8 reasons why you should join 401k

There's lots of talk these days about the uncertain future of Social Security. Even if the program does survive and you do receive Social Security payments later in life, they were never meant to be your only means of income during retirement. In fact, in 1998 the Social Security Administration estimated that Social Security will provide less than a quarter of what you'll need to pay for housing, food and other living expenses -- not to mention an occasional golf game.

It's up to you to save and invest for your own future. That's just one of the reasons why it's a great idea to participate in your company's 401(k) retirement plan.

Here are seven more reasons: You can increase your take home pay, really A "company match" can help your investments grow Automatic payroll deduction makes it easy to save Most of your plan's investment choices are managed by professionals Most plans allow access to money in an emergency Account services keep you informed Your money can go with you, job to job

*Source: Social Security Administration, April 1998. Based on retirees and retired couples with $33,777 or more in annual income.

Investing money through your 401(k) plan gives you the benefit of "tax-deferred saving." This lets you increase your take home pay and decrease your current income tax bill. Remember though, your pre-tax contributions are not tax-free, they're tax-deferred, which means that you don't pay income tax on this money until you withdraw it from the plan (which should be at retirement, when you may be in a lower tax bracket). Take a look at a hypothetical chart to see how contributing to the plan compares with saving outside the plan (in an ordinary savings, or other taxable account).

Contributing to your 401(k) on a pre-tax basis helps you increase your take home pay
	Pre-tax savings in the plan	Saving in a taxable account outside of the plan
Annual gross salary	$50,000	$50,000
6 percent of pay before-tax contribution	- 3,000	0
Taxable pay	47,000	50,000
Less 28 percent Federal income tax	-13,160	-14,000
6 percent regular savings in a taxable account outside the plan (from gross salary)	0	-3,000
Take home pay	$33,840	$33,000
Annual difference in take home pay	$840

Some companies offer a "match" as an incentive to join the company retirement plan. It means that the company will contribute a certain amount to your account (usually between $0.25 and $1.00) for every dollar that you contribute, up to a certain limit. The match formula can vary.

To receive the matching contribution, the plan may require that you work a specified number of years. It makes good sense to take advantage of a company match by setting aside the maximum amount required to qualify for a matching contribution. If your employer offers a matching contribution, your savings can grow that much faster.

Saving is ultra-convenient with your 401(k) because the money comes right out of your pay before you get your paycheck. This automatic payroll deduction helps make saving your number one priority. You don't see the money, so you're not tempted to spend it!

Many of the investment options in your company's 401(k) plan are Fidelity mutual funds. By investing in Fidelity mutual funds, you place your money in the hands of a highly experienced team of investment professionals. Each fund is managed by a "portfolio manager," and a global team of dedicated analysts works behind the scenes to provide in-depth research and analysis on thousands of companies, securities, and other investment opportunities. They do the work, so you don't have to.

The money you invest in your company's 401(k) plan is designed to help you when you need it most: at retirement. But for those unexpected circumstances that can arise, many plans allow employees to dip into their account balances before retirement. Generally, there are two ways to do this:

Loans: When you take a loan from your 401(k) account, you actually take money out of your account, with a promise to repay it. You pay your account back the balance you borrowed, plus interest (a fixed rate determined at the time of the loan), through after-tax payroll deduction. In addition, as long as you repay your loan on time, you won't be subject to withholding taxes or penalties, as you would if you withdraw from your account before retirement.

Withdrawals: Withdrawals are a different story. When you withdraw money from your 401(k) account, you can't put it back. Different plans may allow you to take withdrawals for different reasons. The most common withdrawal type is the "hardship withdrawal." According to IRS regulations, to qualify for this type of withdrawal, your "hardship" must represent an "immediate and heavy financial need" and there must not be "any other resources reasonably available to you to handle that financial need." The IRS recognizes four reasons for a hardship:

Some plans also allow hardship withdrawals for other reasons. Check with your benefits department. You will need to show your employer proof of how you intend to use the money, and proof that the amount you requested isn't more than enough to satisfy your need. You may owe a 10 percent early withdrawal penalty if you are under age 59 1/2. Effective January 1, 1999, certain hardship withdrawals will no longer be eligible for rollover. Therefore, the mandatory 20 percent federal income tax will no longer be automatically withheld from your hardship amount as it is from other taxable withdrawals. The withdrawal will, however, be subject to 10 percent mandatory withholding unless you elect out of withholding. You will still owe income taxes and a possible 10 percent early withdrawal penalty if you are under 59 1/2 when you file your annual income tax return.

Your plan provides many account services to give you frequent and up-to-date information about your account, so you can always be informed about how your investments are performing.

Statements: Your account statements are mailed every three months. They are chock-full of detailed information about your account, including account balances as of the most recent quarter end by investment and by source (pre-tax, after-tax, etc.), loan balances (where applicable), and change in account value during the three month reporting period, just to name a few features.

Telephone services: Whether it's 9-5 or around the clock, call our plan to get updated information on your 401(k) account. Our automated telephone services or our online services are available virtually 24 hours a day, seven days a week*, or you can speak to a Participant Services representative from 8:30 a.m. to 5:00 p.m. PST. Once you establish a personal identification number, you can use the automated telephone service to get current investment prices and yields, current account balances, and in some plans, you can even make transactions. If you don't know your company's dedicated "800" number, call your benefits department.

Online account services: Fidelity is now rolling out a new service that will allow you to view your account information online! participants in 401(k) plans can access their current account information over the Internet. After your employer approves the service for your company's retirement plan, you'll be on your way to getting up-to-date account information in a secure, online environment. You can obtain daily account information right over the phone and receive quarterly account statements to help you track your investments.

* Transaction requests received after 4pm Eastern time or on weekends or holidays will receive the next business day's closing price.

One of the reasons why plans like 401(k)s have become so popular is that they are portable: generally speaking, you can take them from job to job (with some exceptions). If you decide to change jobs, you have three options for your money:

You could directly roll your old 401(k) account into your new employers' 401(k) plan and resume contributing to it.

You could keep your old account and start another 401(k) account with your new employer's plan.

You could directly roll your old 401(k) account to an individual retirement account (known as an "IRA") and start a new 401(k) account with your new employer.