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      02-06-2012, 05:17 PM   #67
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You married at 21? I'm sorry.
Don't be, been happily married for a few years now
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      02-06-2012, 06:47 PM   #68
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Pre-tax or not, if the fund doesn't perform, your investment into the fund isn't worth it.

I've never seen a fund (from the Vanguards to the Fidelitys) that has performed very well in the past 10 years. Automatic contributions, and company matching often mask poor performance as well.
This is true looking at a 10 year investment as if you bought one time, 10 years ago and watched the money without dollar cost averaging.

If you are consistent and buy during all markets, including the worst bear market we've had in some time, you can still make a good return. The key is consistency and actually increasing your contributions when the market drops say, 10%. I double my contribution during these times and back it off as the market recovers. When the dow was <10,000 and even 7,000, I was pouring money in as fast as I could in my 401k, IRAs, and brokerage accounts. Like many others, I have been rewarded for my patience and consistent approach.

Honestly, I am more scared to buy stocks now than I was during the crash in 2008-2009.
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      02-06-2012, 07:03 PM   #69
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Isn't it a good idea to max a 401(k) for tax reasons and savings?
Here is my two cents:

Does your company match your 401K input? I would recommend contributing only the maximum your company will match. You could probably trim that down to $500 and invest the rest in addition to having extra spending money if they do not match. It is smart to contribute to your 401K @ your age. My wife and I did at your age and we both have at least $500K in retirement. We also have investments and an annual tuition bill for my daughter. My generation alone will need at least $1 million in retirement (total w/investments) to retire a bit early so you are already ahead by planning. Good luck, and yes, people have different priorities. I have not had a sports car (coupe) or motorcycle since college
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      02-06-2012, 08:32 PM   #70
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Here is my two cents:

Does your company match your 401K input? I would recommend contributing only the maximum your company will match. You could probably trim that down to $500 and invest the rest in addition to having extra spending money if they do not match. It is smart to contribute to your 401K @ your age. My wife and I did at your age and we both have at least $500K in retirement. We also have investments and an annual tuition bill for my daughter. My generation alone will need at least $1 million in retirement (total w/investments) to retire a bit early so you are already ahead by planning. Good luck, and yes, people have different priorities. I have not had a sports car (coupe) or motorcycle since college
You need a compelling reason to invest in a taxable account versus a 401k.
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      02-06-2012, 08:58 PM   #71
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You need a compelling reason to invest in a taxable account versus a 401k.
All I am saying is the OP can diversify. At his age there is a higher risk acceptance versus my age and my philosophy has always been match the company contribution only. He can diversify with stock, bonds, and CDs. The 401K funds are not immediately available.
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      02-06-2012, 10:29 PM   #72
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The 401K funds are not immediately available.
That's the beauty of it along with it being pre-tax. At a young age, piling that money with compounding returns and not ever seeing it is huge. Most decent 401k programs have a diverse mix of investment options. I have index funds, bond funds, actively managed funds, etc.
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      02-06-2012, 11:05 PM   #73
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That's the beauty of it along with it being pre-tax. At a young age, piling that money with compounding returns and not ever seeing it is huge. Most decent 401k programs have a diverse mix of investment options. I have index funds, bond funds, actively managed funds, etc.
exactly...plus, lets get real...the do it on your own people seldom follow through...

as someone who owns their own business (and "employs" their wife) I max our 401(k) every year plus 4% match plus profit sharing...(as the highly compensated employee...i get most of it)...the tax advantages are overwhelming...I get to save >100K/yr tax free...
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      02-06-2012, 11:07 PM   #74
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. My generation alone will need at least $1 million in retirement (total w/investments) to retire a bit early so you are already ahead by planning.
not even close!
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      02-06-2012, 11:10 PM   #75
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This article has your answer. They put a M3 on a pedestal so bad you can't make this stuff up.

http://www.msnbc.msn.com/id/25352526.../#.Ty9Ig_kRA1I
this article sums most of us up perfectly :P

****
depends on your personality, do you want nice things when you're young and fun (correct answer), or when you're old and boring?

no bias.

haha, it's up to you, but personally I'd rather have nice things when I can enjoy it more.

fuck it, do it
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      02-06-2012, 11:13 PM   #76
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not even close!
My wife will have to work longer
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      02-06-2012, 11:32 PM   #77
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You live in Cali...move to a cheaper place to live and see your disposable income go waaaaay up
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      02-07-2012, 12:05 AM   #78
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Quote:
Originally Posted by BayMoWe335 View Post
This is true looking at a 10 year investment as if you bought one time, 10 years ago and watched the money without dollar cost averaging.

If you are consistent and buy during all markets, including the worst bear market we've had in some time, you can still make a good return. The key is consistency and actually increasing your contributions when the market drops say, 10%. I double my contribution during these times and back it off as the market recovers. When the dow was <10,000 and even 7,000, I was pouring money in as fast as I could in my 401k, IRAs, and brokerage accounts. Like many others, I have been rewarded for my patience and consistent approach.

Honestly, I am more scared to buy stocks now than I was during the crash in 2008-2009.
Sure there could be special individuals out there who have carefully managed their 401ks and have managed to have a respectable annualized return with proper education to make informed decisions. But most people simply pick an employer sponsored plan, pump money into it pre-tax, get a contribution and sleep well at night.

Statistically though, 401k plans have failed in performance as an investment vehicle over the past 25 years.

Here's a statistic to mull over: The past 25 years the S&P 500 had annualized returns of around 12%. Bonds around 7.5%. Mutual funds? 4.4%.

I'm not trying to bash on people who put a lot of their hard earned cash into a 401k, but I'm not seeing the performance numbers. It could be for a variety of reasons which I'm too busy to actually seriously research myself; hidden costs in plans, people making uninformed decisions and following funds based on return history, no rebalancing, etc.

The simple fact that your boring t-bill has outperformed your average investor fund the past 25 years shows that 401ks don't perform very well.
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      02-07-2012, 12:13 AM   #79
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You guys do realize that many 401 can be designed in very compelling ways... I have index funds, EFTs, treasuries or even individual stocks if desired...The goal is to keep the costs to a minimum...
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      02-07-2012, 12:28 AM   #80
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100k, 1 year out of college?! I'm a mechanical engineering student and I'll be graduating this spring..and I'll be lucky if I make 70k. If you don't mind me asking, what type of engineer are you and what is an "SV tech" company? sorry, but I haven't heard that phrase before
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      02-07-2012, 12:34 AM   #81
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Quote:
Originally Posted by MediaArtist View Post
Sure there could be special individuals out there who have carefully managed their 401ks and have managed to have a respectable annualized return with proper education to make informed decisions. But most people simply pick an employer sponsored plan, pump money into it pre-tax, get a contribution and sleep well at night.

Statistically though, 401k plans have failed in performance as an investment vehicle over the past 25 years.

Here's a statistic to mull over: The past 25 years the S&P 500 had annualized returns of around 12%. Bonds around 7.5%. Mutual funds? 4.4%.

I'm not trying to bash on people who put a lot of their hard earned cash into a 401k, but I'm not seeing the performance numbers. It could be for a variety of reasons which I'm too busy to actually seriously research myself; hidden costs in plans, people making uninformed decisions and following funds based on return history, no rebalancing, etc.

The simple fact that your boring t-bill has outperformed your average investor fund the past 25 years shows that 401ks don't perform very well.
Not sure if serious. A 401(k) is just an account. You can fill it with a lot of different things..including bonds, index funds, mutual funds, etc....
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      02-07-2012, 12:35 AM   #82
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100k, 1 year out of college?! I'm a mechanical engineering student and I'll be graduating this spring..and I'll be lucky if I make 70k. If you don't mind me asking, what type of engineer are you and what is an "SV tech" company? sorry, but I haven't heard that phrase before
SV = Silicon Valley.

I don't want to say exactly, but its one of these: Google, Facebook, Apple, Twitter, Dropbox.
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      02-07-2012, 12:43 AM   #83
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      02-07-2012, 12:57 AM   #84
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The reason you can't afford an M3 on a $100k salary is because you're an engineer! Engineers are very smart people typically and extremely dense on financial issues. If you want an M3, go get one. You can afford it.
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      02-07-2012, 01:26 AM   #85
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You guys do realize that many 401 can be designed in very compelling ways... I have index funds, EFTs, treasuries or even individual stocks if desired...The goal is to keep the costs to a minimum...
I think I mentioned that very fact in the first sentence of my post.

I think the assumption that the 401k is being personally managed, and managed well by your average W2 is a huge assumption. If that is to be assumed, then that person could do a lot better than an employer sponsored 401k as an investment vehicle.
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      02-07-2012, 01:31 AM   #86
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Not sure if serious. A 401(k) is just an account. You can fill it with a lot of different things..including bonds, index funds, mutual funds, etc....
Sure you can, from funds within your employer sponsored plan. You're also assuming that your management of your account is solid enough to give you returns that are respectable compared to other vehicles. Like I said, I think employee contributions, and employer matching often mask bad performance of a 401k.

Here's a good article you should read explaining exactly what I'm talking about. The research has proven on average, 401k plans are mismanaged, non-performing investment vehicles over the past 25 to 30 years:
http://www.mibiz.com/opinions/money-...01k-plans.html

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Now that 30 years have passed since the first 401k plan, researchers are checking to see how well they’ve worked. Their findings aren’t pretty. In short, too many workers have not participated in their employer’s retirement plans; too many have contributed insufficient amounts; too many have not contributed enough to receive their company’s match (leaving free money on the table); too many have misallocated their investment choices, thereby failing to be adequately diversified; too many have churned their investments, foolishly trying to time the market or chase the hottest trends and too many have borrowed money from their retirement plans and not repaid it, incurring early withdrawal penalties and subjecting withdrawals to income taxes.

Here are two ugly facts from the Benefits Research Institute’s most recent annual Retirement Confidence Survey. About 29 percent of workers have less than $1,000 available for retirement. Another 27 percent have more than $1,000, but less than $25,000. It’s clear as a bell most of these people won’t be able to retire or will live in poverty during retirement. It’s also clear 401k plans have not achieved their potential, nor have they achieved the hyped returns many workers expected. For the majority of workers, they have failed as retirement plans.
Yet another finding from the National Institute on Retirement Security:
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. Indeed, a study by the National Institute on Retirement Security found that professionally managed pensions can deliver the same level of retirement benefits at half the cost of a 401(k)-style plan. This means we must investigate policy options that combine the portability features of 401(k) plans with the professional investment management, long terms asset growth strategies, shared risk and guaranteed income streams that make traditional pension plans so efficient.
The above is my personal experience. I don't know anyone with a 401k who has beaten the returns I've gotten from a professionally managed retirement plan.

Although some will claim that they are hot shot investors disguised as regular W2 workers and have great returns via a 401k, the actual data doesn't support that conclusion in general. The 401k for all statistical purposes is a failure.
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      02-07-2012, 02:41 AM   #87
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Mismanagement of your 401k is not the same thing as poor returns from your 401k. If you are not looking at your 401k as a long term investment, and treat it like a checking account to draw money from, it will most likely not give you the returns you expect.
Failure of 401ks are mostly attributed to participants that do not understand what they are for, and not the 401ks themselves. They contribute too little, too late in the game to save enough to retire, or they cash out of them when they change employers.
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      02-07-2012, 03:10 AM   #88
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Quote:
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Sure you can, from funds within your employer sponsored plan. You're also assuming that your management of your account is solid enough to give you returns that are respectable compared to other vehicles. Like I said, I think employee contributions, and employer matching often mask bad performance of a 401k.

Here's a good article you should read explaining exactly what I'm talking about. The research has proven on average, 401k plans are mismanaged, non-performing investment vehicles over the past 25 to 30 years:
http://www.mibiz.com/opinions/money-...01k-plans.html



Yet another finding from the National Institute on Retirement Security:


The above is my personal experience. I don't know anyone with a 401k who has beaten the returns I've gotten from a professionally managed retirement plan.

Although some will claim that they are hot shot investors disguised as regular W2 workers and have great returns via a 401k, the actual data doesn't support that conclusion in general. The 401k for all statistical purposes is a failure.
That quote you posted doesn't even back up what you're saying.

You highlighted "About 29 percent of workers have less than $1,000 available for retirement. Another 27 percent have more than $1,000, but less than $25,000.". Thats because they're not contributing to the 401k, not because the returns aren't good. You can contribute 1k in a month, let alone 30 years...

The 401k aren't doing bad because the returns are bad, the article clearly says its because a number of reasons, most being the people don't enroll, or don't contribute enough. And if they can't setup proper allocation in a 401k, what makes you think they will be better off with a regular investment account? Asset allocation is the same all across the board, no matter if its a 401k, IRA, or a regular investment account. According to that article, almost 60% of people contributed less than 2 years worth of contributions over a 30 year period. Thats because they messed up, nothing to do with the returns.
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