Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
They all say, "put money in your 401k," but for many workers, not possible. Even if their employers supposedly offer one. Outdated 401(k) Rules Are Shortchanging Americans - Bloomberg
In fields like Engineering, Architecture, or IT where jobs may not last a year it prevents any access. Another problem, not mentioned, is no coverage for contractors or job shoppers.
I have known a lot of people who work on contract or who provide consulting services. Those who are successful, charge enough to make a good living, to pay for periods without work and to fund their retirement and healthcare. Many employers reward long term employees with better benefits. That could include participation in retirement plans, matching amounts, better working hours and more vacation. I see no problem with that, nor do I think that approach is outdated. If you look for a job and the starting benefits look poor, then look for a different job.
The simple solution is to raise IRA contribution limits. Congress could fix this with the stroke of a pen.
Yep. I'd like to see a (very generous) yearly employee contribution which would cover all retirement accounts combined. Let each employee figure out how to split that number between whatever various retirement account options (401k/403b, 457b, various types of IRA accounts, etc.) he has access to. Any employer match would not be counted toward that limit and would be subject to whatever guidelines the employer chose to implement, just as it is now. That way folks who have the ability to save more but who only have access to an IRA woudln't be disadvantaged relative to those who also have access to a 401k.
True, but having more access to tax-favored investment accounts really helps boost returns on retirement savings. Folks who only have access to an IRA, with its much lower yearly contribution limits, are definitely getting the short straw.
The 401K is not perfect but for those that offer a company match, it's foolish not to put in at least the amount that gets matched. It's free money. No matter the poor investment choices or fees, you are always going to come out ahead when the company contributes that percent of money to your plan.
The 401K is not perfect but for those that offer a company match, it's foolish not to put in at least the amount that gets matched. It's free money.
It's free money only as long as you work at the company long enough to vest in the 401k program (often that's five years). If you leave before then, you get to keep your contributions, but not the match contributions. That's one point the OP was trying to make. I'm not totally sympathetic to it, though, because it's no different than having to work at a company for a certain number of years to vest in the pension program.
I AM sympathetic to the argument that people who don't have access to a 401k plan for whatever reason are hurting relative to those who do, because the yearly limits on IRA contributions are so low. I'd like to see the law changed so that someone who isn't contributing to a 401k could contribute more funds to their IRA. The yearly limit should be on TOTAL COMBINED contributions to all retirement program, not limits on individual programs, and should be very generous, to encourage people to save.
401K plans are great when there is a company match. Think of it as the company awarding you your pension as you earn it. But don't forget that a 401K is not the only savings vehicle out there. Having the 401K is really only beneficial if you are going to be in a lower tax bracket when you retire, since it allows you to pay your taxes on the earnings when you are presumably not earning as much money, hence the lower tax bracket. If you intend to make lots of money when you retire (by selling real estate, having great investments, etc.) then you are sometimes better off paying taxes while you are employed, then investing in a business, property, etc.
Over my working years, I always contributed to a 401K with employer matching. I was never particularly confident that the funds were managed based on my personal best interest -- as if I had maintained my own accounts. (I don't know that they weren't, but didn't have too many stellar performance years).
Having rolled those funds over into IRA accounts (annuities and other) in retirement, I'm still not having many stellar years. In my case, I'm have neither the skills or interest (nor do I want the hassle) of regularly tracking and maintaining my own investment accounts. I guess that mediocre performance is part of the price one pays for that.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
