Post Bad Financial Advice You've Heard

[TexasHusker]

Claiming that 401k stinks because you can't get rich quick enough (or retire as early as you) is starting to claim that certain investment is better than others.

Or are you claiming that 401k is a scam and you are actually better off stashing money under your mattress?

A 401K is certainly better than the mattress, but i think they certainly can be a scam. When i have time, I’ll explain how my employer basically cleaned my clock through the 401K. I’ve posted the story before. It might explain more where I’m coming from.

As Steve is a moderator, I bet he can easily find that exposé and repost it. It’s pretty ugly and could provide some interesting insight. “Lest you’ve walked a mile in my shoes...”

[Singuy]

A 401K is certainly better than the mattress, but i think they certainly can be a scam. When i have time, I’ll explain how my employer basically cleaned my clock through the 401K. I’ve posted the story before. It might explain more where I’m coming from.

As Steve is a moderator, I bet he can easily find that exposé and repost it. It’s pretty ugly and could provide some interesting insight. “Lest you’ve walked a mile in my shoes...”

I read that story before and it sucked how it went down. But for the majority of the people, that doesn't happen to their 401k. This is why telling everyone that 401k stinks because you were unfortunate is not the right advice.

[TexasHusker]

I read that story before and it sucked how it went down. But for the majority of the people, that doesn't happen to their 401k. This is why telling everyone that 401k stinks because you were unfortunate is not the right advice.

Well, they aren’t the worst thing, but to me they have so many limitations that are completely an afterthought. Just because you get a match and tax deferment they are automatically at the top of the list. I wholeheartedly disagree, but luckily it’s America and everyone can do whatever.

[Gailete]

There are so many good investment options out there that beat the pants off of mutual funds. It's sad to see so much wealth tied up. People will spend years of their life researching cars, boats, quilts, ancestory, watching movies, watching sports - but they are perfectly content to put 10 percent of their earnings in some fund they found in a leaflet. Amazing!

Goodness, I'm richer than I thought I have oodles of quilts around, some that I won blue ribbons for! Yeah Me.

My IRA mutual fund earned 30% this past year. I'm happy with that

The thing that makes a 401K plan great is it helps some that may have never dipped their toes into the water of any kind of investing to do so and get extra money from their boss. Sort of like getting a raise that you don't have to pay taxes on. Anything that will help people think about their future and the money they will need is a good thing. Not everyone can make quilts.

[TexasHusker]

Goodness, I'm richer than I thought I have oodles of quilts around, some that I won blue ribbons for! Yeah Me.

My IRA mutual fund earned 30% this past year. I'm happy with that

The thing that makes a 401K plan great is it helps some that may have never dipped their toes into the water of any kind of investing to do so and get extra money from their boss. Sort of like getting a raise that you don't have to pay taxes on. Anything that will help people think about their future and the money they will need is a good thing. Not everyone can make quilts.

Most mutual funds did well last year.

As for quilts, my point was that folks spend hundreds of hours a year on their hobbies and interests, but will spend less than an hour committing their entire retirement savings to some mutual fund that your boss chooses to put inside a single fold brochure. All because he’s golfing buddies with the mutual fund’s rep, or they go to happy hour together.

[GrimJack]

“Max out your 401K.”

Worst advice ever, on many levels.

Sorry, I do not understand this comment - could you expand on your comment please?

[TexasHusker]

Sorry, I do not understand this comment - could you expand on your comment please?

Not on your life!

[Gailete]

Most mutual funds did well last year.

As for quilts, my point was that folks spend hundreds of hours a year on their hobbies and interests, but will spend less than an hour committing their entire retirement savings to some mutual fund that your boss chooses to put inside a single fold brochure. All because he’s golfing buddies with the mutual fund’s rep, or they go to happy hour together.

You stated earlier "In terms of acceptable investment returns, the vast majority of mutual funds are complete junk. " So apparently they aren't always junk. I don't have a 401K plan of any kind so my mutual fund was my own choice to pick, and over the years it has consistently returned more that the average they say that the stock market returns when figuring out how much you can tap in retirement.

I do think you are making a lot of flat out statements without proof to back them up. In the days that I was still working, the retirement fund paperwork usually would fill up a small 3-ring binder. I studied it and also helped my co-workers understand it as well. No one was picking any thing from a single fold brochure.

[TexasHusker]

You stated earlier "In terms of acceptable investment returns, the vast majority of mutual funds are complete junk. " So apparently they aren't always junk. I don't have a 401K plan of any kind so my mutual fund was my own choice to pick, and over the years it has consistently returned more that the average they say that the stock market returns when figuring out how much you can tap in retirement.

I do think you are making a lot of flat out statements without proof to back them up. In the days that I was still working, the retirement fund paperwork usually would fill up a small 3-ring binder. I studied it and also helped my co-workers understand it as well. No one was picking any thing from a single fold brochure.

That’s awesome. Keep up the good work and good luck to you!

[GrimJack]

When did I ever claim that a certain method on investing is good for the general population?

I simply responded to the OP’s question, that I believe 401Ks stink. I was then asked to expound, which I did.

Why the hate? I don’t get it.

You made the claim with every one of your arrogant posts denigrating others. When you expound on your personal beliefs, you might try to understand that people who make different decisions than you are actually intelligent people who happen to make different decision to yours.

Personally, I think your choices are not choices I would make but I would not say they stink (at least not out loud). I think most people respond to you how you state your opinions rather than what your opinions are. M. McLuhan was famous for saying "the medium is the message" and your message sucks. (I asked you a question before this post - since I have read your responses to others, you can ignore it)

[TexasHusker]

To all: Please accept my heartfelt apology for my posts regarding 401Ks. I understand that many (almost all?) folks have an opinion of 401Ks that runs contrary to mine. I respect that. In no way did i mean to insult or belittle anyone.

I am particularly dogmatic about 401K plans and employer-sponsored plans, in large part, as a result of my own negative experiences. Others may or may not experience something similar.

Peace to everyone, and happy saving and investing to all.

[rob62521]

A couple of my favorite "bad financial advice" would be:

1. I don't pay off my mortgage because of the tax benefits. (Person who said that doesn't itemize.)

2. I don't need to save for Christmas. I will just spend what I have and leave it at that. They then put it all on credit cards and spend months paying for it.

3. I only live once and I deserve this big vacation. (A truism to an extent, but then before this vacation is paid off, another one is planned.)

4. Look at all the free stuff I got...I bought this drill and got this item free.

[Gailete]

A couple of my favorite "bad financial advice" would be:

1. I don't pay off my mortgage because of the tax benefits. (Person who said that doesn't itemize.)

2. I don't need to save for Christmas. I will just spend what I have and leave it at that. They then put it all on credit cards and spend months paying for it.

3. I only live once and I deserve this big vacation. (A truism to an extent, but then before this vacation is paid off, another one is planned.)

4. Look at all the free stuff I got...I bought this drill and got this item free.

We have rental property and I so love -NOT!- renters excuses in January why the rent is late. "Well there was Christmas". Yeah dude, pretty much all of us celebrated Christmas and we paid our mortgage on time. Why do renters seem to think that they are the only ones that have extra expenses in December.

I see people lining up for donations for Christmas decorations, in the news every years. i always wonder what happened to their decorations from the year before? I never got around to decorating our midget tree this year, but if I had, I would have been using a tree skirt I made 39 years ago, ornaments I bought over 40+ years, for my first tree post college as I had no decorations. IN all those years, only a couple may have broken - probably helps not to have animals in the house.

It is possible to celebrate Christmas without spending oodles of money. It pays to plan ahead for Christmas.

[Tabs]

TexasHusker, I am sorry for the way this turned out. I am no longer as active on the forums, and therefore, I am not as in tune with the sentiment of this community as I used to be. Had I known it would devolve into this, I would not have brought it up.

That said though, I respectfully can not agree with your generalizations about 401(k)s and mutual funds. It is a view that I don't think is factually accurate with what's out there.

1. Often, the bulk of your investments are concentrated throughout your career on the last 10 to 20 years of your life. That is a lot of wealth being tucked away that isn't being used to build wealth for today.

This is true for anything though. Unless you mean something else, the bulk of one's investment capital for anything is generally much greater towards the end than in the beginning.

2. In the world of investments and financial opportunities, your options are limited to the little brochure of mutual funds that your employer chooses to offer.

This actually depends on which company is handling your 401(k). One of my 401(k)s actually did offer energy ETFs, for example. Some companies are great, but I can agree some others are not so great.

Instead, your financial future is in the hands of your XYZ Target 2030 Fund. And whether or not that fund returns zero percent or 12 percent annually between now and the time you're elderly, you're going to pay income tax on every single dime you withdraw.

That... makes no sense. For one thing, we all know target funds are for people who don't want to bother with asset allocations. If you have a higher risk tolerance, set an earlier date. If you want manual control, do your own asset allocation.

Also, it makes absolutely no sense to say that it's going to be 0 to 12 percent between now and the time you're elderly (whenever that is). How are you so sure it's only going to be within those ranges? Have you already checked or are you just assuming they are all like that? Just pulling an arbitrary example, VTINX has already achieved a net gain of 10% on the last 12 months alone.

In terms of acceptable investment returns, the vast majority of mutual funds are complete junk. You're banking on picking the outlier. You're also banking on not having a 2008 correction right before you start taking withdrawals.

You are also generalizing mutual funds. It's just a basket of securities. It's what's in it that matters. And yes, some securities are indeed junk, though often with the appropriate risk and reward that comes with it, but others are not.

Plus, I don't think many are actually trying to bank on outliers. At least not as a sole objective. When you buy diversified securities, you are basically saying you don't know, which I don't think there's anything wrong with acknowledging that, especially when our financial future is on the line.

As for corrections, that's why we diversify. We don't stick all of our money on cotton futures, persian rugs, or red on the roulette wheel. In investing, we are often times thinking of risk mitigation, not trying to find the financial equivalent of a lottery ticket. Well, not just anyway haha.

Who cares if you get a match if you're buying junk? A one time 50 percent match is little consolation.

Well, 401(k) having a match does not automatically mean you have to buy into some kind of junk investment. The two are not connected.

Plus, most matches are not one-time. They are annual.

I have been working with my kids on HOW to invest for years now. The first rule is, when your employer offers a 401K, don't walk away, RUN.

I too have been helping my children with financial tips and investments. The biggest thing I want to impart to them is the ability to think critically. See if what is in front of them really is a good or bad idea, not because I say so, but because it is so.

But that is true for anything, not just retirement investing.... For all I know, I could have an inaccurate assessment of the situation, and I would like them to be able to make the best decisions possible for their own future. If I may be frank, sir, have you considered the possibility that you could have a flawed and inaccurate view in all this?

Let the herd do all of that - they'll still be working for the man at age 60, hoping like heck there will be enough in the kitty to live on.

I do not believe it is herd mentality to think critically. Quite the opposite. Rather, to over-generalize and lump certain things into a particular set of absolutes, such as all 401(k)s are bad, all mutual funds are bad, and all cotton futures are good... is in fact herd mentality.

If you were a handyman, do you automatically throw out the hammer, or the saw, or a screwdriver, just because you think every other herdyman (haha) uses it? A handyman should not care what tools he has to use. He should assess the situation accurately, and simply use whatever is the best tool for the job, regardless of what it is.

I think the biggest point I don't see mentioned is that while gains are mentioned, there is absolutely no mention of risk and losses involved. Sure, everybody loves to win big with no risk or losses involved. However, that often does not exist, or else, we'd all be doing it. If you want to win big, chances are, you will also have to risk big. Depending on your situation in life, and risk tolerance, that may or may not be appropriate. The only danger is when one only sees either gains or risk, but not see the other. To me, that's when you look at a situation with only one eye open.

Ok, I've rambled long enough. For the most part, I will leave all this alone. I've already arrived a bit too late, and anyway, nobody should have to feel sorry for expressing their thoughts and beliefs. Challenged? Sure... but not feel bad about it. I wish you and your family well, and again, my bad if I helped cause any grief in this thread.

[Tabs]

Oh, and back on topic, the best worst financial advice I have ever heard is to haul drugs for the Mexican cartels just once or twice so you can have enough seed money to start up your own small business. Yeah....