PBS Frontline : The Retirement Gamble, sorta Must See (21 Viewers)

[Slapdash]

Healthcare is ridiculously expensive. It was mentioned earlier in the thread, when you retire your monthly healthcare costs could replace mortgage costs.

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.

Are there people that retire early to a country that has a universal health care system?

I have read through those forums you linked, seems like the ACA is a big deal for a lot of people in early retirement.

 

[NewlyRetired]

Healthcare is ridiculously expensive. It was mentioned earlier in the thread, when you retire your monthly healthcare costs could replace mortgage costs.

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.

Are there people that retire early to a country that has a universal health care system? I have read through those forums you linked, seems like the ACA is a big deal for a lot of people in early retirement.

I have read a couple of folks who FIREd and moved to another country but for others who have still have kids, it is not that practical. I am also unsure if or how Obamacare may affect early retirees since I think that plan will only have an income test and not a means test.

 

[NewlyRetired]

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.

I'm sure once Obamacare fully kicks in this won't be an issue. :softball:

I am keeping a close eye on this as it might be something that does have an affect on early retirees. Just need to wait until it finally rolls out and see what the various eligibility tests are.

 

[Politician Spock]

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.

I'm sure once Obamacare fully kicks in this won't be an issue. :softball:

That's more like a golf ball.

A lot of people will swing and miss at that one... but the one who connects will knock it to the other side of town.

 

[humpback]

What are you people doing to need 90% of your income when you retire? When I retire my house will be paid off for at least 10 years, both kids out of college so at most I'll have a monthly car payment. It doesn't cost much to play video games and drink beer on my porch.

Seriously.

I will need like 30% of what I make. And I don't make much.

Are you guys assuming things are going to cost the same when you retire as they do now?

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.

I guess bottom line it's better to have too much than not enough, but it reeks of slimy sales guy to me.

Considering our pathetically low savings rates and average balance in retirement plans, I think it's reasonable. These things are just rules of thumb and the "estimates" are going to end up being pretty far off, but most are probably a bit conservative because it is better to have too much than not enough. I don't think it's absurd at all though if you actually run the numbers. 30% of a low income? That's absurd, unless of course you're literally going to just play video games on your porch.

 

[Dexter]

What are you people doing to need 90% of your income when you retire? When I retire my house will be paid off for at least 10 years, both kids out of college so at most I'll have a monthly car payment. It doesn't cost much to play video games and drink beer on my porch.

Seriously.

I will need like 30% of what I make. And I don't make much.

Are you guys assuming things are going to cost the same when you retire as they do now?

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.

I guess bottom line it's better to have too much than not enough, but it reeks of slimy sales guy to me.

Considering our pathetically low savings rates and average balance in retirement plans, I think it's reasonable. These things are just rules of thumb and the "estimates" are going to end up being pretty far off, but most are probably a bit conservative because it is better to have too much than not enough. I don't think it's absurd at all though if you actually run the numbers. 30% of a low income? That's absurd, unless of course you're literally going to just play video games on your porch.

I like where you're going with this. Video games on the porch? Hmmm I could drink beer, play video games and be on the porch all at the same time? GENIUS!!!!!

 

[Slapdash]

What are you people doing to need 90% of your income when you retire? When I retire my house will be paid off for at least 10 years, both kids out of college so at most I'll have a monthly car payment. It doesn't cost much to play video games and drink beer on my porch.

Seriously.

I will need like 30% of what I make. And I don't make much.

Are you guys assuming things are going to cost the same when you retire as they do now?

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.

I guess bottom line it's better to have too much than not enough, but it reeks of slimy sales guy to me.

Considering our pathetically low savings rates and average balance in retirement plans, I think it's reasonable. These things are just rules of thumb and the "estimates" are going to end up being pretty far off, but most are probably a bit conservative because it is better to have too much than not enough. I don't think it's absurd at all though if you actually run the numbers. 30% of a low income? That's absurd, unless of course you're literally going to just play video games on your porch.

Whenever I look at the numbers, it always stands out how much of our expenses are work-related. Needing multiple cars (with related gas/parking/maintance costs), business clothes, and inflated food costs really add up.

We could certainly live on 30% of what we currently make. Trying to shoot for 50% this year anyways. YMMV

 

[Dentist]

I like where you're going with this. Video games on the porch? Hmmm I could drink beer, play video games and be on the porch all at the same time? GENIUS!!!!!

The revolutionary war was fought so that one day we could achieve maximum laziness of playing videogames/poker (hopefully soon)/surfing in your underwear on your deck.

We should respect our ancestors.

 

[humpback]

Whenever I look at the numbers, it always stands out how much of our expenses are work-related. Needing multiple cars (with related gas/parking/maintance costs), business clothes, and inflated food costs really add up.

We could certainly live on 30% of what we currently make. Trying to shoot for 50% this year anyways. YMMV

Of course you could live on 30% in retirement. I'm sure you could live on 30% of what you make right now if you had to. The reality is, most people are terrible at finances, especially when it comes to planning for the future. I mean, one poster said he "forgot" about health care?

YMMV for all of these things, but IMO most people either haven't run the numbers, and/or aren't being realistic in their assumptions, if they think they only need 30% of current income in retirement if they plan on leading a similar lifestyle. If you just want to survive, sure.

 

[Dentist]

Whenever I look at the numbers, it always stands out how much of our expenses are work-related. Needing multiple cars (with related gas/parking/maintance costs), business clothes, and inflated food costs really add up.

We could certainly live on 30% of what we currently make. Trying to shoot for 50% this year anyways. YMMV

I agree with this. While multiple cars may be a future reality still, I see how much i spend on dry cleaning, continuing education, disability insurance that's not employer provided, commute costs, etc. and I think 50-60% sounds easily do-able.

But then i remember the theory that "idle hands spend money"

and it's true. they do.

Being at work allows me to both generate money, and not spend money filling my time (yes, there are the aforementioned cost to work expenses).

But the traveling, the new hobbies, etc. I mean unless you really are going to watch a lot of TV and play used videogames on your deck and be committed to it.. it could be costly.

and if you're bored at home staring at your wife... well now you have divorce risk... or "remodeling" risk....

 

[Slapdash]

Whenever I look at the numbers, it always stands out how much of our expenses are work-related. Needing multiple cars (with related gas/parking/maintance costs), business clothes, and inflated food costs really add up.

We could certainly live on 30% of what we currently make. Trying to shoot for 50% this year anyways. YMMV

Of course you could live on 30% in retirement. I'm sure you could live on 30% of what you make right now if you had to. The reality is, most people are terrible at finances, especially when it comes to planning for the future. I mean, one poster said he "forgot" about health care?

YMMV for all of these things, but IMO most people either haven't run the numbers, and/or aren't being realistic in their assumptions, if they think they only need 30% of current income in retirement if they plan on leading a similar lifestyle. If you just want to survive, sure.

True. And it most people ran their numbers they would realize how much wasteful spending is in their lifestyle.

 

[NajehHejan]

Ignorant 401k contributor here who is now opening his eyes to fees. I'm currently around 1.4 ratio. I see a balanced fund that is 75% equity/20% bond/5% cash that only has 0.9 expense ratio - would be similar to my 80/20 stock/bond blend now - is it wise to move into that fund? It has comparable rates of return...

 

[NewlyRetired]

Whenever I look at the numbers, it always stands out how much of our expenses are work-related. Needing multiple cars (with related gas/parking/maintance costs), business clothes, and inflated food costs really add up. We could certainly live on 30% of what we currently make. Trying to shoot for 50% this year anyways. YMMV

Of course you could live on 30% in retirement. I'm sure you could live on 30% of what you make right now if you had to. The reality is, most people are terrible at finances, especially when it comes to planning for the future. I mean, one poster said he "forgot" about health care? YMMV for all of these things, but IMO most people either haven't run the numbers, and/or aren't being realistic in their assumptions, if they think they only need 30% of current income in retirement if they plan on leading a similar lifestyle. If you just want to survive, sure.

True. And it most people ran their numbers they would realize how much wasteful spending is in their lifestyle.

Good points being brought up here in the thread. For me, gas, car maintenance, dining and entertainment expenses all plummeted after retirement. Groceries went up a touch and health care of course was a huge jump.

 

[Dentist]

Ignorant 401k contributor here who is now opening his eyes to fees. I'm currently around 1.4 ratio. I see a balanced fund that is 75% equity/20% bond/5% cash that only has 0.9 expense ratio - would be similar to my 80/20 stock/bond blend now - is it wise to move into that fund? It has comparable rates of return...

possibly, how old are you

 

[NajehHejan]

Ignorant 401k contributor here who is now opening his eyes to fees. I'm currently around 1.4 ratio. I see a balanced fund that is 75% equity/20% bond/5% cash that only has 0.9 expense ratio - would be similar to my 80/20 stock/bond blend now - is it wise to move into that fund? It has comparable rates of return...

possibly, how old are you

I am 39. Hope to retire around 67.

My company only matches up to 4%. I put in 10%. Am wondering if I should instead take the 6% and invest in a Vanguard index fund with .17 expense ratio. How do I figure out what is best, weighing in after tax or before tax money?

 

[Dentist]

Ignorant 401k contributor here who is now opening his eyes to fees. I'm currently around 1.4 ratio. I see a balanced fund that is 75% equity/20% bond/5% cash that only has 0.9 expense ratio - would be similar to my 80/20 stock/bond blend now - is it wise to move into that fund? It has comparable rates of return...

possibly, how old are you

I am 39. Hope to retire around 67.

My company only matches up to 4%. I put in 10%. Am wondering if I should instead take the 6% and invest in a Vanguard index fund with .17 expense ratio. How do I figure out what is best, weighing in after tax or before tax money?

do you utilize a roth ira (if elegible, i dont' know, you may make too much).

if you qualify for the Roth:

step 1) contribute enough to get full match

step 1a) do you have a proper emergency fund? if not, fund it. any bad high interest debts? if so eliminate those. are you properly insured? if not, insure up. Do you have a high deductible health insurance? if so, get money into HSA - the most tax blessed vehicle there is.

step 2) contribute to roth IRA until you reach the maximum $5500 (also if you are married and your wife has any earned income make sure she puts in as much as possible up to the max) With the roth you can get any investment you want.. like a vanguard S&P 500 ETF at 0.05%

step 3) if there is any money remaining go back to the 401k

 

[Slapdash]

Whenever I look at the numbers, it always stands out how much of our expenses are work-related. Needing multiple cars (with related gas/parking/maintance costs), business clothes, and inflated food costs really add up.

We could certainly live on 30% of what we currently make. Trying to shoot for 50% this year anyways. YMMV

I agree with this. While multiple cars may be a future reality still, I see how much i spend on dry cleaning, continuing education, disability insurance that's not employer provided, commute costs, etc. and I think 50-60% sounds easily do-able.

But then i remember the theory that "idle hands spend money"

and it's true. they do.

Being at work allows me to both generate money, and not spend money filling my time (yes, there are the aforementioned cost to work expenses).

But the traveling, the new hobbies, etc. I mean unless you really are going to watch a lot of TV and play used videogames on your deck and be committed to it.. it could be costly.

and if you're bored at home staring at your wife... well now you have divorce risk... or "remodeling" risk....

Maybe. It seems like for me that tired hands spend money. After a long day of work I don't feel like cooking, much rather go out eating/drinking. When I have somewhere to be early I don't make a pot of coffee, I just grab it once I get to the office.

One of my favorite hobbies has always been nice, long walks. Work certainly gets in the way of that one.

 

[NajehHejan]

Ignorant 401k contributor here who is now opening his eyes to fees. I'm currently around 1.4 ratio. I see a balanced fund that is 75% equity/20% bond/5% cash that only has 0.9 expense ratio - would be similar to my 80/20 stock/bond blend now - is it wise to move into that fund? It has comparable rates of return...

possibly, how old are you

I am 39. Hope to retire around 67.

My company only matches up to 4%. I put in 10%. Am wondering if I should instead take the 6% and invest in a Vanguard index fund with .17 expense ratio. How do I figure out what is best, weighing in after tax or before tax money?

do you utilize a roth ira (if elegible, i dont' know, you may make too much).

if you qualify for the Roth:

step 1) contribute enough to get full match

step 1a) do you have a proper emergency fund? if not, fund it. any bad high interest debts? if so eliminate those. are you properly insured? if not, insure up. Do you have a high deductible health insurance? if so, get money into HSA - the most tax blessed vehicle there is.

step 2) contribute to roth IRA until you reach the maximum $5500 (also if you are married and your wife has any earned income make sure she puts in as much as possible up to the max) With the roth you can get any investment you want.. like a vanguard S&P 500 ETF at 0.05%

step 3) if there is any money remaining go back to the 401k

Thanks for spoon feeding this to me. Makes a ton of sense. I do qualify for a Roth IRA – and am on it!

 

[igbomb]

Retirement savings is always one of those areas where I feel bad that I haven't given it more focus.

I have a defined pension that should pay between 50-60% of my final salary (depending on when I retire and hoping it is still there).

And then I put about 15% into a 401K once you factor in the matching.

I get so focused on other things that I just look at some high level advice that suggests I am doing enough without really getting down and running some numbers.

Plus the defined pension plan makes me nervous because I hear so much doom and gloom about their long term future.

I think my commitment this year is to pay more attention to this area. In the last month or two I have been paying attention to budgets for the first time in years and this can be my next step.

 

[Dentist]

Ignorant 401k contributor here who is now opening his eyes to fees. I'm currently around 1.4 ratio. I see a balanced fund that is 75% equity/20% bond/5% cash that only has 0.9 expense ratio - would be similar to my 80/20 stock/bond blend now - is it wise to move into that fund? It has comparable rates of return...

possibly, how old are you

I am 39. Hope to retire around 67.

My company only matches up to 4%. I put in 10%. Am wondering if I should instead take the 6% and invest in a Vanguard index fund with .17 expense ratio. How do I figure out what is best, weighing in after tax or before tax money?

do you utilize a roth ira (if elegible, i dont' know, you may make too much).

if you qualify for the Roth:

step 1) contribute enough to get full match

step 1a) do you have a proper emergency fund? if not, fund it. any bad high interest debts? if so eliminate those. are you properly insured? if not, insure up. Do you have a high deductible health insurance? if so, get money into HSA - the most tax blessed vehicle there is.

step 2) contribute to roth IRA until you reach the maximum $5500 (also if you are married and your wife has any earned income make sure she puts in as much as possible up to the max) With the roth you can get any investment you want.. like a vanguard S&P 500 ETF at 0.05%

step 3) if there is any money remaining go back to the 401k

Thanks for spoon feeding this to me. Makes a ton of sense. I do qualify for a Roth IRA – and am on it!

i think TD ameritrade has one of the finest options for Roth IRA's. It's what i recommend to my employees.

I would use it myself except that I don't qualify anymore, and if i did I qualify for the 30 free trades a month with Merill Edge through my Bank of America relationship, so that's low cost for me also.

 

[igbomb]

What is the single best do-it-yourself investment book? I've seen Bogleheads mentioned a couple times, and actually have it sitting on my shelf, and I've read The Intelligent Investor, but I'm curious what folks view as the go-to book.

 

[Dentist]

What is the single best do-it-yourself investment book? I've seen Bogleheads mentioned a couple times, and actually have it sitting on my shelf, and I've read The Intelligent Investor, but I'm curious what folks view as the go-to book.

what type of investing? retirement/passive/index fund investing? Active stock picking?

I thought that Bogleheads guide to retirement or their guide to investing was excellent for passive investing.. but it's nice to get a rounded viewpoint.

I thought Jane Bryant Quinn's "where to put your money now" was the most comprehensive personal finance book ever written (900 pages of advice for a HUGE number of situations.."

I thought Jim Cramer's "stay mad for life" was the most readable personal finance book, and while a few chapters are dated, the first few chapters of the book have some very good personal finance advice... now when he gets into stock picking, that's a different investing religion.

There's a book written by an indian guy called: "i will teach you to be rich" - i liked that book as well and it was very readable.

 

[wilked]

What is the single best do-it-yourself investment book? I've seen Bogleheads mentioned a couple times, and actually have it sitting on my shelf, and I've read The Intelligent Investor, but I'm curious what folks view as the go-to book.

You already mentioned it, Bogleheads. You don't need another book.

Intelligent Investor is great as well, but more theory-level.

 

[Slapdash]

What is the single best do-it-yourself investment book? I've seen Bogleheads mentioned a couple times, and actually have it sitting on my shelf, and I've read The Intelligent Investor, but I'm curious what folks view as the go-to book.

what type of investing? retirement/passive/index fund investing? Active stock picking?

I thought that Bogleheads guide to retirement or their guide to investing was excellent for passive investing.. but it's nice to get a rounded viewpoint.

I thought Jane Bryant Quinn's "where to put your money now" was the most comprehensive personal finance book ever written (900 pages of advice for a HUGE number of situations.."

I thought Jim Cramer's "stay mad for life" was the most readable personal finance book, and while a few chapters are dated, the first few chapters of the book have some very good personal finance advice... now when he gets into stock picking, that's a different investing religion.

There's a book written by an indian guy called: "i will teach you to be rich" - i liked that book as well and it was very readable.

I wasn't a big fan of I Will Teach You To Be Rich and Ramit seems way too slimy for my tastes.

I'll put a plug in for Your Money or Your Life. Not a book that teach you about investments. It will shift your perspectives towards work and saving.

 

[igbomb]

What is the single best do-it-yourself investment book? I've seen Bogleheads mentioned a couple times, and actually have it sitting on my shelf, and I've read The Intelligent Investor, but I'm curious what folks view as the go-to book.

what type of investing? retirement/passive/index fund investing? Active stock picking?

I thought that Bogleheads guide to retirement or their guide to investing was excellent for passive investing.. but it's nice to get a rounded viewpoint.

I thought Jane Bryant Quinn's "where to put your money now" was the most comprehensive personal finance book ever written (900 pages of advice for a HUGE number of situations.."

I thought Jim Cramer's "stay mad for life" was the most readable personal finance book, and while a few chapters are dated, the first few chapters of the book have some very good personal finance advice... now when he gets into stock picking, that's a different investing religion.

There's a book written by an indian guy called: "i will teach you to be rich" - i liked that book as well and it was very readable.

My MBA was light on personal finance (I specialized in Strategy) but I learned enough to come to the conclusion that passive investing in index funds is the way I want to ride. Stock picking is simply not a game I plan to play.

Frankly, I don't know that i have much to change. The 401k is sitting pretty good, the pension could be great, and when we wife re-enters the workforce in five years (she is an engineer) all of her money is retirement, kids education focused.

I just feel like I could do a bit more to understand that right formula.

 

[NewlyRetired]

This book is not specific to investing, but more to personal finance in general. It was a very good read for those trying to figure out how some people do it.

======================================

The Millionaire Next Door

http://www.amazon.com/The-Millionaire-Next-Door-Surprising/dp/1589795474/ref=sr_1_1?ie=UTF8&qid=1367260976&sr=8-1&keywords=the+millionaire+next+door

The bestselling The Millionaire Next Door identifies seven common traits that show up again and again among those who have accumulated wealth. Most of the truly wealthy in this country don't live in Beverly Hills or on Park Avenue-they live next door.

 

[JoeSteeler]

question:

is there a limit on the % of your income you can contribute? I know there is a $ limit but what about %?

If there isn't a limit what would stop me from getting a part time job for a few years and having 100% of my pay to a 401(k). Is this allowed?

I am well behind on where i shoud be as far as retirement goes and am thinking of doing this.

Thoughts?

 

[wilked]

question:

is there a limit on the % of your income you can contribute? I know there is a $ limit but what about %?

If there isn't a limit what would stop me from getting a part time job for a few years and having 100% of my pay to a 401(k). Is this allowed?

I am well behind on where i shoud be as far as retirement goes and am thinking of doing this.

Thoughts?

My understanding: The GOV has a $$ limit. Companies often impose a percentage limit. Check with your company. But it is well within the legal rules

 

[NewlyRetired]

If there isn't a limit what would stop me from getting a part time job for a few years and having 100% of my pay to a 401(k). Is this allowed?

Only fly in the ointment I can see is that not every company will offer a 401k plan to part time workers, especially those working only a few hours a week. At my last company I was with required 32 hours a week to continue to get the 401k benefit.

 

[Dentist]

question:

is there a limit on the % of your income you can contribute? I know there is a $ limit but what about %?

If there isn't a limit what would stop me from getting a part time job for a few years and having 100% of my pay to a 401(k). Is this allowed?

I am well behind on where i shoud be as far as retirement goes and am thinking of doing this.

Thoughts?

my mom is an employee of our company and put 99% into the 401k

conversely you could have a small part time gig and put 100% into a Roth IRA (not tax deferred, but would give you better choices)

 

[acarey50]

Ignorant 401k contributor here who is now opening his eyes to fees. I'm currently around 1.4 ratio. I see a balanced fund that is 75% equity/20% bond/5% cash that only has 0.9 expense ratio - would be similar to my 80/20 stock/bond blend now - is it wise to move into that fund? It has comparable rates of return...

possibly, how old are you

I am 39. Hope to retire around 67.

My company only matches up to 4%. I put in 10%. Am wondering if I should instead take the 6% and invest in a Vanguard index fund with .17 expense ratio. How do I figure out what is best, weighing in after tax or before tax money?

do you utilize a roth ira (if elegible, i dont' know, you may make too much).

if you qualify for the Roth:

step 1) contribute enough to get full match

step 1a) do you have a proper emergency fund? if not, fund it. any bad high interest debts? if so eliminate those. are you properly insured? if not, insure up. Do you have a high deductible health insurance? if so, get money into HSA - the most tax blessed vehicle there is.

step 2) contribute to roth IRA until you reach the maximum $5500 (also if you are married and your wife has any earned income make sure she puts in as much as possible up to the max) With the roth you can get any investment you want.. like a vanguard S&P 500 ETF at 0.05%

step 3) if there is any money remaining go back to the 401k

Thanks for spoon feeding this to me. Makes a ton of sense. I do qualify for a Roth IRA – and am on it!

i think TD ameritrade has one of the finest options for Roth IRA's. It's what i recommend to my employees.

I would use it myself except that I don't qualify anymore, and if i did I qualify for the 30 free trades a month with Merill Edge through my Bank of America relationship, so that's low cost for me also.

Do you do the backdoor ROTH? I know it is referred to a lot on the bogleheads site as a way to get money into a ROTH for those that don't qualify due to higher income. http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

 

[culdeus]

why does wife having earned income matter for roth ira?

 

[culdeus]

question:

is there a limit on the % of your income you can contribute? I know there is a $ limit but what about %?

If there isn't a limit what would stop me from getting a part time job for a few years and having 100% of my pay to a 401(k). Is this allowed?

I am well behind on where i shoud be as far as retirement goes and am thinking of doing this.

Thoughts?

I think 55% is the limit.

Edit: sorry, there is no irs limit. my company 55% is the max..

 

[Dentist]

why does wife having earned income matter for roth ira?

ask uncle sam, just the rules, bro

 

[Sand]

My company only matches up to 4%. I put in 10%. Am wondering if I should instead take the 6% and invest in a Vanguard index fund with .17 expense ratio. How do I figure out what is best, weighing in after tax or before tax money?

A 4% match is superb, BTW.

What is the single best do-it-yourself investment book? I've seen Bogleheads mentioned a couple times, and actually have it sitting on my shelf, and I've read The Intelligent Investor, but I'm curious what folks view as the go-to book.

You already mentioned it, Bogleheads. You don't need another book.

Intelligent Investor is great as well, but more theory-level.

I got a huge amount out of The Ivy Portfolio. The asset allocation parts of it were excellent.

 

[Doctor Detroit]

Finally watched this. I think fees definitely aren't spelled out well enough but I realized this in 1996 when I had my Roth IRA (think it was a tradional then) with Fidelity. They were gauging me for almost 4% and I could see it at that early stage of investing. At the time I was in college doing some lower-level finance courses and Vanguard seemed like the way to go. I moved my IRA over there in 1997 and never looked back.

Now I have the Thrift Savings Plan as a federal employee and that plan is also tied to indexs and with a very low fee structure. I think for those who have never thought about it before the program is very valuable and may allow you to adjust fire now before fee compounding wrecks your gains.

 

[culdeus]

why does wife having earned income matter for roth ira?

ask uncle sam, just the rules, bro

what's the penalty for violating this? Where the #### does it say this on the conty form?

 

[NewlyRetired]

why does wife having earned income matter for roth ira?

because the eligibility rules are based on your MAGI (modified adjusted gross income) from your taxes. This assumes you file jointly.

 

[NewlyRetired]

why does wife having earned income matter for roth ira?

ask uncle sam, just the rules, bro

what's the penalty for violating this? Where the #### does it say this on the conty form?

read here for how to fix. If you don't fix under a certain time limit, there is a 6% penalty per year.

http://fairmark.com/rothira/excess.htm

 

[guru_007]

What are you people doing to need 90% of your income when you retire? When I retire my house will be paid off for at least 10 years, both kids out of college so at most I'll have a monthly car payment. It doesn't cost much to play video games and drink beer on my porch.

Seriously. I will need like 30% of what I make. And I don't make much.

Are you guys assuming things are going to cost the same when you retire as they do now?

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. I guess bottom line it's better to have too much than not enough, but it reeks of slimy sales guy to me.

I think it's important to do the bolded.While I do not think that I'll be spending 80% of my household income now when I am in retirement, there are a ton of factors that most people don't take into account when saving for retirement.Assuming you just have money in a 401k or Traditional IRA, you will be paying taxes on all money you withdraw. Keep in mind that income tax rates today are at historically low rates. If the debt stays where it's at, and as more baby boomers are getting out of the workforce, that is going to be less money that the government collects in income taxes. Taxes will be going up, up, up. So, if you want to take out 50K per year in retirement, chop off conservatively 25% in taxes alone.And while hopefully I will not have a mortgage to pay, I will have another significant expense in health care.And no more day care or college costs, but I will more than likely need to travel to visit children/grandchildren and this will also cost money.Day-to-day expenses will still be there, utilities, property taxes, food, etc....And then you have to remember as you age you have a much greater chance of needed assisted living facilities which are unbelievably expensive.It adds up quickly, and once you take yourself out of the work force, there are no more raises coming, or bonuses, or opportunities to land a bigger and better job.

 

[BeTheMatch]

Stupid, somewhat related question. Dentist mentioned Health Savings Accounts. We've never used one. Always have had pretty good health insurance so never had any big expenses come up.

But son may have to get braces soon, and none of it is covered by insurance.

1) Are braces eligibile to be paid for by money in an HSA?

2) What if we put it in this year and then don't end up spending it? Does that just roll over or what happens? It's not like you lose it or something?

3) The big issue at my wife's work is there's only one time per year you can put money in, and that really doesn't seem to make sense to me, but that's how it is.

 

[James Daulton]

How much do people really need to retire? My parents have good pensions and some savings and they have more money now than when they were working. They probably bring in $80k in retirement income. My inlaws live off social security + $2k per month in pensions. They also live better now. They key it seems is no mortgage and little spending on anything other than vacations.

 

[Slapdash]

Stupid, somewhat related question. Dentist mentioned Health Savings Accounts. We've never used one. Always have had pretty good health insurance so never had any big expenses come up.

But son may have to get braces soon, and none of it is covered by insurance.

1) Are braces eligibile to be paid for by money in an HSA?

2) What if we put it in this year and then don't end up spending it? Does that just roll over or what happens? It's not like you lose it or something?

3) The big issue at my wife's work is there's only one time per year you can put money in, and that really doesn't seem to make sense to me, but that's how it is.

1) I believe so

2) Yes. As long as it is a HSA, you can keep what you have placed and even invest it once it is over a certain threshold.

3) HSA contributions are typically part of HR's health-care enrollment period. Just like you can't (usually) change your health plan mid-year, you can't change your contribution amount.

 

[inca911]

Stupid, somewhat related question. Dentist mentioned Health Savings Accounts. We've never used one. Always have had pretty good health insurance so never had any big expenses come up.

But son may have to get braces soon, and none of it is covered by insurance.

1) Are braces eligibile to be paid for by money in an HSA?

2) What if we put it in this year and then don't end up spending it? Does that just roll over or what happens? It's not like you lose it or something?

3) The big issue at my wife's work is there's only one time per year you can put money in, and that really doesn't seem to make sense to me, but that's how it is.

Braces = absolutely fine for HSA

HSA is not a Cafeteria Plan, so the money carries over into subsequent years.

My work allows changes to HSA contributions anytime.

Maxing HSA is after Roth IRA in terms of priority, and before remaining un-matched 401(k) contribution. You are certainly going to have health expenses in the future....

 

[BeTheMatch]

Thanks for the info, guys

 

[NajehHejan]

This article says that paying more than 1% expense ratio in your 401K is too much - do folks agree that <=1% is acceptable?

http://www.forbes.com/sites/stuartrobertson/2012/07/09/see-how-your-companys-401k-plan-stacks-up-in-three-simple-steps/

If you’re one of the many business owners with a 401(k) plan, you probably just received an important 401(k) plan fee disclosure document from your plan administrator that reveals, in greater detail than ever before, just how much you and your employees are paying in fees.

And while that document provides a lot of answers, it may also beg a few important questions including:

- Is my business paying too much?

- What are the most competitively priced plans charging in fees?

- How can we go about switching providers?

Answers to all of these questions can be found in three simple steps:

1. Calculate Your Employee Expenses

Using the new fee disclosure document that was sent to you by your provider, take the total amount of investment fees paid (total of fund expenses and all other investment fees) and divide that number by your plan’s assets. Ideally, use the average balance of your plan over the last year or your calculation will likely understate your fees.

2. Compare Costs of Plans Offered by Other 401(k) Providers

Now that you’ve calculated your employee fees, if that rate is greater than one percent, you know you’re in a higher priced plan – and that can cost your employees a very material and sizeable chunk of their retirement over a career. You’ll likely want to do some shopping around for a better deal. Some providers will create a custom cost comparison at no charge or obligation to help you see how different plans stack up.

3. Make the Switch if You’re Paying Too Much

 

[wilked]

Najeh: I personally think paying more than 1% is way too much. Gruecd made a great point though in that the percentage charged is highly dependent upon your company's size and plan.

If you list your choices, along with their respective ER%, people can advise on what might be good choices

 

[Slapdash]

Najeh: I personally think paying more than 1% is way too much. Gruecd made a great point though in that the percentage charged is highly dependent upon your company's size and plan.

If you list your choices, along with their respective ER%, people can advise on what might be good choices

If all of the funds in a company's plan are 1+%, wouldn't they just be better off only contributing till the match ends? Then put the rest in an IRA where you can get some reasonable fees.

 

[Chadstroma]

How much do people really need to retire? My parents have good pensions and some savings and they have more money now than when they were working. They probably bring in $80k in retirement income. My inlaws live off social security + $2k per month in pensions. They also live better now. They key it seems is no mortgage and little spending on anything other than vacations.

It depends on what you want your retirement to be and the expenses involved with that.

 

[Chadstroma]

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).

You are right- you didn't understand the statement. Hint: I never said a 401K and a Roth IRA are the same thing.