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Fire Me Boy!
04-26-2007, 04:35 PM
So... I just got in the game.

Yesterday I went to the HR person at work and have them putting 6 percent into a pre-tax 401K from every paycheck (that's the max that corporate will match 50 percent). Never had a 401K, so it was all kinda new.

Since I'm only 28, I'm letting them do all the work (Vanguard). They'll be putting my money into the aggressive category... I just will have to ride it out. The people I talked to at work that had the same basic plan said even with last year's dip, they still got a 3 percent return.

A lot of this is mumbo jumbo... anyone got an suggestions for a newbie, or have I just done the majority of the work in setting it up?

JBucc
04-26-2007, 04:37 PM
Forget 401k. Spend every extra penny you have on lottery tickets.

petegz28
04-26-2007, 04:38 PM
Ok first of all put as much as you can in your 401k do not worry about the company match, that is just bonus. The more you put in the less taxe you pay.

Secodnly do NOT put ALL your money into Aggressive funds. Pu tmost into it then make sure you put some in a bond fund and some into a money market fund.

Do yourself a favor and get a book and learn more about asset allocation. It is YOUR money and no one is going to care more about it than YOU so YOU need to know as much as you can about what to do with your money.

Der Flöprer
04-26-2007, 04:40 PM
My advice is to put half of your money into aggressive investing. (Only because of your age, if you were older I'd tell you it's just gambling.) The other half should be divided between low risk, and moderate investments. There's my 2 cents worth.

Donger
04-26-2007, 04:41 PM
They'll be putting my money into the aggressive category...

All of it? I wouldn't do that.

Fire Me Boy!
04-26-2007, 04:43 PM
Not all. About 75 is going into aggressive funds, then allocating the rest between low and moderate risk investments. Sorry, should have mentioned that.

Fire Me Boy!
04-26-2007, 04:45 PM
Ok first of all put as much as you can in your 401k do not worry about the company match, that is just bonus. The more you put in the less taxe you pay.

Secodnly do NOT put ALL your money into Aggressive funds. Pu tmost into it then make sure you put some in a bond fund and some into a money market fund.

Do yourself a favor and get a book and learn more about asset allocation. It is YOUR money and no one is going to care more about it than YOU so YOU need to know as much as you can about what to do with your money.
Yeah, we're going 6% right now... I can adjust at any time.

Stewie
04-26-2007, 04:53 PM
They'll be putting my money into the aggressive category

That's fine, you're only 28. Once you get a substantial amount in the account then I'd worry about allocation. If your income is <50K you can also open an IRA (with all the tax deductions) that you can invest as you like. I'd only put in the amount that gets a match in the 401K because you have alot more options outside of those restrictive plans. Try the online brokers like Scottrade, etc. for an IRA. They have myriad options for investments. Just my 2 cents.

ChiefaRoo
04-26-2007, 04:55 PM
Yeah, we're going 6% right now... I can adjust at any time.

Unless you are a highly compensated individual, very high up in your company you can put up to 10 to 11% of your $$ into the 401K. In other words you should max out your contribution. Last year I had four funds picked, 25% each. 30% overall gain. Don't put anything in the old man funds - bonds etc. You're 28, get into the aggressive funds. If your companys account is managed well you should make money just by looking at the quarterlys and the 1 and 5 year performances as the dud funds should be replaced by your fund manager. Good luck.

Stewie
04-26-2007, 05:01 PM
Unless you are a highly compensated individual, very high up in your company you can put up to 10 to 11% of your $$ into the 401K. In other words you should max out your contribution. Last year I had four funds picked, 25% each. 30% overall gain. Don't put anything in the old man funds - bonds etc. You're 28, get into the aggressive funds. If your companys account is managed well you should make money just by looking at the quarterlys and the 1 and 5 year performances as the dud funds should be replaced by your fund manager. Good luck.

Not true. Companies that get "safe harbor" designation have no limit on the % contribution made by employees, but they still have the $15K maximum contribution by each employee.

ChiefaRoo
04-26-2007, 05:16 PM
Not true. Companies that get "safe harbor" designation have no limit on the % contribution made by employees, but they still have the $15K maximum contribution by each employee.

Your right on the 15K max but I've never heard of the safe harbor designtation. How does that work? I know as a fact the way our company is set up the highly compensated individuals can only put in X amount based on the average size and/or contribution to the fund by the rank and file of the company.

My overall point is a young guy should be maxing out his contribution as that money really starts to add up later in life. If he starts putting in a chunk of change in at 28 and keeps contributing by the time he's 58 the result will be a nice chunk of change.

Stewie
04-26-2007, 05:20 PM
Your right on the 15K max but I've never heard of the safe harbor designtation. How does that work? I know as a fact the way our company is set up the highly compensated individuals can only put in X amount based on the average size and/or contribution to the fund by the rank and file of the company.

Most companies with a conscious go for "safe harbor." It allows everyone to contribute whatever they want. The only limit is the 15K, so no matter if you make $40K or $2 million, everyone gets the chance to take advantage of the maximum limits of the plan. My company went to this last year and from what I've read this has been a very popular designation.

ChiefaRoo
04-26-2007, 05:24 PM
Most companies with a conscious go for "safe harbor." It allows everyone to contribute whatever they want. The only limit is the 15K, so no matter if you make $40K or $2 million, everyone gets the chance to take advantage of the maximum limits of the plan. My company went to this last year and from what I've read this has been a very popular designation.

Hmmm, good stuff. I'm going to ask a few questions.

Stewie
04-26-2007, 05:30 PM
Hmmm, good stuff. I'm going to ask a few questions.

Yes, you should. Amazing what you'll learn on CP, eh? That's what's great about this site.

ChiefsFanInIndy
04-26-2007, 07:10 PM
So... I just got in the game.

Yesterday I went to the HR person at work and have them putting 6 percent into a pre-tax 401K from every paycheck (that's the max that corporate will match 50 percent). Never had a 401K, so it was all kinda new.

Since I'm only 28, I'm letting them do all the work (Vanguard). They'll be putting my money into the aggressive category... I just will have to ride it out. The people I talked to at work that had the same basic plan said even with last year's dip, they still got a 3 percent return.

A lot of this is mumbo jumbo... anyone got an suggestions for a newbie, or have I just done the majority of the work in setting it up?

Find a Fidelity office near you and go in and ask them about Freedom Funds. They are a managed portfolio that uses a formula based on your current age and planned age of retirement. Early in your life it leans more towards aggressive stocks but still has some conservative investments. The closer you get to retirement the balance moves more toward conservative investments.

I moved everything I had into Fidelity Freedom Funds last Sept and I am not kidding when I say it is making a killing. Even February when the market dropped 400 points I barely lost a penny.

And man I can't wait to see my April statement with the market passing 13,000 this week. Of course there will be occassional corrections, but the closer I get to retirement the less risk my portfolio will carry.

At your age it's a no brainer. Wish I had done it back then. Vanguard has that kind of Fund also. Not sure what they call it. You for sure should talk to someone about them.

ExtremeChief
04-26-2007, 07:56 PM
Find a Fidelity office near you and go in and ask them about Freedom Funds. They are a managed portfolio that uses a formula based on your current age and planned age of retirement. Early in your life it leans more towards aggressive stocks but still has some conservative investments. The closer you get to retirement the balance moves more toward conservative investments.

I moved everything I had into Fidelity Freedom Funds last Sept and I am not kidding when I say it is making a killing. Even February when the market dropped 400 points I barely lost a penny.

And man I can't wait to see my April statement with the market passing 13,000 this week. Of course there will be occassional corrections, but the closer I get to retirement the less risk my portfolio will carry.

At your age it's a no brainer. Wish I had done it back then. Vanguard has that kind of Fund also. Not sure what they call it. You for sure should talk to someone about them.


I have a Fidelity Freedom fund as well. The have done well even through the dips in the market.

Brock
04-26-2007, 08:24 PM
3 percent? That's awful.

ChiefaRoo
04-26-2007, 09:16 PM
3 percent? That's awful.

I read that too. I just assumed it was a typo.

2bikemike
04-26-2007, 09:33 PM
Another thing to consider: If you can afford to I would put a minimum of 10% of your wages away in some sort of retirement fund. I would not necessarily open a traditional IRA but a Roth IRA IMHO is a better way to go.

Think of it as being taxed on your "Seed" (Roth IRA) rather than your "Harvest".(401k, IRA) Meaning you don't get a tax break for the money you stash in your Roth but all your earnings are tax free. Which I feel in the long run (31 years for you) will be the better deal. Especially if you build a large quanity of money.

The one thing a lot of people don't understand is that there is an age trigger where you will have to make withdrawals from the IRA and 401k that may shove you into a fairly high tax bracket and at that age you may not have many write offs to offset the taxes you owe.

2bikemike
04-26-2007, 09:35 PM
I should add that you should always put in enough into the company 401k to get the maximum match.

chief52
04-26-2007, 09:42 PM
The one thing a lot of people don't understand is that there is an age trigger where you will have to make withdrawals from the IRA and 401k that may shove you into a fairly high tax bracket and at that age you may not have many write offs to offset the taxes you owe.

While that is true, I hope I am faced with that. I hope my investments are doing so well that I am having to pay a good chunk of taxes. I do not want to...but I it is better than the alternative.

Slick32
04-26-2007, 09:44 PM
I started late with my 401K. My first one they matched the first 4%, I was putting in 10%. I was in moderate to safe investments. In 9 years I was at about $33K. In the past year and a half I've been putting in 20%, my current company matches 3%. I've been in agressive investments with the whole thing. I've more than doubled that figure as of today. If the market dumps you stand to lose more, but you also stand to make more by being agressive. Like others I ahve plans for 3 different funds on retirement. Military retirement, Social Security (if it lasts) and 401K. I'm not much counting on SS and the 401K will be the supplimental.

My recommendation would be to put in as much as you can without shorting your family. Keep the bulk of the money in agressive funds and buy the occasional lottery ticket.

Oxford
04-26-2007, 09:56 PM
Past Performance is no guaranty of Future Gains. Do your homework on the funds available. Look how they over/under perform like funds from other companies. Look how they over/under perform the market as a whole. If you are risk-adverse you might want to consider a fund that has a little less upside for less downside risk. 10% in international funds is a good bet at 28. Just understand that investing in IRA/401/403b/457 is money for retirement, the penalties for early withdrawl are stiff. I put $4000 in a Municipal Bond fund in 1985, have paid no federal tax on the reinvested dividends, and its worth around 18,000 now. And I have the money if I really need it.... Watch out for universal life plans, "term life insurance" with a part of the premium invested in a low yield investment. There is a reason insurance companies sell them.

Oxford
04-26-2007, 09:58 PM
I read that too. I just assumed it was a typo.

I get a $10 match per pay period... I'd take 3%

ChiefaRoo
04-26-2007, 10:11 PM
I get a $10 match per pay period... I'd take 3%

I thought he was talking about his annualized profit.

alnorth
04-26-2007, 10:28 PM
I am a young and very aggressive investor. I have nothing going into a "safe" investment. (aside from my emergency fund in an ing direct money market account) The only thing remotely safe I have is a 10% allocation to a high yield junk bond fund. If I take a hit a couple years in a row, I'm fine with that, its a buying opportunity for cheap stock as far as I'm concerned. When I get past 50, I'll throttle it down with safer investments, but I've still got a ton of time.

However, I am not acting greedy or insane about it either, diversified investing is the key. Have a little in every sector, dont overweight in anything. I currently have my 401k contributions split into 11 different mutual funds in little chunks ranging from 7%-15% each. Most of it in Domestic Stock, some in International Equities, a small amount in emerging markets. Every category going 50/50 to an index fund or a professionally managed fund. (I dont know if the manager will beat the index in a given year, so I'd rather be half right than all wrong) Of the domestic stocks I hit all four corners, large cap and mid-small cap, value and growth, again split between index funds and managed funds.

I wish my 401k had a REIT mutual fund and a foreign bond fund, but I'm doing well so far. Every year I can count on 1 or 2 funds doing pretty badly, and 1 or 2 funds hitting it out of the park (this year it seems my foreign funds are going nuts, I'll have to rebalance soon, selling some of it off to buy more of the stuff that didnt do as well to balance it out again.) On average though, if your well diversified, your winners should be able to carry your losers into a decent gain in most years. In the bad years like when everyone was buying 100% tech and got killed, having small amounts in many baskets will reduce your loss.

Brock
04-26-2007, 10:38 PM
I get a $10 match per pay period... I'd take 3%

I'd quit.

SLAG
04-26-2007, 10:47 PM
anyone here a real financial advisor that could help me get on the right track with my money starting from scratch?

arrowheadrocks
04-26-2007, 10:59 PM
anyone here a real financial advisor that could help me get on the right track with my money starting from scratch?

Not an advisor, but an analyst for a $1.3 bn portfolio. Could easily get you in touch with one though.

ChiefsLV
04-27-2007, 12:13 AM
Find a Fidelity office near you and go in and ask them about Freedom Funds.

I recently moved my stuff into the Fidelity Freedom 2045 fund myself and it has been doing very well. I also have money in the Fidelity Low Price stock fund which has done really well over the past couple years.

stlchiefs
04-27-2007, 12:19 AM
anyone here a real financial advisor that could help me get on the right track with my money starting from scratch?

No, but I did stay at a Holiday Inn Express last night.

Toto
04-27-2007, 06:48 AM
Another thing to consider: If you can afford to I would put a minimum of 10% of your wages away in some sort of retirement fund. I would not necessarily open a traditional IRA but a Roth IRA IMHO is a better way to go.

Think of it as being taxed on your "Seed" (Roth IRA) rather than your "Harvest".(401k, IRA) Meaning you don't get a tax break for the money you stash in your Roth but all your earnings are tax free. Which I feel in the long run (31 years for you) will be the better deal. Especially if you build a large quantity of money.

The one thing a lot of people don't understand is that there is an age trigger where you will have to make withdrawals from the IRA and 401k that may shove you into a fairly high tax bracket and at that age you may not have many write offs to offset the taxes you owe.

2bikemike said some very good things above....the ROTH is a GREAT additional tool if you qualify!!!!

I would contribute the 6% to get full company match to the 401k AND put $4,000 per year into a ROTH. If you have any extra money, then put that into the 401K up to the 15k max.

Take full advantage of the Company 401k to get the full company Match (That's FREE Money)...also check to see if they offer the Vanguard FUND that diversifys for you like a Target 2040 fund, etc. Also make sure you check out the fees they charge...usually Vanguard are among the lower.

I would also TAKE A VERY STRONG look at the IRA Roth if your income is low enough to qualify. With 37 years till you are 65 it will grow nicely! ALL the money in a ROTH will be TAX FREE when you start drawing it after the age of 59.5.

Put in $4,000 per year at 5% interest (tax free growth) in 37 years (age 65) it will be worth 426,838. again TAX FREE. One other MAJOR benefit of the ROTH...is you can take out your principle if you need it w/o penalty (Don't plan on this...but it's there if you have a major need.)-Read up on the Roth IRAs to find out more!!!!

Every penny of your 401K will be taxed when you start pulling that money out. You gain some tax benefits now (lower taxes and tax-free growth.), but ZERO later when you take draws. So having some tax-free income (ROTH) when your older gives you added flexibility!!!

...believe me I know - I'm starting to evaluate my exit strategy and wish the ROTH was a portion of my retirement income. They say tax rates will be better when you retire...don't buy that! If you did well enough to give yourself a nice retirement...pulling in that income yearly will still put you into the 28% plus tax bracket.

...Pay yourself First!!!!

:-)

Fire Me Boy!
04-27-2007, 07:42 AM
Find a Fidelity office near you and go in and ask them about Freedom Funds. They are a managed portfolio that uses a formula based on your current age and planned age of retirement. Early in your life it leans more towards aggressive stocks but still has some conservative investments. The closer you get to retirement the balance moves more toward conservative investments.

I moved everything I had into Fidelity Freedom Funds last Sept and I am not kidding when I say it is making a killing. Even February when the market dropped 400 points I barely lost a penny.

And man I can't wait to see my April statement with the market passing 13,000 this week. Of course there will be occassional corrections, but the closer I get to retirement the less risk my portfolio will carry.

At your age it's a no brainer. Wish I had done it back then. Vanguard has that kind of Fund also. Not sure what they call it. You for sure should talk to someone about them.
I'm on the Vanguard fund that's like the Fidelity Freedom. Same deal.

The 3 percent I mentioned was for 1st Q 2007 with the major market dip in Feb. Sorry I screwed that up.

Fire Me Boy!
04-27-2007, 07:42 AM
2bikemike said some very good things above....the ROTH is a GREAT additional tool if you qualify!!!!

I would contribute the 6% to get full company match to the 401k AND put $4,000 per year into a ROTH. If you have any extra money, then put that into the 401K up to the 15k max.

Take full advantage of the Company 401k to get the full company Match (That's FREE Money)...also check to see if they offer the Vanguard FUND that diversifys for you like a Target 2040 fund, etc. Also make sure you check out the fees they charge...usually Vanguard are among the lower.

I would also TAKE A VERY STRONG look at the IRA Roth if your income is low enough to qualify. With 37 years till you are 65 it will grow nicely! ALL the money in a ROTH will be TAX FREE when you start drawing it after the age of 59.5.

Put in $4,000 per year at 5% interest (tax free growth) in 37 years (age 65) it will be worth 426,838. again TAX FREE. One other MAJOR benefit of the ROTH...is you can take out your principle if you need it w/o penalty (Don't plan on this...but it's there if you have a major need.)-Read up on the Roth IRAs to find out more!!!!

Every penny of your 401K will be taxed when you start pulling that money out. You gain some tax benefits now (lower taxes and tax-free growth.), but ZERO later when you take draws. So having some tax-free income (ROTH) when your older gives you added flexibility!!!

...believe me I know - I'm starting to evaluate my exit strategy and wish the ROTH was a portion of my retirement income. They say tax rates will be better when you retire...don't buy that! If you did well enough to give yourself a nice retirement...pulling in that income yearly will still put you into the 28% plus tax bracket.

...Pay yourself First!!!!

:-)
I'll be doing that later, but right now part of the reason I'm doing it is to lower my taxable income.

Buehler445
04-27-2007, 08:09 AM
Find a Fidelity office near you and go in and ask them about Freedom Funds. They are a managed portfolio that uses a formula based on your current age and planned age of retirement. Early in your life it leans more towards aggressive stocks but still has some conservative investments. The closer you get to retirement the balance moves more toward conservative investments.

Vanguard has a similar deal. As you age, it adjusts your diversification.

Overall, good work, men. This is some very helpful informatoin. Keep up the good work

cookster50
04-27-2007, 08:17 AM
with last year's dip, they still got a 3 percent return.


Holy crap, 3% for a full year? That is a CRAPPY return. You would do better with CDs!

401k = great
crappy fund managers that only get 3% last year = turd

Find a better fund to put your dough in. I can't imagine the turds they invested in for a so called aggressive fund to only get 3%.

cookster50
04-27-2007, 08:21 AM
I'm on the Vanguard fund that's like the Fidelity Freedom. Same deal.

The 3 percent I mentioned was for 1st Q 2007 with the major market dip in Feb. Sorry I screwed that up.

Oh, ok, that is better.

caffeinated_virus
04-27-2007, 10:13 AM
Ahh, investing...the one thing I have been trying to learn up on.

For the gurus out there, can you tell me if what I am doing currently, is on track:


401K - company matches 8% up to 50% of what I put in. I am putting in 10%.

Pension - company puts in 10% of my salary every year to my pension. Fully Vests after 7 years.

(2) Roth-IRA plans. Try to put in as much as I can. About $100 each every month.

Made some money in real estate that I am trying to figure out what to do with. Right now, just sitting in a Orange Savings account at 5% interest until I can figure out how to make that make more money for me.

I was looking into those Freedom Funds from Fiedlity. They seem to do well and people here really like them.

Thanks.

CV