| Author | Message | ||
     Interest |
Who knows a bit about 401(k)'s? My employer offers it, and I haven't been taking advantage of it. I can finally see myself staying with the company for a while, so I figured I should probably invest in my future. I just got a list and need to select the percentages of investment in each. Who can help me make this decision? I don't have a financial planner, or anyone to turn to. My choices: -AFS Cash Management Trust -Franklin Strategic Mortgage -Alliance Bond Fund Corp Bond -Oppenheimer Quest Balance Value -Eaton Vance Large Cap Value -American Funds Washington Mutual -Federated Max-Cap Index -American Funds Growth Fund of America -Mutual Beacon -Delaware Trend -Franklin Balance Sheet Investment -American Funds EuroPacific Growth -Eaton Vance Worldwide Health -Delaware REIT -MFS Utilities Any input is greatly appreciated. -Andrew | ||
| Dragon_slayer |
Just send the money to me and I will call you when we have enough to party on! Best advise I can offer you is start investing now! Do not wait any longer. It's called compounding interest over time. More time equals lots more money! | ||
| Iamike |
The best example I have heard about starting early- Two twins, a boy and a girl, were told about IRAs. At 25 she started putting the max of $2,000 in each year, he partied. At 35 she stopped investing and used her income on her family. He started investing the $2,000 max. At retirement she still had more in her IRA than he did. I've never run the math to prove it, but it makes for a good argument. What you need to do is look up each of those choices and decide what works for you. You can compare the 1, 3 & 5 year averages to see how they do in the long run. Your provider should give advice too. Spread your investment around a little so if one sector doesn't do well others should. My regret about my 401k is that I didn't put enough in and I didn't go for the agressive stuff early. | ||
| Johnnylunchbox |
One rule of thumb is to invest the maximum allowable amount. It is usually tax deferred, and you are betting on being in a lower tax bracket when you retire. Better to pay taxes at a lower rate then, than at a higher rate now. | ||
| Az_m2 |
Start now and invest in the higher risk funds. Look at their track records and pick the ones that look best to you. If your company matches up to 3% like many do, you contributing a mere $100 per month, will cost you only $75-80 and will get you $200. Use automatic deduction and you won't even miss it. | ||
| Az_m2 |
Also, don't spread your contributions out over a lot of funds. Pick one fund from each risk category that you want to invest in and go with it. | ||
| Barker |
For you investment options: Look at the returns. You are hear to make $$$. This is what you have to compete with. Inflation +/- 4% Stock market +/- 12% Invest in funds/options that have made 13% or better for the last 10 years nothing less. If they havent been around for 10 years do waste your time. Try to mix it up. Try to invest atleast 25% in international funds. If you are <30 invest only up to the company match. 410k's are not a good places to keep all of your retirement. And most important dont take $$$ advice from broke people. If you want more specific advice PM me. | ||
| Barker |
Johnnylunchbox, bad idea. Actually we are currently at a historically low tax rate. And personally I only see taxes going up. If you are somewhat "young" Only put in up to company match, here is the math Example. 401k, tax deffered you dont pay when it goes in, you pay when it goes out. $100 before tax out of your paycheck a month for 30 years 36,000 dollars invested. You pick you investments and make $1,000,000 taxable. Roth IRA, You pay going in, not going out. $75 ($100 after tax) a month for 30 years 27,000 dollars invested. You pick you the same investments and make $900,000 untaxable! So my question? Wanna pay taxes on 36k or 1mil? (Message edited by barker on December 05, 2006) | ||
| Barker |
Interest, "I can finally see myself staying with the company for a while" Invest now even if you dont plan on stay long. Not investing in a match 401k is like leaving money on the table. If you leave the company you can roll over the 401k into a IRA where you can have some real control, and dump those crappy funds they offer. All of my old 401k's have been rolled over into a Hi-perforamce IRA that I control. It also transferable to my wife if me and the bike dont make it back from the mountain.(most cash out when you die, really kill all tax advantages. The gubment will take out +/- 30% at death) After I freed my 401k's I placed them with real funds. Whipped em into shape now they are make some $$$. If you change jobs rollover your 401k to a traditional Retirement IRA. | ||
| Lastcyclone |
This has worked well in the past. <http://morningstar.com/> or <http://moodys.com/cust/default.asp> Don't rush into anything. Make changes when needed, but not too often. The market is like a ferris wheel. Ask a pro for advice if you need to. Most brokerage firms are happy to give it out for free if they believe there is a chance you will do business with them. The important part is to contribute up to your employer's matching amount at least. Good luck. | ||
| Blake |
Tax deferred sure beats not tax deferred, doesn't it? The Roth option (tax free when withdrawn) is a good one, but allows very limited contributions. | ||
| Interest |
Good question on the tax deferred vs. roth....What are the differences with contribution limits? I think I would rather pay taxes on 36k than 1 mil....but that's just instinctual. My financial instincts haven't been much to rely on though. | ||
| Barker |
If you make to much $$$ you might no quailify for a roth. I can remember exact #s. The contribution limit is 4k a year. your 401k up to company match, and a roth IRA together should be enuf for most people. Good rule of thumb is to save 15% for retirement. Roth IRA @ 4k a year for 30 years @ 15% is $3,273,404.80 untaxable Plus what ever else is in your 401k | ||
| Brucelee |
I am a financial planner. The one thing that is clear is that you should invest as much money in your 401K as you can afford up, to the legal limit. I assume your employer has some form of match, so he will add to your fund values. That is "free money" and will grow tax free until you withdraw the cash from your 401K or IRA. As to specific investment funds, I would suggest reading up on index funds and go from there. Good LUCK! | ||
| Homeslice3 |
For the ROTH vs 401 - remember, you're not paying taxes on 1million dollars, you're paying taxes on the INCOME from the million dollars each year. Let's assume at 65 you have 1 million bucks in your 401K and you've moved it into a nice TBILL type of fund that pays 5%. You'd be paying taxes on the 50K per year that the money makes. Also, the key to the 401K is the employer match - which is like free money year after year. At the very least, you should make sure whatever match they're giving you invest up to (actually 15% IS the best way to go, you won't miss the money and you'll be set at retirement). | ||
| Brucelee |
The 401K has the employer match AND a higher max contribution level. Usually, these two features make it preferable to a Roth but each individual needs to caculate and decide based on their own situation. | ||
| Doerman |
Hi Andrew First let me say this. Do take advantage of a 401K if your employer offers one. I have categorized the the funds that you 401K provider offers into 4 categories. Money market funds Very stable with positive yield. But the interest yield is low 3-6% perhaps Large CAP Funds comprised of large corporations such as IBM, Ford, Microsoft, etc … aka BlueChip stock.. These are stable and yield better than Money market, but you may see negative return in a single quarter or year. Over time, you should see an average of 5-8 percent yield Mid CAP These funds consist of a mix smaller to medium companies. That means that they are more volatile on the market. Average (over years) yield is in the double digits. But you will see negative years with these funds, Overseas funds These are world market funds and not only is the fund performance affected by the stocks that are in the fund but also currency fluctuations. These funds are highly volatile and may yield as much as 30 percent but may also yield -30 percent. The picks you make for your 401K depends on what age you are. If you are near retirement, then stick with Money Market and Large CAP If you have 15 years or so to retirement, Mix in Large Cap and Mid Cap If you still have more than 20 years of time to participate in your 401K (or rolled over IRA). The go aggressive. With a mix of mid CAP and Large CAP. I can not emphasize enough that you study up on the funds themselves. Don’t look at what they have done in a given year, look at what they have done over a 10 year average. That is much more meaningful, since a 401K is really a long haul deal. You have to have the hootzbah to ride out a negative quarter or a year. Money market funds -AFS Cash Management Trust -Franklin Strategic Mortgage -Alliance Bond Fund Corp Bond -Oppenheimer Quest Balance Value Large CAP funds -Eaton Vance Large Cap Value -American Funds Washington Mutual -Federated Max-Cap Index Mid-CAP -American Funds Growth Fund of America -Mutual Beacon -Delaware Trend -Franklin Balance Sheet Investment Overseas -American Funds EuroPacific Growth -Eaton Vance Worldwide Health I don’t know this one -Delaware REIT I don’t know this one?? -MFS Utilities I hope this is helpful Asbjorn |
