Participation in a Company-Sponsored Retirement Plan (A/K/A “Qualified Plan”), normally enables the employee to make regular contributions–and the Employer might also make “Matching” Contributions (generally from three-to-six percent). These funds would be invested as the employee decides, within a range of (mostly) mutual funds.

Although Employee Contributions are usually made in small increments, coming out of their Payroll, they can certainly grow over time. Also, these funds would grow tax-deferred and the Employee might still be able to contribute to either a Traditional or a ROTH IRA.

An important point to be aware of, however, is that Qualified Plans are the Employer’s Plans. They control the Administration, Investment Options, and Withdrawals, among other things. As the linked article points-out, such Retirement Plans can be wrapped-up in Bankruptcy and other Legal Proceedings–and out of the reach of Employees, perhaps when they most need them. The article is in today’s NY Times, by Gretchen Morganson, When a 401(k) Is Locked in the Freezer,

Approximately six years ago, Federal Laws were changed to enable “In-Service” Roll-Overs, by persons who are at least 59 1/2, as long as the Plan permits. Generally, investment options are limited within a Plan; however, there is often considerably more flexibility within a personal IRA. Perhaps more importantly, especially if an Employer is having financial difficulty, having personal control of YOUR assets would be quite advantageous.

Many people who participate in 401(k)s, and the like, don’t really do their homework. They merely assume that the Employer is contributing Matchings Funds for their entire Account, which is certainly not the case. Also, the Configuration of the Plan is all at the discretion of the generally not so benevolent Employer. The Plan is generally established with keeping the costs to the employer as low as possible.

In today’s Economic Environment, I would suggest that Employees take control of their assets–especially if they are approaching Retirement–OR believe they might be laid-off. In-Service Roll-Overs can also be done on a partial basis; thus enabling the person who is not concerned about the financial stability of their employer, to shift assets incrementally to their personal control.


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