403(b) Plan

  

Categories: Tax, Investing, Stocks, IPO

Think: 401k Plan...Lite. That is, for companies with fewer than 25 employees.

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Finance: What is a 401(k)?51 Views

00:00

Finance a la shmoop... what is a 401k plan? okay say it with me tax deferred savings

00:11

that's it it's really not all that complex for the fancy numbers there all [Complex formula scribbles]

00:16

right well when you make money at work you get to defer the tax that you'll pay

00:21

on your income or earnings to be paid much later in life and you get to invest

00:28

that dough and let it ride tax-free until you take it out of your 401k plan [Money coming out of deferred savings piggy bank]

00:34

brokerage account and then at that point well you'll pay ordinary income tax on

00:38

your gains well the 401k was a part of the tax code

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that was put into motion in the 1980s as the government began to painfully

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realize that Social Security wasn't all that secure and that a whole generation

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of people who had paid money into Social Security wouldn't get anything back so [People protesting outside the white house]

00:57

the government opened the door and made it easy or at least easier for the semi

01:02

wealthier masses to save money for their retirement and this was a new idea at

01:08

the time a whole new concept like a flying car before then it was mama [Man talking and flying car goes by a window]

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corporation who managed the pension money for her employees you know that

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sucking off the corporate teat and all that stuff well it fostered a sense of

01:20

long-term lifetime loyalty to the company and was all just very you know

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IBM like a born in pinstriped blue diapers IBM employee with a hard loyal [Baby boy playing with a flashing rattle]

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workforce working away there toiling in the IBM salt mines for 35 years

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then retiring at 60 and having smoked a lot dying at age 65 and then that was

01:43

all she wrote well that was then this is now it's a different era different

01:47

financial pressures so companies don't generally offer pensions today and they

01:51

don't generally manage them themselves because the cost of buying real talent

01:56

like people who consistently beat the stock market in good times and

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bad managing that 401k money is astronomically expensive and generally [Boxing gloves punching the stock market]

02:05

speaking corporations can't afford to pay those people nine times whatever

02:09

the CEO makes so companies generally contribute some amount of money to a

02:13

401k and then they leave it up to the employees to figure out how they want to

02:18

invest their retirement savings on their own and that's a good thing most of the

02:22

time and you know hopefully it's there when they want to go take it out and

02:25

they need the money when they're old and decrepit like like I'm getting...

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