401k

A 401k is an employer-sponsored, long-term savings plan that is intended to help you sock-away money for your retirement. A 401k offers significant tax breaks and has a few drawbacks. The money you put away now to be used later after 59 ½ years of age or at retirement is not taxed until it is distributed. Some companies match part of the dollars that you stash away. Your retirement savings are increased through these employer matching contributions. You can borrow against a portion of a 401K, as long as you pay it back plus the low interest. Otherwise, if you tap into your savings before 59 ½, you pay penalties for early withdrawal and the early distribution is also treated as regular income for tax purposes.

In-Plan Annuities Show Promise Despite Obstacles

An " in-plan annuity " refers to an annuity option that exists within a 401k plan. The notion of an annuity-based retirement income option within a 401k plan is a relatively new concept. Advocates of in-plan annuities--which include key members of the Treasury Department and Congress--believe that partial annuitization is important for the retirement security of the millions of Americans whose access to stable sources of pension income is largely limited to Social Security . There are, however...

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Time to Revamp the 401k?

Writing in the Huffington Post, CBS MoneyWatch Editor in Chief Eric Schurenberg says he thinks it is time to consider major changes for 401k plans. His criticisms include: 401k plans randomly create winners and losers. 401k plans leave people poor. 401k plans expose people to longevity risk . Comments on longevity risk include: The shame of this is, longevity risk can be insured away by averaging out the risk over an entire population. Every annuity does this. Why not the national retirement...

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Taxes and Annuities

A good, straightforward article on how annuities are taxed from Kiplinger Contributing Editor Kimberly Lankford. There is discussion of tax implications of using qualified funds (i.e. funds from an IRA or 401k) to purchase an annuity versus non-qualified funds. Also basic discussion of how different types of annuities such as deferrerd and immediate are taxed. 1035 exchange tax issues are also addressed. Source: Kiplinger Full Story

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The Business Week Cover Story on Retirement--Life-Cycle in Theory but Status Quo in Practice

Business Week just ran a timely cover story on the post-financial crisis retirement landscape. Portions of the feature present a remarkable contradiction. While there is a clear endorsement of...