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Exchange Traded Funds
EXCHANGE TRADED FUNDS They call ‘em ETFs. There are hundreds of them. The mutual funds don’t want you to find out about them. Why? Because they beat the socks off mutual funds in so many categories. The expense ratios of most mutual funds runs...
How to Avoid Dumb Investment Mistakes
Smart people sometimes make dumb mistakes when it comes to
investing. Part of the reason for this, I guess, is that most
people don't have the time to learn what they need to know to
make good decisions. Another reason is that oftentimes when...
How we eluded the bear in 2000
The date October 13, 2000 will forever be embedded in my mind. It was the day after our mutual fund trend tracking indicator had broken its long-term trend line and I sold 100% of my clients’ invested positions (and my own) and moved the...
Should You Get Out?
Pretend, for a moment, that you have a gut feeling the market will be falling. You think that oil, the hurricane, the economy, whatever, is going to ultimately bring down the market.
Should you get out of the market entirely?
Making a decision to...
Why should I use penny Shares to build wealth?
A strategic question. Why indeed? 1. A penny share would usually refer to a share available for less than $1.00. This makes the aquisition of shares manageable by even the most modest investment budget. 2. The London Business School’s research...
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Understanding 401k Plans
What is a 401(k) plan?
The 401(k) retirement plan is funded by employee contribution
and a matching employer contribution. The major feature of the
plan is that the contributions are taken from pre-taxed salary.
The fund accumulates tax-free until it is withdrawn. Most
businesses and tax-exempt organizations can create these
retirement plans.
The 401(k) takes its name from the IRC (Internal Revenue Code)
of 1978. The operation of the 401(k) is administered by the EBSA
(Employee Benefits Security Administration) of the Department of
Labor.
The 401(k) plan has a lot of advantages. First and foremost is
that the employee can contribute pre-tax money that reduces the
tax paid in each paycheck. Also, the company contribution and
any growth in the fund is free of tax until withdrawn.
The compounding of the fund during a 20 to 30 year period is
quite amazing. The employee has a lot of control in the
direction of the future contributions. When the company matches
your contributions, it adds something extra on top of your own
money. All money in the plan can be moved from one company to
another unlike pension.
The 401(k) plan is protected by pension laws since it is a
personal investment plan. It includes protection from
garnishment by creditors but not from domestic cases that
include child support.
There are some disadvantages in the 401(k) plan, it is hard to
get your 401(k) contributions before age 60 (59 1/2 to
Associated Websites
be
exact). The 401(k) is not insured by the PBGC (Pension Benefit
Guaranty Corp). Also, the company contributions do not kick in
until a certain number of years of service have been given. The
rules state that company matching contributions must either be a
3 year 'cliff' plan (100 percent after 3 years) or a 6-year
'graded' plan.
Employees participating in a 401(k) plan have many options for
investment. In most cases a listing of mutual funds. The mutual
funds usually include money market fund, treasuries, stock funds
and bond funds. Some plans may include investing in company
stock and US Savings Bonds. The employee gets to choose how the
savings is invested. The employee can also choose at any time to
stop contributions.
Financial advisers usually say that the average 401(k)
contributor is non-aggressive in terms of their investment
options. Stocks have historically outperformed other types of
investment, since the 401(k) is a long term investment it should
be able to minimize the stock fluctuations.
About the author:
Jay is the web owner of http://www.retirement-in.com Retirement Planning, a
website that provides information and resources about
retirement, from retirement planning and calculation, to state
retirement systems and retirement homes. You can visit his
website at: http://www.retirement-in.com/Alabama/ Alabama
Retirement
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