Employees Fret Over 401K Plans

By Dave Jordan, NEWS 9

OKLAHOMA CITY -- The recession started with a meltdown in the housing market and Wall Street witnessed firms fold shortly after. Now, the auto industry is feeling the strain and the next economic crisis could be retirement funds.

Corporations are taking steps to cut costs that could affect their employees' 401Ks.

Americans have been hearing for decades the best way to save for retirement is to invest in employers 401K, and many companies even encouraged the practice by agreeing to match the amount an employee invests, but in these tough economic times, some companies are no longer doing that.

The 401K was seen as a light in a sea of financial uncertainly, a tax-free haven of diversified investments, generating decent yield and keeping money safe for years to come, but a tumultuous 2008 on Wall Street has left many questioning their financial future.

"This is a time of fear," said Edward Jones Financial Advisor Bobby Abel. "A lot of people are out there worried about their portfolios, worried about their retirement."

The fear is growing, as corporations cut costs. 401K-matching contributions are first on the chopping block for several companies.

"A lot of people have questions," Abel said. "'What do I do with my 401K if they're no longer matching?'"

Financial Advisor Bobby Abel said employees should continue to invest in their 401K, even if their employers aren't matching.

"The money that you defer out of your paycheck comes out before you pay taxes on it," Abel said. "It grows and it's tax-deferred and when you retire, it's taxable too."

Another option would be putting money in a Roth IRA, or individual retirement account, and the earlier the better.

"If you're 20-21-years-old and putting money away for potentially 40 years, you have 40 years of tax-free growth," Abel said. "That's a beautiful thing."

It is possible to invest in both a 401K and an IRA, but investors should research which IRA is best because the rules change depending on income level.

Pension plans are in trouble as deficits climb into the hundreds of billions of dollars.