What is Digg?Sponsored by Newegg.com
$5,000 Newegg Eggstreme Challenge Video Contest Extended to 11/15 view!
newegg.com - Show them what YOU would do with the money you save by shopping at Newegg. Seriously, show them...
45 Comments
- ravage86, on 07/27/2008, -1/+18401k... pfft. I've been paying into social security for years, I can retire off of that in 30 years... right?
right? - goostoff, on 07/27/2008, -0/+6Another tip, a 401k is not a savings account or a rainy day fund. It's a retirement account.
If you want to make any type of a return or have any kind of money for retirement you cannot take a yearly loan or withdrawal from your plan. I've seen too many people take money out for cars, vacations, and new homes. You can't be prepared if you aren't taking the concept seriously.
And although this defies common investment thought, solid company stock can yield tremendous amounts of money if held for the short term. I've seen returns of over 25% for this year based on trading in and out of company stock. - dilpil1, on 07/27/2008, -0/+5This is an article by CNN. They are not known for financial acumen.
- subgeniusd, on 07/27/2008, -0/+4Sure---it's guaranteed by an irresponsible government busily bankrupting an entire nation. They probably won't just cancel social security, just "adjust" the retirement age to 75 hoping we all die off before collecting a penny.
- jdaniel284, on 07/27/2008, -1/+4No, you are not screwed. The funds you rolled-over previous should be in your Roth though. If you haven't done that, look into it. Also, don't let a year go by that you don't max that Roth out. Max your Roth before you do anything else for the year (except get your employee match into your 401-k).
- and303, on 07/27/2008, -1/+4Wait, you have a plan?
- temporarysanity, on 07/27/2008, -1/+4>> There is absolutely no reason to "favor" index funds in your 401-k.
Meh...not so fast with the idiot labels....
"But in general, most actively managed funds come with higher annual expenses that eat into performance and profits, making it difficult to beat index funds. Over the past 10 years, the cheapest S&P 500 index funds (such as Fidelity Spartan U.S. Equity Index, with an expense ratio of 0.09 percent, and Vanguard 500 Index, with an expense ratio of 0.18 percent) beat more than 60 percent of their large-cap blend peers, according to Morningstar. "
http://www.bankrate.com/brm/green/retirement/index ...
This is a very well known fact. Please do not spread misinformation based on whatever your own personal (fund managerial?) interests might be. - Bloodwine, on 07/27/2008, -0/+3Actually, that was the intent of the original social security. At the time they set the initial age they expected people to maybe get 2-5 years of SS before dying off.
Their big mistake is that they hardcoded the age requirement instead of setting it to scale with increasing lifespans. - izackcarson, on 07/27/2008, -0/+3This is advice for people with crappy 401ks. If you have a crappy 401k then you probably have the choice of 1, maybe 2, international and/or global funds and nothing commodity based.
- blackinthmiddle, on 07/27/2008, -0/+3^schotty
His information about index funds, however, is completely wrong and that's what the responder was getting at (he never responded about the stuff you hilighted). And sorry, you're not an idiot for not knowing, just ignorant. - eviljim, on 07/28/2008, -1/+4Wow. Everything you say about index funds is completely wrong.
The S&P will beat out near every mutual fund over time. Google it, it's well documented.
Almost all S&P 500 based mutual funds have an expense ratio. - Zer01, on 07/27/2008, -7/+9What's this got to do with Batman or legalizing pot?
- oldgal, on 07/27/2008, -0/+2It barely covers health insurance for my family of three, and I am on medicare with a Sr. advantage plan.
- rclancy, on 10/27/2008, -0/+2Stop, wait, there is no more reason to worry. The government is now going to take away 401(k) plans so you don't have to worry about it any more.
http://www.workforce.com/section/00/article/25/83/ ...
Go Democrats - communism worked for the Soviets, we can make it work here too. - jdaniel284, on 07/27/2008, -0/+2// You don't put pre-tax money into a Roth.
You can roll over your 401-k into a traditional IRA when you quit. You can then roll over that amount into your ROTH IRA. You will simply have to pay the income tax on it at the end of the year. This roll-over amount does not count towards the $5000 max you can contribute for the year - that's the beauty of it. It is most likely worth it if you are young though, because your principle will dwarf your earnings after twenty years or so. I'd much rather pay tax on the principle than pay tax on the earnings. - subgeniusd, on 07/27/2008, -0/+2You must be an Alex Jones fan. Although he wanders "off the reservation" at times I share much of his informed paranoia.
- koreth, on 07/27/2008, -0/+2Not a single mention of international funds or commodities? What stunning financial advice. If you're diversified across currencies, you're protected to some degree against any single one of them (like, say, the US dollar) dropping in value. Same with commodities.
- Daedalus81, on 07/27/2008, -1/+3You don't put pre-tax money into a Roth.
- BossKey, on 07/27/2008, -0/+2A good way to warn yourself off of withdrawing from your retirement account is to remind yourself that it's got to support your for maybe 20-30 years, if you retire at 65 and live to 85-95. If you don't have enough* money in your retirement account to support 20-30 years of maintaining your current spending rate and you don't want to lower your lifestyle, you damn well better not touch it except to put more in.
Otherwise you'll be spending your last days with a cardboard sign by the off ramp.
* "enough" meaning accounting for both compound interest and inflation - MegaCarpenter7, on 07/27/2008, -1/+3I have a 401k, a Roth IRA, and another regular unleaded IRA I rolled over from a past job. Am I screwed? (I also save money, eff the economy)
- koreth, on 07/27/2008, -0/+2While it's certainly true that the financial industry makes out like a bandit on 401(k) revenue, that doesn't mean it's a ripoff. Tax deferment is a pretty good deal for the individual. If you aren't maxing out your 401(k) (and you can afford to do so) you should really run some numbers and see if you're coming out ahead at the end of the day -- the answer is almost certainly no.
- mikemil828, on 07/27/2008, -1/+2//Not to mention index funds usually never beat even the sluggish mutual funds offered, expense ratios or not. There is absolutely no reason to "favor" index funds in your 401-k.//
FOOL! The only people that can consistently beat the market are politicians. No matter how well a mutual fund is managed, over the long term it will at best perform as well as the market. - Xel565, on 07/27/2008, -1/+2@jdaniel
The reason you'd want to invest in bonds in a tax-defered account is so that you can take the dividends that are thrown off and have them either taxed as capital gains once you start withdrawling (traditional IRA) or never taxed (roth IRA). If you didn't do this all those dividends that are thrown off are taxed at regular income rates. So if you don't mind losing all your gains to taxes feel free to invest in bonds in regular taxable accounts.
Also bond funds are a terrible idea, just buy the individual bonds. - mikemil828, on 07/27/2008, -0/+1//You don't put pre-tax money into a Roth.//
If you have a Roth 401k you can - SolarisSkyrider, on 07/27/2008, -0/+1Decent advice! If your 401(k) plan is ripping you off, then (A.) use the employer match to get as much free money as possible and (B.) invest as much as you're eligible for in a separate IRA.
- jdaniel284, on 07/27/2008, -3/+4>> Never miss out on the employer match.
This is good advice and common sense.
>> Consider bonds. Bonds are usually best suited for your tax-deferred account. Sometimes you can find a bond fund in your offerings that is less outrageously expensive than the stock funds.
What? Is this guy a complete idiot? While it may make sense to invest in bonds in a 401-k if you are nearing retirement in order to reduce risk and volatility, it is usually a terrible idea. If you are going to invest in bonds, why you not invest in municipal bonds in a regular trading account that you have full control over and you are not subject to early withdrawal penalties and management fees. The bonds are tax free in either case.
>> Favor index funds. If you are buying an equity fund, see if your plan offers some kind of index fund. Often an S&P 500 index fund with an expense ratio of 1.00% or more is still better than an active fund with a 2.00% expense ratio.
This guy *is* an idiot. An S&P index fund will not charge you a 1% expense ratio, because by definition THERE IS NO EXPENSE RATIO. It is an index fund! All it does is track the S&P 500, that's it. No one makes any decisions about anything, there is no expense! Would anyone want to invest in an S&P index fund that paid you 1% *LESS* than the S&P? Not to mention index funds usually never beat even the sluggish mutual funds offered, expense ratios or not. There is absolutely no reason to "favor" index funds in your 401-k.
>> Opt for a rollover.
Good advice. You have to quit your job in order to do this though. You can first roll it over into a traditional IRA that you setup and have complete control over. Depending on your income tax bracket, you should then start rolling that into a ROTH. - MoneyTutor, on 01/08/2009, -0/+1Index funds are over rated. The plan I participated in cost over $100 per share and paid no dividends and capital gains. Those two words are the forerunners in my choosing a mutual fund to purchase.
- dixandbub, on 07/27/2008, -1/+2Every 401k plan is a ripoff to payoff investment banks for underachieving.
- moulin1, on 07/29/2008, -0/+1Investing in international funds WAS a very sound idea and good advice. Unfortunately it's too late now.
- Sethbacca, on 07/28/2008, -0/+1A Roth is (can be) a feature of a 401K plan, you do not have a Roth 401K, you have a 401K with a Roth feature :P So yes, by definition, you can put pretax money into a 401k, even if it adds the Roth feature. Although I suppose the plan could be amended to not allow pretax contributions and only allow Roth, but I would imagine plans that do that are extremely rare, we have a couple thousand plans under management where I work, and I've not touched one that is Roth only. You all can call me at work and discuss if you're bored sometime (okay no, not really) :)
- theJeebus, on 07/28/2008, -0/+1Only if he's 65. For most of digg's audience, there's plenty of time for the USD to rebound, and it will, given 5-10 years. In fact, it's such a bargain by now that I would be buying $$ for all my euros, if I had any.
- MoneyTutor, on 01/08/2009, -0/+1"This is contingent upon having the right relationship with your employer and bringing the matter up to the owner or the human resources department."
This comment reminds me of my actions while working. I met with the union and described how the changing of the program administrator every 2 years was adversely affecting the employees. Needless to say, they did not understand what I was talking about.
Unfortunately, when I met with the people in Corporate I soon learned that they didn't understand either.
In other words, someone is hired to do a job that no one understands. - izackcarson, on 07/27/2008, -0/+1You need to investigate the rate of return for each of your plans to determine where you're at. Part of what you want to do is make sure your money is in the best type of plan (see jdaniel's recommendations) and then to look at how your money is invested within that plan. If you have $100,000 or more between both of your IRAs, I would suggest looking into a Registered Investment Advisor. Although you will pay annual fees of 1-2%, a good RIA will get you a much better rate of return so that you're better off in the long run.
- moulin1, on 07/29/2008, -0/+1They do not comingle investors funds with their own. If they went broke it would be a big hassle but the invested funds would still be where they left them. The issue you are thinking of is Enron where management encouraged their employees to put all of their 401k investment into the company stock fund.
- bsmeteronhigh2, on 07/27/2008, -0/+1Now that the Federal Reserve Bank has an endless credit account to bail out Freddie Mac and Fannie Mae with your hard earned tax dollars, I'd say your hard saved funds will soon be worth a bit less. Of course, if you retired in 1975, a Big Mac cost just a bit over 55 cents. Thirty some years later the same thing cost $3.27. I wonder how much more one will cost in ten years? Perhaps it's time to ponder eating cat food--the cheap stuff, I might mention!
- c1966x, on 07/27/2008, -1/+1S&P is a pure index, which doesn't take into consideration trading charges.
S&P 500 index funds absolutely do have expense ratios. There is the cost of maintaining the positions when investors are going in or going out/pulling their funds. You've got to figure out what to sell and what to buy to keep equilibrium with the S&P index. This costs money.
The costs shouldn't be as high as an actively managed fund because there shouldn't be the kind of turnover inherent with actively managed funds... however, being in an index isn't free or close to it... even if you mirrored the S&P yourself. - CrimsonFlash, on 07/27/2008, -1/+1Wohh, I thought 401(k) were administered by the bank. Mind you, I'm in Canada, and we have RRSPs, and the like, so I can see where I am confused. I started my RRSP when I was 18, and I have had no problems with it yet.
- JeffShap, on 07/28/2008, -0/+0The way I deal with my bad 401(k) plan and crappy benefits is by utilizing a secondary income. You can find out more at my submissions if you are interested. http://digg.com/users/JeffShap/history/submissions
- moulin1, on 07/29/2008, -1/+1I am afraid you are the idiot. If you want to know why it will cost you $250/hour. Thats what I charge for educating amateurs who think they know everything. The fellow who wrote the article is a professional as well and right on every count.
- inactive, on 07/27/2008, -0/+0Can the financial company that administers the 401 go broke just like the banks that failed?
Didn't Exxon pull something sinister with the 401 or was that just with the stocks that employees bought? - robertmules, on 07/28/2008, -1/+0The dollar is moving lower again this morning against the euro at $1.5709 and Japanese yen, at 107.72 while it is flat against the pound at $1.9876. One would think that the downbeat consumer confidence report in Germany would have given the dollar more of a lift against the euro, but there are just so many other factors weighing on the dollar and the outlook remains dismal.For more market events just log on at http://www.weturl.com/996/ .
- schotty, on 07/27/2008, -2/+1Bonds suck because they are practically zero risk, thus low interest.
That is what the GP is getting at. Fine if you are older and looking to shelter the cash, but a complete moronic move for anyone younger.
And the GP is spot on with regards to a ROTH. Anyone not investing into a ROTH is a complete moron. And no apologies on the name calling either. Its a tax shelter that has sick gains year in and year out. Why opt for double/triple taxation when you can have it easy with nice gains? - inactive, on 07/27/2008, -6/+3only if all of your savings/assets are based on the american dollar
then yes, your totally screwed - Jikul, on 07/27/2008, -6/+0Bah... who cares!
- inactive, on 07/27/2008, -12/+3Buried as another lame American article.
Hi rest of world.
© Digg Inc. 2009
— Content created and posted by Digg users is