401K changes

[Micha]

Hi guys!

Back in October or November I created a thread asking about making changes to your 401K and I searched all over for this thread but I can't seem to find it anywhere. I basically wanted to lower the percent I put into my 401K and someone responded that it is in my best interests to keep my savings at such an aggressive rate because the money put into my 401K is not taxed. Therefore, I was just going to continue with the most aggressive portfolio. But then I was talking to a friend about this and she said that when I do eventually take out the money from my 401K I will be taxed anyway. So exactly what advantage do I have for putting the highest percentage into my 401K?

I am sorry if I don't make much sense, I am terrible when it comes to this kind of stuff .

[keemac]

Micha,

The 401k is an IRS tax rule deferring income tax until you retire. I believe it's 59.5, not sure. Meaning, your distribution of invested income and market returns will be taxed upon withdrawal at retirement, however at a considerably accrued lower rate than getting it taken out (income tax) on a weekly basis plus non-taxed invested higher rate of return. There are numerous ways your accountant can deduce tax based on market volatility in your funds, meaning in down markets there are tax write-offs. If you decide to take it out before retirement, I believe the they penalize you .1% on amount taken. I can give you an example if you really want my brain to work, but your benefit is paying the tax when you retire unless you are savvy in negating annual capital gains yearly, which trust me really suck paying. If you are under 40, keep 75% of your contribution very aggressive, the other 25% conservative/money markets.

I'm not sure of your financial situation, but if you have other investment tools you are using that offer higher return than your 401k plan overall value, obviously ease off the 401k. Do your cost benefit analysis.

Good luck.

[Micha]

Thank you. I think it's in my best interest to lower the percentage rate. I really appreciate the response!

[nealnor]

Have to agree with keemac. I have invested quite some money in my 401K savings plan but it's just not the investment option it used to be anymore. Now there are way better tools that offer higher return available. I have reduced the payments into my 401k to a minimum and focus on other pension savings options. I think I won't take out the money, don't want to pay a penalty.

[TheHipHopBillGates]

Have to agree with keemac. I have invested quite some money in my 401K savings plan but it's just not the investment option it used to be anymore. Now there are way better tools that offer higher return available. I have reduced the payments into my 401k to a minimum and focus on other pension savings options. I think I won't take out the money, don't want to pay a penalty.

pension savings options?

[lost soul]

Yea what pension savings options? I was goign to ask same question

[Micha]

I decided not to make the change. I get taxed so damn much I'd rather put the most tax free money away as I can.

[chrisd1163]

I prefer to pay my taxes now and not worry about it in the future. When I worked for a company, I only put in whatever the company was willing to match. I invested seperately into a Roth IRA also.

[darius]

Micha,
Does your employer have a match up to a certain percentage in your 401K that you put in? If so, I would highly advise against investing any less or any more than whatever your employer-match is. It's essentially free money. What fund family does your employer 401K offer? T.Rowe Price? Fidelity? TIAA-CREF? American? The reason I ask is because you could probably get a better rate of return by investigating fund rates of return on your own, or if you have someone you can trust to do that for you. Most investment firm "reps" that work with employers really don't know their shit.
What I would advise in addition to investing in your 401k up to whatever your employer matches, would be to see if you can qualify for a RothIRA (depends on how much you earn). It's another tax shelter in which you are actually putting money in, after taxes, and when you eventually retire, you retain the entire capital tax-free.

[darius]

I prefer to pay my taxes now and not worry about it in the future. When I worked for a company, I only put in whatever the company was willing to match. I invested seperately into a Roth IRA also.

exactly the right idea!

[Micha]

Micha,
Does your employer have a match up to a certain percentage in your 401K that you put in? If so, I would highly advise against investing any less or any more than whatever your employer-match is. It's essentially free money. What fund family does your employer 401K offer? T.Rowe Price? Fidelity? TIAA-CREF? American? The reason I ask is because you could probably get a better rate of return by investigating fund rates of return on your own, or if you have someone you can trust to do that for you. Most investment firm "reps" that work with employers really don't know their shit.
What I would advise in addition to investing in your 401k up to whatever your employer matches, would be to see if you can qualify for a RothIRA (depends on how much you earn). It's another tax shelter in which you are actually putting money in, after taxes, and when you eventually retire, you retain the entire capital tax-free.

It's Fidelity. So basically you are suggesting I make changes and lower my aggressive portfolio to the amount of percentage my company matches. Which to my knowledge is like only 10%. I will look into the RothIRA right now the only other investing I do is in a Money Market and that doesn't seem to be making any money

[TheHipHopBillGates]

It's Fidelity. So basically you are suggesting I make changes and lower my aggressive portfolio to the amount of percentage my company matches. Which to my knowledge is like only 10%. I will look into the RothIRA right now the only other investing I do is in a Money Market and that doesn't seem to be making any money

The 75/25 split the one girl mentioned is silly. You should definitely match what your employeer puts in, and if you're worried about taxes later then you can put your work contributions into a Roth 401k you don't necc have to go the IRA route anymore. If the fed starts raising rates you might see better performance in the money market, but you could get the same out of a regular savings....

[keemac]

Bill Gates,

Are you recommending she not diversify in her fund portfolio? Also, if I'm not mistaken the Roth 401k's have low annual contribution allowance and employer contribution is taxed. Again, we don't have the slightest information of what her funds look like and how she is investing, but unless I'm misreading, what you are advising doesn't make sense.

Furthermore Micha, keep your fund distribution in a conservative money market with long stretches of commercial paper as portfolio managers are getting these pennies for the dollar and five years from now it will have a great return. If you can list the Blmbg codes, if possible, or names on the funds available through Fidelity, I can build an advantageous return for you. Or, I know a lot of the money managers there if you want me to put you in contact.

Another little tip on your monthly investment statements, this is a trading tip, but you should never be loosing money in your personal investments, if you're down 2% on anything or only making 6% on that same anything, then get out and get into something better.

[Micha]

I prefer to pay my taxes now and not worry about it in the future. When I worked for a company, I only put in whatever the company was willing to match. I invested seperately into a Roth IRA also.

Now that I just finished my taxes, I get this response better. It also answers my initial question as to what the advantage of putting tax-free money away when you will be taxed when you finally take it out. Thank you. Sorry it took so long to conceive what you meant.

I really need to look into a Roth IRA.

[Micha]

Bill Gates,

Are you recommending she not diversify in her fund portfolio? Also, if I'm not mistaken the Roth 401k's have low annual contribution allowance and employer contribution is taxed. Again, we don't have the slightest information of what her funds look like and how she is investing, but unless I'm misreading, what you are advising doesn't make sense.

Furthermore Micha, keep your fund distribution in a conservative money market with long stretches of commercial paper as portfolio managers are getting these pennies for the dollar and five years from now it will have a great return. If you can list the Blmbg codes, if possible, or names on the funds available through Fidelity, I can build an advantageous return for you. Or, I know a lot of the money managers there if you want me to put you in contact.

Another little tip on your monthly investment statements, this is a trading tip, but you should never be loosing money in your personal investments, if you're down 2% on anything or only making 6% on that same anything, then get out and get into something better.

Ok now I am really confused.

[ERR]

Ok now I am really confused.

you just got sales rheotoric. pay it no mind, and listen to gates. Think about getting some emerging market funds involved would be my two cents as well.

[keemac]

Micha,

Give a list of all funds available through your Fidelity 401k and I'll research an investment strategy. Everyone else is giving you a macro observation of what you should or shouldn't do with your retirement investing. I'm giving you a micro solution of listing all of the funds available to you through Fidelity, more than likely labeled Aggressive/Moderate/Conservative, for your benefit. Log into your Fidelity web account and find the funds you are vested in and the ones available. My above advice was, and again I have no knowledge of your age, monthly investment or long term goal to give you a complete analysis, if you have $100 to invest monthly, you should break that $100 into ten different funds labeled Aggressive/Moderate/Conservative Fidelity offers for a 401k portfolio of 75% Aggressive 25% Conservative. INVESTING 101 (and with Easter tomorrow) IS NOT PLACING ALL OF YOUR EGGS INTO ONE BASKET, which hopefully you should already know, but this goes along with retirement investing as well. The complaints last year about everyone loosing their 401k value was they were all in a single fund in their portfolio.

Also, just to give you a basic fact, you can use your tax deferred 401k to invest in a house or if you encounter tough times. You can then repay the loan to yourself, which I could be wrong, but I don't think you can do that through the ROTH investment. I've flipped two condos with only my 401k and completely paid back the loan on the flips to myself without incurring penalty and compounded annual average rate of return on my 401k to 36%. I'll be a millionaire 6x over by the time I'm 59 just through my 401k. I've done this all by using the above advice given to me from a senior portfolio manager at Goldman. In addition, I would stay away from any upfront tax you will pay and defer it for as long as possible with the right accountant, due to the amount of confusion and uncertainty taking place in DC.

Finally, don't take advice about your own investing from anyone on a nightclub message board, because how can you qualify it's sound advice. Write all of your questions down and call Fidelity directly or I can put you in contact.

[ERR]

Finally, don't take advice about your own investing from anyone on a nightclub message board, because how can you qualify it's sound advice.

irony at its finest

[keemac]

EAR,

What's truly ironic would be your ham and egg advice of investing in "emerging market funds" is a report I worked on eight years ago. So, you're a little late to that party. My trading desk calls it 'ham and egg' advice you're giving, because you can get it for breakfast anywhere-save your two pennies. If I have to state my qualifications-3, 7, 24, 63, Level II CFA, Registered in Hong Kong, London and Singapore, and an MBA from Financial Times #1 business school in the world. I can go get my 6 to give her better mutual fund advice, but I think I've accomplished enough to mitigate financial information. If you're in the financial industry, continue your path margin clerking in custodial services, because every industry needs trash taken out.

Micha,

I apologize for giving negative commentary in your thread. Also, I love house music, which is why I come to this website.

[ERR]

EAR,

What's truly ironic would be your ham and egg advice of investing in "emerging market funds" is a report I worked on eight years ago. So, you're a little late to that party. My trading desk calls it 'ham and egg' advice you're giving, because you can get it for breakfast anywhere-save your two pennies. If I have to state my qualifications-3, 7, 24, 63, Level II CFA, Registered in Hong Kong, London and Singapore, and an MBA from Financial Times #1 business school in the world. I can go get my 6 to give her better mutual fund advice, but I think I've accomplished enough to mitigate financial information. If you're in the financial industry, continue your path margin clerking in custodial services, because every industry needs trash taken out.

Micha,

I apologize for giving negative commentary in your thread. Also, I love house music, which is why I come to this website.

cool story, bro.