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401k plan is a horrible plan because it has so much limitations. It is essentially like long term CD. What's really bad about it is that you may get locked into a really bad fund and they are eating your portfolio away with fees unless you roll it over to something you can manage. But majority of people who are in some big corps are forbidden from rolling it away.
I only put what is required into the various funds offered by my company ((most of it company (defense contractor) stock)). The vast majority of the 401k contributions I put into a self-directed brokerage account, and that freedom and flexibility has been a bonanza for me.
But I understand your position. If you are putting your money into these "age targeted" retirement plans, or the fixed income bond funds you are effectively volunteering to have your wealth slowly siphoned away from you. Sure those funds may tic up a little bit over time, but the trajectory of your growth is going to be peanuts, and you may even lose out to inflation.
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Quote:
Originally Posted by WVNomad
I am in the same tax bracket that I was while working....we are not taking RMDs. When RMDs kick in, we will be in a higher bracket. That's us, but obviously you have planned a more favorable tax situation in retirement. Well done.
I call that "QUACK" (QUalified Account ACK).
Inflation has a way of changing tax brackets.
But sometimes people chose the correct time to retire and financial stuffs.
We too improved a bracket but from the lowest to the next lowest. If I planned our 2023 income correctly we may drop back down to the lowest marginal bracket. For 2024, taking full allowable incomes from annuities and 4% from brokerage IRAs.
ymmv
I only put what is required into the various funds offered by my company. The vast majority I put into a self-directed brokerage account, and that freedom and flexibility has been a bonanza for me.
But I understand your position. If you are putting your money into these "age targeted" retirement plans, or the fixed income bond funds you are absolutely allowing your wealth to be stolen from you. Sure those funds may tic up a little bit over time, but the trajectory of your growth is going to be peanuts (and you may even lose out to inflation).
usually the glide path isn’t a problem until way way later with target funds ..ln fact for pre retirement new research shows they still may be to equity heavy for the proverbial red zone period .
but most are high equity for decades
the vanguard 2070 fund is up about 16% ytd , so is fidelity , so certainly not growing peanuts
401Ks with matches are awesome. Invest enough to get the max matching employer contribution and you are ahead of the game before your investments even earn any money.
If you quit and you are vested in the plan, you can roll the entire 401k balance over into a Roth IRA of your choosing.
I'm not seeing the downside here.
How do you know the matching isn't negated by fees and bad fund selection? For example every large corp with a good matching only offers a few select ETFs that doesn't have good returns and high expense fees. The funds are so awful that performance on open market ETFs will outperform your ETF with matching.
There's no such thing as FREE picnic. Any company that offers matching are subsidizing the match with high expense fees and kickbacks from the fund managers.
You get some bad funds that only return 1-5% on the 1st 10 years? Then 5-8% in 15 years. What a joke.
401ks are all bad, take the money roll it over to Fidelity and pick a vanguard or S&P based fund with less than 1.75% fee way better.
How do you know the matching isn't negated by fees and bad fund selection? For example every large corp with a good matching only offers a few select ETFs that doesn't have good returns and high expense fees. The funds are so awful that performance on open market ETFs will outperform your ETF with matching.
There's no such thing as FREE picnic. Any company that offers matching are subsidizing the match with high expense fees and kickbacks from the fund managers.
You get some bad funds that only return 1-5% on the 1st 10 years? Then 5-8% in 15 years. What a joke.
401ks are all bad, take the money roll it over to Fidelity and pick a vanguard or S&P based fund with less than 1.75% fee way better.
there are annual disclosures in simple english that list all fees and charges every participant gets . it’s law.
that is just nonsense, all 401ks are not bad . many have excellent low cost institutional shares of fidelity and vanguard funds at lower costs then even admiral shares
usually the glide path isn’t a problem until way way later with target funds ..ln fact for pre retirement new research shows they still may be to equity heavy for the proverbial red zone period .
but most are high equity for decades
the vanguard 2070 fund is up about 16% ytd , so is fidelity , so certainly not growing peanuts
Any amount over 0% allocated to bonds is way, way too much.
At 100% stock portfolio will absolutely run circles around bonds over the long run. There's no reason to own bonds under the age of 60, and even then they can only give so much downside protection.
Toss money into dividend producers, let them D.R.I.P back in, and watch your money double every 5-6 years.
Any allocation toward bonds is fuddy-duddy advice (do your own due diligence of course). Might as well just get a CD at the credit union.
How do you know the matching isn't negated by fees and bad fund selection? For example every large corp with a good matching only offers a few select ETFs that doesn't have good returns and high expense fees. The funds are so awful that performance on open market ETFs will outperform your ETF with matching.
There's no such thing as FREE picnic. Any company that offers matching are subsidizing the match with high expense fees and kickbacks from the fund managers.
You get some bad funds that only return 1-5% on the 1st 10 years? Then 5-8% in 15 years. What a joke.
401ks are all bad, take the money roll it over to Fidelity and pick a vanguard or S&P based fund with less than 1.75% fee way better.
the maximum fee on a fund where i work is 0.68% (way less than 1%). the admin fee of 1% is paid out of people's accounts who forfeit amounts because they leave before vesting periods
I was watching an analyst that had a chart where they expect the S&P 500 to average a negative 4% per year over the next 12 years (because, you know the crash is coming)... But, I generally have been wrong to listen to that since 2012 so what do I know (not much).
If the 401K is a Roth, you can do that without a tax consequence. If it a traditional 401K, then there are tax consequences to that conversion.
I have the bulk of my retirement funds in traditional 401K's and traditional IRAs. For me, the only downside was I should have paid taxes when I earned the income and put more money into a the 401K. I anticipate ending up in an equivalent or higher tax bracket in retirement than in my working years. Tax-wise, I think I would have been better off incurring the tax hit when working---not just because of potential higher marginal rates, but because we will likely end up paying more in medicare premiums because our income will be elevated due to RMDs. Kind of a double whammy which was due to my less than ideal tax planning.
Yes, you are right, I oversimplified it. It's complicated when you get into conversions and the like.
There are a bunch of rules with Roths one of which is that you have to wait 5 years since you've contributed to your Roth before you can withdraw money from your Roth tax free. So you might become eligible to take IRA withdrawals at 59 1/2 but to take a tax free withdrawal from your Roth it has to be 5 years since you last contributed to it or some such thing. It's all a bit confusing and does require a certain amount of advanced planning. Best to consult a tax/financial advisor. It's enough to make your head explode.
Yes, you are right, I oversimplified it. It's complicated when you get into conversions and the like.
There are a bunch of rules with Roths one of which is that you have to wait 5 years since you've contributed to your Roth before you can withdraw money from your Roth tax free. So you might become eligible to take IRA withdrawals at 59 1/2 but to take a tax free withdrawal from your Roth it has to be 5 years since you last contributed to it or some such thing. It's all a bit confusing and does require a certain amount of advanced planning. Best to consult a tax/financial advisor. It's enough to make your head explode.
No. It's just the first 5 years. You can draw it down to zero at 59.5. Then you can put money in it and withdraw it as you please. You never have to redo the 5 years.
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