The money tutor - Jo Ann Brown enlightens the reader about how the 401(k) plan is introduced on the job. She gives advice on how to prepare yourself to participate in the 401(k) plan when you become eligible. The reader gains information on how to start setting goals and planning. The reader will no longer miss the FREE MONEY given away by the employer.

1. Your
Company’s
401(k) Plan
By
Money Tutor
Jo Ann Brown

2. Congratulations!
You’re
Hired

3. I worked in Corporate America for
10 years. When first hired, I
endured a grueling two-week on the
job training course. The instructor
gave explicit instructions on how to
perform the job. I was drilled for
hours, day in and day out. One
morning, I was introduced to
someone from the payroll
department who gave a 15-minute
presentation about the company’s
401(k) plan. I listened intensely
and gathered several details only to
learn that I could not join. As I
repeated the phrase through my
head, “You cannot join now,” I
wondered why someone would even
mention something I couldn’t
participate in. I walked out of
training, job ready, and never
thought about the 15-minute 401(k)
presentation again

4. Sounds Familiar?
Hopefully, you will soon start reading your
Financial Security Benefits Package and learn the
following:
1. Your company offers a Retirement Savings
Plan – 401(k) that all employees are
eligible to join after completing 1 year of
full-time employment.
2. Internal Revenue Code authorized the
401(k) plan and through the years more
and more employers have adopted this
deferred compensation retirement plan and
no longer offer a pension to their
employees.
3. Employees decide how much money they
want to contribute each pay period. It’s
your option to invest the maximum. You
can invest any amount your budget allows.
4. Employees decide how they want to invest
the money. The employer has preselected
stocks choices for you to invest in.
5. The employer will match a portion of your
contribution. This means that every dollar
you invest, the employer will give a dollar.
This can best be described as FREE
MONEY.

5. For example, if the employer matches 6% your
contributions and your hourly wage is $15. Note the
following:
2080 hrs x
$15
40 hr.
work
week
52 weeks 6%
Annual employee =
Salary $1,872
$31,200
6%
employer
$15 per hr match =
$1,872
Annual salary is $31,200 (working 40hrs per week x 52 weeks =
2,080 hrs worked) and (2,080 hrs x $15 hourly pay = $31,200).
If you invest $1,872 ($31,200 x .06) your employer will also invest 1,872.
That’s right – the employers are giving
away money – Free Money.

6. The amount you decide to defer is money that
comes out of your paycheck before income taxes. You
immediately start paying less to Uncle Sam because
your gross annual salary will automatically deduct all
contributions you have made to your 401(k) plan. For
example – your annual salary above was $31,200:
Annual Salary
$31,200
Minus
$1,872 401(k) contribution
Pay Taxes on $29,328
401(k) annual contribution = $1,872
Annual salary $31,200 – contribution $1,872 = $29,328
You will pay taxes on $29,328 because of your 401(k)
contribution.

7. Your initial $1,872 investment will be kept out of
the hands of the Federal and State governments until
you retire. Equally important, the dividends and capital
gains earned on your investments are also deferred.
Participating employees choose to take home a
smaller paycheck because there are several major
advantages to saving for retirement through the 401(k),
including:
Immediate tax savings because contributions
come out of your check before taxes are
withheld.
You don’t pay taxes each year on capital gains,
dividends, or other distributions made on these
investments.
You can borrow from yourself instead of the
bank – also known as a general loan. It may
reduce credit card usage.
You can also borrow from yourself instead of the
bank – in cases of a hardship or emergency.
Free money.

8. Don’t forget the earlier you get
started, the more money you
will have saved at retirement.
The next step is to start getting organized. Ideally,
three months before you are eligible to participate in
the 401(k) plan. Remember, the employer, the plan
administrator, and you are a team and work together to
find the investments that may produce an 8% rate of
return. Each person has a role to play, but you are the
one that makes the ultimate decision of how much to
invest and which stock to invest in. Develop an
approach to learn the Plan, Product, and the Program
administrator’s website.
Want To Learn More?