2million - My Journey to Financial Freedom

A Personal Finance Blog      ANNOUNCEMENT:2million has moved to www.2millionblog.com.     

Sunday, May 07, 2006

Hosting the Carnival of Personal Finance

I am excited to be hosting my first carnival next week. The Carnival of Personal Finance will be passing through here at 2millionblog.

I would like to "theme" next week's carnival around a personal finance topic, the 401k. I would like to encourage everyone to submit any posts related to 401ks in any way, shape, or form. Anything from the ins and outs of the 401k plan, the good, bad or ugly with 401ks, personal experiences, etc.

Of course all posts no matter what topic will still be in the carnival, but I plan to pay special attention to any posts focused on 401ks.

If you have any submissions feel free to email them to me at 2millionblog@gmail.com.


  • One quick comment about 401(k)'s: If you are going to have both 401(k) and normal after-tax investments ... and you are going to have both stocks and bonds ... then it is better to put the bonds in the 401(k). The reason is that the interest on the bonds will only have to pay tax once at the end in the 401(k), but as a normal investment you have to pay tax on it every year which reduces your total return. Stocks, on the other hand, you only have to pay for once with a big capital-gains payment at the end.

    By Blogger Jordan, at 10:24 PM  

  • The large insurance companies of the world have you believing that the 401k is the best thing since sliced bread.

    But the fees charged to 401k participants are outrageous. The industry has done everything possible to hide the true costs to consumers. Congress is doing nothing to change this. Try contacting your HR department to find out the true all-in costs of your funds. You won't get an answer.

    What's the solution?

    Have congress raise the IRA contribution limit to be the same as a 401k ($15k) and allow people to make contributions pre-tax. Further, allow companies to make matching contributions to these IRAs.

    Why not?

    No additional paperwork or administration costs. Every American would be covered. And workers with a 401k could chose to stay with their 401k or go with a low-cost alternative.

    Guess what?

    The insurance industry would never allow this to happen.

    By Anonymous Anonymous, at 4:23 PM  

  • Great ideas - put them on a post in your blog and submit the link so I can include them in the carnival :-).

    By Blogger 2million, at 5:48 PM  

  • "Try contacting your HR department to find out the true all-in costs of your funds. You won't get an answer."

    Very true; in my company, the HR department has nothing to do with the company 401(k) and most likely is just as curious about fees.

    By Anonymous Flexo, at 4:28 PM  

  • Great blog!!! I am exactly a year younger than you and hoping to come close to your current networth by next yr.

    I was wondering if you could have a detailed post on ESPPs, how it works in realtion to the taxes. I have seen a number of articles on stock options and the tax implications of it but have not seen anything on ESPPs.

    Thx a bunch


    By Anonymous Anonymous, at 9:32 PM  

  • anonymous,

    I am not sure I follow your conspiracy post. If I put in pretax dollars and can track the performance of each contribution in my 401k to prove that I am indeed getting the returns stated by the mutual fund itself, I fail to see where any exorbitant costs you refer to impact me directly.

    If my company pays fees to the 401k provider on my behalf with money other than my pay, I don't care.

    By Anonymous Anonymous, at 6:04 PM  

  • The insurance company conspiracy - a little light on it:

    I've helped run an HR department in the past.
    Employers pay fees to 401k plan providers - some are insurance companies, while many others are not.
    The fees are not that expensive, I do know that some insurance companies charge about $1500 per year for the smallest companies, however, this is a fee the sponsoring company pays, not the employees.
    Some 401k providers do charge an account fee, often quarterly of $5-$25. I don't like this fee and would prefer to pay it in cash outside of my retirement account. This fee is paid by the employees. It may be waived once your account reaches a certain size.
    Perhaps this is the high fee anon is concerned about.
    I think it reflects a good portion of the administrative costs to service the account. Where these fees do not exist, I assume the sponsoring company is absorbing them or there are enough assets in the plan to cover the fees.
    I've looked at quite a few plans and found very few exhorbitant.
    Perhaps you should ask your HR department to consider comparing other plans to benchmark account maintenance fees?
    have a wonderful day,

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