BY: KATELYN MCKINNEY, KRISTEN MEEKS & JANINE SCOTT The 401(k) and the Financial Crisis

An Overview of the 401(k) Defined contribution plan Tax deferral until withdrawal Tax deductible contributions Greater than 50 percent of U.S. have 401(k) accounts.

401 (k) Account Risks Market risk Longevity risk Risk of under saving

401(k) and the Financial Crisis Negative Factors during the Crisis: Financial Market Downturn Early Withdrawals Employer and Employee Cutbacks

Investors Effects on 401(k) Age: Young Investors Vs. 5yrs from Retirement Wealth: High Income vs. Low Budget Investors Risk: Risk Adverse Investors vs. Risk Takers

401(k) Participant Behavior in the Financial Crisis Individuals in need of money: -Take a loan from a bank instead of touching 401(k) funds -Interest rate on loan lower than rate of return on 401(k) -Opportunity cost of the interest made on 401 (k)

401 (k) Participant Behavior in the Financial Crisis Individuals not in need of money: -Invest their funds -Leave 401(k) alone “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” –Warren Buffett  Diversification=Security