Author Topic: Walmart 401k & Employee Stock option  (Read 612 times)

Millie

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Walmart 401k & Employee Stock option
« on: September 21, 2020, 02:19:38 PM »
Hello everyone, long time lurker looking for some advice.  Thanks in advance!

We have a 401k with 6% match.  I知 not very well read about retirement funds but my parents were wary of them (for God knows what reason) and I have also heard that the fees associated with this specific 401k are extremely bad. **

I feel dumb for avoiding it because that is a potential $1,400 per year that I could be collecting.  But I also don稚 really feel comfortable leaving the money in there (it痴 not FDIC insured and it can lose value, correct?).  Would it still be worth getting the match but then taking the money out once a year and just paying the penalties and taxes?  If my calculations are correct it would be something like this.

My contribution per year: $1,400
Their match: $1,400
Combined amount: $2,800
My taxes: around 15%
Penalty: 10%

$2,800 - 25% = $2,100
Profit of $700
Any pitfalls I should be aware of if I did take this route?  Advice to make me less wary of just sticking with the 401k?  Are the fees associated with it as bad as people believe?  I知 interested in learning to invest but nervous due to no one in my family having ever done it or taught me.

Second.  I was about to get into Walmart stocks since we get +15% but then I realized the tax implications and I知 hesitant to do it.  I知 not worried about having all my eggs in one basket since I have other investments as well as plenty of savings/an emergency fund.  Is it worth getting some?  Is it better tax wise to sell within a year, or hold them till they increase a lot?


**I guess this is why
https://www.forbes.com/sites/williampbarrett/2011/12/05/walmart-merrill-lynch-agree-to-pay-13-5-million-to-settle-401k-fiduciary-lawsuit/

https://www.consumeraffairs.com/finance/merrill.html?page=4

bbqbonelesswing

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Re: Walmart 401k & Employee Stock option
« Reply #1 on: September 21, 2020, 03:08:44 PM »
Any pitfalls I should be aware of if I did take this route?  Advice to make me less wary of just sticking with the 401k?  Are the fees associated with it as bad as people believe?  I知 interested in learning to invest but nervous due to no one in my family having ever done it or taught me.

Second.  I was about to get into Walmart stocks since we get +15% but then I realized the tax implications and I知 hesitant to do it.  I知 not worried about having all my eggs in one basket since I have other investments as well as plenty of savings/an emergency fund.  Is it worth getting some?  Is it better tax wise to sell within a year, or hold them till they increase a lot?

First of all, you should read more about 401ks, index funds, and the tax implications before you move ahead. Then you can make a well-informed and confident decision. This is a very quick and easy read that you can finish over a weekend:

https://www.goodreads.com/book/show/51572334-retire-before-mom-and-dad

You should just stick your cash in the 401k, get the match, and leave it there. Fees will depend on which specific fund you choose to invest in. Some (mostly older or more active) do indeed have high fees, but there are plenty of index funds out there these days that are cheaper. Can you meet with your 401k rep and review your options?

achvfi

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Re: Walmart 401k & Employee Stock option
« Reply #2 on: September 21, 2020, 03:21:39 PM »
Hello @Millie, To answer you straight, yes it is dumb to miss out on
1) 401k match
2) Investing in 401k for your long term financial future.

Your parents are probably not financially savvy, so do your own learning.

I looked up some of the investment choices in your plan, there are some you can choose that are low cost fairly safe investments (Such as treasuries and other bond funds) and some index based stock funds that can gain or lose significant value based on stock market movements, that most people in this community invest.

To begin, start contributing to your 401k at least till the 6% match and select safer option such as treasury bond funds or money market funds.

Next start learning more about investing for long term financial future. 401k is a good vehicle for that. Consider just leaving the the investments in there and do not withdraw for short term needs.

MudPuppy

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Re: Walmart 401k & Employee Stock option
« Reply #3 on: September 22, 2020, 05:55:27 AM »
I agree with above posters to learn more about 401k in general.


Definitely contribute up to the match and more if you at all can. WRT yearly pulling money out, it will almost never make sense to pull money out of your retirement accounts prior to retirement. Under some situations you will even lose the match money. The fees are not particularly bad in the Walmart accounts and the article you linked is from 2011.

slappy

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Re: Walmart 401k & Employee Stock option
« Reply #4 on: September 22, 2020, 06:48:41 AM »
Maybe lurk a little more...

Also, you can post the fund options here and people will help you figure out the best option.

As another poster, definitely do not pull the money out once a year and pay penalties and taxes on it.

reeshau

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Re: Walmart 401k & Employee Stock option
« Reply #5 on: September 22, 2020, 06:58:00 AM »
First, congratulations on taking the big first step, and asking the question!  No need to feel awkward about it--everyone had to learn sometime.  The shame is that we don't seem to feel as a society that this information is necessary enough to require it to be taught in schools.  It most certainly is!

You have done a lot of thinking about your situation, but I agree with the others that you should start with some more reading on 401k's in general before deciding on a course of action.  What you are asking to do now is not optimal.  But it's great that you are looking to take some action!

One thing I would look to particularly address is your fear of losing money on the stock market.  Stocks return more over time.  That is a fact.  Yes, they can lose money for periods of time--they make more money *because* they are at risk.  When you are saving for retirement, you are saving for the long term.  It is difficult for all of us to think in these timescales, but it is enlightening.  The first fact is that the stock market has never lost money for any 20 year period:

https://www.visualcapitalist.com/stock-market-returns-time-periods-1872-2018/

This is important because you probably have more than 20 years to go in your career + retirement. (aka the rest of your life)

Not only that, but you need this growth, because inflation will be operating in your life.  Even as low as it has been so far this century, inflation is slowly but surely making things cost more.

https://equitable.com/retirement/articles/inflation-and-long-term-investing#:~:text=The%20average%20annual%20rate%20from,rate%20was%202.11%25%20in%202017.

So when you think FDIC-insured options are best, understand this:  your insured savings account is guaranteed to *lose* money, after inflation.  Stocks will almost certainly beat inflation, which is why they are an important and common tool in retirement planning: owning stocks means you need to save less in order to have enough money to retire.  (Or to accomplish any long-term goal, really)  If you need the security of sure things to sleep at night, that is OK to realize.  But it means you have a heck of a lot more saving to do.  Pick your poison.

It is possible, though!  The hard part is not picking your investments--it is sticking to the discipline to continue saving, and watch your spending theough your life.  Good luck on your investigation, and keep asking questions!

socaso

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Re: Walmart 401k & Employee Stock option
« Reply #6 on: September 22, 2020, 10:56:04 AM »
You are very much going to see the value fluctuate in any investment. It's still better to start investing. My advice is, don't look at it too much. Maybe once a month at most. The ultimate trajectory of your investment is going to be up.

The way I think of it is that Past Me is taking care of Future Me. My investments seemed so small when I started and there were scary dips in value but now when I look at my accounts I feel good that Past Me stuck with it and Future Me is going to be able to retire!

Millie

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Re: Walmart 401k & Employee Stock option
« Reply #7 on: September 27, 2020, 01:33:11 PM »
First of all, you should read more about 401ks, index funds, and the tax implications before you move ahead. Then you can make a well-informed and confident decision. This is a very quick and easy read that you can finish over a weekend:

https://www.goodreads.com/book/show/51572334-retire-before-mom-and-dad

You should just stick your cash in the 401k, get the match, and leave it there. Fees will depend on which specific fund you choose to invest in. Some (mostly older or more active) do indeed have high fees, but there are plenty of index funds out there these days that are cheaper. Can you meet with your 401k rep and review your options?

Thanks so much!  I ordered the book and will read it with my husband next chance I get (got a physical copy so I can pass it on to a friend after I知 done lol).  I知 not sure if I can talk with a 401k rep before I even open the account but I値l call Merrill Lynch next day off and see if someone can point me in the right direction.

bbqbonelesswing

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Re: Walmart 401k & Employee Stock option
« Reply #8 on: September 27, 2020, 01:38:57 PM »
Good luck!