401k (discussion)

[4dmin]

401k (discussion)

I saw a really good specially on FRONTLINE last night on PBS on 401k and there are alot of things i didn't know. Its very crazy and alarming the info they had on this show.

What i didn't know that 401k was a supplemental retirement plan introduced back in the 70's b/c a few big companys were having issues (Kodak, Xerox)... after this got introduced companys found out it would be cheaper for them to do away w/ pentions and go to this system.

On the avg pention plan the empolyees shell out around 15% of cost and employers 85%, w/ the 401k this has shifted and employees are now taking on more cost approx 55% of cost while having to manage their own retirement.

I also found out that the avg middle income person needs to have 8x their annual salary when they retire to be able to carry them through, most are retiring w/ 3-4x their salary which is less then 1/2 of what they should. The census last night was we will be redefining RETIRED; many will have to work through retirement age to live comformatably.

From most of the what i heard on this 401k needs to be reformed along w/ social security.

I personally for one am not enrolled, I can't afford the luxury of 5-15% of my pay taken out since i have a wife in school fulltime. We need all of the money we make until she finishes school; then i plan on enrolling.

anyones thoughts...

[tony]

401k (discussion)

I saw a really good specially on FRONTLINE last night on PBS on 401k and there are alot of things i didn't know. Its very crazy and alarming the info they had on this show.

What i didn't know that 401k was a suplemental retirement plan introduced back in the 70's b/c a few big companys were having issues (Kodak, Xerox)... after this got introduced companys found out it would be cheaper for them to do away w/ pentions and go to this system.

On the avg pention plan the empolyees shell out around 15% of cost and employers 85%, w/ the 401k this has shifted and employees are not taking on more cost approx 55% of cost while having to manage their own retirement.

I also found out that the avg middle income person needs to have 8x their annual salary when they retire to be able to carry them through, most are retiring w/ 3-4x their salary which is less then 1/2 of what they should.

From most of the what i heard on this 401k needs to be reformed along w/ social security.

anyones thoughts...

Yep I knew of this when I started putting into my 401k, basically big corporations put the responsibility on the employees. I dont really have time right now but I'll expand on it later.

[B16a2 Civic]

how much do ya'll put in ya 401k?

my job offers to put .5% of every 1% we put in it up to 6%...so naturally i have 6% in mine

[tony]

I put about $120 every two weeks and the company matches %80.. since I'm 25 I go pretty aggressive with my portfolio but this week has been rough.. lost almost $500 after the federal reserve announced they were raising interest rates again.

[B16a2 Civic]

I put about $120 every two weeks and the company matches %80.. since I'm 25 I go pretty aggressive with my portfolio but this week has been rough.. lost almost $500 after the federal reserve announced they were raising interest rates again.

yeah i feel ya.
on an everage, i think i put almost 100$ every month, im 22 now, and i've been building my 401k since i was 18.
Have you ever taken a loan out on it?
BTW, who is your 401k provider, mine is Merril Lynch

[tony]

yeah i feel ya.
on an everage, i think i put almost 100$ every month, im 22 now, and i've been building my 401k since i was 18.
Have you ever taken a loan out on it?
BTW, who is your 401k provider, mine is Merril Lynch

Fidelity, I took a $5000 disbursement like two years ago and it was the dumbest thing I could have done.. taxed at 10% AND I would have had well over $20k by now had I not taken that out.

I'm about to take a loan out but its for my business, and I will pay it back promptly.

[B16a2 Civic]

Fidelity, I took a $5000 disbursement like two years ago and it was the dumbest thing I could have done.. taxed at 10% AND I would have had well over $20k by now had I not taken that out.

I'm about to take a loan out but its for my business, and I will pay it back promptly.

yeah, i believe when you take a loan out on it for buisness, house loan or hardship, they dont tax as much or the interest rate to pay it back isn't as high, i forgot which.
i was going to get a loan through my 401k, but ended up going through a credit union.
To be honest, alot of people dont look at the big picture when it comes to 401k, my friends ( my age or younger) always say " i'll be old, what will i need money for".
i think 401k's are one of the best systems out there, weather its trying to save money or always having that something to fall back on, just in case

[silver]

I am right there with you Paul.. I cant afford to have anything taken out.. but I AM enrolled in 401k... But I only have like 2% taken out.. i put my salary as $28,000 so only like $20 a paycheck gets taken out every 2 weeks.. yeah its not much but its something.. and one day when I can put more I will..

Actually to be honest.. I do get paid salary and when I started having my 401K taken out, it's pretax so my taxable pay actually increased my paycheck after taxes by $30.. So at the same time I am setting up my retirement, and getting more money after taxes.. so we will see how that works out when tax tmie comes, lol...

But you should try it.. you can always un-enroll.. start with 1%, yeah its not much.. but its something.. and you barely will even notice it gone..

[v3rd1g0]

i'm pretty young and stupid, but what's 401k? lol

[4dmin]

But you should try it.. you can always un-enroll.. start with 1%, yeah its not much.. but its something.. and you barely will even notice it gone..

ya i'm looking now for a new job i plan on starting it w/ the next job... kate will be out in a year and half so we are good

[B16a2 Civic]

i'm pretty young and stupid, but what's 401k? lol

its like a retirement plan fund/savings acct
not your typical savings acct, where you can get the money whenever you want, you get it in your later years in life, most companies try and offer this and give a certain percentage too.
Honestly, its agood thing to have....if you have the money to spare for it now....in your later years when your not workign and pullign reirement from your company, your 401k will come in handy, im sure Tony can put it in a more intelligent way, i just cant word it out right, im sure you kind of get it

[B16a2 Civic]

also, with certain 401k's, you can get a loan out of it, but the taxing on it is a bitch ( like tony said), some companies have great interest rates

[B16a2 Civic]

Paul, can you add another option to the poll LIRL
" i am enrolled but i put in a small ammount of my check in there"

[ShooterMcGavin]

enrolled in mine, managed by vanguard. i get matched completely up to 2%, then 75% matching for the next 3%, so naturally i've got in 5%. i'm only 24 now so i figure i can get away with only putting this little away for now.
funds been doing ok so far, i don't really keep track of it too much (although i should).

[4dmin]

Paul, can you add another option to the poll LIRL
" i am enrolled but i put in a small ammount of my check in there"

isn't that the same as saying "i'm enrolled but i put in the min"....

[B16a2 Civic]

isn't that the same as saying "i'm enrolled but i put in the min"....

almost, but i get your point

[~The_Duke~]

I am enrolled and I put in the amount that my company will match at the end of the yr.

[tony]

Mannnn I have lost about $800 since last week in my 401k when the fed raised interest rates, every day its dropping like $200 but I'm trying not to make any changes.

[SniperJoe]

i think 401k's are one of the best systems out there, weather its trying to save money or always having that something to fall back on, just in case

Actually, I typically only recommend that people put the maximum amount that the company will match into a 401k. From a tax viewpoint, there are many more advantageous vehicles that will result in you paying less taxes long term. In addition to this I don't want ANY of you to view this as "fallback" money. You want to have a dedicated cash reserve of 3 to 6 months of living expenses somewhere easily accessible such as a money market account.

[SniperJoe]

i'm pretty young and stupid, but what's 401k? lol

A 401k is a plan that allows you to save money on a pre-tax basis (as in before the government takes taxes on it). You set it up so that the money is taken directly from your check so that you never see it. Some employers will match the amount that you take out (it depends on the employer and what their terms are). You cannot touch the money without penalty until you are 59 and a half and once you DO start taking the money out, you have to pay the normal income tax rate on it.

[LiL PaKi]

I used to have 401k at my previous job and now since I am part-time my current job doesn't offer that benifit to me... do u know if there is a way to have 401k without out going through the company you work for?

[tony]

I used to have 401k at my previous job and now since I am part-time my current job doesn't offer that benifit to me... do u know if there is a way to have 401k without out going through the company you work for?

That would be an IRA, Individual Retirement Account.. but of course that is only the money you put in. A ROTH IRA seems to be the best option.

[ShooterMcGavin]

someone here that can explain what makes a ROTH IRA special/desirable?

[SniperJoe]

someone here that can explain what makes a ROTH IRA special/desirable?

In a Roth IRA, you take after tax money and invest it and when you pull the money out (past 59 and a half), it is tax free.

[ShooterMcGavin]

ah ok, now i recall someone telling me this. therefore the benefit is you're protecting yourself against potentially higher tax rates in the future.

[threehundred]

I have 401K. My company matches 100% for the first 4%. I give 4%.

I'm on a very aggressive plan, with 70% of my 401k allocated to International Stock assets and 30% in stable assets.

Tony,
Even though you are "losing" money, that is simply because the value of your stocks is going down. If you don't change anything, then that means each week (or payday), you will automatically buy more stock. You will be buying it at this new low price. When the stocks go back up, you will, theoretically, have more money than you would have if you changed your allocations when the stocks were down. We're young, stay aggressive and the trends will level out.

As far as the high interest rates on loans, you are paying the high interest rate TO YOURSELF, so who cares. Its all your money, no matter how you look at it. The only time we will ever be REALLY taxed on it is after retirement when you are just drawing from it (not taking loans). Hopefully by then, the Fairtax laws will be in place, and we won't pay taxes on it then either.

[SniperJoe]

ah ok, now i recall someone telling me this. therefore the benefit is you're protecting yourself against potentially higher tax rates in the future.

It isn't neccessarily a question of possible higher rates in the future, it is simply a question of paying the taxes on the money now, when it is small or in a few decades, when the money has grown substantially.

I have 401K. My company matches 100% for the first 4%. I give 4%.

I'm on a very aggressive plan, with 70% of my 401k allocated to International Stock assets and 30% in stable assets.

Tony,
Even though you are "losing" money, that is simply because the value of your stocks is going down. If you don't change anything, then that means each week (or payday), you will automatically buy more stock. You will be buying it at this new low price. When the stocks go back up, you will, theoretically, have more money than you would have if you changed your allocations when the stocks were down. We're young, stay aggressive and the trends will level out.

As far as the high interest rates on loans, you are paying the high interest rate TO YOURSELF, so who cares. Its all your money, no matter how you look at it. The only time we will ever be REALLY taxed on it is after retirement when you are just drawing from it (not taking loans). Hopefully by then, the Fairtax laws will be in place, and we won't pay taxes on it then either.

You forget about the penalty that you pay when you take that money out, though. That's a pretty big chunk that goes out to the IRS. And threehundred, in regards to your allocation in your 401k, I think that you should take a serious look at some domestic securities versus the hugely weighted international. A proper allocation could possibly give you a similar return, but at less risk.

[Julio]

401 k is great.. I wish I wouldve start earlier in my life, Im 27 now.. Ah If I wouldve start when I was 18 how nice that account would be looking.. oh well live and learn I guess.
Mines with frankilin Templeton/ Fidelity Blue Chip Growth Fund, 7% every week.. is looking good right now =]
Company I work for also has a program called STARS wich is cool.... I put no money into it but they do for me depending on there stock value for each quarter. They calculate everything based on 10% of my gross income for each quarter. There is a vested period though. But hey, once that time is up wich is 5 years, If I want I can take that money out and invested elsewhere and still continue to rack up more cheese without investing one penny.

Never take a loan out against your 401k.. dumbest move you can make please.

check out www.clarkhoward.com for more info on all this stuff.

[ALVIN]

lol I don't have a 401k yet...I will in a few years when I have more money to do so with. I do, however, have a savings account with bank of america. I know you might be thinking a lot of people have those but the way I do mine is every $1k-1.5k I make a CD (certificate of deposit, i believe) which yields a higher interest rate, therefore making more money than if it was just sitting in a regular savings account. I started when I was 17 and I have $15k saved up...i'm 19 now. Ohh and thats with $35 a week into the savings.

[Schugg]

i was enrolled at my old job but at my new job i dont think i can do it.

[Julio]

lol I don't have a 401k yet...I will in a few years when I have more money to do so with. I do, however, have a savings account with bank of america. I know you might be thinking a lot of people have those but the way I do mine is every $1k-1.5k I make a CD (certificate of deposit, i believe) which yields a higher interest rate, therefore making more money than if it was just sitting in a regular savings account. I started when I was 17 and I have $15k saved up...i'm 19 now. Ohh and thats with $35 a week into the savings.

Look around, Im willing to bet there are a few better banks out there with a better rate then bank of america.
But either way, thats cool what you got going on

[Julio]

i just did some research.. BOA is paying rigth w. a "SPECIAL OFFER " 4.12.. thats nothing.. you can def find better and make more cheese =]

[SniperJoe]

i just did some research.. BOA is paying rigth w. a "SPECIAL OFFER " 4.12.. thats nothing.. you can def find better and make more cheese =]

Yeah, you can get a Money Market account with a better rate than that.

www.bankrate.com is a great tool to find the best rates.

[Julio]

Yeah, you can get a Money Market account with a better rate than that.

www.bankrate.com is a great tool to find the best rates.

werd, just today I opened an account with hsbc .. trying to boot Ingdirect.. they are falling behind in the interest rate war going on with online investing.
Waiting on a confirmation from hsbc to transfer all my $$$ out of ING.

[{X}Echo419]

anything short of putting your $$$ in a savings account is risky(and even that holds some risk). unfortunatlly savings accounts intrest rates blo. IMHO

[SniperJoe]

anything short of putting your $$$ in a savings account is risky(and even that holds some risk). unfortunatlly savings accounts intrest rates blo. IMHO

That's not necessarily true. There is some risk that your purchasing power will go down if the interest rate doesn't keep up with inflation (inflation risk).

[civic95]

Everyone needs to start a 401K, or contributing to an IRA asap. Every company used to provide a pension just about, but now they've almost all switched to matching a small portion of your 401K contribution. If you don't contribute you don't get that small benefit.

This is really scary to think about. Your relying on people to take the initiative or be intellegent/deligent enough to realize how much they are going to need this in their future. Sad thing is a lot of Americans don't even understand what it is, much less contribute to it. We are the nation that lives off credit. A lot of people will be 70 with 0 savings in the near future. The government needs to start enforcing that everyone contributes atleast 2-3% when they get hired, and leave them with the option of putting in more or its going to be bad for a lot of people.

[SniperJoe]

Everyone needs to start a 401K, or contributing to an IRA asap. Every company used to provide a pension just about, but now they've almost all switched to matching a small portion of your 401K contribution. If you don't contribute you don't get that small benefit.

This is really scary to think about. Your relying on people to take the initiative or be intellegent/deligent enough to realize how much they are going to need this in their future. Sad thing is a lot of Americans don't even understand what it is, much less contribute to it. We are the nation that lives off credit. A lot of people will be 70 with 0 savings in the near future. The government needs to start enforcing that everyone contributes atleast 2-3% when they get hired, and leave them with the option of putting in more or its going to be bad for a lot of people.

I'll give you another way to think about things:

Say on average, people that are reading this thread are 25 years old and on average, the retirement age is going to be 65. Everyone only has 40 years to save enough money to last them 25 to 30 years of retirement. Doesn't seem like so much time now, does it?

[{X}Echo419]

That's not necessarily true. There is some risk that your purchasing power will go down if the interest rate doesn't keep up with inflation (inflation risk).

that's what I'm sayin' savings accounts suck for a different reason.
Good Luck old people