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Posted: 7/25/2007 9:08:52 PM EDT

From a motley fool article... looks like the baby boomers are going to be in a world of hurt. This only confirms to me that our country needs help w/ their money. So if you can provide a "Solution" to this "Problem" money can and is being made. It's a win-win situation.

From article,
"In fact, according to a separate survey, 31% of Americans would rather scrub a bathroom than plan for retirement."

http://www.fool.com/personal-finance/retirement/2007/07/25/prepare-for-a-gruesome-retirement.aspx

Posted: 7/25/2007 10:50:36 PM EDT

[#1]

To me, it's the exact opposite. Retirement planning is relatively simple (or rather, it can be).

The simple and easy way to do retirement - get a 401k through your employer and invest all of your money in an index fund or some other 'balanced' mutual fund. Add about 10% (or more) of your monthly income to your 401k every month. Or if you want to do something besides a 401k, there are IRA's too. Just do (pretty much) the same thing.

Hell, I think nowadays companies like Fidelity even have mutual funds specifically based on your age (or the year that you're retire). I mean, it's just too easy not to do it, especially when it's one of those things that 'handles itself' if you set it up properly. And even if the mutual fund you pick isn't exactly 'hot', most of them still provide something like a 8-10% return over time, which is a lot better than just putting your money in a bank savings account and letting it grow interest there...

Posted: 7/26/2007 2:42:34 AM EDT

[#2]

There are a lot of reasons not to invest more into a 401k than the amount matched by your employer. I saw an old thread on this not too long ago, and most of the pitfalls of 401k plans were covered.

Posted: 7/26/2007 3:13:09 PM EDT

[#3]

Quoted:
There are a lot of reasons not to invest more into a 401k than the amount matched by your employer. I saw an old thread on this not too long ago, and most of the pitfalls of 401k plans were covered.

Now though there are Roth 401ks, which is like, the best of everything. You get matched by your employer like a normal 401k AND you get the tax free growth and distribution of a Roth.

Posted: 7/26/2007 8:07:56 PM EDT

[#4]

The simple and easy way to do retirement - get a 401k through your employer and invest all of your money in an index fund or some other 'balanced' mutual fund. Add about 10% (or more) of your monthly income to your 401k every month. Or if you want to do something besides a 401k, there are IRA's too. Just do (pretty much) the same thing.

There lies a problem though, people think just because they have a "401k" that they are set for retirement. Not to mention the "throw the dart" and "Check a box" which is what usually happens when these people select their investments inside their 401k. There's a BIG difference come tax time when you start withdrawing your monies at retirement. 10% tax bracket or 35%?

Posted: 7/26/2007 9:01:43 PM EDT

[#5]

Quoted:

The simple and easy way to do retirement - get a 401k through your employer and invest all of your money in an index fund or some other 'balanced' mutual fund. Add about 10% (or more) of your monthly income to your 401k every month. Or if you want to do something besides a 401k, there are IRA's too. Just do (pretty much) the same thing.

There lies a problem though, people think just because they have a "401k" that they are set for retirement. Not to mention the "throw the dart" and "Check a box" which is what usually happens when these people select their investments inside their 401k. There's a BIG difference come tax time when you start withdrawing your monies at retirement. 10% tax bracket or 35%?

well, that's what a Roth 401k is for - the money you put has already been taxed, so once it's in the account, it can grow tax free and when you take it out, it's tax free. Like I said, it's the best of a 401k and a Roth IRA combined - a Roth 401k

So, if you're a new entry to the workplace, making somewhere near a starting salary of whatever, Roth is perfect because you're in the lowest tax bracket you'll be in; you'll move up as you age, but your money will also grow tax free as you age (as it has already been taxed).

So by the time you reach the 35% tax bracket and retire, you'll have all the money that you invest years ago when you were in the 10% bracket and it will have grown and grown and grown and there it will be - yours for the taking

Of course, if you start investing late in life (say when you've already hit the 28% or 33% bracket) - by then it would probably be better to just go with a traditional IRA.

Posted: 7/26/2007 9:41:13 PM EDT

[#6]

From article,
"In fact, according to a separate survey, 31% of Americans would rather scrub a bathroom than plan for retirement."

http://www.fool.com/personal-finance/retirement/2007/07/25/prepare-for-a-gruesome-retirement.aspx

Planning for retirement means saving, which means not buying the second new car and plasma TV. No wonder no one wants to do it.

PLanning for retirement also requires a basic grasp of investing and math, which may people don't have.

Which is how they wind up in places like Edward Jones or Ameriprise, giving their hard earned money to an ~~advisor~~ salesman who is going to line his own pockets, and if they are lucky, may look after their interests too.

The answer is, in my opinion, this: the government should convert Social Security over to a defined contribution plan, a 401(k) by force if you will. Everyone invests, like it or not. If people refuse to choose investments, they get government bonds (just like today).

Posted: 7/27/2007 6:27:46 AM EDT

[#7]

Quoted:

From article,
"In fact, according to a separate survey, 31% of Americans would rather scrub a bathroom than plan for retirement."

http://www.fool.com/personal-finance/retirement/2007/07/25/prepare-for-a-gruesome-retirement.aspx

Planning for retirement means saving, which means not buying the second new car and plasma TV. No wonder no one wants to do it.

PLanning for retirement also requires a basic grasp of investing and math, which may people don't have.

Which is how they wind up in places like Edward Jones or Ameriprise, giving their hard earned money to an ~~advisor~~ salesman who is going to line his own pockets, and if they are lucky, may look after their interests too.

The answer is, in my opinion, this: the government should convert Social Security over to a defined contribution plan, a 401(k) by force if you will. Everyone invests, like it or not. If people refuse to choose investments, they get government bonds (just like today).

Planning for retirement would also require these folks to run some financial calculations that would make them realize they aren't ever going to be able to retire. Sometimes, it's easier to just pretend the problem isn't there than to address the problem (especially when the problem was caused by your own ignorance).

Posted: 7/27/2007 9:00:58 AM EDT

[#8]

Since after-tax dollars are used to fund a Roth 401k, could somebody explain exactly how employer-matching works in a Roth 401k??

Posted: 7/27/2007 12:29:15 PM EDT

[#9]

Quoted:
<snip>

Posted: 7/27/2007 1:17:21 PM EDT

[#10]

Yep, and -OT- its pretty hard on some parents putting their kids through school. Imagine if say conservatively 25k was gone from your income for 4 or 5 yrs depending on the kid's schoolastic preformance. Thats money that could have doubled by retirement.Thats 1 kid!

Posted: 7/27/2007 4:27:05 PM EDT

[#11]

Quoted:
Since after-tax dollars are used to fund a Roth 401k, could somebody explain exactly how employer-matching works in a Roth 401k??

en.wikipedia.org/wiki/Roth_401k

Posted: 7/28/2007 1:23:59 AM EDT

[#12]

height=8

Quoted:
Yep, and -OT- its pretty hard on some parents putting their kids through school. Imagine if say conservatively 25k was gone from your income for 4 or 5 yrs depending on the kid's schoolastic preformance. Thats money that could have doubled by retirement.Thats 1 kid!

If parents started saving $200 a month when they had a kid, they could cover the cost of college. It won't be enough for 4 years at a top-tier school but with a student loan or scholarship you'd have enough for any good quality school.

People live paycheck to paycheck. They buy everything they can afford and don't start an IRA or contribute to a 401K. It is so easy to retire a multimillionaire but parents don't teach kids to invest or save and then those kids grow up and neglect to teach their kids and it's a vicious cycle that continues for generations.

Posted: 7/28/2007 7:05:47 AM EDT

[#13]

Quoted:

Quoted:
Yep, and -OT- its pretty hard on some parents putting their kids through school. Imagine if say conservatively 25k was gone from your income for 4 or 5 yrs depending on the kid's schoolastic preformance. Thats money that could have doubled by retirement.Thats 1 kid!

If parents started saving $200 a month when they had a kid, they could cover the cost of college. It won't be enough for 4 years at a top-tier school but with a student loan or scholarship you'd have enough for any good quality school.

People live paycheck to paycheck. They buy everything they can afford and don't start an IRA or contribute to a 401K. It is so easy to retire a multimillionaire but parents don't teach kids to invest or save and then those kids grow up and neglect to teach their kids and it's a vicious cycle that continues for generations.

I agree in a lot of ways.

The school system needs to start an aggressive program of financial management education. The people in this country know FAR less than they need to about managing money. Just look at the savings rate in this country. Look at the level of credit card debt in this country.

My wife's aunt is in her late 60s. Her husband recently died. She's thinking about moving to where we live. I found out that she has about $900 a month in Social Security payments and $23k to live on FOR THE REST OF HER LIFE!! They never owned their own house so she can't sell it to have money to live on.

We argue a lot on this forum about how to invest but the people on this part of the site are WAY ahead of the rest of the country. At least they are trying to have something for their old age.

Sad.

I really wonder how many baby boomers will be working well into their retirement years. I'll work for the rest of my life because I want to. But I want the freedom to not HAVE to work.

Posted: 7/28/2007 7:21:17 AM EDT

[#14]

Quoted:

Quoted:
Since after-tax dollars are used to fund a Roth 401k, could somebody explain exactly how employer-matching works in a Roth 401k??

en.wikipedia.org/wiki/Roth_401k

Thanks for the link. Never know whether to believe Wikipedia, or not, considering the sources. So, an employer can match, but only with pre-tax dollars, and the match can't be co-mingled with the after-tax contributions of the employees. Sounds like the Roth 401k is substantially superior to a "conventional" 401k.

Posted: 7/28/2007 11:57:37 AM EDT

[#15]

Quoted:

Quoted:
Since after-tax dollars are used to fund a Roth 401k, could somebody explain exactly how employer-matching works in a Roth 401k??

en.wikipedia.org/wiki/Roth_401k

Thanks for the link. Never know whether to believe Wikipedia, or not, considering the sources. So, an employer can match, but only with pre-tax dollars, and the match can't be co-mingled with the after-tax contributions of the employees. Sounds like the Roth 401k is substantially superior to a "conventional" 401k.

Yeah, that's kind of the idea. Employers have been kind of avoiding it (they don't want to rock to boat or learn about the 'new' 401k plan - it also requires a lot more paperwork on their part) but that's starting to change now that bigger companies like GM and Chevron have started offering them.

Posted: 7/28/2007 1:12:26 PM EDT

[#16]

Quoted:

Quoted:
Since after-tax dollars are used to fund a Roth 401k, could somebody explain exactly how employer-matching works in a Roth 401k??

en.wikipedia.org/wiki/Roth_401k

Thanks for the link. Never know whether to believe Wikipedia, or not, considering the sources. So, an employer can match, but only with pre-tax dollars, and the match can't be co-mingled with the after-tax contributions of the employees. Sounds like the Roth 401k is substantially superior to a "conventional" 401k.

Yeah, that's kind of the idea. Employers have been kind of avoiding it (they don't want to rock to boat or learn about the 'new' 401k plan - it also requires a lot more paperwork on their part) but that's starting to change now that bigger companies like GM and Chevron have started offering them.

Looks like the employer's contribution is treated exactly the same way as a "conventional" 401k...taxable when coming out. I'd assume the same penalties apply for excessive accumulations and distributions.

Posted: 7/29/2007 6:48:50 PM EDT

[#17]

Quoted:
f parents started saving $200 a month when they had a kid, they could cover the cost of college. It won't be enough for 4 years at a top-tier school but with a student loan or scholarship you'd have enough for any good quality school.

People live paycheck to paycheck. They buy everything they can afford and don't start an IRA or contribute to a 401K. It is so easy to retire a multimillionaire but parents don't teach kids to invest or save and then those kids grow up and neglect to teach their kids and it's a vicious cycle that continues for generations.

I agree about the parents, but what about our schools? Becoming financially independent is SIMPLE, why can't we have a money 101 class in h.s. and college?

EDIT: Didn't read Colt's post til after mine. Coltrifle is right on, these people out there need somebody to SHOW them how to play the money game to WIN. There are not enought Ar-Jedi's out there to teach the entire country.

Posted: 7/29/2007 7:19:20 PM EDT

[#18]

Quoted:

Quoted:
f parents started saving $200 a month when they had a kid, they could cover the cost of college. It won't be enough for 4 years at a top-tier school but with a student loan or scholarship you'd have enough for any good quality school.

People live paycheck to paycheck. They buy everything they can afford and don't start an IRA or contribute to a 401K. It is so easy to retire a multimillionaire but parents don't teach kids to invest or save and then those kids grow up and neglect to teach their kids and it's a vicious cycle that continues for generations.

I agree about the parents, but what about our schools? Becoming financially independent is SIMPLE, why can't we have a money 101 class in h.s. and college?

EDIT: Didn't read Colt's post til after mine. Coltrifle is right on, these people out there need somebody to SHOW them how to play the money game to WIN. There are not enought Ar-Jedi's out there to teach the entire country.

+1; IMHO 'personal finance' should be a class in HS. BUT...on the other hand - some things you have to figure out for yourself...not everyone can just be a millionaire

. I mean, they can

but I don't think it should be one of those 'hold your hand through life' sort of deals. I don't know - I'm conflicted. Maybe it shouldn't be mandatory - but optional in high school - have it along with home economics as a 'elective' course

Posted: 7/30/2007 5:42:47 AM EDT

[#19]

Quoted:

Quoted:
f parents started saving $200 a month when they had a kid, they could cover the cost of college. It won't be enough for 4 years at a top-tier school but with a student loan or scholarship you'd have enough for any good quality school.

People live paycheck to paycheck. They buy everything they can afford and don't start an IRA or contribute to a 401K. It is so easy to retire a multimillionaire but parents don't teach kids to invest or save and then those kids grow up and neglect to teach their kids and it's a vicious cycle that continues for generations.

I agree about the parents, but what about our schools? Becoming financially independent is SIMPLE, why can't we have a money 101 class in h.s. and college?

EDIT: Didn't read Colt's post til after mine. Coltrifle is right on, these people out there need somebody to SHOW them how to play the money game to WIN. There are not enought Ar-Jedi's out there to teach the entire country.

+1; IMHO 'personal finance' should be a class in HS. BUT...on the other hand - some things you have to figure out for yourself...not everyone can just be a millionaire

. I mean, they can

but I don't think it should be one of those 'hold your hand through life' sort of deals. I don't know - I'm conflicted. Maybe it shouldn't be mandatory - but optional in high school - have it along with home economics as a 'elective' course

I think it should be mandatory. It's not about getting rich. It's about not dying completely broke! It's about managing the money that you make and not spending yourself into bancrupcy.

My wife SUCKS at managing money. She has a bankrupcy on her record that I don't like. All because her parents never taught her how to manage money. I've been teaching her and she's getting better.

I don't think that I'll ever be a millionaire. I invest VERY conservatively. I don't like risk. As a result, I'll lose opportunities to make mega bucks, but I'll stay out of debt and end up at a retirement age comfortable and with all my expenses paid, and then some.

However, many people don't even have that because they can't manage the money that they have.

My wife's dad used to make about $100k per year for a good portion of his life. They now are in their mid 60s and live in a rental house and try to live off social security. They have no savings and he still works part time so they can take trips to the casino and blow more money. They are nice people but it's very sad how poorly they manage money.

Posted: 8/8/2007 9:41:57 AM EDT

[#20]

Quoted:
Yep, and -OT- its pretty hard on some parents putting their kids through school. Imagine if say conservatively 25k was gone from your income for 4 or 5 yrs depending on the kid's schoolastic preformance. Thats money that could have doubled by retirement.Thats 1 kid!

I read a good article about parents placing priority on saving for retirement vice saving for their kids' college.

College vs Retirement

Notable quote: "You can borrow money for college but you can't borrow money for retirement."

Posted: 8/8/2007 10:12:28 AM EDT

[#21]

Quoted:

Quoted:
Yep, and -OT- its pretty hard on some parents putting their kids through school. Imagine if say conservatively 25k was gone from your income for 4 or 5 yrs depending on the kid's schoolastic preformance. Thats money that could have doubled by retirement.Thats 1 kid!

If parents started saving $200 a month when they had a kid, they could cover the cost of college. It won't be enough for 4 years at a top-tier school but with a student loan or scholarship you'd have enough for any good quality school.

People live paycheck to paycheck. They buy everything they can afford and don't start an IRA or contribute to a 401K. It is so easy to retire a multimillionaire but parents don't teach kids to invest or save and then those kids grow up and neglect to teach their kids and it's a vicious cycle that continues for generations.

Adopt a minority. You'll get scholarship. Just kidding.

Realistically, make sure they work hard for scholarships, do their paperwork, work in civic organizations, and encourage the military option. These are all things that help. In states like Florida, you can prepay their college. My parents did it for me. I also got academic scholarhips, and for a short time, money from Uncle Sam til I got hurt.

Posted: 8/9/2007 2:52:50 PM EDT

[#22]

What's really scary is all these folks who haven't saved squat are susceptible to the message of the nanny-state Democrats.

And they can still vote.

Posted: 8/12/2007 3:38:24 PM EDT

[#23]

Quoted:
What's really scary is all these folks who haven't saved squat are susceptible to the message of the nanny-state Democrats.

And they can still vote.

Well said.

Posted: 8/13/2007 2:34:15 AM EDT

[#24]

height=8

Quoted:
There are two problems I observed with a "Practical Financial Skills" class in high school:

1. When I took it the teacher saddled with teaching it was an IDIOT. She had no idea how to manage money on her own, beyond balancing a checkbook. I did learn how to calculate a loan payment, based on interest rate and term, but that is about it.
2. High school is too early for a lot of kids. They have had so little exposure to money that they can not grasp the concept of savings, or having extra around.

shooter

I had a very good teacher in high school. The class was only a semester and they didn't have a follow on class so she only had time to teach the basics. Schools should put more funding into economics and investing classes but like all things it's politics. The dept. of education (my opinion) feels that math and english are the priorities then comes science. Everything else is just filler houldIf my mom would have sat down and showed me a chart with IRA contributions vs. age I would have been putting every spare dime away so I could retire at a decent age. Some things you have to learn on your own but not knowing about how to save money or invest can be a costly mistake that may very well impact the rest of your life.
The Navy doesn't pay a whole lot nor does my wifes job but we manage to put money in two IRAs and a couple other accounts so we don't end up living in a hut eating cat-food when we should be happily retired.

Posted: 8/13/2007 2:39:55 AM EDT

[#25]

height=8

Quoted:
I read a good article about parents placing priority on saving for retirement vice saving for their kids' college.

College vs Retirement

Notable quote: "You can borrow money for college but you can't borrow money for retirement."

I agree that saving for retirement can be more benificial than saving for college BUT all too many people don't plan or save for either one leaving them with nothing but a hope and a prayer that their kids get a scholarship or are forced to get a loan (which the parents may not be able to pay) for a community college.

The rich get richer and the poor get poorer because they let it happen.

Posted: 8/13/2007 8:04:00 PM EDT

[#26]

Being able to invest money tax free and not have to pay taxes on gains is BIG. The government is allowing us to do so because when the social security fails, they will point the finger back at us and say, "we GAVE you the option to take care of yourself"

Wait, I guess SS has already failed. For some, SS isn't enough so they have to get a job, which in turn makes them give up their SS.

Posted: 8/14/2007 6:33:31 PM EDT

[#27]

Quoted:
Being able to invest money tax free and not have to pay taxes on gains is BIG. The government is allowing us to do so because when the social security fails, they will point the finger back at us and say, "we GAVE you the option to take care of yourself"

Wait, I guess SS has already failed. For some, SS isn't enough so they have to get a job, which in turn makes them give up their SS.

wooo wait a minute as an investment newb (first salaried job started a few weeks ago)

roth ira/ 401k are only income tax at deposit and are not subject to capitol gains at retirement?

Posted: 8/14/2007 7:06:04 PM EDT

[#28]

Quoted:
roth ira/ 401k are only income tax at deposit and are not subject to capitol gains at retirement?

just to clarify your terminology so the answer is clear:

both the Roth IRA and the Roth 401k are funded by after-tax contributions. basically, you pay taxes now, and the contributions + earnings can be withdrawn "tax free" later.

see, for example,
en.wikipedia.org/wiki/Roth_IRA
en.wikipedia.org/wiki/Roth_401%28k%29

and especially,
en.wikipedia.org/wiki/401k_IRA_matrix

ar-jedi

Posted: 8/15/2007 4:27:31 PM EDT

[#29]

Thanks for clarifying that Jedi.

As for the 401k, you fund it with PRE tax money. Money from your check that has not been touched by the state, feds, med, and SS etc. It then grows tax-deferred and at retirement (59 1/2), when you start to pull it out, you are taxed at your ordinary income tax rate.

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