Retirement investing

[Saggy Aggie]

Alright 3ADL,

I've got a basic understanding of a lot of this stuff, but I'm admittedly new. I think I know what I want to do but I'm looking for advice from people who have been there and done that.

I intend to start contributing 6% of my salary to my company's 401K plan this year (of which, my company will match 3%). I'm opting to go with the Roth IRA for now since there are many advantages over a traditional IRA, namely:

Your earnings are not taxed,
Lower tax bracket now as opposed to later in life

Obviously sometime in the near future I'll crack the income limit for Roth IRA, but I'll cross that bridge when I get there.

I think the 401K is a no-brainer, but here's where 3ADL may be able to help me. Honestly, I might be looking for a professional financial advisor; haven't decided if I need one yet. So, if any of you happen to be one or know one that you'd recommend (in or around Houston would be even better), pm me.

Besides the 401K, I've got interests in a few individual stocks but I guess a simple stock trading site would be the way to go? E-trade? Scottrade? Something like that?

I've also got quite a bit of interest in investing in an index fund that mimics the S&P 500 (though I dont really think now would be that great of a time to buy in as the market is practically at an all time high?). I guess the best way to do that would be to sign up for something like the Vanguard 500 which has an expense ratio of 0.17% but a minimum investment of $3,000....

Any advice would be much appreciated or anyone who'd like to pm me on this subject, feel free. Thanks.

[coach]

Alright 3ADL,

I've got a basic understanding of a lot of this stuff, but I'm admittedly new. I think I know what I want to do but I'm looking for advice from people who have been there and done that.

I intend to start contributing 6% of my salary to my company's 401K plan this year (of which, my company will match 3%). I'm opting to go with the Roth IRA for now since there are many advantages over a traditional IRA, namely:

Your earnings are not taxed,
Lower tax bracket now as opposed to later in life

Obviously sometime in the near future I'll crack the income limit for Roth IRA, but I'll cross that bridge when I get there.

I think the 401K is a no-brainer, but here's where 3ADL may be able to help me. Honestly, I might be looking for a professional financial advisor; haven't decided if I need one yet. So, if any of you happen to be one or know one that you'd recommend (in or around Houston would be even better), pm me.

Besides the 401K, I've got interests in a few individual stocks but I guess a simple stock trading site would be the way to go? E-trade? Scottrade? Something like that?

I've also got quite a bit of interest in investing in an index fund that mimics the S&P 500 (though I dont really think now would be that great of a time to buy in as the market is practically at an all time high?). I guess the best way to do that would be to sign up for something like the Vanguard 500 which has an expense ratio of 0.17% but a minimum investment of $3,000....

Any advice would be much appreciated or anyone who'd like to pm me on this subject, feel free. Thanks.

Retirement? Aren't you still in High School?

[Rabid Cougar]

What's retirement?????

[bobcat1]

What's retirement?????Same thing as internment.

[Bullaholic]

Watch "Wolf of Wallstreet" several times....:D

[Rabid Cougar]

Same thing as internment.

is this "retirement" I see on your signature picture?

[caleb_mccaig]

I have a Roth IRA right now that I opened at the beginning of 2014 and the only downside is that there's a cap that you can invest per year, $5,500 if I'm not mistaken. I lost like $40 over my first year which I guess is better than losing the $5,500, but I told my advisor to be super aggressive so I'm not too upset.

[Saggy Aggie]

Thanks for the help guys...

[BwdLion73]

Thanks for the help guys...

I personally think (based on what I think is your young age) that you should be dumping closer to 12 to 15% of your salary into your retirement/investment. When I first got out of school and into the real world I endured all the jokes about moths and dust in my wallet along with snickers of he has every penny he has ever made. lol

I'm no finance adviser but I have used a lot of the Dave Ramsey tricks to my advantage. He can get old at times but he has some good info on what your investments could be worth.

[Rabid Cougar]

i personally think (based on what i think is your young age) that you should be dumping closer to 12 to 15% of your salary into your retirement/investment.


^^^^ this!!!!

At least until you get married, buy house and have kids etc.. If you can keep it up afterwards, more power to you.

[slingshot]

I am certainly not a retirement investing specialist, but... what I do is:

Stick back as much as you can--you will thank yourself later...
Put 10% in safe bonds, 40% in low cost safe funds--spread it around--some conservative, some aggressive, some precious metals based, 50% in stocks and break that down into--25% in large cap blue chip stocks, 20% in aggressive growth stocks and 5% into 'rocket riders' (small cap companies with high risk and possible high returns). This approach has worked for me. Others may think I'm crazy.

As you get older (each decade) move more into the safer investments--also rebalance your portfolio at least annually to keep the above %'s and lock in your gains and limit your exposure to risk.

[caleb_mccaig]

I am certainly not a retirement investing specialist, but... what I do is:

Stick back as much as you can--you will thank yourself later...
Put 10% in safe bonds, 40% in low cost safe funds--spread it around--some conservative, some aggressive, some precious metals based, 50% in stocks and break that down into--25% in large cap blue chip stocks, 20% in aggressive growth stocks and 5% into 'rocket riders' (small cap companies with high risk and possible high returns). This approach has worked for me. Others may think I'm crazy.

As you get older (each decade) move more into the safer investments--also rebalance your portfolio at least annually to keep the above %'s and lock in your gains and limit your exposure to risk.

If I had any balls whatsoever, I wouldn't even save. I'm totally convinced that the world will end in my lifetime or that the U.S. will get taken over or something and the average american when that happens will be thinking, "Wait, so when do I get all that money I saved up?"

[Farmersfan]

Alright 3ADL,

I've got a basic understanding of a lot of this stuff, but I'm admittedly new. I think I know what I want to do but I'm looking for advice from people who have been there and done that.

I intend to start contributing 6% of my salary to my company's 401K plan this year (of which, my company will match 3%). I'm opting to go with the Roth IRA for now since there are many advantages over a traditional IRA, namely:

Your earnings are not taxed,
Lower tax bracket now as opposed to later in life

Obviously sometime in the near future I'll crack the income limit for Roth IRA, but I'll cross that bridge when I get there.

I think the 401K is a no-brainer, but here's where 3ADL may be able to help me. Honestly, I might be looking for a professional financial advisor; haven't decided if I need one yet. So, if any of you happen to be one or know one that you'd recommend (in or around Houston would be even better), pm me.

Besides the 401K, I've got interests in a few individual stocks but I guess a simple stock trading site would be the way to go? E-trade? Scottrade? Something like that?

I've also got quite a bit of interest in investing in an index fund that mimics the S&P 500 (though I dont really think now would be that great of a time to buy in as the market is practically at an all time high?). I guess the best way to do that would be to sign up for something like the Vanguard 500 which has an expense ratio of 0.17% but a minimum investment of $3,000....

Any advice would be much appreciated or anyone who'd like to pm me on this subject, feel free. Thanks.


The Roth IRA and a 401K are two different plans and can't be combined. The 401K is a corporate plan and the IRA is a personal plan. Perhaps you are meaning a Roth 401K plan through your employer? The 401K with your employer's .5 to 1 match is the better bet for several reasons. #1. the .5 to 1 match which you can't get with a IRA. #2. the IRA will be limited to 5500.00 yearly contributions and the 401K enables you to put away a maximum of 17.5K. (plus a catchup allowance if over 50). Most employer 401K plan already have a asset allocation fund that is established based on your projected retirement date. It is already balanced based on your risk tolerance (time until retirement). I think the one big drawback of a 401K is that you can't withdraw your money from it unless it's for specifiic reasons like education, purchase a home or medical expenses. Most 401K plans allow you to borrow from it but then you have to pay yourself back with interest. Be careful if this is a traditional 401K because you will pay back the loan with interest with after tax money as well as pay taxes on the same money when it's distributed. That's double taxation. I also believe you are able to withdraw your money from a Roth IRA at any time without any penalty or tax.................. Sorry I'm not being specific but I've been out of the business for 8 years.

[Saggy Aggie]

I personally think (based on what I think is your young age) that you should be dumping closer to 12 to 15% of your salary into your retirement/investment. When I first got out of school and into the real world I endured all the jokes about moths and dust in my wallet along with snickers of he has every penny he has ever made. lol

I'm no finance adviser but I have used a lot of the Dave Ramsey tricks to my advantage. He can get old at times but he has some good info on what your investments could be worth.

I'm 24.

Yeah I've read Ramsey's book and live basically according to his philosophy, which is to dump every dime you've got into your debt.

So I've spent the last 12 months paying off my student loans. I just finished those literally last week. 27K worth.

I hear you on the 15%, plenty of literature that says that's what millenials will need to retire.

I'm contributing the 6% plus the 3 matching so 9%), but I fully intend to stick a few more percent into individual stocks and the vanguard index fund.

[Macarthur]

The Roth IRA and a 401K are two different plans and can't be combined. The 401K is a corporate plan and the IRA is a personal plan. Perhaps you are meaning a Roth 401K plan through your employer? The 401K with your employer's .5 to 1 match is the better bet for several reasons. #1. the .5 to 1 match which you can't get with a IRA. #2. the IRA will be limited to 5500.00 yearly contributions and the 401K enables you to put away a maximum of 17.5K. (plus a catchup allowance if over 50). Most employer 401K plan already have a asset allocation fund that is established based on your projected retirement date. It is already balanced based on your risk tolerance (time until retirement). I think the one big drawback of a 401K is that you can't withdraw your money from it unless it's for specifiic reasons like education, purchase a home or medical expenses. Most 401K plans allow you to borrow from it but then you have to pay yourself back with interest. Be careful if this is a traditional 401K because you will pay back the loan with interest with after tax money as well as pay taxes on the same money when it's distributed. That's double taxation. I also believe you are able to withdraw your money from a Roth IRA at any time without any penalty or tax.................. Sorry I'm not being specific but I've been out of the business for 8 years.

Yes, FF is right about the 401K. If you have an employer that matches, that is free money so you have to take advantage of that.

A smart man once told me the only financial Santa Clause is time. So don't be overly aggressive and don't be overly conservative, but most important, avoid debt as much as you possibly can. Obviously, Mortgages and car loans, but avoid CC debt like the plague. If you do those things, you'll be fine.

[Saggy Aggie]

The Roth IRA and a 401K are two different plans and can't be combined. The 401K is a corporate plan and the IRA is a personal plan. Perhaps you are meaning a Roth 401K plan through your employer? The 401K with your employer's .5 to 1 match is the better bet for several reasons. #1. the .5 to 1 match which you can't get with a IRA. #2. the IRA will be limited to 5500.00 yearly contributions and the 401K enables you to put away a maximum of 17.5K. (plus a catchup allowance if over 50). Most employer 401K plan already have a asset allocation fund that is established based on your projected retirement date. It is already balanced based on your risk tolerance (time until retirement). I think the one big drawback of a 401K is that you can't withdraw your money from it unless it's for specifiic reasons like education, purchase a home or medical expenses. Most 401K plans allow you to borrow from it but then you have to pay yourself back with interest. Be careful if this is a traditional 401K because you will pay back the loan with interest with after tax money as well as pay taxes on the same money when it's distributed. That's double taxation. I also believe you are able to withdraw your money from a Roth IRA at any time without any penalty or tax.................. Sorry I'm not being specific but I've been out of the business for 8 years.
Yep, definitely meant Roth 401K plan. Thanks for the correction.

[Farmersfan]

I'm 24.

Yeah I've read Ramsey's book and live basically according to his philosophy, which is to dump every dime you've got into your debt.

So I've spent the last 12 months paying off my student loans. I just finished those literally last week. 27K worth.

I hear you on the 15%, plenty of literature that says that's what millenials will need to retire.

I'm contributing the 6% plus the 3 matching so 9%), but I fully intend to stick a few more percent into individual stocks and the vanguard index fund.

It's pretty impressive at 24 you are so dedicated to your retirement plan. So many at your age can't see that far in the future.........

[caleb_mccaig]

It's pretty impressive at 24 you are so dedicated to your retirement plan. So many at your age can't see that far in the future.........

I honestly don't know one I went to school that hasn't started some kind of a retirement plan yet. I'd say most people who go to school and graduate and get a decent corporate job these days will almost always have it going from the get go.

[Saggy Aggie]

I honestly don't know one I went to school that hasn't started some kind of a retirement plan yet. I'd say most people who go to school and graduate and get a decent corporate job these days will almost always have it going from the get go.

I mean yeah, but the percent of people our age who go to school, graduate and get a corporate job is like 5% or less.... Lol

And of those, probably half start some kind of retirement immediately. Of those, 2/3 really don't have any clue what they're doing besides putting money in a 401K plan.

My educated flawless math says 1.67% have an educated idea of what they're doing with their investments lol

[caleb_mccaig]

I also believe you are able to withdraw your money from a Roth IRA at any time without any penalty or tax.................. Sorry I'm not being specific but I've been out of the business for 8 years.

If you withdraw from your Roth IRA at any time before you're 65 1/2 then you get hit pretty big with penalties and taxes. At least that's what my guy told me when I started it up.

[caleb_mccaig]

I mean yeah, but the percent of people our age who go to school, graduate and get a corporate job is like 5% or less.... Lol

And of those, probably half start some kind of retirement immediately. Of those, 2/3 really don't have any clue what they're doing besides putting money in a 401K plan.

My educated flawless math says 1.67% have an educated idea of what they're doing with their investments lol

To be honest I have no idea what I'm doing with mine. I just put the money in and hope the market does well, but hey, it's better than doing nothing with it.

[Saggy Aggie]

To be honest I have no idea what I'm doing with mine. I just put the money in and hope the market does well, but hey, it's better than doing nothing with it.

Exactly, so you're better than 97.5% of people

[Additup]

Started investing $50/month 20 years ago. Co-worker told me I'd never miss it from my paycheck. He was/is right. Now I invest more than 40% of my take home pay. 1) Getting out of debt ASAP is always solid. 2) Buy things instead of renting if possible - NEVER lease a car 3)Max out ROTH IRA every year. 4) Max your 401K if employer matches 5) No load Mutual funds and Index funds are for investing - Buying individual stocks are for "playing the game". 6) Swinging for the fences on said individual stocks can break you. If you think a stock "can't go any lower" and it's a great time to throw more good money after bad, then I can teach you about a 1 for 4,000 reverse split. 7)If you're maxing out your ROTH IRA but you have extra income you wish you could invest the same way, look into Universal Life Insurance. Under the 7702 Tax Code, you basically can take distributions Tax-Free from this LIRP (Life Insurance Retirement Plan). Never buy TERM Life insurance. 8) Stay out of commodities trading or at least trade "with the trend". The leveraging for control of a contract works against individual investors too quickly.

[navscanmaster]

I put in 6% to 401K and 6% to company discount stock purchases twice a year. As large as our company is, the stock is a pretty safe bet. Unfortunately, they took our 401K options for self strategizing the percentages away from us, going with age target date funds now instead that follow the aggressive early and conservative late plan.

[regaleagle]

Check out the book "Be Your Own Banker"......a good read and and eye opener that will give you a different perspective on saving.

[Additup]

Check out the book "Be Your Own Banker"......a good read and and eye opener that will give you a different perspective on saving.
or "Bank on Yourself" same idea http://www.bankonyourself.com/
Basically borrowing from the cash value in a life insurance policy. Cliff's Notes style below:

1) Only Dividend Paying whole life companies - annual Dividends paid every year without exception for at least 100 years.
2) Only Mutual Insurance companies
3) A.M. Best Rating of A+ or better.
4) Only Non-Direct company - means it pays you dividend even if you have a loan out.
5) Policies structured to include a Paid Up Additions Rider (PAUR)
6) PAUR is very flexible - premiums paid when and where you want and can withdraw and put them back in later.

Finding a company that distributes according to #4 is not very easy anymore. Basically it means if you borrowed $40,000 of a $100,000 policy, the company will still pay a dividend as if you had $100,000 and not just the $60,000 actually left in equity.

If I end up doing this, it'll be to Bank On Myself for investment purposes and not for car and vacation loans.

[BwdLion73]

Check out the book "Be Your Own Banker"......a good read and and eye opener that will give you a different perspective on saving.

I may have missed something but it sounds like your buying a "whole life" policy and then when you borrow against it you pay interest on your own money! Sounds more like a scam...unless I'm missing something.

[Dawgs]

Not sure your salary range, but I agree with others about putting more than 6%. Max for your age bracket is 17.5k. Might be 18k in 2015. You should try to get that much if possible. What I do is put that much in, and then every 2 weeks act like that money is getting taken out in taxes. Then I complain about how much the government takes out of my check to anybody that will listen. It's pretty fun. If you are able to get 18k in, and still want to invest you can put after tax money in your 401k after you have maxed out your pre tax 18k limit. I would suggest against this. Take that extra money to a professional financial advisor and let him open a brokerage account. This way in 10-12 years when you want a down payment for a house or a new car you can just take money out of that account. It can be like a pseudo savings account. Also if you let your financial advisor invest this excess money, they will usually handle your 401k for free. I am doing 85% stocks 15% bonds. Vangaurd has some great investment options.

[Additup]

I may have missed something but it sounds like your buying a "whole life" policy and then when you borrow against it you pay interest on your own money! Sounds more like a scam...unless I'm missing something.
No, you got it basically right, but if you can find a Non-Direct Mutual Insurance Company it may work because they'll continue to pay a dividend with the borrowed amount included.

Example:
A)If I saved $25,000 and then bought a $25,000 car outright, I have no car payment and I can invest payment money. Problem is, I'm starting back at $0 principle on the investing side.
B)If I borrow $25,000 to by the car, I lose the car payment as the amount I could be investing and paying an interest on the loan.
C)If I have $25,000 to borrow from my Non-Direct Mutual Insurance company, I get the car, pay back the loan and interest to myself and company, BUT the insurance company still pays me a dividend as though the $25,000 I borrowed is still there.

Much better idea than borrowing against your 401k, 403b or other retirement investment. If I had to borrow from my 403b annuity, I would only make interest on what's in the account, not on what's in the account AND what I borrowed.


The biggest scam going is Fractional Reserve Banking. I deposit $1,000 of my money in a bank and they can loan out up to $10,000 of made up money. (If you try to do this it's called a Ponzi scheme, but the Fed does it and it's called stimulating the economy) My $1,000 gets devalued in the form of inflation caused by "made up money".

[buckeyebob]

Retirement can be very nice...rules are:
You never want to outlive your savings...invest in your 401K as much as you can (until it hurts)...pre-tax dollars...and don't touch it until you move then move it with you.
Whole Life Insurance (they label it many other things) is not an investment (that is the reason you see insurance people always on vacation...get term ins. to protect you family.
Have 6 months of all expense in a savings account (ready cash)
Find a Financial Advisor (ask friends)...I would recommend they work for one of the large companies...much easier to get your money back if your F.A. runs off to Never Never Land with some guy named Deanard.
Have one Credit Card for gas & emergencies (run your gas on it & pay it off monthly...this will have use on it that will reflect use)
Don't get divorced...shoot 'em
See that all kids are employed during their teen years & thru college & have them saving for the future...an education is not a Right.
Don't invest in rental property or with any guy with a diamond ear stud.
Never loan money to friends or family...give it to 'em if you must.
A regular bowel movement in the morning is the most important thing you will do all day.

[Farmersfan]

If you withdraw from your Roth IRA at any time before you're 65 1/2 then you get hit pretty big with penalties and taxes. At least that's what my guy told me when I started it up.


I'm pretty sure he's referring to a traditional IRA. A Roth is different. There is no penalty but you might have to pay taxes on any earning you withdraw..................
http://money.cnn.com/retirement/guide/IRA_Roth.moneymag/index5.htm

[Emerson1]

1. You don't need a broker. They just take your money for advice you can find on your own (see #2).
2. Read this Reddit FAQ - http://www.reddit.com/r/personalfinance/wiki/faq#wiki_retirement_accounts and then read this one http://www.reddit.com/r/personalfinance/wiki/commontopics
2b. Read reddit.com/r/frugal - Learn how to save money in general.
3. Put more than 6% if you can currently afford to.
4. If you have a place online that you can check your status remember that it doesn't account for inflation. Mine says I will have $120,000 a year for retirement. That isn't accounting for inflation. http://www.calculatorweb.com/calculators/inflationcalc.shtml

[Emerson1]

5. Get a credit card. Yes, a credit card. Discover is 5% cashback on gas right now and rotates 5% categories quarterly. In addition there is ShopDiscover which offers 5-25% cashback to a good number of online retailers. I can refer you and we both get $50 :D. Also, consider a different checking account. Something that actually offers you something worthwhile. I have Bank of America right now. They suck. Savings account interest is like .09% while others offers 1% annually. They offer no type of points or cashback. Discover is one, but there are others too that are great. Most offer free ATMs at a lot of locations. If you have $5,000 sitting in savings you can at least get $50 out of it. Obviously be smart and pay it off every single month.

More Discover card shilling. You can buy an item and if you see it on sale within 90 days from any location you can get a price match. Call up Discover. Scan the ad and receipt. Send to Discover. Receive check.

[regaleagle]

Buy a small frame house away from the city with good black soil and a well. Plant a big garden, set up solar powered generator, wind turbines, make friends with your neighbors and watch each others backs. Commute to work and pay the extra gas. Get a vehicle that will not be affected by an EMP. Learn about firearms and become proficient with them. Forget about getting exercise.....you'll get it, haha. Raise your own livestock and join the local farmer's credit union. Don't worry about schools for your children....they will get a superior education in a smaller, more rural setting. Be careful who you allow on your property and into your life.

[buckeyebob]

Move to Gilmer and become a Buckeye.

[New Taiton]

My thoughts are to invest in your 401k up to the match or as much as you'll need to drop your AGI enough to not have to write a check in April.

I would then invest the rest of your money into a managed account of mutal funds, etc. This kind of account allows you to take your money out (must claim on taxes) in the event you want to buy a house or you'd be able to pledge the account in the event an opportunity presents itself.

I would be hesitant to tie up too much money in accounts labeled as "retirement". When you do, that money becomes to hard to access and has too many restrictions. There are numerous other types of accounts you can open that will earn just as much that are more liquidable in the event you "need" that money.

As far as stocks go - I'd suggest some DRIPs. I buy $50 of XOM and MMM every 14 days. That's about 1/2 share of XOM and 1/4 share of MMM. This portion of stock is purchased directly from the company and there are no fees involved. There are DRIPs for 1000s of companies. I chose these two because they are two companies I always use whom have a good track record and they have no purchase fees, etc. I do not have any stocks in my regular portfolio. These two DRIPs I have is me squeezing just a little bit more.

One last thing I've started is the app Acorns. I use an american express for 99% of my purchases. After every purchase, Acorns rounds up to the nearest dollar and that money is deposited into a small investment account. So - if you spend 24.35 on gas, $0.65 is deposited into another account Acorns has setup for me. Since Christmas, I have "rounded-up" $48. While that's not a lot, it will be greatly appreciated on upcoming vacations, etc.

[BwdLion73]

A regular bowel movement in the morning is the most important thing you will do all day.

Words of wisdom:thumbsup: