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Is retirement going to be available for millennials through 401k?

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I've heard a lot rumors about companies getting rid of 401k. Therefore forcing employees to do retirement plans on there own but, it will be be hard to do if a person doesn't make a lot of money.
#retirement #financial-planning #millennials

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14 answers

Roger’s Answer

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Hi Charles: I have not heard of the rumor that companies are getting rid of 401k's. In fact, smart companies -- a company YOU would want to work for -- gladly offer and encourage their employees to participate in 401k's. And, these same companies often match your contribution by 6%. So, if you are making $50,000 a year, the company is giving you $3000 on top of your salary as a participant in a 401k. Good companies really want you to participate and invest in 401k's. These wonderful long-term wealth creating financial benefits are not going away.
Keep in mind the biggest benefit to a 401K is the longevity. Start a 401K as soon as you are able and invest at least the amount that your company will match. 401Ks can often earn a 10% return on investment. For example, when your 401K reaches $100,000 you will $10,000 if you receive a 10% ROI. There are plenty of 401K calculators online to reference. Michael Dunmire Translate
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Jay’s Answer

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Many companies are looking for any possible way to save money: spending less on their retirement plan benefits is one option. However, 401k's will never go away as long as the tax law stands at present. The tax code makes saving money for retirement substantially more advantageous in a 401k plan versus on your own without the tax benefits of 401k's. Keep in mind that the owners and highly compensated employees of companies are looking for tax benefits for themselves. So they want a 401k as much or more than people who are not making a lot of money. But... I do foresee employer's "match" amounts decreasing. (The match is an amount of money that the employer adds to the employee's 401k plan.) Decreasing matching amounts WILL make an employer less attractive, but many employees who do not make much prefer to have money in hand today instead of matching funds in a savings account for later. Employers want to use their money in a way that is most attractive to the maximum number of employees.

I hope this answer is helpful. But please don't get hung up on which tool to use for saving. 90% of the challenge of investing is learning how to spend less than you make. That's the hard part most people cannot do. Focus on that, and you will be way ahead of most people.
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Kenneth’s Answer

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Rumors like this come and go, and frankly, I agree with many of the other people who responded in saying that I have not heard that 401k plans will go away. What I have heard is that SOME companies may consider stopping their match of the contributions by their employees. Does that mean you should stop investing in the plan? Certainly not. If the employer ceases a matching contribution, you still receive the tax benefits of a 401k for your own contributions.
Even if 401k plans go away altogether, or if the company you work for does not offer a 401k, you should still put money away, preferably in a tax-sheltered program like an IRA or ROTH IRA. Something is better than nothing!
Ideally, you want to be in a position where 15% of your income is put away each year. This may sound like a lot, so if it is too much for now, start with a smaller percentage and increase it every year.

I hope that my comments have helped.

Kenneth recommends the following next steps:

  • Stay with your employer's plan.
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Laura’s Answer

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Hi Charles,
401(k)'s are not going away. You may be thinking of social security retirement benefits; that source of retirement benefits is dwindling and could run out of money in the future. But 401(k) money that you contribute is ALWAYS yours. The only way you can lose it is if the investments you allocate it into go down in value. Sometimes employers will give you money toward your 401(k) (called a match: they'll match a percentage of what you contribute). Even if you leave your employer, you can take that money & put it in your next employer's 401(k) plan, or open your own IRA account somewhere, & put the money in there. But absolutely participate in a 401(k) if there's one available where you work.

Just FYI, the money an employer "matches" takes a certain amount of time to become yours totally. That's called "vesting." But when that time has passed & the employer contribution has vested, that is your money, too, & the employer can't keep it if you leave. It's yours.

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Alan’s Answer

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I am not familiar with the idea of companies discontinuing these types of plans. And I would suggest you get started deferring into this type of plan as soon as possible once you start working. Find out about the plan your employer might offer and contribute as soon as possible (At least as much as the company matched, if not more - say 10% of pay). If you want to have sizable nest egg when you reach retirement age, you want to start saving as soon as possible. Experts suggest you save between 10%-15% of pay for your entire career in order to save enough for you to retire with an amount that could approach 10 times your salary.

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Bobby’s Answer

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Hey Charles B. Most companies are establishing 401k, 403b and similar plans. 401k plans and similar plans are called Defined Contribution Plans. Defined Contribution Plans are what most employers are transitioning too, they are a lower cost to the company than Defined Benefit plans, or pensions. With Defined Contribution plans the employees designate a portion of their income toward their retirement. Some experts suggest 10%-15% or to at least match the maximum employer contribution. The employer matches up to a certain percentage, typically I've seen 3%-6% from the employer. Defined Benefit plans can be costly and are being phased out by companies in an effort to establish a Defined Contribution Plan.

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Tiffany’s Answer

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I have no heard anything regarding 401K plans going away and in fact, my company just highlighted a future plan to continue to contribute to the important financial goal. I started investing right away when I get the 401 k option and doing the company match is a great way to build for retirement and save.
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Steve’s Answer

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Charles I have been a financial advisor for over 20 years the first step is teaching people how to budget how to come up with the gold you’re saving for and save according to how long you plan on using this money with her 401(k) is go away or not companies are always trying to attract and then sent people to join the company with tax savings so I don’t believe 401(k)s are going to go away but there are other ways for you to save happy to help you
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Diana’s Answer

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I do thing 401ks will always be around. Government as well as corporations do realize this is one of the most effective ways to introduce individuals to savings. It's also the easiest considering it comes directly out of the paycheck. If it does go away, I do believe something else will come in it's place. For instance, independent financial advisors like myself can set up a retirement plan for individuals where money can come directly out of their checks if they are self employed, etc.

Diana recommends the following next steps:

  • You should always save at least 10% of whatever you make, (for every $1 save a dime). Once a person start this, particularly at a young age, (below 30), it has been proven that they can have quite a lot of money saved in this account by there retirement.
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LaTonya M’s Answer

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I have not heard about 401k's being dismantled but I can assure you that investing in a plan as soon as you get a job is of the utmost importance. I started working professionally at 24yrs old and I have been investing in my 401k since my first paycheck. Now, 23yrs later, I continue to increase my contribution.
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Sergio G’s Answer

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401(k) plans are a type of retirement plan that is set up by employers and allows employees to elect to make contributions. Some employers also make contributions on behalf of employees. You must decide how your retirement plan is invested. The rate of return is not guaranteed and your account may loose value, but still a retirement plan is your best option to save for retirement and you should make contributions as early as possible.

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Dhruv’s Answer

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While 401k plans may still be available it is important for individuals to take retirement into their own hands and create accounts. Roth iras are perfect for lower income individuals to take advantage of tax free growth. With that said, company matches are excellent for employees and you should always get the maximum match (free money!)

I think the rumors you are talking about will not come true but if they do, be prepared and don’t rely on anyone else to fund your retirement.

Dhruv recommends the following next steps:

  • Open an IRA or Roth IRA
  • Learn more about investing
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Kenneth’s Answer

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Rumors like this come and go, and frankly, I agree with many of the other people who responded in saying that I have not heard that 401k plans will go away. What I have heard is that SOME companies may consider stopping their match of the contributions by their employees. Does that mean you should stop investing in the plan? Certainly not. If the employer ceases a matching contribution, you still receive the tax benefits of a 401k for your own contributions.
Even if 401k plans go away altogether, or if the company you work for does not offer a 401k, you should still put money away, preferably in a tax-sheltered program like an IRA or ROTH IRA. Something is better than nothing!
Ideally, you want to be in a position where 15% of your income is put away each year. This may sound like a lot, so if it is too much for now, start with a smaller percentage and increase it every year.

I hope that my comments have helped.

Kenneth recommends the following next steps:

  • Stay with your employer's plan.
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Mary’s Answer

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I believe there will be 401ks and multiple other financial instruments to help you prepare for retirement. The key is planing Charles. Find what you love to do and work hard. In your 20s and 30s put some money (no matter how little) away every month. In your 40s you need to get serious about saving and will most likely need the assistance of a fiduciary financial planner. You may have to interview several financial planners before you fine someone you trust. Your 40 and 50s are your money making years. Best of luck to you!
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