The face of 401k in 2017

The face of 401k in 2017

Preface A 401k is a retirement savings plan offered by an employer to allow employees to invest and save a portion of their income before taxes. Some employers even offer contributions up to a certain percentage of the employee’s income (usually between 1-3%), however these funds can be held until the employee is fully vested . This would mean that an employee would have to work for the company for a certain number of years before they are entitled to the employer’s contributions. You can incur early withdrawal fees if you cash out too soon.

The face of 401k in 2017

March 23, 2017 No Comment(s) 3 Views

If you leave your job You have three options:

  • Cash out your 401k. This 401k early withdrawal calculator will show you if any penalties will apply.
  • Keep your investment in your current plan (if your previous employer allows it).
  • Roll over your investment into your new company’s 401k or IRA.

Investment limits (as of 2013)

  • $17,500 in a given year.
  • Or $51,000 combined with employer contribution.


  • Any contributions you make into a 401k plan can be deducted from your taxable income.
  • This means if you made 110,000 but contributed 10,000- your taxable income would only be 100,000.
  • Taxes do have to be paid when it comes time to withdraw your 401k investment, as this is viewed as income.

There are many online tools, such as this 401k early withdrawal calculator , to predict what taxes would applicable in your situation. Responses to 401K Workers who have a retirement plan, whether it is a defined 401k contribution or an IRA, feel much more confident about their retirement then those who do not. Many workers who are not currently saving say they would be more inclined to do so if they had employer matched contribution, while others say they would like more environmentally and socially conscious options.

The studies have shown specifically that millennials would increase their 401k contributions if their investments were making a positive environmental and social impact, as the younger generation is much more concerned with the implications of their investments then ever before . They are also willing to pay more for secure retirement funds then the baby boomers, who are saving much less on average.

Surprisingly, small businesses have been found to be some of the best performing 401k plans , in some cases surpassing their larger company counterparts in performance. This could be largely due to the tailoring of the plans to suit the employee’s core values, an effort to increase their retention.

How 401k is changing Recent auto enrollment in 401k plans has increased over all employee participation; however many younger workers are still opting out of these plans until they are given options aligned with their future visions and current values. Their investments have to support a future economy in order for the contribution to be worthwhile.

Why invest in a business that is destroying the future we are hoping to enjoy and create?

Since millennials are naturally becoming a larger percentage of the work force (more and more boomers are easing into retirement) and will be the recipients of a trillion dollar wealth transfer, this is going impact many 401k plans to move towards simpler managed accounts and more conscious and innovative products- a huge trend for 2017 . These retirement plans will have to adjust to a demographic of responsible investing in order to continue being successful.

Investments are now being viewed as a tool for social, political, and environmental reform . In an economy where it is difficult to be heard, these investments are the voice of a generation, and in many ways their vote for the future. Its time to put your money where you mouth is , or so the saying goes.

This new outlook is providing superior retirement solutions, and opening a huge growth opportunity for clean water and clean energy companies, due to the high value of the society and the environment.

One company in particular called “Stok” created a fossil free 401k plan, which had the highest ever documented employee participation in the company , at 100%.  The increase from previous years contributions was up by a whopping 75%.

For the conscious investor, there are companies that provide sustainability impact ratings to show us how our retirement funds are preventing climate change and promoting social responsibility. Check our HIP investor for an example of this.

Trump and 401k Tax reform by the republicans will probably not have any positive impact for 401k , with current reform packages forcing strong percentage reductions on contribution limits, much of this due to rise of HSA.

This may open up some possibilities for hybrid HSA/401k plans which will force advisors to focus more on health care investment products as well as social and environmentally aligned companies.

Happy Investing!

Blog March 23, 2017 No Comment(s)

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