The Animation Guild 401(k) Plan Made Easy

Everything you need to know about the Guild's 401(k) Pension Savings Plan in 2 minutes and 48 seconds.



(In case you're wondering, those are Steve Hulett's dulcet tones narrating the above.)

Whoever you are, wherever you are, you're being short-sighted if you don't participate in an offered 401(k) Plan. This isn't because 401(k)s are the end-all and be-all of retirement plans (they're not) but because in this uncertain age, when other pension plans are going away and Social Security and Medicare are under assault, people are idiots if they don't stash money into tax-sheltered accounts for their sunset years. A few tips:

... Maximize your tax break. Traditional 401(k) plans allow you to defer paying income tax on the money you save for retirement. Investors can contribute up to $18,000 to a 401(k) plan. And after age 50, the limit jumps to $24,000. ...

Diversify with a Roth. A growing proportion of employers now offer a Roth 401(k) option in which workers can save after-tax dollars, and distributions are tax-free in retirement. A Roth 401(k) generally offers the biggest benefits to young and low-income workers who expect to be in a higher tax bracket later on in their career, but can also add tax diversification and flexibility to the portfolios of people closer to retirement. ...

Don't cash out. Most workers switch jobs several times over the course of their career, which means they need to decide what to do with the 401(k) balance at their former employer. It can be tempting to withdraw the cash, but workers who withdraw money from their 401(k) account before age 59½ face a 10 percent early withdrawal penalty (Federal), a 2 1/2 percent penalty from the state of California, and income tax on the amount withdrawn. Early withdrawals also cause you to miss out on valuable compound interest. ...

Avoid funds that charge the big management fees. Index funds​ generally have the lowest fees, because they require little or no hands-on management by a professional. These funds are automatically invested in shares of the companies that make up a stock index, like the S&P 500 Index. ...

Last point: Pick an asset allocation with both stocks and bonds (60% stocks/40% bonds; 50% stocks/50% bonds; 40% stocks/60% bonds are the most popular) and stick with it. Understand that, during the course of your career, investments will go up and down. And know that the best thing you can do is ignore the gyrations and soldier on. At the end of your time in the labor force, you'll have a sizable pile of cash*.

* Fidelity Investments -- the second largest mutual fund family -- performed a survey of the most successful Fidelity investors. Fidelity discovered that the most successful investors were the individuals who forgot they had investments with FI in the first place, and never touched or moved anything. (In other words, by accident they weathered every market drop and therefore ended up with more money.)