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401(k) Plans |
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401(k) Plans
I’ve been in and interested in the stock market so long (one year
shy of forty years) I can remember when the mutual fund pages in my
home town paper were just one page! Now it looks like there are more
mutual funds then there are stocks listed on the New York stock
exchange.
I wonder how many billions of investor dollars are supporting these
funds. How many investor dollars are supporting all the brokerage
firms? How many times has 401(k) monies been given to a ‘financial
expert’ to manage after retirement, then three years later the
$400,000 is down to $200.000 (Yet, the financial expert is still
driving around in a new Lexus).
I could tell you stories from the people I know, who have retired
and aren’t so happy with these experts, but I bet you know some
stories of your own.
Do you know what you’re going to do with your 401(k) money when you
retire? If you are going to hand it over to a financial expert to
manage, see if you can get the names of some of his/her clients. See
if you can call some of the expert’s clients, tell them what you’re
planning to do and ask them if they’re satisfied with the expert’s
performance. Or you could talk to those people you’ve once worked
with, have retired, and went with a financial advisor or planner.
Try to get some reference from a live body that has already been
there, rather than just a bunch of statistics thrown at you by the
expert.
Today’s 401(k) plans are excellent vehicles for saving money and
here’s what I like about mine:
I like the 10 percent contribution being a tax write-off (some
plans, sixteen percent). I can contribute up to 16 percent, but 6
percent would have to be after-taxed dollars.
I like that the monies made in a 401(k) are tax-deferred.
I like the company’s 70 to 100 percent company match (it differs
every year with my company) up to 6 percent of my contribution.
I like the option to move my money (every business day, if I wished)
into my company’s stock or an Interest Income fund, Bond fund,
Mutual fund or Index fund, at no cost.
I like the option to roll-over into an individual IRA account, twice
a year, any after-tax and company matched dollars put into my
401(k), with no penalties or fees, even while I am still employed
with the company. This allows me to select individual stocks and
allows the dividends from those stocks to be rolled-over
automatically into more shares of each company, also at no cost.
(However, there are commission fees for the purchases of the stock.
Dividend purchases only are commission-free. In my book 'The
Stockopoly Plan' I explain how to purchase stocks commission free.)
I like that the company’s dividends in my IRA (set up by monies from
my 401(k) plan) are also tax-deferred and are 85% tax free.
I like knowing that when my retirement day arrives, I’ll already
have an individual IRA set up to move the rest of the 401(k) monies
into, with twelve stocks already chosen, owned and proven to provide
reliable ever-increasing dividend income. (The companies owned all
have a history of raising their dividends every year.)
I like the free 1% the company gives me, just for being in the
401(k) plan.
I like the option to borrow money from my 401(k) plan, pay a low
interest rate on the loan and know that the interest rate I’m paying
on the loan goes to me (if I were paying a credit card bill of
$3,000.00 at 18%, I know I have the option to pay off the high
interest credit card loan and pay only 6% interest (to myself) on
the $3000.00 loan from my 401(k).
I like knowing that when I move the rest of my 401(k) monies into my
IRA when I retire, I’ll know about how much income I can reasonably
expect in dividend income four times a month, twelve months a year
(all twelve stocks have staggered dividend pay-out dates, providing
cash dividends every week of the year).
The companies chosen in my IRA, with their history of raising
dividends every year, will provide the comfortable, worry-free
income which I believe investing should be all about.
My advice on 401(k) plans is to talk to an expert from the firm your
401(k) monies are with and find out what options are available to
you and/or what your company allows. My point was simply to inform
you that you may not be restricted to just putting your money into a
Mutual fund or your company’s stock.
You can transfer monies from your 401(k) to an individual IRA
(Tradition, Roll-Over or Roth), at no fee and build your own Mutual
fund. (I have been doing this in my 401(k) plan for years (2002)
while still employed with my company.) If those companies you choose
in your IRA have a dividend reinvestment plan you can request to
have the dividends reinvested back into the stock each quarter. And
this would be done for you, commission-free.
Charles M. O’Melia is an individual investor with almost 40
years of experience and passion for the stock market.
Author of the book ‘The Stockopoly Plan’, published
by American-Book Publishing. For more excerpts on
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