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Deleted member 17706
Unconfirmed Member
In a thread called "How to Invest for Retirement?"
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How to Invest for Retirement
- Thread starter Piecake
- Start date
In a thread called "How to Invest for Retirement?"
Eh I'm 34 and already have more than $100k in retirement assets, as well as a $5000 yearly pension from a previous company.
Another ~20k invested in the stock market (non retirement).
That's not counting what my wife has socked away. We both max out our IRAs yearly.
I've been fairly aggressive in my 401k asset allocations.
Yeah. Morbid curiosity.
Marry money?
I'm 31 and only have about 26k in my 401k (5 years worth of throwing money into it).
I've been doing 10% of my pay into:
75% Target Fund 2045 through Vandguard
15% into Pimco Total Return
10% company stock.
Not sure if I will have enough to retire. I'm a bank manager, and this is all based on my branch's investment rep telling me what to do.
I've been doing 10% of my pay into:
75% Target Fund 2045 through Vandguard
15% into Pimco Total Return
10% company stock.
Not sure if I will have enough to retire. I'm a bank manager, and this is all based on my branch's investment rep telling me what to do.
Be prepared to work forever?
How are you planning on living after you stop working, dude?
http://www.bogleheads.org/wiki/Indexing
That explains index fund investing. I would just look around that site to clear up any confusions. I would first start by going to the below link and watching the following videos
http://www.bogleheads.org/wiki/Video:Bogleheads®_investment_philosophy
I havent read these books, but I am sure they provide good information. I really don't think they are necessary though since index investing is incredibly simple. You can find all you need to know on the web.
http://www.amazon.com/dp/0470102101/?tag=neogaf0e-20
http://www.amazon.com/dp/0470067365/?tag=neogaf0e-20
If you keep contributing to your Roth IRA and 401k at a decent rate, it looks like you are in very good shape.
Do you think that is to low or high? I am honestly curious. Hopefully I made it clear in the following sentences that that was a broad guess. Obviously some people can't put much money towards retirement. That simply means that they will have to put a lot more in after 35 if they want to catch up
Yeah thats the plan. Ultimately I'd like to increase my 401k contributions and get my house paid off ASAP. We refinanced a year or two ago and dropped 2% on our mortgage so we will save about $120k in interest over 15 years. Still, I'd like to at least make more than our mortgage rate on the stock market.
We actually have 2 different financial advisors we meet with, though one is a bit pushy with life insurance etc.
I think you're on the money. Just googled it myself and there was a general chart that said if you make $100K a year you'd want 100k by 35, and $300k by 45, obviously growing by multiples as you get older. There is no hard formula.
To retire at a decent age, that's about right. The current generation of retirees - and those behind them, for that matter - are in deep trouble. Most will never actually retire, or will retire into poverty.
Edit: second too late. Figures.
D
Deleted member 17706
Unconfirmed Member
Which makes you wonder what kind of world it will be by the time you get there with so many angry and impoverished elderly and younger generations who aren't much better off. The deep uncertainty of "the system" is one thing that has prevented me from getting into investing earlier. I now realize it's probably an unfounded fear, though, so I'm starting to get serious about this stuff.
Manmademan
Member
Social security is meant to be a safety blanket. As it is now it guarantees an easily predictable return on that investment with pretty much zero risk.
Index funds don't do this. Hard as it may be to remember, there IS such a thing as a "bear market" as well as "stock market crashes" and even index funds are too risky for what social security sets out to do.
Also, social security is EXTREMELY cheap for the government to administer, dumping the money into the stock market is not. Fees to manage that account would be many, many times more expensive on top of the increased risk.
Privatizing social security is a worse option than leaving it as-is in just about every way you can think of.
Its just that the thought of having 30k in savings for a house is a distant dream for many i know, including myself, but to have 50+k for just retirement let alone other savings is insane. Feel like that luxury is nearly gone for most people.
And with fewer people getting married and forming dual incomes to save more, people are even worse off with stagnating wages and rising cost of living.
Not totally sure how a SEP IRA works. Can you fully fund a SEP and a Roth IRA? If the SEP IRA is basically like a 401k with all of its limitations and downsides, then yea, opening up a Roth IRA is a good idea. Its also a good idea to diversify your tax advantage situation (assuming an SEP is treated like a 401k).
I have a 401k and a Roth and treat it like this:
401k up to the match
Fully fund Roth IRA
Fund 401k as much as I can after that.
So might be a good idea to follow the same principle if SEP and 401k are similar
D
Deleted member 17706
Unconfirmed Member
From what I'm reading, taking 30k and using it as a down payment for a house loan is exactly the kind of thing that you should not be doing if you are interested in saving a lot of money for retirement. I may be wrong, though.
PeakPointMatrix
Member
Great PSA. I'd been contemplating about this recently, but didn't know where to begin. Very easy to keep up with your wording, thanks a lot. Definitely bookmarking this thread.
Yea, I am not a fan of home ownership for that, as well as the mortgage interest, holding a hugely expensive iliquid asset, and all of the other costs and responsibilities that come with home ownership that dont come with renting. I am sure some of you might be thinking that Mortgage interest rate deduction will take a huge bite out of your mortgage interest, but it really isnt true. The Mortgage deduction is pretty worthless for the majority of americans because it usually makes more sense to take the standard deduction. Its basically a tax cut for rich americans, especially ones with multiple houses.
Still, no denying that there are benefits to owning a home. People should just avoid looking at it as an investment, but think of it as a lifestyle choice.
Kinggi, it sucks, but I would sit down and do some long term planning. You might have to give up some things that you want right now, but relying on social security alone, or only being able to take out a few thousand a year to suppliment that is a life of poverty.
i don't live in the US so a lot of these terms i don't understand, but we have a similar thing here (australia) called superannuation in which your employer legally has to put in 9% (more if you work for the military, government or a few other areas) of your income into an account for your retirement. i'm almost 27 and only have $4.5k in mine...guess i'm fucked.
While I think basically everyone should be invested in index funds for their retirement, I really don't think the specific numbers on how much we Americans need to save and invest or the kind of vehicles we put our investments in is all that useful.
Ive heard that Australia has a very good retirement system. Well, ours kinda sucks. The only thing that Americans are guaranteed for their retirement is social security. The average monthly social security check is about 1,200 bucks a month. Thats it. And that is why we need to save so much on our own. Your situation could be completely different
BannedEpisode
Member
I am so fortunate to have found a job with a 401k option at 23.
I obviously need to do more research on how I allocate my contributions but I've only been at it for 4 months and Im already over a thousand. I know its just a pebble but I'm proud of it.
It is rough though, I dont really make very much and my rent and student loans kill me. I hardly have any money left over to use on anything but the necessities. It will be worth it though... I hope.
I obviously need to do more research on how I allocate my contributions but I've only been at it for 4 months and Im already over a thousand. I know its just a pebble but I'm proud of it.
It is rough though, I dont really make very much and my rent and student loans kill me. I hardly have any money left over to use on anything but the necessities. It will be worth it though... I hope.
the_log_ride
Member
Subscribing for reference. Thanks, OP!
www.financialsamurai.com/how-much-should-one-have-in-their-401k-at-different-ages/
$215-331K according to Financial Samurai, but I feel this guy's charts are unrealistic. Then in the comments he basically tells people to save until it hurts.
Very much this. I'd discourage anyone from thinking of their home as an investment. It's a lifestyle decision, albeit one with major financial implications.
I love owning our home. Being the home handyman is a lot of fun, though not without its downsides. We're also paying it down fast, and will have it paid off in ~10 years. Working another 10 years or so with dramatically reduced cost of living will give the retirement funds a kick in the pants, but that wasn't a strategy until after we'd purchased.
I'm 36 and tracking to retire around age 56, and I don't have anywhere near that. I suppose it depends on what kind of lifestyle you want in retirement.
Edit: I see he has people retiring at $2.6m. I'll only need $1.5m.
Thanks. I'll definitely do more research on it at some point in the upcoming months.
zero shift
Banned
I still don't know if I should buy or rent in the future when it comes to houses.
Oh so say if the government did put its money into index funds prior to the recession a lot of that money would be lost then?
Chile privatized social security and spends little on it.
gutter_trash
Banned
I got a modest RRSP with my bank 10 years ago and have a corporate RRSP with my job that has a good rate.
I own a condo that is now risen in value, so it is basically my investment bank.
I own a condo that is now risen in value, so it is basically my investment bank.
RustyNails
Member
Besides, government funneling money into the stock market can create problems which can cause huge panic during high unemployment or inflation. Besides, if the stock market crashes, we will have an insurrection on our hand.
ProtoCents
Banned
So I've been working for 3 years now out of college. Have my loans paid off and want to open up a Roth IRA. I bank with Bank of America who is affiliated with Merrill Lynch. My company's 401k is with Fidelity. GAF keeps bringing up Vanguard. Where do I go with my Roth IRA? Does it matter? Could it matter? I plan on maxing it every year.
I always recommend Vanguard because I use them and I like their business model
No other investment company is structured that way.
Another benefit of Vanguard is if you have an account at Vanguard and buy vanguard funds, those funds are free to purchase. I believe Fidelity is the same way and also has low cost index funds. There are probably other companies that do the same thing, but I honestly havent looked into it.
RustyNails
Member
Piecake, I am doing my taxes on TurboTax and there's a section on IRA accounts. I have both 401k and Roth 401k. It's asking about contributions I made last year and plan to do so until April 2014. What is this about? Is this a deduction?
Great info piecake, where were you when I was 20?
I started way late, bumbled around a bit trying to pick sector funds and stupid shit with horrible returns and crazy fees. All of my "auto" investing is now in s&p500 indexes. I upped my contribution to 10% of my salary. I see a lot of people recommend only going to employer match then putting the rest in another fund but for me this never worked, that money would always get spent on tv's, iPods, video games whatever. Never had the discipline to invest it.
Now since getting serious I have built up $40k in 5 years. I plan on pretty much never buying bonds (although as you say my risk appetite might diminish as I get older) now I did get somewhat lucky in that I got serious exactly when the market started to recover again might change my tune the next disaster.
I started way late, bumbled around a bit trying to pick sector funds and stupid shit with horrible returns and crazy fees. All of my "auto" investing is now in s&p500 indexes. I upped my contribution to 10% of my salary. I see a lot of people recommend only going to employer match then putting the rest in another fund but for me this never worked, that money would always get spent on tv's, iPods, video games whatever. Never had the discipline to invest it.
Now since getting serious I have built up $40k in 5 years. I plan on pretty much never buying bonds (although as you say my risk appetite might diminish as I get older
) now I did get somewhat lucky in that I got serious exactly when the market started to recover again might change my tune the next disaster.Yes to Fidelity. That is where my employee retirement accounts are, and so I moved my IRA's there as well. We've never paid a fee of any kind. Their index funds are here, which are what I'm largely invested in.
demosthenes
Member
Outside of the initial purchase though you're not going to be losing extra money every year though correct?
Any money you put into the Roth you claim as regular income. Any money you put into the regular 401K is deductible.
demosthenes
Member
Will be on your W-2.
Vanguard funds have super low expense ratios. Something like .2%
RustyNails
Member
I had to pay taxes on my dividend income, which cut down my federal returns ;_;
Thanks Obama
Thanks Obama
It seems like people in the US need more than $1 Million for having a good retirement. What are the reasons for such a high barrier? I mean, dividends and interests included, that's a lot of money for a very long time.
I think my parents are good with $600k - 700k as a pair, and they live in Switzerland AKA one of the most expensive places in the world.
The two main reasons are, high healthcare costs and low social insurance. Piecake mentioned earlier, Social Security payments are very small, and healthcare costs are spectacularly high in the US. Since pensions are being phased out in the US (no one really offers them any longer), employees need to save for retirement on their own, and plan for high medical costs as part of it.
Not sure how that compares to Switzerland. My wife's father retired on a similar balance as your parents, but he had a pension from his employer which pays out for the first 20 years of retirement, so he didn't have to save as much as I will.
Polishin8r
Member
Thanks for this thread Bookmarked for future references and will be opening some IRA's soon....
EDIT: what do you guys think about using CD's (laddering) as a form of saving ?
Bookmarked for future references and will be opening some IRA's soon....EDIT: what do you guys think about using CD's (laddering) as a form of saving ?
What kind of salary is he basing this off of? lol
401ks are automatically deducted from your taxable income on your W-2s. A Roth 401k is not deductible because the way its taxed (taxed now, tax free later). For traditional IRAs you have to make the deductions manually since its not through your employer so they will have no way to know if you contributed to that or not. If you contributed to a Roth IRA you won't get any deductions, but you might get access to a retirement investment credit if your income is low enough.
Great info piecake, where were you when I was 20?
I started way late, bumbled around a bit trying to pick sector funds and stupid shit with horrible returns and crazy fees. All of my "auto" investing is now in s&p500 indexes. I upped my contribution to 10% of my salary. I see a lot of people recommend only going to employer match then putting the rest in another fund but for me this never worked, that money would always get spent on tv's, iPods, video games whatever. Never had the discipline to invest it.
Now since getting serious I have built up $40k in 5 years. I plan on pretty much never buying bonds (although as you say my risk appetite might diminish as I get older
Hah, I feel the same way. It was only about 5 years ago when I started getting serious about investment and really looking into retirement, index funds, etc.
There is no initial purchase fee if you have a vanguard account and buy vanguard funds. There are no account maintenance fees if you sign up for electronic communication. There is the expense ratio though, which takes out money annually, but that is common to all mutual funds and etfs. One of the main reasons why index funds are better is because that expense ratio is usually much much lower than most funds
HammerOfThor
Member
Man, I've been trying so hard to understand this stuff for the past few months.
I started with just putting money into my 401K up to what my employer matches.
Now I'm looking at putting the $5,500 into a Roth IRA. Why is there a limit? Is it per person or per account?
Once I get that set up, I've been tinkering with the idea of investing in stocks that have solid monthly dividends, but I don't know if that would ever come into fruition.
So aside from my employers 401K and a Roth IRA account, what is a solid mid term option and long term option?
I say mid because what if 15-20 years from now(I'm 25) I need to move, or something else unforeseen happens. I don't want my money tied up but I want it to grow.
I've learned the hard way that I need cash on hand, so until I can save enough money to cover 6 months worth of expenses if I lose my job I'm not doing anything other than my employers 401K and maybe opening a Roth this year
I started with just putting money into my 401K up to what my employer matches.
Now I'm looking at putting the $5,500 into a Roth IRA. Why is there a limit? Is it per person or per account?
Once I get that set up, I've been tinkering with the idea of investing in stocks that have solid monthly dividends, but I don't know if that would ever come into fruition.
So aside from my employers 401K and a Roth IRA account, what is a solid mid term option and long term option?
I say mid because what if 15-20 years from now(I'm 25) I need to move, or something else unforeseen happens. I don't want my money tied up but I want it to grow.
I've learned the hard way that I need cash on hand, so until I can save enough money to cover 6 months worth of expenses if I lose my job I'm not doing anything other than my employers 401K and maybe opening a Roth this year
Your best long term option is a 401k and a Roth IRA. Thats really all you need. If you want to contribute more after you fully funded your roth IRA, simply fund more to your 401k. And yea, its 5,500 limit per person per year. I am assuming that the reason why there is a limit is that the government doesnt want a bunch more money holed away in tax advantaged retirement accounts.
Just so you know, dividends are taxed at a much higher rate than the capital gains you get for selling stock. Now, that won't matter if its in a tax advantaged account, but it sounds like you are interested in a taxable account. You should do quite a bit of research on the stock you want to buy and just not go to a well known company with a high dividend. Buying individual stocks is risky so you need to know what you are getting into before purchasing. Even then there are still a bunch of random variables and risks.
As for mid-term options you are going to have to go with a regular taxable account if you want to invest that money. This is a lot more tricky to answer because it depends on how much money you have, how much money you need, and how flexible you can be. If you have a lot of money, need little, and can't be time flexible then you'll probably want to invest more in bonds. The opposite, invest more in stocks. I still think index funds are the best way to go about this.