"Mad Money" host Jim Cramer explains why employees should invest in a company-sponsored 401 plan.
"If the company you work for offers an employer match for your 401 contributions, then you want to put money into your 401 until that match is maxed out. No reason to pass up free money," he said. "And after that, put any additional retirement savings in an IRA," which is an Individual Retirement Account.
There are some negatives, however, when it comes to 401 plans. One of those issues includes the fees charged by both the mutual fund and the 401 administrator, who is hired by the employer. Due to federal gift tax laws, single investors can only contribute $14,000 a year, or $28,000 if you're married and file taxes jointly. Grandparents can contribute to the plan, as well, and can even start a 529 plan with your child as the beneficiary, though Cramer thinks it is better for a parent to do it.
However, his beef is not with all mutual funds. Specifically, he warned against actively managed mutual funds with people deciding the stocks and securities to buy and sell.because the managers don't get paid for delivering performance — they collect a fee from investors regardless of the amount of money they make for their client.
Free money isn't a thing. 😂😂
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