401k discussion

[ksniperfox]

if you've never participated in some form of IRA/401k program dont litter this thread with useless info.

as an employee of QT, i take advantage of the 401k program. they match 50 cents up to 6% deferral from my paycheck. i do 7% just because i do a little bit more than the minimum. there are quite a few stocks, bonds, and retirement funds that i can choose to diversify my funds. pros and cons of each, keeping in mind that i am only 21, making a little over 40k...im all ears to any advice/thoughts on the subject, as my knowledge of them is nearly 0.

if someone can tell me how to make a screenshot it would be tremendous help so i dont have to type all this **** out.

[tony]

Go aggressive, this is what my portfolio looks like

58.42% DFA INTL VALUE II
18.98% LIFEPATH 2040 (Fidelity)
11.42% T ROWE MID CAP GRTH
10.01% VANG GRTH INDEX INST
0.60% FID GROWTH & INCOME
0.58% INDEXED STOCK FUND

97% of my portfolio is in stock investments (international has been good to me for the past couple of months) and I see an average return of about 12%-17% a year.. not too bad all things considering.

I did change my asset classes this year so the 12-17% based off of previous asset allocation and not my current one.. I'm trying something a bit different this year with 58% in International funds. I'm down 3.9% this year (an improvement from -11% in february) but the way the market has been the risk is more than worth the reward in the long run.

[ksniperfox]

i started mine late in january, so i havent gotten any reports/returns yet i dont think. i will post them later-im goin to bed lolz.. +reps given


ill get you later it says i have to spread.

[civic95]

Here's a quick rule:

Take your age, and subtract it from 120. Thats the amount you should have in stocks. So in your case 99% of your money should be in stocks. The remaining 1% you can put into bonds or a money market stable value fund. Bonds are stable, but have little returns. Stocks are volatile, but can have better rewards. Over a 30 yr period the stock market has averaged an 8% increase in value per year. You can't get that with bonds. Having too much in bonds or stable value funds can cost you hundreds of thousands of dollars by retirement age.

Now as far as what funds, you haven't told us what you even have to select from. It's a good idea to diversify into large, midcap, and small cap stocks. They all have their advantages. I would put a good percent in a international fund if available. Pick up a good finance book. Like Jim Cramers "Stay Mad for Life". Lots of good info in there, that I don't feel like typing 2 pages to repeat.

Main thing is watch the funds fees. There are a lot of funds out there ripping people off in fees, and most people don't even notice.

Also if you can contribute more now, DO IT. There is nothing better than starting early. Contributing 15% for 1 yr now, will pay off more than contributing 10% the next 5 yrs. Trust me.

Here's a little comparison. Just imagine starting at your age. The more you can throw at it now, the easier the rest of your life will be.

[magicandmisc]

I have an IRA with Edward Jones and have all my assets in a company called Lord Abbott. This is a funds of funds, which means that all of your money isn't in one basket. The Lord Abbott Company puts my money in different branches of the market. I have mutual funds/certificate of deposits/stocks.

In long term savings you want to be diverse having some high risk and some blue chips (Wal-Mart, Coke, Companies that will always make money). When you are young you want to have more high risk than low risk stocks because you can take a hit while you are young, but when you are old you want to have more low risk stocks than high risk stocks because if a high risk stock crashes all your assets will be depleted and you will have less money to retire on.

Now, I know you think you are saving a little more than minimum, but you are not. In all of reality you should save at least 10%. If QT is matching 50 cents (per dollar you save, I assume) that means you are going to be saving $4000 a year at your salary of $40,000 a year at 7% savings rate.

BUT, if you save 10% you will save A LOT more $$$$$$ and be able to retire earlier.

If you save 10%, that means you are saving $4,000 a year of your own money. QT will give you $1,200 (6% of $40,000 divided by 2) a year as long as you save at least 6%. So that means you will be saving $5,200 a year instead of just $4,000.

With money, the more you save now the more you will have later (no ****). So if you save more while you are young, you can retire a lot earlier.

Wanna guess how old I am?

[ksniperfox]

I have an IRA with Edward Jones and have all my assets in a company called Lord Abbott. This is a funds of funds, which means that all of your money isn't in one basket. The Lord Abbott Company puts my money in different branches of the market. I have mutual funds/certificate of deposits/stocks.

In long term savings you want to be diverse having some high risk and some blue chips (Wal-Mart, Coke, Companies that will always make money). When you are young you want to have more high risk than low risk stocks because you can take a hit while you are young, but when you are old you want to have more low risk stocks than high risk stocks because if a high risk stock crashes all your assets will be depleted and you will have less money to retire on.

Now, I know you think you are saving a little more than minimum, but you are not. In all of reality you should save at least 10%. If QT is matching 50 cents (per dollar you save, I assume) that means you are going to be saving $4000 a year at your salary of $40,000 a year at 7% savings rate.

BUT, if you save 10% you will save A LOT more $$$$$$ and be able to retire earlier.

If you save 10%, that means you are saving $4,000 a year of your own money. QT will give you $1,200 (6% of $40,000 divided by 2) a year as long as you save at least 6%. So that means you will be saving $5,200 a year instead of just $4,000.

With money, the more you save now the more you will have later (no ****). So if you save more while you are young, you can retire a lot earlier.

Wanna guess how old I am?

i dont do guess work. 19.

[ksniperfox]

BONDS
PIMCO Total Return Bond
CASH AND EQUIVALENTS
American Beacon Select Money Market
STOCK
American Funds Washington Mutual
Vanguard Institutional Index
Vanguard Mid Cap Index
American Beacon International Equity
TARGET RETIREMENT
Vanguard Target Retirement 2005
Vanguard Target Retirement 2015
Vanguard Target Retirement 2025
Vanguard Target Retirement 2035
Vanguard Target Retirement 2045

[magicandmisc]

i dont do guess work. 19.

WOW, im impressed, that is how old I am.

[getto301]

BONDS
PIMCO Total Return Bond
CASH AND EQUIVALENTS
American Beacon Select Money Market
STOCK
American Funds Washington Mutual
Vanguard Institutional Index
Vanguard Mid Cap Index
American Beacon International Equity
TARGET RETIREMENT
Vanguard Target Retirement 2005
Vanguard Target Retirement 2015
Vanguard Target Retirement 2025
Vanguard Target Retirement 2035
Vanguard Target Retirement 2045

not too fond of target date funds by vanguard, i like T rowe price a bit better, I would suggest a Roth IRA if your young, your 20 something, a Roth Ira would let you take out your innicatial contribution on such things as 1st home purchase n etc (of course theres a limit to how much you can take out approx 10 k i belive). However, since your employeer matches your contribution i suggest to fatten up your 401k to a nice level and then roll it over to a IRA



becarefull of funds with 12b1 fees and large fees, they will eat away into your investment, invest agressive, and during a little bit shaky economy like todays, i play large cap stocks, a few mid caps, and a good amount of ETFs a majority being foreign investments etfs and new energy sectors.

peace

[civic95]

I would suggest a Roth IRA if your young, your 20 something, a Roth Ira would let you take out your innicatial contribution on such things as 1st home purchase n etc (of course theres a limit to how much you can take out approx 10 k i belive

You can take out your contributions at anytime. Because they were after tax dollars to begin with. You only pay a penalty if you take out money you've earned before 59 1/2. The nice thing about a ROTH is you're not taxed on your withdrawals at retirement like with a 401K.

But I would still advise contributing to a 401K to get the full employer match, and then start a ROTH. Otherwise you're letting free money get away.

[1SICKLEX]

At 21, you are going to be FAR ahead of the game by the time you retire. Someone posted the chart above starting at 30, which shows the difference. Starting at 21, you can triple your retirement b/c the ten years from 20-30 will just compound like mad.

I've invested in 401k since 20 and here is my advice.
1. Invest in Stocks. No need for bonds, plenty of time to make back your money if you lose it.
2. Don't check your balance everyday, it will make u go nuts, unless you are truly into the stock market.
3. TODAY, I recommend investing into international funds.
4. DO NOT under any circumstance WITHDRAW your funds. Always loan it to yourself if you must. Withdrawing your 401k= tax rape (think 40% plus) and automatic red flag with the IRS

If you have debt, then I would just pick what the company matches and use the extra money to pay off the debt.

Good luck, you are on your way to a solid financial future!!!

[ksniperfox]

how much is the tax rate of 401k withdrawals after 59 1/2? how do IRAs work? if i can deposit pretax dollars into an IRA and not have it taxed when i withdraw, that seems better than 401k. but if i take my money that i earn that is already taxed, put it into an IRA, it is not taxed when i withdraw? are there age limits on it? seems like it is taxed, just the opposite way from 401k. are there any benefits to that?

everyone ive spoken to about it suggests investing into stocks, but i really need to look in detail as to what (fund?) contains which stocks and look at their quarterly and yearly reports? i think they have it online, but i never read much into it.

but say i do invest in stocks(i have already, as of january 2007), when and how would i see a return, or if the value of my share has gone up? if it goes up, can i sell/convert that $ into another fund?

as far as debt, i don't do debt. never had any never will, unless its a car i guess. or whenever i get a house. but nothing like a credit card debt.

sorry for all the questions, looking to learn all i can. im asking various sources-here, people i know, etc..+reps have been given to all positive posts. thanks.

[Jkuao]

how much is the tax rate of 401k withdrawals after 59 1/2? how do IRAs work? if i can deposit pretax dollars into an IRA and not have it taxed when i withdraw, that seems better than 401k. but if i take my money that i earn that is already taxed, put it into an IRA, it is not taxed when i withdraw? are there age limits on it? seems like it is taxed, just the opposite way from 401k. are there any benefits to that?

everyone ive spoken to about it suggests investing into stocks, but i really need to look in detail as to what (fund?) contains which stocks and look at their quarterly and yearly reports? i think they have it online, but i never read much into it.

but say i do invest in stocks(i have already, as of january 2007), when and how would i see a return, or if the value of my share has gone up? if it goes up, can i sell/convert that $ into another fund?

as far as debt, i don't do debt. never had any never will, unless its a car i guess. or whenever i get a house. but nothing like a credit card debt.

sorry for all the questions, looking to learn all i can. im asking various sources-here, people i know, etc..+reps have been given to all positive posts. thanks.

The tax rate is based on your income for the year(how much you withdraw that year). If you pull 20k/year you get taxed at the going tax rate for someone who makes that much in a year. If you think you're going to be in a lower tax bracket when you retire, the 401k works better. If you're thinking it'll be higher, the Roth IRA works better since you get taxed now and not when you retire. Given our current gov't financial situation, it's probably safe to say even if you expect to pull the same amt of money in retirement as working, you'll probably get taxed at higher rates in the future.

The traditional IRA works exactly the same as a 401k. No tax until you pull money out (retirement time). The Roth is the one that you pay tax now on and not when you retire.

Since you get a company match on the 401k, it's likely best to put money into the 401k up to the company match and then fund a Roth IRA after that. Then you have money in both untaxed and taxed accounts that you can pull on. The Roth is a great thing to have since you can keep all of the money that accrues over the years. You can pull from it in an emergency but that doesn't mean you shouldn't keep a 3-6 month emergency fund of cash anyway.

As for when you see returns, the accounts move up and down daily. My account swings 1-2k sometimes which hurts to see but the overall goal shouldn't be to move it around too often. Instead you should just be continually contributing money into the account. If some fund does grow really big, you may want to shift some money into other funds to lock in profits but you really don't want to do that more than once or twice a year. Moving stuff around just burns all of your gains on fees and trading costs. My solution has been to redirect my contributions to other funds to rebalance my portfolio rather than selling anything.

I currently put 10% in the 401k (company matches to 4%), max the Roth IRA, and then keep a decent cash reserve and some tax advantaged index funds and a few stocks in my regular trading account.

[ShooterMcGavin]

as others have said, go aggressive. i've recently signed up for a managed plan and they actually advised me to go even more aggressive than what i had originally.