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66

Do they want your help? Many times parents have difficulty taking advice from those whose nose and butt they wiped. Your accomplishments and investments are independent of the fact. What are their needs? They likely have social security and is that meeting their needs now? What happens after dad passes? Coming up with solid numbers is an important step ...


58

To compare apples-to-apples, let's pretend that you are considering saving $5,500 each year ($458 per month), which is the current IRA contribution limit. And we'll compare your 401(k) to a traditional IRA, which is pre-tax just like your 401(k). Let's assume the rate of growth on your investment is 8%. In the 401(k), when you contribute $458 per month, ...


57

Nobody ever got to retirement age and said "Wow, I saved too much". Your wealth has a direct effect on your quality-of-life in retirement - how much you travel, whether you go to movies vs. the opera, for instance. Near to endlife, it decides how good your situation will be: the quality of your independent living, assisted living, skilled nursing or ...


54

Mathematically it seems like the expected rate of return, whatever that might be, is the same for both. An aggressive strategy is higher risk and higher reward. A conservative strategy is lower risk and lower reward. That is not true. Roughly, the mathematical analogue of "higher risk and higher reward" is "higher standard deviation and higher mean". In ...


49

According to the link below, it does appear that you must take an RMD, or Required Minimum Distribution, from your IRA at age 70½, or face a 50% penalty of the RMD AMOUNT that has NOT been taken, which is going to be much less than 50% of your entire account balance. Why specifically this happens would be opinion based on my interpretation of the reasoning ...


48

I find this very hard to believe Believe it. The bottom quarter of American households have negative net worth, and the bottom three quarters have no more than a tiny amount saved up. https://en.wikipedia.org/wiki/Wealth_in_the_United_States#/media/File:MeanNetWorth2007.png In an emergency, 63% of Americans would not be able to come up with $500 without ...


48

Probably they shouldn't be investing. It's too late for that. And if they aren't investing it's pretty simple: Sell the big property before they urgently need the money because that takes time, then pay off the mortgage on the other house because the mortgage only costs money and they probably can afford to pay it off. In that order so they always have some ...


41

There are two parts to the hack you describe. One is moving to a high-cost, high-pay country to work, and the other is moving to a low-cost, low-pay country to retire. As Dilip mentioned in a comment, the first part is not so easy in many cases. You can't just take a plane to the USA and start making big bucks immediately. In the first place, it's ...


38

Your analysis is not comparing apples to apples which is why it looks like investing money in a non-qualified account is better than a 401k (traditional or Roth). For the non-qual you are using post tax dollars (money that has already been taxed). Now on top of that original tax you are also going to pay capital gains tax for any growth plus dividend rates ...


35

I was at a restaurant in NYC, 1st Avenue and 63rd street. I don't recall how the conversation started, but the woman at the next table remarked how none of her friends from the West side, 9th avenue or thereabout, would visit her. Less than 2 miles away, yet in their minds, too far. Your question isn't likely to be answered with facts, but opinion. In this ...


34

You give hints, but don't quite answer the key question - At the time you retire, what fraction of your income will be replaced by the benefits you list? If that amount is your 'happy' number, you really have little need to save for retirement. Or to be clear, you are already saving, just not into an individual account like we tend to think of. What's ...


32

Making the assumption that social programs will have the same conditions in 30-40 years (or even 5 years) as they do now is a very dangerous assumption to make. For example, how do you think the folks in the mid 1920s thought their retirements would be? Many of those folks in the 1960s weren't even in the same country anymore, and nearly all of them had ...


32

I can see several problems with your plan: Retirement exists for a reason. There are various things that may prevent you from working when you are older: You may be less able to work, be it because of physical deterioration of your body or mental exhaustion. And that's just the normal process - if you are unlucky, you might become sick and completely ...


28

The key question in personal finance is what your personal goals are. We can't tell you what those will be. 'How much' you should save is a question about payoff now vs in the future. Why eat only rice and beans for the next 20 years, just so you can buy a yacht when you get your inheritance? Do you want a house in 5 years? How much of a down payment on ...


27

You elected to defer paying taxes by contributing to an IRA. Lawmakers simply want to make sure that they collect those taxes by requiring you to either withdraw the money (incurring a tax liability) or pay a penalty (tax).


26

To be honest, I think a lot of people on this site are doing you a disservice by taking your idea as seriously as they are. Not only is this a horrible idea, but I think you have some alarming misunderstandings about what it means to save for retirement. First off, precious metals are not an "investment"; they are store of value. The old saying that a gold ...


26

If you are vested, then the money is all yours. Tax withheld will be 20%, which is standard, but at tax time you'll owe the difference, the 10% penalty plus your marginal rate, 25% most likely. More than that, it's our job to talk you out of this. Why not roll it to the new company 401(k) or to an IRA? Let me add a thought - including state taxes, say you ...


26

Explain to your parents what a fiduciary1 is. Tell them that no matter how much they like this guy (gal?) they should only invest with someone that they have a fiduciary relationship with - because they only have one shot left and it needs to be the best thing for them. Steer them to someone who is a certified financial planner or any other ...


24

Social security and pensions make up a big part of it. You may want to look at the source of the data. If a person, has 5K at Vanguard, 5K at Fidelity and 100K at the bank; Fidelity will report on that person as having only 5K. Vanguard will do the same. The opening pitch of a life insurance salesman sometimes includes the "100 man story". Before ...


24

Would it be wise to begin investing into this plan? Provided you have no other consumer/educational debt to take care of first, yes. How does it work when I leave my current place of employment? You own the investment even after you leave your employer (voluntarily or involuntarily). Most people will either roll it to an IRA account or to their new ...


22

$9000 over 6 months is great, I'd use it for long term savings regardless of the 401(k) situation. There's nothing wrong with a mix of pre and post tax money for retirement. In fact, it's a great way to avoid paying too much tax should your 401(k) withdrawals in retirement push you into a higher bracket. Just invest this as you would your other long term ...


22

Let me focus on the retirement number. I wrote a blog post on just that, The Number. In which I offer an easily editable spreadsheet to help users see if they are on track. With a goal of having 20X one's final income(1) at a retirement age of 62, at age 40, you should have just over 5X your annual income saved. If your income is $70K or less, you are doing ...


21

Your assumptions are flawed or miss crucial details. An employer sponsored 401k typically limits the choices of investments, whereas an IRA typically gives you self directed investment choices at a brokerage house or through a bank account. You are correct in noticing that you are limited in making your own pre-tax contributions to a traditional IRA in ...


19

2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser.


19

This is called a Life Annuity, and any life insurance salesperson will gladly sell you one.


17

Different priorities At retirement age, your life priorities are somewhat different, and two key items come to mind. 1. Social circle Your social circle, community and extended family contacts are highly related with your lifespan at retirement age. Loneliness kills, literally. Long distance relocation would weaken those ties exactly at the time when you ...


17

A 401(k) is just a container. Like real-world containers (those that are usually made out of metal), you can put (almost) anything you want in it. Signing up for your employer's match is a great thing to do. Getting into the habit of saving a significant portion of your take-home pay early in your career is even better; doing so will put you lightyears ...


17

Some employers actually support a lifestyle similar to this in form of allowing "sabbaticals". It usually works like this: Over a course of a few years, you either work extra hours or take a paycut. Then you can take an extended period of paid leave, equivalent to the unpaid hours you've worked during those years (usually up to one year). During that paid ...


16

As others have said, this opinion is predicated on an assumption that early in your life you have no need to actually USE the money, so you are able to take advantage of compounding interest (because the money is going to be there for many many years) and you are far more tolerant of loss (because you can simply wait for the markets to recover). This is ...


16

There are 3 options (option 2 may not be available to you) Traditional 401k Roth 401k Taxable investment account When you invest 18,000 in a Traditional 401k, you don't pay taxes on the 18k the year you invest, but you pay taxes as you withdraw. There's a Required Minimum Distribution required after age 70. If your income is low enough, you won't pay ...


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