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Old 06-24-2010, 12:57 PM
 
Location: Virginia Beach, VA
5,517 posts, read 9,217,955 times
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Quote:
Originally Posted by jimmyP View Post
think of the employer match as a 50% return on your money. not too shabby. I've done it for 28 years.

The employer match is not standardized.
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Old 06-24-2010, 01:36 PM
 
77,781 posts, read 76,762,849 times
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the main reason im all for the 401k is like i said above, very few have the discipline to invest or save on their own if its not taken out of their check..

quite alot of companies use low cost funds that are decent.. our own company uses fidelity. most funds are the same as the regular versions of the funds although with just a smidgeon of extra expense.. i own the same funds in and out of the 401k and the difference between them is a mere fraction of a percent.

very few of us so far that reached retirement age are in a higher tax bracket with no pay check then we were with a pay check..

if you bet over the last 40 years your taxes would be higher when you retired so you didnt bother with a 401k and taking the tax deduction you would have been very wrong..

many have taken the 401k tax deduction while living in high tax states eventually retiring to no or low cost tax states sweetening the value of that tax deduction even more.

the taxes and penaltys will help keep your hands off it so you cant spend it.......

Last edited by mathjak107; 06-24-2010 at 01:56 PM..
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Old 06-24-2010, 02:45 PM
 
Location: Virginia Beach, VA
5,517 posts, read 9,217,955 times
Reputation: 2542
Quote:
Originally Posted by mathjak107 View Post
the main reason im all for the 401k is like i said above, very few have the discipline to invest or save on their own if its not taken out of their check..
And others simply dont have the ability. Yes a 401k is great for someone who needs a nanny for their investments.

Quote:
Originally Posted by mathjak107 View Post
quite alot of companies use low cost funds that are decent.. our own company uses fidelity. most funds are the same as the regular versions of the funds although with just a smidgeon of extra expense.. i own the same funds in and out of the 401k and the difference between them is a mere fraction of a percent.
In none of the companies Ive ever worked have I seen a fund that performed consistantly good enough that Id think about putting money in it.


Quote:
Originally Posted by mathjak107 View Post
very few of us so far that reached retirement age are in a higher tax bracket with no pay check then we were with a pay check..
Depends on what point you compare it to.......I have averaged less then 30k a year from age 18-29, with several under 20k. Somehow, I believe that I will be at a much higher tax bracket, even without a paycheck, when I am old enough to drain the 401k. There isnt much place for me to go but up. I think probably most people under age 30 would actually be doing themselves a favor by not investing in the 401k for its "tax benefits", especially in todays age of migrant working.


Quote:
Originally Posted by mathjak107 View Post
if you bet over the last 40 years your taxes would be higher when you retired so you didnt bother with a 401k and taking the tax deduction you would have been very wrong..
Given the current climate, do you want to question how well that call will perform this time around?

Quote:
Originally Posted by mathjak107 View Post
many have taken the 401k tax deduction while living in high tax states eventually retiring to no or low cost tax states sweetening the value of that tax deduction even more.
Planning on moving to a "lower tax state" in 40 years is a ridiculous strategy to base current investments on.

Quote:
Originally Posted by mathjak107 View Post
the taxes and penaltys will help keep your hands off it so you cant spend it.......
Nor can you use it for much better investments when they present themselves. They are tied up in some crap fund barely floating above water.
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Old 06-24-2010, 02:54 PM
 
77,781 posts, read 76,762,849 times
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well all i can say is im retiring nice and early, if not next year then over the next few years. , both my 401k funds and regular accounts have done very well since 1987...

i would do it all exactly the same.

as far as planning i prefer to plan around what was, what is and what stands a fairly good chance of continuing.....


to each his own....
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Old 06-24-2010, 05:06 PM
 
77,781 posts, read 76,762,849 times
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in my almost 25 years as an investor and active in the financial world and having evaluated more 401k plans for folks then i care to count heres what i found...

i can count on 1 hand the number of plans where i would be hard pressed not to come up with at least a fairly well structured investment portfolio that wouldnt have done well over the decades...

my own mix of nothing special fidelity funds are up 1200% since i started in 1987...

while the expenses on some of the plans i saw were a little higher then i would like the truth is they still would have done well. alot of plans have gone to fidelity and vanguard and are very low cost.. i own both the same fidelity funds in my 401k and outside and on most there is maybe 1/4 point difference in fees.

now heres the problem: most folks know more about their car or refrigerator then they do anything financial... id say how did you end up with this mis-matched hodge podge of funds and they would say they copied a co-worker.

throwing money into a hodge podge of funds isnt a comprehensive plan.

there is no plan for diversification, no plan for risk level, no plan for rebalancing ...then they do the wrong thing by bailing right before the bottom instead of buying and they end up committing financial suicide blaming everyone and everything but themselves...


dont blame the investment vehicle. blame the folks who have no clue how to invest or have any interest in learning ...these same folks would committ the same financial suicide in a 401k or on their own.

want proof? check out the new small investor index morningstar has on all funds lately. it tracks the money in and out of the funds by small investors... it shows they buy and sell at exactley the wrong times.....

many funds have returned 3x what the small investor actually got by trying to time things or buying and selling at the wrong times.

i saw many plans where folks loaded up on their company stock and thought that was a plan...

as we saw risk tolerance is extremely important, its the single most important parameter as to how to put your plan together, not age.

a 30 year old who bails at the near lows because he hasnt the stomach for a drop is in the wrong investments.. a 65 year old who has a high tolerance for risk because its with money he dosnt need to eat with for 20 years can be way more aggressive.

all these things are human error not the investment vehicle or fund selections..... in our out it wouldnt matter the results will be the same.

as far as whether young people should take the deduction now? i believe yes even at their low income levels because the time factor becomes very important in accumulating wealth. reality is very few unless they do this thru a plan at work will have any kind of comprhensive plan going on their own.

the younger they are forced to save because its deducted from their check the better.

i worked for a financial company in the 70's when i was going to school.. they sold me all kinds of products,.. things i never would have bought on my own. i didnt even know what i bought but you know what? for years i kept the monthly contributions going in...


by the time i got married and realized what i bought i had a nice sum saved to start really investing with. if i wasnt forced i would have never done it.

Last edited by mathjak107; 06-24-2010 at 06:00 PM..
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Old 06-27-2010, 11:10 AM
 
692 posts, read 2,845,555 times
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Just keep in mind that All these Monies you are contributing to 401K's, Tradition IRA's. etc. will qualify for the Required Minimum Distribution when you and/or your spouse reach age 70 1/2.
The more you have .. the Larger the distribution amounts that will have to been taken out each year. The larger the amounts .. the higher the Tax Bracket it will put you in. You will have no choice.
If you happen to live in a State with a State Income Tax, that will most likely be added onto your Tax Load each year. Some States @ 9% plus Federal Income Taxes.

My suggestion would be to first Fully Fund Roth IRA accounts each Year, and then go to the 401K etc.
Use the 401K only for the amount the employer contributes.
Then Open and contribute to a Traditional IRA.
Keep in mind the limits of FDIC insuarance on all you accts.
Also keep in mind your current age and all tax implications as they relate to your investments.


Why Roth IRA first ??

1. Because you Still Can !!! Who knows what the Government will do next.

2. You will not have to pay any Taxes at age 70 1/2 .. Federal or State.

3. At age 59 1/2 you can withdrawl Tax Free and penalty free the full amount you invested + interest and gains if you meet the 5yr holding requirement.

4. At 59 1/2 You can also withdraw the full amount you invested minus interest and gains without meeting the 5 year requirement.

I would also recommend in many cases to Convert any 401K you are not contributing to anymore to a Traditional IRA acct. so you will have a much better position to manage those monies with many more investment opportunities.

No one knows for sure what the Tax Laws and Rates will be when you retire.

Last edited by silverfox; 06-27-2010 at 11:33 AM..
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Old 06-27-2010, 12:09 PM
 
77,781 posts, read 76,762,849 times
Reputation: 54691
main reason i like roths are wealth passing . its amazing how long and how much can be passed using life insurance and roths.
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Old 06-28-2010, 04:27 PM
 
16,092 posts, read 37,261,451 times
Reputation: 6280
I would max out both a 401K and Roth IRA if at all possible. Otherwise I just don't think you are going to have enough money. Even maxing both you may not - I would say pay off your house on a 15-year note, only buy used cars and consider buying a rental property or two (on short notes).

Then you really don't have to budget - what ever is left (if anything) you may spend.
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Old 06-29-2010, 07:10 PM
 
Location: In America's Heartland
929 posts, read 1,916,802 times
Reputation: 1177
You can do it either way. You can transfer all the cash in Fund X to Fund Y or leave it in Fund X and start to contribute the money that was going into Fund X to Fund Y. The choice is up to you.
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Old 07-01-2010, 02:18 PM
 
2,775 posts, read 3,036,025 times
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Quote:
Originally Posted by darrell2525 View Post
Hello, I have a good question. Feel free to recommend some good book on 401k if needed, I think I am confused.

My co-worker believes people should stop investing in their 401k because the everyone have high (eg, -50 to -30 %) negative (red showing) returns on their 401k. He thinks "why put it in, if its losing more money".

I disagree with him, because 401k is a retirement fund and free money up to 5% of the pay check. Also, I disagree with him because the money I am putting in now is used to buy low value stocks the funds are buying. Yes, i have high losses for the past 3 months, but is it ture that people should stop contributing to 401k. If so, please explain.

Please comment.

Thank you.
It's the "free money" concept which makes the choice brain dead simple in my opinion (to do it). If your employer's match is significant and likely outweighs any given year's losses, then invest up to the matching amount to get the free money. If you don't have employer matching, or any matching of significance, then I would save money elsewhere.
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