the 401(k) scam

[unblock]

like most americans fortunate enough to participate in a 401(k) plan, i do my best to contribute as much as i can.

but is it worth it?

if your company matches your 401(k) contribution, this is free money and almost guaranteed to be worth doing.

however, if your company doesn't match, or to the extent you contribute beyond any match, is it worth the fees?

my 401(k) provided sucks out 0.5% of my BALANCE each quarter. this is 2.0% per year. note that this is on top of any mutual fund expenses i am indirectly facing.

now, this may sound like a pittance compared to the wonderful benefits of compounding that they love to show you when you sign up for the plan, but consider this:

the advantage of a 401(k) plan is tax deferment. if my money grows 8% per year, and i don't pay taxes, the money that i would have otherwise paid to uncle sam is reinvested for my benefit.

but if the money i would have paid uncle sam simply goes to a 401(k) provider, where's the benefit?

a 2.0% fee no 8% annual growth is like a 25% tax on my money.



are my fees common? i work for a very small company, and as a result, my fees might be higher than most. but if this is typical, a lot of 401(k) subscribers are not getting anywhere near the benefit they are expecting....

DO YOU KNOW WHAT YOUR 401(K) FEES ARE????

[bbinacan]

1. Your fees are higher

because you are with a small company. Economies of Scale but it still sucks. Who is the 401k provider. Is it Nationwide?

[unblock]

3. john hancock

[bbinacan]

6. No surprise, their plan is

very similar to Nationwide's. Part of that fee probably goes to the investment rep who sold it to the company. If so, that rep should be earning the fee by advising and educating the employees.

[Yupster]

25. That fee is very high

Mutual fund companies run 401(k)'s and don't charge fees anything like those.

They may charge a front end load if a small company plan though until you reach a breakpoint of half million or a million in the plan, but even then, it's just once, not every quarter.

[HockeyMom]

2. I have both a Pension (free) and a 401K

I opted OUT of the 401K. I simply don't trust that.

[bbinacan]

4. You should do the 401k

plan, especially if the company matches. BTW, the trend now is for employers to convert their pension plans to 401k plans.

[HockeyMom]

8. Non Profit

Mental Health Agency. My salary really sucks, but I have great medical/retirement benefits, partially funded by the State. Sorry, even if I wanted to, I cannot afford to take chances and put money, little I have, into any gamble of 401K.

[bbinacan]

12. Is there a match to your contribution?

At least put some in even if it's in a guaranteed account or at least a money market. Your contribution comes out pretax reducing your AGI and the money grows tax deferred.

[Phoebe Loosinhouse]

10. The one you should distrust is the pension.

Talk to some United Airline pilots sometime. At least you own the 401K. Your pension could be pulled out from under you at any time if your company goes into bankruptcy. Unless, of course, you have a government pension.

[kentuck]

5. And if for some reason you have to withdraw from the account ??

Then you really wonder if it is worth it?

[FormerDittoHead]

7. Here's some good information (link)

No help with fees, but it doesn't sound like you have much bargaining power in that dept.

I learned a couple of things here, and I have to say I'm not too crazy about 401k's:
http://www.401khelpcenter.com/mpower/feature_050801.html

[BooScout]

9. I had no fees with mine. n/t

[unblock]

24. good deal for you. your company must have paid them

unless they're being taken out without your realizing it.

i actually had to go through the numbers carefully to realize that they were taking out a fee.

in fact, it didn't become clear until i dropped my contribution down to a measly $10/paycheck for a while. then i noticed that my number of shares was going DOWN despite the fact that i was contributing. turned out, i wasn't contributing enough to pay their fees, so they had to sell my shares to pay it!

[BooScout]

26. My company managed the fund...

My company was/is a major financial services company and manages funds worldwide. I am now on severance from the company and to the best of my knowledge will still not pay a fee once the severance is finished. Early withdrawals are subject to a charge. Other than that there are no 'fees'. However, I am sure the 'fees' are indeed taken out from the precentage the fund is earning. I know I have had good luck with my portfolio. I switched things around considerably before Bush took his first oath of office and managed to avoid losing my shirt as many of my collegues did.:evilgrin:

[Poppyseedman]

11. Any 401 (K) plan without a company match

isn't worth putting your money into.

But I' d tell a even more important thing to look for.

DO NOT UNDER ANY CIRCUMSTANCE PAY FOR TERM LIFE INSURANCE BOUGHT THOUGH YOUR COMPANY. AFTER YOU LEAVE IT DOESN'T COME WITH YOU.

I SPENT 14 YEARS WITH A COMPANY AND BOUGHT TERM LIFE INSURANCE AT VERY NICE RATES FOR MYSELF AND MY WIFE. AFTER I LEFT I TRIED TO GET LIFE INSURANCE AT 47 YEARS OLD. FAT CHANCE. NOBODY WILL INSURE ME.

BUY YOUR OWN WHEN YOU ARE YOUNG.

[bbinacan]

13. A 401k without a match

is still worth doing because the $ goes in pretax and it grows tax deferred. You're absolutely right about insurance. Buy permanent insurance when you're young.

[KatieW]

17. That's my understand too.

That amount you put into your 401K you don't pay taxes on, till you are able to draw from it after you're 60 or so. (I'm not sure on the exact rules on when you can start taking withdrawals from your 401.) So if you make $40,000 and put in $6,000 in your 401K, you're taxed as if you made $34,000, not $40,000. And the employee can decide what type of investment they want to put their money into. I have a 401K which my employer does not add to, but trust me, the money in my 401K does add up over time. I have no pension, so I need to save all I can for my retirement.

[Freedom_Aflaim]

16. Term insurance through your employer is fine

as a supplement.

It is what it is. Its short term and non transferable.

I've got policys outside my employer which is my long term insurance. Im also carrying term insurnace through my employer because its cheap (cheaper than any outside the company) and I only plan to carry it till the kids get through college.

The idea is that you use it as a supplement for your primary insurance during the years when you need insurance most. Once you are older, gets out of school, house paid for etc, you drop it because you don't need as much insurance.

[spinbaby]

14. My worry about my 401k...

...is that it will be rendered virtually valueless by inflation.

[pansypoo53219]

15. except for matching funds.

nothing but a ponzi scheme to get $$$ into wall street.

[RebelOne]

18. When I first started my 401K plan, my company matched it

100%. But then we were bought by a very large corporation and now it only matches it 50%. I am not complaining because my plan is still showing quite a profit.

[scruffy]

19. You really need to do the 401(k) . . . .

and put as much in it as you possibly can. Don't stop at the amount of match - put the full amount in - $15,000 this year plus $5000 catch-up if you are over 50.

What is your alternative?

Defined benefit pension plans are on the way out - and have been for years and years(ask employees at IBM and Unisys, plus lots of other companies). Plus - even if your plan is still there when you are ready to retire - the income from it is not all that great. In my years as a financial planner, I've seen very few people actually be able to retire on just a pension alone - or on just a pension and social security, if it will even be there.

As others have said - the 401(k) gives you tax deferral on the amount you put in, plus the balance grows tax-free until you take it out. The match is free money and also grows tax-deferred. Yes, fees are a pain and 2% sounds high - but with any decent funds in your plan you should still be able to make the thing grow. Unless you are very close to retiring, put your money in a mix of equity funds - both US and international - and then leave the thing alone. DON'T put it in the money market or bond funds unless you are almost ready to retire or absolutely scared of the stock market.

[Ksec]

20. There are entire industries out here using your money to make money

And some do it shady.

Im of the opinion that those who profit off of your labor and money are parasitic.

[corporate_mike]

21. My company's 401(k) has no fees and good selection of mutual funds

Contact your HR dept.

[Rocknrule]

22. 401K, isn't that the bra size of most Republican women?

[lovuian]

23. As usual some can be scams and some not

but since pensions are on the outs this is for some the only way to go...

Its a terrible shame what they have done to pensions!!! Horrible...

[NMMNG]

27. My agency pays the fees

And I'm averaging about 10% most years.

[Nicole]

28. I put in only the amount matched

The extra I could have put in went to my mortgage co. to pay down the principal. I was able to pay my 30 year mortgage off in 18 years.

I think being mortgage free will make living on social security, pension & 401K a lot easier. Especially if one or more of them cease to exist.

[B Calm]

29. I would much rather have a guaranteed pension for life, but

my employer done away with company pensions, so I don't have any choice but too save in my 401 K or be an older desperate cheap laborer for some cheap labor con control freak!

[Jose Diablo]

30. Plus, you do not vote in any stockholder meetings

what this means is the stocks held by mutual funds are not voted by the real owners. The mutual fund operators have taken the voting power of the real owners, those that invest in the mutual funds are not able to control what the executives in the corporation are doing.

Thus the CEO's, who are actually 'hired hands' gain the power of ownership as the real owners become more or less absentee landlords. The CEO's are actually 'squatters' sitting on all the money of the corporation. The mutual fund operators are just flunkey's put in place by the bankers, directing the flow of investment money to the mutual funds.

The lack of owner oversight is what allows the corporations to use our money, to steal from us by off-shoring, using our own capital against our best interests. Plus, as an added bonus to the executives, they can dictate their own pay. Thats how they are getting so much money. It's like a club of elites connected by their 'social background', using our money for their best interests.

The establishment of the 401K's are what really fueled the boom of the 90's. It is the flow of 401 money that paid for the building of overseas plants that are being used to take our jobs from us. But we don't really own these plants, because all while this is going on, the capital is being siphoned away by pump and dump manipulations in the stock market. We're being screwed by wall street and the international investment bankers.

The same thing is happening with the pension funds, this country's financial assets are being gutted by the fascists.