educate me 401-k

[tsorfas]

So i dont believe in any retirement plan. I am a firm believe that I save my money and invest my own way in things I believe in and trust.

however the company I work for has a fairly competitive benefits/retirement plan/package (as iv been told at least).

I just turned 4 years with them. I used to contribute from 3-6% in my 401k through out those 4 years.
the match my contribution up to 6%.

I currently have $23k in. what does that really mean?
when do i, if ever, i get that money?

I really am clueless about that stuff. some people I know put 10% and are well over 50k in about the same time (maybe a year more).

[Drewski]

If your company has a match, it's free money. Take advantage of it. You might not have true freedom on how to invest it, but you are still playing with some house money if there is some loss. Look at the specs of the plan, usually you need to be 62 for a 401K disbursement unless you meet certain hardship requirements and you will pay taxes on the disbursements once you reach age. Depending what you are looking for, your discipline and what your age is you might be better off in a Roth IRA where you invest post-tax income and you won't pay taxes on your disbursements once you reach age. Either way, great move to invest in your retirement, SS won't be there in another 20 years or so....

[breakdirt916]

So i dont believe in any retirement plan. I am a firm believe that I save my money and invest my own way in things I believe in and trust.

it's a risk either way...I'd invest in the 401k...ideally, max it out...if you can't, then put the highest amount you can comfortably contribute and forget about it

here are the generally accepted rules to finance:

1.) calculate how much you spend in a month, multiply by 6 - keep in your savings account and DON'T F'N TOUCH IT. = your e-fund
2.) max out your 401k and roth IRA (backdoor if you make a lot)
3.) auto debit your recurring bills and make sure your checking account covers it...knock out debt as soon as you comfortably can
4.) get a rewards CC that maximizes your benefits and auto pay it off every month
5.) live below your means, save the rest of the cash...if you're good at investing, make that cash work for you. If you suck, put it in a Vanguard acct.
6.) ???
7.) retire @ 65...race for fun, have a gf on the side as a bang maid

or

marry an older rich broad

[RandyO]

I believe you can start drawing from a retirement plan 401k or IRA when you are 59½ without penalties, and there are exceptions for hardships. (downturn in economy and late notice on a mortgage payment is a hardship) a Roth IRA you can extract any cash you have put in at any time without tax (you have already paid tax on Roth TRA money)

the advantage to investing in 401k or regular IRA, is that you defer paying taxes on any money until you draw it when you are theoretically making less money and in a lower tax bracket, however it doesn't always work out that way..... sometimes the investments are so good and over a long period, that when retirement comes, the annual returns on the investment that built up over the years is more than one earned while working

[csmutty]

Ideally you want to contribute 15-20% of your income to retirement each year after the match is accounted for. You are still young so your investment elections should be pretty aggressive to allow you the maximum return. Some 401k plans offer limited options when it comes to investing but you should be able to find a decent one that suits your needs.

401k also takes the money from your check before taxes are applied. So it lowers the dollar amount that is reported to the irs. You are taxed on the money when you withdraw it though. A roth ira on the other hand deals with money that has already been taxed and it will not be taxed for capital gains when withdrawn. I have one of each account to spread out my risk, but each has their own benefits. I love the freedom to choose investments in the roth.

[OreoGaborio]

the match my contribution up to 6%.

100% match???

NO.... BRAINER....

My employer matches a mere 10% of my contributuion, up to 3%

[GixerJockey]

So i dont believe in any retirement plan. I am a firm believe that I save my money and invest my own way in things I believe in and trust.

however the company I work for has a fairly competitive benefits/retirement plan/package (as iv been told at least).

I just turned 4 years with them. I used to contribute from 3-6% in my 401k through out those 4 years.
the match my contribution up to 6%.

I currently have $23k in. what does that really mean?
when do i, if ever, i get that money?

I really am clueless about that stuff. some people I know put 10% and are well over 50k in about the same time (maybe a year more).

I will call you later. 401K and retirement investing was my previous background. I shall explain all...

[TheIglu]

I put 15% in, company puts in 10%. Every year my raise increases my contribution instead of take-home. I go Roth since I am a believer that taxes will be higher when I retire than they are now.

If you aren't taking advantage of a 401k match, you are just throwing money away.

[GixerJockey]

Oh... and by starting a thread like this... prepare to receive...

I believe you can start drawing from a retirement plan 401k or IRA when you are 59½ without penalties, and there are exceptions for hardships. (downturn in economy and late notice on a mortgage payment is a hardship) a Roth IRA you can extract any cash you have put in at any time without tax (you have already paid tax on Roth TRA money)

^ BAD
and
v GOOD

Ideally you want to contribute 15-20% of your income to retirement each year after the match is accounted for. You are still young so your investment elections should be pretty aggressive to allow you the maximum return. Some 401k plans offer limited options when it comes to investing but you should be able to find a decent one that suits your needs.

401k also takes the money from your check before taxes are applied. So it lowers the dollar amount that is reported to the irs. You are taxed on the money when you withdraw it though. A roth ira on the other hand deals with money that has already been taxed and it will not be taxed for capital gains when withdrawn. I have one of each account to spread out my risk, but each has their own benefits. I love the freedom to choose investments in the roth.

...information.



What Randy meant to say is that there are 4 reasons that you can take money from your traditional 401(k) without paying the 10% early withdraw penalty. Buying or rescuing your primary residence, Education, Loss of spouse, Extraneous medical bills.

What Christian said is almost word for word what I told him two years ago about how to easily understand the basics of IRS Qualified Retirement Programs.

[tsorfas]

I am currently at 6% because that's what they match. I wouldn't put more.

What I mean I don't believe in a retirement plan such as the one described? I don't think someone else can manage my money better than me.
I'd rather get that 401k money and put them in a savings account that I will touch when I want. Or invest in real estate.

My retirement goal age is 35. It's a dream as much as a goal but that's what I want to accomplish in my life.

[TheIglu]

I don't think someone else can manage my money better than me.

I've been seeing a ROI of 14.5% for the last 3 years, 9.9% since starting it in 2007. If you think you can do better, by all means. For me, I put the money in and that's the end of my effort.


Real estate is a much bigger gamble. Potential higher returns, also potential huge losses.

Savings account ROI is so small that likely won't even keep pace with inflation, meaning you are losing money by keeping it there.


Have you done any of the math out to see how much you need to have set aside in order to retire at 35? 40? 45? etc?

[tsorfas]

I pay roughly $5000 a year interest on my mortgage. If I put that in my 401k they were invested the wrong way. That's my uneducated opinion.

Also when I say retired I just mean I won't have to work. I will hopefully have my own business with no need to me physically work.

Yes it's a bigger risk but pretty much my life is a bunch of risky moves. From moving here and forward that's all it was. And luckily it has been paying off for me

I just think it's not for me to hope to invest my money on plans like that. I might not even reach 62. What's good about 401K then? Nothing I assume.

I get that at 6% I am doubling the money I put and that's why I'm doing it. But if I can just pull out the money one day to buy a building or finance a business I'd rather do that. I still manage to do my retirement account on my own and it feels good that I have theoritically 23k in my
401k pretty much effortless and without really missing the money but usually when I need extra money I do extra work so I don't have to dig in into savings or anything like that.

[TheIglu]

I pay roughly $5000 a year interest on my mortgage. If I put that in my 401k they were invested the wrong way. That's my uneducated opinion.

Can you clarify that statement? Not sure what you are trying to say.


What funds are you invested in with your 401k funds?

What is your mortgage interest rate?

[csmutty]

What if things don't pan out and your risk changes?

I understand you want to maximize your returns but a 401k is a great place to build a nest egg for your future.

Try some of the calculators online that tell you how much you will need to save to retire.

[tsorfas]

I will have to look at my YTD 401k contributions.

My mortgage was originally 160k. I at 122k left in 2 years.

My interest rate is 3.75%. Last year I paid $5000 in interest. I roughly pay $400 interest on each payment.

- - - Updated - - -

What if things don't pan out and your risk changes?

I understand you want to maximize your returns but a 401k is a great place to build a nest egg for your future.

Try some of the calculators online that tell you how much you will need to save to retire.

Then I restart and try something else. That IF is just as big as what IF I don't reach 62?

[RandyO]

What Randy meant to say .

was that if a downturn in the economy causes you to be late on a mortgage payment is but one reason (been there, done that)

[RandyO]

What if things don't pan out and your risk changes?

I understand you want to maximize your returns but a 401k is a great place to build a nest egg for your future.

Try some of the calculators online that tell you how much you will need to save to retire.

401k is great if your company matches, also can depend on what it takes to get vested into the company matching funds

if not, IRA can be better deal

[Petorius]

I'm sure there is a personal finance book that you need to read, but I'm not sure what it is.

[stoinkythepig]

Then I restart and try something else. That IF is just as big as what IF I don't reach 62?

The better question is what if you reach the age/state where you are unable to keep a good paying job and you have no money? That would not suck as much as dying early, but it would still suck.

[csmutty]

If you die before 62 you are still going to leave money behind bro....

[JettaJayGLS]

Based on your beliefs, I think you're doing it right. You don't like IRAs, but you are smart enough to take advantage of the matching but stop there. The money you don't put in is being used for other investments like homes, business, etc... Seems logical to me. Risk/reward my friend. You understand the risks, its worked out well for you. I'd say continue what you're doing.

I am TERRIBLE with personal finances and investing. The only reason I contribute to my IRA is because I do not have the time to manage the money myself. I use it as a set it and forget it vehicle. Maybe down the line I'll change my thoughts, but right now I don't have a single minute to consider managing a portfolio. I choose to spend my little free time with my hobbies and friends. Managing a portfolio is not one of my hobbies so I leave it to someone else.

There is no right answer for anyone despite what the books tell you to do. That is my story and I'm sticking to it in order to sleep at night. I may not have a huge retirement, but I'm enjoying my life right now while I'm still young. That's my risk.

A lot of people regret not putting enough away for retirement. I'd be willing to bet even more regret not seeing the world, racing motorcycles, etc. while they had the chance.

[tsorfas]

Jay feels me.
The purpose of this thread is just for me to make sure I'm not missing out on anything in regards to 401k.
I will be fine to retire with or without 401k. I know that for a fact.

I just wanted to get a better understanding of 401k. If I can't touch that money til I'm 62 it's kinda pointless to me.

For all I know I might not even live here by then.

[Crimedog]

I think that a lot of you guys are confusing IRAs/401ks with mutual funds. A 401k or IRA is just a retirement account that gets invested in things. Most people put the funds into a mutual fund (ie 2050 retirement account) which is a professionally managed fund that has divested its pooled funds and adjusts its risk/growth objectives based on a future date. However the funds are there for you to invest how you like, you can buy stocks, mutual funds, bonds, etfs, whatever. Not all IRA/401ks allow you to take full control of them however. If you are managing your money, or having someone do it for you, you can do just as well with an investment account but the tax implications are obvious.

[Petorius]

Risk/reward my friend. You understand the risks, its worked out well for you. I'd say continue what you're doing.

I agree with everything Jay said except for this. Your comment below makes me question whether or not you truly understand risk. The past is not necessarily indicative of the future, and risk is not just a word to throw around lightly to justify why you think you are capable of obtaining greater returns than your investing peers. I'm sure you know somebody who has been wiped out by a business venture gone sour. Make sure you KNOW, through and through, that this is a real possibility.

Yes it's a bigger risk but pretty much my life is a bunch of risky moves. From moving here and forward that's all it was. And luckily it has been paying off for me

[TheIglu]

I will be fine to retire with or without 401k. I know that for a fact.

I just wanted to get a better understanding of 401k. If I can't touch that money til I'm 62 it's kinda pointless to me.

For all I know I might not even live here by then.

That's you now saying that. Imagine yourself 30 years from now thinking "oh man, it's so nice to have this extra cushion of half a million sitting there."

For the small reduction in take home pay now(and the tax benefits it provides), you'll have quite a few more options financially when you decide it's time to stop.

I don't know enough about your situation to say weather your "retire at 35" dream is a pipe dream or not, but letting your money grow without having to work at it is never a bad thing.