401K questions

Discussion in 'General Conversation' started by iowacatter, Oct 17, 2006.

  1. iowacatter

    iowacatter New Member

    Messages:
    403
    State:
    Iowa
    Hey everyone, The Co., I work for is doing some differnet things in the retirement program, and I have decided, I need to get really serious about my 401K. The trouble is, I dont fully understand the best way to go about it.
    Up until now, I have been very lazy about it. I get my statements, sometimes I look at them, most of the time I didnt, because I figured, no more than I had in it, it wouldnt matter. I dont know if any of you know a good place to find more info on this.

    Do they have a book : 401K for Dummies?

    Any help anyone could give me, would be very much appreciated. Some of my questions are:
    How do I know what are the best places to put my money?
    If I make a transaction, does it cost me anything?
    Can I switch my account to another investment Co. without penalties?
    and many many more!!!
    If anyone doesn't want to aswer in public forum, please pm me, email me, or catch me in the chatroom.
    Thanks in advance for any help you can give me!
     
  2. laidbck111

    laidbck111 New Member

    www.clarkhoward.com

    This guy is on the radio and has a bunch of GREAT info on his web site. If he is broadcast in your area call in are sign up on line and they will call you back and answer all of your question's for free. I have taken some of his advice and managed to put back more money than ever.
     

  3. iowacatter

    iowacatter New Member

    Messages:
    403
    State:
    Iowa
    Thanks Benji, I will definetly check it out!
     
  4. GaryF

    GaryF New Member

    Messages:
    3,649
    State:
    O.P., KS
    It varies from company to company as to what your 401k options are, but a few common features are:

    Company Match – The company will match, either dollar per dollar, or on a percentage basis, what you put in the fund, up to a certain point. For example, they might match 50cents for each dollar you put in, up to 8% of your income. So if you contribute 8% of your pay, they will match with 4%. That is a great deal that anyone who is able should take advantage of.

    Taxes – Money is taken out of your pay pre tax, and reduces your tax obligation. If you make 50k a year and contribute 8% ($4000), you only pay taxes on 46k of income. Interest and investment gains accrue in the 401k tax free.

    Withdrawal of funds– You should look at it as a retirement savings. Generally the only time you can take money out is if you change jobs, but you will have to pay taxes and a 10% penalty on what you take out if you do that. If you change jobs, you can usually leave the money in your old employers plan, roll it over to your new employer, or if all else fails, open a personal rollover IRA account to avoid the taxes and penalty.

    How to invest – That’s the big question. Most plans have a limited number of options, usually different mutual fund and money market type fixed return investments. The company should be able to provide a prospectus of how each has done in the past. Good advice would be to spread your money out and not put too many eggs in one basket. Be somewhat aggressive, you do have to take some risk in order to maximize gains, so don’t throw it all in a fixed rate fund. Once you make your choice, don’t try to micromanage, just look at how it’s doing every 6-12 months and consider making changes then. Watching it every day will just make you crazy.

    On specific questions:
    “How do I know what are the best places to put my money?”
    Look at historic returns of the various options. But it comes down to a best guess.
    “If I make a transaction, does it cost me anything?”
    It varies from plan to plan, and your employer or plan sponsor will have to answer that. It’s usually free / cheap to make occasional changes in your investment elections.
    “Can I switch my account to another investment Co. without penalties?”
    Usually you can’t move the money unless you change jobs or retire.

    Other advice: Contribute as much as you can to your 401k, even above what the company will match. The fact that it will grow tax free will allow you to accrue more money than if you were using after tax dollars and paying taxes every year on the gains. You also generally benefit from the plans low operating costs vs trying to do individual investments.
     
  5. olefin

    olefin New Member

    Messages:
    3,908
    State:
    Texas
    Stan,
    I would like to comment to invest all you possibly can in your 401.

    I was in a 401 for over 30 years. When the company first started it I don't think it was called that back then. I know some of the guys said they couldn't afford to pay into it... I told them that I was putting the maximum even if we had to cut back on the groceries, :big_smile:.

    Now days I'm having to pay the taxes that were deferred but that's OK for I made money from that tax money for many years.

    In our plan we had three ways to invest... Company Stock, High Risk Stock or Insured investing like CD's, Treasury Notes, etc.
    I usually stayed with some in Company Stock, some in Insured and a smaller amount in high risk.
     
  6. just cats

    just cats New Member

    Messages:
    325
    State:
    Leslie Missouri
    Like Gary said it varies from company to company. I'm sure there is a "Help" line you can call or email your questions too within your company. They should have a booklet that they could send you that will most likely tell you all about it.Check into that and I'll bet it's all there for ya.
    And like olefin said , invest all you can. You'll never regret it.
     
  7. iowacatter

    iowacatter New Member

    Messages:
    403
    State:
    Iowa
    Benji. Gary, Dayton, and Jack,
    Thank you all for the responses and help, I just think it is definetly time for me to, "take the bull by the horns", so to speak and learn all I can about this. After all, it is my money.
    I also agree, highly, that we should all put as much as we can afford into it. The Co. match is free money, the way I look at it, so I take advantage of that. I just wonder about putting it with another, smaller investment Co. that might do a lil better with it, than what I have currently! Again, Thanks you for the help!:big_smile:
     
  8. Cheryl

    Cheryl Well-Known Member

    Messages:
    5,010
    State:
    TN
    Stan,

    The one I belong to can be managed by me, via the internet, 24/7. If you have this option with yours, then do the research and make your own choices, or move it from what you have now to what you want to try. With mine, I can change it anytime I want and view it anytime I want.........isn't technology wonderful? What did we do without it and a dang cell phone?

    Ours also has a "hardship" clause. And we can borrow from our plan, too.

    Take care.
    Cheryl
     
  9. laidbck111

    laidbck111 New Member

    there is a "new" IRA account now available also it is called a ROTH. The difference is that the money is taxed as it goes in not when it comes out. The limits are about the same as a standard IRA, 4000 a year if I remember correctly. We max our's out every year. I love free money and when I worked for the county I put 26% in, the max, and had a match up to 9% so That was good. Then rolled it all over to my new plan here at BCBS.