Post Bad Financial Advice You've Heard

[disneysteve]

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

I don't want to start up the whole debate again but I do want to clarify this.

A match is a one-time event. If you put $1.00 in your 401k, the company adds $0.50. Once. What happens to that $1.50 for the next 5 or 10 or 30 years is dependent on the performance of the investments you choose. The company doesn't keep adding to that investment. That's what TH means when he says the match is one time.

[bjl584]

I'm going to interject here concerning TexasHusker.

I've been in correspondence with him outside of this forum and actually had a very pleasant phone conversation with him last evening.

I learned a few things:

1) Who he is in real life is not who he comes across as on this forum. He is a very insightful and down to earth person.

2) He has achieved a level of success that I hope to have one day using a rather simple and basic formula. I won't post any numbers out of respect for his privacy. He can divulge details if he chooses.

3) Mostly I've learned to not judge a book by its cover. If you really want to get to know someone, then make the effort and time to really get to know them. Assume nothing on the surface.

I will definitely be staying in contact with him going forward for investing insight and advice.

He apologized for coming across brash on the boards. He didn't mean to offend anyone.

- Happy saving everyone!

[disneysteve]

I'm going to interject here concerning TexasHusker.

I've been in correspondence with him outside of this forum and actually had a very pleasant phone conversation with him last evening.

Thank you for taking the time to do that, Brian.

Sometimes people don't realize how they are coming across. And in a text-based environment like a message board or email or texting, it can be impossible to tell someone's actual attitude or intent. They may be joking or being sarcastic but their message comes across as if they are serious.

[corn18]

I don't want to start up the whole debate again but I do want to clarify this.

A match is a one-time event. If you put $1.00 in your 401k, the company adds $0.50. Once. What happens to that $1.50 for the next 5 or 10 or 30 years is dependent on the performance of the investments you choose. The company doesn't keep adding to that investment. That's what TH means when he says the match is one time.

This is correct. But another tidbit that needs to be included is that match can now be invested and earn money. Free money earning more free money.

42% of my 401k consists of free money.

[james.hendrickson]

Brian,

Thank you for reaching out to Texas. While his views are often different from the mainstream, I personally value his perspective and look forward to reading his postings.

I agree with Disneysteve that good people can sometimes make comments that get misinterpreted in a text based forum.

[disneysteve]

This is correct. But another tidbit that needs to be included is that match can now be invested and earn money. Free money earning more free money.

42% of my 401k consists of free money.

Absolutely. I don't think the match is a bad thing at all. I was just trying to clear up the "one time" comment.

I think the match is one of the greatest things. Everyone should at least invest enough in their 401k to get the full match. Where else can you get a guaranteed 50% return on your money?

[Captain Save]

I don't think maxing out your 401k is the "worst financial advice ever" .. but what's bad about is that it's a generic advice that gets spewed by every financial article online and "financial advisors' ...

if you're working 9-5 and you're an extreme saver ..
and you know for sure you're going to retire in your 60's
and you know for sure your career is pretty secure..
and you know for sure you will end up in a much lower tax bracket during retirement years
etc.. etc..

it will work out beautifully and many people fit many of these criterias (rarely all) .. but that's a lot of If's.

It sounds like TexasHusker much rather have control over his own income and be able to take advantage of opportunities when they present itself. ..

That's a lot of money tied up in a non liquid asset that you have very limited access to.

Contribute up to the match .. and diversify elsewhere. instead of maxing out your 401k.. pay your taxes up front and throw the money in the Roth.

[disneysteve]

I don't think maxing out your 401k is the "worst financial advice ever" .. but what's bad about is that it's a generic advice that gets spewed by every financial article online and "financial advisors' ...

and you know for sure your career is pretty secure..

I'm not sure why this one matters. As long as you are with the company long enough to be vested, that money is yours for life even if you change jobs 6 times after that. And even if you leave before you are vested, the money you contributed is still yours. You just may not get some or all of the matching funds.

Contribute up to the match .. and diversify elsewhere. instead of maxing out your 401k.. pay your taxes up front and throw the money in the Roth.

I agree with this. This is pretty standard advice. First get the full 401k match. Then fund the Roth. Then go back to the 401k if you can still afford to put away more.

[Captain Save]

I'm not sure why this one matters. As long as you are with the company long enough to be vested, that money is yours for life even if you change jobs 6 times after that. And even if you leave before you are vested, the money you contributed is still yours. You just may not get some or all of the matching funds.

The problem is not in the 401k and how it works. I use this example to highlight the type of person who sees their job as a 9-5 that they do for 30-40 years and retire from. If indeed they they stay the course for this set of amount of years, and they've been maxing out their 401k .. that strategy would probably work fine.

That type of person has a vision of staying in a 9-5 career for years.. so they better make sure that they're in a field where at age 50 ... it can still be a viable career.

My girlfriend's mother turned 62 and was given her walking papers. she wants to retire but doesn't have enough funds in her account .. and she will have a tough time getting hired .. her career is not what I would consider secured because she doesn't have many options once she get laid off. Thankfully this didn't happen 5 years earlier... it would be even tougher.

I on the other hand decided to go in the insurance industry partly because I know ... I will most likely be able to earn an income. I could work for select quote for years but 1. If I get laid off, I will be able to earn a living working for myself ... 2. I will probably have many opportunities along the way to start my own independent insurance business..

..I will be better serve to have some liquid asset to to keep me afloat while I'm getting my business up and running or to invest in some sort of a venture. I say this, because I see many of these opportunities pass me by and I wish I had the liquid capital.

[LivingAlmostLarge]

Depends. If you have enough to max out 401k, roth, and then some then does it really matter? Just having this debate with my DH now. Debating more into after tax 401k. Question is do we want to tie up our money in retirement or is it time to do something else with it?

[disneysteve]

For the first time, we won't be able to fund Roths this year as we'll be over the limit (most likely). So I absolutely intend to max out my 401k. I would have done it anyway and funded the Roths but without the Roths, I want the max I can get into retirement.

[rennigade]

For the first time, we won't be able to fund Roths this year as we'll be over the limit (most likely).

Thats better than being able to fund a roth anyway!

[disneysteve]

Thats better than being able to fund a roth anyway!

I suppose that’s true. I’ll stash some money somewhere else instead.