PBS Frontline : The Retirement Gamble, sorta Must See (1 Viewer)

[KCitons]

KCitons - what books have you read to help grow your knowledge base on retirement planning / investing? With hundreds of thousands of dollars (maybe millions?) at stake you must do some research

To be honest, not nearly enough. I've started reading through some of the online resources recommended here. Boglehead's, Mr Money Moustache, etc In a nutshell, I know I'm out of my comfort zone. Which was why I looked for help from Wells Fargo. My next step is to find a flat fee fiduciary (or friend of a friend) that can give us financial advise without a conflict of interest.

 

[Binky The Doormat]

Thanks Binky.

Balco mentioned earlier that owning over $10k in Vanguard lowers the costs. Does it matter if I purchase them through Wellstrade or do I need to have a Vanguard account?

I don't know for sure, but I would imagine that Wells Fargo will get a piece upfront when purchased and includes it as a part of their monthly/quarterly management fee (on top of the Vanguard fund fees - just like any other fund they purchase on your behalf and put in your account).

BTW - my advisor used a Wells Fargo stock management/trading program (it goes by many branded names based on the advising company selling it - as I understand). The idea is that their expert programs buy/sell to outperform the market - you pay a straight management fee (1% and up based on amount invested).

After 3 great years of market ...I get 6.5% vs. against their own conservative investment benchmark that produced +9%. ####'em.

 

[Sand]

Thanks Binky.

Balco mentioned earlier that owning over $10k in Vanguard lowers the costs. Does it matter if I purchase them through Wellstrade or do I need to have a Vanguard account?

I don't know for sure, but I would imagine that Wells Fargo will get a piece upfront when purchased and includes it as a part of their monthly/quarterly management fee (on top of the Vanguard fund fees - just like any other fund they purchase on your behalf and put in your account).

BTW - my advisor used a Wells Fargo stock management/trading program (it goes by many branded names based on the advising company selling it - as I understand). The idea is that their expert programs buy/sell to outperform the market - you pay a straight management fee (1% and up based on amount invested).

After 3 great years of market ...I get 6.5% vs. against their own conservative investment benchmark that produced +9%. ####'em.

Unless those programs have the brains of Buffet, Munger, or Faber in them I call bull####. And, IMO, 1% sliced off the top is a pretty damn big chunk.

 

[The Ref]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

 

[NewlyRetired]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

 

[The Ref]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

 

[Sand]

As far as I am aware you can't buy individual stocks in a 401k. So this is kind of the Kobayashi Muru of investing moves...

 

[The Ref]

As far as I am aware you can't buy individual stocks in a 401k. So this is kind of the Kobayashi Muru of investing moves...

I can.

 

[NewlyRetired]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

Most times it is referred to generically as SEPP, since that is the basic foundation of the rule.

If memory serves there are three different formulas you can choose to create your withdrawal.

 

[NewlyRetired]

As far as I am aware you can't buy individual stocks in a 401k. So this is kind of the Kobayashi Muru of investing moves...

I can.

This is pretty rare.

Do you have a finite list to choose from or can you choose anything?

 

[Binky The Doormat]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

It is nice if needed - but it does lock you in on withdrawal amounts. You can't go back once you start the chosen withdrawal pattern.

 

[The Ref]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

Most times it is referred to generically as SEPP, since that is the basic foundation of the rule.

If memory serves there are three different formulas you can choose to create your withdrawal.

Correct. $2.5M at 40 gets you roughly $80K a year

 

[The Ref]

As far as I am aware you can't buy individual stocks in a 401k. So this is kind of the Kobayashi Muru of investing moves...

I can.

This is pretty rare.

Do you have a finite list to choose from or can you choose anything?

No options and I think there are restrictions on some of the leveraged ETF's, but other then that it's like a regular account. There is no margin on the account either so you cant day trade (need the funds to clear and that takes 3 days after the sale).

 

[Binky The Doormat]

Thanks Binky.

Balco mentioned earlier that owning over $10k in Vanguard lowers the costs. Does it matter if I purchase them through Wellstrade or do I need to have a Vanguard account?

I don't know for sure, but I would imagine that Wells Fargo will get a piece upfront when purchased and includes it as a part of their monthly/quarterly management fee (on top of the Vanguard fund fees - just like any other fund they purchase on your behalf and put in your account).

BTW - my advisor used a Wells Fargo stock management/trading program (it goes by many branded names based on the advising company selling it - as I understand). The idea is that their expert programs buy/sell to outperform the market - you pay a straight management fee (1% and up based on amount invested).

After 3 great years of market ...I get 6.5% vs. against their own conservative investment benchmark that produced +9%. ####'em.

Unless those programs have the brains of Buffet, Munger, or Faber in them I call bull####. And, IMO, 1% sliced off the top is a pretty damn big chunk.

Amen brother. Its usually a pretty good gamble to buy some Berkshire Hathaway b shares when you have enough to justify purchase fees. (123/sh)

 

[Binky The Doormat]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

Most times it is referred to generically as SEPP, since that is the basic foundation of the rule.

If memory serves there are three different formulas you can choose to create your withdrawal.

Correct. $2.5M at 40 gets you roughly $80K a year

What return and monte carlo percent confidence you fixin' that at?

Firecalc - learn it, use it, love it (and its free!!!)

Shows 100% positive outcome and you would average a balance of $14.7 million at that withdrawal rate over a 50 year period - high balance model outcome - is a chet style $50ish million

http://www.firecalc.com/firecalcresults.php

 

[The Ref]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

Most times it is referred to generically as SEPP, since that is the basic foundation of the rule.

If memory serves there are three different formulas you can choose to create your withdrawal.

Correct. $2.5M at 40 gets you roughly $80K a year

What return and monte carlo percent confidence you fixin' that at?

Firecalc - learn it, use it, love it (and its free!!!)

Shows 100% positive outcome and you would average a balance of $14.7 million at that withdrawal rate over a 50 year period - high balance model outcome - is a chet style $50ish million

http://www.firecalc.com/firecalcresults.php

Good stuff. But my point was the IRS would only let you take out $80K a year penalty free before 59.5 with a 2.5M balance. Or at least that's what the 72T calculator I stumbled across said.

 

[Binky The Doormat]

Gotcha.

 

[NewlyRetired]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

Most times it is referred to generically as SEPP, since that is the basic foundation of the rule.

If memory serves there are three different formulas you can choose to create your withdrawal.

Correct. $2.5M at 40 gets you roughly $80K a year

What return and monte carlo percent confidence you fixin' that at?

Firecalc - learn it, use it, love it (and its free!!!)

Shows 100% positive outcome and you would average a balance of $14.7 million at that withdrawal rate over a 50 year period - high balance model outcome - is a chet style $50ish million

http://www.firecalc.com/firecalcresults.php

For any Firecalc users, you probably know that that tool is no longer being maintained by the original developers who if memory serves are touring the country in an RV

The Fire community picked up the project and continued it here

http://www.cfiresim.com/input.php

 

[NewlyRetired]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

Most times it is referred to generically as SEPP, since that is the basic foundation of the rule.

If memory serves there are three different formulas you can choose to create your withdrawal.

Correct. $2.5M at 40 gets you roughly $80K a year

What return and monte carlo percent confidence you fixin' that at?

Firecalc - learn it, use it, love it (and its free!!!)

Shows 100% positive outcome and you would average a balance of $14.7 million at that withdrawal rate over a 50 year period - high balance model outcome - is a chet style $50ish million

http://www.firecalc.com/firecalcresults.php

Good stuff. But my point was the IRS would only let you take out $80K a year penalty free before 59.5 with a 2.5M balance. Or at least that's what the 72T calculator I stumbled across said.

Note that most of the online 72(t) calculators use the Required Minimum Distribution method for the formula. This formula gives the lowest distribution amount.

The other two formulas, Fixed Amort, and Fixed Annuity are more complicated but also can create a much larger distribution.

The government does not care which of the three formulas you use, as long as the rules are followed.

 

[KCitons]

Bringing up the Monte Carlo simulator, reminds me of another red flag from my Wells Fargo visit. He said that their software runs a Monte Carlo simultor and said it was named after the casino in Las Vegas. I mentioned that that Monte Carlo is a place. He paused for a second and said "you may be right"

 

[NewlyRetired]

Bringing up the Monte Carlo simulator, reminds me of another red flag from my Wells Fargo visit. He said that their software runs a Monte Carlo simultor and said it was named after the casino in Las Vegas. I mentioned that that Monte Carlo is a place. He paused for a second and said "you may be right"

The name comes from the Monte Carlo casino in Monaco, not Vegas.

The casino in Vegas was built in the mid 90's.

The formula has been around since the 40's.

 

[KCitons]

Bringing up the Monte Carlo simulator, reminds me of another red flag from my Wells Fargo visit. He said that their software runs a Monte Carlo simultor and said it was named after the casino in Las Vegas. I mentioned that that Monte Carlo is a place. He paused for a second and said "you may be right"

The name comes from the Monte Carlo casino in Monaco, not Vegas.

The casino in Vegas was built in the mid 90's.

The formula has been around since the 40's.

Then we were both wrong.

Dumb and Dumber.

Edit: Double checked. Monte Carlo IS part of Monaco. There is more than just the casino.

 

[NewlyRetired]

Bringing up the Monte Carlo simulator, reminds me of another red flag from my Wells Fargo visit. He said that their software runs a Monte Carlo simultor and said it was named after the casino in Las Vegas. I mentioned that that Monte Carlo is a place. He paused for a second and said "you may be right"

The name comes from the Monte Carlo casino in Monaco, not Vegas.

The casino in Vegas was built in the mid 90's.

The formula has been around since the 40's.

Then we were both wrong. Dumb and Dumber.

Edit: Double checked. Monte Carlo IS part of Monaco. There is more than just the casino.

Yes but the formula is based gambling, which is why it is associated with the casino.

"The name Monte Carlo simulation comes from the fact that during the 1930s and 1940s, many computer simulations were performed to estimate the probability that the chain reaction needed for the atom bomb would work successfully. The physicists involved in this work were big fans of gambling, so they gave the simulations the code name Monte Carlo."

 

[Binky The Doormat]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

I have NEVER heard of this rule before. Great stuff. Now I just need a stock to go up 5000% in the next few years.

Most times it is referred to generically as SEPP, since that is the basic foundation of the rule.

If memory serves there are three different formulas you can choose to create your withdrawal.

Correct. $2.5M at 40 gets you roughly $80K a year

What return and monte carlo percent confidence you fixin' that at?

Firecalc - learn it, use it, love it (and its free!!!)

Shows 100% positive outcome and you would average a balance of $14.7 million at that withdrawal rate over a 50 year period - high balance model outcome - is a chet style $50ish million

http://www.firecalc.com/firecalcresults.php

For any Firecalc users, you probably know that that tool is no longer being maintained by the original developers who if memory serves are touring the country in an RV

The Fire community picked up the project and continued it here

http://www.cfiresim.com/input.php

Thanks NR - no, I didn't know that! Glad to to see this!!

 

[Tom Hagen]

This may seem like a bit of an odd question, but what if you put some money in a stock in your retirement (401K brokerage account) and hit it absolutely huge?

Case in point what if you did something so stupid as to put $100K on PLUG last month and now your looking at $5 Million (you sold early) in your 401K account. Do you just stop contributing and pay down any small debits you have and get busy living? What if you were 40 and thought maybe one of you or your wife could retire? "Hardship" withdrawal for 1M of it?

no need for hardship withdrawal. The law plans for cases like this with out the need for penalties.

Assuming you want to retire and gain access to this money, this is one procedure you could follow

1) Quit job

2) Rollover your 401k into an IRA

3) Follow rule 72(t) (see below) to access your money penalty free

Rule 72(t):

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy. By taking out your funds early you are putting yourself in jeopardy in the future.

To be clear you must take substantially equal periodic payments for the longer of 5 years or until you reach 59.5. Also the rules applies to 401k accounts if the employee separates from service prior to starting distributions.

 

[Sand]

As far as I am aware you can't buy individual stocks in a 401k. So this is kind of the Kobayashi Muru of investing moves...

I can.

This is pretty rare.

Do you have a finite list to choose from or can you choose anything?

No options and I think there are restrictions on some of the leveraged ETF's, but other then that it's like a regular account. There is no margin on the account either so you cant day trade (need the funds to clear and that takes 3 days after the sale).

I want your 401k. I'm stuck with TIAA and medium expensive mutual funds. About 4 years ago I requested a natural resources fund (during the downturn) and was turned down because the head of the company committee thought it went against his fiduciary duty. ####.

 

[Otis]

After the market tanked in 08 I had roughly 100k in a 401k. Apple was down to 88 bucks and I was certain it was the best company in the world and a bargain. I made some phone calls and tried desperately to figure out a way to buy AAPL options with that money. I couldn't make it happen. Years later I would have had retire now-type money. Sigh.

 

[Sand]

After the market tanked in 08 I had roughly 100k in a 401k. Apple was down to 88 bucks and I was certain it was the best company in the world and a bargain. I made some phone calls and tried desperately to figure out a way to buy AAPL options with that money. I couldn't make it happen. Years later I would have had retire now-type money. Sigh.

I bought a dollop of AAPL at 100, which makes me happy, but I wish I had had enough conviction to up what I bought by an order of magnitude.

 

[wilked]

After the market tanked in 08 I had roughly 100k in a 401k. Apple was down to 88 bucks and I was certain it was the best company in the world and a bargain. I made some phone calls and tried desperately to figure out a way to buy AAPL options with that money. I couldn't make it happen. Years later I would have had retire now-type money. Sigh.

Lots of people are certain about things in hindsight... I imagine if it was as sure a thing as it looks now you would have found a way (options, loans) to buy some stock.

This also is a good demonstration of why people should not be able to easily buy individual stocks with their retirement money, just as they should not be allowed to use it to play online poker

 

[KCitons]

Warren Buffett Recommends Index Funds for his heirs.

 

[Tiger Fan]

Warren Buffett Recommends Index Funds for his heirs.

Always good to get an endorsement from buffet on waft your already doing

 

[Dentist]

Warren Buffett Recommends Index Funds for his heirs.

Always good to get an endorsement from buffet on waft your already doing

The only thing i was surprised about in the article was that:

1) he didn't suggest investing in Berkshire... that's fine

2) why be so limited as the S&P 500.. all american... I'm a huge fan of index funds, but if I was going to pick just ONE to put everything into (which is a fine choice) i'd pick something that tracked the Russell 3000/Wilshire 5000 or something like the VT ETF by Vanguard that invests in both the Russell 3000 and a ton of international companies.

Zero international exposure seems a bit short sighted.. as does ZERO small or mid-cap exposure

 

[saintfool]

so i have recently switched jobs. i left a pretty good gig with an established education-technology company for a great opportunity with a start-up. i like this new gig quite a bit with the exception of one thing: no 401k. are there any good options for me here?

i have already rolled a 401k from a previous job into an IRA. i will likely do the same with the most recent 401k too. but limiting my contributions to $5500/year kind of blows when i could plan for up to the $17,500 with the employer 401k.

any advice here?

 

[Tiger Fan]

Warren Buffett Recommends Index Funds for his heirs.

Always good to get an endorsement from buffet on waft your already doing

The only thing i was surprised about in the article was that:

1) he didn't suggest investing in Berkshire... that's fine

2) why be so limited as the S&P 500.. all american... I'm a huge fan of index funds, but if I was going to pick just ONE to put everything into (which is a fine choice) i'd pick something that tracked the Russell 3000/Wilshire 5000 or something like the VT ETF by Vanguard that invests in both the Russell 3000 and a ton of international companies.

Zero international exposure seems a bit short sighted.. as does ZERO small or mid-cap exposure

I think the key is that he's making the suggestion to the "Average" Investor...those who basically just need some steer and would be wasting money buy going to visit some Ameriprise guy. The other thing it doesn't mention is as you near retirement, to "phase out" when the market is high...something that I think is key

 

[Sand]

Warren Buffett Recommends Index Funds for his heirs.

Always good to get an endorsement from buffet on waft your already doing

The only thing i was surprised about in the article was that:

1) he didn't suggest investing in Berkshire... that's fine

2) why be so limited as the S&P 500.. all american... I'm a huge fan of index funds, but if I was going to pick just ONE to put everything into (which is a fine choice) i'd pick something that tracked the Russell 3000/Wilshire 5000 or something like the VT ETF by Vanguard that invests in both the Russell 3000 and a ton of international companies.

Zero international exposure seems a bit short sighted.. as does ZERO small or mid-cap exposure

I think the key is that he's making the suggestion to the "Average" Investor...those who basically just need some steer and would be wasting money buy going to visit some Ameriprise guy. The other thing it doesn't mention is as you near retirement, to "phase out" when the market is high...something that I think is key

Well, the average investor SUCKS in their returns. So simply picking a stock/bond/REIT?etc. exposure and sticking to it is by far the best way to go for most.

 

[Fruitbat]

Well, 2 months in (contributing once per month) and I am net positive! Not too bad considering I started on 5/17 at pretty much the 12-month high of the S&P.

2 months is too short of time to really evaluate longer-term investment money, but its nice to be in the black (even if it is just $11)

Almost 4 months in now -- and still treading water. I'm basically dead even. been contributing monthly, and its becoming routine. feeling a little more confident in stashing some money in this manner.

Almost 6 months in now. And my account at TD Ameritrade has the best ROI of all the vehicles I have right now over that timeframe. My other vehicles are a mix of 401k, 403b, 457, and accounts managed by a financial planner.

Oh, actually I take that back. I have an old ESA at Invesco that is sitting in a couple of utility-based funds. That is slightly better than my TD account.

Unfortunately, my TD account also has the smallest balance. But I'm contributing a little bit each month.

I am self-employed and have an individual 401(k) with my financial planner that I consistently contribute to.....I'm tempted to rip that away from them and start one up on TD myself.

Probably just leave things as is until spring (post-tax season), reevaluate, then have a come to Jesus meeting with the financial planner if things havent changed.

Almost a year now, and same story....best return of anything I've got. not sure if its the best data point though given how well the stock market has done in general the last year or so.

side note: I've been trying to find a new adviser that just charges by the hour. I'd be awfully tempted to take charge of everything that my current adviser is managing, and push it to TD Ameritrade or something similar that I control myself. But I'd like to have a 2nd set of objective eyes check it out 1-2 times per year. My wife has a stipend at work...something like $750 a year...that can be put toward paying for sessions with an adviser.

But I am having a heck of a time finding such an adviser that charges by hour instead of by a percentage of the account. Am I nuts? Does such a thing exist?

 

[KCitons]

Well, 2 months in (contributing once per month) and I am net positive! Not too bad considering I started on 5/17 at pretty much the 12-month high of the S&P.

2 months is too short of time to really evaluate longer-term investment money, but its nice to be in the black (even if it is just $11)

Almost 4 months in now -- and still treading water. I'm basically dead even. been contributing monthly, and its becoming routine. feeling a little more confident in stashing some money in this manner.

Almost 6 months in now. And my account at TD Ameritrade has the best ROI of all the vehicles I have right now over that timeframe. My other vehicles are a mix of 401k, 403b, 457, and accounts managed by a financial planner.

Oh, actually I take that back. I have an old ESA at Invesco that is sitting in a couple of utility-based funds. That is slightly better than my TD account.

Unfortunately, my TD account also has the smallest balance. But I'm contributing a little bit each month.

I am self-employed and have an individual 401(k) with my financial planner that I consistently contribute to.....I'm tempted to rip that away from them and start one up on TD myself.

Probably just leave things as is until spring (post-tax season), reevaluate, then have a come to Jesus meeting with the financial planner if things havent changed.

Almost a year now, and same story....best return of anything I've got. not sure if its the best data point though given how well the stock market has done in general the last year or so.

side note: I've been trying to find a new adviser that just charges by the hour. I'd be awfully tempted to take charge of everything that my current adviser is managing, and push it to TD Ameritrade or something similar that I control myself. But I'd like to have a 2nd set of objective eyes check it out 1-2 times per year. My wife has a stipend at work...something like $750 a year...that can be put toward paying for sessions with an adviser.

But I am having a heck of a time finding such an adviser that charges by hour instead of by a percentage of the account. Am I nuts? Does such a thing exist?

I recently talked to a fee only financial adviser. You may be able to find one in your area using the NAPFA site. Your market may vary, but the guy I spoke with started $500 per year depending on level of involvement.

 

[mquinnjr]

OK, so I have a question for you guys. My company just started in 2014 offering a HDHP with the associated HSA Savings Account. This is my first time (2014) having access to and investing in funds within an HSA account, and I am maxing out the $3,300 contribution limit for a single filer. Very excited that this is an option now available to me.

The fund custodian for the HSA is Chase, and the investment options kind of stink (lowest fee mutual fund is a JP Morgan S&P 500 index fund @ 0.55%). I am reading that you can use any custodian that you want for the HSA, and definitely want to pursue this. Anywhere that offers Vanguard funds or even better ETF's would be great, as my goal with these funds is to not use them for medical expenses now and beef the account up as much as I possibly can as a traditional 401k extension, if you will.

Even the Bogleheads HSA custodian wiki http://www.bogleheads.org/wiki/Health_Savings_Account doesn't depict a real clear winner here as a 3rd party HSA custodian, so I figured I'd ask you guys. Any 3rd party in your opinion that you've had good experience with for HSA investment administration? Ideally, I want to keep making my contributions to Chase so I don't muck up my payroll tax withholdings during the year (I know my tax return will true me up, but I don't want to extend the gov't. a "free loan" on my dime during the tax year on this money), and wire/roll over the money to XYZ 3rd party HSA custodian to put it into better funds than are offered via Chase.

Worst case scenario, I live with the 0.55% fee fund at Chase, but I'd love to shoot the money elsewhere if possible/feasible. Thanks in advance, this thread is a go-to for me on questions like this.

 

[culdeus]

OK, so I have a question for you guys. My company just started in 2014 offering a HDHP with the associated HSA Savings Account. This is my first time (2014) having access to and investing in funds within an HSA account, and I am maxing out the $3,300 contribution limit for a single filer. Very excited that this is an option now available to me.

The fund custodian for the HSA is Chase, and the investment options kind of stink (lowest fee mutual fund is a JP Morgan S&P 500 index fund @ 0.55%). I am reading that you can use any custodian that you want for the HSA, and definitely want to pursue this. Anywhere that offers Vanguard funds or even better ETF's would be great, as my goal with these funds is to not use them for medical expenses now and beef the account up as much as I possibly can as a traditional 401k extension, if you will.

Even the Bogleheads HSA custodian wiki http://www.bogleheads.org/wiki/Health_Savings_Account doesn't depict a real clear winner here as a 3rd party HSA custodian, so I figured I'd ask you guys. Any 3rd party in your opinion that you've had good experience with for HSA investment administration? Ideally, I want to keep making my contributions to Chase so I don't muck up my payroll tax withholdings during the year (I know my tax return will true me up, but I don't want to extend the gov't. a "free loan" on my dime during the tax year on this money), and wire/roll over the money to XYZ 3rd party HSA custodian to put it into better funds than are offered via Chase.

Worst case scenario, I live with the 0.55% fee fund at Chase, but I'd love to shoot the money elsewhere if possible/feasible. Thanks in advance, this thread is a go-to for me on questions like this.

Honestly, for the hassle, it may cost you more in time than the money you will save taking this approach. If you truly have no intention of using this money as anything but a health care retirement sink then maybe you are on to something.

 

[mquinnjr]

OK, so I have a question for you guys. My company just started in 2014 offering a HDHP with the associated HSA Savings Account. This is my first time (2014) having access to and investing in funds within an HSA account, and I am maxing out the $3,300 contribution limit for a single filer. Very excited that this is an option now available to me.

The fund custodian for the HSA is Chase, and the investment options kind of stink (lowest fee mutual fund is a JP Morgan S&P 500 index fund @ 0.55%). I am reading that you can use any custodian that you want for the HSA, and definitely want to pursue this. Anywhere that offers Vanguard funds or even better ETF's would be great, as my goal with these funds is to not use them for medical expenses now and beef the account up as much as I possibly can as a traditional 401k extension, if you will.

Even the Bogleheads HSA custodian wiki http://www.bogleheads.org/wiki/Health_Savings_Account doesn't depict a real clear winner here as a 3rd party HSA custodian, so I figured I'd ask you guys. Any 3rd party in your opinion that you've had good experience with for HSA investment administration? Ideally, I want to keep making my contributions to Chase so I don't muck up my payroll tax withholdings during the year (I know my tax return will true me up, but I don't want to extend the gov't. a "free loan" on my dime during the tax year on this money), and wire/roll over the money to XYZ 3rd party HSA custodian to put it into better funds than are offered via Chase.

Worst case scenario, I live with the 0.55% fee fund at Chase, but I'd love to shoot the money elsewhere if possible/feasible. Thanks in advance, this thread is a go-to for me on questions like this.

Honestly, for the hassle, it may cost you more in time than the money you will save taking this approach. If you truly have no intention of using this money as anything but a health care retirement sink then maybe you are on to something.

Yeah, I'm with you and thanks for responding.

I think I'm going to give this a weekend day or two of research when I have some downtime and see if it's feasible, just need to hunker down and look into it. if I could save 0.40% a year in management fees and it's relatively painless to get the HSA funds from Chase to a 3rd party, my timeline is ~30 years if we treat this as a 401k retirement extension so it'd be worth kicking the can on. Will report back if I get anything worth posting from looking into it.

 

[Doctor Detroit]

By Walter Hamilton, Los Angeles Times

Fewer Americans are counting on 401(k) accounts to fund their retirement years, apparently because of disappointment with the stock market after painful losses in the Great Recession, according to a recent study.

Only 48 percent of non-retirees expect a 401(k), individual retirement account or similar savings vehicle to be a major source of retirement income, according to a Gallup poll. That’s up from 46 percent last year but down from 54 percent in early 2008, just before the worst of the global financial crisis struck.

Even though the stock market has recouped its crisis-era losses and gone on to a series of new highs, many small investors missed the gains because they bailed out before that. Confidence in 401(k)s has improved in recent years from a low of 42 percent in 2009, according to the poll. But that’s fairly unimpressive, given the resurgence in stock prices.

A bit more than 3 in 10 non-retirees expect to rely heavily on Social Security, according to the poll. That number has grown in the aftermath of the Great Recession. From 2002 to 2007, the portion of non-retirees expecting to count heavily on Social Security fluctuated between 25 percent and 29 percent. From 2008 to 2014, by contrast, the range increased to 30 percent to 34 percent.

 

[Jobber]

By Walter Hamilton, Los Angeles Times

Fewer Americans are counting on 401(k) accounts to fund their retirement years, apparently because of disappointment with the stock market after painful losses in the Great Recession, according to a recent study.

Only 48 percent of non-retirees expect a 401(k), individual retirement account or similar savings vehicle to be a major source of retirement income, according to a Gallup poll. That’s up from 46 percent last year but down from 54 percent in early 2008, just before the worst of the global financial crisis struck.

Even though the stock market has recouped its crisis-era losses and gone on to a series of new highs, many small investors missed the gains because they bailed out before that. Confidence in 401(k)s has improved in recent years from a low of 42 percent in 2009, according to the poll. But that’s fairly unimpressive, given the resurgence in stock prices.

A bit more than 3 in 10 non-retirees expect to rely heavily on Social Security, according to the poll. That number has grown in the aftermath of the Great Recession. From 2002 to 2007, the portion of non-retirees expecting to count heavily on Social Security fluctuated between 25 percent and 29 percent. From 2008 to 2014, by contrast, the range increased to 30 percent to 34 percent.

Did the article mention what exactly will be these people's major source of income at retirement? Wal-Mart greeter? Wheat pennies?

 

[culdeus]

How is this shocking, there was a study about a year back that said something like 45% of 401k assets are cash. It's in this thread even and I'm too lazy to quote it.

 

[Doctor Detroit]

WASHINGTON (AP) - It's the silent enemy in our retirement accounts: High fees. And now, a new study finds that the typical 401(k) fees - adding up to a modest-sounding 1 percent a year - would erase $70,000 from an average worker's account over a four-decade career compared with lower-cost options. To compensate for the higher fees, someone would have to work an extra three years before retiring.

The study comes from the Center for American Progress, a liberal think tank. Its analysis, backed by industry and government data, suggests that U.S. workers, already struggling to save enough for retirement, are being further held back by fund costs.

"The corrosive effect of high fees in many of these retirement accounts forces many Americans to work years longer than necessary or than planned," the report, being released Friday, concludes.

Most savers have only a vague idea how much they're paying in 401(k) fees or what alternatives exist, though the information is provided in often dense and complex fund statements. High fees seldom lead to high returns. And critics say they hurt ordinary investors - much more so than, say, Wall Street's high-speed trading systems, which benefit pros and have increasingly drawn the eye of regulators.

Consider what would happen to a 25-year-old worker, earning the U.S. median income of $30,500, who puts 5 percent of his or her pay in a 401(k) account and whose employer chips in another 5 percent:

- If the plan charged 0.25 percent in annual fees, a widely available low-cost option, and the investment return averaged 6.8 percent a year, the account would equal $476,745 when the worker turned 67 (the age he or she could retire with full Social Security benefits).

- If the plan charged the typical 1 percent, the account would reach only $405,454 - a $71,000 shortfall.

- If the plan charged 1.3 percent - common for 401 (k) plans at small companies - the account would reach $380,649, a $96,000 shortfall. The worker would have to work four more years to make up the gap. (The analysis assumes the worker's pay rises 3.6 percent a year.)

The higher fees often accompany funds that try to beat market indexes by actively buying and selling securities. By contrast, index funds, which track benchmarks such as the Standard & Poor's 500, don't require active management and typically charge lower fees.

Thought this was particularly interesting:

In a 2009 experiment, researchers at Yale and Harvard found that even well-educated savers "overwhelmingly fail to minimize fees. Instead, they placed heavy weight on irrelevant attributes such as funds' (historical) annualized returns."

The Labor Department announced plans last month to update a 2012 rule for companies to disclose the fees charged to their 401(k) plans. Fee disclosures resulting from the 2012 rule proved tedious and confusing, said Phyllis Borzi, assistant secretary for the Labor Department's Employee Benefits Security Administration.

"Some are filled with legalese, some have information that's split between multiple documents," Borzi said.

Americans hold $4.2 trillion in 401(k) plans, according to the Investment Company Institute. An additional $6.5 trillion is in Individual Retirement Accounts.

Read more: http://www.wjla.com/articles/2014/04/study-high-fees-can-cut-an-average-of-70-000-from-your-401k-over-your-career-102061.html#ixzz30xnBG6Pr

 

[Sand]

By Walter Hamilton, Los Angeles Times

Fewer Americans are counting on 401(k) accounts to fund their retirement years, apparently because of disappointment with the stock market after painful losses in the Great Recession, according to a recent study.

Only 48 percent of non-retirees expect a 401(k), individual retirement account or similar savings vehicle to be a major source of retirement income, according to a Gallup poll. That’s up from 46 percent last year but down from 54 percent in early 2008, just before the worst of the global financial crisis struck.

Even though the stock market has recouped its crisis-era losses and gone on to a series of new highs, many small investors missed the gains because they bailed out before that. Confidence in 401(k)s has improved in recent years from a low of 42 percent in 2009, according to the poll. But that’s fairly unimpressive, given the resurgence in stock prices.

A bit more than 3 in 10 non-retirees expect to rely heavily on Social Security, according to the poll. That number has grown in the aftermath of the Great Recession. From 2002 to 2007, the portion of non-retirees expecting to count heavily on Social Security fluctuated between 25 percent and 29 percent. From 2008 to 2014, by contrast, the range increased to 30 percent to 34 percent.

Just proof of this. Amazing how bad people suck at investing. Pick a distribution and just leave it the #### alone. The only way to screw up that bad is to sell at the low and sit in cash.

 

[mquinnjr]

http://thebeacongrp.com/blog/dol-rule-on-benchmarking-401k-plans-may-be-misunderstood

I saw this posted on LinkedIn. It's an "update" on guidance as it pertains to benchmarking your firm's 401k plan as a fiduciary of your employees.

Looks like investment advisers/planners are not happy/running scared about the possible upcoming awareness being brought by the DOL to their fee structures within expanded disclosures to plan participants.

 

[inca911]

From the article:

"- If the plan charged 0.25 percent in annual fees, a widely available low-cost option..."

Vanguard Admiral Shares: 0.10%. I wouldn't want to pay 2.5x the fees for no real benefit.

 

[Doctor Detroit]

I listen to Dave Ramsey's podcast and I think he does a lot of good for people. In theory I agree with his premise of eliminating all debt, and I need to do some of that myself and should be mostly set by next spring.

What I disagree with however is Ramsey saying to completely ditch retirement account contributions unless you have completed the first three baby steps which are

$1000k in savings

paying off all debt outside mortgage

accumulating 3-6 month emergency fund

IMO you still have to contribute up to your employer match. Why would you ever give away free money? There is so little of it in the world I've lived in that it just seems like that is still going to be a priority even when in debt. Maybe I'm wrong. Thoughts?

 

[Slapdash]

I listen to Dave Ramsey's podcast and I think he does a lot of good for people. In theory I agree with his premise of eliminating all debt, and I need to do some of that myself and should be mostly set by next spring.

What I disagree with however is Ramsey saying to completely ditch retirement account contributions unless you have completed the first three baby steps which are

$1000k in savings

paying off all debt outside mortgage

accumulating 3-6 month emergency fund

IMO you still have to contribute up to your employer match. Why would you ever give away free money? There is so little of it in the world I've lived in that it just seems like that is still going to be a priority even when in debt. Maybe I'm wrong. Thoughts?

Absolutely take the free money here.

 

[Tiger Fan]

I listen to Dave Ramsey's podcast and I think he does a lot of good for people. In theory I agree with his premise of eliminating all debt, and I need to do some of that myself and should be mostly set by next spring.

What I disagree with however is Ramsey saying to completely ditch retirement account contributions unless you have completed the first three baby steps which are

$1000k in savings

paying off all debt outside mortgage

accumulating 3-6 month emergency fund

IMO you still have to contribute up to your employer match. Why would you ever give away free money? There is so little of it in the world I've lived in that it just seems like that is still going to be a priority even when in debt. Maybe I'm wrong. Thoughts?

Remember that Ramsey is selling a system and likely those who are buying it need some help in some sort of way. The "snowball" approach to paying off debt is dumb from a black and white perspective, but I can see how the milestones are good for those in lots of trouble.