Employer Matching in December, Withdrawls, Loans

[Guest archimedes_pie]

My employer will match only 25% of our contributions and only at the end of the year for contributions made to our 401K and may even announce a 50% match at the end of the year. The mutal funds availabe in our 401K plan are not really satisfactory to me, so I would prefer to invest my money in an account that has accesss to stocks, options, and bonds. I am searching for a way to get the employer matching but still move the money I've put aside out of the account. For example, Could I make contributions to the 401K plan and then withdraw them and pay the 10% penalty, before those contributions are ever matched? In this way I end up basically netting a 15-40% gain. In other words, will taking a loan out or withdrawing funds affect the employer matching(I realize I can't withdraw the employer matching till I am vested)? Then I could increase the contributions we make to my Wife's SEP to reduce our taxable income to compensate for not using the tax advantages of the 401K.

Any ideas? The funds really stink 4-8% returns, and I am getting about 30-60% by investing on my own, this makes a HUGE difference.

[Tom Poje]

it is extremely hard to 'withdraw' $ from a plan - that is the law - the money is in there for retirement. so unless you meet one of the conditions for withdrawing funds it can't be done.

e.g. doubtful you can claim hardship, loans have to be repaid, etc, and then the plan might not even permit these options.

sorry.

[david rigby]

Perhaps you can convince your employer to offer more options in the plan.

[Guest Green92]

In know that in plans I've seen, the loan turning into a taxable distribution scenario you suggested will only be a one time shot. Once you've defaulted on a loan in our 401(k) plans, you will not be eligible for another loan until it is repaid, ever. By the way, there are 401(k)'s that allow participants to open up self directed brokerage account and invest a certain % of vested amounts in individual bonds and stock.

[namealreadyinuse]

I have the same problem. Since you are making 30%-60% on your own, you should ignore the match and just keep your outside investments going. Why go to all of the trouble for the 15% net gain? Matching contributions are for chumps who don't know anything about investing!!!

[Guest archimedes_pie]

Any ideas on what it might cost the company to switch to a plan allowing individuals in the 401K plan to trade in stocks? Our plan is through Fidelity, and we are a small company 100+.

[GBurns]

I would refrain from talking about switching. Instead try to get the employer to add an option that meets your needs.

Have you checked to see if what you need is available from Fidelity in your plan's offerings? If you have Fidelity's Standard 401(k) there might be the self directed brokerage option that you want already available.

[Belgarath]

While I'm not a big fan of the Roth 401(k) option on an overall basis, if you are really getting 30-60% investment return, then you should be on your knees begging your employer to add a Roth feature as well. 'Cause that would turn your gains into tax free returns, as opposed to tax deferred. Of course, I'm of the old "risk/reward" school where you will also lose big at some point, but that's a separate issue.

My experience is that your employer won't be thrilled about switching providers just to accommodate one employee, (particularly if the employer is currently reasonably happy with the plan administration/fees) so you may need to enlist some other employees aid you in your cause.

[Guest archimedes_pie]

I spoke with a service rep about my plan and there is no option to upgrade the account on my end I am limited to the 10 or so funds available in the "plan". However, she said it was possible for the employer to upgrade their plan to one that would allow buying and selling stocks, but I don't know what that might cost. And yes, I think I would need to enlist the support of some fellow employees to lobby the big guys, but it seems most people are content with the hands off approach, and I doubt I could (or should) convince others they may get returns as high as I have, as I have no gurantees either, just wish I had the option.

[GBurns]

Why not ask the same service rep what it will cost and how best to get it done? It might cost nothing and it might only need the employer signature on a simple form to add the option.

[Guest willow]

Would you PLEASE let me know where you you are consistently getting 30-60% returns and are these annual returns?

My family would greatly appreciate it.

Thank you very much.

Willow

[RCK]

Really!

If I were getting 30-60%, I would not be working for a living, and I would not be soliciting free advice. But that's just me.

[GBurns]

Getting free advice can be a very effective expense reduction tool. Of course, sometimes the advice is worth that price though.

Maybe the amount is not enough as yet and archimedes is just taking advantage of the match to accumulate more money. A 50% match is attractive and is a great "rate of return".

archimedes

It's your turn to return the favor and give us some advice. Inquiring minds wants to know, and I could use the tip.

[Guest willow]

Still no word on getting those outsized returns???

Oh well, guess I won't be retiring this week...

Happy soon to be April 15th to all.

Regards,

willow

[Guest archimedes_pie]

OK, ok. Here goes...

This is only my second year to be investing, but being an analytical type, Ive kept very good records of my activity, and for my first year of trading/investing in stocks I got 39.58% gross return (excluding taxes). When I say gross return I mean what I made for the whole year divided by what I contributed for the whole year, but that really doesn't take into account the time value of money, i.e. my "average" contribution. So using Excel if you divide the contribution into 356 equal "payments" you can do a goal seek to find what rate of return would give you the same answer, for my first year that was 63.57% So, I did well the first year, Of course I have no guarantees I will continue to do as well, but I am optimistic, at least enough to be really dissapointed in Funds.

My investing strategy is to follow a hedge fund, because they must file with the SEC on a quarterly basis, you can more or less know what their holdings are albeit three months behind. In addition to that, you must do your own Due Diligence; research the company, check into their financial info, PE ratio's, Earnings forecasts, Debt, etc. There is an unbelievable amount of analysis tools available, for free through sites like Yahoo finance, and MSN portfolio. So, it boils down to reading a ton of information and filtering through all the noise to see if a company is on the verge of a comeback, undervalued, or whatever the case may be. I am still learning too.

[MR]

OK, ok. Here goes...

This is only my second year to be investing, but being an analytical type, Ive kept very good records of my activity, and for my first year of trading/investing in stocks I got 39.58% gross return (excluding taxes). When I say gross return I mean what I made for the whole year divided by what I contributed for the whole year, but that really doesn't take into account the time value of money, i.e. my "average" contribution. So using Excel if you divide the contribution into 356 equal "payments" you can do a goal seek to find what rate of return would give you the same answer, for my first year that was 63.57% So, I did well the first year, Of course I have no guarantees I will continue to do as well, but I am optimistic, at least enough to be really dissapointed in Funds.

My investing strategy is to follow a hedge fund, because they must file with the SEC on a quarterly basis, you can more or less know what their holdings are albeit three months behind. In addition to that, you must do your own Due Diligence; research the company, check into their financial info, PE ratio's, Earnings forecasts, Debt, etc. There is an unbelievable amount of analysis tools available, for free through sites like Yahoo finance, and MSN portfolio. So, it boils down to reading a ton of information and filtering through all the noise to see if a company is on the verge of a comeback, undervalued, or whatever the case may be. I am still learning too.

Here's a perspective that participants in plans need to understand. The Trustees of your plan have an obligation to ALL of the plan participants. This obligation includes providing them with the information and education they need to properly allocate their investments. The danger of opening the plan up to unlimited options is that it becomes a practical impossibility to see to it that the employees really know what they are picking. You do the research and make informed decisions. Others might not and could get themselves into trouble. I own a business and buy stocks with my personal funds, but would be very hesitant to open our retirement plan to anything beyond mutual funds.

Be happy with your 30-60% returns with your outside money, but some day you may find yourself glad that you have your pre-tax investments in boring mutual funds. Those fund managers don't make the big bucks for nothing.