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Old 12-21-2016, 12:12 PM
 
6,604 posts, read 3,738,816 times
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Quote:
Originally Posted by golfingduo View Post
1. No one only puts in a few deposits to only have a pitiful amount. I understand you are just trying to put some context to it but you should use realistic amounts.
2. In a 401k it is tax deferred growth and in a good index fund fees will hurt but not as bad as being able to only put in $5,500 annually.
3. I agree fees are huge in many 401ks but they are different across the board. Not every one has a high fee 401k to use.
4. Matching makes it even better. If you are one of those that have a match at minimum contribute to max on the match as a minimum.
5. mathjak and I disagreed a bit on this but I stand by my point. It isn't always about price share it is also about shares. Mutual funds are sold as shares. When you sell you are selling shares. Yes it is nicer to have a higher price per share but as you are growing your fund it is also advisable to have some shares bought at a lower price per share so that it will have a bigger impact.
6. Time is everything. Having the time to recover from ups and downs in the market makes all the difference. With a larger contribution limit a 401k can grow to very large sums. Yes so can a good Roth or tIRA but as I said you have 3 times the limit in a 401k. Notice I didn't say timing. Timing is a bad idea. Dollar cost averaging is a better choice. Systemic contributions are easier to dollar cost in funds. Having it taking out of paycheck makes it easier.
7. If the fees are high and you notice them you can talk to your employer about it. Maybe they did not see that and can negotiate a better deal. They control the funds and with so many financial products out there they can shop for a better deal if they know about it.
8. Many 401k plans offer Roth now. The rules allow you to put your money in the Roth while contributions in matching from employer are in the traditional pre-tax fund. That gives a good balance of tax free and tax deferred money to grow.
9. Too many people do not know how to nor are willing to start putting money into retirement accounts. A 401k at least in a minimal way sort of forces people to put some money away.
10. My final thought here is I would make it much more difficult to borrow from your 401k if not impossible. I understand the reasoning and the need but it is very disruptive on your savings and it will limit your final number no matter how little you take.

Oh by the way I understand some do not like 401k's. I can see the points they make but I also look at a bigger picture that covers those who are not quite as savvy. Nothing personal here. Just making some points you left out of your argument.



As I mentioned, nothing seems to have been left out. Not savvy about investing? Check...I mentioned comfortableness with picking out own investments vs having an investment company for the 401k handle that. Matching contribution? Not mentioned because that's not an issue in this thread (no match).

Discussing fees with an employer...not a good idea, IMO. They do not want to hear one peep to even indicate you KNOW what the fees are, much less are complaining about them. They go to lengths to prevent everyone from knowing exactly what the fees are. A law had to be passed to require the plan to reveal the fees. I was never told of the fees...the employee has to specifically request the 100 pg full plan to know the fee percentage for the different kinds of fees...I requested the "plan" and was sent the one page summary list that all employees already had. It's best not to make waves. BUT the Roth does not have ANY investment company fees...so whatever the fees are in the 401k, they are more than the zero-fee Roth. Some companies don't offer 401ks at all, so high fees or low fees, at least there's a 401k.
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Old 12-21-2016, 12:25 PM
 
71,470 posts, read 71,652,652 times
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Quote:
Originally Posted by DaveinMtAiry View Post
Good post. Not only that a young person gets a bigger advantage of tax free growth for a longer period of time.
irrelevant , as i said above because the roth's grow tax free does not matter over a traditional as far as balance goes no matter how long .

as long as you are starting with equal amounts of pretax dollars and see the same gains the balance is the same.

you always have to count the taxes you are paying up front on the roth that are available for investment in the traditional and or a brokerage account since you are not spending that money yet .

Last edited by mathjak107; 12-21-2016 at 12:37 PM..
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Old 12-21-2016, 12:35 PM
 
29,764 posts, read 34,851,819 times
Reputation: 11675
As we now are looking at a CCRC in a decade or so we are realizing the importance of how to pay for beyond just the dollar amount. After tax dollars become very important as you can access them with much less tax loss than tax deferred accounts. It is beyond just home equity because you many not be able to sell your home when you want to. Or if a depressed market you may have to sell at a sizable loss if you are going down the buy in route. The monthly fee path is not as dependent on a large sum of money at one time. Imagine with all the reforms coming and possible means testing what a sudden increase in a multiple six figure withdrawals from a 401/403 would do.

It is interesting that this is a common discussion with folks doing their CCRC homework now in their late 60's are discussing. And yes the folks who run and market CCRC's are listening and adapting.
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Old 12-21-2016, 02:00 PM
 
Location: RVA
2,164 posts, read 1,264,598 times
Reputation: 4451
Quote:
Originally Posted by mathjak107 View Post
irrelevant , as i said above because the roth's grow tax free does not matter over a traditional as far as balance goes no matter how long .

as long as you are starting with equal amounts of pretax dollars and see the same gains the balance is the same.

you always have to count the taxes you are paying up front on the roth that are available for investment in the traditional and or a brokerage account since you are not spending that money yet .

That is incorrect IF her current tax rate will be different than it is in retirement. Does ANYONE think that in 22 years taxes will be lower?? If taxes are lower than now, then the IRA is smarter, not a wash. If the taxes are higher, then the Roth is smarter. The only time it is a wash is if taxes are exactly the same at contribution time and retirement. One has to make an educated guess.
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Old 12-21-2016, 03:54 PM
 
Location: Central Massachusetts
4,800 posts, read 4,843,254 times
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Quote:
Originally Posted by Perryinva View Post
That is incorrect IF her current tax rate will be different than it is in retirement. Does ANYONE think that in 22 years taxes will be lower?? If taxes are lower than now, then the IRA is smarter, not a wash. If the taxes are higher, then the Roth is smarter. The only time it is a wash is if taxes are exactly the same at contribution time and retirement. One has to make an educated guess.
You are missing the point. The money you paid in taxes on that deposit is not being accounted for. You might be paying today's taxes at a 25% clip on your deposit. A traditional might be taxed at a 15% clip in the future. This will also include the gains and if made the match. That is the point mathjak is making.

Oh and bpollen I am talking about speaking to the HR not the representative of the financial institute. They may not know. If they don't do anything then you know they are getting paid for the higher fees. The new laws were put in because financial institutions were not acting in the best interest of their clients.
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Old 12-21-2016, 04:11 PM
 
71,470 posts, read 71,652,652 times
Reputation: 49032
annuity's always work best with some form of your own investing
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Old 01-22-2017, 04:09 AM
Status: "Gaining Stability." (set 7 days ago)
 
5,684 posts, read 5,929,554 times
Reputation: 4432
Bad news! My net is close to $200 less than I anticipated. Taxes. Saving for a $1000 return is just not feasible. The anticipated cost of my condo is going to eat up a good chunk of my income. I cannot stay in this studio forever. Owning real estate is important to me. I am looking at definitely being able to put away $300. I guess a draw of $500 is more realistic. I know. It is terrible.

I guess it will be okay. I have social security, a pension, a 401k and I plan to continue working (long term temp/ customer service). Working is fine. I need to keep busy and I am not a volunteer type of a person. I anticipate the condo will be paid off. That should help too.
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Old 01-22-2017, 06:48 AM
 
Location: Ypsilanti, MI
2,434 posts, read 3,659,178 times
Reputation: 4773
Quote:
Originally Posted by TuborgP View Post
As we now are looking at a CCRC in a decade or so we are realizing the importance of how to pay for beyond just the dollar amount. After tax dollars become very important as you can access them with much less tax loss than tax deferred accounts. It is beyond just home equity because you many not be able to sell your home when you want to. Or if a depressed market you may have to sell at a sizable loss if you are going down the buy in route. The monthly fee path is not as dependent on a large sum of money at one time. Imagine with all the reforms coming and possible means testing what a sudden increase in a multiple six figure withdrawals from a 401/403 would do.

It is interesting that this is a common discussion with folks doing their CCRC homework now in their late 60's are discussing. And yes the folks who run and market CCRC's are listening and adapting.
And I read somewhere that profits from the sale of your existing home are not tax free if you use the proceeds to purchase into a CCRC. Still researching, trying to confirm or absolutely deny this statement. That is why I am contributing to a Roth IRA within my current employer's 401(k) plan, to have more after tax dollars, and why I am considering how to best withdraw funds from our current Tax Deferred savings, now, without incurring massive tax bills, to have more After Tax dollars available for things such as a CCRC if we do follow that currently intended route.
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Old 01-22-2017, 07:12 AM
 
13,874 posts, read 7,386,288 times
Reputation: 25351
Quote:
Originally Posted by Perryinva View Post
That is incorrect IF her current tax rate will be different than it is in retirement. Does ANYONE think that in 22 years taxes will be lower?? If taxes are lower than now, then the IRA is smarter, not a wash. If the taxes are higher, then the Roth is smarter. The only time it is a wash is if taxes are exactly the same at contribution time and retirement. One has to make an educated guess.
As mathjack has pointed out many times, it's not just taxes. It's also the means testing on Medicare premiums and other related things. It's probably going away but an early retiree might qualify for subsidized Obamacare exchange insurance or Medicaid if they're living off Roth money where they'd be paying much more with a traditional 401(k)/IRA distribution.

On January 22, 2017, I don't think any of us can forecast out 10 years with any confidence. It's entirely possible that Roth distributions will end up counting in the means testing. It wouldn't surprise me if it went in the Social Security tax percentage worksheet in some way. It wouldn't surprise me if it were factored into Medicare premium calculations. Today, every program is getting lined up to get slashed. Nobody can predict this. Nobody can say with any confidence that a Roth is going to have been the right strategy 10 years from now. Maybe. Maybe not.

It kind of doesn't matter. Relative to the whole retirement cash flow problem, it's going to be a small percentage for pretty much anyone. 10% one way or the other isn't going to kill me. I can adjust to that.
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Old 01-22-2017, 10:36 AM
 
Location: Central Massachusetts
4,800 posts, read 4,843,254 times
Reputation: 6377
Quote:
Originally Posted by goodlife36 View Post
How much do I need to put away each month to draw $1000 per month during retirement? It will be saved over 22 years. Thank you.

Your initial post.


Quote:
Originally Posted by goodlife36 View Post
Bad news! My net is close to $200 less than I anticipated. Taxes. Saving for a $1000 return is just not feasible. The anticipated cost of my condo is going to eat up a good chunk of my income. I cannot stay in this studio forever. Owning real estate is important to me. I am looking at definitely being able to put away $300. I guess a draw of $500 is more realistic. I know. It is terrible.

I guess it will be okay. I have social security, a pension, a 401k and I plan to continue working (long term temp/ customer service). Working is fine. I need to keep busy and I am not a volunteer type of a person. I anticipate the condo will be paid off. That should help too.

Just to bring you back on to your original post and the actual point here. You are putting the cart before horse. Yes it is good to anticipate you potential income and needs 22 years from now. Do not despair that you will only earn what you are earning now 15 years from now let alone 20 years or beyond what your need is.

You also have to live for today as well so do not think that with your potential in a 401k and what exactly your pension will then either. Save as much as you feel comfortable with. Live your life today to enjoy today. Don't be a scrooge in life. It is just that life is just too short. Planning for the future should not obsess anyone so you have something for a rainy day is not all there is to life.
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