Personal Retirement Funds

[Dangerkitty]

The Roth IRA sounds like a great deal, but what if, in the future, some "crisis" arises and the powers that be, feel they HAVE to tax the withdrawals in order to deal with the "crisis", real or otherwise? I just don't trust 'em to keep up their end of the bargain. Regular IRAs and 401ks for me. "A bird in the hand is worth two in the bush" YMMV

When you retire the government will take 30%-40% of all money withdrawn from a 401k.

If you retire with $1,000,000 for example the government could take up to $400,000.

What makes you think that they wont increase what they take out of 401ks?

Your logic makes no sense.

 

[Dangerkitty]

1. Visit http://www.debthelp.com
2. Read "Richest Man in Babylon"

I pay myself 10% of any money I receive. This is money going towards my future. It's my money, I earned it, and I finally have something to show for it. Right now it's in an airline's credit union savings account, making interest at the rate of inflation. That's a little bit better than the sock under the mattress. It doesn't matter if I find a nickel on the sidewalk or get a check from working, 10% goes to myself. No pensions, social security, or poor folks checks required for me when I retire.

I pay my previous spending, debts, with 20% of whatever I receive. That's all they get, 20%. I didn't have to listen to them whine, complain, groan, and moan about only getting 20% of my income -- I ceased all creditors. That was 6 years ago when I had no income and little possibility of getting one. The credit card numbers doubled and tripled, one even claimed I owed 'em 4x the original amount. Now they're back to just the amount owed when I ceased 'em, claiming 50% of that amount would make 'em happy. In one year, they get deleted from my credit history. Two years ago they lost the right to pursue me in court due to the state's statue of limitations. Of course, the court battle is only fought if they think you have something to give up, like assets. The student loans go away in 20 years if I can't repay all of them, locked in with a fixed 3% interest rate.

Then 30% goes towards an emergency fund. I needed the fund last year. I'm almost set if I need it this year. When the fund is full, the rest will go into short and long-term savings and investments.

I live on 50% of the rest. I deal with roommates :uzi: , no social life, a car with 123,000 miles on it, and no IPOD or other toys.

But I'm not broke. I'm working for something. I'm no longer living paycheck-to-paycheck, unable to get ahead.

My income recently quadrupled. I paid myself a bonus (out of the 30%) and spent it on a toy -- still have 10% coming right to me to not spend on toys today.

Good luck!
Jedi Nein

So basically you are a thief that promises to pay and then welches.

You are no better than a common criminal.

 

[westwind]

When you retire the government will take 30%-40% of all money withdrawn from a 401k.

If you retire with $1,000,000 for example the government could take up to $400,000.

What makes you think that they wont increase what they take out of 401ks?

Your logic makes no sense.

Absolutely NOTHING makes me think that they won't also increase the take from 401ks in the same scenario. I never said they wouldn't. I AM however receiving the tax breaks NOW that the 401k provides and pumping up the 401k with the added money. Hence "the bird in the bush..." The Roth just makes too many assumptions on the future for my comfort. BTW, I am not in the withdrawal mode yet, but if I were, my taxes on it would be below your 30-40% numbers.:blush: We can't all be Rockefellers.
Again, I am not trying to dissuade ANYONE from the Roth. Hence also, YMMV

 

[kingairyahoo]

Anybody who thinks that investing in 401Ks and IRAs is the way to a comfortable retirement is dreaming. The mutual fund industry suckers people into believing all the hype and fails to perform. I would never put all my eggs in that basket. Don't listen to Suze Orman and the other self-professed gurus out there.

A portion of investments should certainly be in stocks, but don't count on them just like you now know not to count on pensions. The USA could easily have a Japanese style market meltdown and you could stand still in your investment accounts for 10 to 20 years.

Never give your money to someone else to invest for you. Always keep it in your name. That means to keep mutual funds and trading accounts in your name and not to invest in hair-brained get rich quick schemes.

The recent run-up in property prices makes investing in property a bit risky right now, but look to buy after the correction. Your primary residence is your single best investment. Once you have that look for a decent rental property. Your long term returns should certainly be higher than from the stock market.

P.S.

Marry a rich woman, the single best investment a man can make.

ok...hold up.

you are essentially poo-poo'ing the 401k and IRA route in favor of real estate???

while i can agree with utilizing real estate to supplement, im gonna need some elaborration on why you are the only one here that has essentially said anything against 401K's and IRA's

 

[psysicx]

And a Mutual Fund doesn't just invest in the stock market. There are other investment vehicles.

 

[bafanguy]

Lots of good advice/info here. But, the basic message is: you better be squirreling it away no matter where/how you do it...trust no one but yourself.

I looked for the quote I think is attributed to Albert Einstein but couldn't find it. I "think" it was something akin to "...the real miracle of mathematics is compound interest...".

Time is your friend...start now.

 

[psysicx]

The stock market and investments are a risk. But thats why we have money managers who spend there life watching it. All the rich people have money in bonds and stocks so that has to say something. There are things that are way low risk and ones that are insured. Just use a company that has a proven record. Even when the market crashed in 01 there were still lots of people who didn't loose everything.

 

[typhoonpilot]

The stock market and investments are a risk. But thats why we have money managers who spend there life watching it. All the rich people have money in bonds and stocks so that has to say something. There are things that are way low risk and ones that are insured. Just use a company that has a proven record. Even when the market crashed in 01 there were still lots of people who didn't loose everything.

Read what I said again. All I'm saying is that you aren't guaranteed to retire a millionaire if you invest in 401Ks and IRAs. You need to be doing more. Certainly have a portion of your investments in stocks and bonds, but don't make the mistake of thinking you will get an average of 8 - 10% per year on it for twenty years just because that is the average over the last 20 years. If you do that then you are makig the same mistake that those of us who thought we would have a pension made. Investment accounts can easily stand still for years on end. Thats all I'm saying.

TP

 

[BluDevAv8r]

If you are not investing in a Roth IRA then you are really screwing yourself.

While 401k monies grow tax defered, Roth 401k monies grow tax free.

Maxing out a 401k is great but if you are not investing in a Roth IRA you are pissing money away.

I will post more later today...but....

...How are you "pissing money away? Can you prove this statement? You are leaving out a lot of variables. Please post your assumptions and a few examples that back up your statements above since they are quite absolute. I'm not trying to be a d-ck here DangerKitty but you are making statements with absolute certainty but not backed up by any data or facts. Thanks.

-Neal

 

[smellthejeta]

I will post more later today...but....

...How are you "pissing money away? Can you prove this statement? You are leaving out a lot of variables. Please post your assumptions and a few examples that back up your statements above since they are quite absolute. I'm not trying to be a d-ck here DangerKitty but you are making statements with absolute certainty but not backed up by any data or facts. Thanks.

-Neal

I, too, agree that Dangerkitty is making statements that are absolute as well. The assumptions I believe he is making are that over the years, your income will incrase, as will the rate at which you are taxed. What the assumption is is that with a 401k, you put $1 in untaxed, get your match, watch it grow, and then tax it when you take it out. Presumaly, you will be in a higher tax bracket then you are now, which thoretically means your saving a little to spend a lot. With a Roth IRA, you pay the tax now when your tax rate is lower, and then take it out for no gain when your tax rate is higher. I ran two comparisons with "real" numbers:

Your employer matches 100% of your contribution up to X%. Your investment grows at a rate of 8%. You currently are in the 15% bracket, and will be in the 50% bracket when you retire. You invest for 10 years. For simplicity sake, we will discuss the value of $1 invested now after 10 years.

401(k) within company match: Essentially $2 is put in at time of deposit, although you contributed only $1. After 10 years, the value of the investment is worth $4.45, and the value after it is taxed at 50% is $2.22.

401(k) outside company match: Only $1 is put in at time of deposit, After 10 years, the value of the investment is worth $2.22. After taxes, you will have $1.11.

Roth IRA: $1 is put in at time of deposit. Since it is after tax income, you are only depositing $0.85. After 10 years, the investment is worth $1.89. It is not taxed at withdrawl, so you get all of that $1.89.

Clearly, investing in your 401k to your company contribution is the winner -- you have more than double YOUR initial contribution. Once those limits are reached, it is clear that the Roth is the next best place to invest. Finally, the 401(k) outside of the company match is of little value.