I have a friend that wants me to manage his employee retirement fund because he has employees taking out money to buy cars, etc. then are mad at him for not telling them there is a penalty. He says, I did tell you there’s a penalty when I gave you the material to read about the plan, and you didn’t call me to say you were taking a withdrawal. NO way I am taking on that task, thanks anyway. 😉

Regarding defined benefit plans, they are less effective with today’s mobile work force. If you change jobs every five years, the roll over of the defined benefit, if there is one, is not nearly as good as staying put or a defined contribution. Work force flexibility is pushing retirement flexibility.

Check this math out and see if you agree. The SS tax is 6.2% each so a worker earning $15,000 a year contributes with the employer a total of $1860. And taking 20% of that they would get to invest $372 a year. But they would have to pay a minimum of $50 at Schwab to maintain an account with that low a balance (under $10,000). BTW, it will only take them 20 years to get to the minimum balance to get rid of the charge! So they would actually lose over 13% before they ever got a dime back from investing. I am unsure of who will take a $372 contribution without charging a fee except the US Government. I know I won’t! :-))