short answer why are small business 401ks so expensive
This is a much shorter version of a way too long tutorial I did where a detailed explanation of why small business 401k's are so much more expensive to participants and to providers than larger businesses 401 K and indeed they are more expensive from my book of benchmarkes where I can benchmark your plan expenses and performance if you are contributing to a 401k sponsored by small business your expenses average 1.5 percent of plan assets each year. So for every thousand dollars you have in the plan fifteen dollars every year.
Get taken out to cover plan costs one way or another you and most of the time you don't even see those payments and you don't know where to look all you know is by the time you retire you're hundreds of thousands of dollars behind what you'd be you have been putting that money into a large business 401k If you want proof that lowering plan fees by one percent will save hundreds of thousands of dollars by the time you or your participants retire click here. OK. Here's the answer.
Why small business401k's are not nearly as good a deal because small businesses don't have any employee whose only task is negotiating fees and services the boss is busy HR departments busy and if there's a benefits expert in the HR department they're busy with health care benefits. Usually small businesses end up going to an expert you don't always get from the best deal the experts sell small businesses a supposedly FREE PLAN but the participants get a menu of funds that don't have very many good choices the expense ratios in those funds pay commissions.
Back to the experts the stockbroker the adviser the 401k company the insurance company whoever sold you that planned and these experts make the solution seem more complex than it has to be like they're the only way to get you through the minefield they tell you all the horrible things that can happen instead of giving you lowcost ways simple ways to avoid the minefield That's why small businesses need a 401k advisor like me, a FEE ONLY adviser who gets no commissions to help negotiate a 401 k plan to help design.
401 k plan that has much lower fees that don't leech out each participants accounts every year on my example if you want to see a play and 0.5 0.6 percent range, a full percent lower than average. The average is not good plus I offer more services for that price I don't just compete on price I compete on bringing large company services to small company 401k's it's not that hard to migrate to a better plan it'll save you money very first year a good plan administrator can make those conversions troublefree.
So it doesn't take a lot of Your time. it's not that complicated A plain 401 K doesn't have to pick you through a minefield I pick out and service a plan design and providers that don't go anywhere near the minefield thanks for watching this tutorial if you questions about this tutorial my other tutorials or plan costs in general give me a call or if you want watch much longer tutorial where I go into to much greater detail where smaller plants get um. um not as good a deal. Thanks for watching.
Borrowing From 401K to Reduce Your Debt Good or Bad Mint Good Credit Tips Tutorial
Question comes from Max on Mint's Facebook page, and this is Max's question What's the formula to determine if it makes more sense to pay down credit card debt normally or to borrow from your 401k to pay off that credit card debt Max, here's my opinion on that issue. Your 401k is your nest egg. It's the war chest that you're going to build over the entire time that you're working so that someday you can retire and live off of it. Taking money out of a 401k to pay off credit card debt.
Finance Investment Tips Penalty for Cashing in a 401k Early
This is Patrick Munro discussing what is the penalty for cashing in a 401K early. A 401k is a governmental retirement program designed to allow working employees to put away money for retirement and not pay any taxes on the growth of that money. It's a privilege to have a 401k, the government grants you the privilege and if you don't have to pay taxes on the money, it will grow even quicker. However some individuals have, basically have problems with their cash flow and they have to collapse their investment. And if they do so before.
The age of fifty nine and a half, the government then will give you a penalty upon your money for the withdrawal. It's based on your taxable rate as well as a pure ten percent penalty over and above what you take out. So it's a very large penalty and definitely not want to tap your 401k as an emergency cash resource, because it will not only put your retirement funds back but it will actually cause you to lose money. So that's very important as to make sure you build money for your retirement future. This is financial adviser Patrick.
Should I Roll My 401k To An IRA
A question we're commonly asked is should I roll my 401k into an IRA There are many reasons why it makes sense, but there are also circumstances where is does not. If you choose a rollover, you can continue taxdeferred growth, open up more investment choices, possibly choose a Roth account, and consolidate your assets. However, you can't borrow against your assets, fees may be higher and custodial fees may apply. If you remain in your current 401k plan, you can always move to a selfdirected IRA later, and can potentially defer required minimum distributions past age 70.
With this option, however, you might have limited investment options. You may not be able to take a loan, and you might also need to transfer the assets if the account is less than $5,000. Staying in your 401k means it's possible to rollover to another employer's plan. If you rollover to a new 401k, may be able to borrow, will have protection from creditors, and can begin withdrawals after age 55 if you're retired without penalty. As you can see, a lot needs to be considered before making a decision, and an experienced financial planner can help.
Personal Finance 401k About 401k Contribution Limits
My name is Phillip Beningoso, I'm an investment professional, and I'm going to be discussing 401K contribution limits. It's important to keep your eye on what amount that is allowed for your 401K contributions. There are two different 401K contribution limits that you're going to really need to be aware of. The government sets the limit allowable, and an employer sets their own 401K limit. So, let's talk a little bit about both. The U.S. government imposes a 401K contribution limit guideline. Okay, the government is beginning to understand the importance of saving for retirement, and has started to increase that limit each year.
To help people save more money. Now the limit for 2008, 401K contribution limit is fifteen thousand, five hundred. And they also have what's called a catchup contribution feature, which is for those over fifty years of age, and that is five thousand additionally. Now, check with your employer to find out their contribution limit. This is very important. Any information provided here is for general informational purposes only, and should not be considered an investment advice or personalized investments. Any strategies or investments mentioned here may not be suitable for everyone. My name's Phillip Beningoso, and I'm an investment.
Andrew Answers Can I Take A Loan Out Of My 401k
Music Hello, and welcome to Andrew Answers! I'm Andrew. Today's question comes from Casey on Facebook who asked, Do I need spousal consent when requesting a loan from my 401k Well, Casey, that's a great question and while we wouldn't say that we want you to borrow from your 401k, we also know that sometimes circumstances need to require it. So, let's start with the basics first. To take a loan out of your 401k plan, first you need to make sure that your plan has the option available to you. Not all 401k plans have loan options, so you want to make sure.
You ask your employer first before you get started. Now normally there is some sort of loan documentation that goes along with that to let you know what the rules are and what you're allowed to do, so make sure you get that plan document and you read through it carefully first. But the rule of thumb around loans is that you can take a maximum of half of your account balance up to $50,000 for a loan. The lowest you can go is $1,000, so should you need anywhere between $1,000 and $50,000 you are going to be okay, and it can't.
Be more than 50 of your account balance. Once you actually sign up for a loan you're going to get an amortization schedule, which is a repayment schedule, and some sort note between you and your employer saying that you are going to pay it back in a timely manner basically the same thing you would normally use for any other kind of loan. Once you are paying that money back, there is usually going to be some sort of interest most plans require a Prime 2, so whatever the prime rate is.
Of the interest going out there plus 2 is going to be the balance. But again, it's going to be in your loan documents so you are going to want to read through that carefully. Now to get to Casey's question about if you need spousal consent, in most 401k plans you actually don't need it! The only time where you would need spousal consent is when there is a life annuity option. What does that mean Well it means if your spouse happens to pass away, they have allowed that you can.
Take ongoing payments from their 401k account upon retirement. So you are going to want to make sure there is no sort of life annuity option in the plan, as well. When you go to your employer asking about the loan option, find out if there is an annuity attached to it, as well, so you will know if you are going to need your spouse's consent to borrow from your 401k plan. That's it for Andrew Answers this week! If you have questions or want any specifics, feel free to comment where you see this tutorial, and maybe your question will come up again.
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