What are the disadvantages to a 401(k)?
• It is difficult (or at least expensive) to access your 401(k) savings before age 59 1/2. • 401(k) plans don’t have the luxury of being insured by the Pension Benefit Guaranty Corporation (PBGC). (But then again, some pensions don’t enjoy this luxury either.) • Employer contributions are usually not vested (i.e., do not become the property of the employee) until a number of years have passed. • Each year, the Internal Revenue Service sets a maximum contribution limit for 401(k) accounts. For the 2000 tax year, the employee contribution limit is $10,500.
