Need some 401k advice

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i contribute to the match wherever i am. it was more at the last job, but oh well. i've considered dumping mine just so that i can stick it out and sell my MA property because it's a mother****ing money pit and never-ending source of hate and discontent. i have yet to do it because i'd lose so much of the money...

%10 penalty from the institution, %10 federal penalty, and then income tax which would end up being about another %10 of the money. to me personally it'll be worth it if it's a guaranteed sale--i might even make back some or all of that 30% if i can turn a profit. from there i'd re-invest in gold, silver, etc. something a little more tangible.

however literally everyone i've spoken to has told me up and down that it would be a terrible plan except for the precious metals investment, but i was told i need to hold on to the shit for a long time, not just a few years. honestly though i am convinced that the accounts are gonna be raided by the government, or ultimately end up totally worthless by the time i could retire so i'm not optimistic when it comes to 401ks. i've got a long way to go.
 

Matt2109

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Dude, at age 32 you should be maxing out your 401k contribution. Your investment compounds tax free -- as your investment grows, the IRS doesn't take money out of it. Whether your company matches or not, 401ks are a super great deal.

Your 401k plan undoubtedly allows for multiple different investment options. Take a look at your plan. Chances are they have an S&P 500 index fund. Transfer your investment into that.

For the vast majority of people, your only hope of retiring is to max out your 401k.

THIS THIS THIS

Max it out, and get someone knowledgeable to help you select the investments. You NEED to save for retirement and the younger you get started the better off you will be!!!!!!!!!

For the vast majority of people, your only hope of retiring is to max out your 401k.[/QUOTE]
 

Varmint

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Speak for yourself, I'm counting on social security and government handouts. I figure by the time I retire they'll be handing out free homes to the jobless.
 
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Speak for yourself, I'm counting on social security and government handouts. I figure by the time I retire they'll be handing out free homes to the jobless.
While probably not a good idea, there's some truth to that. We know how this'll go... it won't be too long before they take away SS from anyone who has saved in a 401k or other plan. It's sort of like long ago when I was trying to figure out how to get through college. For every dollar I saved, that's one less dollar they'd give me in financial aid. So, it was totally stupid to put away anything for college. They'll use class warfare and justify it for retirement plans in the not too distant future. The "evil rich" who unfairly have these giant 401k's making them set for life! How dare they! Never mind that they withheld consumption all their life in order to be able to contribute.
 
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For any one who's company has a match, I recommend they contribute at least enough to maximize the match. If they want to save more and they qualify, most are well served by using a ROTH IRA.
I do this professionaly and I do it myself with my own money.
 
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i've been maxing out my 401k or at least to the point I can afford since I was 19

about to turn 30 now and doing pretty well, I need to change my plan a little but I think its a good thing to have. plus you can borrow against it in a pinch if you need to, with good interest rates on your own money... makes sense [laugh]
 
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While probably not a good idea, there's some truth to that. We know how this'll go... it won't be too long before they take away SS from anyone who has saved in a 401k or other plan. It's sort of like long ago when I was trying to figure out how to get through college. For every dollar I saved, that's one less dollar they'd give me in financial aid. So, it was totally stupid to put away anything for college. They'll use class warfare and justify it for retirement plans in the not too distant future. The "evil rich" who unfairly have these giant 401k's making them set for life! How dare they! Never mind that they withheld consumption all their life in order to be able to contribute.
This is the thing I fear most. There's already been talk about "excessive levels of retirement savings." I doubt this will be me at least at first. Who knows how it will go when the vast majority of the baby boomers who have saved nothing start clamoring for help when they can't work anymore.

401k in a nutshell is a gamble that your tax rate in retirement will be better than your tax rate now. That's the only difference between 401k and just dumping the money into a bank account or any mutual fund. You are not taxed on that money now (your income will go down by the amount you contribute) but you will be forced to withdraw money on a schedule after a certain age and what you withdraw will be taxed as income. The .gov wants it's taxes so you do not have the option to keep the money in the account if you do not need it. Rhoth IRA's are taxed up front when you contribute and you pay no taxes when you withdraw. At least that is how it works today - there are no guarantees that lawmakers will not pull the rug out from you and change the law.

Will your tax rate be less than it is now when you retire? Only you can make that decision based on your beliefs on where the country is heading and if the politicians will cave and change the rules on you and/or outright confiscate what it feels you are not entitled to. Years ago when I started, it was a no-brainer. Today, in my opinion, I wouldn't do it even with the company match and the easy discipline of payroll deduction. You do need to save though. Social "security" will not be there for you. Given today's climate, I'd be looking more for something that .gov doesn't know about.
 
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66 posts and I have not seen the words "cash it in on hookers and blow"

very disappointed in you guys.
if you just cash it in on blow you can probably get the hookers anyway

you need to be thrifty in retirement spending come on now
 

Varmint

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The government could do a lot of things to target 'wealthy' 401k owners without resorting to confiscation (which is political and economic suicide).

- they could institute a special tax rate for 401ks, so if your 401k income (withdrawal rate) is $40k/year, tax that at 25%, instead of the 0% rate it would normally be.
- raise the forced withdrawal rate, bringing you into higher tax brackets
- take away other deductions if your 401k balance is over $250k.

I'm sure there are other ways - they're more clever than I am.

Most likely is they will eliminate the 401k soon - so you'll keep your existing 401k, but future contributions will no longer be deductible. That's why you should max it out asap.
 
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A 401k is not just about betting tax rates will go down, its about tax planning. You put money in a 401k, tax deferred, and you basically have 30-50 years in which you can choose when it gets taxed. You have a low tax year randomly in your mid 40s, and boom, you do a ROTH conversation, pay your taxes when they're low, and now that money (and all the growth) is tax free.

For instance, I just bought an electric car, and I got s $7500 tax credit I wasn't expecting. That means I can move about $20k from my IRA to my ROTH, and the money will be tax free when I retire. Boom.
 

Varmint

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A 401k is not just about betting tax rates will go down, its about tax planning. You put money in a 401k, tax deferred, and you basically have 30-50 years in which you can choose when it gets taxed. You have a low tax year randomly in your mid 40s, and boom, you do a ROTH conversation, pay your taxes when they're low, and now that money (and all the growth) is tax free.

For instance, I just bought an electric car, and I got s $7500 tax credit I wasn't expecting. That means I can move about $20k from my IRA to my ROTH, and the money will be tax free when I retire. Boom.
So if you got laid off one year, and had a low income, you could do a Roth conversion that year at a low rate? Smart.
 
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at 32 your behind already. i'm 39 and have been investing between 6-9% of my pay in 401k's since i was 25. outside of that i also invest in metals and ammo. i want to have money to retire. if i was you look at some investment models my guess is you should be putting away 10% or more at this point being 32.
 

Varmint

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Elements of Washington have been pushing to eliminate the 401k deduction for years, and the Simpson-Bowles commission recommended it.

Look around the liberal media, Time, NY Times etc - all have stated their belief that the 401k/IRA deduction doesn't help people save (they mean that the 401k/IRA helps, but not the fact it's deductible).

There's $10 trillion out there in untaxed retirement accounts - money that's never been taxed. And $100 billion/year in deductions. How long do you think Washington's going to let that go?
 
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So if you got laid off one year, and had a low income, you could do a Roth conversion that year at a low rate? Smart.
Sure, there are lots of little tips and tricks you can employ. The key is to have a diversified investment strategy, not just in terms of investment, but also investment vehicle: 401k or Traditional IRA, Roth IRA, real estate and cash. Also, have a good estate planning team in place (accountant, financial advisor, and lawyer) and keep them abreast of your situation, so they can advise you when opportunities present themselves.

There seem to be a lot of paranoid voices on this forum who seem to think .gov is coming to raid their savings accounts or retirement plans. I think that's highly unlikely. Quite the opposite, the government is more likely to provide more opportunities for retirement planning. The more people who properly save for retirement on their own, the fewer people will be a burden on the govt (and the taxpayer) in the future. So I expect to see more retirement planning opportunities present themselves in the future, things like a one time tax-free Roth conversion, or a reduced tax rate for IRA withdrawals. But the only way you'll be able to take advantage of these opportunities is to be informed enough to recognize them (or employ people who do that for you), and have the tools in place to take advantage of them.
 

FPrice

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A 401K is only one tool in your toolbox for planning for your future. It has it's advantages and it's disadvantages. And this goes for everything you may consider acquiring or saving for the future: bank accounts, stocks, bonds, guns, precious metals, collectables, food, etc. Before you do any of these you should school yourself in these pros and cons. Even if the item has a "con", it still may be worth doing as long as you understand the ramifications.

YOU have to analyze YOUR situation to see if/how it works for you. Employer matching (even just a portion) helps.

One hint I would offer, if anyone tries to sell you on a certain retirement plan, first check and see if they will benefit (especially financially) from getting you to sign on to that plan. Lots of "financial advisors" make money by getting you to invest in their "plan".

Caveat emptor.
 

ASHDUMP

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I've been battling this type of investment since I started my first real job 10 years ago. I'm now 32 turning 33 soon and still no 401k. I suppose I would be better off if I just put my sheep blinders on and ignore the financial ruins America is in. I'd be better off like 99% of you in this thread. My savings is my savings not yielding anything.

A few of you had mentioned that a 401K might be your biggest asset. I wouldn't be able to sleep at night knowing all my money is locked up in something the .gov has so much control over.

But the other side of me thinks that there is so much money in the stock market from the super rich that they wouldn't let the entire stock market economy collapse... those guys are greedy mofo's and they wouldn't let their wealth disappear....

For me its the fear of your money being taxed more heavily or vanishing....

Has anyone who's heavily invested in their 401K thought about that before or are you just crossing your fingers and hoping for the best?
 
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Elements of Washington have been pushing to eliminate the 401k deduction for years, and the Simpson-Bowles commission recommended it.
Simpson-Bowles commission recommended reducing the limits for 401k contributions (to $20k or 20%), not eliminating it. The point was to limit wealthy individuals from using the investment vehicle as a tax shelter (i.e. tax the wealthy).

Get your facts straight.
 
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Has anyone who's heavily invested in their 401K thought about that before or are you just crossing your fingers and hoping for the best?
Of course, but do you know what I think about more? Retiring at 65, running out of cash at 75 and living until 100. Getting $600 a month from social security and incurring $1200 a month in medical care costs. Having to take a job as a Walmart greeter because I'm too old to do anything productive. Being a burden on my children. Spending my last years as a ward of the state.

That's what I think about...

For a group of independent, self sufficient people, I'm shocked at the number of NESers who are taking no responsibility for their financial future....
 
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I would ask to see the paper you signed to enroll. They can't do it without permission and a beneficiary form. I am an advocate of the 401K but it sounds like you are not. I would go to your HR dept and inquire. What you may be seeing is some companies do profit sharing into a 401K automatically. The last company I was with did this. Not at every paycheck though.
As far as access, you can pull it anytime you want but if you are younger than 59 1/2, I think it is, you will need to pay a penalty i think 10%. If it is a standard IRA type and not a Roth you will also have to pay the taxes on it as it would have been taken out before taxes.
 

Varmint

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A few of you had mentioned that a 401K might be your biggest asset. I wouldn't be able to sleep at night knowing all my money is locked up in something the .gov has so much control over.

But the other side of me thinks that there is so much money in the stock market from the super rich that they wouldn't let the entire stock market economy collapse... those guys are greedy mofo's and they wouldn't let their wealth disappear....

For me its the fear of your money being taxed more heavily or vanishing....

Has anyone who's heavily invested in their 401K thought about that before or are you just crossing your fingers and hoping for the best?
First, just remember that the government is hugely dependent on the faith of investors. Take our national debt for example - Washington is able to run huge budget deficits because Treasury interest rates are so low. If the government did something that caused bond investors to lose faith, interest rates would skyrocket, making our budget deficits impossible. So they will never do anything that will jeopardize investor faith in Treasuries as the safest investment out there. So no confiscation, no defaulting on debts etc. Stop worrying about that.

You're right that the super rich control washington - this is why central banks keep pumping trillions into the stock & bond markets, to keep them from crashing. Unfortunately this type of manipulation never works forever - look at yesterday's $1.6 trillion QE announcement from Europe - it got us only a 1.5% jump in the market. This central bank stimulus is getting less and less effective, and when that fails, there's nothing left to prop up the stock market.
 
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EJFudd

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The government could do a lot of things to target 'wealthy' 401k owners without resorting to confiscation...
And guess who King Obama and the left call "wealthy"? Correct! You and me. [shocked]

First, let me say that utilizing a 401(k) as early as possible and at least up to the limit of the employer match is a no-brainer. Turning down that match makes no sense at all. And while I say that, I am well aware that many younger folks are not in a great position to save even one thin dime for retirement. Divorce, alimony and child support, in particular, can leave us with no option at all but to pay out every last cent of income we make just to stay out of jail. Been there, done that. The courts do not care a hoot about your ability to retire someday. [thinking]

But back on topic, I absolutely expect our beloved, ever more socialist government to change the rules to go after a greater share of all that 401(k)/IRA money. Hell, it is already happening. And you think you are going to be in a lower tax bracket when you finally get to retire? Well, think again. [angry]

Still, my single biggest fear is that our beloved government is going to come up with a way to re-tax Roth 401(k) and Roth IRA money... in effect, taxing it twice if you happen to be "wealthy" (by their definition, meaning not a member of the FSA). As Varmint points out, there are a lot of very sneaky backdoor ways for them to do that. At an absolute minimum, I see them placing new rules on Roth withdrawals (for those "wealthy" people, you and me) to limit how they can be used to minimize your annual tax burden. It's a "loophole" (in the vernacular of the left) that I'm sure the FSA liberals in Washington would love to plug.
 

Varmint

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Simpson-Bowles commission recommended reducing the limits for 401k contributions (to $20k or 20%), not eliminating it. The point was to limit wealthy individuals from using the investment vehicle as a tax shelter (i.e. tax the wealthy).

Get your facts straight.
In other words a 57% cut in the 401k deduction. Oh, thanks, I feel much better now.
 

Dennis in MA

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Funny thread.

Years ago, when I was younger and stupider, I tried to set up a SIMPLE-IRA plan for a client and his employees. Now under a SIMPLE-IRA, the employer MUST make a 3% contribution to all employees.

We had one guy that didn't trust ANYONE. I still use his line to this day, "What's the law?" LOL

He thought somehow if we put 3% of his pay into an account that the company OR the investment firm was somehow scamming him.

Anyone who has access to a 401k and doesn't use it? Similar boat. Don't go crying to liberal politicians when you are 65 and broke.
 

P-14

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So, posts in this thread are saying you should max out your 401k contributions and you're fool for not doing this. However, the reality of life is that all of my money back then was allocated to living expenses for my family. You know: Food, mortgage, car expenses, insurance, household costs, etc. My solution was to put in a couple of percent the first year - because that was all that I could afford - and then up that percentage every time I got a raise.

In that way, I took the money out of our living expenses before we "grew" into the added funds provided by the salary increase. Each year, I was able to bump up the contribution a percent or two and that was how I got it up to the 10% a year that most financial planners will tell you you should be putting away. It worked for me. YMMV.

My thoughts only.
 
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That's one of the things I was afraid of. This is what I don't like about a 401k. I basically forfeit my right to MY money. I agree that it helps you be more responsible about saving, but that aspect just rubs me the wrong way.
You might like a Roth IRA then. You can contribute up to $5,500 a year to it, but that money isn't tax deductible. You can withdraw part or all of the contributions at any time you want, for any reason, without penalty. Any money it earns (interest, capital gains, dividends, etc) can't be withdrawn without penalty until retirement, but it does leave you in control of any money you contributed to it.
 

Varmint

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So, posts in this thread are saying you should max out your 401k contributions and you're fool for not doing this. However, the reality of life is that all of my money back then was allocated to living expenses for my family. You know: Food, mortgage, car expenses, insurance, household costs, etc. My solution was to put in a couple of percent the first year - because that was all that I could afford - and then up that percentage every time I got a raise.

In that way, I took the money out of our living expenses before we "grew" into the added funds provided by the salary increase. Each year, I was able to bump up the contribution a percent or two and that was how I got it up to the 10% a year that most financial planners will tell you you should be putting away. It worked for me. YMMV.

My thoughts only.
I think the consensus is to put in enough to get the company match. Do this even if you can't afford it. Beyond that 5% or whatever, there may be other higher priorities (paying down CC debt etc).
 
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There is some solid advice on this thread. Definitely contribute to your 401K regardless if you feel the world is going end. Juice up your contribution so it makes sense to you and read about it. Once you get going you won't miss the money from your check as you will have a new baseline for your budget/expenses.

If you like gold and silver then buy some occasionally so if the world does end you have something tangible. I like assests I can touch and see at my leisure but you can't ignore the benefits of tax free money and compound interest. I started my 401k at your age and it's working out well for me. If I get jammed up in a financial emergency I know I can borrow against it.

Just dont pick one approach to your financial future - Diversify!
Agreed. Also I don't think it's been mentioned yet, but not putting money away for retirement because you fear the world is going to end is the only guaranteed way to ensure that the world does end for you. If you don't have the savings to live off of in retirement, you either have to keep working until the day you die or you live in poverty after retiring.
 
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