How much should I be putting away?

jtrain609 said:
I don't have the funds to simply "write a check" for my kid's school, hence why I'll save in a 529 plan for the next 18 years.

You know, the old fashioned way.
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There's nothing "old fashion" about a 529. These are fairly new. The old fashion way is to either work until you're 80 putting your kids to school, mortgage or double your home to put your kids through school, take out a loan in your name for thier education, make them work thier own way through school, and/or (last but not least) Federal grants, loans, etc.

And I think your's is a great plan as long as you're going into it with eyes open and you are now aware of the negative impact it will most likely have with regards to Federal assistance. Which, by the way, your kids (and mine) should have the same opportunity to gain access. The 529 will interfere with that access.

Would be interesting to have a discussion about this in 18 years.
 
dustoff17 said:
There's nothing "old fashion" about a 529. These are fairly new. The old fashion way is to either work until you're 80 putting your kids to school, mortgage or double your home to put your kids through school, take out a loan in your name for thier education, make them work thier own way through school, and/or (last but not least) Federal grants, loans, etc.

And I think your's is a great plan as long as you're going into it with eyes open and you are now aware of the negative impact it will most likely have with regards to Federal assistance. Which, by the way, your kids (and mine) should have the same opportunity to gain access. The 529 will interfere with that access.

Would be interesting to have a discussion about this in 18 years.
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By old fashioned I meant save on my own and not have to rely on a loan from the government.
 
jtrain609 said:
By old fashioned I meant save on my own and not have to rely on a loan from the government.
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You may be misunderstanding me here: I'm not stating anyone should RELY on the government for education funding.

I stating a student should be given the option of being able to qualify for Federal Grants/loans. Rather than being denied due to a decision thier parent/grandparents made, let's say 18 year earlier. I absolutely believe in investing specfically for your kids education. But I also want some Grant money to be there to augment (not in lieu of) what I have saved.
 
I have always wondered why there is so little dialogue on the impact of negative ROI on something like a 401(k) or IRA. I got into a semi-heated discussion with Ian J on this subject a few years ago on a thread and it is just glossed over by a lot of folks.

If you are in a situation like a lot of people where they were in their 40's in when 2001 hit and near/in their 50's when 2008 hit, that was disastrous for their portfolio. People like to reference the average return on the stock market's indexes at double digit figures, but they don't account for negative returns. You can't simply average a positive ROI against a negative ROI and have the math come out correctly. A quick example of a $10,000 that loses 30% in 1 day and then gains 30% the next day. You would think that the net gain/loss is 0, but it is far from it. If you lose 30% on 10,000 and then gain 30% on the remaining 7,000, you are now sitting on $9100 for a net loss of 9% on a stock market fluctuation that averaged 0%. I see positive ROI hyped up all the time, but no one likes to talk about the impact of a negative ROI, especially on a large nest egg.

Don't just think you can blindly throw money in an account and have it magically get your 10%+ ROI long term without a lot of hard work. It is a pipedream fed to you by people who benefit from your losses. You have to think about people who are on the other side of these trades and the amount of work you have put in to get to a level where you even understand what is going on, much less perfecting your methods. Would you be willing to bet your entire life savings on getting a base hit from a major league pitcher? The best hitter in the history of the MLB was barely able to be successful less than 40% of the time, so what makes you think you will be any more successful ?

I tend to agree with typhoonpilot. If you don't consider yourself to be an expert in the market, why are you in it? Unless you have an edge (experience, matching, knowledge) why would you gamble your life savings on something so volatile as the stock market?

The IRA/401(k) scam was invented by entities who have an edge. If you can't define your edge, get out and do something else.

That is the end of my drunken, midnight hotel room rant. Take it for what its worth.
 
mikecweb said:
Fantastic. What do you suggest for retirement planning then?
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I am not saying IRA/401(k) is inherently bad. I am about 3 sheets right now, so forgive me if I am not getting my point across. I think a lot of common sense gets overlooked when buying into the hype of the system that we have for retirement.

1. Don't invest in IRA or 401(k) unless you can define a specific advantage or edge that you have in the market. Unless you have devoted a lot of time and effort into refining your methods, you are throwing darts at a board. Even worse, with 401(k)s and load fees, you are throwing money down a bottomless pit and making someone else a lot of money. If you have a match and can get a load fee investment with your 401(k), then that is free money and an instant ROI. Jump on it.

2. Hoard cash until you can buy something useful. Mark Cuban has hinted at this before. If you had a ton of cash on hand in 2001 or 2008 you had a great opportunity to purchase different items at a great discount. If you had it tied in some random 401(k) of which you had very little control over, you probably lost your ass.

The point of my rant is that if you can't define your specific edge in your investment, you probably shouldn't be in that investment. If you are betting your life savings that you are better than someone else who has devoted their life to this sort of thing, you are probably better off putting it on black or red on the roulette table. Don't buy into the hype of average returns of the market and instead use your head and think about the impact of compound interest and ROI.
 
I'm betting 99% of the people have no clue about investing, and if they have no clue about their 401k's then they'll have zero clue about any other investment vehicle.

People aren't betting they are better than the experts, they're betting they can ride the coattails of the experts.
 
mojo6911 I get the general direction on what you're going for. I do however disagree with just hoarding cash with the hopes of buying something at a discount. Maybe it was the apple martinis talking but you seem to love the term ROI. What's the ROI on cash while you're waiting to swallow up this depressed asset with hopes it'll gain value? With the current interest rate climate you can't even get a CD and make more than a 1-1.5%. I agree that someone should strive to gain an edge to succeed in the market but to propose that edge is only gained by professionals is a bit shortsighted. A well trained monkey could make more than 2% with most investments.

I hope I'm not putting words in your mouth but I adamantly oppose the view "the game is rigged". There are more opportunities for retail investors now then there ever has been. I approach it as my second job. It's a business for me and I devote the time it takes to run a business. If someone is not willing to spend time on their "nest egg" than yea they probably are better hoarding cash which will provide just enough money for their final expenses and their kids to pay off a credit card or two but you aren't going to retire with the cash under the mattress.

I guess your retirement goals are something to consider as well. Some people can see themselves working until they die. Some want a place in Del Boca Vista with a Cadillac and Bingo Tuesdays. I just want to live comfortably with a lake house someplace where I can fish and drink good beer till the sun goes down.
 
mikecweb said:
I guess your retirement goals are something to consider as well. Some people can see themselves working until they die. Some want a place in Del Boca Vista with a Cadillac and Bingo Tuesdays. I just want to live comfortably with a lake house someplace where I can fish and drink good beer till the sun goes down.
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Bingo isn't off the table though, right?
 
mojo6911 said:
....
If you are in a situation like a lot of people where they were in their 40's in when 2001 hit and near/in their 50's when 2008 hit, that was disastrous for their portfolio. People like to reference the average return on the stock market's indexes at double digit figures, but they don't account for negative returns. You can't simply average a positive ROI against a negative ROI and have the math come out correctly. A quick example of a $10,000 that loses 30% in 1 day and then gains 30% the next day. You would think that the net gain/loss is 0, but it is far from it. If you lose 30% on 10,000 and then gain 30% on the remaining 7,000, you are now sitting on $9100 for a net loss of 9% on a stock market fluctuation that averaged 0%. I see positive ROI hyped up all the time, but no one likes to talk about the impact of a negative ROI, especially on a large nest egg.....
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This paragraph had me stumped for a bit, but its just a math trick. The numerical percentages stock or investments go up or down from certain perspectives in meaningless. Its plain simple truth of whether they do go up or down, and how much from an absolute view, that matters. Example: from the beginning of the recession in 2008 DOW average went from 14,000 down to under 7,000 and now back up to 14,000. the fact that one can interpret that as the market had a 50% drop. then had to increase 100% to recover from that... It might sound bad, but it dosnt matter. Its back to even!

If you bought a share at $10.00 and it dropped to $5.00, then it went back up to $10.00. Then its worth the same as when you bought it.

The average ROI on charts is referenced from a certain point in time and an end point in time.
 
Fly_Unity said:
This paragraph had me stumped for a bit, but its just a math trick. The numerical percentages stock or investments go up or down from certain perspectives in meaningless. Its plain simple truth of whether they do go up or down, and how much from an absolute view, that matters. Example: from the beginning of the recession in 2008 DOW average went from 14,000 down to under 7,000 and now back up to 14,000. the fact that one can interpret that as the market had a 50% drop. then had to increase 100% to recover from that... It might sound bad, but it dosnt matter. Its back to even!

If you bought a share at $10.00 and it dropped to $5.00, then it went back up to $10.00. Then its worth the same as when you bought it.

The average ROI on charts is referenced from a certain point in time and an end point in time.
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And that's IF you've got all your money wrapped up in a fund that tracks that index. The DOW is little more than a barometer, and some would argue a poor one at that. Guys that were paying attention made money in the recession even though many stocks tanked.
 
Fly_Unity said:
This paragraph had me stumped for a bit, but its just a math trick. The numerical percentages stock or investments go up or down from certain perspectives in meaningless. Its plain simple truth of whether they do go up or down, and how much from an absolute view, that matters. Example: from the beginning of the recession in 2008 DOW average went from 14,000 down to under 7,000 and now back up to 14,000. the fact that one can interpret that as the market had a 50% drop. then had to increase 100% to recover from that... It might sound bad, but it dosnt matter.
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That's not a math trick, it is totally correct. You need a 100% gain to recover from a 50% loss.

But it is a good point, mutual fund/401k/IRA companies could care less if you make money. They (their fund managers) take their 2% off the top of everything you have, every year.

We should make a distinction though - 401k/IRAs are a type of tax advantaged account, they are not an investment. The vast majority of the investments you can buy with them are crappy or inappropriate, but that isn't the account type's fault.
 
I think your first mistake is asking investing advice on a pilot forum.

Seriously though, I'm in the same boat as you pretty much. I have a few grand in a 401k, and put away about 10%, but im not really happy with that. So, I've been learning/playing with stock options and ive been playing on a paper trade account for about a year now. After a year im nowhere good at it, but im getting to the point that it's not just dumb luck anymore.

The downside is that you can lose a lot, quick. You gotta be able to stomach losing a thousand bucks in 30 seconds. Also, you have to constantly watch it. I've seen my position go from a a 2k profit to a 1k profit while i was in the bathroom taking a piss.

The upside is that once you know what you're doing, theres money to be made and it's a great back up "job" if the fit hits the shan and you cant fly anymore.
 
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