PBS Frontline : The Retirement Gamble, sorta Must See (2 Viewers)

[Politician Spock]

I feel like this NY Times blog post describes a pretty brilliant idea. Not sure how we could execute it, and states would scream bloody murder before giving up all that revenue, but the idea of playing the lottery as putting money away for retirement just strikes me as perfect.

I think the federal government should just ban lotteries anyways. They are abhorrent.

Would you still feel that way if 50% of the money spent on lotteries was put into a savings fund for the person who bought the ticket?

Lotteries tax stupid people. That's just inherently wrong. What is done with the tax doesn't make it right.

 

[Steve Tasker]

Well, I finally crossed the threshold where I can't do a Roth IRA anymore.

I'm probably just going to convert all my 401k contributions to Roth 401k contributions and move forward.

It's a good problem to have, I realize.

Is there some reason where I would not shuffle over to the roth 401k that I'm not considering?

Look at you!!

 

[fatguyinalittlecoat]

I feel like this NY Times blog post describes a pretty brilliant idea. Not sure how we could execute it, and states would scream bloody murder before giving up all that revenue, but the idea of playing the lottery as putting money away for retirement just strikes me as perfect.

I think the federal government should just ban lotteries anyways. They are abhorrent.

Would you still feel that way if 50% of the money spent on lotteries was put into a savings fund for the person who bought the ticket?

Lotteries tax stupid people. That's just inherently wrong. What is done with the tax doesn't make it right.

Well, I don't exactly agree with your premise, but it seems to me that putting half the money in a savings fund would be a way to actually benefit the people you describe as stupid. Banning lotteries probably wouldn't result in those people making good investment decisions with the money they currently spend on the lottery.

 

[Slapdash]

I feel like this NY Times blog post describes a pretty brilliant idea. Not sure how we could execute it, and states would scream bloody murder before giving up all that revenue, but the idea of playing the lottery as putting money away for retirement just strikes me as perfect.

I think the federal government should just ban lotteries anyways. They are abhorrent.

Would you still feel that way if 50% of the money spent on lotteries was put into a savings fund for the person who bought the ticket?

Lotteries tax stupid people. That's just inherently wrong. What is done with the tax doesn't make it right.

Well, I don't exactly agree with your premise, but it seems to me that putting half the money in a savings fund would be a way to actually benefit the people you describe as stupid. Banning lotteries probably wouldn't result in those people making good investment decisions with the money they currently spend on the lottery.

I'm not sure why giving away half of your money on state promoted gambling is prefereable to keeping or spending it.

 

[matttyl]

How is this any different than whole term life insurance?

I don't understand. How is it the same as whole term life insurance?

Never mind. I skimmed the article the first time, now I follow their concept better. Not the worst idea ever.

Actually, life insurance wouldn't be a bad way to save for retirement, if it's what I think you were thinking.....

Say you have 1,000 people, age around 35 or so - all relatively healthy (aka insurable). If you're young and healthy like that, life insurance (especially term life insurance) is very inexpensive. Case in point - I wrote a $250k 20 year policy on a 30 year old female recently for $255 a year, and I remember thinking "I wouldn't take that bet."

What if each of those 1,000 people had a $100k, or $250k or $500k life insurance policy on themselves (30 year term), with the death benefit paid out evenly to the other 999 people in the group? If a 2nd person in the group died, the all the proceeds they received from the first person, along with their entire death benefit would be paid out evenly to the remaining 998 people.....and so on. And any death benefits paid could be put into an interest building account until the group reached age 65, or whatever retirement age used.

Say just 3% of the people died, that's 30 people. Say each had $500k of coverage on themselves. That's $15m to the remaining 970 people, or roughly $15.5k each. Say some of those people died early on (say year 6), and their death benefit earned 6% interest for the next 24 years. The "rule of 72" tells us that it would have doubled twice over, so their $500k claim would be $2M when the group reached 65. Wouldn't take much for everyone in the group to "walk away" at age 65 with $30k each - possibly a nice supplement for all of them.

 

[Sand]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

 

[Sarnoff]

I feel like this NY Times blog post describes a pretty brilliant idea. Not sure how we could execute it, and states would scream bloody murder before giving up all that revenue, but the idea of playing the lottery as putting money away for retirement just strikes me as perfect.

I think the federal government should just ban lotteries anyways. They are abhorrent.

Would you still feel that way if 50% of the money spent on lotteries was put into a savings fund for the person who bought the ticket?

Lotteries tax stupid people. That's just inherently wrong. What is done with the tax doesn't make it right.

Well, I don't exactly agree with your premise, but it seems to me that putting half the money in a savings fund would be a way to actually benefit the people you describe as stupid. Banning lotteries probably wouldn't result in those people making good investment decisions with the money they currently spend on the lottery.

I'm not sure why giving away half of your money on state promoted gambling is prefereable to keeping or spending it.

In the whitepaper, and in the UK Premium Bond program, it appears that the lotto ticket buyer keeps all (not half) of the money invested. That is, if a lotto ticket is $10, and the ticket loses, it can still be redeemed later for $10. Unless I'm reading it wrong?

 

[fatguyinalittlecoat]

In the whitepaper, and in the UK Premium Bond program, it appears that the lotto ticket buyer keeps all (not half) of the money invested. That is, if a lotto ticket is $10, and the ticket loses, it can still be redeemed later for $10. Unless I'm reading it wrong?

I think this is correct, but I can't imagine anyplace in the U.S. where the government would actually subsidize the playing of the lottery, even if it would be a good idea. I've been using 50% because that's roughly the amount of "profit" the government currently makes on the lottery.

 

[Politician Spock]

I feel like this NY Times blog post describes a pretty brilliant idea. Not sure how we could execute it, and states would scream bloody murder before giving up all that revenue, but the idea of playing the lottery as putting money away for retirement just strikes me as perfect.

I think the federal government should just ban lotteries anyways. They are abhorrent.

Would you still feel that way if 50% of the money spent on lotteries was put into a savings fund for the person who bought the ticket?

Lotteries tax stupid people. That's just inherently wrong. What is done with the tax doesn't make it right.

Well, I don't exactly agree with your premise, but it seems to me that putting half the money in a savings fund would be a way to actually benefit the people you describe as stupid. Banning lotteries probably wouldn't result in those people making good investment decisions with the money they currently spend on the lottery.

I'm not sure why giving away half of your money on state promoted gambling is prefereable to keeping or spending it.

In the whitepaper, and in the UK Premium Bond program, it appears that the lotto ticket buyer keeps all (not half) of the money invested. That is, if a lotto ticket is $10, and the ticket loses, it can still be redeemed later for $10. Unless I'm reading it wrong?

Is that redemption amount the inflation adjusted amount?

If it is truely ZERO risk for gambling on the lottery, I'll empty my bank account and buy as many as I can.

 

[Sarnoff]

I feel like this NY Times blog post describes a pretty brilliant idea. Not sure how we could execute it, and states would scream bloody murder before giving up all that revenue, but the idea of playing the lottery as putting money away for retirement just strikes me as perfect.

I think the federal government should just ban lotteries anyways. They are abhorrent.

Would you still feel that way if 50% of the money spent on lotteries was put into a savings fund for the person who bought the ticket?

Lotteries tax stupid people. That's just inherently wrong. What is done with the tax doesn't make it right.

Well, I don't exactly agree with your premise, but it seems to me that putting half the money in a savings fund would be a way to actually benefit the people you describe as stupid. Banning lotteries probably wouldn't result in those people making good investment decisions with the money they currently spend on the lottery.

I'm not sure why giving away half of your money on state promoted gambling is prefereable to keeping or spending it.

In the whitepaper, and in the UK Premium Bond program, it appears that the lotto ticket buyer keeps all (not half) of the money invested. That is, if a lotto ticket is $10, and the ticket loses, it can still be redeemed later for $10. Unless I'm reading it wrong?

Is that redemption amount the inflation adjusted amount?

If it is truely ZERO risk for gambling on the lottery, I'll empty my bank account and buy as many as I can.

No, it's not inflation adjusted. A person buys a ticket at $X and gets the same $X back later, not the inflation-adjusted amount. The gov't uses the interest earned in the time between purchase and redemption to pay out the prizes.

 

[culdeus]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

Good article, not to hijack the focus here, but if 50% of people age 60 are 0% equity then they lost their ####### ### last year. Bond funds were what -3.5%+ inflation then their outflows.

 

[Politician Spock]

I feel like this NY Times blog post describes a pretty brilliant idea. Not sure how we could execute it, and states would scream bloody murder before giving up all that revenue, but the idea of playing the lottery as putting money away for retirement just strikes me as perfect.

I think the federal government should just ban lotteries anyways. They are abhorrent.

Would you still feel that way if 50% of the money spent on lotteries was put into a savings fund for the person who bought the ticket?

Lotteries tax stupid people. That's just inherently wrong. What is done with the tax doesn't make it right.

Well, I don't exactly agree with your premise, but it seems to me that putting half the money in a savings fund would be a way to actually benefit the people you describe as stupid. Banning lotteries probably wouldn't result in those people making good investment decisions with the money they currently spend on the lottery.

I'm not sure why giving away half of your money on state promoted gambling is prefereable to keeping or spending it.

In the whitepaper, and in the UK Premium Bond program, it appears that the lotto ticket buyer keeps all (not half) of the money invested. That is, if a lotto ticket is $10, and the ticket loses, it can still be redeemed later for $10. Unless I'm reading it wrong?

Is that redemption amount the inflation adjusted amount?

If it is truely ZERO risk for gambling on the lottery, I'll empty my bank account and buy as many as I can.

No, it's not inflation adjusted. A person buys a ticket at $X and gets the same $X back later, not the inflation-adjusted amount. The gov't uses the interest earned in the time between purchase and redemption to pay out the prizes.

Got it!

It still doesn't justify the govenment only using 50% of the lottery ticket revenue for the prizes when free market gambling shows 97% to be the fair amount.

If the government took that "$X" amount, paid out "$X times 0.97" in prizes, and used the remaining $X time 0.03 in a way that would benefit the lottery ticket purchaser in the future, then I would support that. I might even support it if the government went to 4%, 5% or even somewhat higher, because if it was 3% patrons of legal gambling businesses would get more back gambling on state lottery than they would in private gambling establishments. I don't know what percentage would balance it out. It would obviously depend on the return the lottery ticket gambler would get on the no-prize portion of their ticket.

Yes, I'm hung up on the 50% number government lotteries use. It's a number that was just pulled out of thin air. "What percentage should we make it?" one politician asked. "Let's make it 50%" said another. And the rest of government said "Sounds good!".

Let the fair percentage be determined by the people, and then stupid people won't be ripped off by government lotteries.

 

[wilked]

Well, I finally crossed the threshold where I can't do a Roth IRA anymore.

I'm probably just going to convert all my 401k contributions to Roth 401k contributions and move forward.

It's a good problem to have, I realize.

Is there some reason where I would not shuffle over to the roth 401k that I'm not considering?

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

 

[culdeus]

Well, I finally crossed the threshold where I can't do a Roth IRA anymore.

I'm probably just going to convert all my 401k contributions to Roth 401k contributions and move forward.

It's a good problem to have, I realize.

Is there some reason where I would not shuffle over to the roth 401k that I'm not considering?

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Explain to me how a roth401k is not virtually the same thing.

 

[Dentist]

Well, I finally crossed the threshold where I can't do a Roth IRA anymore.

I'm probably just going to convert all my 401k contributions to Roth 401k contributions and move forward.

It's a good problem to have, I realize.

Is there some reason where I would not shuffle over to the roth 401k that I'm not considering?

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Do you do that wilked?

This is the first year I don't qualify for the Roth IRA and honestly that system seems sketchy enough that I'm not going to do it.

 

[Slapdash]

Since we're talking about Roth: can I still open a Roth that counts for 2013? How do I go about doing so, though a fund vendor like Vanguard?

 

[culdeus]

Since we're talking about Roth: can I still open a Roth that counts for 2013? How do I go about doing so, though a fund vendor like Vanguard?

you can fund a 2013 roth up until you file your taxes for 2013

 

[Doctor Detroit]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

I've read this strategy before some years ago, and yes...it makes a ton of sense. I think you'd have to base the percentages on several variables including other income streams, health, legacy, etc. I would think tracking the S&P and reducing risk in small caps and international funds would also be wise, although I guess a lot of that is determined at where you are in that place in time.

I work with people in their 50s who have all their 401k money in US Treasuries. I try to tell them but they won't have it, they want to do things their own way. Others I have helped move into stocks, but most people just don't understand the Thrift Savings Plan or what the differing options are. At this point I am telling them to just dumb it down and select one of the life-cycle index funds offered, and let the algorithms do the work for them. Some have taken the plunge, others seem wary like I'm trying to sell them something. lol

 

[Dentist]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

I've read this strategy before some years ago, and yes...it makes a ton of sense. I think you'd have to base the percentages on several variables including other income streams, health, legacy, etc. I would think tracking the S&P and reducing risk in small caps and international funds would also be wise, although I guess a lot of that is determined at where you are in that place in time.

I work with people in their 50s who have all their 401k money in US Treasuries. I try to tell them but they won't have it, they want to do things their own way. Others I have helped move into stocks, but most people just don't understand the Thrift Savings Plan or what the differing options are. At this point I am telling them to just dumb it down and select one of the life-cycle index funds offered, and let the algorithms do the work for them. Some have taken the plunge, others seem wary like I'm trying to sell them something. lol

I also work with people in their 30's, 40's, and 50's that are all 100% money market.

The 401k plan we have at work even has target date funds to make it easy.

There are just people out there that liken the stock market to an absolute casino.. and that only read about it or hear about it when it's down violently... and to whom the idea of having a losing year... losing even a dollar of that money that they really don't even want to put in there in the first place would be 100X worse than any gains.

And furthermore the idea of taking a plunge into the market and making the wrong choice... that's also 100X worse than simply not making a choice to them.

I've been on the board for the American Dental Associations entire retirement platform... and the sheer volume of people nationwide that are either largely money market, or whom are 100% the default investment option (a moderate fund which isn't a horrible choice... but certainly isn't a good choice for everyone) is truly staggering.

Those 100% money market people will also probably complain that they don't have enough money for retirement when it comes... just as the people did that cashed out at the bottom (and those numbers were also staggering)

 

[Tiger Fan]

I love the target retirement date index funds. I'm mixed b/w that and S&P index funds

 

[The Ref]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

I've read this strategy before some years ago, and yes...it makes a ton of sense. I think you'd have to base the percentages on several variables including other income streams, health, legacy, etc. I would think tracking the S&P and reducing risk in small caps and international funds would also be wise, although I guess a lot of that is determined at where you are in that place in time.

I work with people in their 50s who have all their 401k money in US Treasuries. I try to tell them but they won't have it, they want to do things their own way. Others I have helped move into stocks, but most people just don't understand the Thrift Savings Plan or what the differing options are. At this point I am telling them to just dumb it down and select one of the life-cycle index funds offered, and let the algorithms do the work for them. Some have taken the plunge, others seem wary like I'm trying to sell them something. lol

I also work with people in their 30's, 40's, and 50's that are all 100% money market.

The 401k plan we have at work even has target date funds to make it easy.

There are just people out there that liken the stock market to an absolute casino.. and that only read about it or hear about it when it's down violently... and to whom the idea of having a losing year... losing even a dollar of that money that they really don't even want to put in there in the first place would be 100X worse than any gains.

And furthermore the idea of taking a plunge into the market and making the wrong choice... that's also 100X worse than simply not making a choice to them.

I've been on the board for the American Dental Associations entire retirement platform... and the sheer volume of people nationwide that are either largely money market, or whom are 100% the default investment option (a moderate fund which isn't a horrible choice... but certainly isn't a good choice for everyone) is truly staggering.

Those 100% money market people will also probably complain that they don't have enough money for retirement when it comes... just as the people did that cashed out at the bottom (and those numbers were also staggering)

I think most of the assertions you make above are sound. With that being said.... and this should be by deliberate choice and not ignorance.... Im less and less opposed to having someone take an ultra conservative approach to investing so long as your earnings are good and you can live within your means.

If your making low six figures as a household and you have no debt and are well along the path to having your house paid off and most importantly are running at a relative positive cashflow every month THEN I can see not getting involved with "the Casino" that is Wall Street. To put it another way you dont need outsized returns to get to a retirement goal eventually in this situation. Nice returns help but if your running well and get caught up in a market crash when you are in your 50's then that sucks.

 

[wilked]

Well, I finally crossed the threshold where I can't do a Roth IRA anymore.

I'm probably just going to convert all my 401k contributions to Roth 401k contributions and move forward.

It's a good problem to have, I realize.

Is there some reason where I would not shuffle over to the roth 401k that I'm not considering?

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Do you do that wilked?

This is the first year I don't qualify for the Roth IRA and honestly that system seems sketchy enough that I'm not going to do it.

I don't do that, mainly because I have rolled over my previous company 401ks into a Traditional IRA. If you do that, then try to do a backdoor roth it gets extremely messy when figuring our basis, etc, and often makes it not worth it.

Lots of people do it, though, it is very legit.

Someone asked how it is different than a Roth 401K. Good question. The big differences are the same as those between 401ks and Roths, but three biggies:

1) Required minimum withdrawals for Roth 401k

http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions

"The RMD rules also apply to Roth 401(k) accounts. However, the RMD rules do not apply to Roth IRAs while the owner is alive."

2) Principal of contributions and seasoned conversions can be withdrawn at any time without tax or penalty from Roth. Not from Roth 401k, Also can use money for house downpayment, education with traditional, but not with Roth 401K (that is, without penalty)

3) A Roth is more flexible upon your death than a 401K. If you think you will be leaving an inheritance, the Roth is preferred.

 

[wilked]

For anyone reading this that did not max their Roth last year, I highly recommend doing so before Tax Season is up. If you can swallow it, go ahead and do 2014 while you are at it...

 

[Doctor Detroit]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

I've read this strategy before some years ago, and yes...it makes a ton of sense. I think you'd have to base the percentages on several variables including other income streams, health, legacy, etc. I would think tracking the S&P and reducing risk in small caps and international funds would also be wise, although I guess a lot of that is determined at where you are in that place in time.

I work with people in their 50s who have all their 401k money in US Treasuries. I try to tell them but they won't have it, they want to do things their own way. Others I have helped move into stocks, but most people just don't understand the Thrift Savings Plan or what the differing options are. At this point I am telling them to just dumb it down and select one of the life-cycle index funds offered, and let the algorithms do the work for them. Some have taken the plunge, others seem wary like I'm trying to sell them something. lol

I also work with people in their 30's, 40's, and 50's that are all 100% money market.

The 401k plan we have at work even has target date funds to make it easy.

There are just people out there that liken the stock market to an absolute casino.. and that only read about it or hear about it when it's down violently... and to whom the idea of having a losing year... losing even a dollar of that money that they really don't even want to put in there in the first place would be 100X worse than any gains.

And furthermore the idea of taking a plunge into the market and making the wrong choice... that's also 100X worse than simply not making a choice to them.

I've been on the board for the American Dental Associations entire retirement platform... and the sheer volume of people nationwide that are either largely money market, or whom are 100% the default investment option (a moderate fund which isn't a horrible choice... but certainly isn't a good choice for everyone) is truly staggering.

Those 100% money market people will also probably complain that they don't have enough money for retirement when it comes... just as the people did that cashed out at the bottom (and those numbers were also staggering)

There are some folks in their 30s who have voiced concern about a stock market plunge. I ask them, "when can you take this money?" Most don't know, they think this is some sort of savings account. When I tell they can't touch the money until 57.5 without serious penalties, they start to listen. Then I explain they actually want down markets in their path because they can buy more shares when the market is down, and then benefit later when the market stabilizes or takes off.

At a certain point I just tell them to read the information and then if they can have questions, they can ask me later. Again, I get the feeling that they think I'm trying to sell them something to benefit myself which makes absolutely no sense whatsoever.

 

[culdeus]

If I did this backdoor roth I would want to open a 2nd Roth account in case the IRS came kicking down my door and wanted my "clean" roth that hasn't been sodomized. Is that even allowed?

 

[wilked]

Why would the IRS kick down your door? It is all legal..

This stuff is all over Forbes, WSJ, etc

Example: http://www.forbes.com/sites/ashleaebeling/2012/01/20/the-serial-backdoor-roth-a-tax-free-retirement-kitty/

from the article: "It's a no-brainer if you have the cash to do it"

 

[culdeus]

BTW thanks everyone for the help here. It's really helped me get my #### together.

 

[Sand]

On another, completely different note, I was in a different situation this year in that I have ended up having a taxable investment account and my retirement 401k at about the same size. So for tax season I readjusted those. I sold a lot of items in the taxable for the tax loss, and rearranged my 401k and taxable such that all the tax inefficient items were in the 401k (Bonds, REITs, etc.) and the relatively tax efficient items are in the taxable. Probably worth .5% or so on total return.

There are articles out there (Bogleheads has one) that goes into it and helps you choose what goes where. Another way out there to squeeze a bit more out.

 

[Steve Tasker]

FWIW, backdoor Roth is legit.

 

[Spin]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

 

[Slapdash]

No Vanguard? Oooof.

 

[Spin]

No Vanguard? Oooof.

Yah, we have to use Principal.

 

[humpback]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

Another option would be to reduce your 401K contribution to 5% (the max of the match) and then fund a Roth IRA with the rest.

 

[inca911]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

I would recommend not increasing 401(k) above the 5% level at which your company is matching $ (#1 Savings Option). For a #2 Savings Option, start a Roth IRA and fund that with anything above the 5% (until Roth is fully funded). The Roth IRA should be #2, provided your short-term debt is not at high rates, else get rid of the high interest short term debt before funding the Roth IRA. You can still get the principle anytime from the Roth IRA if you need it, so it's much more flexible than the 401(k) and has next to no downside. Fully funding 401(k) is likely #3. If you have a HSA option, then things get a little more interesting from a choice perspective, after you take the free 401(k) $, which will always be your #1 goal--even if you have to get a loan to do so!

 

[streamkeeper]

Buy Forever Stamps.

Invest in your government's ineptitude and protect against inflation.

 

[Spin]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

I would recommend not increasing 401(k) above the 5% level at which your company is matching $ (#1 Savings Option). For a #2 Savings Option, start a Roth IRA and fund that with anything above the 5% (until Roth is fully funded). The Roth IRA should be #2, provided your short-term debt is not at high rates, else get rid of the high interest short term debt before funding the Roth IRA. You can still get the principle anytime from the Roth IRA if you need it, so it's much more flexible than the 401(k) and has next to no downside. Fully funding 401(k) is likely #3. If you have a HSA option, then things get a little more interesting from a choice perspective, after you take the free 401(k) $.

Yah, I have an HSA option as well. I contribute $30 out of each check into it, as well as "healthy incentives" from the company. We came to this number by just adding up our total medical expenses for 2013 and divided by 26 pay periods.

 

[KCitons]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

I've read this strategy before some years ago, and yes...it makes a ton of sense. I think you'd have to base the percentages on several variables including other income streams, health, legacy, etc. I would think tracking the S&P and reducing risk in small caps and international funds would also be wise, although I guess a lot of that is determined at where you are in that place in time.

I work with people in their 50s who have all their 401k money in US Treasuries. I try to tell them but they won't have it, they want to do things their own way. Others I have helped move into stocks, but most people just don't understand the Thrift Savings Plan or what the differing options are. At this point I am telling them to just dumb it down and select one of the life-cycle index funds offered, and let the algorithms do the work for them. Some have taken the plunge, others seem wary like I'm trying to sell them something. lol

I also work with people in their 30's, 40's, and 50's that are all 100% money market.

The 401k plan we have at work even has target date funds to make it easy.

There are just people out there that liken the stock market to an absolute casino.. and that only read about it or hear about it when it's down violently... and to whom the idea of having a losing year... losing even a dollar of that money that they really don't even want to put in there in the first place would be 100X worse than any gains.

And furthermore the idea of taking a plunge into the market and making the wrong choice... that's also 100X worse than simply not making a choice to them.

I've been on the board for the American Dental Associations entire retirement platform... and the sheer volume of people nationwide that are either largely money market, or whom are 100% the default investment option (a moderate fund which isn't a horrible choice... but certainly isn't a good choice for everyone) is truly staggering.

Those 100% money market people will also probably complain that they don't have enough money for retirement when it comes... just as the people did that cashed out at the bottom (and those numbers were also staggering)

There are some folks in their 30s who have voiced concern about a stock market plunge. I ask them, "when can you take this money?" Most don't know, they think this is some sort of savings account. When I tell they can't touch the money until 57.5 without serious penalties, they start to listen. Then I explain they actually want down markets in their path because they can buy more shares when the market is down, and then benefit later when the market stabilizes or takes off.

At a certain point I just tell them to read the information and then if they can have questions, they can ask me later. Again, I get the feeling that they think I'm trying to sell them something to benefit myself which makes absolutely no sense whatsoever.

This describes us a few years ago. My wife was making minimum contributions to her TSP and had all of it in the G fund since day one. I'm partly to blame, because I never understood what it all meant. During the downturn in 2008, we kept hearing about people losing big chunks of their TSP. At that point we decided we had better educate ourselves. I'm sure the balance would have been much higher had it diversified prior to 2008, but we had to start somewhere. My wife was hesitant to move any money, since she was looking at how little the balanced dropped compared to other people. I tried to explain that we are buying shares and that it's like anything else, you want to buy when it's on sale.

Our current obstacle is trying to estimate her FERS retirement, in order to establish savings for supplementing that.

 

[inca911]

I would recommend not increasing 401(k) above the 5% level at which your company is matching $ (#1 Savings Option). For a #2 Savings Option, start a Roth IRA and fund that with anything above the 5% (until Roth is fully funded). The Roth IRA should be #2, provided your short-term debt is not at high rates, else get rid of the high interest short term debt before funding the Roth IRA. You can still get the principle anytime from the Roth IRA if you need it, so it's much more flexible than the 401(k) and has next to no downside. Fully funding 401(k) is likely #3. If you have a HSA option, then things get a little more interesting from a choice perspective, after you take the free 401(k) $.

Yah, I have an HSA option as well. I contribute $30 out of each check into it, as well as "healthy incentives" from the company. We came to this number by just adding up our total medical expenses for 2013 and divided by 26 pay periods.

I'd get a HSA reserve setup by funding it a bit more before funding the Roth IRA. Maybe a $3k reserve, or more if you know something may be coming. HSA is funded by pretax contributions, so if you need $ for health reasons, you definitely want to have it come out of the HSA, instead of post tax $ from your savings or Roth IRA.

1. Free 401(k) money

2. HSA Emergency Medical Fund

3. Roth IRA (this is your savings fund for all other expenses, house included if you have to, as you can get principle out anytime with no penalty)

4. Mix* of Remainder of 410(k) / Build-up HSA (your HSA should also have investment options)

*I like maxing HSA before remainder of 401(k) if you have good investment options in the HSA. They are both pretax options, but you can get to HSA without penalty for medical emergencies vs. getting a loan from your 401k (a loan is only possible if you are employed still, I believe).

What's your debt look like for rates? You know the tax rate that you are avoiding via HSA, so it should be easy to fit the debt into the right spot for repayment vs. funding other investments. For example, if your debt is 10% interest rate, and you think market will perform at 5%, pay debt. If debt is 3% interest and you think market will perform at 5%, make minimum debt payments.

Paying debt faster still assumes you have a safety net of liquid capital (including Roth IRA principle as liquid for all uses, and HSA as liquid for medical only), as you can't get more loans if you are unemployed.

 

[wilked]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

what other debts do you have?

 

[Spin]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

what other debts do you have?

950 in a signature loan, paid pretty much all the interest on this as the early payoff option is 983. Monthly payments are 160.430 capital one card, ~12% interest (Its close to that anyhow) 25 min monthly payments

4500 salie Mae student loan, early pay off is at 3800, was originally 7k, monthly payments are 140

16k car loan was originally 19k, monthly payments are 350

~15k student loans, federal differed ATM

Rent, 1100 a month, lease is up in June

 

[Steve Tasker]

I've got an HSA at work, but the only investment option (as far as I can tell) is cash with minimal interest. As I start to accumulate a little more money, slowly but surely, into the account, I'm wanting to move it to a better investment.

Is there anything I can do with this? Roll it over into a personal HSA (kinda like a 401k to IRA rollover)? Or am I locked-into my payroll-deduction HSA?

I'm kinda a noob when it comes to HSAs.

 

[culdeus]

I've got an HSA at work, but the only investment option (as far as I can tell) is cash with minimal interest. As I start to accumulate a little more money, slowly but surely, into the account, I'm wanting to move it to a better investment.

Is there anything I can do with this? Roll it over into a personal HSA (kinda like a 401k to IRA rollover)? Or am I locked-into my payroll-deduction HSA?

I'm kinda a noob when it comes to HSAs.

HSAs usually have a 2k min to invest. You are locked in to your provider. If you are in year 1 and have some cash on hand you can go ahead and make a contribution to get over the minimum to invest and then roll from there. Just make sure you don't overtop the max or you pay a penalty. I forget what the max is this year $5600 or something.

 

[Sarnoff]

I think my HSA won't let me invest until I've been in it for a few years.

 

[UniAlias]

Super newb question.. My company doesn't match, they just simply give a certain percentage (3 or 4% I think) towards 401k. I do another 4% on top of that. But from a couple of the posts above it sounds like rather than contributing towards the 401k account I've had for quite some time, I would be better off using that money towards a Roth IRA? What is the difference between the two, just that Roth is more flexible in regards to withdrawing it if I need it?

 

[Mr. Pickles]

Super newb question.. My company doesn't match, they just simply give a certain percentage (3 or 4% I think) towards 401k. I do another 4% on top of that. But from a couple of the posts above it sounds like rather than contributing towards the 401k account I've had for quite some time, I would be better off using that money towards a Roth IRA? What is the difference between the two, just that Roth is more flexible in regards to withdrawing it if I need it?

Roth will have more investment options. That's generally the advantage over socking more cash in the company's 401k.

 

[Sarnoff]

Both have tax advantages & disadvantages. I can't remember which, but you're supposed to empty one completely first when you retire before touching the other. One is taxed now, the other is taxed later, but it's hard to anticipate for most people, now, what their tax situation is going to be in 30-40 years.

Anyway, I believe the thinking is max out the 401k's "free money" first. Free money has the best ROI, of course. Then, load up the Roth IRA because that's limited ($5500/yr), and once that window closes you're out. For most people, by that point the two are close to "in balance", which means that, on average, you're getting the advantages of both without having to figure out which one is really optimal. It's a "can't lose" strategy... if in the long run it turns out 40 years from now that the Roth IRA is better for you to dip into, then you've maxed it out all this time. If the 401k was what's better for your situation, you've gotten all the free money you could out of it. But I'm not a money expert.

 

[UniAlias]

Thanks guys. After reading up a bit on it, I still think it would be wise for me to continue contributing my measly 4% towards the 401K account since I'm already used to those pre-tax dollars being excluded from my paycheck.. but will probably look into opening a Roth IRA as well.

Currently I set aside $200 a paycheck towards what used to be an ING (Capital One now I think) savings account. Mostly just a rainy-day type of account which I sometimes have to dip in to, but the interest rate on it is #### now. Seems like I'd perhaps be better off throwing these funds in a Roth IRA account. I just always assumed that all types of retirement accounts had stiff penalties for any early withdrawals.

 

[Slapdash]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

what other debts do you have?

950 in a signature loan, paid pretty much all the interest on this as the early payoff option is 983. Monthly payments are 160.430 capital one card, ~12% interest (Its close to that anyhow) 25 min monthly payments

4500 salie Mae student loan, early pay off is at 3800, was originally 7k, monthly payments are 140

16k car loan was originally 19k, monthly payments are 350

~15k student loans, federal differed ATM

Rent, 1100 a month, lease is up in June

Yeah, you need to pay this stuff up first. I would put anything over your match into an IRA afterwards and get some lower fees.

 

[Doctor Detroit]

Bit of new idea - the U shaped retirement. Pretty interesting and it makes a lot of sense.

I've read this strategy before some years ago, and yes...it makes a ton of sense. I think you'd have to base the percentages on several variables including other income streams, health, legacy, etc. I would think tracking the S&P and reducing risk in small caps and international funds would also be wise, although I guess a lot of that is determined at where you are in that place in time.

I work with people in their 50s who have all their 401k money in US Treasuries. I try to tell them but they won't have it, they want to do things their own way. Others I have helped move into stocks, but most people just don't understand the Thrift Savings Plan or what the differing options are. At this point I am telling them to just dumb it down and select one of the life-cycle index funds offered, and let the algorithms do the work for them. Some have taken the plunge, others seem wary like I'm trying to sell them something. lol

I also work with people in their 30's, 40's, and 50's that are all 100% money market.

The 401k plan we have at work even has target date funds to make it easy.

There are just people out there that liken the stock market to an absolute casino.. and that only read about it or hear about it when it's down violently... and to whom the idea of having a losing year... losing even a dollar of that money that they really don't even want to put in there in the first place would be 100X worse than any gains.

And furthermore the idea of taking a plunge into the market and making the wrong choice... that's also 100X worse than simply not making a choice to them.

I've been on the board for the American Dental Associations entire retirement platform... and the sheer volume of people nationwide that are either largely money market, or whom are 100% the default investment option (a moderate fund which isn't a horrible choice... but certainly isn't a good choice for everyone) is truly staggering.

Those 100% money market people will also probably complain that they don't have enough money for retirement when it comes... just as the people did that cashed out at the bottom (and those numbers were also staggering)

There are some folks in their 30s who have voiced concern about a stock market plunge. I ask them, "when can you take this money?" Most don't know, they think this is some sort of savings account. When I tell they can't touch the money until 57.5 without serious penalties, they start to listen. Then I explain they actually want down markets in their path because they can buy more shares when the market is down, and then benefit later when the market stabilizes or takes off.

At a certain point I just tell them to read the information and then if they can have questions, they can ask me later. Again, I get the feeling that they think I'm trying to sell them something to benefit myself which makes absolutely no sense whatsoever.

This describes us a few years ago. My wife was making minimum contributions to her TSP and had all of it in the G fund since day one. I'm partly to blame, because I never understood what it all meant. During the downturn in 2008, we kept hearing about people losing big chunks of their TSP. At that point we decided we had better educate ourselves. I'm sure the balance would have been much higher had it diversified prior to 2008, but we had to start somewhere. My wife was hesitant to move any money, since she was looking at how little the balanced dropped compared to other people. I tried to explain that we are buying shares and that it's like anything else, you want to buy when it's on sale.

Our current obstacle is trying to estimate her FERS retirement, in order to establish savings for supplementing that.

You can get pretty close by taking the number of years of service and multiplying it by 1.1%. Here is a link with some calculators.

 

[KCitons]

Our current obstacle is trying to estimate her FERS retirement, in order to establish savings for supplementing that.

You can get pretty close by taking the number of years of service and multiplying it by 1.1%. Here is a link with some calculators.

Been running some of those numbers. It's her high three years X 1% X number of years. The 1.1% is if she retires after age 62. Finding the high three number is the trick. The only way to know this number for certain is to contact the OPM. You might be able to get close by using tax returns or W2's, but high 3 does not allow for bonuses or overtime. I have a rough idea, but will need to wait to get confirmation.

I would like to set a course where she can retire at 57. We're not sure her eyesight will hold up for another 8 years, but we can't do anything about that. Hopefully the government doesn't pull the FERS supplement between now and then.