Steve Braun

Aug. 5, 2005 - The Latest 401(k) Data & You

The Associated Press reported yesterday that the average 401(k) balance increased 10% in 2004, according to a study of 8.6 million plan participants conducted by Fidelity.

That looks great at first glance but consider that the increase includes contributions made by employees, matching contributions (if any) from the employer, and market gains.

How Do You Compare?

The average 401(k) balance in 2004 was $61,000.

That might seem low, but remember a study like this includes younger workers just starting out with very small balances and older workers who (hopefully) have much larger balances.

What is interesting to note is that the average balance in 2004 is still below the average balance in 1999 of $64,000!

That means that the theoretical "average" worker sank five years of contributions (averaging 7% of pre-tax pay) and any employer matching contributions into his retirement plan and still came out with less money. Ouch! The low point came in 2002 when the average balance hit $44,000.

That's a tough psychological barrier to cross when looking at your account statements.

Don't lose heart!

The "glass half empty" folks will lament this apparent loss while the "glass half full" crowd will say they were able to invest when stocks went on sale.

No matter how you look at it, this is no time to be timid. You need a disciplined investment strategy and plan if you are going to retire comfortably. That takes a major commitment of making consistent contributions on your part.

Social Security isn't enough and will likely provide fewer benefits in the future.

Corporate "Defined Benefit" Pensions are going the way of the dinosaurs.

YOU must make up the difference through your own efforts and with your own money. Saving for retirement is in your hands. No one else is going to provide a retirement for you.

• Post A Comment!

Sep. 3, 2005 - 401K

Posted by mommyx3

My husband has a 401K plan from his previous job. In November of last year his employer stopped making 401K deposits for all employees, while still taking 10% of their pay, and was illegally using this money for business debt. My husband worked there through February of this year, so that is 3 months of 401K deductions missing from his account. When he confronted his employer, he offered to just give him a check rather than deposit it into his 401K account. We're not sure of the legality of that, as this money was not taxed and two months worth are from 2004. Any advice on how to proceed would be appreciated!

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Sep. 5, 2005 - Reply to mommyx3

Posted by

If the employer is offering you a check to make good on the stolen funds (that's exactly what has happened), then I would jump at the chance and take it. First, this employer will not be in business very long and this may be your only chance to get your money back. Second, it is not illegal (to my knowledge) for you to accept this money. It's yours to begin with! Third, the money returned directly to you will most likely be taxable for federal and state income taxes only in the year you receive the check. That's not a big deal because it was deducted from your income previously. I'd just be glad to get my money back.

Once that check has cleared the bank, your husband has an obligation to God and his former co-workers to report his ex-employer for fraud. What is happening here is illegal and who knows what other crimes are involved and the total dollar amount stolen. The ex-employer is violating federal law so you husband should contact the nearest FBI or Labor Department field office. Don't just let it slide. Innocent people are being hurt and you have the power to bring it to an end.

Finally, I'd get that old 401-k rolled over to an IRA account as soon as possible. In theory your husband's ex-employer can't get at this money. But who knows if the plan custodian/trustee is reliable? Better safe than sorry.

Be careful, however, as to where the money gets rolled over. There are lots of advisers out there who would love to get their hands on the account and possibly do even more damage through high fees, bad investments, or both. I can point you to some reputable firms where you can avoid this. Email me privately if you are interested.

Otherwise, let me know how it turns out.

Edited by stevebraun on Sep. 5, 2005 at 8:30 PM

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Nov. 15, 2006 - short term flucuations

Posted by spidey

I am sure the money that Steve invested in bad markets went down as well. I am not sure the point. Plus with 401k your forced to be dollar cost averaging. You actually want the funds to go down. This means when your paycheck comes in you get to buy more shares for less money,
Although my advice is to only put money into the 401k to get the match . Then look for assets outside the 401k. I like the roth ira. I wonder how the goverment is going to pay its bils. Its more likely that all that money that we are working on will have gone down in value. Which is a good reason to buy real estate.Another way for the goverment to get more money is to raise taxes. Wonder what rates people will be paying on that 401k money. The same people that are likely in a reasonable tax bracket today. Or who could of paid capital gains taxes if they invested outside the 401k.

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Steve Braun has been a Christian for 22 years, happily married to his wife Karen (a.k.a. Spunky) for 20 years, and is the proud father of their 6 children who are homeschooled. He is also the founder and president of Liberty Financial Planning. Steve's blog is devoted to writing about the financial services industry, providing commentary on current news items, discussing personal finance concepts or issues, and coaching parents on how to teach their children sound financial stewardship principles.

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