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AR15.COM
4/11/2008 4:02:14 PM EDT
I'm looking in to a 401k or something I can put back for when I want to stop working! I'm going to be starting as a Dallas Police officer May 16 2008 and I'm wanting to take a little money from each pay check and stash it way . So what I'd like to know is what should I place this money in? 401k or something else? What company should I use for my 401k?

I also have one more question my wife is wanting people to buy saving bonds for my children  some type that after so many years they gain 100%. Now is told back some years ago that saving bonds where crap. SO I would like to know what should I tell my wife that we should have there money for college or what ever they want to do with it in? My wife and I want the ops open in case on of are kid does not want to go to college or goes in the military and then after they get out they don't have to worry about paying for college.

Thanks for the help.
4/11/2008 6:21:12 PM EDT
[#1]
congratulations on taking the first steps to financial independence.


Quoted:
I'm looking in to a 401k or something I can put back for when I want to stop working! I'm going to be starting as a Dallas Police officer May 16 2008 and I'm wanting to take a little money from each pay check and stash it way . So what I'd like to know is what should I place this money in? 401k or something else? What company should I use for my 401k?


your employer, in this case the PD, administers the savings plan.  hence, you don't have to go off and find a 401k, or 403b, or whatever part of the tax code your department's tax-deferred savings plan is organized under.  the plan administrators (e.g., the HR folks) can provide you the info you need to get started.  in some cases there will be "matching" funds contributed by your employer, which is basically free money.  don't go by what your fellow officers tell you -- find out for yourself from the HR folks what plans are available.  if you post a few details here we can steer you straight.


Quoted:
I also have one more question my wife is wanting people to buy saving bonds for my children  some type that after so many years they gain 100%. Now is told back some years ago that saving bonds where crap. SO I would like to know what should I tell my wife that we should have there money for college or what ever they want to do with it in? My wife and I want the ops open in case on of are kid does not want to go to college or goes in the military and then after they get out they don't have to worry about paying for college.
Thanks for the help.


what you want is a 529 educational investment plan.  it's sort of a 401k for your kids.  and, it's tax-protected, so you don't pay annual taxes on the gains.  the flexibility at the end is very good, btw, whether or not your kids go to college.   you can open a 529 plan via Fidelity, Vanguard, T.R. Price, and others.  i recommend one of those three, for breadth of investment options and easy web-based account monitoring.  

en.wikipedia.org/wiki/529_plan

A 529 plan is a tax-advantaged investment vehicle in the United States designed to encourage saving for the future higher education expenses of a designated beneficiary. It is named after section 529 of the Internal Revenue Code. The detailed behavior of 529 plans is determined by state legislation, and while most plans allow investors from out of state, there can be significant state tax advantages and other benefits, such as matching grant and scholarship opportunities, protection from creditors and exemption from state financial aid calculations, for investors who invest in 529 plans within their state of residence.



There are four advantages to the 529 plan:

First, although contributions are not deductible to the donor, the principal grows tax-deferred and distributions for the beneficiary's college costs are exempt from tax. This latter feature was made permanent with the Pension Protection Act of 2006. In some states, contributions are deductible to the donor.

Second, the donor maintains control of the account. With few exceptions, the named beneficiary has no rights to the funds. Most plans even allow you to reclaim the funds for yourself any time you desire, no questions asked. (However, the earnings portion of the "non-qualified" withdrawal will be subject to income tax and an additional 10% penalty tax). Compare this level of control to a custodial account under the Uniform Transfers to Minors Acts (UTMA).

Third, a 529 plan can provide a very easy hands-off way to save for college. Once you decide which 529 plan to use, you complete a simple enrollment form and make your contribution (or sign up for automatic deposits). The ongoing investment of your account is handled by the plan, not by you. Plan assets are professionally managed either by the state treasurer's office or by an outside investment company hired as the program manager. You won't even receive a Form 1099 to report taxable or nontaxable earnings until the year you make withdrawals. If you want to move your investment around you may change to a different option in a 529 savings program every year (program permitting) or you may rollover your account to a different state's program provided no such rollover for your beneficiary has occurred in the prior 12 months. (There is no federal limit on the frequency of these changes if you replace the account beneficiary with another qualifying family member at the same time.)

Finally, everyone is eligible to take advantage of a 529 plan, and the amounts you can put in are substantial (over $300,000 per beneficiary in many state plans). Generally, there are no income limitations or age restrictions.


a 529, like a 401k, is a "container".  you put money inside the container (contributions), and then you direct the money to be invested in some fashion (for example, could be mutual funds or even individual stocks).   since by definition this is a long term investment scenario (i.e., could be as long as 18 years before the child goes to college), i suggest investing in a low cost broad market index fund like Fidelity's FFNOX ("Four in one Fund") or a quality actively managed fund like Fidelity's FBALX ("Balanced Fund").  set up for periodic investments (say, $100/month, or the most you can afford), leave it alone, and let it grow.  ignore the voices in your head that make you want to play with the account -- just leave it alone.  

ar-jedi (who has 401k and 529 accounts, btw)
4/14/2008 11:29:33 AM EDT
[#2]
HI Tayous, nice to see you are still here.  I'd max out the 401k plan employer match (Dallas police should definitely have one), and also look at Roth IRAs.  Go with whatever they use for the investment company or they may have their own for the state of Texas.  Other companies with decent mutual funds (low fees, etc.) are Vanguard, Fidelity and T Rowe Price.  I sort of like Vanguard the best.  

Also if you have out of pocket day care or health care expenses see if they have a Health or Day Care spending account.  These take money out pre-tax for those expenses.  

The College Savings plans might not be as good an idea because Texas has no income tax, and there is no Federal tax break on them.  Always look for "tax advantaged" investments where you can either avoid taxes today, or avoid taxes when you retire.  With the right Roth IRAs, save enough and you can get $50,000 a year tax free each year after retirement.  

Best time to start saving is while you are young.  

GunLvr
4/14/2008 9:26:08 PM EDT
[#3]
Roth IRA
4/15/2008 9:46:43 AM EDT
[#4]
Same career field as you're going into...

PD will have a plan (mine is a 457) administered by a company like Nationwide/Vanguard/etc, where you can set your withdrawal amount from your paycheck, and the dept usually matches 2-3%.  This is in addition to the state retirement program which pays you after you get your 20 years.  Neither 401k nor IRA/457's are doing great right now, but the best time to buy in is when prices are low, and you can dollar/cost average.

Dallas' retirement plan administrators will offer 'workshops' where you can go for advice when you get set up, but I'd advise you to do the best you can to put in at least 15% of your paycheck, right from the get go.  With the PD's contribution, and your future raises, you'll be at 100K before your 10 year mark, and from then on, with 10% growth, it'll take off and you'll be close to your 1mil mark at 20 years.  A million isn't gonna be worth much by then, but if you retire, you should be able to use the state retirement + the 457 distribution to come close to your ending police salary, all the way through your retirement.

Don't know much about 529 plans, but college is $$$, and most financial planners recommend that you not jeopardize your retirement in order to fund college savings.
4/15/2008 5:34:06 PM EDT
[#5]
DPD has a pension plan, I think it takes out around 8% each check and the city matches it a bit more.  Full retirement is 20 years and is supposed to pay 96% of the average of your three highest earning years.  This is info off the DPD site so you might want to check with whoever is your HR equivalent for more info.