Are 401K's enough? (pension, financial advisor, divorce, divorced)
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Because this forum is filled with people of all ages I would like to get peoples take on preparing for retirement. I don't think people realize that 401k's are not enough to retire on alone. I saw a program on TV not to long ago on this topic and think people need to be more prepared than they think they are for retirement. I also have friends who live in big houses with extra toys etc... but only contribute to a 401k for retirement and I think they are going to be in for a big suprise down the road, I am 46 and 60 is looking closer, faster everyday. Do any of you retired people or smart investors have opinions to share? I also hope you college kids read this and ask questions, the millionare next door is not always the one driving the Mercedes.
i have a 401k at a part time job that i work at because my full time job dont provide that, but i had set up a mutual fund where i put away money each month. im 32 now and been doing this since i was 22 so hopefully i can have something for retirement
401K's aren't nearly enough. I'm not even convinced that they are worth the risk, especially as so much of the 401K money has moved into unstable overseas markets.
I think the best thing people can do is control their spending NOW and keep credit card use to a minimum, pay off balances every month..don't carry balances through month-to-month, track ATM withdrawals just as you would checks so you can see how much money you're going through, don't take equity loans and deplete your equity ever, pay cars off and maintain and drive them for ten plus or more years, and work to pay your mortgage off.
That is a lot more effective than a 401K plan for overall stability. Save money in longterm government CD's too and let them pay real interest.
I'm wary of the stock market. I've lost a lot of money through no fault of my own in it and I look at it as a pyramid scheme now or a musical chairs type of racket where once the music suddenly stops, you better hope you find a chair.
Being debt free and controlling your spending while also saving is the best way in my opinion.
Since my 401(k) is the only game in town at the moment, that's my savings vehicle. I'm putting away 9%. Every time I get a raise at work I try to put more in. (That doesn't always happen; I have two kids in college right now, which of course, is expensive.)
My car is paid off, though, and since it only has 60,000 miles on it, I'm planning to drive it for another ten years - maybe longer.
I'm managing my credit card debt, and should be debt-free in a month or two.
I don't have a mortgage, but my apartment is under rent control. I'm waiting for a time when I'll have enough room in my budget to begin putting the difference between what I pay vs. the market rate (about $400 now) into savings. That's $4,800 a year I could be adding - and $4,000 of that is tax-deductible if I put it into an IRA. For anyone over 50, you can contribute $5,000 a year for '06 and '07.
Many people got burned in the bear market in 2000-2002. I had one mutual fund (global growth ) that went down 90%!!! When it "came back" to only being down 50% I sold it. I've always been careful to diversify, because it minimizes the risk. It helps that I work in the financial services industry, and the broker I work with has helped me with the allocation. I'm invested 65% stocks/35% bonds now, which is aggressive considering that I'm 43. However, I'm not planning to retire for another 27 years, God willing that my health holds out!
What people aren't planning for is a long life. Many people are living into their 90s now. If you retire at 65, you still have another 25 years of supporting yourself. It's not enough to just beat inflation on your investments, because you're not building up enough principal to generate the income you'll need in retirement.
I'm not counting on social security. I think our politicians will never address that issue, and the system is going to be bankrupt well before I ever retire. But that's a rant which belongs in the political forum, so I'll say no more.
Amen to the ss thing, I am only about 12yrs from retirement and not counting on that myself. I have some money with "edward jones", since I am single I was a little leary of handling my own money. Not so good with mutual funds, IRA's and the like so my agent is handling that for me. I only pay him something like $25.00 a year to keep an eye on things for me. He has my money in diversified fields. What doesn't do good in one thing, it will do good in another. Takes the stress out of the worry for me! Plus, I have a 401K, that he helped me diversify also.
I was divorced and didn't get anything out of the divorce but the little money I took into the marriage, and I sat on it for about 3yrs because I had no clue what to do with it. Well, the place it was in, I lost about $13,000 by holding on to it. This is when I decided to get someone I could trust to help me!!! Everyday u don't have it invested u are losing, and when u do have it invested it is really a crap shoot also. But, I am glad the headache is not mine to handle, my agent does that for me.....
We have a 401K that we add 12% to, but we have long term real estate investments also. I have a small pension from when I worked in a hospital, and I still don't think we are as prepared as we could/should be.
401k's are only one thing you have to do to save for retirement. I would put as much in it as I could. My husband put as much as 20-30% in his. Real Estate is another investment way to go. I would ask people that have money what they did. I would ask people that are living in retirement (like us, we have been retired for 2 years and I am only 40) how they did it.
Don't be afraid to invest. I hear about people that lost money in the Stock Market but we are NOT one of them. We made tons of money and still are. I heard about some people who lost money in the Housing Market but we made tons in that as well. Talk to people with money and ask them what they do. Don't ask people about investing that do not invest. Common Sense I guess. I wouldn't ask about buying a home from someone who has never bought a home. Same thing.
Clearify: Actually he put 15% in his 401k and 10% went to buy company stock and $500 a month went to buying bonds.
Last edited by Roma; 03-03-2007 at 10:13 AM..
Reason: add something.
401k's are only one thing you have to do to save for retirement. I would put as much in it as I could. My husband put as much as 20-30% in his. Real Estate is another investment way to go. I would ask people that have money what they did. I would ask people that are living in retirement (like us, we have been retired for 2 years and I am only 40) how they did it.
Don't be afraid to invest. I hear about people that lost money in the Stock Market but we are NOT one of them. We made tons of money and still are. I heard about some people who lost money in the Housing Market but we made tons in that as well. Talk to people with money and ask them what they do. Don't ask people about investing that do not invest. Common Sense I guess. I wouldn't ask about buying a home from someone who has never bought a home. Same thing.
I still don't trust the stock market, though I can't see how throwing money you're willing to live without into it and taking a chance can hurt if you can afford to lose it. Maybe it will grow, maybe it won't, that's the chance you take. Just remember that the biggest hump of the population is doing the same thing and will be retiring about the time you do...which means that tens of millions of people will be selling 401K stocks to draw income at the same time you are....think about what that would do to the market values of your stocks.... It's wonderful if you aren't part of the wave, but most of us will be in that wave and you can't have millions of people pulling money out and expect those stocks to retain value or grow.
I agree real estate is the way to go. I've made a lot of money in real estate without really knowing what I was doing. It was more than enough for me to buy my current home with cash, carry no debts, put a big chunk in savings, and take two years off! I just went in to investigate a job in my industry Thurday after almost two years off enjoying myself!
I intend to take year breaks now and then into the future as well. Real estate has made that possible for me.
I'm also 44 and seen too many people work so hard to prepare for life at 65 that they miss a lot of the fun between 40 and 65. I've also seen a lot of people in that 40's age group who sacrificed for the future kick the bucket for a number of reasons.
I think we have to prepare, but we have to live now too. We will never get back our (40's) youth and when you're 65, you're not going to want to do the things you wanted to do at 45.
Save, invest wisely, but live now too. Life can throw a monkey wrench at you at any time and you might be gone.
Real Estate was the big winner for us too MoMark! We are also debt free like you. Good for you!
I also want to add that when you retire you have to roll your 401k into something else. We put ours in a Annuity. There are lots of choices out there. Do your homework.
Oops, one more thing about tax deductible IRA contributions. The rules are complex, and have to do with your participation in an employer's retirement plan and your adjusted gross income. If you make over a certain amount, you can only deduct a portion of your IRA contribution. I just wanted to clarify that, but talk to an accountant or a financial advisor for info on your specific situation.
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) that went down 90%!!! When it "came back" to only being down 50% I sold it. I've always been careful to diversify, because it minimizes the risk. It helps that I work in the financial services industry, and the broker I work with has helped me with the allocation. I'm invested 65% stocks/35% bonds now, which is aggressive considering that I'm 43. However, I'm not planning to retire for another 27 years, God willing that my health holds out!
