Few changes to hit the retirement plans

sara

Few changes can be expected to hit the retirement plans. These include the decrease of contribution limits for 401(k) plan and the introduction of Db(k) plan.

Contribution limits for 401(k) may decrease next year: It is possible that the statutory limits on retirement plans can get deceased for 2010. It should be noted that the amount you can save in your 401(k) is adjusted according to the formula based on inflation. If the recent inflation pattern continues into September, it's expected that limits on retirement plans can get deceased. At present, you can save up to $16,500 in your 401(k) account or $22,000 if you're 50 years old or more.

The DB(K) option: This is a new option for the employer sponsored retirement plans which will be available from next year. This plan will be available for businesses with 500 or fewer employees. The DB(k) plan is combined with the 401(k) savings plan with a small guaranteed income stream. The guaranteed income stream is equal to 1% of final average pay for each year of the employee's service and it will be available up to 20 years. Apart from this, this plan would ensure an automatic enrollment feature for the 401(k) portion. However, the employees can always opt out or change the contribution level.

If the contribution limits for the 401(k) plan is reduced, then employees would be able to withdraw a lower amount after their retirement as, their savings would be less. I suppose, if a person opts for the DB(K) option, then they would be able to recover some of their savings. Enrolling in the DB(K) option will help employees in getting a lump sum amount at the year end. They can invest this amount in any good investment plan and save this money for future benefit. They can even consult a financial adviser who would help them in deciding where to invest their money.

sunnyca2009 · Joined: 04 Aug 2009 Posts: 1737 36.13 Dollars($)

All I see is that the goverment wants to collect more taxes and wants you to save less and spend more

Why would any one decrease the 401K contribution limit

smithsussane · Posted: Fri Aug 28, 2009 12:20 am Post subject:

Hi sunnyca!

Welcome to forums!

As Sara has stated in her post, the limit to the 401K contribution is calculated according to the formula based on inflation. If the present inflation pattern persists, then there are chances that the government would reduce the 401k contribution limit.

Feel free to ask if you've further queries.

Sussane

savior70 · Posted: Sat Aug 29, 2009 5:52 am Post subject:

Hi,

It is strange that the Govt. is planning to decrease the contribution limit for 401k plans. They plan to reduce the maximum amount one is allowed to contribute to one's 401k retirement plan by almost $500 for the year 2010. In this depressed economy, we expect the Govt. to offer more incentives to encourage people to make more contribution towards their retirement plan. During this financial crisis, when most workers are trying their best to rebuild their retirement savings, such a reduction in the contribution limit to 401k will no doubt send a wrong message to the people.

However, the decision to introduce the new DB(k) plan next year is definitely welcome. The plan sounds promising as it is expected to provide a strong retirement plan to employees without causing much hassle and financial drain. With the rate of inflation increasing, many of the retired workers will find their voluntary retirement savings inadequate. The amount of lump sum they receive from 401k at retirement may not last long. So, there's no doubt the workers need a more comprehensive retirement plan like DB(k) plan, which blends the best of defined benefit concept with the 401k plan.

sunnyca2009 · Joined: 04 Aug 2009 Posts: 1737 36.13 Dollars($)

Sussane

Do youthink the inflation is goign to go down. See what will happen in the next few years due to all the money dumped by the goverment in to the market.

Dollar will be chaep and indirectly that will drive your proce up

Thanks

smithsussane · Posted: Sun Aug 30, 2009 9:38 pm Post subject:

Hi sunnyca!

Welcome back to forums!

It's really difficult to say whether or not the inflation rate would go down. We will have to wait and watch what the inflation trend would be. This would influence the government's decision whether or not they would decrease the contribution limit for 401k.

Feel free to ask if you've further queries.

Sussane

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