Well, I've just switched jobs and the one prior to this one had a lousy 401k system. This one has a really good one, but I'm kind of hesitant after the mess that 401ks suffered after 9-11. Do you think a 401k is a necessity these days?

We have a 401k and is not bad. But it depends on what plan your company has. So you just have too be careful.

I regret that I didn't start one when I was younger and not self-employed. It's probably not a good idea to keep all your retirement funds in it, but I think they are a good idea - especially if your company has matching contributions.

401k is a great deal in my opinion my company has a wonderful 401k system in which they match a certain percentages of what I put in. So It really works out great, much better than the last compnay I worked for.

The company I worked for canceled the 401k because of lack of interest. They didn't match any funds so it wasn't worth having in the first place.

What mess? You mean the one that helped boost people's 401k?

When your investing in your 401k it is expected that you will buy when funds are cheap and when they are expensive. Don't pay attention to the day-to-day activity. The Dow decreased 25% in '87 in just one day. If you owned stock during it's peak just before that crash, you would be sitting pretty right now.

Realize that over the long haul you will benefit from the historic performance of the market, compound interest, pre-tax investing and possible employer matches.

A 401k is a vehicle for a retirement plan, and therefore is a necessity. If not your 401k, some other plan should be in place if you would like to retire.

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Millionaire Money Habits
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My philosophy has always been, and will continue to be until 401k providers join the real world, that you should utilize your 401k only up to the company's match (and no more).

Keep in mind that deferred tax is a DEBT that you will have to pay at some point in the future. Our marginal tax rate is one of the lowest it has ever been. You could get stuck paying any gains back in additional taxes in the future.

Here is why the financial institutions love the 401k...
1. They want your money.
2. They want your money on an on-going basis.
3. They want to hold it as long as possible, typically until retirement or later.
4. They want to give back as little as possible.

Your 401k helps financial institutions and our government more than it helps you. Period. In fact, I could make an argument that the "free money" company match you get may not even be worth it...

There are good 401k plans out there, but they are very, very rare. I would disagree that they are a "necessity", in and of themselves. But a 401k should be looked at as just a piece of a sound retirement planning strategy.

Excellent points Minion.

With proper investment strategies, you can generally earn far more than what you get matched over time. Maxing out at the match is really the only good idea if you have a 401k.

On the other hand, if you are not inclined to save and invest on your own, if you are unwilling to find out about other possibilities by talking with a financial professional, then having a 401k is certainly better than having nothing at all.

So, I've read several comments like this, regarding a 401k not being a great way to invest for retirement. What I haven't seen yet is a better idea. What do you suggest instead of the 401k? IRAs? Brokerage accounts without tax benefits? If so, what kind of investments? Stocks? Mutual funds?

Just curious, thanks.

h3h8m3, a 401k is a great way to save for retirement IF and especially IF your employer is making contributions.

If an employer is throwing in say 25 cents for every dollar up to your maximum contribution then you've already made 25% on your money PLUS whatever the underlying investments return.

I think most of the professionals on this board would agree that over a ten year period you should be able to consistantly earn at least 7% in the market.

When coupled with an employer's 25% contribution the earnings are 32% on your money.

Money more than doubles every 3 years at 32%.

That being said, WITHOUT an employer's contribution you may as well seek professional advice and do your own thing based on what you value the most?

The return on your money OR the return of your money?

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Gary Spicuzza, *SAFE
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*Self Appointed Financial Expert