Questions about 401k?
Questions about 401k?
So I am about 23 years old and am working my way through college, full time. I decided to take part in the 401k program at work since my bills are somewhat inexpensive and I feel I can afford to do so. I just have some basic questions.
Should I be investing in a 401k if I plan on staying at my current job for maybe 5 years max?
Does my 401k plan go with me to my next job?
Am I too young to start investing in my 401k?
What else should I look into investing in?
I always hear about people losing their plans near retirement, is this a common problem or what should I look out for?
I understand the basic concepts of a 401k plan but just would like to clear the air a bit.
Answers:
MN Ghost: You're never too young to investing in your 401k. In fact, the earlier you start, the better as it gives more time for your investments to mature. If you can afford to do so, do it!
The money you put into it is yours, so it doesn't matter how long you plan to stay at your job. The only time this becomes a factor is if your company gives a match to your 401k contribution (that is, your company also puts money into 401k account), in which case they often require you to be there a certain amount of time before you are allowed to keep that portion of the investment if you decide to leave. This is called "vesting", and 5 years is pretty typical to become fully-vested. If your company gives a 401k match you definitely should put money into your 401k, as this is pretty much free money.
If you do decide to change jobs, it is usually possible to roll your old 401k account into your new plan, so no worries there.
2010-12-04 21:06:42
2010-12-04 21:06:42
the tax lady: When you leave a job, you have 3 options. Leave the 401K, roll it to an IRA (or ROTH IRA and pay the tax), or roll it into a new employer's 401K.
You should start saving for retirement whenever you have income. Do not, however, put all of your money into retirement plans. The biggest mistake I've seen in recent years are people with $0 other savings tapping their retirement accounts for an emergency. Having an emergency does NOT prevent income tax or the 10% penalty. Plus, you put the money in gradually, often saving only 15% in the year of the contribution. Taking it out in a lump sum is usually at 35% (25% tax rate due to a bump to a higher tax bracket and the 10% penalty). This is a sure fire way to lose money.
As for losing their plan near retirement, if your plan is handled by an outside custodian you are fine as long as you don't invest 100% in corporate stock.
Also, the market crunch 2 years ago was no fun. My plan dropped in value by half...but has recovered half of the loss.
2010-12-04 21:09:15
2010-12-04 21:09:15
Chosen Answer
Hoa N: Yes, you should, ASAP , Time is on your side, small amount add up. No, you'd never too young. the sooner the better. If you leave this job, roll over to IRA, if your new employer let you transfer to new 401k, do it by transfer your rollover IRA to new 401k from your new employer. Check out these two books and read: Stock's Trader Almanac by Yale Hirsch Technical Analysis of Financial Market by John Murphy People are just not pay attention to their asset, they are not educated themselves enough. essentially, they are lazy to take care of their asset. In Investment, you should look out for 4 steps: 1/Fundamental analysis: The Fed, The yield curve, the OPEC, ISM manufacturing report, unemployment number to see a trend, CPI, PPI, consumer confidence index, LEI( leading economic indicator)==>macro level, on company level===> check out, P/E, PEG, P/S, P/S, dividend. Tell you WHAT to BUY/SELL 2/Techical Analysis: Chart analysis, momentum indicators like RSI, MACD, TRIX indicators. 3/Sentiment Analysis: learn the VIX index, BULL/BEAR ratio, PUT/CALL ratio, tell you when to get out of market and when to get in. 4/Seasonal cycle: everything in this life involve cycle, stock market is no exception. Check out this MUST READ book Stock's Trader Almanac by YALE HIRSCH My example, I started my job in 25, I put 10% of my salary in 401k. 11 Years later, my 401k is 120,000.00. My Roth IRA is 23,000.00. My cash is 30k. So If I can do it, so can you
2010-12-04 21:14:50
Hoa N: Yes, you should, ASAP , Time is on your side, small amount add up. No, you'd never too young. the sooner the better. If you leave this job, roll over to IRA, if your new employer let you transfer to new 401k, do it by transfer your rollover IRA to new 401k from your new employer. Check out these two books and read: Stock's Trader Almanac by Yale Hirsch Technical Analysis of Financial Market by John Murphy People are just not pay attention to their asset, they are not educated themselves enough. essentially, they are lazy to take care of their asset. In Investment, you should look out for 4 steps: 1/Fundamental analysis: The Fed, The yield curve, the OPEC, ISM manufacturing report, unemployment number to see a trend, CPI, PPI, consumer confidence index, LEI( leading economic indicator)==>macro level, on company level===> check out, P/E, PEG, P/S, P/S, dividend. Tell you WHAT to BUY/SELL 2/Techical Analysis: Chart analysis, momentum indicators like RSI, MACD, TRIX indicators. 3/Sentiment Analysis: learn the VIX index, BULL/BEAR ratio, PUT/CALL ratio, tell you when to get out of market and when to get in. 4/Seasonal cycle: everything in this life involve cycle, stock market is no exception. Check out this MUST READ book Stock's Trader Almanac by YALE HIRSCH My example, I started my job in 25, I put 10% of my salary in 401k. 11 Years later, my 401k is 120,000.00. My Roth IRA is 23,000.00. My cash is 30k. So If I can do it, so can you
2010-12-04 21:14:50