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.
Taking cash out of your 401kMeet Victor
Music gtgt Cashing out my 401k really wasn't part of the recipe. Neither was losing my job. And I'm a long way from being able to retire, and I needed to do more than learn to cook to earn my keep around here. So I tapped into my 401k. Taking the lump sum distribution was a hard decision. I got the money right away and was able to pay a few bills. I've even reinvested some of the money and I have the time to work those investments to the best of my advantage. One thing I didn't realize is that I didn't.
Have to take all of my money out and pay taxes. I could have taken what I needed, left the rest and gave it a chance to grow. tax deferred. By accessing your 401k, You have immediate access to your money. Partial distributions are allowed And some distributions might be penalty free. You really need to find out how much you're going to lose due to taxes and potential penalties before you do anything because it may be more than you think. Cashing out isn't for everyone. It was the best choice for our situation.
You should keep in mind if you're cashing out, there is a potential ten percent early distribution penalty and a twenty percent income tax withholding. Also, the distribution is taxed as income so it may have a potential impact on your tax bracket. And remember, your savings won't have the chance to grow taxdeferred. Hopefully, I can find a job soon and try to get my retirement savings back on track. But take it from me if you have to cash out, make sure it's the right choice for you.
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.
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.
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