" A spokeswoman for Orlando said he was not available to give an interview because of a claws in his contract." - I smell a rat.
Having to dip into savings really sucks, but a 20% hit on money that was matched at 100% by your company, still gives you a 60% return on day 1, without taking any risk.
P.S. I really like your avatar.
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Itās pretty rare to have your company match your contribution at 100% these days isnāt it? I had that for a while, but the company went bankrupt (not primarily because of 401k matching) and the place Iām at now only matches 20% of your contributions
Nonsense. ETFs are fine. I bought 5-6 grand of a certain US market index ETF around 2009. In 2 years I have gained double digit % returns. Whereas if I actually hold ING Streetwise Balanced Growth fund or TD e-series funds my % returns at best would be less then 10% in the same amount of time.
These numbers are after taxes and commissions. I have tracked both ING and TD funds since ever. The ING fund you specifically mentioned started in 2008 and within 2008-2011 it barely recovered the original 10$ range. Worst yet, the true internal fees, MERs, are actually holding the fund back from true recovery to itās original principal amount and going beyond. Whereas if you actually hold ETFs, even around just 5k, you can do better.
Itās not that rare, although 100% matches are usually only for a smallish amount each year. You might get the first $5k matched at 100%, and the next $5k at 50%, and then no more matches for instance.
Pensions were killed off by global competition. If youāre running a company that has hundreds of old workers basically still on the payroll itās very hard to compete with a sweatshop in Asia that is willing to kick their employees to the curb when they hit 50, or just works them to death first. Even if you are more efficient those legacy costs huge. Sure those Asian companies will have massive problems in a few decades with the pollution and poor treatment of the old and whatnot, but businesses and wall street donāt care about 20 years from now, they care about 20 weeks from now when the financials are released.
Thanks! I stole it from the interwebs.
Unfortunately, Iām pretty sure I didnāt have any match or very little match on most of the money Iād saved up to that point. Most of the companies I worked for up to that time were pretty small.
I appreciate that there is a disincentive to not raid your fund all the time, but I feel that there must be a better way than taking peopleās money - perhaps leaving that 20% in but not being able to access until until later.
Well now youāve gone and done itā¦ Your new financial advisor is this 4x6" index card PRISM.
The point is that actively-managed funds almost NEVER outperform (in long-term net returns) passive ones.
401ks were not intended to replace pension plans. The plans were put into place with the best of intentions, i.e. to allow people to build extra retirement nest eggs in addition to their pension plans. Then along came Reaganomics and the whole Repub. anti-middle-class plans, and companies realized they could dump their pension plans w/out any backlash, so they did.
Iām guessing you might have seen the PBS Frontline āRetirement Gamble?ā
I know a lot of people prefer pensions for this reason. However, I think most people should prefer a 401K because it is paid to you immediately. Pensions are a future obligation, and this obligation is not always honored.
While all of the advice points are things you should, if possible, do, the order of operations is not well represented. Money is finite, and there is an order in which you should do these things. I propose:
- Pay your bills in full every month.
- If you have existing high interest debt (~8% or higher, IMHO) pay it down as quickly as possible. Amortgage at 4% and subsidized student loans at 5% are not in this category.
- Build up an emergency fund (ideally enough to cover 3-6 months of essential expenses, but some is better than none). Different people suggest cash, short term CDs, etc. for the form of this fund, but it should be something safe.
- Put enough into your 401k to get the maximum employer match. This will typically be far less than the full ~$17k/yr.
- Take advantage of other tax advantaged accounts as he describes (IRA or Roth IRA - I prefer Roth since I expect to be making more, and paying a higher rate in taxes, when I retire than I do now, 529s, HSAs)
- Now go ahead and max your 401k
- If you still havenāt hit 20% of your income (lucky you!) you can either open a brokerage account, or pay down lower-interest debt, or save for a down payment, etc., depending on your risk tolerance.
Right now Iām in the middle of step 5. Since I donāt have kids (no 529s) or an HSA, I should be ready to start step 6 in about a year.
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No. I just got burned by the āstandard wisdom.ā My ex husband and I went into a lot of debt but saved a lot in retirement. We went through a period where we were drowning in debt and he was out of work for a long time; we had to tap into our considerable retirement and then we watched it just drain because of the fees and penalties - years and years of savings went very quickly down the toilet in a matter of months.
We made tons of money and yet we still struggled to get by; honestly, I donāt know how people do it who have āregularā income.
Nowadays I live with much less debt but I am recovering from that period of time still. I have very little retirement and I wonder if Iāll ever really build it up to a proper size.
Meantime, my mom was a school teacher who made little money during her working years but now, in her retirement, has a very nice pension and healthcare.
Fortunately, the man I am married to now has the kind of job that still has the cushy benefits, so hopefully we will be okay but no longer do I feel that I am impervious to hardship, that it makes sense for my retirement funds to have so many strings attached to them - I am supposed to manage my own money but cannot get into it if I need it. I no longer believe that it really makes that much sense for me to be putting retirement funds into stocks. And, I am a pretty smart lady. My ex husband actually has a masters degree in economics and works in finance. So, if we could not really set ourselves up for a comfortable retirement, I wonder who can.
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The problem is pensions only really work in the standard ālifetime employmentā model. It doesnāt really work if you change jobs ā many pensions paid nothing if you didnāt work somewhere for at least 20 years. And while lifetime employment sounds nice in theory in our not very stable economy, it meant that people stayed at jobs they hated or put up with abusive bosses just to get to their 20 year mark.
If you need advice, the advice is you can not justify anything other than precious metals, cash and carry, stored on your own property.
Example: your broker is allowed by law to sell your stocks if he needs the cash. Nobody told you that, did they? In a bankruptcy that would be automatic.
Unless you gave them that authority explicitly or are buying on margin, this is not correct. The stocks in a brokerage account are as much your own property as a house with your name on the title of the money in a checking account.
Iām willing to be convinced otherwise, if you can point me to an example or the relevant lawā¦
That only applies to stocks held in āstreet nameā.
http://www.gold-eagle.com/article/panic-consolidate-game-over
Your stocks are owned by Cede & Co. I tried to post a link to wikipedia but the software keeps trying to quote the entire page.
True but contractually the right to sell or transfer those shares belongs to you, and they are legally required to be held separate from the shares the brokerage owns for itself. Even if the brokerage firm goes bankrupt, you can still transfer your shares elsewhere. The only way you lose out is if both 1) the company broke the accounting rules and the shares are missing, and 2) the amount missing is more than $500,000 worth of stocks. So basically, if the person you trusted to hold on to your money decides to rob you, you could lose your money. Same as a bank run.
Having read your linked article I figure you might consider this a stupid question, but: in the event of a total financial and/or societal collapse, what makes you think anyone will be willing to trade for anything as useless as precious metals? Stocks and bonds are backed by the ability of people and equipment to produce useful goods and perform useful services. Gold just looks shiny. The former are easier to delete, ignore, or forget about, but the latter isnāt any inherently more valuable.
Well, yes, I get that question a lot and it is always hard to answer politely. Wars have been fought and whole cultures have been murdered to get that shiny metal. You are arguing against history. It doesnāt have to make sense.
Funny, I think a lot of people would enjoy having regular employment with a company that valued them. Yes, itās nice to have options but how many of us have the option of being with one company for any length of time these days, whether we like it or not?
