Ok, so here is what I am currently doing:

15% in a 401k
$1000/month in a 5% interest savings account.

Here are my other options:
$200/month - Roth IRA
$$$ in a mutual fund

There just seems to be too many choices. I would like to have plenty for retirement, but also enough to have fun, travel, and save for a house. Those of you with jobs, how do you save?

10/30/2006 4:48:02 PM

seriously, buy land with timber on it


cut half the timber, get paid.... let the other half go for 2-5 more years then cut it

you'll pay for the land and have multiple acres paid for that you can still sell

10/30/2006 4:50:25 PM

15% 401k and as much as i can spare in a 4.5% money market to max out my down payment in March

10/30/2006 4:54:13 PM

I would definitely be maxing out the Roth IRA before anything else.

10/30/2006 4:55:58 PM

$200/month * 12 months = $2400/year

the max allowed in a Roth is $2500

10/30/2006 5:07:41 PM

^^ 2nd.
change $200/month in R-IRA to $330/month if you can afford it to go to current max (i think) if $4500/year.

forget trying to manage individual mutual funds. That can be just as hard and almost as risky as managing individual stocks. Go with S&P Index funds, or other index funds for NASDAQ, DIJA - can't go wrong in the long run there.
For short-medium term cash on hand, use ING or other high return (5%+) CDs

[Edited on October 30, 2006 at 5:12 PM. Reason : x]

[Edited on October 30, 2006 at 5:16 PM. Reason : 330]

10/30/2006 5:10:26 PM

The max for an IRA is not 2500, the current max is 4000, and either 2007 or 2008 is moving up to 5000.

10/30/2006 5:10:53 PM

yeah
http://beginnersinvest.about.com/cs/iras/a/iracontribution.htm

YEAR 		AGE 49 & BELOW 	AGE 50 & ABOVE
2002-2004 	$3,000 		$3,500
2005 		$4,000 		$4,500
2006-2007 	$4,000 		$5,000
2008 		$5,000 		$6,000

10/30/2006 5:12:27 PM

^correct

put as much as you can in the Roth IRA because all that is gonna be tax deferred growth and will end up being a pretty big retirement account come time to withdraw it

10/30/2006 5:13:27 PM

you guys are right...it's not $2500...that was the amount needed to open a new Roth IRA with Fidelity.

[Edited on October 30, 2006 at 5:19 PM. Reason : asdf]

10/30/2006 5:16:32 PM

maintaining the 15% in your 401k and contributing to a Roth are your best bets if you're looking for long term retirement accounts

10/30/2006 5:20:23 PM

^i agree...but what could I do for the short term. I already have a 5% interest Savings account...but that isn't enough. I would like to turn 10-15% return on a stock, but need to read more about investing before i start that (damn you RHAT!!)

10/30/2006 5:22:06 PM

mutual funds are a good way to invest in a variety of stocks which can eliminate some of the diversifiable risk that investing in stocks possesses

10/30/2006 5:24:48 PM

You want to put the highest % your company will match into the 401K, then max out the roth if possible up to 4K, then put as much in your 401K up to 15K.

You can also designate certain % of your income for fun/travel and another % for a house. If you have a specific time frame when you want to buy a house and a specific amount you are looking to spend, you can work backwards to determine what % you should be saving for your down payment.

For 10%-15% return you'll want your portfolio to be comprised of mainly stocks, very few bonds. Of the stocks you'll want a fair amount of international exposure along with some large growth/value funds and maybe some small/mid cap just to make it diversified.

10/30/2006 5:30:36 PM

for everyone here telling you how to diversify your stock portfolio, 20% international blue chip growth blah blah blah - ignore them all. Unless you are going to become a full-time investor, don't even bother trying to game the market into getting you a 10-15% return. It won't work. period. You might make 20% this year if you're lucky, but you'll lose 40% next year.
If you want to occasionally experiment with a stock you have an interest in, fine - set aside some "experimental money" every month - $100/month if you can spare it, and play some games with it. Hey, you might get lucky and break even in the long run, or even make 5-8% over a 15 years, and you might even go up 20-30% for a year or two. But, be prepared to lose it all, and don't cry about it when you do.

Mutual funds are much the same. You can get some, and even diversify them - some blue chip, some small-cap, some international - but you'll still be lucky to beat the market, especially after you pay management fees or trading fees.
For long-term investment after your tax-protected retirement options, go Index Funds.

[Edited on October 30, 2006 at 5:47 PM. Reason : .]

10/30/2006 5:46:41 PM

Quote :

"for everyone here telling you how to diversify your stock portfolio, 20% international blue chip growth blah blah blah - ignore them all."

It would be very foolish to put all of your eggs in one basket and not diversify.

Quote :

"Unless you are going to become a full-time investor, don't even bother trying to game the market into getting you a 10-15% return. It won't work. period. "

Isn't historical return 10-11%? Personally I try to go for a conservative 8%, but 10% is not impossible long term.

Quote :

"If you want to occasionally experiment with a stock you have an interest in, fine - set aside some "experimental money" every month - $100/month if you can spare it, and play some games with it. Hey, you might get lucky and break even in the long run, or even make 5-8% over a 15 years, and you might even go up 20-30% for a year or two. But, be prepared to lose it all, and don't cry about it when you do."

I'm talking about mutual funds comprised of stocks. I.E. 401K choices, not buying individual stocks.

Quote :

"Mutual funds are much the same. You can get some, and even diversify them - some blue chip, some small-cap, some international - but you'll still be lucky to beat the market, especially after you pay management fees or trading fees."

You are saying he should pass up the tax advantages of his 401K because he'll save small management fees???

Quote :

"For long-term investment after your tax-protected retirement options, go Index Funds. "

10/30/2006 5:57:29 PM

isn't the historical rate of return on the stock market around 12%?

10/30/2006 6:01:40 PM

The 12% figure is a nominal (arithmetic) average annual return as recorded for the broader US stock market (S&P 500) between 1926 and today. The compounded return is 10.7%

10/30/2006 6:03:38 PM

i just put about $14k a month under my mattress.

10/30/2006 6:03:39 PM

Quote :

"I would definitely be maxing out the Roth IRA before anything else. "

Wrong...

Obviously before anything you match up to any available matching limit in the 401k.
Then you go to the Roth. If they aren't offering match, this answer is still not necessarily correct.
What is the money for? Are you renting and trying to save to make a downpayment? Do you have an emergency fund in place? Are you adequately insured? Once you cover those basic decisions, then you can decide to Roth it.

10/30/2006 6:13:25 PM

Quote :

"Ok, so here is what I am currently doing: 15% in a 401k"

he's already maxing it out

10/30/2006 6:34:00 PM

The max is 15K not 15%

10/30/2006 6:35:29 PM

jesus.... by dismantling my post line by line, David0603, you completely missed the entire point.
I wasn't arguing arguing against diversification, or against trying to make a decent return, or against 401ks.

obviously he needs to take full advantage of his matched 401ks, and obviously his 401k will be invested in mutual funds, and obviously it will have fees.

my point was about investing money after 401k and Roth IRAs. Those 2 are gimmies.
What do you think "for long-term investment after your tax-protected retiremnent options" meant - 401ks and Roth IRAs are both text-protected options, albiet in different ways (pre-tax disbursements vs. no capital gains taxes).
And the point is, with cash that you have on hand that you want to invest, you're an idiot if you make an e-trade account and start buying and selling stocks and mutual funds and trying to manage your portfolio by yourself with any significant amount of money that you're planning to have in the future.


And rolley-eyes to investing in Index Funds, then 2 posts later quoting 10.7% return on the S&P 500!!??? WTF did you think I was talking about! Simply put, if you want a no-hassle way to make the most money with low risk and low oversight, invest in an S&P 500-tracking index fund. That's money in the bank - put it in, don't fool around with buying/selling or beating the market - just meet the market and you'll do fine.

10/30/2006 6:45:25 PM

Quote :

"my point was about investing money after 401k and Roth IRAs."

I don't think Desh is going to max out both of these, put 1K away each month for a house, and still have a ton of money left over to buy your oh so precious index funds. If that's the case, then good for him, and going with index funds is a fine route to take.

10/30/2006 6:50:57 PM

^^401ks and roth iras are both text-protected options?

10/30/2006 7:46:13 PM

It's been said before, but to repeat it:

First, put money into the 401k until the company match stops.
Second, max the Roth.
Third, invest however you want. Mutual funds can work if it's a good one. You could also consider an index fund, like Vanguard's Institutional Index Fund.

10/30/2006 8:12:41 PM

basically what other people have said....

company matched 401k is good, roth ira is good.

What is the current rate of inflation? bc you want to make sure it's not more than your earning on that savings account.

10/30/2006 8:45:48 PM

Quote :

"^^401ks and roth iras are both text-protected options?"

yes - 401ks contributions come from pre-tax money. So if you make $1000 per paycheck, then you put $100 into your 401k, you're only taxed on $900 per paycheck. And the money that your employer matches, say $50 or $100 is not taxable income either.
But when you start taking disbursements when your 60 years old, you pay some sort of capital gains taxes on any interest earned.

Roth IRA are majorly tax protected - you can save a ton on taxes with them.
They come out of post-tax money, meaning if your paycheck is $1000, then you take $100 for your 401k so you have $900 left. Taxes are taken out of the $900, say at 30%, so you're left with $600 after-tax money per check. You have to use that money for your Roth, so take $100 and put in your Roth.
But then, you keep contributing to your Roth month after month, and you start getting interest and it's compounding - by the time your 60, even if you make a 10,000% profit based on your initial contributions, you don't have to pay capital gains taxes on your earnings!

for example - take a normal annuity investment (or a 401k) that you pay in $50,000 total cash between the ages of 20 and 60. At 60, through compounding interest, that investment has grown to $500,000 - a profit of $450,000. Nice - but you have to pay capital gains taxes, say, 50%, so your take home is only $225,000.

but if you put the same thing into a Roth IRA and end up with a $450,000 profit, it's all yours - no taxes!

Even though you get taxed on a 401k when you withdrawl, it's still a good thing because 1) any money you put into it is basically like a tax deduction right now on your current salary and 2) if your employer matches, that's literally free money.


___________________________________
OK - everything I wrote was in vain, because I was responding to a typo, but nonetheless, it still stands as true.


[Edited on October 30, 2006 at 9:13 PM. Reason : .]

10/30/2006 9:11:56 PM

Quote :

"So if you make $1000 per paycheck, then you put $100 into your 401k, you're only taxed on $900 per paycheck."

Incorrect. You only pay Fed and State taxes on the $900, but you still must pay FICA tax on the whole $1000.

10/30/2006 9:50:41 PM

if you are able to max out your 401k and a roth, i commend your saving capabilities.

nearly 20k a year is tough to do.

untill i get to that point, im not worried about other options.

10/31/2006 6:57:26 AM

Quote :

"capital gains taxes, say, 50%, so your take home is only $225,000"

What in the name of God did you just say?

First, you're taxed at ordinary income from a 401k, not at Capital Gains Rates unless you own the stock of the company you work for and you use NUA to pull it out. Secondly, capital gains tax rates are 15% (if long term) and ordinary income rates (if short-term). You can't be taxed at 50% on any distribution because that's higher than the maximum income tax bracket (even including a 10% early distribution penalty).

___

Also, I like index funds, but they aren't necessarily the most tax-efficient places to be investing. Sure, they have low turnover, which keeps taxes low, but you have no say about the timing of their sales. Go with a Davis Fund instead.

[Edited on October 31, 2006 at 7:20 AM. Reason : .]

10/31/2006 7:19:31 AM

^ the 50% figure was just a nice round number to make the example easier - not an actual tax figure.

and I misspoke about it being taxed as capital gains - you're right. the gains are taxed as normal income.
and david# is right about the pre-tax money too - FICA/SS is still taken out after 401k contributions

10/31/2006 7:45:49 AM

wow, so many good responses...thanks a TON guys. I"m really starting to get my financial future in line (as long as I have a job)

10/31/2006 9:21:37 AM

Are you still working that job in FL or are you back in NC?

10/31/2006 9:41:40 AM

I think you would be best suited speaking with a financial planner.

As much as some of us may know about investing, we don't know about your specific situation, and you want to tailor your investing to your own lifestyle, income, plans, etc.

We may talk a lot about our best practices for specific things, but for a broad based investing plan, no one here is going to be able to give you the best advice. Find a good fee based financial planner and fork up the $500 or so. It's worth it. I have yet to do this myself but I probably will soon. Many of my co-workers use Team Wealth Investments and swear by them. I will probably go with them as well, but don't have any actual experience to speak of yet.

10/31/2006 9:58:58 AM

^thank you, i'll look into that

^^i'm back in Raleigh, working for SlickEdit

10/31/2006 10:00:12 AM

I use UBS for my roth IRA. It is worth it just for all the free advice my advisor gives me for my 401K.

Slickedit, cool. Are they based here?

[Edited on October 31, 2006 at 10:57 AM. Reason : ]

10/31/2006 10:57:23 AM

Oh my fucking god, get a financial advisor, don't consult TWW for investment advice. Seriously, of all the things that people take seriously, it is beyond me how they they're cavalier about their financial future.

10/31/2006 1:10:51 PM

I think bg does this for a living.

10/31/2006 1:24:19 PM

I do, but I'm not licensed in NC. I will, however, give you as much free advice as I can so long as you don't take it as binding.

10/31/2006 1:59:21 PM

I'll plan it all for you for 8% commission.


Note: Past results do not guarantee future performance.

10/31/2006 6:38:40 PM

i think i'm just going to keep maxing out the 401k and put whatever else i can into a Roth IRA and i'll keep making 5% in my citibank e-savings account. Thanks for all your advice!

@david# - yes, SlickEdit it based out of Raleigh and is a really cool company!

11/1/2006 10:24:30 AM

You doing dev work?

11/1/2006 10:25:28 AM

not at SlickEdit (i got tired of dev at my job with the Navy) so i'm doing tech support. i still have to talk to developers all day everyday so it's pretty much the same thing.

11/1/2006 11:02:45 AM