401k Plan Options Plr Ebook

Table of Contents

CONTENTS

CHAPTER 1 – DEFINING THE 401(K) PLAN 8
PARTICIPANT-DIRECTED 401(K) PLANS 8
TRUSTEE-DIRECTED 401(K) PLANS 9
HOW 401(K) PLANS DIFFER FROM IRAS 10
CONTRIBUTION CAPS 11
EMPLOYER CONTRIBUTIONS 12
PAYROLL DEDUCTIONS AND SAVINGS RATES 12
HISTORY OF 401(K) PLANS 13
REASONS FOR SUPPLEMENTAL RETIREMENT SAVINGS 14
LEGISLATION AND PROVISIONS CREATING 401(K) STATUS 17
SIMILAR SAVINGS PLANS 18
PROBLEMS WITH 401(K) PLANS 21
TRANSFERRING 401(K) EARNINGS 21
HIDDEN COSTS 22
TYPICAL TRANSPARENCY ISSUES 23
2 WHAT WENT WRONG WITH 401(K) PLANS IN 2008? 25
THE COLLAPSE OF THE REAL ESTATE MARKET 26
THE CREDIT CRUNCH 26
STAGFLATION 27
UNEMPLOYMENT 28
3 OPTIONS FOR 401(K) PLANS 30
THE IMPACT OF A BEAR MARKET ON RETIREMENT SAVINGS ACCOUNTS 30
CONDITIONS OF EARLY WITHDRAWAL 31
PENALTIES 32
TAXES 33
REINVESTING IN STABLE FUNDS 33
EXPENSE RATIOS 34
AGE-RELATED FACTORS TO CONSIDER 35
YOUNG INVESTORS 36
OLDER INVESTORS 36
4 A PLAN FOR STABILIZING YOUR 401(K) RETIREMENT SAVINGS 38
READING AND UNDERSTANDING THE SUMMARY ANNUAL REPORT 38
REQUESTING UPDATED MATERIALS 39
ANALYZING HISTORICAL PERFORMANCE 39
APPROACHING YOUR EMPLOYER WITH BETTER 401(K) OPTIONS 39
RECRUITING FELLOW EMPLOYEES TO HELP 40
COMMON 401(K) MANAGEMENT MISTAKES TO AVOID 40
CASHING OUT TOO SOON 41
INVESTING TOO LITTLE TO GET MAXIMUM MATCHING FUNDS 41
TAKING 401(K) LOANS 41
INVESTING TOO AGGRESSIVELY 42
ROLLING OVER INTO IRA SAVINGS 42

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INTRODUCTION

Since they were introduced in the 1970s, the reach of 401(k) plans as retirement savings accounts has risen sharply. Up from just over 60% participation before major rule changes in 2006, it is estimated that nearly 90% of earners take advantage of these accounts to save for retirement, as of the late 00’s. Nearly 50 million workers and their employers have contributed what stood at 3 trillion dollars at the beginning of 2008. A year later, that last figure is considerably lower.

A 401(k) account allows your employer to make a contribution to your retirement without having to be responsible for a pension, making it attractive to both sides. Often, an employer will match your contributions up to a specific percent of your earnings or maximum annual contribution, as determined by your income. While they are more attractive to high-income earners, they also have advantages for most workers.

As a contributor to one or more 401(k) accounts through your working career, you’ll be investing a portion of your income into some type of financial vehicle – most often a combination of them. This has brought a much larger percentage of Americans into the stock market than have been for many decades.

Company plans are sometimes cooperative and allow you to take advantage of a “group rate” that can save costs on fees and give access to exclusive funds. Even then, most of these services are not freely available to worker/investors.