401(k)s For Dummies E-Book

Ted Benna

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 399

Veröffentlichungsjahr: 2011

Beschreibung

Get the most out of your 401(k) in any economy Filled with sample 401(k) portfolios for every stage of life Invest your 401(k) money wisely and make the most of your retirement Want to know what kind of investment mix you need to make your retirement money grow? Don't know what to do with a 401(k) account from your last job? Worried that your company's 401(k) plan doesn't cut it? Relax! This simple, plain-English guide shows you how to manage your accounts, minimize your risks, and maximize your returns. The Dummies Way * Explanations in plain English * "Get in, get out" information * Icons and other navigational aids * Tear-out cheat sheet * Top ten lists * A dash of humor and fun

Leseprobe

401(k)s For Dummies®

by Ted Benna and Brenda Watson Newmann

401(k)s For Dummies®

Published byWiley Publishing, Inc.111 River St.Hoboken, NJ 07030-5774www.wiley.com

Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana

Published by Wiley Publishing, Inc., Indianapolis, Indiana

Published simultaneously in Canada

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Library of Congress Cataloging-in-Publication Data:

Library of Congress Control Number: 2002110280

ISBN: 978-0-7645-5468-1

Manufactured in the United States of America

15 14 13 12 11 10 9 8 7

1B/RV/QS/QU/IN

About the Authors

Ted Benna is commonly referred to as the “father of the 401(k)” because he created and gained IRS approval for the first 401(k) savings plan. Ted is a nationally recognized expert on retirement issues whose articles and comments have appeared in myriad publications. He’s received many citations for his accomplishments, including:

2001 National Jefferson Award for Greatest Public Service by a Private Citizen

2001 Impact Player of the Year selected by Defined Contribution News

One of eight individuals selected by Money magazine for its 20th Anniversary Issue Hall of Fame

One of four People of the Century selected by Business Insurance

Ted has been profiled in The New York Times,Pensions & Investments, USA Today, Employee Benefit News, Human Resource Executive, Fortune, Plan Sponsor, Kiplinger, and many other publications. He’s authored three other books: Helping Employees Achieve Retirement Income Security (Investors Press), Escaping the Coming Retirement Crisis (Pinon Press), and Tips for Successfully Managing Your 401(k) (401(k) Association).

During his 40-plus-year career, Ted has helped thousands of employers establish, restructure, and administer their retirement programs. He is president and founder of the 401(k) Association, and a special consultant to mPower Advisors and MassMutual Retirement Services.

Brenda Watson Newmann is a writer and editor dedicated to helping ordinary folks understand complicated topics. From 1998 to 2003 she was in charge of editorial content for the mPower Cafe, a leading educational Web site for retirement investors. Under her direction, the site won accolades including Forbes magazine’s “Best of the Web.”

Brenda keeps attuned to the concerns of 401(k) investors through the e-mails she receives regularly from readers. She frequently writes articles on retirement investing, and she’s been interviewed by media outlets, such as USA Today and Investor’s Business Daily.

Brenda began her writing career with The Associated Press, and was a foreign correspondent in Germany and Switzerland. She is a graduate of Stanford University and the Johns Hopkins University School of Advanced International Studies.

Dedication

I dedicate this book to Ellie, my first and only wife, who has been my life companion for 40 plus years; our four children, Debbie, Dave, Steve, and Dan; their spouses, Drew, Donna, and Laura; and our grandchildren, Mark, Neil, Matthew, Ryan, Michael, Olivia, Alison, and Christopher. You have all helped to make my life worthwhile.

— Ted Benna

To my husband, Robin, for his unwavering support of my work and his ability to make me laugh, and to Adeline and Dominic for patiently accepting my refrain of “not now, Mommy’s busy writing” during this project.

— Brenda Watson Newmann

Authors’ Acknowledgments

Our thanks to the many people at Wiley Publishing, Inc. who helped bring this book to fruition. Thanks especially to Acquisitions Editor Pam Mourouzis for getting the project off the ground and to Allyson Grove, our Project Editor, for her fine work orchestrating this book’s creation. Thanks also to copyeditor Greg Pearson for making sure we remembered to dot our i’s and cross our t’s, and to the talented folks in Production for creating this attractive book. Many thanks to everyone else at Wiley Publishing, Inc. who played a role in bringing this book to the reading public.

We’re also grateful to our technical reviewers, attorneys Marla Kreindler and Jeffrey Bakker, for lending their expertise to this book and ensuring that we didn’t leave out anything important.

Brenda acknowledges her colleagues at mPower who have worked through thick and thin to bring professional investment advice and education to ordinary folks trying to plan for retirement. Finally, she sincerely thanks everyone — family, teachers, co-workers, and friends — who has ever taken the time to explain something unfamiliar to her in layman’s terms. That is the spirit in which this book is written.

Publisher’s Acknowledgments

We’re proud of this book; please send us your comments through our Dummies online registration form located at www.dummies.com/register/.

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Media Development

Project Editor: Allyson Grove

Acquisitions Editor: Pam Mourouzis

Copy Editor: Greg Pearson

Technical Editors: Marla J. Kreindler, Jeffrey J. Bakker

Editorial Manager: Jennifer Ehrlich

Editorial Assistant: Carol Strickland

Cartoons: Rich Tennant, www.the5thwave.com

Composition Services

Project Coordinator: Dale White

Layout and Graphics: Joyce Haughey, Tiffany Muth, Barry Offringa, Jacque Schneider, Jeremey Unger

Proofreaders/Quality Control: Aptara, John Bitter

Indexer: Aptara

Publishing and Editorial for Consumer Dummies

Diane Graves Steele, Vice President and Publisher, Consumer Dummies

Joyce Pepple, Acquisitions Director, Consumer Dummies

Kristin A. Cocks, Product Development Director, Consumer Dummies

Michael Spring, Vice President and Publisher, Travel

Brice Gosnell, Publishing Director, Travel

Suzanne Jannetta, Editorial Director, Travel

Publishing for Technology Dummies

Andy Cummings, Vice President and Publisher, Dummies Technology/General User

Composition Services

Gerry Fahey, Vice President of Production Services

Debbie Stailey, Director of Composition Services

Contents

Title

Introduction

About This Book

Conventions Used in This Book

Foolish Assumptions

How This Book Is Organized

Icons Used in This Book

Where to Go from Here

Part I : Getting Started

Chapter 1: Benefiting from Your 401(k)

Defining What a 401(k) Does for You

Saving Without Tears

Taking Your Savings with You When You Change Jobs

Letting the Pros Work for You

Buying More When Prices Are Low

Improving Your Chances of an Ideal Retirement

Protecting Your Money

Watching Out for Potential Pitfalls

Telling the Employer’s Point of View

Chapter 2: Understanding the Important Features of Your 401(k)

How Much Your Employer Contributes

How Much You Can Contribute

Vesting: When Your Employer’s Contribution Is Yours to Keep

When You Can Start Participating

Accessing Your 401(k) Plan Money While Working

What Investments You Can Choose

How Much You Pay for Plan Expenses

Trying to Improve Shortcomings in Your Plan

Chapter 3: Signing Up for Your 401(k)

Figuring Out Whether You’re Eligible

Determining How Much of Your Salary to Put Aside

Deciding How to Invest Your Money

Naming a Beneficiary

Part II : Finding an Investment Strategy That Lets You Sleep at Night

Chapter 4: Developing a Savings Plan

Setting a Target Date for Retirement

Calculating How Big Your Nest Egg Should Be

Developing Your Retirement Savings Plan

Chapter 5: Building Wealth by Taking Reasonable Risks

Defining Some Investment Basics

Classifying Different Types of Risk

Understanding the Risk-Reward Relationship

Deciding How Much Risk You Can Stand

Chapter 6: Selecting Investments

Looking Over the Investment Menu

Different Strokes for Different Folks

Baking Your Asset Allocation Pie

Seeking Help from the Pros (and We Don’t Mean Julia Child)

Part III : Getting Your Hands on Your Money

Chapter 7: Putting Your Hand in the 401(k)ookie Jar

Hey, Self, Can You Spare a Dime?

Dipping into Your 401(k) Money to Buy Your First Home

Both a Borrower and a Lender Be

To Loan or Not to Loan (to Yourself, That Is)

Deciding Whether to Take a Hardship Withdrawal or a Loan

Using 401(k) Money for Other Things — Good Idea?

Chapter 8: Weighing Your Options When You Leave Your Employer

A Rolling 401(k) Gathers No Taxes

Never Can Say Goodbye: Leaving Money in Your Old Employer’s Plan

Withdrawing the Money with a Lump (Sum) in Your Throat

Special Company Stock Considerations

Chapter 9: Living Beyond the Gold Watch

Decisions, Decisions: What to Do with Your 401(k) Money

Paying Uncle Sam His Due: Required Withdrawals

Developing a Strategy to Deal with the Tax Man

Managing Your Investments in Retirement

Managing Risk and Maximizing Return

Living within Your Means for Your Lifetime

Row, Row, Row Your Boat, Gently Down the Income Stream

Part IV : Floor Plans of the Other Types of “4” Plans

Chapter 10: Making Sense of the Bizarre 403(b)azaar

Different Name, Same Tax Breaks

Stashing Away As Much As You Can: Contribution Info

Trekking Through Your Investment Options

Withdrawing Money: Watch Out for That Fee!

Taking Your 403(b) on the Road

Vesting

Understanding ERISA versus Non-ERISA 403(b) Plans

Finding Out Rules for Church Plans

Chapter 11: The Wonderful World of 457 Plans

The Scoop on Two Types of 457 Plans

Coughing It Up for the Coffers

Investing Your Money

Taking Money Out of a 457

Part V : From the Employer’s Perspective: Finding the Right Plan

Chapter 12: Meeting the Small Employer’s Challenge

Meeting Regular 401(k) Requirements Is a Pain in the Pocketbook

Finding Alternatives to the Standard 401(k) Plan

Selecting a Plan That’s Right for You

Looking Out for Number One

A Word about Cost

Considering Real-Life Examples of Different Plans

Chapter 13: Walking in an Employer’s Shoes

Keeping the Essentials in Mind

Choosing Investments to Offer in the Plan

Looking at the Packaging of 401(k) Plans

A 401(k) Is a Terrible Thing to Waste: Educating Employees

Getting Up Close and Personal — Why You Shouldn’t

Part VI : The Part of Tens

Chapter 14: Ten Questions Participants Frequently Ask

Contributions

Mergers and Bankruptcy

Loans and Rollovers

Getting Help at Retirement

Divorce

Company Stock Advantage

Chapter 15: Ten Questions Employers Frequently Ask

Contributions

Investment Choices

Nondiscrimination Tests

Distributions and Loans

Assorted Legal Questions

Chapter 16: Ten (or So) 401(k) Mistakes to Avoid

Not Participating

Not Contributing Enough to Get the Full Employer Match

Taking a Loan or Hardship Withdrawal Unnecessarily

Defaulting on a Loan

Contributing Too Much

Investing Too Conservatively or Too Aggressively

Failing to Rebalance

Day Trading

Failing to Name a Beneficiary

Cashing Out Instead of Rolling Over

Loading Up on Company Stock

Chapter 17: Ten Bad Excuses People Give for Not Participating (And Why They’re Bad)

I’m Afraid of the Stock Market

I’m Afraid I’ll Lose My Money if My Employer Goes Bankrupt

I Can’t Afford It

I’m a Single Parent, and I Have to Save for My Child’s Education

I Don’t Like My Plan

I’ll Probably Change Jobs Soon

I Hate Paperwork

It’s Too Hard to Get My Money Out

I Don’t Need Anything More than Social Security and My Pension

I’m Too Young (It’s Too Soon)

I’m Too Old (It’s Too Late)

Introduction

B umper sticker we’d love to see: “I’d Rather Be Managing My 401(k).”

Made you snicker? We agree. Most of us have better things to do with our time than pore over 401(k) statements and investment brochures — and that’s precisely why we wrote this book.

Every day, through our work, we hear from people who want to save and invest for a secure retirement but aren’t sure how to get started or how to do it the right way. Particularly after the decline of the stock market in the early 2000s, and the Enron fiasco, in which many 401(k) participants lost a good chunk of money, people are anxious to find out what to do with their retirement savings.

This uncertainty among workers isn’t surprising, because the concept of retirement has changed dramatically over the last decade or so. Social Security seems less than secure, and it was never meant to cover all your retirement needs, anyway. Most people can’t count on receiving a traditional fixed pension from their employer. The burden of retirement planning is falling squarely on your shoulders at a time when you’re living longer and need more money to finance retirement.