprised how many DO NOT know what a 401k is or chooses not to invest.

anyways, with the first job, when i quit, i cashed my money out to pay some bills off and travel.

with the second company, i got laid off, i cashed my money out to buy a car and pay some more bills off (scared to death if i never get a job, at least i would have lowered my debt a little)

i'm on my third job and and company wide (and that's ALOT of people) its auto enroll at 3%. i think this is great on the bases that there are a lot of people who are not educated, don't want to be educated or want to know but to scared to find out how.

what i found sad is my hr dept in my office don't know much about it, so, that's pretty sad. i'll have to ponder taking hr classes to be prepared when he can't do the job anymore ;)

but at least i know.

they just sent a whole lot of info to my house a few weeks ago. cd, i like what you are doing. i'm gonna have to call you and ask you why you choose the divisions you did to better understand for myself. i think i choose the highest yield/risk, but i'll wait til my next statement to see what the hell i did and then i'll call ;)

[SouthCaliDiva]

Nobody called me on that huge typo in the title? You guys are sweet!

Anyway, I know I shouldn't, but my 401k contributions are going to cease. My rent is increasing $165 on July 1. No more 401k for me until I figure out where to get this money from. :(

[rainy]

Non profit doesn't have 401K but I believe we have something else I am NOT contributing to.

the non-profit version of a 401(k) is a 403(b). governed by a different section of the IRC and with a couple of different rules/limits etc but the same concept.

i do contribute to my 401(k) although not as much as i should. i think i am at about 10% at the moment. it has been so long since i last changed it i cant recall offhand. i have not dipped in it up until this point although i might this time next year as i plan on buying a house between now and then.

[Melotic]

15% of every paycheck goes into a 401K, It's a wise investment to save at least that much of your income anyway...

[sistuhchey]

:cool:

That's Back in the day I wasn't discipline enough to save, better yet, I just didn't make enough money to save.

I have no intention of touching it now.



I too have nightmares of being old and broker!!!...

Match is on hit.....Man Hula....you don't how much I miss that... :beating

[seductive_tee]

It's called TSP for us....and yes i contribute 5% right now and have been since i came in the gov't. I'll increase to 7% open season.

[MR REMI RED]

401k SUCKs.....
its a RIP OFF.....
:fu

[S'More]

Where I work, they automatically enroll you at 4%, I'm glad they did because I have a nice little chunk of change. Bad part mine isn't a 401K but a 403b so I can't get any money out to help me buy a house.

[mystkev]

With my new job I'll get a match. Woohoo!!!

I've been trying to figure out how much I want to contribute. They match the first 6%, so I'm thinking of just doing the up to 6%, and put any additional retirement savings into my Roth.

[Admin]

Looks like the average is 7.5%

Holla

[Admin]

Upped mine to 6.5% today with HR here at the jobby job. My job matches $300 a year. So I'll take that FREE money and add it to mine.

Holla

[Juicey1]

We are getting a match again this year. I don't plan to touch my 401K again until I retire. At least I hope I don't have too. I have been in it twice......1) used it for the downpayment and closing cost when we bought the house; and 2) we got behind in payments when Honeyboo's hours were cut at work.......had to prevent foreclosure.