401k
401k Information

401 K Plans

Roth 401(k) plans were legislated into existence by the Economic Growth and Tax Relief Reconciliation Act of 2001. However, they were not set to begin until 1/1/2006 and were given a life span which lasted only through 2010.

The Pension Protection Act of 2006 permanently extended the use of Roth 401(k) plans. Now it becomes more important to understand the advantages and disadvantages of these plans.

Advantages

1. The biggest advantage may be for high income individuals. If you are comparing the Roth 401(k) against a Roth IRA, you will find the Roth IRA has upper income limits. If you are married and file a joint return and your adjusted gross income exceeds 6,000 (for 2007), you can’t have a Roth IRA. The Roth 401(k) has no income limits.

2. You can contribute more. For 2007, you can contribute up to ,000 to a Roth IRA if you are under 50 and up to ,000 if you are 50 or over. For the under 50 crowd, a Roth 401(k) allows up to ,500 and for those 50 and older ,500.

3. If you are over age 50 and still have some “catch-up provision” contributions coming to you, you can put those in the Roth account.

4. If your employer offers the Roth 401(k) option, you can have both. Simply allocate whatever percentage you want into your regular 401(k) and the Roth 401(k) accounts.

5. Roth 401(k) plans can be rolled over to a Roth IRA or to another Roth 401(k) if you switch employers.

6. Withdrawals from the Roth account can be made without paying income tax or the 10% premature penalty if you have had the Roth account for five consecutive tax years and you are at least 59 ½, disabled, or dead (whoever said the IRS doesn’t drive a hard bargain?).

Disadvantages

1. Your employer may not want to offer the Roth 401(k) option.

If your existing 401(k) plan provides for a Roth election, the plan has to set up separate accounts and record keeping systems for the Roth contributions. This costs money and may be a deterrent to offering the election.

Many 401(k) plans are “boiler plate” plans, especially those for small employers. I think you will see plan sponsors come up with a simple amendment now the Roth option is permanent. From a bookkeeping point of view, it’s just a couple of line item alterations. All in all, I would predict the Roth option to gradually become more available.

2. If your 401(k) plan has an employer match, the match must be allocated to the regular 401(k) plan.

Cautions

1. The rules require money remain in a Roth 401(k) or Roth IRA for five consecutive years before it can be taken out without tax. But if you don’t have a Roth IRA already set up to receive a roll over from your Roth 401(k), the five year clock starts running when the new Roth IRA receives the rollover.

So if you are within five years of retirement, you need to think about the ramifications of a new five year period starting fresh. The solution is to plan ahead if you can by rolling your Roth 401(k) funds into an existing Roth IRA. When this existing Roth IRA is at least five years old, you can take the money out without paying tax on it.

Failure to plan ahead may not actually be as bad as it seems. Here is the IRS explanation: If you take money out before the five year required time frame, the amount you take out is taxed at a percentage which represents the ratio of the earnings in the account to the total account. So let’s say you had ,000 in your account–,400 you put in and 0 of earnings­-and you take out ,000. Here is the math…

,400/,000 = 94% x ,000 = ,700 not subject to tax. The balance of your ,000 withdrawal, 0, is taxable.

2. One of the advantages of Roth IRAs is they are not subject to the minimum distribution requirements when you reach age 70 ½. Roth 401(k) plans are treated just like regular 401(k) plans are subject to RMDs. So you will want to roll your Roth 401(k) over to a Roth IRA to circumvent this rule.

Wh 00004000 ether or not opting for setting up a Roth account in your 401(k) plan would be to your advantage is a function of a number of factors. You, of course, want to make sure your situation and goals match the rules.

The points advanced here represent my understanding of the Roth 401(k) and in no way are to be taken as tax or investment advice. You need to sit down with your financial planner and accountant, have them run hypothetical calculations of projected after-tax distributions from both types of plans and have a clear understanding of the rules of the game before you can make an informed decision.

Frequently Asked Questions

  1. QUESTION:
    What is the average matching funds for 401(k) plans?
    A casino I applied for told me that they will match my 401 (k) plan up to 8 %. What I would like to know is what is the average funds that companies will match. What is the company name or business type (finance, casino, construction, etc.) and how much will they match. And what is the job title: manager, maintenance, construction workers, etc.

    • ANSWER:
      if they are matching 100% up to your first 8% (that’s up to 8% of your salary in FREE money) that is outstanding – I would say the avg company only matches 25-50% of your first 6% of contributions,

      so as soon as you can afford to, contribute and get it up to 8% – that’s 16% of your pay a yr going into retirement savings (up to 16,500/22,000 a yr limit (for YOUR 8%), depending on your age

      matching percentage should be the same for all employees, unless there is a union involved, then they usually have their own pension plans and cannot join the 401k plan

      there are 100,000′s of companies that have 401k plans and match

  2. QUESTION:
    in a no fault divorce when you do it yourself how do you divide your retirement and 401 k plans?
    My husband and I have been married 33 years…and he wants to do a no fault divorce kit he bought from a book store…I want to divide our 401k and retirement plans but dont see that detail..any ideas?

    • ANSWER:
      1. Sorry to hear about the marital situation. Do you have children? If yes, any way to try and seek counseling to resolve the issues. Professionally speaking, “Divorce sucks” – esp if minor children are involved.

      http://family-marriage-counseling.com/therapists-counselors.htm

      2. About No Fault Divorce (law site)

      http://www.nolo.com/article.cfm/ObjectID/6191B9DC-00BF-42CA-A5ADA95C2AEC5196

      3. In most states whatever assets and liabilities existed prior to marriage, stay with that person unless you both agree otherwise in writing and must be filed with the Court (“Stipulated Divorce Settlement”).

      4. You will need to include in the no fault filing (if that is what you do), all the terms of how everything will be divided. A judge will need to approve it. Once the judge approves it, the 401(k) assets might be divided where 1/2 the funds (or amount agreed to) would be sent as a “Rollover IRA” to the other spouse.

      5. I highly advise seeking a CPA or CPA attorney to assist with this careful move. The firm who will be dividing the assets (Contra Account) will need to see the court approved order before any money is transfered to another account. The Receiving Account’s firm will also need a copy of the court order.

      6. You also need to include a statement in the Agreement about how is social security going to be divided if at all; spousal support, child support if minor children involved, custody if minors are involved?

      Hope you can work it out. 33 years is a loooong time to just give up unless it is real abusive or something.

      Good Luck!

  3. QUESTION:
    Is it better to have two 401-k plans or one?
    I have a year’s worth of savings with TIAA-CREF and now have a new job where my 401-k is through Fidelity. Is there a benefit to having two 401-k providers? Or is it better to consolidate all funds to Fidelity?

    • ANSWER:
      transfer the 401k from the old job intu IRA.
      Yu kan stae with tiaa-cref, or muve tu different mutual fund kumpanee.

  4. QUESTION:
    Examples of companies who use SEP or 401(k) retirement plans?
    I need actual examples of companies who use SEP and/or 401(k) plans for a taxation project. If you know for example that K-Mart uses SEP retirement plans for employees let me know. Sources help too. Thanks

    • ANSWER:

  5. QUESTION:
    I am eligible for 401(k), 403(b) and also 457(b) Plans, is there an overall limit to contributions to 3 plans?
    I work for a State University which has Optional Retirement Plan(401(k)) for which I can contribute 8% and my employer matches 7% of my salary, we also have 403(b) with ,500 limit and also state offers 457(b) with 15,500 limit. I was wondering if there is an overall limit to contributions. Please advise. Thank you.

    • ANSWER:
      contributions to a 403(b) and a 401(k) are subject to what is called the 402(g) limit which for 2008 is ,500. Contributions to a 457 plan are NOT subject to this limit but are subject to their own limits because they are considered employer contributions. So bottom line is you have a ,000 limit here unless the individual plan has a lower limit.

  6. QUESTION:
    When are the Dems going to show some real balls and seize those pesky 401(k) plans?
    You know it has to annoy them that all that money sits there untaxed. Just think of how many mice can be saved with that money? Just think of how much ACORN can do with that money?

    • ANSWER:
      They are in the process now… dont you see the news???….

  7. QUESTION:
    Can I rollover multiple 401(k) plans into the same rollover IRA?
    I have two 401(k) plans with different employers and wanted to roll them over into a rollover IRA. Is it possible to open just one rollover IRA account and rollover both 401(k) plans into this account? I believe there is a 60 day rule of some sort with regards to rollovers, can someone explain that to me fully and how it would apply if I did multiple 401(k) rollovers?

    I also wanted to convert that rollover IRA into a Roth IRA but would it count towards my Roth IRA contributions for the year?

    • ANSWER:
      What you want to do is not a rollover but a direct transfer from your 401(k) accounts to an IRA trustee. I recommend Vanguard; they have low-cost funds and helpful information. Go to Vanguard (or wherever) and open an IRA account. It must be a traditional IRA, not a Roth. Then contact your former employers, request a distribution form, fill it out, send it back. Your 401(k) account will be transferred directly to the IRA. You won’t get a check. You won’t have to worry about the 60-day rollover window.

      The transfer must be to a traditional IRA. Once that IRA is funded, you can convert all or part of it to a Roth. Remember, you have to pay taxes on the amount you transfer. A conversion doesn’t affect contributions. But keep in mind the income limits that apply to a Roth (if you make too much money you don’t qualify).

  8. QUESTION:
    How are 401-k plans paid out when a person retires from one of the big 3s?

    • ANSWER:
      Federal law and your plan document will tell you. You basically can a) leave it at your former employer’s, with the same investment options as before; b) roll it into an IRA, where you can decide what to invest in; or c) take it in cash and pay taxes on it.

  9. QUESTION:
    Now that the stock market has crashed, Obama’s threat to nationalize the 401(k) plans is moot, isn’t it?
    The Democrats have sure figured out capital destruction.

    • ANSWER:
      Obama never threatened to nationalize 401k plans.

      The truth is the other way around. The Republicans wanted to privatize social security and have everybody put their retirement money in the stock market, when the market was at a peak. Thank goodness the Democrats in Congress stopped them or social security would be wiped out, too.

  10. QUESTION:
    What kinds of investment choices are typically associated with 401(k) plans?”?

    • ANSWER:
      Mutual Funds mostly. Typically, a plan will give an assortment of funds which vary by risk (conservative to aggressive), market emphasis (small cap, large, cap, mid-cap), and investment emphasis (value, growth, income). You should read the prospectus for each fund you consider and choose a mix of funds based upon your age and number of years until retirement.

  11. QUESTION:
    Employee 401(k) plans are ______ taxable?
    Employee 401(k) plans are ______ taxable

    FICA, Federal and State or
    State or
    FICA, But not Federal and State

    • ANSWER:
      (Do your own tax homework.)

      (Contributions to) employee 401(k) plans are
      FICA, not Federal (income) taxable,

      It/they may or may not be subject to State income tax, local income tax, local employee surcharges, other state taxes, state and local employment taxes, etc., etc….

  12. QUESTION:
    how safe are 401-k plans amidst the market’s crisis?
    with people continuing investing into their retirement plans, how safe are they and the banks whom are associated with them?

    • ANSWER:
      Retirement funds that are FDIC insured are “protected” up to 0,000, not 0,000. If they are not FDIC insured, then your funds could be in jeopardy, and you should worry about it.

      And just because something is FDIC insured does not mean that you will have immediate access to your funds in the event your bank fails. It could take years to get your money.

      I am no longer convinced that these retirement funds are safe. Until the laws change so that they favor individuals over corporations, I would not participate in them. You will hear near-unanimous disagreement from corporations and banks…that’s because they want your money. If you want to trust them, fine. Many people have lost everything they had in the financial institutions that have failed.

      For now, I’ve put my funds in CDs, which are FDIC insured. However, I know that FDIC is only as good as the paper its money is printed on. In other words, I have no faith in the economic system of the USA.

      If it were not for the 10% penalty for early withdrawal, I would use my 401k to pay off my house and own it outright. Honestly, I’m just waiting for this government to find a way to drain our 401ks, the very last treasure chests that greedy Wall Streeters want to get their hands on.

  13. QUESTION:
    T or F, Employee Contributions to 401(k) plans are exempt from employee contributions to Medicare Withholdings?
    True or False?

    Thanks!

    • ANSWER:
      False. They aren’t exempt from income tax either, it is just that income tax is deferred.

  14. QUESTION:
    Would Obama, Dems Kill 401(k) Plans?
    OBAMA’S PLAN TO SEIZE YOUR 401K
    Would Obama, Dems Kill 401(k) Plans?
    October 23, 2008 10:47 AM ET | James Pethokoukis | Permanent Link | Print
    I hate to use the “S” word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers’ retirement accounts (Efharisto, Fausta’s Blog). Now, even Uncle Sam isn’t that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.

    House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” for every worker. The government would deposit 0 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, said that since “the savings rate isn’t going up for the investment of billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that billion for a policy that’s not generating what we now say it should.”

    A few respectful observations:

    1) McDermott is right when he says the savings rate isn’t going up. But the savings rate doesn’t include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at 0, for instance, and its value doubled by December, the savings rate measure would still value that investment at 0. In short, the savings rate is a phony number.)

    2) So based partly on the above faulty logic, the .5 trillion, as of the start of the year, invested in 401(k) plans doesn’t count as savings.

    3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: “I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my money and my mouth both say equities.”

    4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly ,000. But ,000 growing at 7 percent a year for 40 years leaves you with 0,000. That is a high price to pay for what Ghilarducci describes as the removal of “a source of financial anxiety and…fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets.” Please, I’ll take a bit of worry for an additional 8,000.

    5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn’t jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.

    My bottom line: If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.

    Do you think this is a good plan?

    • ANSWER:
      I dunno’ where you get this stuff, but I do know that because all of these things have to go through a long and involve legislative process and eventually they have to be signed into law by the president. After that, if anyone objects to a given law it will be challenged in court. Of course anything can happen, but as a rule very few things of a radical nature ever get passed. Worry about real things, not stuff that totally foolish!

  15. QUESTION:
    401 k??????????
    what is a 401 (k) plan???

    • ANSWER:
      a retirement plan your employeer usually offers this and say you contribute 3% of your earnings to it they will usually match a certain portion of it.. highly recommend it

  16. QUESTION:
    Why did a McCain aide say today that we need to lower the capital gains tax rate on 401 (k) plans?
    He said this on MSNBC today. If he doesn’t know, capital gains tax DOES NOT apply to 401 (k) distributions. Withdrawals from these retirement accounts are taxed as ORDINARY INCOME. So why would he say that we need to lower it for 401 (k) plans?

    They also do not apply to ANY retirement plan, contributions or withdrawals. Capital gains apply to gains made from the sale of an asset outside of a retirement account, such as a home, the sale of individual stock outside of a retirement plan, a mutual or index fund, or a brokerage account.

    Should McCain hire some economic people that actually know what they are talking about?

    • ANSWER:
      Republicans SALIVATE over any opportunity to lower the capital gains taxes. Maybe McCain doesn’t know that capital gains tax doesn’t apply to 401K disbursements but if he does know he probably doesn’t care. The whole idea is to dangle a little carrot in front of the middle class that will allow the rich to save millions and billions on capital gains.

  17. QUESTION:
    What is the effect of the crisis on pension plans, especially 401(k)s?
    I saw Jon Stewart attacking Jim Cramer saying his (Stewart’s) 75 year old mother had seen her savings stolen by Wall Street. How true (and widespread) is this? What is the mechanism? (Sorry if this sounds stupid, but I’m not American and am trying to gauge the real impact of the crisis over there.)

    • ANSWER:
      Retirement plans are losing value. The stocks and funds inside of those plans are dwindling.

  18. QUESTION:
    how much retirement money is in 401(k) plans and how is it invested?

    • ANSWER:
      All plans have rules to become eligble first. When can I enroll in the Plan?
      You must be 21 years old and have completed at least one year of service with the Company to join the Plan. Then you contribute savings and the company usually has a sliding matching scale How much can I contribute?
      Through automatic payroll deduction, you can contribute between 1% and 25% of your eligible pay on a pretax basis, up to the annual IRS dollar limits. Does the Company contribute to my account?
      The Company helps your retirement savings grow by matching your contributions.
      (This is from my plan yours will be different)
      “Your company” will contribute for every on the first 3% of pretax pay you contribute, and $.50 for every on the next 2% of pretax pay you contribute. You can access it on-line and change how it is invested What are my investment options?
      To help you meet your investment goals, the Plan offersyou a range of options. You can select a mix of investment options that best suits your goals, time horizon and risk tolerance. The investment options available through the Plan include conservative, moderately conservative, and moderately aggressive funds. A complete description of the Plan’s investment options and their performance, as well as planning tools to help you choose an appropriate mix, are available.

      go to link to learn more and talk to your benefits manager where you work!

  19. QUESTION:
    How do you open an account or make an investment in a 401(k) plan?
    I just need to know what are the steps to opening an account and making an investment in a 401(k) plan, thanks!

    • ANSWER:
      401K plans are something you get through your employer.
      Does your employer offer this?
      Contact your HR manager.

      If you don’t have an employer that offers this (sometimes very small employers don’t offer it), then you open a discount brokerage account and open a ROTH account.
      You can drop ,000 a year into this account.
      Why don’t I suggest the tax-deductible IRA instead?
      You sound young enough that the ROTH would be the better investment tool.
      Good companies are Charles Schwab, Fidelity Investments, TD ameritrade, Vanguard.

      Note: You will need about ,500 minimum to open an account at some of these brokerages.
      Another note: Do not invest in your retirement unless you have a solid 6 to 8 months worth of living expenses put away in a cd or a savings account. This is money in case you lose your job, have medical expenses not covered by insurance, or have major car repairs. No one, absolutely no one should live without this liquid fund.

  20. QUESTION:
    Is it better to have a 401(k) or Executive Differred Compensation plan?
    I recently moved to the US from Canada and have been wondering about these two types of plans. Originally I did not intend to stay in the US for more than a year and decided to go with my employers Executive Differred Compensation plan (they match contributions at 50%) since I qualified for it with my position. Things have worked out differently and now I will be in the US much longer than I had planned. Should I start a 401(k) plan now or stick to the Exec one I started with?

    • ANSWER:
      Deferred Compensation Plans are usually set up to for executives who otherwise may be ineligible for the 401(k) plans.

      Each year, there is an annual cap to which an employee can set aside a portion of their current income (,000 for 2006 and ,500 for 2007). These amounts are limited, however, for persons whose salary levels are considered “highly compensated” (annual limits for each year). When salary levels reach those amounts, the contributions may be limited or unavailable. To compensate for this, the company may choose to set up DCPs.

      Both plans are contributed pre-tax.

      DCPs are considered non-qualified plans. One difference is that 401(k)s are protected from creditors whereas DCPs are not. One other thing to consider in choosing which plan to fund.

      Look at the two different plans your company provides (401 and the DCP) and compare. Another thing to consider, however, is where you intend on retiring — Canada or US?

      Each DCP and 401 plans are customized to the company sponsoring it. Ask someone from your HR department to give you more information. Or get the details of your company’s plans and seek a qualified tax accountant/financial planner for more details.

      - John

  21. QUESTION:
    What stocks do 401(k) plans invest in?
    I haven’t started a 401(k) plan yet and I’m concerned about the types of companies my money would go to. How are stocks and money markets chosen? I don’t want my money going to corporations I don’t personally support or believe in. And if not a 401(k), what other retirement savings option do I have where I don’t have to worry about who gets a hold of my money?
    Some clarification, companies like the ones noted by DK are exactly the types I don’t want to give money to for ethical reasons. I’d like to avoid supporting environmental polluters, media mongers, and heart attack pushers.

    • ANSWER:
      Read;
      401K’s For Dummies
      and
      Mutual Funds For Dummies

      This is a great time to be a new investor. Don’t miss this opportunity!

  22. QUESTION:
    Democrats want to confiscate 401(k) retirement plans for public good? Is this true?
    Anyone know about this?

    • ANSWER:
      Not even close.

      Why would you even dream that anyone could just walk in and take your savings?

  23. QUESTION:
    Is it mandatory to participate in a 401(k) plan or can an individual opt out?
    Does an individual have a say in whether he/she wants to contribute to or be enrolled in a 401(k) plan?
    Can an individual opt out when offered to be enrolled in the program?
    Thanks everyone for taking the time to answer my questions. I mostly like being hands on with my investments and prefer to choose where I invest my money such as in Money Market accounts, Certificate of Deposit accounts, Bonds and the Stock Market.

    I was curious and wanted to know should the situation arise if I had an option to opt out of being enrolled in a 401(k) plan.

    • ANSWER:
      You can opt out but if you do, will you have the discipline to save on your own? Have you been able to save on your own in the past?

  24. QUESTION:
    Questions about Trad IRA and 401(k) plans?
    I am a single female, age 56 and have some questions about my Trad IRA and my 401(k) plan at my job. First, I’ve been working at this job for only 4 years (make about 000) and haven’t accumulated much (around -13,000). Every pay period (26 pay periods per year), I have 0 deducted to go into this account. How much more can I have deducted? At my age, is there a limit I can have taken from my paycheck? We also have a profit sharing plan but the firm contributes to that. Next, I have a Trad IRA that is about ,000. I don’t know the difference between traditional IRA and Roth IRA, can someone explain in “layman’s terms.” At my age and status, which is the better and/or preferred one? The way I look at it, I’ll be working until I’m in my mid-60s and am trying to achieve a good retirement. Thank you to anyone who can explain this to me more thoroughly.

    • ANSWER:
      You qualify for “catch-up” withholding, so no doubt you COULD have way more taken out than you can afford to have taken out. 401Ks are employer-sanctioned retirement savings plans and thus you can’t take a Tax Deduction for any IRA contributions you make. The 401K deductions are usually pre-tax, but the Roth IRA is post-tax contributions, so you won’t be taxed again when you withdraw the money, after you retire, the way you will be for 401K and IRA contributions. Hopefully you will be able to continue working until that age, but you should try to deduct as much as you POSSIBLY can afford, now. The 401K is probably preferable, particularly if your employer “matches” even a part of your contributions, With only 8-9 years left, though, you are unlikely to “achieve a good retirement” but you need to do whatever you can, since SS will not go far enough to keep you going, let alone afford you a “nice” retirement.

  25. QUESTION:
    Your friend, Sal, wants to know how much he would save in taxes by contributing to his 401(k) plan?
    In a memo to your friend that outlines how much he would save in taxes by contributing to his 401(k) plan. Include an Excel spreadsheet that provides answers for each of the following investment choices: 2%, 4%, 6%, 8%, and 10%. Additionally, provide Sal with other suggestions to minimize his taxes.

    • ANSWER:
      1. We cannot include an Excel spreadsheet here.
      2. You need to tell us how much Sal earns and what his tax bracket is.
      3. I would suggest that Sal hire someone to watch his kids and make sure that they do their own homework, instead of posting it here, and then deduct the expense as “child care”.

  26. QUESTION:
    Young Jehovah’s Witnesses: Does it Show a Lack of Faith to Contribute to Retirement Plans Such as 401(k)?
    It is well-known that the Witnesses teach that we are in the very end of the “last days” spoken of in the New Testament. They have taught this for some time.

    For example, in the May 22, 1969 Awake, page 15 states “If you are a young person, you also need to face the fact that you will never grow old in this present system of things.” The same article adds “Therefore, as a young person, you will never fulfill any career that this system offers.”

    Interestingly, the teenagers to whom this article was directed are now almost 60 years old!

    So, what about today? For example, would it betray a lack of faith for a 25 or 30 year-old Witness to contribute to a 401(k) plan? Should he put this money in the contribution box instead? To a Witness, what is the likelihood that such a young person will retire in “this system of things”?

    For a 25 year-old to retire at age 65 would mean that “this system of things” would still be going in the year 2048–a full 134 years after the “last days” began in 1914, and 128 years after Watchtower President J.F. Rutherford published a book titled “Millions Now Living Will Never Die.”

    @anewme: Thank you for responding. Do you mean that JWs no longer believe that we are in the end of the “last days”? Also, can you point me to a WT publication where the WT leaders humbly apologized for being wrong in discouraging its young people from pursuing careers and education? I have not found such an article.

    Finally, do you think it shows lack of faith for a young JW to contribute to a 401(k) retirement plan?

    • ANSWER:
      I was 18 when that Awake was published in 1969.

      It was considered immature if you bought a house, worked overtime, went to college and if they had been available then, investing a 401K would bring a frown to an Elders face.

      Fortunately, after 1975, I really didn’t listen to them anymore on these issues. In fact, after 1975 and Armageddon did not come, it seemed like they backed off on this type of stuff.

      Remember that Armageddon was still going to come before the end of the 20th Century and before the 1914 gen died off. So, while nothing happened in 1975, the Jo Ho mood was that it was imminent, so why make plans for a future in this old world.

      For those Jo Ho “1975 Deniers”, this is what I was reading:

      The Watchtower, 2/1/69 PAGE 70

      “More recently, the book entitled “Famine-1975!” [by W. & P. Paddock, 1967, pp. 52, 55, 61.] said concerning today’s food shortages: “Hunger is rampant throughout country after country, continent after continent around the undeveloped belt of the tropics and subtropics. Today’s crisis can move in only one direction – toward catastrophe. Today hungry nations; tomorrow starving nations.. By 1975 civil disorder, anarchy, military dictatorships, runaway inflation, transportation breakdowns and chaotic unrest will be the order of the day in many of the hungry nations.” {TLEL 88-9} [Elsewhere, the same source is quoted as stating "By 1975 a disaster of unprecedented magnitude will face the world. Famines, greater than any in history, will ravage the undeveloped nations."]”

      Why quote this book if you don’t believe what it says. You all remember the big 1975 famine, don’t you?

      The Jo Ho’s quote this book again in the Watchtower, 5/1/70 PAGE 270.

      This is one of my all time favorite Jo Ho goofy quotes:

      “Our Kingdom Ministry”, May 1974, page 3:

      “Yes, since the summer of 1973 there have been new peaks in pioneers every month. Now there are 20,394 regular and special pioneers in the United States, an all-time peak. That is 5,190 more than there were in February 1973! A 34-percent increase! Does that not warm our hearts? Reports are heard of brothers selling their homes and property and planning to finish out the rest of their days in this old system in the pioneer service. Certainly this is a fine way to spend the short time remaining before the wicked world’s end.—1 John 2:17.”

      The Society, in 1976 “What, you sold your house. quit you job, sold your stocks, quit college? Hey, who told you to do that?”

      The Watchtower Society did!.

      “Reports are heard of brothers selling their homes and property and planning to finish out the rest of their days in this old system in the pioneer service. Certainly this is a fine way to spend the short time remaining before the wicked world’s end.”

      Some Jo Ho “1975 Deniers” will say, “Hey, they never said to sell your house or that Armageddon was coming in 1975!”

      If you were a Jo Ho in 1974 and read the above, what would you think.

      Then they blamed us.

      In its issue of July 15, 1976, The Watchtower, commenting on the inadvisability of setting our sights on a certain date, stated: “If anyone has been disappointed through not following this line of thought, he should now concentrate on adjusting his viewpoint, seeing that it was not the word of God that failed or deceived him and brought disappointment, but that his own understanding was based on wrong premises.” In saying “anyone,” The Watchtower included all disappointed ones of Jehovah’s Witnesses, hence including persons having to do with the publication of the information that contributed to the buildup of hopes centered on that date.”

      The point is , with all this talk most Jo Ho’s did not expect the system to last until they retired. If you had told me in 1975 that I would be 57, a granfather and ready to retire from my second career, I would have told you that you were nuts. I was nuts for believing a single word they said.

      I see Jo Ho’s in their 70′s still working. I see an elderly couple, that both work at McDonalds. One old guy works at the 7/11 two blocks from my house. He stopped going to meetings about 5 years ago. He is not disfellowshipped, but I am. I go in there and we always talk for 15 or 20 minutes. He’s bitter.

      He married late in life, because he used up his youth pioneering. Thus he has no kids or grandkids, which he regrets. His tipping point was when they changed the interpretation of the 1914 generation.

      I know a hundred guys like him.

      So, Jo Ho’s when you’re 70 and can’t live on your social security check, so you take a job mopping up hurl and lung butter at the Speedway gas station, be sure to say howdy to those JW brothers of yours who stop for a break during service.

      EDIT CYBERME: You said:

      “Jehovah’s Witnesses have adjusted their viewpoint in this regard and no longer make catagorique statements of this kind.”

      “I’m sure you will congratulate them for being humble enough to recognize past mistakes and correct them.”

      “Why dwell on the past? Move on!” (sic)

      Is it very important because many people believed what the Society said and lived their life around what later turned out to be false prophesies and now suffer as a result. You dismiss these things so flippantly, like they’re meaning less.

      Well I lived this stuff and I see some of the results.

      If I were you or any Jo Ho today, I would ask myself what might the Watchtower be teaching today, that has a profound effect on your life that is subject to change. All of it, at the whim of 12 old guys in New York.

      Of course the Watchtower doesn’t make any direct statements of this kind, much anymore. They were wrong every time.

      God’s mouthpiece, his channel of communications made mistakes in the past and you find no problem with that?

      In view of your comment “Why dwell on the past? Move on!”, consider this:

      From the Watchtower, 5/1/93 page 17:

      “From the time Christ’s presence began and down to 1918, the slave class, despite unpopularity, persecution, and even some confusion, had been seeking to give timely food to the domestics. This is what the Master found when his inspection began. The Lord Jesus was pleased, and in 1919 he pronounced that faithful approved slave class happy. What was the slave’s delightful reward for doing what his Master had appointed him to do? A promotion! Yes, larger responsibilities were given in advancing his Master’s interests. Since the Master was now a heavenly King, why, then, his earthly belongings became even more precious.”

      This event in the past in the basic foundation of Jehovah’s Witnesses. This was when Jesus “approved” of the Watchtower Society and appointed it his channel of communications.

      So everything from that point, 1919 on, is from Jesus. So, Jesus was wrong…or did he allow his Channel of Communication to misunderstand and make false statements and predictions?

      Why would it be that Jo Ho’s selectively choose what events or predictions, made by the Watchtower Society were “old stuff” and not to be “dwelled upon” and other stuff, like the 1919 appointment by Jesus is still an integral part of the organizations beliefs.

      Lastly, what if the Watchtower Society said Armageddon was going to come, definitely in 2015, so you better prepare. It’s pointless to invest anytime or money in this system of things, so only the basic education is necessary, why bother with a retirement account, etc etc. Than they commended in print Jo Ho’s who sold their house, quit their job to pioneer in “the short time we have left”……and it didn’t happen.

      That was what happened in 1975. Although they were still saying that Armageddon would come before the end of the 20th century and before the 1914 gen died off.

      What would you do, in view of the 2015 hypothetical prediction? Sell your house and pioneer?

  27. QUESTION:
    McDonald’s 401(K) Plans/Benefits?
    Does McDonald’s offer a 401(K) for employees on part-time or does it have to be full-time?

    • ANSWER:
      Full time only.

  28. QUESTION:
    How do I find plan admin for 401(k) for company that went out of business yrs ago. I don’t have any paperwork.?
    My sister worked for a company several years ago. About 4 yrs ago it went out of business. She needs to find out who the 401(k) plan admin was to determine if she still has money in her 401(k) account. How do we do that?

    • ANSWER:

  29. QUESTION:
    How will a U.S. citizen working in India be taxed in India on his/her contributions to a U.S. 401(k) plan?
    Also, how will a U.S. companies matching contributions and profit sharing contributions to a U.S. 401(k) plan be taxed in India?

    • ANSWER:
      I don’t know, you could look at the India Government website. One observation though – If you were an Indian citizen / company working in the U.S. you & your company would have to pay U.S. taxes in exactly the same way at U.S. citizens working in the U.S. so why would you expect it to be any different the other way around?

  30. QUESTION:
    How can I get my 401(k) from my previous employer?
    The company I worked at two years ago had a 401(k) plan I enrolled in, and after I left the company I never did anything with the account. How do I go about accessing if it’s still possible, and what should I do with it. I don’t have a 401(k) with my current company, so I can’t roll it over. Is it even still possible to get access to that money?

    • ANSWER:
      You need to research what happened to the money.

      Call your old company. They have the information on your 401k plan.

      One of three things probably happened:

      1) They paid you the balance of the 401k when you left.

      2) They rolled it into an IRA for you.

      3) It’s still in their 401k program.

      If you need to rollover the 401k into an IRA, be careful there are penalties that can occur if not completed correctly.

  31. QUESTION:
    how do I find an old 401 k plan?
    I worked for a Block Buster franchise on the Eastern shore of Maryland and had a 401 k plan.

    • ANSWER:

  32. QUESTION:
    How safe is my 401(k) retirement account?
    Banks insure, I believe, up to 0,000 in an account.

    Is there any insurance on 401(k) plans?

    My entire retirement account is with a company that has been considered solid, Now I don’t think any company is “solid”.
    Fortunately I took all my money out of stocks and put it into short term money market or cash about 4 years ago.

    My only other income is social security.
    My moneys is now in an IRA account and in money market and cash. All with a single company. Is it insured at all?
    Up to the 0,000 as with banks?
    Totally insured?

    • ANSWER:
      A 401(k) is a section of the tax code (401) and not an investment.

      What is inside the 401(k) matters. Don’t know what you’re holding so I can’t tell if it is “safe.”

      401(k) accounts are NOT kept on a company’s balance sheet. Thus in the event the business failed, your 401(k) is not wiped out unless, all your money was invested in the company’s stock.

      more:
      Pension Benefit Guaranty Corporation
      (protects against company failure, not a drop in your investments)

      http://www.pbgc.gov/workers-retirees/benefits-information/content/page13181.html

      edit:
      Nice work on the money market. Is it FDIC insured? Some are most are not. Read the print on this not what people tell you.

      If you have left the company, I would move the 401(k) and do a “Direct IRA Rollover.”

      Here you have better control and virtually unlimited investment options verses the dozen or so funds the company has.

  33. QUESTION:
    Is a 401(k) plan a voluntary payroll deduction or a compulsory payroll deduction?
    Is a 401(k) plan a voluntary payroll deduction or a compulsory payroll deduction?

    • ANSWER:
      Amounts that an employee contributes to a 401k are voluntary.

  34. QUESTION:
    401 K savings/ING savings account and how tax filing works when you contribute money into them!?
    I am starting to add funds into my 401 K plan and I also just opened an ING Savings Account to contribute into as well. What is the minimum balance of money I need to claim these contributions on my taxes next year? How much money can you claim off of these two plans….(Limit)…? Thanks

    • ANSWER:
      The limit on 401K contributions change each year and depend on age. For example, the 2007 limit for those in their 30′s was ,500.

      Contributions to a 401K are automatically subtracted from your income by your employer. The amount on your W-2 is the difference between your gross pay and the 401K contributions, so you get the tax savings without claiming anything.

      If the ING account is an IRA, the contributions limit change each year and depends on age. For example, the 2007 limit for those in their 30′s was ,000. You can claim any contributions to an IRA; there is no minimum. Even if you just contribute , you can claim that.

  35. QUESTION:
    Can I make individual contributions to a 401 K sponsored by an employer that I no longer work for?
    I want to keep investing in my Fidelity 401 K. But I’m changing employeers and my new employer does not offer a 401 K with Fidelity. I do not want to roll over to my new employer’s 401 K plan or an IRA. So can I contribute to my old Fidelity 401 K out of my own pocket?

    • ANSWER:
      Most companies will not allow you to do this.

      Your best bet is to rollover into an IRA. The IRA will give you more options on what funds to invest in than a typical 401K.

      You can even trade stocks in an IRA and buy real estate (in certain conditions).

  36. QUESTION:
    Are employer matching contributions to a 401(k) plan taxable as Social Security or Medicare wages?
    Elective 401(k) contributions are tax deductible from Federal Income Tax, but they’re not for Social Security and Medicare. Earned income that is deferred still has to be counted for these taxes, but are the matching contributions from the employer considered extra income for these taxes?

    • ANSWER:
      No. The employer’s match are not subject to FICA. The company will get a deduction for the match on its corporate return.

  37. QUESTION:
    Is it better to save up money yourself for retirement or is it better to use the 401 k plan?
    Do you think it’s better to save up money for retirement like putting it in a safe somewhere in your home or is using the 401 k better for saving up?

    • ANSWER:
      do both or you’ll be eating nothing but Ramen noodles the last 15 years of your life.

  38. QUESTION:
    401 k plan i want to cash out how do i do it ?
    we have a 401 k plan and before i leave on maternity leave i want to know how i can cash out on this?

    • ANSWER:
      A) Most will not allow you to do that since you are not terminating your employment, you are going on (essentially) short term disability leave.

      B) Cashing out is a bad idea since not only will you get about a 20% tax hit, you will also get another 10% penalty for early withdrawal.

      Your best bet is to just leave it alone. I understand you may need that cash now to help cover bills, but it will cost you much more by removing it.

  39. QUESTION:
    are withdrawals from 401(k) plans subject to fica tax?

    • ANSWER:
      Wages generally are subject to FICA taxation when they are paid. However that’s not the case for nonqualified deferred compensation. It is generally subject to FICA when the services for which it is paid are performed, or when the right to the deferred comp is no longer subject to a substantial risk of forfeiture, whichever is later. Often that means that deferred comp is subject to FICA in the year it’s deferred.

      Until recently, this wasn’t cause for major concern because most people with deferred comp arrangements were over the FICA wage base when the services were performed. Now that the Hospital Insurance part of FICA is owed on all wages, however, there’s no escaping paying at least some FICA tax on all deferred comp. Although the issue has now been important for a few years, no one had any guidance on the trickier aspects of exactly when deferred comp was subject to FICA or how to value the amount that would be taxed.

      IRS finally issued detailed proposed regulations that address many of the uncertainties. As a result, all nonqualified deferred comp arrangements should now be reviewed to determine if any action should be taken. The new rules are quite complicated and failure to adhere to them could result much larger FICA taxes in the future. If deferred comp that should be taxed (or should have been taxed) under the new rules isn’t, it will be subject to FICA when paid. If that occurs after retirement, when the recipient has no other wages subject to FICA, both employer and employee would be liable for full FICA taxes on the entire payout, including earnings credited on the amounts deferred. (Reporting the payouts under the new rules avoids much or all of FICA liability on earnings credited to deferred comp). Not paying FICA under the new rules also could subject future payouts to potentially higher FICA tax rates and a higher OASDI wage base.

  40. QUESTION:
    What are the best investment plans ( Roth,401 k, bonds,) in order?
    I currently have an IRA Roth ( which I hear is the best of all plans ) , IRA savings account ( 5% APR ) and a little bit in my 401k. What are the rankings, best to worst.

    • ANSWER:
      There is some debate as to the correct answer. In my opinion a Roth IRA is the best vehicles for retirement savings because the amounts earned within the account are untaxed. A traditional IRA is completely taxed at an unpreferential rate, but the money deposited into it is tax deferred. That is where the area of debate lies. Post tax deposits but untaxed earnings vs pre tax deposits but fully taxed withdrawals. Same with a 401k.

      Historically, sound equity investments have over a long period of time beaten savings accounts and debt investments by about 3 to 7%. Therefore I would have to rank your IRA savings account at the bottom. Do you get company match on your 401k? If so you should certainly put enought into the 401k to get the match. The main problem with the 401k is the taxablity and the somewhat limited number of investment options. I would rank it ahead of the savings account though.

  41. QUESTION:
    what are some examples of 401 (k) plans?

    • ANSWER:
      ….Wut?

  42. QUESTION:
    Can you have etirement plans such as 401(k)’s, Keoghs and IRAs all at the same time?
    Can you have etirement plans such as 401(k)’s, Keoghs and IRAs all at the same time?

    and What happens to them when you divorce with your wife?

    • ANSWER:
      Yes you can. It kind of depends on where you work and what plan you contribute to at that time. It is not illegal. If you get divorced, they can be transferred to your ex by a QDRO or a Qualified Domestic Relations Order.

      Good Luck to You

  43. QUESTION:
    can an empolyer cancel 401 K plans?

    • ANSWER:
      Yes. Your employer is under no legal obligation to offer a 401(k) plan. But whatever money you might have put there in the past is legally yours.

  44. QUESTION:
    Company will match 401(k) plan up to 8%. Is that a good benefit?
    I am looking for a job and one of the companies I applied for stated that they will match my 401(k) up to 8%. The person that hires told me that it is a good deal. is it?
    What is the average amount that a company would match the 401(k) plan?

    • ANSWER:
      It is the best investment you can make. Let’s say you are making 00 a month, and you are putting 8% of your money into the 401k. That is before taxes, so uncle sam doesn’t tax that money–You have 0 now the company matches with another 0, so now you have 0. You have made 100% on your investment!!!

      No where else legally can you make 100% profit.

      Now each month you do the same, in 12 months, you have put in 80 and the company matched that so really you have 60 plus interest—tax free.

      Of course when you retire you will only then have to come up with taxes, but since you won’t have a job, your tax rate will probably be in the 10% area instead of what you pay now.

  45. QUESTION:
    If I take a loan against my 401(k) plan, is the money actually deducted from my account?
    I thought that my 401(k) was used as collateral for the loan but continues to accrue dividends/interest. Is it actually deducted from my account?

    • ANSWER:
      Hi, I can see why you might have thought that it was collateral but, that is not the case. The loan amount is deducted from your 401k account and then you pay yourself back the principal and interest. You may not have known this at the time but, you are making a wise choice taking a 401k loan out in a down market. The reason is that you will be able to increase the amount of money in your 401k because you are paying back the principal and adding the interest payment probably somewhere around 6-8%. This is increasing your tax deferred 401k balance and you have a positive return on your outstanding loan balance. My only word of advice is don’t take to long to pay the loan back i.e., 2 years is a good target. Otherwise you will loose out when the market turns around and heads north again.

  46. QUESTION:
    We have a pension & 2 401-k plans.?
    What is the difference between them? We get quarterly statements from all of the programs. The pension statements have a balance as to what our check will approxamatly be when we retire. We are both still young ( in our 30′s). But this retirement stuff can be confusing! I’m pretty sure that when my husband and I do retire social security will not be there. Thanks for any advice!

    • ANSWER:
      A pension plan is a defined benefit plan. For you on the receiving end, that means your benefit, or monthly payout in retirement, is determined by the plan. The benefit is defined. As you stated, your statement indicates what your benefit in the future will be.

      Your 401(k) plans are defined contribution plans. In these plans you, and possibly your employer with matching contributions, determine how much is put into the plan. The contribution is defined. The benefit is not. The outcome of how much the value of the plan will be in the future is dependent of the performance of the holdings selected in your plan. Typically, you will have a number of choices as mutual funds with stocks, bonds and a fixed or stable account. Your statements will reflect your contributions and current account balance.

      In 401(k) plans you, the participant, determine what investment selection to make. It is worth your time to evaluate your risk tolerance and time frame, etc to help determining your selections. If you are not inclined toward this evaluation, you may wish to consult with a professional financial advisor, as a CFP or certified financial planner, for advice.

  47. QUESTION:
    What U.S. Govt Agency are 401 K plans administered by ?

    • ANSWER:
      They are regulated by the IRS for tax purposes and are administered by you (self-directed plan) or the plan administrator.

  48. QUESTION:
    How much should i be saving every week until my 401(k) kicks in?
    I just got a job out of college, which requires 500 hours of work before i can contribute to my 401(k) plan: i’m at about 350 hours right now, and i usually make about 700 a week after taxes. I’m spending about 900 a month in transportation/bills/rent/etc, so i’m usually coming away with about 1900k a month…how much of that should i put into savings? should i just keep it all in a savings account, and then i get my 401k, kick something like 70% of my paycheck into it and live off what i’m saving now? I’d like to buy a house within 5 years (average price is around 300k here)..so i need to be able to stretch out my money any way i can…thanks

    • ANSWER:
      Well, congratulations! It sounds like you are well on your way to saving for retirement and buying a home. I would advise you to max out your 401k once you are eligible and take advantage of any matches your company offers. As for the savings you have accumulated now, 5 years is a moderate investment timeline, not too short and not too long.

      If you don’t yet have an emergency cash fund, I would open a high yield savings account using HSBC online, ING Direct, Emigrant Direct, GMAC, etc. They have online savings accounts offering 4.5% to 5.05% apy. You should have 6 months worth of expenses stashed in your emergency savings fund.

      Next, find a higher yielding 1Y CD like the 5.55% apy CD from INdyMac Bank, fsb. You can earn some interest on this, it is all principal protected and you can then roll your money over into other CDs and money market funds that offer higher rates. Because you want to buy a home in 5 years or so, keep most of your money principal protected and safe. You aren’t going to get ridiculous interest rates, but you have little risk for loss unless you can delay that dream a few years if you have to.

      If you have some savings you would like to invest in mutual funds, I would recommend the no-load (no sales charge), low expense ratio funds like index funds from Vanguard or Fidelity. 5 years is a medium term time horizon not too long, so investing in riskier asset classes might result in losses within the 5 years, but if you’re well diversified, it is a sound strategy.

  49. QUESTION:
    What percentage of the vested amount does AZ charge for early withdrawal from a 401 K plan?
    My company is cancelling the 401K plan- allowing me to take a full disbursement. I need to know what % AZ charge, as a state, as well as (#2) what % penalty I would pay to take the money now.

    • ANSWER:
      Don’t take it out in cash.
      You will pay your current income tax rate plus a 10% penalty.
      This money will be due at tax time – one big check payable to uncle sam.

      Google: discount brokers like schwab, ing, or fidelity
      Call them and ask them about a roll over IRA account.
      They will take it from there, and even call your company if there are any problems.
      You will pay no taxes or fees if you do this.
      Once the money is in that account, you can invest in cd’s, stocks, even day trade.
      /

  50. QUESTION:
    Will Republicans try to steal Hillary’s great idea for 401(k) plans for all Americans?

    http://news.yahoo.com/s/ap/20071009/ap_po/clinton_retirement_accounts

    • ANSWER:
      I can not stop laughing long enough to properly answer your question!