Question about 401 k?

[EYECANDY000]

Now Usually for whatever reason Ive always been able to save money by opening up certificate of deposits. And I never though about starting a 401 k for myself. My HUman Resource Dir. sent me an email asking me if i was interested in starting a 401 k. Now , what what I have read it states that you have to be with the company about four years before they match your funds. Does that sound about right ? Also, can anyone tell me if theres any negatives about having it. I wont speak to the human resource director til tomorrow. R there any questions you think I should ask, just to get a little more educated on it?

[norajane]

401(k)'s are good because

 

1) the money withdrawn from your check and put into the account is tax-free until you withdraw it at retirement. You don't pay taxes on the amount taken out of your check, and it reduces your overall taxable income.

 

2) you can't touch the money until retirement without paying a penalty, and then you also have to pay taxes on the money you withdraw, so it's less likely you'll withdraw it and spend it on something...which makes it more likely that it will be there for you when you retire.

 

Negatives:

 

You can't touch the money without paying a penalty and taxes So, if you put a lot of money in the 401(k), you'll have less money for something you want to buy, like a downpayment on a house. It is possible to borrow from your 401(k) under most plans, but then you have to pay it back on a monthly basis, with interest. And if you lose your job before you've finished paying it back, then you have to pay it all back at once!

 

 

Companies set their own policies on matching funds. Some don't match at all, and others match as soon as you open the account. Matching percentages also vary. 4 years sounds like a long time; I think most companies start matching within a year if they don't do it right away.

 

Questions to ask:

 

1. Do you have to have worked at the company 4 years, or does your 401(k) account have to have been opened for 4 years before the company matches?

 

2. What are the investment options for the 401(k)? The money doesn't go into a savings account - it gets invested in the bond or stock market based on whatever mutual funds you select when you enroll in the plan. Safest option is a money market fund, but you won't earn much interest on the money. Find out about the different funds available to you, and what company manages those funds.

[musikaprinsesa]

You did it right. do more research