There are many different ways to plan for retirement. Some government employees have pensions, while other employers offer 401(k) plans in which their employees can invest. Individual Retirement Accounts (IRAs) are available for people who do not have access to 401(k)s. On top of that, the federal government offers many protections for retired citizens. The Employee Retirement Income Security Act, or ERISA, governs how retirement savings can be used, and Social Security funds are typically available to many retired seniors. The articles below have lots of information on these topics, click below to find out more.
Employee 401(k) Plans
Employee 401(k) retirement plans involve the participation of the covered employee. Employees assume responsibility for their retirement income by contributing part of their own salary to an account and, in many instances, by directing their own investments. One important consideration has to do with plan fees, which can significantly impact the profitability of the plan. Different fees that may apply include:
- Plan Administration Fees - These fees cover the basic administrative services for the day-to-day operation of the 401(k). Fees of this sort are a necessary part of the administration of the plan and are difficult to avoid. In some cases these fees are assessed directly from the investment returns. In other cases they will be separately charged, either against the employer or the account assets in proportion to the account balances.
- Investment Fees - Fees for the management of plan investments that are usually a percentage of the assets invested are termed investment fees. These are paid in the form of an indirect charge against the account because they are deducted directly from investment returns. Because of this they can be difficult to identify.
- Individual Service Fees - If optional features are offered under your 401(k) plan additional administrative charges may be applied. These individual service fees are charged separately to those who choose to take advantage of a particular plan feature.
Pensions and Layoffs
An employee with a pension plan who is laid off from their job may be concerned about how to recover their investment if they are laid off. Generally, if you are involved in a "defined contribution plan" (one where you have an individual account), a 401(k), or a profit sharing plan you can receive a lump sum distribution of your retirement money when you leave a company. However, if you have a "defined benefit plan" (where you receive a fixed, pre-established benefit) the benefits may be scheduled to begin at retirement age. Accounts of this sort are less likely to allow for early withdrawal of invested funds.
Some tools that can be helpful in determining your rights following a layoff include the Summary Plan Description (SPD), a document that outlines your benefits and how they are calculated. Another tool is an individual benefit statement, which should provide the value of your pension benefits and other valuable information. These documents are available upon request from your employer or pension plan administrator.
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