Program Managers

How is your financial fitness?

You can find out by taking the quizzes below
Financial Fitness Quiz
or
Financial Fitness Checkup

Topics

Additional Course Information

401(k) Plans

If you are under the age of 30 retirement is probably not at the top of your list of things to worry about. If you are over 40 or 50 you probably know its important. You want to be financially secure when you retire and conventional wisdom as you’ll need a minimum of 80% of your working income to be comfortable in retirement. A 401(k) plan might be just what you’re looking for. A 401(k) plan can have amazing short- and long-term advantages.

You may have heard about something called a 401(k) plan at work, but you probably don’t know much about them. Most people in the U.S. who have the option of opening a 401(k) account at work don’t do it. They never fill out the paperwork or put money into the plan. If you are one of those people you should rethink what you’re doing.

A 401(k) plan is a defined contribution employee benefits plan that allows tax-deferred retirement savings. 401(k) plans are made possible by a paragraph in the IRS tax code numbered 401(k). The employees contribute their own money to the plan through a payroll deduction. The money is tax deferred. That means you do not pay taxes on the money when you contribute it, but when you withdraw and actually use it during retirement. There are limits to the amount of money you can channel into the account. Currently it is 15% of your income or a maximum of $9,500 per year per person. Your spouse can open a separate account with their employer and the limits will remain in effect individually.

A 401(k) plan has some distinct advantages:

• The money is withheld directly from your paycheck so you never see it.
• You don’t pay taxes on the money when it is taken out thus lowering you tax bill.
• The money can be invested in mutual funds, giving you the opportunity to earn high interest and make the money grow. The interest is tax deferred until you withdraw the money. This allows the interest to compound. The Taxed and Non-taxed Compounding Calculator can help you see the difference that tax-free compounding can make.
• Many employers will match your contribution in some way. This money is sometimes tied to some sort of vesting schedule, which means that you’ll need to stay with the company for some period of time before the matching funds are placed in your account.
• If you leave the company, the money in the 401(k) is yours and you can take it with you or roll it over into a personal IRA account so it can continue to earn tax deferred money.
• Some 401(k) plans let you take a loan against your balance. When you pay the money back you’re the one who gets the interest. The interest you pay goes directly into your account.
• The loan provision makes 401(k) plan interesting, because it means that you can use your money before you retire with no tax penalties.

There are no significant disadvantages to a 401(k) plan. The money can’t be withdrawn until age 59.5 without a penalty though. If you do withdraw it you’ll have to pay taxes on the money and a 10% fine to the IRS. With all of the advantages, and no disadvantages, it’s silly to not be contributing money into a 401(k) plan regardless of your financial situation. If you were to contribute 15% of a $3000 a month salary and the money grows at the rate of 10% here is what the account balance would be after 40 years.

This is not small change. This is real money. Two things this chart doesn’t include are any employer matching funds and the fact that most peoples' salaries rise with inflation. As your salary goes up so does your contribution. The final balance will be even bigger.

If you’re ever offered a 401(k) and if your company matches employee contributions you will want to seriously consider enrolling. There are significant advantages to doing it.

Assistance

Counseling

• Army - E-mail
  
  Anthony Powell – Ft. Bliss, TX
  Wk Ph:  915-568-4453,
  DSN:  978-4453
  Email:  anthony.powell1@us.army.mil

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• Navy - E-mail
  
  Mike Kempf – Pensacola, FL
  Wk Ph:  850-452-6817,
  DSN:  922-3228
  Email:  mikekempf@bellsouth.net

More information

• Important changes to credit reports for 2008
• Links to more information
• mysdcc.sdccd.edu

New Links 10-21-2008

• Boston.com
• The News Service
• mymoney.gov
• http://www.financialstability.gov/

Calculators

• Savings
• Monthly Cash Flow
• 401(k) Value
• Hidden Expense
• Life Insurance
• Loan Amortization
• Net Worth
• Retirement Planning
• Taxed and Non-Taxed Compounding

Glossary

• Common terms in financial planning

News

• HOME REFINANCE AND MODIFICATION OPTIONS

General Information

• SDCC has articulated the Navy PFM course for one college credit. Navy personnel who have graduated from the Navy PFM course qualify. Typically, it can be difficult to apply one credit and meet the requirements of a three credit semester long course at most colleges and universities. With that in mind, we have taken the initiative of developing a two credit online course that will be available upon completion of the Navy PFM course. Sailors who have completed the requirements of both the Navy PFM course and the online PFM course will be given credit for completing the three credit Consumer Studies 110 course offered by San Diego City College and Mesa College and transferable to any Servicemembers Opportunity College (SOC).

• For additional information or to see if you qualify contact a PFM counselor.