Thursday, September 13, 2007
Things have not been going well in my little world and regular readers know I have been "on the rag" for some time.
There has been a big event looming for several weeks and yesterday "it hit the fan". I have two choices, take or quit.
Our company ( a division of a larger corp) has had a nice 401k package. With their match I have been saving over 20% of my pretax wages.
Yesterday we finally found out about our new retirement package from Prairie Farms (our parent corp). They have a "Thrift Plan" (similar to a profit sharing plan) that our 401k balances will be rolled into. We have no choice unless we quit.
Their plan is great for the younger workers (that they want) but terrible for older workers ( that they would rather not have [ and by the way, you will not see them hiring]).
Our 401k plan was with Fidelity and we had about a dozen choices where we could place our money. The money was placed once a month and "cost averaging" worked in our favor.
In the "Thrift Plan", one has to put in 2% of post tax dollars (can add up 6% more) to participate. That money will be sent to the plan manager once a month and once a year there may or may not be money added ( a percentage of your annual earning) by the company. You have no options as to how he will invest all monies in the plan ( your 401k money or the "Thrift Plan" money). It is put in one "blended vehicle" ( stocks and bonds). Even if you choose not to participate with new money, your old 401k money will be sent to the plan manager.
The 401k money (pretax) and "Thrift Plan" (post tax) will be separated within the plan as there will be no taxes due on the "Thrift Plan" money at time of withdrawal. You can specify which monies you want to withdraw at retirement age. You could use the two to minimize you taxes at retirement.
The problem (besides not having better control over you investments) for old workers and myself is that at only 8% maximum (and those being post tax dollars) and no guaranty of company money being added, it falls well short of my 20% retirement savings.
If company money is added, it will only be added once a year. Thus eliminating "monthly cost averaging". For younger workers or anyone saving a very small percentage it will be a winner for them. Plus you have to plan your retirement date after October 1 of your retirement year for fear of missing out on company contributions. One could retire several months earlier but it would be unwise to retire a month or two before a possible yearly windfall.
As for me, I will be screwed out of several thousand dollars a year, not to mention I have zero control of my retirement money.
I would like to work a while longer but don't like being boxed in a corner with my retirement savings.