SlumTodd_Millionaire
Most Hated Member
You might want to call the plan administrator and see if there is a self directed option. If so, you would be able to invest in any fund.
401k help
- Thread starter Cessnaflyer
- Start date
You might want to call the plan administrator and see if there is a self directed option. If so, you would be able to invest in any fund.
HRDiva
Well-Known Member
I would invest in the 401k to max out the employer match. Then put money in a Roth IRA with the administrator of your choice, Vanguard. You can roll the other 401a to an IRA, or pay taxes now and convert it to the Roth.
Think about Rothschild now. If you are diligent and invested in a lot of IRA's and want to convert later, you have to convert all at once. The immediate tax due can be huge. Perhaps if you were diligent and saved up $500,000, your tax is many thousands. The alternative is that, beginning at age 70.5, there are minimum required distributions that are taxable with traditional IRA's.
Also, if you can invest in stock funds and ladder individual bonds. Bond funds are a bad idea. If stocks go up, bonds go down. A bond fund does this too. If you have laddered bonds you hold to maturity of call, you don't care and don't lose.
Think about Rothschild now. If you are diligent and invested in a lot of IRA's and want to convert later, you have to convert all at once. The immediate tax due can be huge. Perhaps if you were diligent and saved up $500,000, your tax is many thousands. The alternative is that, beginning at age 70.5, there are minimum required distributions that are taxable with traditional IRA's.
Also, if you can invest in stock funds and ladder individual bonds. Bond funds are a bad idea. If stocks go up, bonds go down. A bond fund does this too. If you have laddered bonds you hold to maturity of call, you don't care and don't lose.
Cessnaflyer
Wooooooooooooooooooooooooooooooo
Great advice.
I still haven't touched my 401A. I think I might just move it into a Roth IRA since it is only at $600 tiny hit on taxes.
SpiraMirabilis
Possible Subversive
I have both a 401K (company matches 70% of the first 8%, so it ends up being 5.6% company matching) and an IRA. The 401(k) can be nice for putting pretax dollars, this is an advantage even if you are going to have to pay taxes for it later. I put 10% (+5.6%) in the 401(k) and another 7% in a Roth IRA. I also increase these every year, for example in October I will be putting 12% in the 401k and 8% in the Roth.
Roth and 401(k) are tax advantaged in different ways. I think having a mix of both is probably the best bet. Well, the best bet is having a defined benefit pension plan but thats never going to happen anymore.
If you think your taxes are going to rise (based on where they are now) before retirement it is better to focus more on the Roth. If you think your tax rate will fall at retirement it is better to put more in a 401k.
Roth and 401(k) are tax advantaged in different ways. I think having a mix of both is probably the best bet. Well, the best bet is having a defined benefit pension plan but thats never going to happen anymore.
If you think your taxes are going to rise (based on where they are now) before retirement it is better to focus more on the Roth. If you think your tax rate will fall at retirement it is better to put more in a 401k.
elmetal
Ain't nobody got time for that
look into your 401k fees. they will typically be higher than your IRA/RothIRA fees. For that reason it is generally better to max out your matching (8%) and plug the remainder of extra funds into an IRA/RothIRA. it is very rare when a 401k can outperform an IRA.
So if you think your bracket will go up, Roth IRA, if you don't, regular IRA. With the 401k matching of course.
And this doesn't take into account the specifics of your 401k plan. always look and decide what is best for your situation, but I'd say 80% of the time (madeup stat) a trad IRA will kill a 401k
brian434
Well-Known Member
Max out your match and then if/when you leave the company take those funds and roll them over into an IRA. If for some reason you're earning big bucks maintain a working knowledge of what the yearly ROTH IRA income limits are. High earners are limited in what deductions they can take from a traditional IRA as well. Once you hit the $100k yearly mark you're best bet is to probably hire a financial advisor.
Roger Roger
Bottom of the list
Don't you think by the time retirement hits for most people their tax rates will be higher? And I mean I don't know anyone who wants to live off of LESS income in retirement than they do while working.
SlumTodd_Millionaire
Most Hated Member
Huh? The average person spends between 60-80% of what they made while working in retirement.
Roger Roger
Bottom of the list
Hmm. Interesting. I would have thought that with wanting to do more fun stuff and with health care costs going up with age your average person would be spending more in retirement (on average) than during their working life.
SlumTodd_Millionaire
Most Hated Member
It has gone up in recent years. It used to be that financial advisers would always say to plan on 60% of your final annual earnings. Most advisers are now saying 70%, or even 80% in some cases.
Lots of factors play into it. First, you go on Medicare and either stop paying health insurance premiums or only pay supplemental premiums. That helps a lot with the health care costs. Many people also have their home paid off by retirement, or just a few years into retirement. The "active adult" lifestyle usually doesn't last for too many years, either. Lots of reasons, but the reality is that most people spend less in retirement than they did during their working years.
Roger Roger
Bottom of the list
Good to know. This is why I keep you off my block list
I'm sure people will vehemently disagree with me, which is completely fine as the numbers don't lie but… two words… "FINANCIAL ADVISOR".
Of course, the "When you hear financial advice from pilots, cup your hands over your ears and scream ' NANANANANANANANAAAAA'" rule applies and your mileage may vary.
Cessnaflyer
Wooooooooooooooooooooooooooooooo
I've heard some shady advise from some financial advisors as well. My parents ran two portfolios. One on a advisor recommendations and the other on their own research. After fees on what would have been the advisors route they would have lost nearly 10% in the last three years.
I like to go with the ask everyone and read everything approach and see what bits of information I can take from it all to make a more well rounded decision on cost, taxes and desired income.
SlumTodd_Millionaire
Most Hated Member
Financial advisers are generally a bad idea. Anyone who is actually good at investing doesn't make a modest living by selling their advice. If you don't know what you're doing, just dump your money into an index ETF. That's not my advice. It's the advice of the guy at the left, who's currently worth somewhere in the neighborhood of $60 billion.
Cessnaflyer
Wooooooooooooooooooooooooooooooo
It's one of the best tax efficient ways if you invest in a passive fund as well.
drunkenbeagle
Gang Member
If they have better returns than the S&P500, it is because they are taking on more risk as well.
Todd's advice is the best - you don't need a financial advisor to tell you to invest in S&P500 index funds. Hell, my fidelity IRA has commission free ETFs for these. What a deal!
I was absolutely furious when my ex-wife went to a financial advisor she went to school with. Convinced her that S&P index funds weren't "diversified enough," and had her put $100k in otherwise similar funds with a 5% sales load, and 1.5% in management fees. Criminal. She paid 7 grand to not beat the S&P last year.
Financial advisors make money 3 ways. They collect a sales commission on selling you otherwise overpriced funds, they take management fee of so many percent per year, or they charge an hourly fee. Hourly fee is the only person to trust, but they could tell you Todd's advice in 10 minutes anyway...