401K information needed?

Question

My husband has a 401K through his employer and we're having issues with it. His employers had originally stated that they would match their contributions by 3$ and they have yet to do it. We're putting money weekly into this account, and every time we recieve a statement, it's going down, which is not what is supposed to happen in our eyes. So now, we would like to end this 401K through his place of employment and start onbe with our bank along wiht other retirement accounts. Can anyone explain how 401K's work? Are we able to cash out on the current plan to use the money to open our own retirement account that will actually aquire money? Any information would be greatly appreciated. Thanks

Answer 1

All good answers...explained about " choices", explained about withdrawing early, etc. etc.  but what you have to realize is that this is the worst the market has performed in YEARS... you may have just started at a bad time..BUT it will change... if you keep up the contributions, you are buying into funds at their lowest points in years... ( have you heard of Warren Buffet ? he is buying big amounts in low priced companies... he's done it before and he'll do it again...that's why he is a billionaire)

What I'm saying is: " don't panic"

...and as far as the company contribution...in some plans it is made  all at once..( not weekly WITH your contribution)  so at some point down the road they will add a lump sum.

... you mentioned other " retirement" accounts " at the bank"...are they invested? or are they CD s ? ...if they are invested, they are probably not doing great either...if they are cd s ...well, maybe you're making something... but it will be NOTHING compared to what your 401 will make if you have some patience.

Answer 2

I agree with the first poster about checking with your HR department about the matching.  But the reason it may be going down is what the plan itself is invested in.  It could be B share mutual funds or a variable annuity with an insurance company.  Both of those tend to have high fees which bring down your return.  If either of those are the case then it might be a good idea to contribute only up to the match you are suppose to get and then contribute to an IRA.  Or stop contributing to the 401k altogether and just contribute to an IRA.  In the end you might be better off.

Answer 3

First of all you need to talk to your HR folks about when you will see the matching contribution.  That is the 1st step.  Now do you have options of what you want to invest in in your 401k.  Most if not all plans do give options.  What did you select?  Some options are much more volitile than others.  You might want to rethink your investment options.  You have the option of cancelling your contributions to your 401k, but if you do you will then not receive the matching contribution.  If you pull your money from your 401k you will be subject to a 10% penalty and taxes on the distribution.  I do not believe that you have the option while you are still employed with the company of rolling the 401k over to an IRA.  I could be mistaken on that point however.

There should be someone in your company that can help you select a better investment strategy that will better suit your peace of mind and also answer your question about the matching funds.  

Now, about investing in general.  Equity investments especially are subject to volitility.  They go up and they go down.  Over the long term they tend to go up at a rate that generally is about 4% better than the rate of inflation.  They are the only investments that tend to do so.  Currently however they are not going up.  They are going down.  That happens from time to time, about once every 5 years or so and especially after there has been a prolonged rise in values which is what was seen from 2003 to 2007.  It is referred to as a market correction.  

Answer 4

Your husband's investment choices within the 401(k) are what is "losing money", if he held the same investment in an IRA outside his job, he would be "losing" the same amount.

You do NOT want to "cash out", since you'll get less than half the value after taxes and penalties!

If you are under 40-45, you should probably start putting MORE money in his 401(k), since he's probably in fairly aggressive choices if the money is "shrinking" (as the stock market has been lately), because at current lower levels most stocks are "on sale", so get 'em while they're cheap!

Think of his investment dollars as buying cans of tuna fish you guys plan to eating after you retire....if the price goes down, it makes sense to buy MORE while they are cheaper, not to sell the ones you already have stored up (at a loss!).  

The stock market will ALWAYS recover eventually, until the day it doesn't, and then the world will end...LOL!

Answer 5

Banks are a poor place to open retirement accounts.  Their funds are mediocre, with high expenses.  If you don't want the value of his 401k to go down, then DO NOT INVEST IN EQUITIES.  Invest in money markets (period).  These will never go down in value.  Tho in my opinion, they are lame investments for the long term.  

Got a problem with company match, call them up, and ask what is going on.  By the way, if you invest thru the bank, and not his 401k, there will be no company match (guaranteed).

Unless he leaves his current employer, you cannot withdraw from his 401k.  But you can stop contributions to it.