Retirement

The 401k plan is one of the most innovative creations that has every been thought up as a way to help people save for retirement. For years people depended on Social Security as their primary income source upon retiring but with a growing population and an increase in coverage, population, and expanding entitlement programs, Social Security is no longer adequate to confront the rising costs of living. There are now many different types of retirement savings plans but they’re all based around the basic principal of putting money aside for retirement. With any new plan, there are always problems and there’s a growing concern among many that shows a huge gap in what people are putting aside and what they actually need.

These various plans have allowed average citizens to save for retirement by depositing money into investment accounts and, based on different taxation plans, allows people to deposit funds and allow the money to grow on a tax-deferred basis. Some plans, like Roth IRA’s, allow people to pay the taxes up front but the basic principal is much the same. What’s been even more helpful is when companies get involved and allow their employees to participate in a 401K plan by matching applied funds. The US Department of Labor reported that over 17 thousand companies offered similar plans which has helped millions of Americans. The problem is that, when people are given control over the accounts, they mismanage the funds and find themselves lacking when the need arises.

Many lawmakers and public officials have noted this growing concern and are worried what this will create huge savings deficits for current and future generations. Senator Herb Kohl, D-Wis, and others, drafted the SEAL 401K Savings Act in order to counteract 401k repayments and withdraws. Sen. Kohl stated, “The gap between what Americans will need for retirement and what they will actually have saved is estimated to be a staggering 6.6 trillion dollars. While having access to a loan in an emergency is an important feature for many participants, a 401k savings account should not be used as a piggy bank.” Unfortunately, what should be done and what people are actually doing are two different things.

Though people work and save their money, it’s incorrect to assume that people are able to become their own pension and savings managers. People too often treat their retirement accounts as if it were a savings account and when people decide to withdraw from their plans, statistics have shown that people, very rarely, replace the funds.

Thankfully the solution to many of these issues is simple but the execution is what will make the difference. As with most things, the solution is in educating individuals about their retirement savings and diversifying their investment portfolios. The best investor is an educated investor and there are many companies that will help individuals looking to save and spend their money wisely. Applying some forward thinking and better money management could mean the difference between a comfortable retirement and having to get a second job after retiring.

This article was written by Retirement Calculator.

You are working so hard to earn money. You are literally working the whole day and early evening just to make ends meet and have some savings for the rainy days. Perhaps, you have noticed that it is becoming a norm that people work hard while they are young and able, and then take the much-needed long break when they get to the retirement age.

But some people are just not lucky and wise. Some people, who have worked so hard all their lives, find themselves broke and financially bruised when they get to their retirement age. You probably have heard of many sad stories about workers who end up owning nothing after they retired from their jobs.

Work while you are still young. You must be wise to allocate even a small portion of your earnings for your retirement. When you reach your retirement age, chances are that you would not be able to easily find a job if you need it. And if ever you do find a job, you would be sorry because your body might not be in the proper form to work anymore.

So how could you ensure that you would not fall into such a depressing state when you grow old? The answer is very simple. You should start investing in several retirement programs and packages. Planning your retirement income should not wait; it must be done now.

Investing for old age
If you would start investing for retirement at an early age, imagine how much money you would accumulate when you reach your retirement age. And what is more enticing is that investing in retirement products is like taking investments. Your money would grow as it stays with the retirement firm.

Employees are now becoming wiser as to how they could save for their retirement. And there are numerous retirement companies that offer workers attractive retirement packages. Any worker surely would want to allocate portions of his savings to retirement investments. There are superannuation systems that make retirement investments of employees
mandatory. The federal government is operating and keeping a social security system that not only fund workers’ emergency needs, but also serve as a retirement fund.

Other investments for retirement
There are private retirement companies where you could entrust your retirement savings. Usually, these companies would ask you to turn over a fixed amount monthly, quarterly or yearly to fund your retirement program. In a matter of years, they would make sure your money is safe and actively growing.

There are pension funds that also serve as retirement investments. Pension funds usually require higher premiums or fixed contributions from members, but they are historically more reliable. When you get to your retirement age that is when your pension would start coming to you. You could receive money on a regular basis. The amount you would receive would depend on how much investment you have contributed during your working years.

Enjoying retirement with travel or taking a small townhouse in the suburbs could be your ideal retirement. You could possibly do so and live more comfortably during those years if you would save for your retirement starting today.

Andrew works in the finance industry as a refinance specialist. Although he is not yet to, Andrew plans on maximizing his chances to enjoy his life after 65!

Keep in mind, 401(k) investments are long term investments. It is important to remember your long term goals and remain discipline with your asset allocation.

Below a video of TODAY’s Matt Lauer speaking to a group of experts about how people should handle their 401(k).

http://today.msnbc.msn.com/id/26184891/vp/26970885#26970885

There is an interesting article on 401k on MainStreet.com.

http://mainstreet.com/article/money/stocks-funds/farnoosh-answers-your-401-k-questions

I still have my funds in my ex-employer’s account, but I have been actively managing the funds on the web. It was a good thing that I started depositing money as soon as I was qualified. I contributed to this 401k account during my college years before I turn full-time status in the same company.

At that time, my colleagues around my age thought I was stupid for putting money away that I may never see again. I explained to them that this money will be my retirement fund. I may not see it now but if the funds grow at a rate of 10% annually and I contribute on a regularly basis, my 401k portfolio balance will increase significantly over the long run. I was thinking about the future. They were thinking about that moment in time. Of course, nobody listened to me. I find human nature to be very funny at times. When you have a good vision and try to give people good, honest advice, they take it for granted. People thought I was silly and naive. Now that they have known how well I did with my investments over the years, they wish they had done the same thing. It’s always the “should’ves, would’ves, and could’ves.”

In any case, over the span of seven years, my 401k portfolio has grown at an average rate of 25% annually. The company match made it even a sweeter deal. My last account balance was at $46,000, and less than half of that amount came from my contributions. For starting with a few hundred dollars in the year 2000 and reaching $45K in seven years, I thought it was worth contributing early and regularly.

For the year of 2007, the contribution limit is $4,000 for individuals under 50. Individuals who are 50 and older may contribute a maximum of $5,000. As posted earlier, I have already contributed my maximum limit to the Roth IRA. Personally, I feel the limit is low, so I have been contributing the maximum every year. Also, I like to fund the Roth IRA early in the year because I actively trade in the account. There are huge advantages trading in an IRA account, but there are also tremendous risks. Consult a professional before you start trading frequently.

My father qualifies for the higher limit and I helped him fund $5K in his Roth IRA account. I made it simple and dumped his IRA funds in the Vanguard Target Retirement funds.

Here are there IRA contribution limits:

I contributed the maximum of $4000 to my Roth IRA at Scottrade. This deposit allows me to meet the minimum requirement for the Scottrade Elite platform. I downloaded the software, but have not used it yet. One of the features I looked forward to was the Level II quotes but I just learned that Scottrade charges $10 a month for it. I can get free Level II quotes from my non-retirement brokerage accounts so I wouldn’t be paying for it at Scottrade. I like to deposit money early in the year because I do a lot of trading and the extra funding gives me more buying power.