Rohn Jambo
Footballguy
You're wrong about this. A lot of rich people I know are cheapskates.
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PBS Frontline : The Retirement Gamble, sorta Must See (2 Viewers)
- Thread starter Smack Tripper
- Start date
The Ref
Footballguy
Rohn Jambo
Footballguy
I will never willingly hand over my hard earned money for someone else to manage. Many "financial advisors" treat their clients' investment dollars like free money at gambling web sites.
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The Ref
Footballguy
I think what a lot of non custody banker types (I am one) are saying exactly that, we would be better off without a plan. Or what i really mean is, an alternative plan where the employer cuts us a check and we get to shop the money around for the best deal and are not forced into a plan that is bought and sold by a company that pays kickbacks to said employer and rapes the employee.How many dollars are in the plan??I'll say it one more time, because you keep ignoring it. There are fixed costs in operating a plan. Most employers don't want to pay them directly, so they get built into fund expenses. Regarding this particular fund line-up, if you looked at the portion of the listed fees that are actually being kept by the investment managers, you'd probably think they're quite reasonable. But if it costs $14,000 to operate the plan, and there are $2M in plan assets, then there's going to be an additional 0.70% added into your fund expenses. So a fund that would otherwise have "reasonable" expense of 0.50% now has an expense ratio of 1.20%. Get it???Again, your alternative is not having a plan. I don't see what this is so hard to understand.
The current system sucks, it's very obvious, and nobody is really talking about it.
Rohn Jambo
Footballguy
I don't live extravagantly today. If "get away with it" means living better than people who are in jail then the answer is No.
The Ref
Footballguy
Fair enough and I'm not suggesting that you do.
lots of people use the whole 80% of my lifestyle today as the benchmark. Now i get that nobody wants to make sacrifices including myself. But if I can retire at 55, I'd be more then happy to move away from a high cost location like Cali, NY/NJ etc and move to a retirement state like Florida or Arizona. Buying your freedom at an earlier age isn't just a asset story but if you can live by slashing expenses by 30%-40%.
Rohn Jambo
Footballguy
I am sure there are ways to survive but we were talking about goals and mine involves some level of happiness.
Rohn Jambo
Footballguy
Does anyone know what kinda part time positions are available to seniors?
gruecd
Footballguy
For the love of god, there are no "kickbacks" to the employer. That's not legal. The "kickbacks" are revenue sharing arrangements with the funds whereby the recordkeeper, third-party adminstrator, advisor, etc. get paid for their services. It's all disclosed annually by law and very legal.The only thing that "sucks" about the current system is that people aren't saving enough. People need to stop looking for someone to blame.
steelerfeever
Footballguy
Has anyone addressed their "exit strategy" to 401k's and Regular IRA's? I read through most of these posts and didn't see it.
Before we get to that I do agree on this:
1.) Contribute into your 401k enough to get the match.
2.) Then max out your Roth IRA (if you qualify for one anyhow.. make too much and you can't have one)
3.) Then I would think long and hard about going back to the 401k... Personally, I don't like this because of there is no good exit strategy.
Lets say you put an extra $10k into your 401k. Suze Orman and the financial guru's of the world say, "Do it! You get a tax deduction!"... But what they forget to tell you is the whole story. So you put $10k into the 401k after your match, you're in the 25% tax bracket so you "save" $2,500 this year. But did you really "save" $2,500? Nope, you sure didn't. That $10,000 grows over 25 years to $30,000. When you go to take the money out, the whole $30,000 is taxed. Does anyone really believe tax rates will be the same or lower in 25 years? Social Security is cooked, Medicare is 10 times worse, and now we have health are entitlements. I don't care which way you vote, the only way to pay for that is reducing benefits or raising taxes. The people that vote the most are old people and they will never stand for their representatives to vote to reduce benefits, so what's that leave us? A tax environment that's going to crush our 401k's.
My advice... Move to the Roth 401k if you can. If it's not an option, just do up to the match, max your individual Roth account, then think about other strategies before going back to that 401k. Investment Properties, Tax-Free Bonds, Permanent Life Insurance, etc... Lastly, if you have an old 401k that you've rolled over into a Regular IRA, seriously think about "converting" it to a Roth IRA. If you're in your 40's or under and have the cash to pay the taxes, it makes a TON of sense. Research it.
Before we get to that I do agree on this:
1.) Contribute into your 401k enough to get the match.
2.) Then max out your Roth IRA (if you qualify for one anyhow.. make too much and you can't have one)
3.) Then I would think long and hard about going back to the 401k... Personally, I don't like this because of there is no good exit strategy.
Lets say you put an extra $10k into your 401k. Suze Orman and the financial guru's of the world say, "Do it! You get a tax deduction!"... But what they forget to tell you is the whole story. So you put $10k into the 401k after your match, you're in the 25% tax bracket so you "save" $2,500 this year. But did you really "save" $2,500? Nope, you sure didn't. That $10,000 grows over 25 years to $30,000. When you go to take the money out, the whole $30,000 is taxed. Does anyone really believe tax rates will be the same or lower in 25 years? Social Security is cooked, Medicare is 10 times worse, and now we have health are entitlements. I don't care which way you vote, the only way to pay for that is reducing benefits or raising taxes. The people that vote the most are old people and they will never stand for their representatives to vote to reduce benefits, so what's that leave us? A tax environment that's going to crush our 401k's.
My advice... Move to the Roth 401k if you can. If it's not an option, just do up to the match, max your individual Roth account, then think about other strategies before going back to that 401k. Investment Properties, Tax-Free Bonds, Permanent Life Insurance, etc... Lastly, if you have an old 401k that you've rolled over into a Regular IRA, seriously think about "converting" it to a Roth IRA. If you're in your 40's or under and have the cash to pay the taxes, it makes a TON of sense. Research it.
Sand
Footballguy
Personally I'd vote for taxes being about the same. This is the tax burden that Americans will tolerate and it really hasn't changed much in a while.
But Gru is right - just saving something, anything is really the key.
The Ref
Footballguy
If you want the match you need to participate in a system where (generally speaking) you can't shop where to place your investments. I don't care if it's Kickbacks, revenue sharing arrangements, a suitcase of cash in a dark ally or whatever white shoe boy language you want to use. It's all expense to the person who is participating in the plan. I'm not saying it's illegal. All I'm saying is the participant would be better off if they deposited the money in a e-trade account and the proceeds were used to buy shares of SPY.
I'm not excusing "people". As a whole most aren't saving enough. That has nothing to do with the above.
Britney Spears
guest speaker
I have a "ROTH" option on my 401k. I can choose to put the money in traditional or ROTH. Admittedly, I don't understand this portion of the account, and Fidelity doesn't really explain it well on their site. I also have a ROTH IRA with the $5500 limit. Could I use the ROTH 401k to get more money in, or am I completely doing this wrong?
wilked
Footballguy
I do get what you are saying now... I have no idea what the size of that company plan is. But damn, it is hard to make money when you are paying 1.5% a year to simply be a part of the plan.
Thanks for responding, it did help to clarify.
wilked
Footballguy
The whole Roth vs traditional argument hinges on what future taxes are, and no one knows that. I solve this by simply diversifying. My advice? Max the Roth IRA, and max the traditional 401k. Come retirement, this strategy will leave you with options, and options are always nice.
wilked
Footballguy
Good Times article on the search for better 401k options
http://www.nytimes.com/2011/06/18/your-money/401ks-and-similar-plans/18money.html?_r=0
Although they never really state what a 401k plan should cost to administer for different comapny sizes
http://www.nytimes.com/2011/06/18/your-money/401ks-and-similar-plans/18money.html?_r=0
Although they never really state what a 401k plan should cost to administer for different comapny sizes
NewlyRetired
Footballguy
Health care and travel can be two big expenses in retirement for some.
Chadstroma
Footballguy
Dexter
Footballguy
You only need one of those things.
I dunno man I read all these articles by financial people who keep saying you need more and more for retirement. What I'm hearing is they just want more of my money. It's just like any other thing. Create a need by scaring people.
Don't get me wrong I have a 401k, IRA and a Roth IRA. Along with some other crap. I've done a pretty good job saving for retirement, but if I walked into a financial experts office Monday morning he would say I needed to save more no matter how much money I have.
NewlyRetired
Footballguy
You asked and I answered. Some people want to travel and that is why they need more money in retirement than those that want to sit on their porch and drink beer. It is all up to the individual to determine how they want to live in retirement. Expenses in retirement drive everything when planning.
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Britney Spears
guest speaker
Are you a financial advisor?
Chadstroma
Footballguy
It is not ignorant or stereotypical... it is exactly the frame of mind you must have to protect yourself.
I am in the financial industry and I do conduct myself in a trustworthy way. It sometimes amazes me how much I do not have to work for that trust with some clients. It amazes me because I know how many people do not conduct themselves with any amont of integrity within the industry.
I don't take offense when someone makes me earn their trust. As someone who works to be trustworthy for all my clients, it is just part of doing business. The only people who take offense are those who have no interest in earning a clients trust but just want the sale.
Chadstroma
Footballguy
Now?Great...Wall Street now has their hands on this.
Less money for everyone except for them.
the moops
Footballguy
Chadstroma
Footballguy
True- as you near retirement, your portfolio needs to be adjusted. This should be done on an ongoing basis so it is not about timing but just simply adjusting the portfolio (often called balancing) to be more protective as you get closer. But most Americans are not saving for retirement. Those that do, the vast majority 'manage' their retirement by selecting a few things when they get hired by a new employer and that is it. (Not to mention leaving past 401k's with old employers scattered throughout the land). So how many do you think take the effort to adjust their portfolio consistently?
The Ref
Footballguy
This kind of sums up my points made earlier nicely. I won't need 80% (Inflation being equal) of what I make now at 38 when I'm 60. If I save enough to spend 80% of what I make now I'll be able to live on a cruise ship for 15 days of every month in my 60's. No mortgage, No daycare, No college 429 plan drops my expenses my more then 50%.
Chadstroma
Footballguy
I have a client that when we got to talking about her retirement, it mostly was in her husbands teachers pension since she was a contract employee. If nothing happens to the pension, they will be 'ok' but being in a state like Illinois, I strongly encouraged her to make other plans. There is just too much risk- no one knows now what will happen with these pensions. SOMETHING has to happen- will it impact someone like her husband? There is a decent chance of that. As soon as we get her mortgage re-fi done we are going to dig into this more.
Chadstroma
Footballguy
Chadstroma
Footballguy
Wow. Good for you on putting so much away at your age.
401K and IRA are basically the same thing. I would say no unless the following: 1) Your options in the 401K stink. 2) You do not have a ROTH option in your 401K then it would be a good thing to move money into a ROTH IRA specially at the clip you are saving at such an early age.
Chadstroma
Footballguy
An overly defensive response.
The plain fact is that retirement is big money. When big money is at play then there will be players that are playing at the edge of the rules (and beyond them) or trying to find areas that the rules do address to make the game work for them.
There are some major problems and it really can not be debunked:
1) There is a lot of confusion. Even for educated, intelligent individuals it takes a lot of time, effort and energy to cut through the confusion.
2) A whole lot of the 'professionals' that are suppose to help you cut through the confusion- are really nothing more than salespeople.
3) Too many Americans do not think about, plan for and manage their course to retirement. For many Americans, the minimal amount that they do is taken advantage of buy financial firms that make a lot of money off of their apathy and/or ignorance and want to keep it that way.
Britney Spears
guest speaker
Hey GB.I mostly understand ROTH vs traditional IRA (I have a ROTH with a $5500 limit per year). I also understand generally my 401k, which I contribute to. But I now am seeing a 2nd option in my 401k for "ROTH" contributions alongside the traditional, 401k contributions. This is new to me and I'm unclear what it is, and wondering if I can use it in addition to my ROTH to get more than the $5500 in post-tax...?
wilked
Footballguy
Brit, you know there is no free lunch... Taxes being equal now and at retirement, Roth and traditional 401k will equal the same amount.
As I understand it, Roth 401k isn't a 'get your cake and eat it too' option. I believe you lose a lot of the amazing things that you get with a regular Roth:
-Ability to withdraw principal with no penalty
-Ability to pay things such as house or education without penalty from it
-No required withdrawal at retirement age, ability to put it in your estate and pass it down
THere are also always rumors that Congress will change the rules with Roth.
All these things led me to want to not keep all my eggs in one basket. So I do traditional 401k and max out Roth
As I understand it, Roth 401k isn't a 'get your cake and eat it too' option. I believe you lose a lot of the amazing things that you get with a regular Roth:
-Ability to withdraw principal with no penalty
-Ability to pay things such as house or education without penalty from it
-No required withdrawal at retirement age, ability to put it in your estate and pass it down
THere are also always rumors that Congress will change the rules with Roth.
All these things led me to want to not keep all my eggs in one basket. So I do traditional 401k and max out Roth
NewlyRetired
Footballguy
People who live well below their means before retirement will, by definition, need less of a nest egg to keep a similar lifestyle. For those that live on close to what they earn before retirement and/or want a better lifestyle in retirement (travel etc) may need as much or even more income in retirement. Everyone is different in these cases. Health care is the big factor most forget when thinking about retirement costs. For many people, the cost can be as much or more than what they were paying for a home mortgage, at least until medicare kicks in.
culdeus
Footballguy
Are you guys assuming things are going to cost the same when you retire as they do now?
KCitons
Footballguy
No, I haven't. And I don't see myself doing business with them any time in the future.
Britney Spears
guest speaker
I hear you, and I max by ROTH IRA, and contribute to my 401k like you do. I'm just wondering if the ROTH 401k is a third option that would get me more of the benefits that the ROTH IRA does (since I am limited to $5500 currently). I'm probably explaining this poorly because I don't really understand it.
Steve Tasker
Footballguy
Brit - your Roth IRA and Roth 401(k) limits are separate. My understanding is that contributions to a Roth 401(k) will not be counted when considering your Roth IRA annual limitation; you could potentially put away more than $5,500 after-tax in a year.
Britney Spears
guest speaker
Awesome, this is what I was trying to ask. I like the concept of having a good portion of my money "clear" of future taxes, and $5500 a year doesnt feel like a lot. I am probably close to some of the folks in the video or the ones Dentist is describing, who are pretty aimless when it comes to this. I have been investing in 401k for 13 years now and really don't understand how to "actively manage" that money. I get some of the real basic stuff I guess like the fees, but certainly don't have any real clue about how to pick good funds. My money is mostly in index funds and company stock because those are the easiest to understand for me which is probably not a good reason. I've contemplated sending my list of assets to someone like Tigerfan and begging him to tell me if I'm doing it wrong.
wilked
Footballguy
Brit, I just want to be certain you are clear...
Being free and clear of taxes is nice, but don't forget that you paid taxes already. I have a vague idea that you are a decent (or better) earner, so you are paying a decent (or better) amount in taxes today. 401K money is put in pretax...and if you retire and don't need much income when you retire (as all of the above posters seem to think)...then you would be much better off paying those low taxes when retired vs your high taxes now.
Let's say you pay 35% taxes today. On $1000 earned, you elect to do traditional 401K. Upon retirement, you are in the 25% tax bracket. You ended up tripling that $1000 through earnings into $3000, minus taxes, is $2250 in your pocket.
Let's say you did Roth 401K instead. $1000 becomes $650, which triples, and upon retirement is worth $1950. $1950 in your pocket.
These are examples, but it is worth showing them on paper as it 'sounds' better to get the taxes out of the way.
Being free and clear of taxes is nice, but don't forget that you paid taxes already. I have a vague idea that you are a decent (or better) earner, so you are paying a decent (or better) amount in taxes today. 401K money is put in pretax...and if you retire and don't need much income when you retire (as all of the above posters seem to think)...then you would be much better off paying those low taxes when retired vs your high taxes now.
Let's say you pay 35% taxes today. On $1000 earned, you elect to do traditional 401K. Upon retirement, you are in the 25% tax bracket. You ended up tripling that $1000 through earnings into $3000, minus taxes, is $2250 in your pocket.
Let's say you did Roth 401K instead. $1000 becomes $650, which triples, and upon retirement is worth $1950. $1950 in your pocket.
These are examples, but it is worth showing them on paper as it 'sounds' better to get the taxes out of the way.
Chadstroma
Footballguy
A wise decision.KCitons said:
Dexter
Footballguy
Not at all, but feeding my wife and myself will be cheaper than feeding a whole family. I also plan to be debt free. I'll admit I forget about healthcare, but I just find it absurd how much money we are being told to save.humpback said:
I guess bottom line it's better to have too much than not enough, but it reeks of slimy sales guy to me.
inca911
Footballguy
I don't understand the statement someone made that 401(k) and Roth IRA are roughly the same, so to clarify:
401(k) uses un-taxed capital you invest to grow. That alone is a nice benefit since you have more $ to invest. Yes, your withdrawls will be taxed during your future retirement when you pull money out, but you likely won't have much other income when you are withdrawing, so the tax rate you'll experience will likely be less that your current tax rate. Let's say the tax rate you are avoiding at the time of contribution is ~25%, and the tax rate you'll see at withdrawl is ~15%, that's a 10% benefit to the 401(k)--ignoring any potential growth. For higher earners, we're talking 37% vs. 10-20% (effective rate), so the benefit is pretty big.
Roth IRA lets you avoid taxes on gains made from the investments in your Roth IRA. During retirement, Roth IRA withdrawls don't count as income, keeping your tax rate low for your 401(k) withdrawls. Your Roth IRA contributions are taxed at your current likely higher tax rate vs. your retirement tax rate (which is a down-side, but one that is hopefully offset by your investment returns). High earners are phased out of being able to have a Roth IRA.
401(k) employer matching is #1, as the match money is free (i.e., you don't need any gains to benefit significantly).
Roth IRA is second, as the gains are tax-free and the contribution amounts are liquid anytime and for any reason.
Third option is un-matched 401(k) contribution, but realize this money is locked up until retirement (can borrow from it), so don't lock it up until you are safe and don't need it (IMHO).
401(k) uses un-taxed capital you invest to grow. That alone is a nice benefit since you have more $ to invest. Yes, your withdrawls will be taxed during your future retirement when you pull money out, but you likely won't have much other income when you are withdrawing, so the tax rate you'll experience will likely be less that your current tax rate. Let's say the tax rate you are avoiding at the time of contribution is ~25%, and the tax rate you'll see at withdrawl is ~15%, that's a 10% benefit to the 401(k)--ignoring any potential growth. For higher earners, we're talking 37% vs. 10-20% (effective rate), so the benefit is pretty big.
Roth IRA lets you avoid taxes on gains made from the investments in your Roth IRA. During retirement, Roth IRA withdrawls don't count as income, keeping your tax rate low for your 401(k) withdrawls. Your Roth IRA contributions are taxed at your current likely higher tax rate vs. your retirement tax rate (which is a down-side, but one that is hopefully offset by your investment returns). High earners are phased out of being able to have a Roth IRA.
401(k) employer matching is #1, as the match money is free (i.e., you don't need any gains to benefit significantly).
Roth IRA is second, as the gains are tax-free and the contribution amounts are liquid anytime and for any reason.
Third option is un-matched 401(k) contribution, but realize this money is locked up until retirement (can borrow from it), so don't lock it up until you are safe and don't need it (IMHO).
Britney Spears
guest speaker
Hmm. I had not thought of this, and when taxes, etc. come into play this is really where I am out of my range of knowledge. Full disclosure, I don't know what I pay in taxes today (35% seems about right but I'm not certain). Again, I'm probably one of the types of people this video is calling out as uninformed, and its probably right. I mostly just put money in the 401k and hope it grows (which it has other than when the market took the fall around 08). I don't know if the funds I have are good, or if the performance I am getting as a whole is good/bad. Right now less than 10% of my retirement is in ROTH IRA. The rest is in "regular" 401k. I was thinking of putting some in the ROTH 401k because of what you alluded to (it sounds good to have taxes out of the way), but now I'm not real sure to be honest. I feel like I'm way behind all you guys on this. I don't have any real idea of when I will be able to retire, because I don't know how much money I will need. I felt like I was taking good steps to get there, but now I am questioning it.
Dentist
***Official FBG Dentist***
just read a nice book like: Bogleheads guide to retirement or Jane Bryant Quinn's "Where to put your money now" (thick book, but very comprehensive).
if most people would just read one book on the subject they would feel infinitely more informed and be able to execute a solid plan.
there are no secrets.. it's like following a basic strategy guide when playing blackjack.. the basic strategy has been laid out, it doesn't guarantee success because there are things like market risk and mortality risk (how long you live). Just like in any given shoe of blackjack basic strategy can be a failure if the dealer is running hot... but the only thing you can control is what you do... so just play the hand right!
Sand
Footballguy
Go to Firecalc.com and go through the pages and enter some info. That will get you an idea of where you sit.
lumpy19
Footballguy
Healthcare is ridiculously expensive. It was mentioned earlier in the thread, when you retire your monthly healthcare costs could replace mortgage costs.
NewlyRetired
Footballguy
yeah, for us it was actually more than we were paying for a mortgage when we had one (although we are paying for a family plan, so the price should come down slightly once our daughter is on her own).
I think most people who want to retire a bit early are going to be shocked by the costs. It is by far and away the highest ticket item for our retirement so far.
Sand
Footballguy
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