Asset Allocation and Age...

[Thrif-t]

Age 50, 60/40

[FoolFromAZ]

So much wrong in this post. So you're maxing your 401k and taking an absolute beating with cc interest? huh? Maybe stop spending lavishly? Maybe not send kids to every activity you can think of? Maybe eat out once or twice a week? Or just keep doing what you're doing...

I don't see any reason to payoff my c.c sooner as long as interest rate is less than 3%. Also provided I am building the assets or increasing my net worth. We are still living well below our means. Saving 30% of our income. Driving 10k worth car when friends with similar household income driving 50k+ car. Paying 1300 for mortgage when my friends paying 3k for mortgage. Yes I spend more than them on other things.

[disneysteve]

I actually haven't done a detailed calculation lately but I just did a quick estimate and we are at about 75/25. I'm 52. DW is 53.

[Nutria]

I don't see any reason to payoff my c.c sooner as long as interest rate is less than 3%.

Where's that 3% CC? I want one!!!

Also provided I am building the assets or increasing my net worth. We are still living well below our means. Saving 30% of our income. Driving 10k worth car when friends with similar household income driving 50k+ car. Paying 1300 for mortgage when my friends paying 3k for mortgage. Yes I spend more than them on other things.

Borrowing from 401(k) means that you're not enlarging your 401(k), since:

1. whatever money that was being added to your 401(k) is now replenishing it, and
2. your 401(k) is now "earning" 3% on a smaller balance instead of 7% (average S&P500) on a larger balance, and
3. 401(k) loans are paid from after-tax earnings.

[FoolFromAZ]

Where's that 3% CC? I want one!!!



Borrowing from 401(k) means that you're not enlarging your 401(k), since:

1. whatever money that was being added to your 401(k) is now replenishing it, and
2. your 401(k) is now "earning" 3% on a smaller balance instead of 7% (average S&P500) on a larger balance, and
3. 401(k) loans are paid from after-tax earnings.

our credit is really good now. so we keep getting 0% interest CC offers for either 1 yr to 18 months. we try to either open a new account or we sometimes get 0% on existing account, thats how we keep transfering the balance from one card to another.. 3% i mentioned, because we pay transaction fee of 3% most of the time when we transfer the balance.. sometimes that would be 2%. thats why I mentioned 0 to 3%.. average of paying 1.5% on our 60K CC debt for the past 8 yrs or so.

like I said, myself and wife max out our 401k. although we kept 50% on stable funds/ bonds.. we still have got about 6% average returns for the past 8 yrs or so. we paid less tax for the past 8 yrs.

[FoolFromAZ]

As I have been maintaining 50/50 for the past 8 yrs, I don't want to change it to something like 75/25 now, especially when it's at all time high. If it goes down in next 2 yrs, I will add more to stocks.

[disneysteve]

As I have been maintaining 50/50 for the past 8 yrs, I don't want to change it to something like 75/25 now, especially when it's at all time high. If it goes down in next 2 yrs, I will add more to stocks.

Market timing never works. Don't invest based on what the market is doing today or tomorrow or the next day. Your allocation should be based on your needs, your time horizon, and your risk tolerance, not on what the DJIA closing is today.

[FoolFromAZ]

Market timing never works. Don't invest based on what the market is doing today or tomorrow or the next day. Your allocation should be based on your needs, your time horizon, and your risk tolerance, not on what the DJIA closing is today.

I agree, it's not right to time the market. But we have seen it twice in last 20 yrs. chances of market going up from now in 8+% rate per annum is very less. Don't want to be aggressive at this time and lose the little profit I have had over the years. I want to take a chance of slowly rebalance it. I have set the future contributions to stocks 100%.

[AJ444]

our credit is really good now. so we keep getting 0% interest CC offers for either 1 yr to 18 months. we try to either open a new account or we sometimes get 0% on existing account, thats how we keep transfering the balance from one card to another.. 3% i mentioned, because we pay transaction fee of 3% most of the time when we transfer the balance.. sometimes that would be 2%. thats why I mentioned 0 to 3%.. average of paying 1.5% on our 60K CC debt for the past 8 yrs or so.

like I said, myself and wife max out our 401k. although we kept 50% on stable funds/ bonds.. we still have got about 6% average returns for the past 8 yrs or so. we paid less tax for the past 8 yrs.

I wouldn't sleep very well at night living so close to the abyss, if one of you loses your job with a 401k loan it becomes due immediately or you take it as a distribution with a penalty. If the economy heads south those credit card offers will dry up like they did in 2009. Saying you spend less on a car/home than your friends while majorly overspending elsewhere is like ordering a monster burger with super sized fries and apple pie but justifying it because you got a Diet Coke. It's great you don't want to skimp on your kids activities but you do them more of a disservice living so close to ruin.

[FoolFromAZ]

I wouldn't sleep very well at night living so close to the abyss, if one of you loses your job with a 401k loan it becomes due immediately or you take it as a distribution with a penalty. If the economy heads south those credit card offers will dry up like they did in 2009. Saying you spend less on a car/home than your friends while majorly overspending elsewhere is like ordering a monster burger with super sized fries and apple pie but justifying it because you got a Diet Coke. It's great you don't want to skimp on your kids activities but you do them more of a disservice living so close to ruin.

yes. incase of emergency i am ready to take the distribution with penalty. to pay off 60K CC loan, I would have to sell 100K of my 401k. thats fine. if I had tried to pay off CC loan without maxing out my 401k, I would have had more than 100k less in my 401k by now. I am not losing any sleep here. like I said earlier, as long as I build assets in good rate, i dont mind having CC debt provided the interest rate is less than 3%.

my friends are paying 2K+ on Mortgage and car payment. no matter how lavishly i spend on eating out or entertainment (I dont feel guilty about spending money on my kids.. I am not going to add that here. infact my friends too send their kids to all classess), still I spend only 500 or 600 more than my friends when it comes to eating out/entertainment. I am still saving more than 1.5K more than them when it comes to overall expenses.

[Nutria]

yes. incase of emergency i am ready to take the distribution with penalty. to pay off 60K CC loan, I would have to sell 100K of my 401k. thats fine. if I had tried to pay off CC loan without maxing out my 401k, I would have had more than 100k less in my 401k by now. I am not losing any sleep here. like I said earlier, as long as I build assets in good rate, i dont mind having CC debt provided the interest rate is less than 3%.

Lots of assets are petty useless if you also have lots of debt. The crucial question is whether or not your net worth is growing as quickly (or faster) as your assets, and taking that penalty is contraindicated to increasing your net worth.

[corn18]

yes. incase of emergency i am ready to take the distribution with penalty. to pay off 60K CC loan, I would have to sell 100K of my 401k. thats fine. if I had tried to pay off CC loan without maxing out my 401k, I would have had more than 100k less in my 401k by now. I am not losing any sleep here. like I said earlier, as long as I build assets in good rate, i dont mind having CC debt provided the interest rate is less than 3%.

my friends are paying 2K+ on Mortgage and car payment. no matter how lavishly i spend on eating out or entertainment (I dont feel guilty about spending money on my kids.. I am not going to add that here. infact my friends too send their kids to all classess), still I spend only 500 or 600 more than my friends when it comes to eating out/entertainment. I am still saving more than 1.5K more than them when it comes to overall expenses.

Wow, just wow. You sound a lot like I did when I first joined SA and had a lot of income and no net worth. The folks here just didn't get how smart I was.

You can argue your point all you want, but you won't find anyone here that agrees with you and I'm speculating that 99.9% of financial experts polled would berate your approach to CC debt and your 401k.

Please consider other ways that are better.

[FoolFromAZ]

Lots of assets are petty useless if you also have lots of debt. The crucial question is whether or not your net worth is growing as quickly (or faster) as your assets, and taking that penalty is contraindicated to increasing your net worth.

I said we are maxing out our 401k contribution and not adding more c.c debt. Obviously assets growing faster.

[Nutria]

I said we are maxing out our 401k contribution and not adding more c.c debt. Obviously assets growing faster.

Must have missed that part.

Still, if you have an "unemployment event", that 10% penalty + taxes won't do your NW any good.

[FoolFromAZ]

Must have missed that part.

Still, if you have an "unemployment event", that 10% penalty + taxes won't do your NW any good.

not only me and even with the person who has emergency fund and no CC debt, even his net worth will also get affected. he has to use from emergency fund to get through 3 to 6 months until he finds the next job. Yes I would be paying slightly more than him. but situation is not drastically different. rather than worrying about paying of CC debt and saving EF, i simply ignored both and started building equities by putting max on 401k and bought my current primary home and investment home (again I used 401k loan for the down payment for both houses).

if I have equity, i can get money out of it to get through 6 month or 1 yr. worst case I would sell some of it.