Thread: 401k

Originally Posted by weazel

I have no idea what a 401k is... is that like a retirement savings plan in the US? If it is, I currently invest 6% of my salary to this, and my company matches it... they will match up to 10%.

They will match up to 10%?!?! That's insane. Why aren't you contributing the full 10% then? You are leaving free money on the table.

Originally Posted by Buff

They will match up to 10%?!?! That's insane. Why aren't you contributing the full 10% then? You are leaving free money on the table.

I was up until this year, they switched the investment company they use and I wanted to see what their return would be for the year. The old one was very good, I dont think the new one will come close to the old one but we will see.

Originally Posted by weazel

I was up until this year, they switched the investment company they use and I wanted to see what their return would be for the year. The old one was very good, I dont think the new one will come close to the old one but we will see.

So put 4% of your contribution in a money market fund or something with little risk until you figure out if you want to invest more of it... But in the meantime you are literally losing out on free money.

Originally Posted by Buff

So put 4% of your contribution in a money market fund or something with little risk until you figure out if you want to invest more of it... But in the meantime you are literally losing out on free money.

money in the account is nice too though. I posted more but I think I will make it a new thread

Originally Posted by Buff

There is real value in active management, but the problem is trying to find an active manager who is worth their fees.

And the related problem of an active manager feeling the pressure to justify their fees by being active when it might benefit them to not be.

Originally Posted by weazel

I have no idea what a 401k is... is that like a retirement savings plan in the US? If it is, I currently invest 6% of my salary to this, and my company matches it... they will match up to 10%.

You should do 10% then.

Always take full advantage of any matching funds. You automatically double your money. You will never find "easier" money.

Originally Posted by NightTrainLayne

And the related problem of an active manager feeling the pressure to justify their fees by being active when it might benefit them to not be.

I max my 401k despite basically no matching and refuse to pay a manager. I had one during the worst of the "lost decade" and they were no help whatsoever. Waste of money.

I basically work backwards from the lowest expense ratios and fees in all cases. I love ETFs and Vanguard funds. Rollovers go into a target fund.

The 401k is a shameful disgrace but at least it results in taxable income reduction so I max to the point of pain on it. I think the chances I'll be able to wait until 67 to start tapping into it are nearly zero though.

Replacing pensions with the 401k is another black eye - but that's another subject.

Originally Posted by tomjonesrocks

I max my 401k despite basically no matching and refuse to pay a manager. I had one during the worst of the "lost decade" and they were no help whatsoever. Waste of money.

I basically work backwards from the lowest expense ratios and fees in all cases. I love ETFs and Vanguard funds.

The 401k is a shameful disgrace but at least it results in taxable income reduction so I max to the point of pain on it. I think the chances I'll be able to wait until 67 to start tapping into it are nearly zero though.

Replacing pensions with the 401k is another black eye - but that's another subject.

If you don't receive any match from your employer/company, then you should consider maxing out your Roth IRA contribution.

It means putting in after-tax dollars now, but all qualifying withdrawals at retirement are tax-free at that point. If you do the math, and assuming a decent growth rate of your funds, the tax savings you experience at withdrawal far outweigh the tax deductions you receive on the front-end of a 401k or traditional IRA.

If the power of compound interest doubles or triples your money over time, you are much better off to avoid taxes on all of that growth in a Roth IRA, than avoiding taxes on the contributions, but then having all of the doubled or tripled account exposed to taxes on withdrawal.

My problem is I am petrified of it losing money. I monitor it every day to see which funds are still gaining, which ones have lost. I am afraid of looking back months or years down the road to find it hasn't done anything, or worse has lost money.

Originally Posted by Rick

My problem is I am petrified of it losing money. I monitor it every day to see which funds are still gaining, which ones have lost. I am afraid of looking back months or years down the road to find it hasn't done anything, or worse has lost money.

It sounds like you could use some help initially in getting your portfolio set up with the right mixture of investments (asset allocation). There are a lot of free asset allocation tools online that can give you a breakdown of the right asset classes based on your time horizon and risk tolerance. You could probably set up an inexpensive one-time consultation with the company who is sponsoring your 401k as well. If you at least had some assurance that you've selected appropriate investments, then that should allow you to be a little more hands off and let them work for you.

But if you're just taking shots in the dark and picking funds on a whim, then you're never going to have any confidence that your money is in the right place and it's going to cause you to make a lot of emotionally-driven investment decisions that will cost you money over the long haul.

I had talked with one of their people over the phone, he suggested I put all of it in a vanguard target fund. Initially I did that but then I moved it back out because it instantly started losing money. I lost 4 bucks initially and the funds I transferred it into has swung it around and I was on a $6 gain for the first 16 days I had the plan opened, so lost 4 and then had a $10 swing.

I thought I was on the right path but then look on Friday morning and I lost a small chunk, about 50 cents, and looked and every one of the funds they offer were down from the day before.

I probably am over thinking it, and right now stressing over pennies, but with no real guidance from them and trying to get a feel for stock market, just trying to make sure it stays on the right path.

Originally Posted by NightTrainLayne

If you don't receive any match from your employer/company, then you should consider maxing out your Roth IRA contribution. It means putting in after-tax dollars now, but all qualifying withdrawals at retirement are tax-free at that point. If you do the math, and assuming a decent growth rate of your funds, the tax savings you experience at withdrawal far outweigh the tax deductions you receive on the front-end of a 401k or traditional IRA. If the power of compound interest doubles or triples your money over time, you are much better off to avoid taxes on all of that growth in a Roth IRA, than avoiding taxes on the contributions, but then having all of the doubled or tripled account exposed to taxes on withdrawal.

Interested in knowing more - never really understood this. I did an IRA while contracting a couple years back and had no 401k access. I reached the max you could contribute so quickly (seemed like about $5k/yr from memory) but last I read it was like $6-7k now. Plus none of it was deductible on my taxes. It just seemed like far too low an amount (vs like $17k for 401k).

I could move a percentage to an IRA but it seemed too low to "replace". I probably don't fully understand them.

I really just save as much as I can (more than I can really) and hope someday I won't have to go to work anymore. Doesn't look promising from the numbers saving so aggressively the last 15 years. There just isn't enough compounding to ever reach an amount I could live on seemingly.

Originally Posted by tomjonesrocks

Interested in knowing more - never really understood this. I did an IRA while contracting a couple years back and had no 401k access. I reached the max you could contribute so quickly (seemed like about $5k/yr from memory) but last I read it was like $6-7k now. Plus none of it was deductible on my taxes. It just seemed like far too low an amount (vs like $17k for 401k).

I could move a percentage to an IRA but it seemed too low to "replace". I probably don't fully understand them.

I really just save as much as I can (more than I can really) and hope someday I won't have to go to work anymore. Doesn't look promising from the numbers saving so aggressively the last 15 years. There just isn't enough compounding to ever reach an amount I could live on seemingly.

You can contribute to an IRA AND a 401(k).

On the IRA side, there is the Traditional IRA, and the Roth IRA. In your situation, I would recommend contributing the maximum amount to a Roth IRA, and the balance of your retirement savings into the 401(k). Save the same amount, just put as much of that amount as you can into a Roth.

For someone whose company does match 401(k) contributions, put in enough to maximize their match, and then go to the Roth if you want to contribute more. If you max out the Roth, and still want to save more, then go back to the 401(k).

Originally Posted by NightTrainLayne

You can contribute to an IRA AND a 401(k). On the IRA side, there is the Traditional IRA, and the Roth IRA. In your situation, I would recommend contributing the maximum amount to a Roth IRA, and the balance of your retirement savings into the 401(k). Save the same amount, just put as much of that amount as you can into a Roth. For someone whose company does match 401(k) contributions, put in enough to maximize their match, and then go to the Roth if you want to contribute more. If you max out the Roth, and still want to save more, then go back to the 401(k).

Hmm. I'll seriously consider it.

Originally Posted by BroncoJoe

I do 4.5% because that's what my company matches. Almost makes the ROI insignificant at that rate.

And THAT's the best reason to do it. If you get a company match, you're playing with house money unless there's a market crash.
The only other reason is to reduce your tax bite. Some 401Ks will also allow you to take a loan out against your account's worth that is interest-free. I once used that to close a credit card account that was screwing me.

I hear the next time our markets crash, the Democrats will bail us out by seizing our 401K, IRAs and savings accounts and promising us "free" healthcare in return. So the safest place for your money could be a mattress.