Friday, December 11, 2009

401 K Plans Face Criticism

By, Meredith Anderson



A 401K plan is a pension plan that allows you to put aside and save for retirement throughout your years of work. It was originated in 1978 with the passing of the Tax Reform Act. The government thought that Americans needed and little push and incentive to save for retirement. Its a way to put aside a portion of your pay check directly into an investment account and defer income taxes until withdrawal. Once you have retired you are given back the money and the profit you have earned on the investment. If you decide to retrieve your money before the age of 59.5 you will receive a penalty of 10% additional taxes. The plan was titled after the section 401 paragraph K in the Internal Revenue Code.


With a 401K you have a side saving. With many people struggling to pay bills and keep their lives moving day by day 401K plans are being viewed in a less positive light. Many feel that they need to focus on today and not 20 years from now. People are willing to dip into their retirement funds to stay alive today without realizing how much harder it could be in the future. There is much debate between experts whether or not this is a smart move. Most will agree that taking out of this plan to simply pay of credit card debt is not smart, however there is much debate on whether or not there are better places to be investing you money. Some are saying GOLD is the way to invest rather then your retirement?


Sources:

http://money.howstuffworks.com/personal-finance/financial-planning/401k.htm
http://www.cbsnews.com/stories/2009/12/11/earlyshow/series/main5967017.shtml

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