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 Post subject: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 5:42 pm 
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Is anyone else totally confused about their 401k?

I just recently watched a documentary from Frontline called "The Retirement Gamble" and it made me terrified and lit the fire under my butt about actually understanding my 401k more but every time I try I'm so confused!


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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 5:48 pm 
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kind of tangentially related: you get to choose your 401k company (provider?), right? are there any cruelty-free/ethical companies out there?

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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 6:41 pm 
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Nope, my company does it through JP Morgan :(


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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 6:47 pm 
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You can't choose your company's 401k plan administrator but, to varying extents, you can choose which funds you invest in. I don't have the patience for learning about investing so I just signed up for my company's "target retirement date" fund (more aggressive the longer you have until retirement, shifting to less aggressive/more stable funds as you approach retirement and don't have time to recoup market losses.) For all I know, I am invested in Walmart and Monsanto and other stuff I want nothing to do with, but if I'd waited until I did all the research necessary to make an informed choice, I'd never have started the thing to begin with.

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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 8:34 pm 
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Mine did pull out of something they deemed unethical a couple years back. I don't remember what it was but I do remember agreeing and being excited that ethics were at least on the table.

Of course my plan is organized through a labor union so the politics are probably different than your typical corporate plan.


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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 9:02 pm 
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What are you confused about? 401ks vary. I think ours is managed by ING now? It changes every few years it seems. For us, we have a variety of options including 2 types of bonds, the company stock plan and various mutual funds of sorts. There is also the target date stuff that monkeytoes mentioned but that seems to underperform on our account. Also, each of the funds have a morningstar rating which I find useful. Basically, you want to diversify. Put some money in bonds (especially use bonds if you think the market is going downhill), and pick 3-5 other funds to put your money in. I'm really wary of newer funds within our options so I tend to choose ones that have been around for at least 5 years.

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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 11:12 pm 
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If you're putting money into your 401k (especially up to whatever your employer matches), you're doing well enough.


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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 11:23 pm 
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Chard Martyr
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It is so confusing! My company had a 2 hr meeting about it for those of us eligible for it. I rattled off some of what was said at the meeting to a friend of mine who remarked that what they would match was good. I just didn't know which to pick! I ended up going 33.33% on each: a safe bond, one somewhat risky, and one pretty risky.

So, my funds are being matched 100% and I am 20% vested at this point.

And I feel really adult when I say things like that.


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 Post subject: Re: 401ks are confusing.
PostPosted: Fri Jun 28, 2013 11:40 pm 
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Nooch of Earl
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I would say that the important things to remember are:

- if you get any sort of matching, contribute as much as you can at least to the limits of what is matched
- when in doubt, just go with an index fund
- diversify where you can


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 Post subject: Re: 401ks are confusing.
PostPosted: Sat Jun 29, 2013 7:34 am 
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Oh yeah, at least put in to get the company match, whatever that is. There is also a limit, set by the government on how much you can put in each year pre-tax. Always put in pre-tax before any post-tax deductions. I think the current pre-tax limit is around $18k. We actually put in the max right now although my husband is pretty risk adverse so he puts a lot of money into bonds, I told him he needs to diversify a little. He doesn't think the market is stable enough yet.

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 Post subject: Re: 401ks are confusing.
PostPosted: Sat Jun 29, 2013 7:44 am 
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I put in the full amount to get the company matching (they don't match much but still!). Looking at the plans I can't even tell what is an index fund and what's a bond. Maybe I'm dumber than I thought? I picked the ones with the lowest fees. I think they just make it as confusing as possible on purpose.


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 Post subject: Re: 401ks are confusing.
PostPosted: Sat Jun 29, 2013 7:45 am 
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Also another dumb question: what is the difference between an index fund and a mutual fund? Is an index fund a kind of mutual fund?


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 Post subject: Re: 401ks are confusing.
PostPosted: Sat Jun 29, 2013 9:34 am 
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An index fund is a type of mutual fund. If you google your funds or if there is any information on the 401k website, you can look into them. Ours will show a pie graph for type of investments of the fund.

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 Post subject: Re: 401ks are confusing.
PostPosted: Sat Jun 29, 2013 10:38 am 
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If you're totally stumped on what to pick, the lowest fee options should always win because many, many 401(k) plan-offered mutual funds charge insane fees. I'd call anything over 1% expensive (and index funds should be quite a bit less than that since they're not actively managed).


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 Post subject: Re: 401ks are confusing.
PostPosted: Sat Jun 29, 2013 11:46 am 
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I really want to post the video from Chappelle's Show of Wu Tang Financial, but I can't find one that doesn't look like it was recorded on someone's mobile while they watched it on TV.

When I was working out how I wanted my pension invested, I was told that the ethical funds would be higher risk because they tend to be newer and less established. So if you're close to retirement, you'd want to invest in the lower risk (but lower payout) things like bonds and such.

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