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educate me 401-k

  1. #76
    Bizarro Zoolander Petorius's Avatar
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    Re: educate me 401-k


    Quote Originally Posted by nhbubba View Post
    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.
    Probably better to think of the service provided as "tailoring your portfolio to match your personal risk appetite/preferences" rather than earning a premium. There is no alpha, the market is the market. Or at least thats what I keep telling myself.

    If you dont want to make a hobby out of investing in securities and you don't want to pay a financial planner (directly), Vanguard offers "target" funds that attempt to provide risk profiles appropriate for various target retirement years. The portfolios are rebalanced over time to reduce risk as we near the target dates. Ie Vanguard Target 2055, Vanguard Target 2030. The Target 2055 will be much more aggressive now than the 2030.

    I guess the point for Sav, it is good that you are taking advantage of your company match. The next step is to consider how you are investing the money in the 401k. Your goal should not necessarily be to "beat" the market or other investors, but to choose your investments such that your portfolio matches your high appetite for risk. The secondary goal is to minimize the fees paid to the financial institutions (Fidelity, Vanguard, whatever it may be) while maintaining that portfolio. Frequent transactions cost the most money (generally), mutual funds cost a decent amount, and index funds generally cost the least.

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  2. #77
    Super Moderator TheIglu's Avatar
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    Re: educate me 401-k

    Also keep in mind, paying more towards your mortgage allows you to use that leverage to gain additional credit with significantly lower interest rates than typical car loans/credit cards/student loans.

    You make the decisions the best you can at the time given the information available. We refi'd right after the crash in '08. Got a really low rate and went to a 15 year loan. We refi'd again a couple years ago to a 10 year @2.65%. The investment of paying off the house early will be available far before retirement age. I'll be 40 and debt free. As in, absolutely nothing. That frees me to either retire then and let my wife finish her years as a teacher until she is out with full pension, or keep working and buy a retirement/vacation home somewhere warm.



    Had I known then what I know now, I wouldn't of gone to a 15 or 10. I would of gone to a low rate 30 and invested the difference. But at the time, it was sure thing vs oh shit the market just crashed everyone lost their shirt.

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  3. #78
    The NEW hot Setup Manny's Avatar
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    Perhaps you could educate the rest of us.

    What investments have you made that made money?

    I'm not talking about work or a house you love in. I'm talking about I invested 50k in xxxxx and now that asset or investment has appreciated to or paid out xxxxxx.

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  4. #79
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    Wow. Here and I thought I was risk adverse..
    the rules have probably changed, I have had 401k plans at 2 former employers, when I left the first employer for the second, I rolled the 401k over into the new one, I had to wait a year before I rolled it over to get the match money because that wasn't vested

    the second company's 401k I rolled over into my current IRA about 25 years ago, at least I didn't loose my own money I put into it, all the match money was invested back into the company, that ended up filling bankruptcy instead of paying dividends. When Roth IRA became available I stopped putting money into the regular IRA and opened a Roth IRA, both are invested in the same mutual fund, they done well over the years averaging 10-12% (worse -1.5% best 45%) and were a lifeboat for me a few years ago when I only had enuf work coming in to support my employees and not myself

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  5. #80
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by Petorius View Post
    ..Vanguard offers "target" funds that attempt to provide risk profiles appropriate for various target retirement years.
    They all offer these.. at a cost. And the cost isn't just the expense ratio listed on the fund fact sheet. Pay attention to turnover rate too.

    Lots to read, lots to learn.

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  6. #81
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Randy. A vesting period for match monies is neither unusual nor that much of a problem for me. You have to let that money chill at the old company for an extra year. Big whoop. We're talking long-game here.

    The idea that you were forced to invest all of a match into company stock is insane. I've never seen or heard a program like that. I'm far from an expert.. but that smells downright illegal.

    None of that changes the fact that a reasonably diversified 401k is a great tool for savings. Especially with employer match.

    Conversions I know less about. I've converted money from a old 401k to a personal IRA with no penalty or tax. I did this mostly because the 401k was too restrictive and had horrible reporting and service tools. I moved it all to an IRA with fidelity partly because I like their website. I've compared costs and Fidelity is competitive. So why not use the service with the nifty, easy to use website and wizbang graphics.

    I've never converted a 401k or IRA to a Roth. I may do some of that this year. I need to read up on the details and caveats.

    Random semi on-topic Q: Does anyone know what the deadline for doing a rollover for 2014 is? Is it like a Roth contribution where you can make the contribution for 2014 all the way up to 4/15/2015? Or does it need to be done in 2014? Would be nice to make this evaluation once I know my total income for 2014.

    Some of this shit is pretty fascinating.

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  7. #82
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by TheIglu View Post
    Also keep in mind, paying more towards your mortgage allows you to use that leverage to gain additional credit with significantly lower interest rates than typical car loans/credit cards/student loans.
    This doesn't make any sense to me. Are you saying having a very low loan-to-value (LTV) on your mortgage gets you better rates on other loans?
    If your goal is to live debt free, who cares?

    Legitimate questions. Wondering what I'm missing.

    A 10 year with rates in the 2's.. doode, you're made. I'd pay that loan as slowly as possible.

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  8. #83
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    Re: educate me 401-k

    Quote Originally Posted by RandyO View Post
    When Roth IRA became available I stopped putting money into the regular IRA and opened a Roth IRA, both are invested in the same mutual fund, they done well over the years averaging 10-12% (worse -1.5% best 45%)
    Not that it obviously has worked out well for you, but you're worried about FDIC insurance but put all your eggs in one mutual fund basket?

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  9. #84
    Super Moderator TheIglu's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    This doesn't make any sense to me. Are you saying having a very low loan-to-value (LTV) on your mortgage gets you better rates on other loans?
    Yes.

    This is two-fold.


    1. Rate on existing HELOC ($55k worth currently): 2.85% Try beating that with a stick compared to auto loans, student loans, other lines of credit.

    2. HELOC interest is tax deductable just like your mortgage interest(or at least that's what my tax guy tells me). Auto/credit card/etc is not. Even student loan interest is limited depending on your income (ours is over the threshold for claiming student loan interest). Any debt we have that is more than 2.85% gets paid off and put on the HELOC. We usually pay it off pretty quickly. My bank is happy to update the amount every few years to reflect our home value and difference to 80% principal. Last time it went from $17k to $55k.

    3. Remember, you don't get ALL your interest back in taxes. If you did, people wouldn't bother shopping around for a lower rate. You get some back, but there is a limit. It still benefits you to pay as little as you can to borrow money.

    At the same point of don't bother putting money into your savings account, a sizeable HELOC you can treat like a savings account. You can use it for unexpected spending and large purchases you normally would need a bunch of money sitting away unused in a savings account for a long time before use for. Yes, it is tied to your home, so always give yourself enough liquid assets to cover it in case of job loss or something, but that's what your retirement account can be used for in a pinch. Or have plenty of toys to sell. I've never bought anything with it I couldn't turn around and sell without anything more than a "Oh well, I'll miss that toy" feeling.


    And no, I don't put much more than I need to towards the 10 year loan. I do enough extra to shave off an extra year at the end. The difference in payment is less than one night out for dinner with me and the second income provider per month. That's worth it in my mind.

    Total interest saved from going from our 30 down to our 10 is in the mid $2xx,xxx range. That's a vacation/retirement house. Right now we're looking at buying property around Mountain City TN. Yeah, just north of the Dragon, still in the Smokey Mountains.

    There are many ways to save for the future. A retirement account is a very useful and valuable way to do so, but not the only way.

    In keeping with the OP's intent of the thread:

    Savas, max the 401K out if you can do so without hurting your other options. Keep in mind it is a really safe and tax-friendly way to accumulate wealth. It should not impact your other methods mentioned much (real estate, personal money management, business ventures, etc). As mentioned previously, that's $17.5k for 2014, $18k for 2015. If you can't do all of that, shoot for 15% of your pay. It comes out before your check and after a couple months you won't miss it. Hell, you'll probably get a bunch of that figure just from National Grid fixing your electric bill......

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  10. #85
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Alright. I'm with you on some of those points.

    I still say investing in a 401k >>> paying off your home right now. The rates are so silly low that there just isn't any incentive to pay it down. And the tax benefit makes it even sweeter. The "one night out for dinner" money could be stuffed into the market and returned 15% over the last year.

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  11. #86
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    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.
    Please tell me you have read that I'm putting in what my employer is matching.

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  12. #87
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Please tell me you no longer have doubts about doing that.

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  13. #88
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    Re: educate me 401-k

    Quote Originally Posted by Manny View Post
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    Perhaps you could educate the rest of us.

    What investments have you made that made money?

    I'm not talking about work or a house you love in. I'm talking about I invested 50k in xxxxx and now that asset or investment has appreciated to or paid out xxxxxx.
    0

    When I refer to an invest I mean flipping. Buying soemthing and making As profit out of it. Building/vehicle/business.
    I don't do stocks. I consider it a fancy form of gambling.

    I also believe the only stock on my profolio in my 401k by fidelity is att. And that's it.

    - - - Updated - - -

    Quote Originally Posted by nhbubba View Post
    Please tell me you no longer have doubts about doing that.
    I already now that I get how it works I feel better about the amount I have contributed and wi continue to contribute.

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  14. #89
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    Thanks Clay that was very helpful. And I appreciate the fact that your make it in sime English for me.

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  15. #90
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
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    When I refer to an invest I mean flipping. Buying soemthing and making As profit out of it. Building/vehicle/business.
    I don't do stocks. I consider it a fancy form of gambling.

    I also believe the only stock on my profolio in my 401k by fidelity is att. And that's it.

    - - - Updated - - -



    I already now that I get how it works I feel better about the amount I have contributed and wi continue to contribute.
    If you don't think you are invested in stocks what are you invested in?

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  16. #91
    I've been here before. Mustang'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.
    Looks like I had something to learn in this thread.

    Quote Originally Posted by RandyO View Post
    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
    The match is free money. If you choose to put both your money and the free money into an investment (which you have chosen) which goes down the tubes, then it's your fault. The FDIC insurance your bank account in case there's a run on the banks (i.e. the market crashes); but to get there, you elect to invest your money in an FDIC-backed bank and not Joey Boombat's Savings & Loan in a back alley on 24th St.

    RE: your other post Randy - if the company match only goes into company stock, then yes it's potentially worthless if the company you work for sucks. But that's related to an entirely different issue

    Quote Originally Posted by nhbubba View Post
    I've never converted a 401k or IRA to a Roth. I may do some of that this year. I need to read up on the details and caveats.

    Random semi on-topic Q: Does anyone know what the deadline for doing a rollover for 2014 is? Is it like a Roth contribution where you can make the contribution for 2014 all the way up to 4/15/2015? Or does it need to be done in 2014? Would be nice to make this evaluation once I know my total income for 2014.
    You can just start a Roth; you don't have to convert from traditional to Roth to have a Roth.

    The contribution rollover date should be 4/15/15 per traditional deadlines; but I haven't looked for 2014.

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  17. #92
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by csmutty View Post
    If you don't think you are invested in stocks what are you invested in?
    I think that's where the whole confusion happened and it might have been my mistake to use the word invest.
    When I say invest I don't mean stocks. I mean putting my money in better use which a better return (either in time or in amount) for me and the time being.

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  18. #93
    Back marker... jwm2k3's Avatar
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    Re: educate me 401-k

    I want to die owing millions...

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  19. #94
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by Mustang View Post
    The match is free money. If you choose to put both your money and the free money into an investment (which you have chosen) which goes down the tubes, then it's your fault. The FDIC insurance your bank account in case there's a run on the banks (i.e. the market crashes); but to get there, you elect to invest your money in an FDIC-backed bank and not Joey Boombat's Savings & Loan in a back alley on 24th St.

    RE: your other post Randy - if the company match only goes into company stock, then yes it's potentially worthless if the company you work for sucks. But that's related to an entirely different issue
    I understand that the match is free or "bonus" money above and beyond your regular salary and personal contribution

    you don't have to make a bad investment sometimes shit happens like in my case, had I been able to roll my 401k over without waiting , it would not have been affected so badly by October 19, 1987, Most companies have good 401k programs, other companies, the 401k options suck, while generally 401k's are safe, ya gotta research your company's 401k options like any other investment

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  20. #95
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k

    This thread motivated me a bit to actually look where the Merrill Lynch "Advice Access" tool was putting my money. It wasn't bad, but I went ahead and took a good bit out of the low risk items and moved them into the more aggressive funds.

    Thanks NESR for making me think on occasion.

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  21. #96
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by tsorfas View Post
    When I refer to an invest I mean flipping. Buying soemthing and making As profit out of it. Building/vehicle/business.
    I don't do stocks. I consider it a fancy form of gambling.
    Dude. It's all gambling. My neighbor across the street lost a quarter million on his house in 2 months in 2008. It could happen to you too!

    Buying stocks or mutual funds is exactly the same thing. You are not buying it to have it indefinitely. You plan to flip it for a profit some day.

    Some stocks even pay dividends. This means you get paid just to own the damned things. Making money for doing positively nothing. You should try it. It's 'murica baybe! Crack a brew and toss me a high-five.

    Quote Originally Posted by tsorfas View Post
    I also believe the only stock on my profolio in my 401k by fidelity is att. And that's it.
    You should reconsider that.

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  22. #97
    Super Moderator TheIglu's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    Alright. I'm with you on some of those points.

    I still say investing in a 401k >>> paying off your home right now. The rates are so silly low that there just isn't any incentive to pay it down. And the tax benefit makes it even sweeter. The "one night out for dinner" money could be stuffed into the market and returned 15% over the last year.
    Yes, I agree, with the stipulation that you really can't touch that money until 59.5 years of age. With match, I'm still putting in what equates to 20% in my retirement, so I'm not shorting myself there.

    I want to have something available in between when I want to stop working and when I can finally withdraw penalty free. That's where my 10 year mortgage comes in.

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    Last edited by TheIglu; 10-31-14 at 12:43 PM.
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    Super Moderator TheIglu's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    You should reconsider that.
    Savas, if you get anything out of this thread, Bub's point should be it.



    You are putting ALL your proverbial eggs in ONE very big basket. If you don't like gambling, then what you just said is like you putting quarters into a slot machine at Foxwoods while you say you don't like gambling.


    Spread it out into mutual funds. They invest in lots and lots of companies (like ATT), but at small percentages. The end result is a relatively safe bet for growth without the risk associated of a particular company losing value and sacking your entire account with it.

    And don't put it into just one mutual fund. Pick 3 or 4 that perform well historically (think long term) and have a low expense ratio (amount of money they keep out of the profits it makes to administer it for you). Some were already mentioned here in other threads.


    Just ask the employees of companies like Tyco how things worked out after they invested in nothing but their own company with their retirement funds. They took quite a beating. Diversify and protect yourself.

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    Last edited by TheIglu; 10-31-14 at 12:44 PM.
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  24. #99
    Lifer tsorfas's Avatar
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    Re: educate me 401-k

    I'm ok with moving my stocks to other options. I haven't considered that money available for a while anyways.
    But I don't know a thing about stocks.

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  25. #100
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by TheIglu View Post
    Yes, I agree, with the stipulation that you really can't touch that money until 59.5 years of age.
    Yes, you can. Read the link I posted earlier.

    I'm going to be looking into "back door"-ing some of mine this year into a Roth.

    Quote Originally Posted by TheIglu View Post
    And don't put it into just one mutual fund. Pick 3 or 4 that perform well historically (think long term) and have a low expense ratio (amount of money they keep out of the profits it makes to administer it for you). Some were already mentioned here in other threads.
    As I posted earlier, look into index funds. Expense ratios in the 0.07-0.05% ballpark if you are in for $10k or more, ~0.10% until then. I think this is the ticket for those not interested in watching the market continuously.

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