Need some 401k advice

Varmint

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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.
Murphy's Law. Like putting all your savings in a bank ensures the zombie invasion.
 

Rob Boudrie

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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.
Bingo.

Outside of investment risk of loss, there are two risks to 401Ks and IRAs:

1. Taxes will be at a higher more confiscatory level when you retire. Unlikely, since you are putting money away that would be taxed at our higher incremental rate and withdrawing when it is you only income outside of SS.

2. The system will punish people for savings. This is a very real risk. I doubt the gov would ever seize IRAs, but it could do something like add means testing for SS - as in "you saved for yourself, will give you share of SS to someone who did not". This is already done to a degree - for example, the SS rules that reduce your benefits if you work while collecting. (think income redistribution)

Some precious metals companies are now claiming you can take possession of your own gold in an IRA, or that gold is a safe deposit box is not in your "physical custody" and therefore meets IRA requirements. Don 't believe for a minute that these creative interpretations will stand - the purpose of the IRA custodian is to assure the owner cannot spend the money without the withdrawal being reported to the IRS.
 

greencobra

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Our company also started a few years ago basicly the same thing. When they did away with the company pension plan they would enroll the folks not already in the 401k, taking a minimal payroll deduction each week. You could of course opt out. You had to be clever and have good ears to catch that announcement. New hires are just told during orientation and given the choice then. Since we are gone feb 28th, the guys too stupid to know they were having money saved for them are a bit screwed because of the early removal penalty.
 

M1911

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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.
Exactly.

These paranoid delusions seem to mostly be justifications for not saving a dime.
 

JoeT

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just out or curiosity

what is social security paying out per month right now? I know it has to do with what you put in, but lets talk averages....


I'm going to use our home as a quick example. The property tax bill dropped this year to $12,000 a year (was $15,000 but home values dropped in town and they changed taxes this year)

So assuming that when I retire there's no changes in ANYTHING. the 1st $1000 a month will go to pay the tax bill. Or they take the home and I have no place to live (the reality is that the home will be paid off, and we will have downsized because the kids better be gone by then

those that aren't saving for retirement and are planning on just social security, what's the plan to just live?



some suggest gold and other metals

here's a quick gold graph for the last 5 years


and here's silver


you have to go back past 10 years to see any return on investments (and what's been the inflationary rate over the past 15-20 years?)

as said above you need to diversify your retirement .
 
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just out or curiosity

what is social security paying out per month right now? I know it has to do with what you put in, but lets talk averages....
Average is ~$1,300/mo per individual. Max is $2,600 (but I rarely see that much).
 

Mini88

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If you are afraid of sending money off to a scary place that you cannot retrieve it without a 'qualifying event' (home purchase, children etc.) lest you pay substantial penalties, then consider other investment/savings vehicles. Perhaps a life insurance plan that is backed by a money market where you can use your money whenever you want, don't even have to pay it back. The only penalty for not paying it back would be at the time of your eventual death what you did not pay back would be deducted from the death benefit your beneficiary (family) receives. I recently started one of these at Northwestern, roth IRA's are great as well. And DEFINITELY do your best to learn about your company's plan and evaluate what it would take for you to at least maximize the company match.

People harping about how slimy the auto-enrollment practice may be are just incorrect. I promise this was commmunicated multiple times including instructions on how and when to opt out if desired, it is perfectly legit.

I'm 26 now and have only been contributing to my 401k for 2 years, I sincerely regret not starting immediately, my retirement account is likely half the size now it could have been if I had started at age 22.

http://www.milliondollarninja.com/retirement-plan-options/
 
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In my younger years I spent all my money on coke and hookers,now at 42 I'm paying the price. I've only been contributing to a 401K for 10 years and I know I'll have nowhere near enough I'll need come retirement time. At least I am in a "stable" situation for now. My company recently started matching my contribution a small amount. At the start of this year I changed my contribution from 4% to 8% and in the next few years I'll be able to keep that percentage climbing. My only regret is I don't remember 50% of the fun I had back then!
 
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M1911

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In my younger years I spent all my money on coke and hookers,now at 42 I'm paying the price. I've only been contributing to a 401K for 10 years and I know I'll have nowhere near enough I'll need come retirement time. At least I am in a "stable" situation for now. My company recently started matching my contribution a mall amount. At the start of this year I changed my contribution from 4% to 8% and in the next few years I'll be able to keep that percentage climbing. My only regret is I don't remember 50% of the fun I had back then!
Every year when you get a raise, increase the percentage of your contribution.
 

cbrxx

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If it wasn't for the 401k, I would never have the amount of money saved that I have now. You should at least contribute enough to get an employer match. Stupid not to do that.

Been at my current employer 24 years. They do a one time annual profit sharing contribution into your 401k, usually 5% of your salary. It's not a match, so you get their contribution regardless.
At the beginning I started with just a few percent from my pay so it didn't hurt, and each year I got a 5% raise, I bumped my contribution by 3%, so still saw an increase in my check.
Wasn't after too many years that I was contributing the maximum allowed and have been doing so ever since.

My biggest fear is the means testing Rob mentioned above. In 15 or 20 years the .gov may look at your assets and decide you no longer deserve your share of social security and give more to all the fools who blew their money.
I see it with people around me. Don't save, but seem to always have the new phone, expensive lunches, etc. They will be broke in retirement.
 
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the only thing safe in a 401k fund is a money market, which is probably where your $36/paycheck is going by default. I'd leave it there
leaving it in a money market fund is the same as stuffing your mattress with dollar bills. if the market collapses, you're okay, but you get none of the gains in the market growth.

it's a gamble, similar to investing in a bunch of guns & bullets to prepare for thunderdome.

the last thing you want is to start investing in a 401k and see it drop 70%, that might discourage you from investing
it's counter-intuitive, but a 70% drop in the market is actually great if you keep a level head, have cash and have a plan.

the moment the DOW crashes is the *perfect* time to pump cash into your investment accounts. you can use your cash and buy stock in GE, IBM, Google, etc. at unprecedented lows. history suggests that the elite will make sure the funds rebound after they reap the profits from the middle class panic selling.

again, participating in the market is a gamble, and absolutely worth the price of admission to the casino (unless you're getting drunk with hookers, doing blow and playing the slots).

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...
you have old 401(k)s? these could (should) be rolled over into a roth ira. there is a tax hit, but it's well worth the investment to get your money in this type of account. if it's only a current employer 401(k) then you can't roll it over yet.

regardless, investment accounts can be used without penalty for your escape from worcester. get some coaching from a financial planner. tabascoisnice knows about certified financial planners.

one option:

you can take a low-interest loan against your current or former employer 401(k)s to use as a down payment.

another option:

if you have a roth ira, you also temporarily borrow from it for a period of 60 days to use for anything (down payment for a new mortgage, hookers and blow, etc). there's no penalty if you return the money within 60 days. if you miss that window, you pay the early withdrawal penalty.

this is a gamble, but not a so dangerous because you can calculate most of the risks. it's still a seller's market, so you would have more buyer candidates - you can search out the ones who are more serious, with have fast access to credit and liquid cash to close within your 60 day window.
 
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EJFudd

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My biggest fear is the means testing Rob mentioned above. In 15 or 20 years the .gov may look at your assets and decide you no longer deserve your share of social security and give more to all the fools who blew their money. I see it with people around me. Don't save, but seem to always have the new phone, expensive lunches, etc. They will be broke in retirement.
Oh, more of that is coming. You can bet on it. Gotta feed the FSA illegals & layabouts! Remember back when they didn't tax SS benefits at all? Then at 50%? Now I get taxed on 85% and it won't be long before that is 100%. Then they'll continue lowering the income thresholds. Then they'll "means test" SS benefits such that if you have a healthy 401(k)/IRA portfolio or other assets, you won't get any SS at all. It's all coming. Some of it is already here. Not a matter of "if." Just a matter of "when." [thinking]
 
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Any type of employer match is free money and free money is always good.
With investing most people get burnt when they try to time the markets or panic sell when things go south.
A wise man once told me during one of the down turns that you have not lost anything unless you are looking to cash out at that time.
most people panic during a down turn and sell when actually it is the best time to buy. Dollar cost averaging is an investors frined
 

M1911

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Any type of employer match is free money and free money is always good.
With investing most people get burnt when they try to time the markets or panic sell when things go south.
A wise man once told me during one of the down turns that you have not lost anything unless you are looking to cash out at that time.
most people panic during a down turn and sell when actually it is the best time to buy. Dollar cost averaging is an investors frined
Since I started investing in a 401k back in 1984, there have been numerous downturns and recessions. I didn't panic. I didn't take transfer my money out of the market or, worse, cash out my 401k. I just let the accounts be, with periodic reviews and rebalancing. And guess what? Every time the market came back. Sometimes quickly. Sometimes slowly. But it did come back. Every. Single. Time.
 

Varmint

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leaving it in a money market fund is the same as stuffing your mattress with dollar bills. if the market collapses, you're okay, but you get none of the gains in the market growth.

it's a gamble, similar to investing in a bunch of guns & bullets to prepare for thunderdome.



it's counter-intuitive, but a 70% drop in the market is actually great if you keep a level head, have cash and have a plan.

the moment the DOW crashes is the *perfect* time to pump cash into your investment accounts. you can use your cash and buy stock in GE, IBM, Google, etc. at unprecedented lows. history suggests that the elite will make sure the funds rebound after they reap the profits from the middle class panic selling.

again, participating in the market is a gamble, and absolutely worth the price of admission to the casino (unless you're getting drunk with hookers, doing blow and playing the slots).
The big banks (i.e. the Fed) have spent trillions to convince us to think this way. Every market crash has been met with massive Fed stimulus, either QE or lower interest rates, or both, in order to keep the masses thinking a crash is a buying opportunity.

I think the next big crash will break this trend, since the Fed is out of weapons to fight a crash.

Simply put, I'll put my money back in stocks when the global central banks stop stimulating the stock market. It could be a while but I'm patient.
 
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Since I started investing in a 401k back in 1984, there have been numerous downturns and recessions. I didn't panic. I didn't take transfer my money out of the market or, worse, cash out my 401k. I just let the accounts be, with periodic reviews and rebalancing. And guess what? Every time the market came back. Sometimes quickly. Sometimes slowly. But it did come back. Every. Single. Time.
I am in that same situation as you. Now that I am getting near retirement I am going to shift some money into some safer investments in the near future. I started investing in the 80's with the guidance of a successful investor who immediately got me to dump the Whole life insurance "investment" I had made. It has worked out very well. Like yourself I have been through the 20-40% dump at least 3 time and always came out ahead in the long run.
 
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Simply put, I'll put my money back in stocks when the global central banks stop stimulating the stock market. It could be a while but I'm patient.
yup. that resonates with me to the tune of 20% of my investments. the other 80% is banking on SNAFU

there's a decent chance the Fed can pull off another "recession" / economic redistribution without making any substantial changes, given a good crisis
 
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where is the compounding stat about the guy who starts saving at 25 vs 40? I can't find it but the difference was dramatic.
http://www.businessinsider.com/compound-interest-retirement-funds-2014-3

It also points out that, assuming annual returns of 7% in each account, putting away $5,000 per year from age 25 to age 35 (10 years) and leaving it alone thereafter will net you more savings than putting away $5,000 per year from age 35 to age 65 (30 years)...which most people find surprising. Someone who puts $50,000 in a retirement account ends up with more than someone who later puts $150,000 into an identical account.
 
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chinalfr

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you can take a low-interest loan against your current or former employer 401(k)s to use as a down payment.
Bad bad bad advice. Everytime anyone talk about this I would smack him.

I can have many reason how dumb is this. This is your 401k. The money is your assuming you fulfilled the requirement. Why the heck you want to borrow your own money and pay ****ing interest. This is like 0/0. Plus, you have to repay your loan. There is a culprit on borrowing against 401k. If you get layoff or leave the company sponsor 401k, you have to repay the loan in full.

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http://www.businessinsider.com/compound-interest-retirement-funds-2014-3

It also points out that, assuming annual returns of 7% in each account, putting away $5,000 per year from age 25 to age 35 (10 years) and leaving it alone thereafter will net you more savings than putting away $5,000 per year from age 35 to age 65 (30 years)...which most people find surprising. Someone who puts $50,000 in a retirement account ends up with more than someone who later puts $150,000 into an identical account.
So regardless of returns, the earlier the better. I dont even know what my retirement plan is yielding... I should find out.
 

JJ4

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I'm a huge fan of the Roth IRA. I contributed a lot towards it while I was a student. As someone mentioned, since you can always withdraw your Roth contributions at any time without penalty you can use it as a quasi emergency fund. I often see an oversimplification of retirement investing that goes something like "if you believe your tax rate now is lower than your tax rate at retirement then contribute to Roth IRA, but if you believe your tax rate now is higher than when you retire, contribute to a Traditional IRA / 401k." [Aside from always contributing towards 401k match] this oversimplifies things a bit in a way that can hurt people. An even worse oversimplification is "if taxes will be higher/lower when you retire...". Here's why:

For example, here are the 2015 single filing tax rates:



Since the taxes are marginal based on your income, you pay 10% on your first $9225, then 15% on the amount between $9225 and $37450, then 25% on the amount between $37451 and $90750.... etc. So if you make $75,000 per year, you think of yourself in the 25% tax bracket but your effective tax rate is actually lower.

When planning for retirement, you have to consider ALL your potential taxable income starting at $0. Say you want $35,000/year in retirement. Imagine you *only* max out your Roth IRA and somehow have no other taxable income at retirement. In that case, you're savings coming off the top were taxed at 25% and you have no other income taxed at the 10% rate! With the Traditional IRA/401k, your contributions are saving the 25% tax rate and then paying later on at the 10%/15% rates. As another poster mentioned, say in the middle of your career you have a low income year due to layoff or family leave - during that year you can do a Roth conversion and pay the taxes at the lower rate. So generally it's good to have a mix of Roth and Traditional so you can tax advantage of structuring your high and low tax years - just keep in mind the total contribution to your marginal tax rates.
 

DMW

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Without reading any but the first post, I'll say that if someone is not saving for retirement, they're no better than a welfare lifer because that's what they will eventually become when they retire. The rest of us will be paying for these people.
 

In God We Trust

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just out or curiosity

what is social security paying out per month right now? I know it has to do with what you put in, but lets talk averages....


I'm going to use our home as a quick example. The property tax bill dropped this year to $12,000 a year (was $15,000 but home values dropped in town and they changed taxes this year)
.
You can live off SS if you own a place outright and have a smaller tax bill. Honestly man, if you are paying 12 grand in taxes a year and plan to stay there in retirement, I hope you have a BIG 401K. My yearly taxes are about 3,800 on a decent size house in MA. When retirement kicks in, I will be moving to the boonies somewhere with lower taxes and cheaper living. The plan for my 401K is to give me just enough to supplement my SS to live comfortably, but not lavishly.

All I need is 3 hots and a cot, internet and a little booze from time to time. Ammo also of course, but I suppose I can learn to reload.
 
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