After the introduction of 401K plans, pension plans began to disappear.  Remember pension plans?  Your employer would deposit funds every year and you would receive a guaranteed income at retirement that was based on your years of service, income and retirement age.  These pensions, coupled with social security, were the base retirement income vehicles for working Americans.  The 401K plan, based on employee contributions coupled with employer matches largely replaced the pension portion of the traditional retirement combination.  Few worried about this during the two decades of stock market growth in the 80’s and 90’s.  Even the last several years, with mediocre stock market returns, there was little in the way of general concern. The cataclysmic events of 2008, with the near collapse of our financial system, has shaken the confidence of nearly everyone, particularly those that are nearing retirement.  It’s estimated that the total of 401K account values  has shrunk by $2 Trillion. A number of employers are examining the reduction or elimination of 401K matching contributions.

Those old enough to remember the old combination of social security and pension income are nostalgic for the return of that security. The rest of the working age population wishes something like that were in place today.  For some portion of the working population, it is possible to re-capture that security.

Many 401K plans allow for distributions for non-hardship, in service purposes.  The funds in the 401K plan can be rolled into an individual Retirement Account on a non-taxable basis.  Once in the IRA, funds can be deposited into an annuity contract that provides a guaranteed annual increase in value and a guaranteed retirement income.  Even though funds have been removed from the 401K plan, participation continues, and the employer match remains.

Some plans limit this to employees over the age of 591/2, others have no such limitation. Each plan has a Summary Plan Description that contains the provisions dealing with this option. Every participant is entitled to a copy of the Summary Plan Description for their plan. We always advise clients to request a copy.

Anyone who is concerned about their retirement security, and today that is probably everyone, should investigate this option. For additional information, please contact us!