Need some 401k advice

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What about the idea of investing it in tangible goods such as gold or silver coin.

as for not having a 401k, for the last 12 years of my adult life I have needed every extra penny to pay for things like food, heat, and fixing up my old ass house. Retirement has been the least of my concerns.
Nothing wrong with holding silver and other goods. Diversification is key to a strong portfolio. Nothing says you can't invest in metals, but you should explore and educate yourself on other types on investments as well.

Look up your company on www.brightscope.com and see if they are listed and how their retirement plan ranks. If it's low, perhaps you can opt out, and roll your 401k balance into an IRA that you can manage yourself.

I invest in silver (I love American Eagles) but the fact is I haven't made much money with them. My 401k however returned 10% last year, and 30% the year before. Plus there are tax advantages and such to take advantage of.

I know there's a lot of doom and gloom scenarios around 401k and other retiremrnt vehicles, but I would rather invest in retirement and get some bad news, than not invest at all and have nothing happen and rely on my social security in my old age.




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Whole life insurance (insurance with a built in investment) is an antiquated concept - that kind of policy hasn't been relevant since the 1970s. Buy a term life policy that will cover your spouse and kid(s), and invest your money separately. The policy will be much cheaper, and you'll get a better return on your investment.
Correct. Basically the first 12 payments of a whole life plan go to the sales person as commission, so they are usually the first thing that is attempted to sell to someone seeking investment advice.

Buy term life sbli is a good place or the NRA had member term life plans that I found to be cheaper.
 
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Use 401k if they match. The risk is when you retire that you pay tax based on those future rates. My crystal ball is broken but I only expect our tax burden to increase.

Use roths to contribute post tax with known tax rates. If you are a real cynic, invest in muni bonds, that way the unborn children of those municipalities can foot the bill.

Stay away from life insurance with cash values as they are scams like annuities. If you can, buy rental properties that pay 10%+ per year.

I personally don't contribute to my 401k as it doesnt match so I rolled it into an IRA that I can manage better.
I like to invest in emerging markets with no muni bonds.
Since roth contributions are post tax, does that mean it wont be taxed again once retirement time comes?
 

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Since roth contributions are post tax, does that mean it wont be taxed again once retirement time comes?
As stands now, you wouldn't pay tax again on the principal.


Also, if the employer matches contributions to 401k, contribute exactly that amount. Otherwise you are leaving money on the table.
 
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chinalfr

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The problem with this is that if your employment situation changes, or if your employer gets bought out or changes 401K providers, you end up having to pay back the whole loan immediately, or get taxed and pay the penalty.
It happen to one of my friend. He end up taking the money out and get hit with penalty + tax. If anyone looking the pros of this loan, you can only borrow up to 50%. You can always get out of the loan but need to pay penalty + tax. Based on your tax bracket, you might end up with some change or you need more $$$ to pay your penalty.

<CALayer: 0x15e55e40>
 

Obie1

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As stands now, you wouldn't pay tax again on the principal.


Also, if the employer matches contributions to 401k, contribute exactly that amount. Otherwise you are leaving money on the table.
If you are over 59.5 and have had the Roth account for more than five years, all withdrawals (not just principal) are tax-free under current law. I doubt that any future Congresses will change that law, but I don't doubt that a few moonbat legislators who are sure that your money is theirs will try.
 

ASHDUMP

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Whole life insurance (insurance with a built in investment) is an antiquated concept - that kind of policy hasn't been relevant since the 1970s. Buy a term life policy that will cover your spouse and kid(s), and invest your money separately. The policy will be much cheaper, and you'll get a better return on your investment.
Correct. Basically the first 12 payments of a whole life plan go to the sales person as commission, so they are usually the first thing that is attempted to sell to someone seeking investment advice.

Buy term life sbli is a good place or the NRA had member term life plans that I found to be cheaper.
It was a term life insurance policy but was told that it was also an investment at the same time... its all new to me so I'm learning. I thought you just paid monthly for life insurance and if you croak then you get say 500,000 or 1M depending on whatever you had chosen. But it seems like that money you pay monthly somehow gets to becomes yours if you need it. But if you die, then you only get the difference of what the balance is if you had borrowed against it.

Do I have that right? the Life insurance quotes were thru John Hancock but I can't remember how much I would have to pay monthly.
 
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The other big thing for retirement planning that most people tend to overlook is to plan now (while you're relatively young) so that you have as little debt as possible when you plan to retire. Having the mortgage, car, student loans, credit cards, etc. all paid off means that much less money you need each month. You need a lot less saved up if you're not watching thousands of dollars a month going to pay off, and the more you're paying in interest.
 

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For those of you concerned about taxes rising in the future, yes, they may. What is an almost certainty, however, is that your marginal tax rate now, while you are working, is higher than your marginal tax rate will be once you have retired and have little income.

So avoiding taxes now, during your high tax years, is more advantageous than avoiding taxes later, during your low tax years.

For those of you convinced that there will be some confiscatory tax scheme enacted in the future, would you rather save after tax money now, with the possibility if double taxation when you withdraw? Or would you rather save pretax money now, accepting that you will pay taxes in the future when you withdraw.

401k programs have another advantage that hasn't been mentioned. Your 401k contribution is deducted from your paycheck. You never actually handle that money. And because you don't handle it, it is a lot harder for you to spend it.

Many (most?) people in our society are not disciplined savers. Our society is built around consumption. We have entire industries (advertising, magazines, search engines, blogs) dedicated to convincing us to buy more stuff. With a 401k, it is out of sight, out of mind. It is an easy way to save, even for undisciplined spendthrifts.
 
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I, for one, think auto-enrollment is a great system, and am glad to see it being widely adopted. The bottom line is that if you are not saving for your retirement, you are planning on living off the government. Yeah, you paid into Social Security, whatever. If you do the math, it is pretty simple to see that 1) the amount promised far exceeds the amount paid in, and 2) it isn't enough to live on comfortably.

The dirty little secret that Obama and the redistributors don't want you to know is that the people with the 401k's generally don't have a lot in them, and even if they do, it is usually because those people chose to forego spending money now rather than spending money later in life. Their own money.
 

Varmint

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I, for one, think auto-enrollment is a great system, and am glad to see it being widely adopted. The bottom line is that if you are not saving for your retirement, you are planning on living off the government. Yeah, you paid into Social Security, whatever. If you do the math, it is pretty simple to see that 1) the amount promised far exceeds the amount paid in, and 2) it isn't enough to live on comfortably.

The dirty little secret that Obama and the redistributors don't want you to know is that the people with the 401k's generally don't have a lot in them, and even if they do, it is usually because those people chose to forego spending money now rather than spending money later in life. Their own money.
I disagree, it's yet more government control of what you should do yourself. You give up your freedoms, eventually you'll have none left.

now granted it really only affects those asleep at the wheel, but I'm tired of the nanny state thinking it needs to do every single thing for us.
 
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I disagree, it's yet more government control of what you should do yourself. You give up your freedoms, eventually you'll have none left.

now granted it really only affects those asleep at the wheel, but I'm tired of the nanny state thinking it needs to do every single thing for us.
The thing is, you can opt out. The only change is that the default setting is that you do save for your own future instead of not saving for your own future. Nobody benefits but you.

This simply removes all of the artificial barriers to saving, not least of which is that it is hard to set up a 401k. Given that most companies who do this do have some matching, then yeah, if you are dumb enough not to participate, you do need someone making your decisions for you.
 

ASHDUMP

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**** it... I just signed up. Minimum to get the 50% match.

I hate myself for doing this. I hope to prove myself wrong... I'll continue to buy silver and gold as well.
 
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**** it... I just signed up. Minimum to get the 50% match.

I hate myself for doing this. I hope to prove myself wrong... I'll continue to buy silver and gold as well.
it is a good move. The simple math is that you are buying at a discount because the dollars you are putting in were not taxed and your employer is giving you another 50% of whatever they do.
lets assume you are in a 25% bracket and you are able to put in $100. You are actually getting that 100 in 401K for what 75 in post tax dollars would cost you plus your employer is also going to give you $50 for free.
This is way over simplified and the math isn't perfect but it gives you an idea.
The employer match id FREE MONEY. Never pass up free money
 

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It may have been posted somewhere in the preceding 16 pages, but, one piece of information that a lot of people aren't aware of is this:

A 401K or IRA has pre-tax money going into it. The money then grows and when withdrawn is all taxed.

A ROTH 401K or IRA has post tax money going into it. The money then grows and when withdrawn, is all tax free.

If you are in the same tax bracket when you put money into the account and when you withdraw it, there is no difference between the amount of money you end up with.
 
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Rob Boudrie

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A 401K or IRA has pre-tax money going into it. The money then grows and when withdrawn is all tax free.

A ROTH 401K or IRA has post tax money going into it. The money then grows and when withdrawn, is all taxed.
You've got those inverted.

it is a good move. The simple math is that you are buying at a discount because the dollars you are putting in were not taxed and your employer is giving you another 50% of whatever they do.
lets assume you are in a 25% bracket and you are able to put in $100. You are actually getting that 100 in 401K for what 75 in post tax dollars would cost you plus your employer is also going to give you $50 for free.
This is way over simplified and the math isn't perfect but it gives you an idea.
The employer match id FREE MONEY. Never pass up free money
If taxed at the same rate, the tax discount does not make a difference.'

Consider 1000, tax free, compounded at 5% for 20 years and withdrawn at a 40% tax rate:

$1000 * (1.05^20) * (1.0-0.4)

Or, $1000 taxed at 40% deposited to a traditional account:

$1000 * (1.0-.40) * (1.05^20)

Same thing.

Traditional thinking is you will be withdrawing at a lower tax rate.

Another benefit is inheritance. The beneficiary of an IRA/401K must withdraw at a rate based on that person's life expectancy at time of inheritance (even if the inheritee is below 59.5), thus further delaying the tax obligation.
 
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It may have been posted somewhere in the preceding 16 pages, but, one piece of information that a lot of people aren't aware of is this:

A 401K or IRA has pre-tax money going into it. The money then grows and when withdrawn is all tax free.

A ROTH 401K or IRA has post tax money going into it. The money then grows and when withdrawn, is all taxed.

If you are in the same tax bracket when you put money into the account and when you withdraw it, there is no difference between the amount of money you end up with.
You have the withdrawal taxes backwards.

A regular 401k and a Traditional IRA are funded with pre-tax money when you contribute to them (assuming you're not over the income limits for a Traditional IRA). When you withdraw from a 401k or Traditional IRA, you are taxed on both the money you contributed to the plan, as well as the money it earned.

A Roth 401k and a Roth IRA are funded with after tax money. When you withdraw the money after retirement there are no taxes on the money that was contributed to the plan, nor are there any taxes on earnings. Also, you can withdraw any money contributed to a Roth IRA (contributions only, not earnings) at any time without tax or penalty.

* This refers to how federal taxes work for these plans, state and local taxes may vary.
 
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You've got those inverted.



If taxed at the same rate, the tax discount does not make a difference.'

Consider 1000, tax free, compounded at 5% for 20 years and withdrawn at a 40% tax rate:

$1000 * (1.05^20) * (1.0-0.4)

Or, $1000 taxed at 40% deposited to a traditional account:

$1000 * (1.0-.40) * (1.05^20)

Same thing.

Traditional thinking is you will be withdrawing at a lower tax rate.

Another benefit is inheritance. The beneficiary of an IRA/401K must withdraw at a rate based on that person's life expectancy at time of inheritance (even if the inheritee is below 59.5), thus further delaying the tax obligation.
this is correct and you have also leveraged that extra 40% by it also compounding hopefully. The .gov is going to get their tax money at some point. I would rater use it to grow than give it to them up front.
 

rep308

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Doesn't the 401K pass to your spouse upon your death as well? I'm not sure of the details on probate and trusts but I think they get the money tax free as well.
 

P-14

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If you are over 59.5 and have had the Roth account for more than five years, all withdrawals (not just principal) are tax-free under current law. I doubt that any future Congresses will change that law, but I don't doubt that a few moonbat legislators who are sure that your money is theirs will try.
Yes they are! And, I've been putting $1/week away for the last 5 years just to have the account open and ready to use when the day comes (soon).
 

Rob Boudrie

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Doesn't the 401K pass to your spouse upon your death as well? I'm not sure of the details on probate and trusts but I think they get the money tax free as well.
Not "tax free", but "taxed a time of withdrawal".

I believe IRAs and 401Ks MUST be bequested to your spouse, unless the spouse has given written consent to another disposition.
 

drumenigma

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Doesn't the 401K pass to your spouse upon your death as well? I'm not sure of the details on probate and trusts but I think they get the money tax free as well.
Your spouse has the option of taking on the retirement account as their own or they can turn it in to a beneficiary account(typical non-spouse option). Depending on their age/financial situation one option may be more advantageous than the other.
 

M1911

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**** it... I just signed up. Minimum to get the 50% match.

I hate myself for doing this.
Dude. You should hate yourself for previously saying "no, I don't want that money you are trying really hard to give me".

This is the best financial decision you could make.

- - - Updated - - -

If you are in the same tax bracket when you put money into the account and when you withdraw it
Which is highly unlikely.
 
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Alot of helpful information here. Thanks.

So what are the long term risks of these retirement plans?
- Possible higher taxes at retirement/time of withdrawal than current rates?
- Fluctuates with the stock market, including bad fluctuations?

I am currently putting in 7.5% of my check into my retirement plan. Similar to 401k. I will raise it when I get another raise... but I am also saving for a house.
 

M1911

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Alot of helpful information here. Thanks.

So what are the long term risks of these retirement plans?
- Possible higher taxes at retirement/time of withdrawal than current rates?
- Fluctuates with the stock market, including bad fluctuations?
1) Will tax rates go up? Quite possibly. However, you are likely to be at a much lower tax rate during retirement than you are now. For example, if you are in the $75k-$150k income, married filing jointly, your tax rate is roughly 25%. If, during retirement, your income drops into the $18k-$75k bracket, you are now in the 15% tax rate. Will that 15% bracket increase to above 25% between now and the time you retire? Unlikely, IMO.

2) Yes, if you put your money in a stock fund, it WILL fluctuate with the stock market. You could lose money. Chances are, though, if you leave your money in, it will grow. If you just park your money in a money market fund, it won't keep up with inflation and you WILL lose money.

3) No matter what you invest in, it may go down and you may lose money. Take a look at precious metal price charts -- they are all over the place.
 
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M1911

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With The Kenyan and his ilk in charge, you will be lucky if it's a 4K by the time he leaves office.
Oh baloney. He's got 2 more years. Look at the stock charts for his term in office.

Does Obama suck as a president? Absolutely. One of the worst we've had. But the world isn't going to end in the next 2 years. If we do have another recession in that time, we will climb out of it just as we've climbed out of all the previous recessions. The key is to not get scared after the stock market goes down in the recession and end up selling low, then waiting until the market recovers and buying high.
 
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Not "tax free", but "taxed a time of withdrawal".

I believe IRAs and 401Ks MUST be bequested to your spouse, unless the spouse has given written consent to another disposition.
Yes the spouse part is true, they have to sign off on it if you want to leave it to someone else. Just went through all this with my recent job change.
 
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