Automatic enrollment to 401k (2009, percentage, pension, purchase)

[sheenie2000]

So the other day I get an envelope in the mail from my company's benefits center that had a Fidelity Fund Prospectus in it. There was no letter or anything so I was very confused. I have a Fildelity account but the letter would have then been addressed from Fidelity. I started my job less than a year ago so I never began contributing to my 401k with my company. (They dont match until you've been with them for a year).

Then today I decided to check my work email and lo and behold it says the following:

Because you’ve never enrolled in the 401(k) Match & Savings Plan, you’re missing an important opportunity to save for retirement. As announced in the Annual Benefits Enrollment Guide, XXX is adding a 401(k) automatic enrollment feature to the plan. To help you start saving, you will be automatically enrolled with a default 401(k) contribution election of 3%. Your deductions will start beginning with your January 7, 2009 pay. The contribution will be deducted from your pay each period and will be invested in the Fidelity Freedom Fund appropriate for the date you will reach age 62. The Plan’s default investment fund that applies to you is based on your age and a target retirement date of age 62. This default fund satisfies the requirements of a “qualified default investment alternative” under applicable Department of Labor regulations.


What the?!! They can't just decide to invest in what they feel like is best for me?!

[CouponJack]

I'd have to disagree with you on this.

If you understand investing, all you have to do is change the allocation to your risk tolerance. What's the big deal? Just change it.

Too many people are not thinking about retirement and automatic enrollments (although not the perfect idea) are still a very good idea to get people going...

Worst case, if you don't want to invest in your 401k, then Opt out...its that simple.

[lchoro]

Opt out if you wish. 3% is not sufficient to fund retirement. It doesn't appear that there's a corporate match either.

If you want to keep it, you can also designate your contribution goes into a income fund that maintains a stable value and has a regular dividend, although many bond funds have been clobbered lately. A forced savings plan should generally not go into investments that can fluctuate in value; i.e., lose money.

The biggest problem with the 401(k) concept is that it was intentionally set up by WS to force savings into investment vehicles. Investment assets should only be entered into after consideration of the value of the assets relative to the income derived from the underlying assets. Mindless throwing money at assets regardless of their intrinsic value is what created the current economic crisis.

[Donn2390]

Anyone who isn't enrolled in their 401k is a fool..! I'm glad they finally made it automatic to save the ignorant people who don't enroll. Waiting a year until you get a company match just cost you a year..!
So what is the 401k's are dropping in value right now, that just means you get more for your money.

[CouponJack]

Originally Posted by lchoro

The biggest problem with the 401(k) concept is that it was intentionally set up by WS to force savings into investment vehicles. Investment assets should only be entered into after consideration of the value of the assets relative to the income derived from the underlying assets. Mindless throwing money at assets regardless of their intrinsic value is what created the current economic crisis.

401(k)'s (unlike a pension) allow me to control how my retirement money is invested, which I like.

You don't think the concept of a 401(k) is a good idea?

[sheenie2000]

Ok, I could be wrong then, if they are a good idea. For those who are older as I'm only in my 20s, how have your 401ks done? Does it still make out better in the long run in comparison to just putting away the money yourself?

[evilnewbie]

I wish it go a step further and make it mandatory 7.5% and have withdrawal penalties before the age of retirement... that way they can eliminate social security...

[CouponJack]

Originally Posted by sheenie2000

Ok, I could be wrong then, if they are a good idea. For those who are older as I'm only in my 20s, how have your 401ks done? Does it still make out better in the long run in comparison to just putting away the money yourself?

Doing a little research on the Fid. Freedom fund, basically its the same thing as a "target retirement fund", where basically the early life of investing your weighted more towards equities, and as you get closer to retirement, the fund automatically shifts you more into bonds and fixed investments.

Its a good fund to be in if you're not into meddling too much w/individual choices.

Again, its not the choice of the fund, I think the concept of "automatic enrollment" is to prop up the dismal percentage of people funding their retirement.

[juggler]

I too think it's great that they are automatically enrolling people. Too many people just starting out in the workplace have retirement as the furthest thing from their mind. With the way Social Security is being depleted, people need to do everything they can to grow a retirement fund.

A 401k is certainly better than investing the $ yourself for at least two reasons: your company will usually match up to a certain percent (that's free money for you ) and your contributions are tax-deferred, which means you will usually be in a lower tax bracket by the time you withdraw funds, and will pay less taxes.

I started investing about 10% of my income in my company's 401K plan 15 years ago, when I was 22. Even with the current economic crisis, the balance is still looking pretty darn good.

[Nepenthe]

You can change our contribution to anywhere from 0% to 20% at any time (may take a pay period or two). You can trade your shares to a different fund or funds and you can change the funds your future contributions purchase at any time.

Interesting about the auto enrollment. I'd suggest bumping it above 3%! I also suggest looking into opening a Roth IRA.

Here's your fund: Fidelity Investments:

Is there a company match?