When you think about retirement, what comes to mind- a luxuriously easy life with nothing much to worry about and perhaps follow a hobby or travel?
But will it be possible if you have only a 401k plan? With growing concerns with each passing day, do you think one plan is sufficient?
What is the 401k plan?
This kind of a plan is a retirement plan. The plan is a contribution type, which is to say that the insured person will contribute to the plan from out of their pockets or paycheck. The insured person may pay such amount before or after the deduction of tax. In addition to this, the plan is subject to clearing and payment of the 401(k) plan fees.
Threats to your retirement when all you have is a 401(k) plan
There are numerous concerns and problems which arise when all you have is a 401(k) plan. Have a look at some of the issues that you may face.
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The contribution is voluntary
With the 401(k) plans, the contribution in the plans is too voluntary. With no restrictions, there are often times when young employees find other excuses not to pay up. Although such excuses seem legitimate at the time, they only hamper with future plans. -
Use it as an ATM
Most people use their 401(k) plan as an ATM, which would serve them when their savings or cash runs out. Others may use such plans and their benefits during a time of emergency, which only leads to the depletion of the nest egg. -
Fee structure
This plan is subject to a lot of paperwork and compliances. The buyer will have to pay 401(k) plan fees no matter what. Furthermore, the plan will not directly come into existence; it will take some time. -
No Guarantee
The 401(k) plans, no matter how assured they make you feel, are still subject to market risks. The market may crash at any time. -
Possibility of making bad decisions
There is no guarantee that a person will always make the correct decisions. Since this plan is a contribution plan, the buyer or investor may forget or may default to pay which would lead to future investment problems.
A person can buy a 401(k) plan from various providers after paying the 401(k) plan fees. However, it is imperative that buyers look for another plan along with it or be careful with their payments to enjoy retirement benefits.