401k needs help, please help!

In reply to stuart in mn:

Yeah, I got contacted by an "agent" or whatever they're called at the brokerage I have both my 401(k) as well as personal stock portfolio with, and he suggested a couple times that I should sell everything, pay the capital gains, and put all the money back into some big managed fund that the brokerage house manages. The minimum buy-in was $200,000 and there were fees involved and it just started to feel like a racket. Stopped taking his calls.

He also said my portfolio was doing very well save for one fund that had been performing weekly. So why would I sell all of it again?

1988RedT2 wrote: My experience with "investment guys" is that they'll try to put you into whatever makes them the most money.

That's why I suggested going with a "fee only" advisor if you want an advisor. You want to make sure that you don't end up with someone who might charge you a fee and then gets a fat commission for selling you something unsuitable.

I've got mine set on 'Aggressive' or something like that.
But I also just turned thirty, so might be apples to oranges.

Its either a workplace - organized 401k or an individual IRA, but not both. Or you may have both types of accounts as managed through PNC, and they have different rules. The posts here aren't clear.

In a 401k, usually the "cash" option is a low interest earning money market. If you are in that long term you are losing money. Most of them also do not have any options to purchase individual stocks, only a select group of mutual funds.

If it is an IRA, you have a lot more flexibility.

I agree with the above that at this account balance, pick an index fund and let it do its work. I'd also suggest that with that balance, and your age, to look at contributing a lot more money per week/month/whatever for it to be useful in retirement.

My wife and I have been saving for retirement fairly aggressively from when we started working, and it recently got to the point (ie enough money to potentially earn or lose more than I do in a year) where we have hired a fee-only investment advisor. I'm confident his input will more than cover the modest fee.

Dr Hess brings up a good point: it's best to buy when the market is down. That can be difficult, since generally that means if you are rolling over a 401 it's probably going to be down as well. If you close a 401 or IRA and don't immediately roll it over into another similar fund, the IRS will hit you for taxes plus a 10% penalty so that means you can't pull the money when the market's up, park it in savings then buy when the market's down. But it's not impossible to do.

I had two 401k's, one was sorta draggy and the other was a freakin' roller coaster, it would routinely lose 25% of its value then gain it all back but never seemed to get above the vested amount. Of course the Principal got their fees like clockwork, though. Hmmm.

I started the Vanguard IRA with the money from the divorce settlement, then rolled the slow 401 over into it. Timing wasn't important on that one since it was sluggish; it didn't make much but it also didn't lose much either. The rollercoaster fund's ups and downs weren't really tied to the market but it had tanked again, so I sat back and watched till it rollercoastered back up to its peak again, then snatched it out and rolled it into the IRA. As luck would have it, the market had dropped a little when that happened so I was able to buy shares at a lower price, which only helped my situation.

So my suggestion is to look into a self directed IRA, maybe start a small one with a few hundred bucks then watch the market, try to roll the existing one over when the market is down. But definitely do your research beforehand! You particularly want to investigate the fee structure and the long term performance of the fund.

stuart in mn wrote:

1988RedT2 wrote: My experience with "investment guys" is that they'll try to put you into whatever makes them the most money.

There are idiots in every line of work, but it doesn't mean they are all idiots.

True enough, but this is one of those cases where it will cost you money to find out if he's an idiot or not.

Dr. Hess wrote: Lessee: Every business is making less money or losing money. Even Walmart is down on US same store sales. Since 2008, food stamps are up 68% and full time jobs are up 1%. The stock market is at the highest point it has ever been. Yeah, this is a GREAT time to invest. Go all in on Detroit Bonds. y0. (Or, keep your money in cash and wait. At least you'll still have your money.)

Jesus. You sound like my Dad. "The economy has failed!!! Buy these magic beans...I mean gold, at the top of the market! It's got nowhere to go but down!" Before that was land - which he also lost his ass on. Stocks are cheap, land is cheap. I don't see the latter getting any cheaper, and I don't see many better potential double-digit returns than the stock market. That's where I'm placing my bets. YMMV.

Regardless, investing in cash isn't turning a pile of money into more money.

FWIW, my business is up 20% for the year.

Dr Hess brings up a good point: it's best to buy when the market is down.

Edit: I read Hess's post as sarcasm. If I misunderstood, forgive me.

The financial world as it exist today is no more than a bunch of vultures feeding off a dead carcass that was once the NA economy. Of course the stock market looks good, but how long does carrion last?

Good uck with this. Long term deposit migh be the best bet since it is "do and forget."

The Best Money Show On Radio went off the radio a little while ago (radio station changed formats from talk to thumpity thump) but they always had really good common sense info. Here is their website:

http://www.bestmoneyinfo.com/index.php

They have a section on recommended mutual funds. The list is updated by one of the best private financial investors in Boston. The recommended advice from them is if you don't have a 500k minimum portfolio, most investment managers/advisors won't talk to you. You would do better by doing it yourself.

Quick tips:

Best tip - Pay yourself first. Treat any retirement savings like a bill. The first bill of every paycheck. Then fit the rest of the bills in around it. This is key.

Goal - 15% of income/yr to retirement savings (401k, ira, Roth Ira, individual funds targeted )

If your company has a match, max it out. It is free money. And it does count toward the 15% goal

If they offer regular and Roth 401k options, try to do the Roth. It goes in post tax, instead of pretax like the regular 401k, but it grows tax free!!! You will not have to pay income tax on it when you withdraw it in the future.

Stock market is going to be the best vehicle for investing. Just do mutual funds. They should capture a good portion of the investment growth of the stock market, but not expose you to the volatility of individual stocks.

The target funds ( like a 2035 retirement target) are not fantastic. If you want to just put it into something and leave it, they are ok. But you can do better.

Add me to the pile. This stuff is interesting to me, but John Bogle makes it simple and boring. You can buy his "Little Book of Common Sense Investing" or you can just buy low cost index funds from vanguard (or whatever your 401k offers) and set it/forget it. Contribute the max you can. I buy the Target Retirement for my IRA from vanguard. For 401k thingy, I am a gov't employee, so use the Thrift Savings Plan (which incidentally follows Bogle's ideals precisely by using index funds).

Next: Don't "play" the market. Dollar cost averaging is a fancy way of saying "pick the highest amount your family can afford and invest the same amount or percentage of your income every month". Don't try to time the market when it's down. You'll buy cheap, you'll buy expensive. People aren't often able to successfully time the market over time (cue internet hero in 5, 4, 3....).

Easy. The other website to help you learn about finances that I find interesting is www.mrmoneymustache.com . Goofy name, but the guy has some very good information and interesting philosophy.

Um, zombie canoe?

Yes, Zombie, but a couple of comments.

1) Only $10,000 in your 401(k) at age 46 is a huge problem. (Unless your company also offers a generous pension plan. It's highly unlikey that it does.) Let's assume you stop working at your normal social security retirement age, 67 with $100,000. Divide that by a fraction of your current income, and you are out of money in a few years, but still alive and need food. Divide $300,000 by the same number and it last roughly 3 times longer, but I bet you are still alive and need to eat. (I'm ignoring social security because I assume it won't exist in it's current form in 21 years.)

2) Roths are for rich people like Romney who puts in $2,000 that magically turns into $1,000,000 with zero tax due on the gain. If you don't plan to pay taxes on your social security, then a Roth is wrong for you. I've done the math a dozen times because it's counter intuitive, but Roths are only for the rich that are worried about paying a lot of income tax after they retire. That's not me. My dad pays no income tax, so a Roth would have been a huge mistake for him.

Zombie canoe reminds me I forgot about this. Again.

spin_out wrote: Yes, Zombie, but a couple of comments. 1) Only $10,000 in your 401(k) at age 46 is a huge problem. (Unless your company also offers a generous pension plan. It's highly unlikey that it does.) Let's assume you stop working at your normal social security retirement age, 67 with $100,000. Divide that by a fraction of your current income, and you are out of money in a few years, but still alive and need food. Divide $300,000 by the same number and it last roughly 3 times longer, but I bet you are still alive and need to eat. (I'm ignoring social security because I assume it won't exist in it's current form in 21 years.) 2) Roths are for rich people like Romney who puts in $2,000 that magically turns into $1,000,000 with zero tax due on the gain. If you don't plan to pay taxes on your social security, then a Roth is wrong for you. I've done the math a dozen times because it's counter intuitive, but Roths are only for the rich that are worried about paying a lot of income tax after they retire. That's not me. My dad pays no income tax, so a Roth would have been a huge mistake for him.

Couple of questions/comments:

First, I cannot agree more with #1. I have nearly double that saved in various forms (brokerage accounts, savings, 401k), I'm only half your age, and I don't feel comfortable. AND my company has a generous pension plan, and while I expect it to be around (if I remain at this company long enough to get it, 3.5 more years before I'm vested), I am planning as if it won't be around. Of course, I'm also looking at college tuitions for kids in my future, which could realistically be a nestegg for a single person in some areas.

Secondly, explain number #2 more. I'm kind of confused by it. Why wouldn't it get taxed when it comes out? I'm fully expecing the tax rate to be higher in the future, wouldn't I want my money taxed at a lower rate? Okay, lets say it isn't taxed... don't we get that back in our return NOW anyways? Or do we not? (Serious questions here)

mtn wrote:

spin_out wrote: Yes, Zombie, but a couple of comments. 1) Only $10,000 in your 401(k) at age 46 is a huge problem. (Unless your company also offers a generous pension plan. It's highly unlikey that it does.) Let's assume you stop working at your normal social security retirement age, 67 with $100,000. Divide that by a fraction of your current income, and you are out of money in a few years, but still alive and need food. Divide $300,000 by the same number and it last roughly 3 times longer, but I bet you are still alive and need to eat. (I'm ignoring social security because I assume it won't exist in it's current form in 21 years.)

Couple of questions/comments: First, I cannot agree more with #1. I have nearly double that saved in various forms (brokerage accounts, savings, 401k), I'm only half your age, and I don't feel comfortable. AND my company has a generous pension plan, and while I expect it to be around (if I remain at this company long enough to get it, 3.5 more years before I'm vested), I am planning as if it won't be around. Of course, I'm also looking at college tuitions for kids in my future, which could realistically be a nestegg for a single person in some areas.

I was thinking the same thing. I am 24 and have around that in my 401K.

When in doubt, find the S&P 500 index fund with the lowest total fees (annual load + annual fee). Unless you've got time to think about what specific stocks to buy it's unlikely that you'll do better than that.

stuart in mn wrote:

1988RedT2 wrote: My experience with "investment guys" is that they'll try to put you into whatever makes them the most money.

There are idiots in every line of work, but it doesn't mean they are all idiots.

No, but they ARE all crooks. They are hired to buy and sell paper with your money until it is their money.

It amazes me how quickly people have forgotten that Wall Street made of with Trillions of dollars that were meant to be the middle classes retirement fund and rather than criminal prosecution they got bonuses for doing the deed. Its like staffing a day care with pedophiles and asking the catholic church to supervise them!

It has been admitted over and over that the market is fixed and the little guy is just there to be fleeced.

The other thing to consider is that the market, regardless of what its posted numbers are on a given day, represent only a fraction of the number of trades that it did ten years ago, That means that there is less ballast, and movement will happen fast both up and down; great if you are the guy manipulating, because they use the swings to ratchet up their profits, but not so much for the "joe- investor".

Seriously, no offense, but this is far too complex for a GRM thread. More helpful might be some suggestions on books to get that might help you get on the right course. (Dave Ramsey seems popular here, I learned what I know in business school classes so I have no good suggestions)

Old thread on the subject, I tried to post a couple tips there:

http://grassrootsmotorsports.com/forum/off-topic-discussion/teach-me-about-investing/68699/page1/

ShadowSix wrote: Seriously, no offense, but this is far too complex for a GRM thread. More helpful might be some suggestions on books to get that might help you get on the right course. (Dave Ramsey seems popular here, I learned what I know in business school classes so I have no good suggestions)

I'll say it again- John Bogle's "Little Book of Common Sense Investing" is a winner. Easy, short read, but the essence is to find the lowest cost index fund (total stock market is probably a bit better than S&P 500, but no matter- either is fine) and buy it with as much as you can.

I didn't want to ring the alarm bell on how much you have in your 401k at such a late time in your life. You need to have about 20-25x annual income by the time you want to retire to maintain your same std of living. You've got a damn long way to go- some would call this an emergency. You've got 18 years to save/accumulate $990k (assuming you make $50k/yr and want a similar number in retirement). You can do it if you save about $25k/year (at 4.5% real return+3.5% inflation= 8% return). That's going to take some work, but it can be done. I wouldn't even consider paying for my child's college or other education until my goals were met.

Wxdude10 wrote: If your company has a match, max it out. It is free money. And it does count toward the 15% goal

company match is not yours until you've been an employee long enough to satisfy the vesting period. at my employer, it's 25% vested at 2 yrs, 50% at 3, 75% at 4, and fully vested at 5 yrs. so i put away 15% BEFORE company match. maybe when i'm vested i'll reduce that.