Author Topic: 401K plan  (Read 3896 times)

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hbelden

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« on: Oct 14, 2005, 06:33 pm »
I had a 401K plan back when I had a day job.  I don't know much about it, but it did give me a couple of hundred dollars when I quit and cashed it in.

What's the deal with AEA's 401K plan?  Which employers contribute matching funds?  What are the pros of setting one up?  Are there any cons - like for instance, if I need cash now to pay down a credit card or a car loan or something.  What about if I don't have a theatre job for a few months?  What happens to it then?

Vernon, I saw you were part of the WCLO contract negotiation that secured this for us.  Can you give us the highlights?

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VSM

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« Reply #1 on: Oct 15, 2005, 12:56 pm »
Well said, Scoot.
Long term investments are, in my opinion, the way to go.
I max out my IRA every year just to be safe.
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hbelden

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« Reply #2 on: Oct 16, 2005, 11:15 am »
Quote from: "scoot"

Production Contract automatically contributes 3% ASIDE FROM YOUR SALARY even if you don't choose to defer anything on your own.

In LORT and a few others you can do salary deferrals on your own that are NOT matched by anything from the producers.

...

You could start with 2.5 percent to match the union funds and you'll be surprised how easy it is.  



Question - what exactly is the matching situation here?  Production Contract producers contribute 3% on top of your salary; other producers do not contribute anything; and the union contributes 2.5% on top of your salary for all these contracts?

If I apply for a 401K on a WCLO or LORT contract, and don't put any of my money in at all (maybe $500 seed money), is the 401K growing because union funds are going into it?  

You'll have to excuse my ignorance, I have a real trouble understanding anything beyond simple savings and checking accounts...

Thanks,
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Heath Belden

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VSM

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« Reply #3 on: Oct 16, 2005, 11:42 am »
It is my understanding that the Production Contract is the only contract that contributes any funds to the individual Actor's accounts. This was negotiated into the contract and other things were given up in order to get it (as is the case in all negotiations).

The other contracts that allow 401K Actor contributions only, LORT, WCLO and also Casino (I think), simply have arranged for the program to be in existence. The Actor chooses to contribute or not while the Producers simply provide the opportunity.
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phillydan

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« Reply #4 on: Dec 21, 2005, 12:46 pm »
One thing you need to be careful of is thinking of the 401K plan as a savings account, as I think many people can fall into the trap of doing (let's face it, when you work in this industry and live paycheck to paycheck thinking in terms of the long haul financially can be difficult to do).  

It's a retirement investment tool and you need to make sure that when you make a contribution that you are willing to forget you ever had that money for the next 20 or 30 years, depending on how far out from retirement age you may be.  The penalties for early withdrawl are enormous and just not worth it.  So if you think you might end up needing the money in the near future, DO NOT put it into a 401-K.  

Also, if there's no matching contribution, and you have credit card debt it makes little sense to contribute until your debt is paid down.  The interest you're paying on that debt most likely far exceeds any potential returns on your investment.  If you have debt and you're putting money into a savings account or retirement plan, odds are you're really not saving money at all.  Use the money you have saved to pay off your debt and THEN start saving (unless it's already in a 401-K--again those penalties!!).  Of course, I always try to have a cushion to get me from gig to gig, but in the long term scenario paying down debt is step #1 and should be an absolute priority.

The exception to that rule is if there is an employer contribution (for those with "real jobs").  In that case, even with debt, you should contribute because that employer contribution is free money.  In other words if your employer contributes fifty cents for every dollar that's an automatic fifty percent return on your money and you just can't pass that up.  So in that case you would contribute up unitl the limit that your employer matches and then stop contributing and then turn your attention back to reducing debt.

Also consider a ROTH IRA.  Unlike a traditional IRA, you do not get the tax deferral because it's paid with after-tax money, but you may withdraw your contributions at any time without any penalties.  Only the earnings on your investment are subject to taxes and penalties.  In other words, If you invest $4000 and that money earns $200 in a year, you can withdraw the $4000 without paying a dime.  However, the $200 in earnings would be subject to income tax and the penalty (which I think is 10%, but that number could be wrong).

There's a great book out there that has been extraordinarily helpful to me--"The Money Book for the Young, Fabulous & Broke" by Suze Orman.  Pick it up!!  This woman has changed my life.  She manages to make financial planning seem manageable and concrete, not just some abstract numbers on a page.

hbelden

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« Reply #5 on: Dec 22, 2005, 11:43 pm »
That makes a lot of sense, scoot.  Thanks for clarifying!

I've got some debt to pay down first, but I'll keep these lessons in mind when it the slate is clear for pension planning.
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Heath Belden

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