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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75335  
Subject: Re: New law needed for 401k Date: 10/6/2007 11:31 AM
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I'm already contribute IRA investing ($5000/year) .

That's a good start. Are you also investing money that you could be investing in the 401(k) ($15,500/yr) in taxable accounts?

I think in terms of incentive the companies can use other methods to keep their employees . 401k is a government approved tax deferred program that government has implemented for people to have incentive to invest for their retirement and I don't think the companies should use it as a tool to take advantage against their employees . I can understand if they don't want to match any money for new employees for certain period of time that would be their right , But in this case we are talking about allowing an employee to contribute .

Especially for small businesses, it is likely that every employee account that is set up has a cost to the company. That's a real dollar cost in terms of how much the company has to pay an administrator. The company needs to determine if it is worth the cost to allow employees to contribute, if they are going to stay less than 1 year, on average.

As you know we live in a society in which people live mainly for today .

That's not going to be solved by requiring companies to allow employees to contribute to 401(k)s from day 1. It's a culture and attitude change.

Trillions of $$$ in debt was not just created by the "government" .

Oh really? The federal public debt was $5.6 trillion, as of September, 2007. (http://en.wikipedia.org/wiki/United_States_public_debt)

There is a Good percentage of people who not only don't have much in their retirment accounts but also are in debt .

22.3% of the people who are eligible to contribute to 401(k)s do not. (http://www.401k.org/401kdeferrals.html) So without also requiring people to contribute, requiring companies to allow contributions from day 1 isn't going to improve retirement savings by much.

Investing in 401k would not only be good for the individuals but also for the society as a whole , that's why government created 401k in the first place .

Actually, the 401(k) plan was created to resolve an ongoing debate between employers and the IRS about deferred compensation plans that were already being implemented. (http://www.ebri.org/pdf/publications/facts/0205fact.a.pdf) It was more about ensuring that the government would eventually get some of the tax revenue that was being deferred than about being good for society.

I still think at least those who are closer to the retirement age (let's say 55), should not have to wait one year before they can contribute .

You always have the option of either finding a job with an employer who does not require their employees to wait a year, or staying more than a year with your employer. But in an industry with a high turnover rate, it is more likely that the employer would stop offering the benefit than bear the cost of creating and administering accounts employees who are not going to be around in a year. So you probably wouldn't even have the opportunity to contribute. Would that really be a better solution?

Believe me it is not always the extra $$ that make people to switch jobs If for instance my company loses its contract which is very easy to do , then I be out of job .

As suggested before, you still have to option to invest outside of retirement accounts. And you have the option of finding another industry. Even at 55, you still can make a career switch.

Then there are other reasons when an employee wants to leave because of abuse or other unfair treatment at work , but has to stay as a prisoner just to be able to keep the 401k . That is not right .

Umm.....the money that the employee contributes to the 401(k) is always their money. They are not a 'prisoner' to 'keep the 401(k)'. If they've been there less than a year, and can't contribute, then the only thing they lose is the opportunity to contribute that much sooner.

Truly unfair and abusive treatment generally has other remedies, but if it's bad enough that the person is suffering from it, the ability/inability to contribute to a 401(k) shouldn't be a deciding factor.

AJ
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