401 (k) Time is on Your Side
What’s a 401(k) <ul><li>It’s a retirement account </li></ul><ul><li>You only get through an employer </li></ul><ul><li>Low...
Sample Pay Stub No 401(k) Deduction $  886.39  Net Pay $  0.69  PA SUI $  35.42  PA Withholding $  16.73  Medicare $  71.5...
Sample Pay Stub 5% 401(k) Deduction $  839.13  Net Pay $  57.69  401(k) Deduction $  0.69  PA SUI $  33.65  PA Withholding...
Defers Capital Gains Taxes <ul><li>5% of $30,000 Annual Salary Invested at 9%apr </li></ul>
Employer Matching Contributions <ul><li>Free money </li></ul><ul><li>50 ¢ on the dollar up to 6% of salary </li></ul><ul><...
Makes Saving Easy <ul><li>Automatic </li></ul><ul><li>Percentage </li></ul>
Compounding <ul><li>Using money to make money </li></ul><ul><li>More time, more money </li></ul>
401(k) Savings Calculator can be found at www. bloomberg.com
 
This Is My  First  Job <ul><li>If you leave your employer </li></ul><ul><li>   Take the money and run </li></ul><ul><li>...
Plan Restrictions <ul><li>No such thing as a standard plan </li></ul><ul><li>Employer Retirement Income Security Act (ERIS...
2008 Contribution Limits
Types of Vesting 100%    5 0% < 5 Percentage of money you keep Years with employer Cliff Vesting
100% 7 80% 6    7 60% 5    6 40% 4    5 20% 3    4 0% < 3 Percentage you keep Years with employer 7 Year Graduated Ves...
Plan Expenses <ul><li>Recordkeeping and administrative  </li></ul><ul><li>Investment management </li></ul><ul><li>Benefit ...
Where to Invest <ul><li>Mutual Funds </li></ul><ul><li>   Money Markets </li></ul><ul><li>   Stable Value </li></ul><ul>...
Risk <ul><li>More time—more risk tolerance </li></ul><ul><li>Greater risk—greater possible return </li></ul>
Diversification Investment “B” 20yrs Investment “A” 20yrs $15322 $10955 $9646 12% $1000 $0 -- $1000 $1806 3% $1000 $3870 7...
Company Stock <ul><li>Blessing and a Burden </li></ul><ul><li>   Enron </li></ul><ul><li>   Dot com’s </li></ul>
Getting Money Out <ul><li>Depends on plan </li></ul><ul><li>If allowed, difficult to do  </li></ul>
Withdrawal <ul><li>Must be a “hardship” </li></ul><ul><li>   Facts and circumstances test </li></ul><ul><li>   Deemed ha...
Penalties, Taxes, Lost Money <ul><li>10% early withdrawal penalty </li></ul><ul><li>Income taxes—25% - 40% </li></ul><ul><...
Loans <ul><li>Most plans allow loans </li></ul><ul><li>   Some allow for anything </li></ul><ul><li>   Commonly use deem...
Loans <ul><li>You pay interest </li></ul><ul><li>Must be repaid within 5 years </li></ul><ul><li>Leaving creates issues </...
Resources <ul><li>www.psca.org </li></ul><ul><ul><li>Profit Sharing/ 401(k) Council of America </li></ul></ul><ul><li>www....
Further Resources <ul><li>www.dol.gov/ebsa / </li></ul><ul><ul><li>Employee Benefits Security Administration </li></ul></u...
Questions
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401k Presentation No Video Clip

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This is a presentation that I put together while in college to educate other students about 401k's. My intention was to get them to participate in a company 401k if offered at their starting jobs. Originally the presentation had an intro slide show of people moving from college through various stages of life to retirement with the Rolling Stone's "Time is on My Side" playing in the background. Unfortunately, Slideshare doesn't support embedded video and audio, since that was probably my favorite part of the presentation.

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  • 401k Presentation No Video Clip

    1. 1. 401 (k) Time is on Your Side
    2. 2. What’s a 401(k) <ul><li>It’s a retirement account </li></ul><ul><li>You only get through an employer </li></ul><ul><li>Lowers your taxes </li></ul><ul><li>Employers can match employee contributions </li></ul>
    3. 3. Sample Pay Stub No 401(k) Deduction $ 886.39 Net Pay $ 0.69 PA SUI $ 35.42 PA Withholding $ 16.73 Medicare $ 71.54 Social Security $ 143.08 Federal Withholding $1,153.85 Bi-weekly Gross Pay $30,000 Annual Salary
    4. 4. Sample Pay Stub 5% 401(k) Deduction $ 839.13 Net Pay $ 57.69 401(k) Deduction $ 0.69 PA SUI $ 33.65 PA Withholding $ 16.73 Medicare $ 71.54 Social Security $ 134.42 Federal Withholding $1,153.85 Bi-weekly Gross Pay $30,000 Annual Salary
    5. 5. Defers Capital Gains Taxes <ul><li>5% of $30,000 Annual Salary Invested at 9%apr </li></ul>
    6. 6. Employer Matching Contributions <ul><li>Free money </li></ul><ul><li>50 ¢ on the dollar up to 6% of salary </li></ul><ul><li>$2700 </li></ul>$2250
    7. 7. Makes Saving Easy <ul><li>Automatic </li></ul><ul><li>Percentage </li></ul>
    8. 8. Compounding <ul><li>Using money to make money </li></ul><ul><li>More time, more money </li></ul>
    9. 9. 401(k) Savings Calculator can be found at www. bloomberg.com
    10. 11. This Is My First Job <ul><li>If you leave your employer </li></ul><ul><li> Take the money and run </li></ul><ul><li> Leave it in the plan </li></ul><ul><li> Roll it over into an IRA </li></ul><ul><li> Roll it into another 401(k ) </li></ul>
    11. 12. Plan Restrictions <ul><li>No such thing as a standard plan </li></ul><ul><li>Employer Retirement Income Security Act (ERISA) </li></ul><ul><li>Your plan may be more restrictive </li></ul>
    12. 13. 2008 Contribution Limits
    13. 14. Types of Vesting 100%  5 0% < 5 Percentage of money you keep Years with employer Cliff Vesting
    14. 15. 100% 7 80% 6  7 60% 5  6 40% 4  5 20% 3  4 0% < 3 Percentage you keep Years with employer 7 Year Graduated Vesting
    15. 16. Plan Expenses <ul><li>Recordkeeping and administrative </li></ul><ul><li>Investment management </li></ul><ul><li>Benefit transactions </li></ul><ul><li>Education and advice </li></ul>
    16. 17. Where to Invest <ul><li>Mutual Funds </li></ul><ul><li> Money Markets </li></ul><ul><li> Stable Value </li></ul><ul><li> Bond </li></ul><ul><li> Stock Funds </li></ul>
    17. 18. Risk <ul><li>More time—more risk tolerance </li></ul><ul><li>Greater risk—greater possible return </li></ul>
    18. 19. Diversification Investment “B” 20yrs Investment “A” 20yrs $15322 $10955 $9646 12% $1000 $0 -- $1000 $1806 3% $1000 $3870 7% $1000 $0 -- $1000 $10955 4% $5000
    19. 20. Company Stock <ul><li>Blessing and a Burden </li></ul><ul><li> Enron </li></ul><ul><li> Dot com’s </li></ul>
    20. 21. Getting Money Out <ul><li>Depends on plan </li></ul><ul><li>If allowed, difficult to do </li></ul>
    21. 22. Withdrawal <ul><li>Must be a “hardship” </li></ul><ul><li> Facts and circumstances test </li></ul><ul><li> Deemed hardship </li></ul><ul><li>♦ Buying a primary residence </li></ul><ul><li>♦ Education expenses </li></ul><ul><li>♦ Medical expenses </li></ul><ul><li>♦ Preventing eviction </li></ul>
    22. 23. Penalties, Taxes, Lost Money <ul><li>10% early withdrawal penalty </li></ul><ul><li>Income taxes—25% - 40% </li></ul><ul><li>$15,385 withdrawn = </li></ul><ul><li>$334,843 lost retirement money </li></ul>
    23. 24. Loans <ul><li>Most plans allow loans </li></ul><ul><li> Some allow for anything </li></ul><ul><li> Commonly use deemed hardship list </li></ul><ul><li>No more than 50% up to $50,000 </li></ul>
    24. 25. Loans <ul><li>You pay interest </li></ul><ul><li>Must be repaid within 5 years </li></ul><ul><li>Leaving creates issues </li></ul>
    25. 26. Resources <ul><li>www.psca.org </li></ul><ul><ul><li>Profit Sharing/ 401(k) Council of America </li></ul></ul><ul><li>www.morningstar.com </li></ul><ul><ul><li>Investment advice </li></ul></ul>
    26. 27. Further Resources <ul><li>www.dol.gov/ebsa / </li></ul><ul><ul><li>Employee Benefits Security Administration </li></ul></ul><ul><li>401(k)s for Dummies </li></ul><ul><ul><li>Co-authored by the 401(k) creator </li></ul></ul>
    27. 28. Questions

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