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New 401(k) Law Helps Companies Force Employees Into Saving

By Erik Folgate

Take a look at this article from Smart Money about a new law that will allow companies to set employees up for automatic contributions to their 401(k) accounts. It will also allow a company to automatically increase an employees contributions to a 401(k) each year up to a certain cap percentage.

According to the article, about 25% of eligible employees choose not to participate in their 401(k), and only 11% of the employees that do participate will max out their contributions. It’s understandable why some people don’t contribute the maximum amount, but to not participate at all, is detrimental to your financial well-being. Many companies offer a company match, which is FREE money. You’ll never have anyone offer you free money the rest of your life, so why not take it?

Can’t afford to contribute to your 401(k)? How do you know? You’re used to balancing your budget on the amount that you currently take home, but if you made a few adjustments, you could find enough money to start contributing to your plan. The best thing about a 401(k) is that you start to forget about the money getting taken out. Before you know it, you’ve socked away a big chunk of cash that will continue to grow exponentially.

If you want more information about 401(k)’s and what funds to invest in, check out the related articles below…

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • JXL71

    It should be easy to define. ,

  • Frank

    My company forces us to take our leftover health insurance money and put this into a 401K. This is fine, however the do not match any amount. On top of this, if I am in the military and use their health insurance, the whole amount is the forced into 401K ($3.30/hr) Is it legal to force me into a 401K when they themselves do not put anything into it?

  • http://twitter.com/oxygengirl Donna

    Of course an employer wants to force ee’s into contributing, it reduces their tax burden. The money comes out on a pretax basis thus reducing the amount of money the employer has to contribute to Medicare and Social Security.

  • Tasha Kay

    You are very uneducated regarding 401k. It is a scam. Nobody has any money left in the 401k’s. They claim a drop/loss in the stock market. Well how convenient.

    • http://twitter.com/RKH0927 Gravlore

      Yup, just found out the wife has $450 a month stolen from us. So now the employer has a dictatorship on our money. This used to be done by the Mafia. I am against government pensions and corporate. The money is matched but by the time retirement rolls around the purchasing power of the dollar will be crap along with the investments once the boomer’s retire. We want out. Anyone know how to do it? Perhaps quitting her job is in the future. I will not tolerate robbery of any kind and that is exactly what FORCED pension is.

  • LA Brown

    I think it is unethical for a company to force you into their 401K options. I should have a choice where to invest my money and how much I want to invest. My husband works for a company that forces you to contribute 100 percent without employee matching. Tell me who has the advantage? It surely isn’t the employee. How much of the money does the company get as a kick-back from the companies for forcing all of their employees into this? Also, who is to say that now that all these employees are forced into these contributions that good old wall street (thieves in suites) won’t pull off another Enron. It already feels like a robbery for someone to tell me where I am going to spend my money and how much I am going to spend without my consent.

  • http://batman-news.com Sandy Parrett-Almonte

    So is it legal for an employer to make you participate in a 401K plan and not offer any matching amounts? If it is not in the employee hand book that they participate, can they force you into joining and then hold against you a bonus you would normally get?

  • http://batman-news.com Sandy Parrett-Almonte

    I read the article above, but I wanted to know if it was illegal to make you join when its not stated in the employee handbook, nor is it stated that you will lose your bonus for the year for safe driving if you don’t. Their should be an opt out if they are bringing in a 401k plan.

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