Sunday, May 3, 2009

401K and the economy

As we move toward our senior years we have to secure at least our future if not that of our loved ones. A $1.75 trillion market in assets as of 2001 and $2.7 trillion by the end of 2006, the 401K plan is an easy way for individuals to do just that through their employers. Employers can offer this benefit in post-tax or pre-tax basis.

As of 1990, there were 19.5 million participants with 5.3% in a pre-tax method for lower paid individuals and 6.4% for higher paid employees. There are many reasons why someone would or would not decide to participate in a savings plan such as 401K. Among these reasons to participate are:

· Funding retirement
· Company match
· Tex-deferred status of contributions
· Payroll deduction feature

And the people that do not participate may have the following reasons:

· Not being able to part with money for the plan
· Not being able to save
· Not liking the plan features
· Not understanding the plan features

The key problem here, especially in the recent economic trend, is that many employees are either doing away with 401K plans all together or at the very least are not offering company matching 401K. One of the more attractive reasons why a person would think about investing in a 401K is that the company matches the employee contribution up to a certain percentage.


As mentioned earlier there has been a $1 trillion increase in assets of 401K plans in only 5 years. This could mean that many more people are understanding the plan features as well as deciding that they have to do something to secure their future. The trend in this movement and investment activity differ depending on the age of participants. The younger the participant the more likely they would go toward equity funds. On the other hand the older the participant is the more likely they lean toward the fixed-income securities. The reason behind this, as you might have guess, is that the younger the person is the more time they think they have to make up any losses that they might suffer.

Wednesday, April 29, 2009

Personal finance and the economy



There are many factors contributed to the economic problems we are in right now. One of which actually ignited the 1990’s with speculations and the dreams of everyone involved which is the dot.com boom. At its onset, and during the explosion, of the dot.com business people were acquiring wealth and became extremely secure in the continuous success of the dot.com industry as well as their own business.



Investors from all walks of life expecting a 20 percent return on their money per year forever became evident that it did not hold water. This; however, caused the same people to mount up a huge amount of personal debt. When that happens, and families get in tight budgets, it will result in consumers to reduce their debt by conserving and not taking on any additional debt no matter how minimal the amount is. Now consider this. Every business in the world depends on consumers walking in their stores and businesses and purchases their products. When that does not happen it will start the domino effect. One thing leads to the next. If the company’s profitability is reduced then they will have to lay off workers in order to stay afloat. This will add fuel to the fire. Now we have more people with huge amount of debt and now without a paycheck.




The key thing here is to get people back to work. The president has a great plan on how to stimulate the economy. We always hear about the stimulus plan and bail out money. However, this is not really his main objective in how to revitalize this economy. His main goal is to not only get people back to work, which is a short term goal, but also to have a more globally competitive work force that can compete with technology giants such as China and Japan on a long term goal basis. His first congressional address, he laid out the core of his plan on the fact that we need to start from first grade, keep our kids in school, educate them the right way and product a more capable, technologically competitive citizens that can produce more state of the art products which in turn will keep our hard earned money in this country instead of financing foreign countries.

Tuesday, April 28, 2009

How the economy is affecting the people



One of the hottest, if not the hottest, subjects of our daily lives is the economy. It has affected everyone from young to old, the poor and the rich, and everyone else in between. Many people lost their jobs thanks to the recession and trying to find ways to cope with this problem. One of the ways is opening up a home based business.

A home based business is ideal because it allows the person to be his or her own boss. This means that there is nobody else to answer to than own self. There is no one to tell the person what to do and not to do. There is one of two choices; however, a person can go about doing so. The first, opening a “brick and mortar” business. Using this method entails a lot of preopening requirements and spending tons of money. Also, it can limit the entrepreneur geographically and it can take a long time to develop.

The other way is using the internet. Opening up an internet business is much simpler and cost effective if the person knows what to do. The audience are much larger and the customers can be from anywhere in the world. The entrepreneur can attract clients to their store from across continents and countries. There are no borders and customs to deal with. The problems in starting an internet business; however, is that some people can get over anxious and impatient. One of the key steps to take in order for the person to save money and time is for them to make sure to have a teacher or a mentor.

Someone who has been there and done that. Consider this, if you are a novice when it comes to fixing a car and your car breaks down. Would you just jump in and start taking out parts? Or even a computer or a dishwasher. Anything that we are unfamiliar with in order for us to get involved in we have to seek the advice of a subject matter expert. Well, it really doesn’t even have to be an expert but someone that have at least more experience than us.