Lost money?

[Nutria]

For tax efficiency, going back on Steve's comment about advising people to only participate in a 401k for the company match and then do your own IRA on the side. I think Steve is only taking about a ROTH IRA on the side. You cannot take any tax deductions from a regular IRA if you are with a company that offers a 401k.

Depending on income. You and Disney are well above that threshold; my wife and I are apparently over the limit, too.

Anyway... the max combined IRA+Roth contrib for a person over 50 is $13K, whereas it's $24K for a 401(k).

Thus, what's the benefit of doing a 401(k) just up to the match, and then Trad and Roth IRAs?

[Outdoorsygal]

Have you lost money on your house in the 2008 bubble? Or another period? Have you lost money on stocks? What did you do?

When DH and I graduated in 2000 many of our friends couldn't find jobs with the tech bubble burst. We had many friends just grabbing anything because engineering jobs weren't happening and just jobs in general were going by the wayside. The money we had invested in stocks $5k tanked and I think I had $1500 in my Roth IRA by 2002 when we bought our first house.

That house we sold in 2005 and bought another and then we had to ride out that bubble bursting until maybe 2013? It didn't drop really and we put down 20% so we could get out at any time but it might have been breakeven with selling fees. BUT most of our friends in Southern California either foreclosed or went underwater for years. I can't tell you how many walked away in 2008. Many put nothing down as well.

In 2008 I was looking back to at our NW tracker DH's 401k started in 2007 at $9300 and ended at $24k after maxing out and a match. That means he lost money around I believe 10%? Maybe more. All I know is that I saw our contributions being less than what we ended the year at for 2006-2008. And even now we are contributing even with the possibility of losing a big chunk of our money.

I guess I figure a lot of our money we don't plan on "retiring" even if it's not in retirement accounts for another 10 years so we'll gamble. Of course this year we've ended better than ever. I feel though I'm only in my 30s that i've experienced quite a bit and swallowed hard learning these lessons.

So I can say I won't turn away from the markets or housing. Did you?

Yes we lost money on some property (well we will soon when it sells) and on our home to a short sale.
But we didn't know what we were doing when we bought it -and- developed medical issues pop up that played into it.
History shouldn't repeat itself as we are healthier and all the wiser for it.

[disneysteve]

I keep getting sick or injured and my husband is working too much to help out. I'm sick right now, and I'm waiting to find out when my surgeries will be. Long story short, I have to have both of my ulnas shortened so I probably won't be able to do much. I can't do much right now because of it, either!

Best of luck to you. I hope everything goes well and you recover quickly.

[disneysteve]

what's the benefit of doing a 401(k) just up to the match, and then Trad and Roth IRAs?

Doing the 401k up to the match gets you the maximum in free money.

The Roth gives you far more control and often lower expenses than the 401k. The withdrawal process is much better, as well, since there are no required minimum distributions like there are with the 401k. Plus it's all tax-free. And although I don't condone using Roth funds for anything other than retirement, the possibility does exist to take money out at any time for any reason without penalty if some true catastrophe were to occur.

Once the Roth is maxed (for both spouses, working or not), then you can always go back to the 401k for further savings.

ETA: When I say Roth, I mean a Roth IRA, not a Roth 401k.

[Outdoorsygal]

Doing the 401k up to the match gets you the maximum in free money.

The Roth gives you far more control and often lower expenses than the 401k. The withdrawal process is much better, as well, since there are no required minimum distributions like there are with the 401k. Plus it's all tax-free. And although I don't condone using Roth funds for anything other than retirement, the possibility does exist to take money out at any time for any reason without penalty if some true catastrophe were to occur.

Once the Roth is maxed (for both spouses, working or not), then you can always go back to the 401k for further savings.

DS you mean a Roth IRA

[Nutria]

I have to have both of my ulnas shortened so I probably won't be able to do much.

Both at once??

[disneysteve]

DS you mean a Roth IRA

Yes. Thanks for pointing that out. I always forget that Roth 401k's exist. Anytime I say Roth, I'm talking about a Roth IRA.

[TexasHusker]

Seriously? What is safer and easier than making a 100% return instantly? The risk of hohum funds available in the 401k? WTF. There ain't any deal you got going that offers a 100% instant return. I wonder what goes on in your head to be so myopic.

It's 100% one time. Not every year.

Let's say your employer matches your $5000, and now you have $10,000. That is your 100 percent return. If you put the $10,000 in the XYZ Target Fund and it compounds at an average of 6.7% (the S&P average over 15 years). If the average holds for 30 years, you've got $62,106. Not bad!

Now take the same $5000 in your self directed IRA, and invest it in something like Kansas City Southern Railroad, sporting a 13.16% annual return for the last 15 years. If the average holds for 30 years, you've got $173,000, or almost triple the S&P fund with the 100 percent match.

I had to look up the definition of myopic, but since I did and now know what it means, you might check your own 401K colored glasses.

[disneysteve]

If you put the $10,000 in the XYZ Target Fund and it compounds at an average of 6.7%

Now take the same $5000 in your self directed IRA, and invest it in something like Kansas City Southern Railroad, sporting a 13.16% annual return

You're comparing apples and oranges. You can't compare a Target Fund that has broad diversification and owns shares of hundreds of stocks and bonds to betting the whole bankroll on a single stock.

And cherry-picking one stock that happens to have done very well historically certainly isn't a great investment strategy either but that's another issue.

[TexasHusker]

You're comparing apples and oranges. You can't compare a Target Fund that has broad diversification and owns shares of hundreds of stocks and bonds to betting the whole bankroll on a single stock.

And cherry-picking one stock that happens to have done very well historically certainly isn't a great investment strategy either but that's another issue.

I'm not advocating betting on a single stock. The point is, a 100% employer match is a one-time 100% return. And while that has value, the total return over a period of years can pretty easily be beaten.

It all depends upon what an acceptable return on investment is for you. If 6-7-8 percent meets your objectives, then the typical 401K offerings are going to fit the bill.

If you want 12-15 percent returns over a 30 year period, that is certainly do-able too, but unlikely under a 401K umbrella. It takes more work and more risk. I wouldn't be satisfied with below 12 percent annual ROI on ANY investment. Then again, making money is my hobby - I work at it a fair amount, don't mind taking risk, and don't trust others (i.e. mutual fund managers, etc.) to handle my stuff.

A 401K is but ONE tool. It might or might not fit each circumstance.

Finally, if we can somehow refrain from the name-calling and personal insults, calls to "go away", etc., I think the dialogue on the board will be more fruitful. I might have been guilty of a little of that myself, so I'm calling out myself on this too.

[Nutria]

The point is, a 100% employer match is a one-time 100% return.

It's an every paycheck return.

[TexasHusker]

It's an every paycheck return.

I give up.

[tripods68]

Doesn't mean you have to put ALL your money into a 401k, but getting the match is wise.

Tom,

I'm glad you point this out because I have never been comfortable adding Employer match. Its because we are not entitled to it until retirement age, or decide to opt for lump sum payment. I've only been adding our contributions only + market gain or loss.

[rennigade]

If you want 12-15 percent returns over a 30 year period, that is certainly do-able too, but unlikely under a 401K umbrella. It takes more work and more risk. I wouldn't be satisfied with below 12 percent annual ROI on ANY investment. Then again, making money is my hobby - I work at it a fair amount, don't mind taking risk, and don't trust others (i.e. mutual fund managers, etc.) to handle my stuff.

If you're getting a consistent 12%+ return over a long time frame more power to you...thats really impressive. I wouldnt have the nerve to take that much risk...although it seems like you're doing a ton of research so it appears it has given you an edge.

[TexasHusker]

If you're getting a consistent 12%+ return over a long time frame more power to you...thats really impressive. I wouldnt have the nerve to take that much risk...although it seems like you're doing a ton of research so it appears it has given you an edge.

Well, I don't think much above 12-16% can be done with equities, because I tried for 15 solid years. Now some years, I was up 80%. Others, I was down 50. I decided that the markets any more are nothing more than glorified online gambling. I think if you select blue chip stocks that are consistent dividend payers, you can do 15%. Of course, some years might be +50%, other years might be -20%.

To get the returns I wanted, I had to start investing more in business type stuff. If you have the willingness to accept the risk, there are wonderful business opportunities out there that can provide 20-30-40% ROI. That's a different world though, and really is beyond the purview of "savings advice".

Through leverage, I've been able to turn around $600K into assets worth about $1.3 million +/-since approx. 2011, and annual income of around $230K. The first couple years, profits were slim, then last year $150K-ish, then $230K this year. Not sure what sort of return that works out to, but I had to go in some different directions obviously. Hoping and planning for more growth, since my investments provide my living!

I think the goal of this forum is to find the best no-load mutual funds, how to pay less in income taxes, and finding ways to save a nickel. None of these interest me that much, so I'm not sure what I contribute to the board in the end.