Is retirement going to be available for millennials through 401k?
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
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.
Sergio G’s Answer
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.
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.