Nice retirement for a sweet, humble, smart Wal Mart couple

[EdwardBaiamonte]

But the quality of the guiding principals of that fund will be revealed over a longer time horizon.

but over the long term they all do badly as do hedge funds. THe best and brightest do no better than monkeys throwing darts.

 

[Flopper]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

 

[Flopper]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

My son in law can never seem to keep a job more than a few years so he either doesn't start a 401K or if he does he cashes it out when he leaves because he says he needs the money.

 

[EdwardBaiamonte]

401K's are a wonder way to invest for retirement.

I would eliminate SS and make 401's mandatory so average American could retire with estate of $1.4 million. Since financial industry is basicially corrupt I would make them capitalist requiring a box in top right corner showing fees and return %.

 

[Spare_change]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

How much did you make off of them?

Does it make a difference? Do you suppose his clients aren't happy with what he's done? Do you think they don't believe he needs to be rewarded?

Your question is a trap ---- with no right answer.

 

[Spare_change]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

 

[Mac1958]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

More and more group Roth IRA's are coming out to give people a tax-free income at retirement.

Either plan includes tax-deferred growth, and I'll take that all day long.

What we need more than anything else is a better-educated and better-disciplined populace.

.

 

[Zander]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

Personally, I like the "all of the above" approach.

Invest the maximum in tax free Roth IRA's (or backdoor convert the maximum each year) , invest the maximum in tax deferred accounts, , and put whatever else you can into a regular taxable investment account.

 

[Andylusion]

But the quality of the guiding principals of that fund will be revealed over a longer time horizon.

but over the long term they all do badly as do hedge funds. THe best and brightest do no better than monkeys throwing darts.

But I have shown evidence that clearly shows otherwise. We keep going round and round.

 

[Andylusion]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

That is not true to the best of my knowledge.

If you own an investment outside of a retirement account, the growth of that money is taxed.

So if I have $100,000, in a basic investment, and it grows 10%, that's $10,000, I would owe taxes on that $10,000 at the end of the year. Capital gains would be 15%, so $1,500 in additional taxes.

In a 401K, you don't pay any taxes on that growth.

Of course Roth 401K and IRA, is better. You pay the taxes upfront, and pay no tax on the growth, OR the income at retirement.

 

[Andylusion]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

Personally, I like the "all of the above" approach.

Invest the maximum in tax free Roth IRA's (or backdoor convert the maximum each year) , invest the maximum in tax deferred accounts, , and put whatever else you can into a regular taxable investment account.

Well yes of course. I'm always amazed at people who say "How much do I need to save?"....... well duh..... how rich do you want to be?

Why would you want to the least possible wealthy you can get? The more you invest................ the more wealthy you'll be. Just that simple.

 

[EdwardBaiamonte]

but over the long term they all do badly as do hedge funds. THe best and brightest do no better than monkeys throwing darts.

But I have shown evidence that clearly shows otherwise. We keep going round and round.

I don't recall seeing the evidence??

The Motley Fool How-To Guide: (Sharebuilder)How To Start Investing
周攠䵯瑬敹⁆潯氠䡯眭呯⁇畩摥⁓桡牥扵楬摥爠䡯眠呯⁓瑡牴⁉湶敳瑩湧
‎
Actually, on many occasions, monkeys randomly selecting stocks have fared better than ... That's a 2.7% underperformance for the average mutual fund. ... This doesn't come out of the fund's stated returns like the factors discussed above , but it ...

 

[Spare_change]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

That is not true to the best of my knowledge.

If you own an investment outside of a retirement account, the growth of that money is taxed.

So if I have $100,000, in a basic investment, and it grows 10%, that's $10,000, I would owe taxes on that $10,000 at the end of the year. Capital gains would be 15%, so $1,500 in additional taxes.

In a 401K, you don't pay any taxes on that growth.

Of course Roth 401K and IRA, is better. You pay the taxes upfront, and pay no tax on the growth, OR the income at retirement.

ALL investments are taxed ... it's just a question of when (obviously, exluding some unique government bonds).

Let's work with your scenario ....

You put $100,000 in pre-tax dollars, and it grows by $10,000 - When you cash out the 401(k), you owe taxes on $110,000 at normal income tax rate - for this case, we will assume 25%. You now owe not $1,500 in taxes, but rather $25,250. (The tax on your contribution is deferred, not forgiven). Thus, after distribution and taxes, you receive a grand total of $84,750.

(This, of course, ignores any employer contribution .... that's why the smart move is to always invest the minimum necessary to maximize the employer contribution. It's free money - except that, you DO have to pay taxes on it when you withdraw it).

The Roth IRA, on the other hand, is built with post-tax dollars. So, your pre-tax $100K converts to $75K investment (after you pay the taxes). Therefore, when you cash out (after making a commensurate $7,500), you will only receive $82,500

That presumes, of course, that your tax level remains constant. If, on the other hand, you invested the $100K during a time when your tax rate was 15%, your taxes on that initial investment would be $15,000, not the $25,000 you would pay with your higher tax rate at retirement. (Remember, all government programs only benefit the government - all you are trying to do is to minimize your loss through taxes. Somehow, we've gotten this idea that allowing the government to steal less of our money is a success). Why would you make an investment without considering the tax consequences?

 

[Zander]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

That is not true to the best of my knowledge.

If you own an investment outside of a retirement account, the growth of that money is taxed.

So if I have $100,000, in a basic investment, and it grows 10%, that's $10,000, I would owe taxes on that $10,000 at the end of the year. Capital gains would be 15%, so $1,500 in additional taxes.

In a 401K, you don't pay any taxes on that growth.

Of course Roth 401K and IRA, is better. You pay the taxes upfront, and pay no tax on the growth, OR the income at retirement.

ALL investments are taxed ... it's just a question of when (obviously, exluding some unique government bonds).

Let's work with your scenario ....

You put $100,000 in pre-tax dollars, and it grows by $10,000 - When you cash out the 401(k), you owe taxes on $110,000 at normal income tax rate - for this case, we will assume 25%. You now owe not $1,500 in taxes, but rather $25,250. (The tax on your contribution is deferred, not forgiven). Thus, after distribution and taxes, you receive a grand total of $84,750.

(This, of course, ignores any employer contribution .... that's why the smart move is to always invest the minimum necessary to maximize the employer contribution. It's free money - except that, you DO have to pay taxes on it when you withdraw it).

The Roth IRA, on the other hand, is built with post-tax dollars. So, your pre-tax $100K converts to $75K investment (after you pay the taxes). Therefore, when you cash out (after making a commensurate $7,500), you will only receive $82,500

That presumes, of course, that your tax level remains constant. If, on the other hand, you invested the $100K during a time when your tax rate was 15%, your taxes on that initial investment would be $15,000, not the $25,000 you would pay with your higher tax rate at retirement. (Remember, all government programs only benefit the government - all you are trying to do is to minimize your loss through taxes. Somehow, we've gotten this idea that allowing the government to steal less of our money is a success). Why would you make an investment without considering the tax consequences?

The vast majority of people pay LOWER tax rates in retirement, not higher.

 

[Spare_change]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

That is not true to the best of my knowledge.

If you own an investment outside of a retirement account, the growth of that money is taxed.

So if I have $100,000, in a basic investment, and it grows 10%, that's $10,000, I would owe taxes on that $10,000 at the end of the year. Capital gains would be 15%, so $1,500 in additional taxes.

In a 401K, you don't pay any taxes on that growth.

Of course Roth 401K and IRA, is better. You pay the taxes upfront, and pay no tax on the growth, OR the income at retirement.

ALL investments are taxed ... it's just a question of when (obviously, exluding some unique government bonds).

Let's work with your scenario ....

You put $100,000 in pre-tax dollars, and it grows by $10,000 - When you cash out the 401(k), you owe taxes on $110,000 at normal income tax rate - for this case, we will assume 25%. You now owe not $1,500 in taxes, but rather $25,250. (The tax on your contribution is deferred, not forgiven). Thus, after distribution and taxes, you receive a grand total of $84,750.

(This, of course, ignores any employer contribution .... that's why the smart move is to always invest the minimum necessary to maximize the employer contribution. It's free money - except that, you DO have to pay taxes on it when you withdraw it).

The Roth IRA, on the other hand, is built with post-tax dollars. So, your pre-tax $100K converts to $75K investment (after you pay the taxes). Therefore, when you cash out (after making a commensurate $7,500), you will only receive $82,500

That presumes, of course, that your tax level remains constant. If, on the other hand, you invested the $100K during a time when your tax rate was 15%, your taxes on that initial investment would be $15,000, not the $25,000 you would pay with your higher tax rate at retirement. (Remember, all government programs only benefit the government - all you are trying to do is to minimize your loss through taxes. Somehow, we've gotten this idea that allowing the government to steal less of our money is a success). Why would you make an investment without considering the tax consequences?

The vast majority of people pay LOWER tax rates in retirement, not higher.

Yep, they do .... but that is AFTER they have rolled over their 401(k), which is typically taxed at the rate of your last working year (you know, when your tax contribution is maximized).

 

[Zander]

401K's are a wonder way to invest for retirement. Unfortunately many workers don't take full advantage of them. According to industry data, the average contribution percentage for workers saving in a 401(k) is around 6 percent. Workers contribute the least when they should be contributing the most, when they're young. Then they try to make up for it by contributing the most when they are approaching retirement and their money doesn't have time to grow. I know someone who was planning to retire in 2008. He started maxing out his contributions in 2005 which of course didn't work out that well.

401(k)'s are a nice retirement tool ... but they are not the panacea the government would have you believe.

If you remember, your contribution to the 401(k) is pre-tax dollars. When you withdraw that money, you pay at your normal income tax rate. HOWEVER - the profit made on your investments is also taxed at the normal income tax rate.

The only thing that really makes 401(k)s a valuable asset is the 'employer contribution'. Every employee should contribute up to the amount that maximizes the employer contribution - AND NOT ONE CENT MORE!!!!! Instead, invest that extra money as you normally would - and pay capital gains tax instead. In the long run, you will make more money that way.

Despite all the government propaganda - 401(k)s, IRAs, etc. are not government inducements to invest in your retirement. They are a method to increase your tax liability - and their income. Always ask yourself - who is the one truly benefiting from this program? I know of no government-incentivized program that benefits you - only the tax collector.

That is not true to the best of my knowledge.

If you own an investment outside of a retirement account, the growth of that money is taxed.

So if I have $100,000, in a basic investment, and it grows 10%, that's $10,000, I would owe taxes on that $10,000 at the end of the year. Capital gains would be 15%, so $1,500 in additional taxes.

In a 401K, you don't pay any taxes on that growth.

Of course Roth 401K and IRA, is better. You pay the taxes upfront, and pay no tax on the growth, OR the income at retirement.

ALL investments are taxed ... it's just a question of when (obviously, exluding some unique government bonds).

Let's work with your scenario ....

You put $100,000 in pre-tax dollars, and it grows by $10,000 - When you cash out the 401(k), you owe taxes on $110,000 at normal income tax rate - for this case, we will assume 25%. You now owe not $1,500 in taxes, but rather $25,250. (The tax on your contribution is deferred, not forgiven). Thus, after distribution and taxes, you receive a grand total of $84,750.

(This, of course, ignores any employer contribution .... that's why the smart move is to always invest the minimum necessary to maximize the employer contribution. It's free money - except that, you DO have to pay taxes on it when you withdraw it).

The Roth IRA, on the other hand, is built with post-tax dollars. So, your pre-tax $100K converts to $75K investment (after you pay the taxes). Therefore, when you cash out (after making a commensurate $7,500), you will only receive $82,500

That presumes, of course, that your tax level remains constant. If, on the other hand, you invested the $100K during a time when your tax rate was 15%, your taxes on that initial investment would be $15,000, not the $25,000 you would pay with your higher tax rate at retirement. (Remember, all government programs only benefit the government - all you are trying to do is to minimize your loss through taxes. Somehow, we've gotten this idea that allowing the government to steal less of our money is a success). Why would you make an investment without considering the tax consequences?

The vast majority of people pay LOWER tax rates in retirement, not higher.

Yep, they do .... but that is AFTER they have rolled over their 401(k), which is typically taxed at the rate of your last working year (you know, when your tax contribution is maximized).

There is no tax on a rollover of a 401K to an IRA. It's only taxed when you withdraw the money.

 

[Care4all]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

seems like a lot of money but at todays interest rates how do you live on it?

They both have full social security and we've set them up at a 5% annual withdrawal. Totals about $56,000 a year for the rest of their lives plus cost of living increases, with plenty of emergency funds.

That's more than they've been making.

Portfolio invested conservatively to replenish withdrawals.

Easy as pie.

.

Very hard to believe that these people couldhave that amount of money invested in their 401 k's on Walmart salaries for such a short time period....but TIMING is everything I would suppose?

17 years ago, they were just beginning with their 401k's in the stock market so when 9/11 came around and the stock market fell to new lows that were a shock to everyone with any kind of retirement investment and were nearing retirement, this couple was NOT affected, and they benefited from the rise in the stock market after it.... don't know how they made it through the 2008 CRASH and burn so well, with such a short time to recover from it..

I would love to know what they were invested in and how they could start at ZERO dollars saved and get it to that much money in just 17 years on MEASLY Walmart salaries for their sales clerks and going through 2 major crashes?

 

[Ravi]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

seems like a lot of money but at todays interest rates how do you live on it?

They both have full social security and we've set them up at a 5% annual withdrawal. Totals about $56,000 a year for the rest of their lives plus cost of living increases, with plenty of emergency funds.

That's more than they've been making.

Portfolio invested conservatively to replenish withdrawals.

Easy as pie.

.

Very hard to believe that these people couldhave that amount of money invested in their 401 k's on Walmart salaries for such a short time period....but TIMING is everything I would suppose?

17 years ago, they were just beginning with their 401k's in the stock market so when 9/11 came around and the stock market fell to new lows that were a shock to everyone with any kind of retirement investment and were nearing retirement, this couple was NOT affected, and they benefited from the rise in the stock market after it.... don't know how they made it through the 2008 CRASH and burn so well, with such a short time to recover from it..

I would love to know what they were invested in and how they could start at ZERO dollars saved and get it to that much money in just 17 years on MEASLY Walmart salaries for their sales clerks and going through 2 major crashes?

Magical thinking, prolly.

 

[Mac1958]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

seems like a lot of money but at todays interest rates how do you live on it?

They both have full social security and we've set them up at a 5% annual withdrawal. Totals about $56,000 a year for the rest of their lives plus cost of living increases, with plenty of emergency funds.

That's more than they've been making.

Portfolio invested conservatively to replenish withdrawals.

Easy as pie.

.

Very hard to believe that these people couldhave that amount of money invested in their 401 k's on Walmart salaries for such a short time period....but TIMING is everything I would suppose?

17 years ago, they were just beginning with their 401k's in the stock market so when 9/11 came around and the stock market fell to new lows that were a shock to everyone with any kind of retirement investment and were nearing retirement, this couple was NOT affected, and they benefited from the rise in the stock market after it.... don't know how they made it through the 2008 CRASH and burn so well, with such a short time to recover from it..

I would love to know what they were invested in and how they could start at ZERO dollars saved and get it to that much money in just 17 years on MEASLY Walmart salaries for their sales clerks and going through 2 major crashes?

Magical thinking, prolly.

Ravi doesn't like this example, prolly. Regular people being smart, putting money away, taking care of themselves 'n stuff.

Let's fire up my financial software.

If, between two people and 401K matching funds, you put away $1200 a month for 17 years at an 8% compounded growth rate, you end up with $525,885.03.

Nothing magical about that.

.

 

[Care4all]

Just initiated a 401K rollover for a very sweet couple, both aged 63. They both spent the last 17 or so years working at Wal Mart. Not in corporate, but in regular ol' stores. Stocking shelves, receiving, some management, you name it.

They said "we were just careful with our money, we never had to buy the newest stuff, we lived within our means and stayed humble with our money". That's their big secret.

Totals of their 401K's:
Husband: $287,729.57
Wife: $211,898.10

Separate Roth IRA's at Edward Jones:
Husband: $42,114.52
Wife: $43,001.58

Total retirement portfolio: $584,743.77

After our meeting today, they left for a week-long camping and fishing trip with friends, celebrating the start of their comfy retirement. Just bought a cool new red Honda four-wheel-type thing for the trip. They like driving through streams.

So long Wal Mart, hello striped bass.

.

seems like a lot of money but at todays interest rates how do you live on it?

They both have full social security and we've set them up at a 5% annual withdrawal. Totals about $56,000 a year for the rest of their lives plus cost of living increases, with plenty of emergency funds.

That's more than they've been making.

Portfolio invested conservatively to replenish withdrawals.

Easy as pie.

.

Very hard to believe that these people couldhave that amount of money invested in their 401 k's on Walmart salaries for such a short time period....but TIMING is everything I would suppose?

17 years ago, they were just beginning with their 401k's in the stock market so when 9/11 came around and the stock market fell to new lows that were a shock to everyone with any kind of retirement investment and were nearing retirement, this couple was NOT affected, and they benefited from the rise in the stock market after it.... don't know how they made it through the 2008 CRASH and burn so well, with such a short time to recover from it..

I would love to know what they were invested in and how they could start at ZERO dollars saved and get it to that much money in just 17 years on MEASLY Walmart salaries for their sales clerks and going through 2 major crashes?

Magical thinking, prolly.

Ravi doesn't like this example, prolly. Regular people being smart, putting money away, taking care of themselves 'n stuff.

Let's fire up my financial software.

If, between two people and 401K matching funds, you put away $1200 a month for 17 years at an 8% compounded growth rate, you end up with $525,885.03.

Nothing magical about that.

.

How could they put away $1200 a month for 17 years if they were only making $900 gross, for each a month and at the time you could only put in 10% of your income in to 401k's with a Walmart match of only 50% of the 10%?


I think this couple must have rolled a, or several, previous 401ks in to their Walmart 401k from the previous decade(s) they worked or IRA's in to their 401k at Walmart or something like that...and you were just unaware of this....because there is NO WAY POSSIBLE that 2 Walmart Sales clerks could save that kind of money, even with good investments, in their 401k's on Walmart Sales clerk salaries, in just 17 years.