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Subject:  Re: New law needed for 401k Date:  10/6/2007  7:34 AM
Author:  aj485 Number:  59442 of 88520

I am 55 years old and in my line of work (which is not very stable in terms of continous employment) , it has become industry norm to require at least 1 full year before you can contribute to 401k .

Why are jobs not very stable in your line of work? Are the ternminations usually voluntary on the part of the employee? Or do the employers do the terminating?

I know government has some exceptions for those who are closer to the retirement age when it comes to IRA contribution . I wish they (government) could also do something about the 401k and waiting period , specially for those 55 and older .

If the terminations are usually voluntary on the part of the employee, I would say that you have your own solution in hand - quit quitting. Yes, you may get $1 more at the new place, but think about how much that is costing you in the opportunity to invest in a tax-deferred account.

Even if the terminations are usually initiated by the employer, you can still invest in taxable accounts and IRAs. So nothing is stopping you from investing money for your retirement. Sure, you won't get the tax-deferral in the taxable accounts, but you also won't have to pay as much in taxes on the withdrawals in your retirement, and you won't be required to take out more money than you might actually need.

The 401(k) is a benefit that is offered by an employer. The government rules give employers some leeway in implementing that benefit, so that the employer can implement the benefit in a way that they believe will provide the best return for both the employer and their employees. If, because of high turnover, the employer chooses to use the 401(k) benefit to try to encourage long-term employment, that's their option. If the government were to require that employees be eligible beginning Day 1, do you really think that employers in your industry would continue to offer the 401(k) as a benefit?

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