401k ? i'm new to this and need some help and have some questions?

Question

ok i know i am allowed to put in 15% of my total income and that my company matches it 100% but what i need to know is, what are the fee's if i need to take the money out early, and are there any purchases that i will not be penialised for using the money?

am i guaranteed to have the money? what if i get fired or quite the job do i still get the money?

i know i have never heard of a company that matches it 100% either, which is why i feel like i should take advantage....right now i am 5 months pregnant and single and worried that there might come a point that i need the money

Answer 1

Sometimes there is a waiting period until you can get the company's matching portion. When you reach it you are "vested" in the program, and can take what they contributed plus your contributions when you leave.

You should put in all 15%. It is a great deal. When you leave that job or get fired or whatever you can move your 401K to a new job or just let it sit there. When you change accounts that is called "rollover".

Some places let you choose how to invest the 401K money. Like where I work we can put it in stock fund, small capitalization fund, international fund, etc. If you are young and have a choice, just put it in the stock market. That has a good record over history.

Yes, there are fees but you probably cannot control them through the employer's 401K. They are usually pretty low. Someone is managing that money and they have to have a salary, too, to keep records and send you statements etc.

Some programs have loan programs where you can borrow from the 401K program. If you quit the job before the loan is paid back, though, it is all due immediately. Sometimes they require you to show proof of hardship or medical expenses or real estate purchases but sometimes not. When you pay back the loan, there will be interest (but you're paying it to yourself). You must consider that if you borrow from it that money won't be in the account growing and earning for you. Bad idea to borrow from it.

I have typed enough.

Answer 2

First, nothing is ever important enough for you to pull out of yoru 401K early, if it is, I wouldn't be too concerned about the fees cause you have a life-changing or major situation on your hands anyway. However, I think you are looking at 45% or something like that. Don't hold me to that.

You have to choose how to invest the money, since you are young and just starting out I would likely put 25% in conservative - possibly between conservative and money market, 35% in mid-range, and 40% in high risk stuff. And I would definitely do every bit of what the employer matches.

Since you are investing the money, it may or may not be there. Money Market is no risk but very little return. However, your money is guaranteed there. That is why I would keep some in there. You getting fired or quitting has no bearings on your 401k except that you aren't putting more into it every 2 weeks.

By the way, what employer in the world will match your 401K max? Never heard of that before.

Answer 3

First of all if you are looking at it as a savings account you need to find another method, such as a money market account.

You can actually put up to $15,000 in, though your employer may only match 15% of your income, which is really good, unless you are over 50 in which case there is a "catch-up contribution" of $5,000.

If you take the money out early you will pay a 10% penalty plus you will have to pay the taxes that you deferred when it was taken pre-tax from your check. So depending on your income tax bracket you will lose from 20 - 45% of the distribution.

The only qualified distributions are for retirement after age 59 1/2, therefore there are no purchases that will not be penalized.

You are guaranteed the money you contributed to the plan, but with regard to the company match, you will only get your vested company contributions. So that amount will depend on how long you have been there and the plan's vesting schedule.

If you are fired or quit, if your account value is over the plan minimum, then you can leave the money with the plan until you choose to roll it over into a Traditional IRA or your next employer's 401 (k). If not a mandatory distribution will be made and you will need to either roll it over into the above mentioned options or treat it as an unqualified distribution and pay the penalty and income taxes on it.

Hope this helps.

Answer 4

hi you have god questions. Lets see now

what are the fee's if i need to take the money out early??

i am not aware of any fees but your 401K is Income tax exept. Once you decide to take it out however, TAX AXE


purchases that i will not be penialised for ????

If you mean not have to pay income tax on then yes you can do away with that if you
Buy a property
Invest in govt bonds
Ask a financial consultant


am i guaranteed to have the money?

Most 401K are invested in mutual funds(MF). So yes the money is guaranteed but will be at whatever is left of your investment. So, if you have $10 in MF at the time and the value of your investment went up to say $15, then you have $15.

what if i get fired or quite the job do i still get the money?

401K is managed by some third party and is completely trasferable to your new employer. However, keep in mind that not every employer matches it 100%

Answer 5

When you withdraw money early, you get taxed on that money, since the money you put in to a 401k is pre-tax. You also get a 10% early withdrawal fee, but don't have to pay that til you do your taxes. You may not have to pay the fee at all if you put that same amount back into a 401k plan or IRA whithin a certain amount of time, either 3 or 6 months, can't remember. As far as swithching jobs or getting fired, the money stays put until you decide to put it into your current remployers 401k, an IRA, or "cash out" so to speak. You won't get charged a penalty unless you "cash out".