Investing For Retirement

[thatonethere]

I know I might be in the wrong place to ask this question, but I wanted to ask anyway. For quite some time, I've had a Roth IRA. The funds have been frozen, meaning that I haven't added any money to it for quite some time. I would like to excersize other options in investing money since the IRA (in general ) doesn't have a great interest yield. I hear about Money Market accounts and CDs and such. The company I work for has the 401k option, but I'm really leery of putting money in it. I keep hearing that 401ks are a very bad idea because they depend on investing in mutual funds, stocks or bonds, all of which can be very risky. With that being said, I've been wondering if there is anybody on this forum who has saved or is saving up for retirement or has a particular type of account in which they do so. What kind of account do you have, and what are the benifits of having that kind of account?

[dizzbizz]

You should probably move this to the serious discussion thread. I have no idea what this is. Haha.

[thatonethere]

[quote name='dizzbizz' date='03 February 2010 - 03:14 AM' timestamp='1265192093' post='449428']
You should probably move this to the serious discussion thread. I have no idea what this is. Haha.
[/quote]


You're right...consider it done!

[thatonethere]

For quite some time, I've had a Roth IRA. The funds have been frozen, meaning that I haven't added any money to it for quite some time. I would like to excersize other options in investing money since the IRA (in general ) doesn't have a great interest yield. I hear about Money Market accounts and CDs and such. The company I work for has the 401k option, but I'm really leery of putting money in it. I keep hearing that 401ks are a very bad idea because they depend on investing in mutual funds, stocks or bonds, all of which can be very risky. With that being said, I've been wondering if there is anybody on this forum who has saved or is saving up for retirement or has a particular type of account in which they do so. What kind of account do you have, and what are the benifits of having that kind of account? Edited February 3, 2010 by thatonethere

[liquidglass]

Well I myself haven't done a whole lot regarding these various investing vehicles mostly because my jobs haven't allowed me to do so feasibly.

However, i do have a degree in it lol.

My personal suggestion is to look into what you can do about the IRA (just don't take any money out before you are 59 1/2, bad idea.

As far as the 401k how much does your company say they'll match? Because as long as it's financially viable I suggest investing the max I think this year it's 5k. Plus you need to look into who they work through with it as well as the various vehicles used for the 401k. Some varieties allow you to customize it yourself which is your best option if you want to attempt to maximize your rate of of return (and you're willing to take risks)

As far as other investment tools. Mutual funds are a great way to go. I'd stay away from CDs simply because you can get savings accounts that will generally have the same rate of return as most CDs and your money isn't tied up for a set amount of time.

My best advice is READ read read read. The more you read, the more you know, and the better you can invest. Also find a financial adviser close by that you can consult on it and ask him/her to assess your best options based on your income, background, age, and goals. Most of what I'm saying is very generally applicable as I'm not sure of your situation.

Here is an example of one of my long term investment tools. Life Insurance. yes I know it sounds crazy but stick with me. I currently have life insurance with Northwestern Mutual that guarantees a min. return of about 7.5% per year. With it normally being much higher. Why? Becuase they are a mutual company rather than most insurance companies so they are more stable and allow for a greater return of monies to their clients. I got it two years ago when I was 22. In 8 years I will no longer have to pay a premium as my dividends will more than cover it. Then when I turn 60 I'll be able to keep the current level of life insurance and draw 30k-50k per year in dividends. Not a bad supplemental income if I may say so myself.


You need to assess the money you can invest, decide how risky you like to be with it, and then invest in a vehicle that allows for the greatest return within your risk range. Plus diversity doesn't kill anything but losses.

Hope it didn't sound too tech. I tried to use terms that are commonly used so it wouldn't be confusing.

[liquidglass]

Oh and by the way for anyone with an estate worth $2 million or more 2010 is a great YEAR TO DIE! lol just joking. But seriously, if you're going to kick the bucket soon make it this year As the Estate Tax law dies off from legislation. It'll be renewed in 2011 most likely but might as well make your decedents filthy rich without paying out the ass lol.

[thatonethere]

[quote name='liquidglass' date='03 February 2010 - 04:16 AM' timestamp='1265195793' post='449459']
Well I myself haven't done a whole lot regarding these various investing vehicles mostly because my jobs haven't allowed me to do so feasibly.

However, i do have a degree in it lol. [b]Badass!!! I guess I came to the right place then.[img]http://www.hookahforum.com/public/style_emoticons/default/good2.gif[/img] [/b]

My personal suggestion is to look into what you can do about the IRA (just don't take any money out before you are 59 1/2, bad idea. [b] My first thought was to roll it into the 401k.
[/b]
As far as the 401k how much does your company say they'll match? Because as long as it's financially viable I suggest investing the max I think this year it's 5k. Plus you need to look into who they work through with it as well as the various vehicles used for the 401k. Some varieties allow you to customize it yourself which is your best option if you want to attempt to maximize your rate of of return (and you're willing to take risks) [b]My company said they'd match $2000.00 of it. That may have changed since I first inquired about my 401k options. They do have options, but they come pre packaged. The levels are "Aggressive" "Moderate" "and I think the last option is "Steady" (or something like that). With each option you get a fixed number of companies that vary in whatever industry they happen to be in.
[/b]
As far as other investment tools. [b]Mutual funds are a great way to go[/b]. I'd stay away from CDs simply because you can get savings accounts that will generally have the same rate of return as most CDs and your money isn't tied up for a set amount of time. [b]I've also wanted to do this becauseI've done a bit of research on them. They are what you say they are, but if you wanted to "tie up" the money to prevent the temptation of using it could that be[/b] [b]done also?
[/b]
My best advice is READ read read read. The more you read, the more you know, and the better you can invest. Also find a financial adviser close by that you can consult on it and ask him/her to assess your best options based on your income, background, age, and goals. Most of what I'm saying is very generally applicable as I'm not sure of your situation.

Here is an example of one of my long term investment tools. Life Insurance. yes I know it sounds crazy but stick with me. I currently have life insurance with Northwestern Mutual that guarantees a min. return of about 7.5% per year. With it normally being much higher. Why? Becuase they are a mutual company rather than most insurance companies so they are more stable and allow for a greater return of monies to their clients. I got it two years ago when I was 22. In 8 years I will no longer have to pay a premium as my dividends will more than cover it. Then when I turn 60 I'll be able to keep the current level of life insurance and draw 30k-50k per year in dividends. Not a bad supplemental income if I may say so myself. [b]I will look into this as an option. From what I understand, there are several types of Life insurance policies. I assume this option moves around with you, meaning if I were to lose my job, I'll still have it available, no? How high are the premiums? I checked out the one at Northwest Mutual, and maybe I'm mis reading the info, (my ignorance might be showing) but $25,0000 per year is very high.[/b]


You need to assess the money you can invest, decide how risky you like to be with it, and then invest in a vehicle that allows for the greatest return within your risk range. Plus diversity doesn't kill anything but losses. [b]Part of me would like to invest in some stocks from consumer based companies, simply because some of them show a steady growth rate for five years straight.
[/b]
Hope it didn't sound too tech. I tried to use terms that are commonly used so it wouldn't be confusing.
[/quote]


You weren't too technical. I was able to follow for the most part. What would be a good option for someone who doesn't make a whole lot of money per year? I get by alright simply because I really don't need much to be happy, but I've stayed out of debt (except for my house note), and I have a little bit of extra cash at the end of the month that tempts me to burn a tiny hole in my pocket. I burn about $200/month maximum on entertainment, and I usually end up with $300.00 per month left over more or less. That leaves $100/month as idle money. I want to start putting away $200.00 or $250.00/month, and keep $50.00 for myself (or something of that nature). Any thoughts?

[Dr. B]

I know there are a few of us business people on the forum, but the ones you'll wanna talk to are the ones who study Finance. I know enough to make conservative investments being an accountant and economist; and also how to avoid heavy taxation; but the Finance guys are the ones who are gonna tell you how to avoid risk while capturing higher returns.

My advice for a steady interim plan is to find an agent/broker who will organize a money market mutual fund with a conservative bias. The benefits are that the habitual acquisition/disposition of currencies means that come tax time, your capital gains are going to be treated as short term and therefore only subject to your marginal rate and you can factor in broker fees and commissions into your cost basis. However, if you anticipate that you'll be in the lower income tax brackets, long term capital gains (investments held for 1 year+) will be taxed at 0%. With the bias taken into consideration, you can at least see some return on principal while you plan out longer-term investment strategies. Another vessel would be, like you mentioned, buying a 5-year flexible CD. Buy it with a local credit union as they'll pay closer to prime than a national commercial bank and they tend to be, believe it not, more stable (WaMu/ML anyone?). The benefit of planning short-term or buying a flexible CD is that you can still exercise the option to reinvest the funds with little hassle.

There are volumes more to expand upon this, but consider this a jumping off point.

[Jeff_T]

Dr. B gave some good advice that I'd also give, but mainly find an agent/broker you feel comfortable with. They'll be able to talk with you, find out your short-term/long-term and interim goals, create a prospectus of plans/solutions that you feel comfortable with (because it's your money at stake) and proceed from there. There are a ton of different routes you could take as far as investing, but remember that for all intensive purposes higher risk yields higher returns, it's the way of the market. As far as what's best for you, that will depend on a ton of variables, but mainly your age, investment horizon and risk tolerance. As you stated it can be risky to invest in stocks, funds, etc. but they are going to ultimately give you a higher return than any other option (barring unforeseen circumstances; housing boom with real-estate invesments, gold right now/compared to 5 years ago, etc). I'd say the MM investments could be a viable/safe short(er) term investment, but if you talk with a financial advisor they will be able to set you up with a portfolio containing all types of investment (what they are will depend on your willingness to expose yourself to risk). Take a look at some bond investments as they tend to be safer, less risky than stocks. Treasury bills/bonds are pretty much zero risk, then municipals will be a little more and taxfree and corp. will be most risky/highest return and taxed as any other investment. I'd suggest for anyone not that close to retirement (withing 5 years or less) to create a diversified portfolio containing stocks, bonds, MM, mut. funds, etc. The only difference will be the weights (allocations) into each portion depending again on the risk you'll take. Generally you'd start with something like 80% stocks, 20% bonds and gradually these weightings would shift toward 20% stocks, 80% bonds as you get closer to retirement. All in all, the best advice I could give you is talk to a professional about what You want to do and feel comfortable with and diversify as much as possible (it will significantly lower your exposure to risk).
It's hard seeing things like they are now with the markets and being comfortable investing, but if you look at historical trends, even for investments held throughout the Great Depression, the late 70's, early 80's and early 2000's they are higher than other types of investment returns. Another thing to remember is that although the market has been hit hard, it will rebound (and have significantly rebounded since last summer) and right now riskier investments (stocks, funds, etc.) are at more of a "bargain" than they previously were. So the adage of buying low, selling high seems to fit the current situation (if your financial position allows it). There is a ton of information out there, but if you have any other questions I can try to answer them for you to the best of my knowledge. If you're interested I'd highly recommend checking out the book, [url="http://www.amazon.com/Stocks-Long-Run-Jeremy-Siegel/dp/007058043X"]Stocks for the Long Run[/url]. I read this and used this information a lot while in school and found it to be quite interesting.
P.S. I recently graduated with a degree in Finance for what it's worth. Like I said though, I'd highly recommend doing your own research and consulting a financial advisor (they're paid to make you money and keep your investments as shielded from risk as possible).

[BBKakes]

Doing your due diligence is important no matter if its buying stock in your favorite video game company or buying a shrimp farm in Ecuador. The only thing I want to point out is that 401K's and Roth IRA's are investment vehicles that hold your particular investment choice and are structured depending on how you are trying to hedge/defer your tax expenses. Although your current investment elections in your IRA may not be yielding too much, your IRA dollars are not stuck there (at least I'm assuming that). You could always sell that asset and invest in something else as long as the money stays in the IRA vehicle. I would strongly advise looking into the details behind your place of work's 401K plan. If they have some sort of matching plan and you plan on sticking around long enough (or are already) to be vested, hit it. Its free money. You could put these funds in a money market type investment and just sit back and not have to worry about market risk (or market returns).

[liquidglass]

[quote name='thatonethere' date='03 February 2010 - 07:00 AM' timestamp='1265198401' post='449465']
[quote name='liquidglass' date='03 February 2010 - 04:16 AM' timestamp='1265195793' post='449459']
Well I myself haven't done a whole lot regarding these various investing vehicles mostly because my jobs haven't allowed me to do so feasibly.

However, i do have a degree in it lol. [b]Badass!!! I guess I came to the right place then.[img]public/style_emoticons/default/good2.gif[/img] [/b]

My personal suggestion is to look into what you can do about the IRA (just don't take any money out before you are 59 1/2, bad idea. [b] My first thought was to roll it into the 401k.
[/b]
As far as the 401k how much does your company say they'll match? Because as long as it's financially viable I suggest investing the max I think this year it's 5k. Plus you need to look into who they work through with it as well as the various vehicles used for the 401k. Some varieties allow you to customize it yourself which is your best option if you want to attempt to maximize your rate of of return (and you're willing to take risks) [b]My company said they'd match $2000.00 of it. That may have changed since I first inquired about my 401k options. They do have options, but they come pre packaged. The levels are "Aggressive" "Moderate" "and I think the last option is "Steady" (or something like that). With each option you get a fixed number of companies that vary in whatever industry they happen to be in.
[/b]
As far as other investment tools. [b]Mutual funds are a great way to go[/b]. I'd stay away from CDs simply because you can get savings accounts that will generally have the same rate of return as most CDs and your money isn't tied up for a set amount of time. [b]I've also wanted to do this becauseI've done a bit of research on them. They are what you say they are, but if you wanted to "tie up" the money to prevent the temptation of using it could that be[/b] [b]done also?
[/b]
My best advice is READ read read read. The more you read, the more you know, and the better you can invest. Also find a financial adviser close by that you can consult on it and ask him/her to assess your best options based on your income, background, age, and goals. Most of what I'm saying is very generally applicable as I'm not sure of your situation.

Here is an example of one of my long term investment tools. Life Insurance. yes I know it sounds crazy but stick with me. I currently have life insurance with Northwestern Mutual that guarantees a min. return of about 7.5% per year. With it normally being much higher. Why? Becuase they are a mutual company rather than most insurance companies so they are more stable and allow for a greater return of monies to their clients. I got it two years ago when I was 22. In 8 years I will no longer have to pay a premium as my dividends will more than cover it. Then when I turn 60 I'll be able to keep the current level of life insurance and draw 30k-50k per year in dividends. Not a bad supplemental income if I may say so myself. [b]I will look into this as an option. From what I understand, there are several types of Life insurance policies. I assume this option moves around with you, meaning if I were to lose my job, I'll still have it available, no? How high are the premiums? I checked out the one at Northwest Mutual, and maybe I'm mis reading the info, (my ignorance might be showing) but $25,0000 per year is very high.[/b]


You need to assess the money you can invest, decide how risky you like to be with it, and then invest in a vehicle that allows for the greatest return within your risk range. Plus diversity doesn't kill anything but losses. [b]Part of me would like to invest in some stocks from consumer based companies, simply because some of them show a steady growth rate for five years straight.
[/b]
Hope it didn't sound too tech. I tried to use terms that are commonly used so it wouldn't be confusing.
[/quote]


You weren't too technical. I was able to follow for the most part. What would be a good option for someone who doesn't make a whole lot of money per year? I get by alright simply because I really don't need much to be happy, but I've stayed out of debt (except for my house note), and I have a little bit of extra cash at the end of the month that tempts me to burn a tiny hole in my pocket. I burn about $200/month maximum on entertainment, and I usually end up with $300.00 per month left over more or less. That leaves $100/month as idle money. I want to start putting away $200.00 or $250.00/month, and keep $50.00 for myself (or something of that nature). Any thoughts?
[/quote]


Since this was a duplicate thread I reposted what we said in the other and here's some advice.

If your company matches up to $2,000 in a 401k then go ahead and roll over the IRA into it (btw Roth IRAs are superior to normal IRAs) Determine your level of risk. Aggressive is GREAT because of the potential outcome, but you're taking higher risk with possible loss. If you aren't too concerned with what goes on I would highly suggest aggressive to moderate, steady is great but just from how I feel about investing I dont' like it. Again talking to an investment manager would allow you for better options as they could get all your information much better than i could over a public forum.

[b]Remember your company matching your investment is like $2000 year bonus!! [/b]That's FREE money the company is giving you that most people don't take advantage of. At just $200 a month you're hitting $2,400 yearly contribution (which is just half of your personally allowed contribution (max this year is $5,000)) plus the company and you're looking at $4,400 in a year. So guess what! you're already doubling your investment just by putting the money in that's a 100% return each year essentially.


- Mutual funds are a great way to go and there are certain ways you can "lock" it in so you can't touch it. But above all else consider it money spent when it's gone and just don't think about it. Again a financial advisor would be a great path to go on this.


As far as [b]Northwestern Mutual[/b] they are one of the few mutual insurance companies left in the market and they've been around for over 150 years, they are the highest rated by every independent insurance rating company.

Here's an example of what I have.

I got $250,000 in whole life with a $100,000 term rider (meaning it's a much lower rate and I can make it whole life later) I'm paying about $125 a month (got it when I was 22) The beautiful thing about doing it with a mutual company is you gain dividends every year. The current rate is 7.25% last I checked. And they guarantee a 5% no matter the economic conditions.

In 8 years my payments will completely disappear (dividends will cover it) and the policy will build on itself from the dividends. By the time I retire I can potentially take $30,000 a year via the dividends (that's $30,000 pure income for doing nothing) OR i can continue to let it build. Assuming I live to 70 that $350,000 in insurance will have grown to $1.2
million.

Quick summary: (remember dividends will increase over time) so for paying about $10,000-12,000 over a ten year span I will have potential retirement income built up, $1.2 million in death benefit, and I can take out secured loans if I ever need to against it. (companies love to give loans secured with insurance)

Hope that helps let me know if you need anything else!



By the way guys remember 2010........great year to die! The estate tax has totally disappeared this year So even if you have assets over $2million you will not have to pay a dime.
And if anyone else needs help planning for things I can prob give some advice on here.

[jellywerker]

Woah, this is interesting stuff. I'm 18, and don't have much to invest right now (mostly broke actually, woo!) but I'll have about $1,500 to put away long term at the end of summer. Any good ideas for that small an amount of money?

[thatonethere]

Thanks for the advise guys! I'll definitely keep reading about potential options. Right now, I'm strongly leaning toward a mutual fund. 401ks have a very bad rep, so I'm still not sure if I want to do it or not. Then again, a $2000.00 match/year sounds like a very good deal for the time being.

[liquidglass]

[quote name='jellywerker' date='15 February 2010 - 02:19 AM' timestamp='1266218340' post='451501']
Woah, this is interesting stuff. I'm 18, and don't have much to invest right now (mostly broke actually, woo!) but I'll have about $1,500 to put away long term at the end of summer. Any good ideas for that small an amount of money?
[/quote]


Well firstly, be glad that you are starting much sooner than most people in investing your money. I know savings/investing was the last thing on my mind at 18 lol.

You have a few choices.

1) There are online savings accounts that can give 3%-6% per year interest! That's amazing stuff. Especially considering CDs are below that and the money stays tied up. Do your research and honestly if you're going that route don't be happy until you find a solid bank that gives above 3% per year.

2) This is a rather novel idea [url="http://join.lendingclub.com/lending.php?src=73311"]Lending Club[/url]. Basically you put in cash starting at just $25 to whatever amount you want and it's lended to other people. Right now the average return is 9.95% which is better than any other "savings" type account you might find. Only downside is the money is tied up for a predetermined amount of time. So it all depends on when you want your money out.

[quote name='thatonethere' date='15 February 2010 - 03:45 AM' timestamp='1266223503' post='451515']
Thanks for the advise guys! I'll definitely keep reading about potential options. Right now, I'm strongly leaning toward a mutual fund. 401ks have a very bad rep, so I'm still not sure if I want to do it or not. Then again, a $2000.00 match/year sounds like a very good deal for the time being.
[/quote]

Sounds good, 401ks do get a bad rep so if possible find out where it's invested and do a little research, see what people think. I would def try to take advantage of the added cash. I mean even if the 401k only makes 3% per year remember you're doubling your money up to $2000. So that's a great investment.

Mutual funds are a great way to go though. So again talk to a financial advisor in your area. It might be in your best interest to diversify your portfolio, never thought you'd have one did you

[BBKakes]

[quote name='thatonethere' date='15 February 2010 - 12:45 AM' timestamp='1266223503' post='451515']
Thanks for the advise guys! I'll definitely keep reading about potential options. Right now, I'm strongly leaning toward a mutual fund. 401ks have a very bad rep, so I'm still not sure if I want to do it or not. Then again, a $2000.00 match/year sounds like a very good deal for the time being.
[/quote]

Why do 401K's have a bed rep when its the investment elections within the 401k that that expose the investor to risk? I would do some more reading on what a 401k actually is before making such a statment. 401ks and mutalfund/stocks are not the same.

[hookahman]

this might be a little late, but Berkshire Hathaway always is a good long-term stock. invest with warren buffett! Also, MKL is like a warren buffet stock that might be good.