Skip to Content.
Sympa Menu

homestead - Re: [Homestead] 401k question

homestead AT lists.ibiblio.org

Subject: Homestead mailing list

List archive

Chronological Thread  
  • From: EarthNSky <erthnsky AT bellsouth.net>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] 401k question
  • Date: Sat, 25 Oct 2008 00:14:24 -0400

So what happens if a business goes under?
For the sake of argument, the business is mid sized, less than 50 employees. All 50 would have to be paid within a few weeks, no?

Clansgian AT wmconnect.com wrote:

Why is it, if you have a 401K through your employer, that you have to
quit your job in order to cash out? Why?


The simple answer (non answer, really) is that federal law mandates it.

But the reason is because your employer doesn't actually have the money. The money is theoretical, just like 'money' in the stock market. When you work a job you have the option of keeping all your money and spending it as you choose, or buying 401K lottery tickets with part of it.

Just like of 50% of the people who had, say, ITT stock put in an order to sell that stock on Monday morning (cash it out, as it were), the other 50% of the people who own that stock would get nearly nothing. Actually it would only take ore like 5% rather than 50%. It's because the "money" in that stock doesn't really exist, even as money, which itself doesn't really exist in any real sense of the word.

So if an employer sponsors a 401K and suddenly half the employees decided to "cash out", there isn't any actual money to pay them. All the "money" (nod, nudge, wink) is actually a hope that the stocks that make up the 401K will be doing well when you do cash out.

So limiting withdrawals and dissolutions to only employees who are leaving the company and the plan, the employer is not faced with the need for coming up with a large amount of cash (which it doesn't have) to pay off the contributors should a lot of them just want or need the money.

James
_______________________________________________
Homestead list and subscription:
http://lists.ibiblio.org/mailman/listinfo/homestead
Change your homestead list member options:
http://lists.ibiblio.org/mailman/options/homestead/erthnsky%40bellsouth.net
View the archives at:
https://lists.ibiblio.org/sympa/arc/homestead



------------------------------------------------------------------------


No virus found in this incoming message.
Checked by AVG - http://www.avg.com Version: 8.0.175 / Virus Database: 270.8.3/1744 - Release Date: 10/24/2008 6:08 PM


--
“Fear is the path to the Dark Side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.” Yoda




Archive powered by MHonArc 2.6.24.

Top of Page