Homework writing of pros and cons of a 401k

Introduction to 401k Retirement plan of pros and cons of a 401k

Before digging deep into the pros and cons of 401 (k) let’s find out about this term or word 401 (k), whatever you may call it. This is a very basic question that “What is 401(k)? And its answer is as simple as this question is. 401(k) is one of the savings plan that is being associated with the retirement and plan is supported by the employers themselves. This saving plan helps the employers to save some amount of the money and then further invest a small portion of their payment, all this procedure takes place after the taxes are being taken out from the payment. One cannot pay the taxes until or unless the amount or payment is not being withdrawn from the account. The name 401(k) savings plan has been named for the portion of the different tax code which manages it. (Turner, J.A. and McCarthy, D.D., 2013.)

Pros of the 401k plan of pros and cons of a 401k

Different kind of matching funds are being offered of pros and cons of a 401

There is a huge list of such employers or managers that are offering this 401k retirement plan, along with this plan different matching funds are also being offered that can boost up the account easily of workers. Free matching of different kind of funds will definitely help you in giving a raise without doing anything, as a result it is very beneficial to set up the 401k assistances to maximize the match of managers otherwise it will be just like leaving a simple and easy money without having its use.

401k plan is under the protection of legal federation of pros and cons of a 401k

There are many of the retirement plans associated with different companies that are completely protected by the Employee Retirement Income Security Act that was known in 1974, this is one of the federal law that has set up the minimum standards for the managers who elect the certain retirement plans. Same is the case with 401k plan, it is also protected by this ERISA completely. This helps in ensuring that helps in ensuring that all the benefits are being received. So there is no need to worry about the maybe employers will steal money or run away through bluffing the workers. All the benefits will remain protected no matter what, whether a worker change their job or decides to take retirement.

Financial guidance is absolutely free of pros and cons of a 401k

All the people associated with this plan helps the workers without charging any kind of fee or funds. They guide them as much as possible, so workers should completely take an advantage of this opportunity by asking different kind of questions whatever comes up in their mind. Like why this plan is important? How this 401k plan works? The people associated with this plan will also help the workers in figuring out the best of the investment options by knowing about their circumstances.

Limit can be increased as well on yearly basis of pros and cons of a 401k

As soon as workers have appropriately subsidized to take a complete advantage of this 401k plan, one can easily raise the contribution amount every year. If any worker earns enough he or she should make thing sure that they don’t hit the contribution limit yearly. If it has been done already then the solution is to avoid the contributions too much through flat payments. All these things will make a workers happy and relaxed while getting retired.

Cons related to 401k plan of pros and cons of a 401k

401k plan entails the early withdrawal fees of pros and cons of a 401k

There is one of the biggest drawback related to this 401k plan and that is putting the money in the account of 401k plan means workers will be penalized for taking out the money from account before getting retired. Many workers try to take out the money when they feel any kind of financial difficulty, but here this account is only for the retirement age. One can only take out the certain amount of money at the retirement age and before doing this, penalty will be given. Through this act, many of the participants also get discouraged. (Allen, E.T., Melone, J.J. and Rosenbloom, J.S., 2008)

Their account fees is much expensive of pros and cons of a 401k

Due to some of the administrative responsibilities required by the 401k plan, this is quite expensive to have. As an alternative, it is being advised to choose the low-cost index funds or exchange traded funds. It will not cost a worker much burden financially.

Investment options are inadequate of pros and cons of a 401k

As compared to other investment accounts like IRAs, this 401k plan have very certain or few investment options. It involves that if a worker is looking for the investment options other than cash, stocks and bonds that particular person won’t be able to have it. They offer a very limited menu.

A worker can make this 401k plan as complex as possible or can also make it as simple as he or she wants. But here one thing is important that full advantage should be taken of this 401k plan.

Life Insurance Policy of pros and cons of a 401k

Life insurance policy is a kind of an agreement two different parties and those two parties are, insurance policy holder and the second one is insurer. In this agreement, insurer commits to pay an elected amount of money in the exchange of a certain kind of premium when the death of an insured person takes place. (Black, K., Skipper, H.D. and Huebner, S.S., 1987.)

Pros of taking this life insurance policy of pros and cons of a 401k

·         Very first benefit is the protection of your loved ones. After death certain kind of financial as well as emotional problems starts taking place. So to settle them this life insurance policy plays one of the major role.

·         Second one is the removal of worries. It makes a person or insurer tension free from different kind of worries like what will happen if I die or who will take care of my family and all.

·         After taking up the life insurance policy, insurer or its family will never have to pay up the taxes on the cash if it is increasing due to investment or anything like this. All of the policy loans are totally free from any kind of the income tax.

·         Another advantage of using or taking this life insurance policy is the flexibility, there comes a great flexibility over no matter what kind of company is being chosen, duration and coverage.

·         Biggest benefit of taking this life insurance policy is its cheap price. Many people have this in their mind that maybe these life insurance policies are very expensive. No, not at all. Anyone can buy it or use it without getting worried about its price or money.

Cons of taking life insurance policy of pros and cons of a 401k

·         Many people these days are seeing this life insurance policy as a luxury in the market, this means that people continuously think that they could spend their money somewhere else in a more positive and useful way.

·         Many of the times people don’t have enough savings and therefore it is not necessary at all that they should have taken this life insurance policy and only then they can save or protect their family after the death of insurer which is completely a wrong concept. Getting overburden is not a solution for this policy. Only those should buy or consume it who easily can without any of the worries or getting over-burden.

·         There is no doubt in it that the life insurance market can become one of the trickiest thing to understand. There are certain things which are not easily clear or answered properly.

·         Lack of trust is one of the biggest disadvantages of taking this life insurance policy. Many people don’t want to have it because as there are many fraud people in the market that can easily bluff others and can vanish all of a sudden without even notifying them. this is a great business which many fraud people have made these days and there is no doubt in it that people should worry about this fact because using life time savings is not an easy thing.

All the pros and cons of life insurance policy have been mentioned above and it completely depends on a person that how he or she uses it or whether they should take it or not.

Different kind of life insurance policies of pros and cons of a 401k

There are many different kind of life insurance policies that have been notified by different companies but if we talk about the most important ones then there are three major kind of life insurance policies. These are the policies which are being used by different people on large scale and they are much beneficial as well. (Beckfield, J. and Bambra, C., 2016)

Whole life insurance policy of pros and cons of a 401k

This is a permanent life insurance policy that stays the same throughout the life of a policy. Premiums related to this life insurance policy seems to be higher as compared to the risk of the death in the early times of the year, cash can b accumulated and can be further invested in the general portfolio investment of a company.

Universal life insurance policy of pros and cons of a 401k

It is almost the same like the whole life insurance but its coverage goes almost one step further. All of the cash value and coverage will be same like the whole life insurance but except for the flexibility. As soon as money gets accumulated in the account, frequency can be varied according to the requirement of the insurer.

Variable life insurance policy of pros and cons of a 401k

It is the third form of the insurance that is being used on a large scale by the different people in the world. Having this policy means receiving the same death protections as one can receive with the above mentioned policies. Here difference comes in that how cash value should be invested. Insurer can control this on their own. Insurer have a complete option of investing the cash value in the form of stocks, money market funds or in the form of different kind of bonds. This insurance have a benefit that value of the policy have a complete potential to grow as quickly as possible. One risks lies here that if the investments don’t perform according or in a better way than the cash value and all the benefits associated with the death have chances to get decreased as well. (Beckfield, J. and Bambra, C., 2016)

Pros of Indexed Universal Life of pros and cons of a 401k

·         Having this insurance will help the insurer to protect his or her family from getting unstable financially and having any kind of difficulties in future. Loans are also available and given by many banks but having this insurance means something else. Family don’t feel burdened or afraid to return the amount. This is basically savings of the workers which are being used in future after the death.

·         Indexed life insurance policy shows the excellent growth potential and this is another reason why people chose this insurance over another insurance policy. If the market index in increasing up to 10% then ultimately 10% increase in the account will also take place. (Rubin, H.T., 2014)

·         Another advantage of using or taking this life insurance policy is the flexibility, there comes a great flexibility over no matter what kind of company is being chosen, duration and coverage.

Cons of Indexed Universal Life of pros and cons of a 401k

·         IUL can be complicated and there is no doubt in it at all. There are many people who fail to understand their terms and policies in a proper way and find this insurance policy very difficult. Due to this reason they don’t use it or ignore it completely.

·         Many of the times people don’t have enough savings and therefore it is not necessary at all that they should have taken this life insurance policy and only then they can save or protect their family after the death of insurer which is completely a wrong concept. Getting overburden is not a solution for this policy. Only those should buy or consume it who easily can without any of the worries or getting over-burden. (Rubin, H.T., 2014)

·         Cost of the insurance is directly proportional to the age of the worker. Policies associated with IUL have an increasing cost for those whose age is above 50. Cost of this insurance increases as the age of a worker. They don’t give any benefit to the aged workers but they cost them even more.

Conclusion of pros and cons of a 401k

There are plenty of reasons to choose this IUL life insurance policy but they need to go against their cons so that they can have more insurers in the market. This is one of the most sold and reliable insurance policy that is giving benefits to different people and their families since long time.