401k...

DryIce:
#2. There is an age factor. If you withdraw after a certain age (around 60 or so, check 401K sites), there is no penalty. The withdrawn amount will be clubbed as regular income and taxed at whatever rate one will be.
#7. Avg returns of 7-8% is considered pretty decent given the cumulative accumulation of money. The past 2 years there have been people who have seen their 401K decimated because they kept their money in high growth aggressive stock funds and also their employer's stocks. So returns not guaranteed but it is a good average cost balancing vehicle.

Even if you went to India (for those who have it as homeland), the bank FD rates are like 8% per annum and being cut constantly. Private investment in stocks/mutual funds/finance corporations are extremely risky in India. For those who stay a while in US and could rack up a few 10s of thousands in their 401K, it is good to leave it as is. As long as the Rupee does not appreciate against the US Dollar, one can take the money out later in smaller increments and pay lesser tax and apprecaite the few extra % returns because of the currency values.
 
10%

Guys....

Remember the 10% penalty...that everybody is talkng about is only on the interesty U earned on the savings...Not the Original amount...
 
asdasd: The 10% penalty is also on the original amount and any gains if you withdraw before you are 60.
 
ppl dont even think investing money now in 401K

In our company almost 60% employee lost half of their 401K investment during this stock turmoil. I stopped paying 401K from the early 2001 for some reason and it saved me to loose moeny in 401K.
 
woreq123

When changing jobs, you can elect to keep the 401k account as is, if you have at least $5k in that account.

Otherwise, you can do a "rollover" of the 401k account into a traditional IRA.

You could even do a "conversion" of the traditional IRA into a Roth IRA, if you are willing to pay taxes on the amount being converted. Conversion also requires that your Adjusted Gross Income doesn't exceed some number close to 100k (both for single and married folks in this case, I think).

-- alaknanda
 
Habiban,

U can start another thread if u wanted to tell a grammer joke........


Guys look at this from Habiban........

=======================================
I stopped paying 401K from the early 2001 for "some" reason and it "saved me to loose" moeny in 401K.
========================================

60% lost 50% in 401K and for "some" reason Habiban saved to loose MOENY (what's that, Mohini!!!!!!!!!!) in 401K.


Phew, I would love to appear in one such TOEFEL test as Habiban did to see how people pass it with such funny grammer.


;) :p :p
 
habib: Most companies offer various instruments for 401K investments. There are bond/treasury funds, fixed income funds, growth, small cap, blue chip, index and international funds. Most companies give a choice of these which amounts to anywhere from 10 or more choices.

Based on your risk, you can elect your monthly distribution and also redistribute your current amounts and future allocations. Putting money without any election would mostly place it in a money-market fund. Also, electing only to a govt bond/treasury fund can easily return 5-7%.

There are avenues to make money in 401k. If you do not know about the 401K in detail, please read some material and financial websites.

The only reason people lost lot of money was they did not have a balanced portfolio and kept most of their money in high growth aggressive funds which tanked when the bubble burst.
 
401K managed by Wells Fargo bank

My companies 401K is managed by Wells Fargo bank . Last time I recieved a statement , I saw I have already lost 10% of my money bcos they invest in some stupid Wells Fargo portfolio.

I am just trying to find out if I can stop them from investing my money in there stupid portfolio.
 
This is an awesome topic to discuss for immigrants.I feel bad that we don't discuss more of such topics, since most of the immigrants are in the same boat and everybody wants to atleast know the pro's and cons.

Habibi, u have a very good point. 401K atleast in the current form is not good as people have been pointing out. They have been mentioning abt 7-8% returns, but pls note, these are historical figures and they vary based on the investments u make.

Eg: My employer makes a 3% match but that match is stock based rather than cash. So on the whole, if my employer was any of the worldcoms/enrons then all my 401K contrib is in dust bin, atleast the company's part.

Most of the employers allow very limited investment option, generally u wont like them. Like investing in their stock etc. So, this is a very tricky situation. Lets say, I started with Worldcom and started putting all my money into worldcom stock and the matching was also in worldcom stock, then u have nothing at the end of u'r retirement life, atleast in 401K's.

Also note, 70%+ of the companies that trade on national exchanges wont be there by the time u retire. Thats a fact.

So, just be careful, the companies have a upper hand in 401K plans not u, unless u r smart in how u allocate money in 401K.

Moving back to motherland for good:
If u'r planning to move back to India, u don't need to pay taxes on the income(hopefully u'r 401k contrib is pre-tax). Just pay the penalty and move on for good. Here is how u can do it.
After u retire or when u move back to India just withdraw all the money from 401K acct and don't file US taxes for good(hopefully, u wont have property in US lying around). I am sure nobody will come after u. If there is a penalty for wihdrawing the money in full, then max'm u will pay is 10% on the total amt and not the Fed taxes.

Also, note if u are making contrib to IRA's too then put everything into Regular IRA and not Roth incase u r planning to get out of US.

Does anybody see why people moving back to motherland cannot take the above approach.

Pls note, I am not a CPA......................
 
Re: 401K managed by Wells Fargo bank

Originally posted by 1LongWait
My companies 401K is managed by Wells Fargo bank . Last time I recieved a statement , I saw I have already lost 10% of my money bcos they invest in some stupid Wells Fargo portfolio.
Click to expand...

Most of the companies 401K plan options are wacky and my companies plan is in the same boat. Luckly, mine is up because my companies stock is up in the last few yrs but I don't like the options my company offers.

Hopefully, Bush's plan to make changes to 401K will help individuals.
 
you can avoid penalty but not tax

One way to avoid penalty is to trasfer your 401K into an IRA account, not Roth IRA. You can only do this, if you are eligible for rollover. It does not make sense to rollover to Roth IRA because, Rother IRA is post Tax and 401k is Pre tax.
 
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