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educate me 401-k

  1. #51
    Lifer tsorfas's Avatar
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    Re: educate me 401-k


    My house value is currently up $40k since I bought it. There is a long story behind it about a major upgrade that happened in the area where my house is.

    I don't think a savings account is the way to go retire but I use it to save up money for my future investments.

    I also believe that the way I handle money I will most like never be in a situation where I would need to liquidate something so major like a house.

    I get what you saying and for most the way they handle money and finances it makes sense. For me it doesn't.

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  2. #52
    Your Father csmutty's Avatar
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    Re: educate me 401-k

    And they limit my 401k contribution at 15%. Ill never max that bish out haha.

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  3. #53
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    My goal when I bought the house was to pay it off in 5 years. I am planning on buying a second house as an investment in 2015 or start my own business.

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  4. #54
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by csmutty View Post
    Last time ceo told me that I listened. I have stopped putting extra on the mortgage and instead opened other investment accounts where I have earned much more than the 5.125% on my mortgage. Well worth it.
    But you don't know how long you ll keep your house or if you will end up paying it off. Completely different situation than me.

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  5. #55
    Lifer ilikenapalm's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    Half a mil? In 4 years I'm at 23k. How is $500k realistic?
    I'm ok at 6% contribution but even that I believe I can use in a better way.
    Compound interest.


    If you have Excel, pop this nifty equation in there and play around with it.

    Future Value= Present Value (1 + interest rate ) ^ number of periods

    So, just for giggles, with your current 23k in your 401k, and a 9% yearly return, you would have $128,901 in 20 years, and $305,156 in 30 years. This assumes you do not contribute any more to your account.

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  6. #56
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    The contribution limit is $17,500 for 2014 regardless of pay. The 15% thing hasn't been the rule for like 10-15 years.
    In 2015 it goes to $18k.

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  7. #57
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by ilikenapalm View Post
    Compound interest.


    If you have Excel, pop this nifty equation in there and play around with it.

    Future Value= Present Value (1 + interest rate ) ^ number of periods

    So, just for giggles, with your current 23k in your 401k, and a 9% yearly return, you would have $128,901 in 20 years, and $305,156 in 30 years. This assumes you do not contribute any more to your account.
    Got it. It's a great return if you think about it that. I don't know what my yearly return is to be honest but I assume 9ish is about right.

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  8. #58
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    But you don't know how long you ll keep your house or if you will end up paying it off. Completely different situation than me.
    I don't understand how keeping a house or paying it off or any increases in its value has anything to do with the fact that you pay less than ~5% on that debt while the market is returning double digits.

    CEO is right, you've lost money paying down the debt. It could have gone the other way-there is always risk-but it didn't.
    And honestly, beating the very low mortgage interest rates we are looking at these days isn't that hard.

    I went through the same thing with my father last year. He told me to stop paying the house down so aggressively. I really hate saying it.. but my old man was right, I was wrong.

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  9. #59
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    It all depends on what you planning on doing bubs.
    I'm paying of my mortgage because interest is legit mowny thrown away. Legit that's money you GIVE.

    Also at this stage in my life is very important to me to have the money in my bank ready to use it as a down payment to start whatever business I decide to start. And the equate in the house comes in play as well for the same exact reason.

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  10. #60
    Your Father csmutty's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    The contribution limit is $17,500 for 2014 regardless of pay. The 15% thing hasn't been the rule for like 10-15 years.
    In 2015 it goes to $18k.
    My company limits me at 15%. It's their policy that I can't go any higher.

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  11. #61
    Your Father csmutty's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    It all depends on what you planning on doing bubs.
    I'm paying of my mortgage because interest is legit mowny thrown away. Legit that's money you GIVE.

    Also at this stage in my life is very important to me to have the money in my bank ready to use it as a down payment to start whatever business I decide to start. And the equate in the house comes in play as well for the same exact reason.
    You aren't getting it bro. With the interest rate so low the extra money that you are putting towards the mortgage could make you more money than the amount in interest you would have saved.

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  12. #62
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    Legit that's money you GIVE.
    I get it. I write a mortgage check every month that includes a ludicrous chunk of interest that gets me nowhere.
    But on the flip side, I get a nice tax deduction for it. And the money I threw into the retirement account made TWICE AS MUCH as I lost to the mortgage co.

    Also.. and I'm no business expert.. but doesn't having a lien on your house help protect you from liability if something goes horribly wrong with the business?

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    Quote Originally Posted by csmutty View Post
    My company limits me at 15%. It's their policy that I can't go any higher.
    Ah. Well, that blows. And by offering a plan, that probably prevents you from going your own on an IRA to make up the balance as well. That's a nice little FU.

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  13. #63
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by csmutty View Post
    You aren't getting it bro. With the interest rate so low the extra money that you are putting towards the mortgage could make you more money than the amount in interest you would have saved.
    Correct. It can go on things I believe and consider investments.

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  14. #64
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post



    Ah. Well, that blows.
    Some of you guys are seriously contributing more that 15% to your IRA? I find that crazy! But I guess it doesn't take much for that $17.5k limit to be a reasonable percentage of someones income.

    I think if you guys saw how little I have to show (in assets, not experiences) for what I make/the three years I've been out of school you'd call me crazy. Then again, I'm only three years out of school...plenty of time to save (or at least I keep telling myself that). Threads like this and activities of others make me question my personal decisions constantly...but living in the now, I have a lot of fun and I like to think I have a real solid career path ahead of me. Like I said in my previous post, I am TERRIBLE with personal finances. This is a cool thread to follow.

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  15. #65
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    Then loan I applied for (business) it was helpful that I had assets and so much into my house.

    Yes it is a liability depending on company structure.

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  16. #66
    Lifer gumby's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    It all depends on what you planning on doing bubs.
    I'm paying of my mortgage because interest is legit mowny thrown away. Legit that's money you GIVE.

    Also at this stage in my life is very important to me to have the money in my bank ready to use it as a down payment to start whatever business I decide to start. And the equate in the house comes in play as well for the same exact reason.
    Don't mean to get off topic. When you pursue your business venture, don't allow the lender to talk you into using your home equity/ownership to be used as collateral.

    JettaJay- Again, the sooner you can start, the more it grows... Even with conservative contributions.

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  17. #67
    Lifer obsolete's Avatar
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    Re: educate me 401-k

    I don't know what you plan on doing but a good piece of advice is to homestead your house and don't use it as collateral for a business loan.

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  18. #68
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by gumby View Post

    JettaJay- Again, the sooner you can start, the more it grows... Even with conservative contributions.
    Yeah, I'm not doing nothing. Company matches 50% up to 5%. So I pay 5%, they pay 2.5%. That's all I got in there.

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  19. #69
    Lifer Not Sure's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    I don't think someone else can manage my money better than me.
    The odds are you're wrong on this, and I'm not breaking your balls but based on this thread I'm guessing the odds are really against you in particular. You're not alone, most people can't manage their money better than strong financial planners / firms. Not everyone, but definitely most. In reading this it also doesn't seem like you want to be educated on 401Ks, it seems like you want to counter most of the advice (a lot of it it solid IMO) being posted. Just my view.

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  20. #70
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by Not Sure View Post
    The odds are you're wrong on this, and I'm not breaking your balls but based on this thread I'm guessing the odds are really against you in particular. You're not alone, most people can't manage their money better than strong financial planners / firms. Not everyone, but definitely most. In reading this it also doesn't seem like you want to be educated on 401Ks, it seems like you want to counter most of the advice (a lot of it it solid IMO) being posted. Just my view.
    I want to be sold on 401k if it's worth it.
    Luckily for me though the fact that I moved here with $700 and where I am today shows that I know very well how to manage my money.

    2 1/2 years ago I had this entire forum (and a bunch of other people) tell me it's IMPOSSIBLE to get a mortgage with a a 6month credit history that involved one secured card and one authorized user account. I think I already proved that was wrong.

    Again want to make my point clear. I don't think 401k is awful. Like I said I'm already contributing what my employer matches. I am a very firm believer I know what to do with my money. And my investment in the things I believe, trust and control will have a greater pay out for me.

    I already learned a couple of things about 401k that I didn't know. Enough to at least satisfy me
    For the amount I have contributed and will continue to contribute.

    There are people that I consider extremely knowledgable here and I truly value and respect their opinions. That's why I post threads like that. I have no problem saying that I don't know shit about a specific topic. Unfortunately sometimes on forums I have to deal with some show offs who are ignorant and just want to talk but luckily it's easy to filter them out.

    To me the fact that I have a basic understanding about how 401k works now is already a win. Up until now it was just another line on my paystub. But I will totally argue the point that I am a better investor than someone who doesn't know my life and my life goals when it comes to my money. And if I fail I want it to be my mistake, not because
    I trusted a system or a third party professional.

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  21. #71
    Lifer Not Sure's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    the fact that I moved here with $700 and where I am today shows that I know very well how to manage my money.
    Not necessarily, but I wish you luck over the long haul.

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  22. #72
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    If your goal here is to prove the rest of the world wrong, well.. best of luck.

    A 401k with employer match is eleventy billion percent worth it. The government has gone out of its way to make this the best way to save money for retirement. Not taking advantage of it is like saying "no thanks" to a raise. It's part of your compensation package. Just do it.

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  23. #73
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Regarding how to invest..

    I've recently got myself hooked on the idea of managing my own investments using very low-cost index funds. Basically follow this 3 fund or lazy portfolio technique. This means I have to manage the allocation between the funds myself. I use a variation of the "age in bonds" rule modified for my personal tolerance for risk and goals. I keep a spreadsheet and update it 4-6 times a year, more if the market gets wacky. If my asset allocation starts to diverge from the rule I set up, I rebalance and/or change my contributions. It really isn't hard and only requires about an hour every month or two. I think the key is to come up with a plan and stick to it.

    Alternatively you can either hire a manager to do this sort of thing for you by picking individual stocks and bonds directly. Obviously this costs more. The key is to find someone good enough to earn you enough of a premium to offset their fees.

    Or you can use one of the managed mutual funds offered by almost every major investment firm. Fidelity, Vanguard, everyone has them. For a long time I used these as they are completely hands off.

    Finally, you can dig into the world of investing and start picking your own investments. Personally, I've got other things I'd rather do. But I know a lot of people that really enjoy that sort of thing.

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  24. #74
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post

    A 401k with employer match is eleventy billion percent worth it.
    would seem that way, but 401k plans are not insured by FDIC, all your money can go into a bad investment, what difference it make if your money is matched or not

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  25. #75
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Wow. Here and I thought I was risk adverse.

    I'm not at that stage of life, so I haven't looked into it that much. But it looks like FDIC backed CDs are available in my IRA account. T-bonds are too, if that's your bag. Looks like neither is available through my employer sponsored 401k. But I believe I can roll money from the 401k to an IRA to open up those options, if I were so inclined.

    In my opinion that would be CRAZY for someone Savas age though. He should have a shit-ton of higher risk/higher return stocks at this stage. Just my opinion.

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