Retirement Plan????

[usedto]

Bent Pencil- you asked for opinions and I gave one. And I said it would be blunt. Being adept at taxes hardly makes one an expert at retirement planning. IRS regulations with regards to 401(k) plans are pretty simple.

No need to get brassy. You're the one who questioned my tax lady's advice. And I really shouldn't call her that. She just so happens to do my taxes, among other things.

I do not like to dismiss other folks' opinions, especially ones I do not know, but I have a hard time with the notion that "clever real estate purchases" are better than a 401(K) plan. This country is presently full of people who got burned on such transactions.

It is my understanding that most of the people who got "burned" were folks who didn't have the financial savvy to know whether or not they could afford what they bought, and were egged on by financial institutions to do so.

If your son has or develops a knack for it, great. But it require a huge investment in time, tolerance for high risk, a disdain for diversification, and a great deal of stress.

He's not afraid of hard work, and "knacks" come from hard work, knowledge, and experience.

Rather than asking this woman or your friends at AK, why don't you and your son seek the advice of a pro? Interview several financial planners and hire one.

Just my opinion. Best of luck to you son.:thmbsp:

From all the reading I've done, asking a "pro" is like asking a Ford salesman what's the best kind of car to buy. There are a lot of broke and unemployed experts out there right now, and I truly believe that there's another wave coming.

I don't discount the advantages of a 401K. But I know what worked for me, and a 410 wasn't it. Can't say my son will be as lucky. But I also know that a 401 can go from big to little in a heartbeat with no recourse.

Thanks for the input. Believe me, it will all be taken into consideration.:thmbsp:

 

[Jack Lord]

He's not afraid of hard work, and "knacks" come from hard work, knowledge, and experience.

I did not say he was.

I simpy meant that finding, procuring, managing/maintaiing, and profiting from a portfolio of actual real estate properties requires a large and sustained effort. If its pegged for retirement, that is a lifetime of dealing with such (illiquid) assets. Lots of things are "doable." The questions then are do we want to do them and are they worth it? If the answer is yes, then you have already answered your own question, in part at least.

There is always someone who can explain it all better than I. If you are interested in a really good source of info, drop me a PM.

And my Ford dealer has helped me amass a pretty nice nugget. But I always liked Mustangs.

 

[usedto]

The 401K is through Mass Mutual. It says you can choose where your investments go, and change any time.

 

[old_tv_nut]

If he doesn't want to go beyond the matching level, fine. If he wants to spend the time and effort to be a real estate whiz, or to improve his situation some other way, fine. But the match amount is 100% free money, so why would anyone give that up? You can't find any investment that starts with that big positive jump. If he's nervous, he should investigate the history of the 401k before opting in, but assuming there's no funny business, it seems like a no brainer to do in addition to whatever else. (Unless the vesting takes a long time and he's sure he won't be around there.)

 

[rswojo]

I've done some rough calculations here. Seems that all things being static (which they aren't) my real estate investments will have increased by about 33% over an interest bearing investment over the 25 years I've done this. That doesn't take into consideration the tax benefits of the interest deductions, depreciation, etc. And, the rental income from the property is taxed at a reduced rate as opposed to withdrawal from a 401K.

I guess you can manage your investment accounts, or manage your properties. Both pay dividends in the end.

3% of a paycheck will not be missed if it is taken out beforehand and if the company matches 100% of that, a 100% return is hard to beat, anywhere. Plus you have the tax savings to add into the equation. He can invest the rest of his disposable income anywhere he wants.

Nothing is guaranteed, people lost their ass in both stocks and real estate recently. Stocks came back, real estate hasn't. If you think you can time the market, 401Ks have a guaranteed safe option such as a Money Market Fund to duck into when you figure the market will crash.

It sounds like you had your mind made up before you even asked the question. So why even ask? Sorry, it seems you are trolling.

 

[usedto]

It sounds like you had your mind made up before you even asked the question. So why even ask? Sorry, it seems you are trolling.

My mind isn't made up. And it isn't my money. I have the way I do things. Other people have their way. And I never said my way was the best. I am trying to get my son the best possible advice. So far all I have heard is that the 3% is free money and the rest is taken out before taxes. No one has commented yet on how big a hit their 401Ks have taken lately. Maybe they ARE the best investments, in that case. That's what I'm trying to find out.

And in case you didn't know, not ALL real estate took a hit. At least not all of mine.

By the way, "trolling" is such a yuppie word.

 

[rswojo]

My mind isn't made up. And it isn't my money. I have the way I do things. Other people have their way. And I never said my way was the best. I am trying to get my son the best possible advice. So far all I have heard is that the 3% is free money and the rest is taken out before taxes. No one has commented yet on how big a hit their 401Ks have taken lately. Maybe they ARE the best investments, in that case. That's what I'm trying to find out.

And in case you didn't know, not ALL real estate took a hit. At least not all of mine.

By the way, "trolling" is such a yuppie word.

Yuppie? I'm not young, I am old. I'm not "upwardly mobile", I'm already there.

Whatever. This thread is going nowhere. I'm outa here.

 

[Andyman]

3% of a paycheck will not be missed if it is taken out beforehand and if the company matches 100% of that, a 100% return is hard to beat, anywhere. Plus you have the tax savings to add into the equation. He can invest the rest of his disposable income anywhere he wants.

If the 401k is the way he chooses, he should contribute to it up to the maximum matching limits only. Any additional funds he should invest in a self directed IRA with a major brokerage firm with online access. IRAs also allow investments in individual stocks, the IRAs I've been in only allowed company stock; most vehicles were mutual funds.

Years ago, I lowered my 401k contributions to that level so I maxed out the match, but contributed the difference to my IRA with Schwab. When I turn 59 1/2 I will start taking distros from my 401 and roll them into my Roth IRA and let them grow there tax free and within my complete control. I buy sell on dips and jumps, so it's important to me to have the ability to do that and I can't in the 401k.

 

[finnbow]

No one has commented yet on how big a hit their 401Ks have taken lately. Maybe they ARE the best investments, in that case. That's what I'm trying to find out.

And in case you didn't know, not ALL real estate took a hit. At least not all of mine.

By the way, "trolling" is such a yuppie word.

Again, it depends where you put it. If you put it in small cap stocks, it can be high risk/high reward. OTOH, you can put it into a Government Treasuries Fund and it will be the most risk-free investment available in the world today, but will only pay ~2%. IMHO, the best advice would be to put in his 3% (along with the matching 3%) into a balanced Index Fund designed for the time horizon that he intends to keep the money in it (e.g., 40 years).

The best managed retirement fund there is (in terms of expenses anyway) is the Federal Government's Thrift Savings Plan. Read up on their so-called Lifecycle Funds to give you an idea of what I'm talking about. Have him put his money in a fund from Mass Mutual similar to the L2040 or L2050 funds described here and forget about it until he's ready to dip into the millions he'll have after 40 years.

For argument's sake, if he started out at $60K/yr., his 3% contribution will be $150/month gross and about $100/month net (with a combined State & Fed marginal tax rate of 33%). With $5K gross monthly income, he shouldn't miss $100/month. However, after a number of years he'll look at that account and wonder how on earth it grew to a $500,000.

 

[Jack Lord]

My mind isn't made up. And it isn't my money. I have the way I do things. Other people have their way. And I never said my way was the best. I am trying to get my son the best possible advice. So far all I have heard is that the 3% is free money and the rest is taken out before taxes. No one has commented yet on how big a hit their 401Ks have taken lately. Maybe they ARE the best investments, in that case. That's what I'm trying to find out.

And in case you didn't know, not ALL real estate took a hit. At least not all of mine.

By the way, "trolling" is such a yuppie word.

Because a "hit" is largely irrelevant.

Once again, retirement money is that which your son (or anyone) will not need for 4 or 5 decades. Therefore, volatility- hits or ups and downs- do not matter as history shows it will appreciate handsomly over time.

Were your son saving for a car or a vacation to Hawaii, stocks would not be the way to go because those are short term goals. Retirement is a long-term goal.

The proper jargon for that is Time Horizon. The longer the time horizon, the more volatility one can tolerate.

As for "hits" to my 401(k), who cares? I am currently 45. I will not need the money for at least 20 more years. As I approach retirement and my time horizon shortens, my assets will be moved to safer vehicles and volatility lessen.

Without divulging too much of my personal finances, my account has receded in value a few times (those hits). But it always comes back and then some. Over time I have done well. Indeed I have beaten the Dow a few times.

Currently, I put 17% in my 401(k). My company gives everyone another 7.5% of their salary annually. Not bad. Its not easy reducing my take home by that much. But hey, I plan on having some serious fun when I walk out of this dungeon known as a job.:yes:

 

[blhagstrom]

My mind isn't made up. And it isn't my money. I have the way I do things. Other people have their way. And I never said my way was the best. I am trying to get my son the best possible advice. So far all I have heard is that the 3% is free money and the rest is taken out before taxes. No one has commented yet on how big a hit their 401Ks have taken lately. Maybe they ARE the best investments, in that case. That's what I'm trying to find out.

And in case you didn't know, not ALL real estate took a hit. At least not all of mine.

By the way, "trolling" is such a yuppie word.

SOoooo, I have land, took that hit back in the 80s. bankrupt. But managed to keep the land. And, land is good, damn good, so work towards that too.

Change life, college, working "in town". Took the 401K "free" money kool-aid. Felt good having some sort of "saving" plan. Let it build. Took a hit in the CEO-08 meltdown. Companies went under so tough to actually recover. But not ALL of them tanked. I still have stock that survived and some are doing well. Most of the nest egg is in CDs and low risk. The hit went against taxes (limited deduction, need to work it against gains).

IF the 401K sucks (company stock only kind of junk) then at least tell him to put 3-5% into IRAs or CDs. A long term comitment to saving some is good. 10% is better.

Plan B? me and Similost are going to have adjacent rooms in the concrete hotel.

 

[hdewees]

My company matches 3% for every 6% I put in a 401k. Sooo - an automatic 50% gain without taxes. So I really don't see the down side to that. I can choose where I put my 401k money. If your company does the same I suggest you do it.

 

[mulester7]

.....I've never been real big on diversifying with my 401k....US Growth, World Growth, and a couple others never did anything but stay level or lose....the only one that was up every quarter was my Union Pacific selection....so, I just switched it all to UP, early, and haven't looked back....it's now worth many times what I paid in....I've heard it said the last one to turn off the lights in this country will be a railroad.....

 

[usedto]

Yesterday evening we briefly went over the documents he had received, looked at the dollars involved, and listened to advice given here, as well as on that other thread that someone else had started elsewhere.

We both agreed that a 410K would most likely give equal or better opportunity for investment growth for right now, so he will more than likely sign up when his probation period is over.

For the few of you who thought I had an "attitude", I apologize. That was not my intent. But neither me or my son are people who will buy that, "just trust me and do it" method. All I wanted was some positive information and advice that made it look like a viable solution. Thanks for all your input.

 

[hdewees]

Hey Bentpencil - no problem -everyone has to make their own choices. You will see on financial blog sites people arguing all the time about where to put their money. I can just say that a 401k and IRA, properly invested, has worked for me. My money invested in 1990 has increased well over 9x fold.
My 401k dividends are reinvested to buy more shares which then get dividends to buy more shares. All tax free, until you withdraw it. If you are young, people might want to look at Roth IRA's. When you withdraw there is no tax hit.

 

[Andyman]

Regardless of where you son places his money, the very fact that's he's astute enough to begin some sort of savings program places him miles beyond many in today's gotta have it now world.

I wonder how many of these clowns out there will be kicking themselves in the ass if they ever realize that they probably could retire comfortably 40 years down the road if they had saved what they wasted on cell phone and cable bills, among other trivialities of modern life..:scratch2: