401k

A 401k is an employer-sponsored, long-term savings plan that is intended to help you sock-away money for your retirement. A 401k offers significant tax breaks and has a few drawbacks. The money you put away now to be used later after 59 ½ years of age or at retirement is not taxed until it is distributed. Some companies match part of the dollars that you stash away. Your retirement savings are increased through these employer matching contributions. You can borrow against a portion of a 401K, as long as you pay it back plus the low interest. Otherwise, if you tap into your savings before 59 ½, you pay penalties for early withdrawal and the early distribution is also treated as regular income for tax purposes.

The Average 401k Balance Decreased 24% in 2008

A recent report from the Employee Benefit Research Institute and the Investment Company Institute reveals that the average long-term 401k balance decreased 24% in 2008. This figure includes contributions from both employer and employees. In addition, the losses are worse (30.5%) for accounts that were created more recently. The report also addresses the amount of time it could take for account balances to recover to beginning of 2008 levels. At lower assumed levels of equity market returns, the...

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Fees, Portability and Fiduciary Risk Continue to Present Hurdles for In-Plan Annuity Market

"In-Plan" annuities refer to the use of annuities within defined contribution pension programs such as 401k plans. The concept is relatively new, but the timing should be a perfect the concept to gain traction: The financial crisis has devastated the portfolios of many retirees and near-retirees. Millions of baby boomers will add to the 70 million or so U.S. residents over the age of 55. People are starving for stable, guaranteed sources of income in light of market volatility and increasing...

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Treasury Officials Seeking Automatic Annuity Options for 401k Plans

Officials from the Departments of Treasury and Labor want annuities to be a default option for workers who participate in employer-sponsored retirement plans such as 401ks. At a recent industry conference, Treasury senior advisor Mark Iwry spoke of creating annuity -based lifetime income options within the defined contribution 401k arena. Issues such as credit risk and portability continue to present obstacles to progress. Employer fiduciary liability with respect to in-plan annuity selection...

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Obama Discusses "Common Sense" Steps to Simplify Retirement System

This past weekend President Obama discussed his "common sense" steps to reform and simplify the system of retirement savings in the United States. President Obama seeks to extend incentives and simplified savings vehicles to the 78 million Americans who do not have access to a retirement savings plan through their employer. Some of the President's proposed changes include: The ability to put unused leave time, sick pay and tax refunds directly into retirement savings accounts. Simplified 401k...

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