If you could go back....

[Chris0nllyn]

What things would you do differently as far as retirement funds are concerned?

Would you you keep a 401K? Roth, Traditional, or both?

What other retirement options are there that are sound, other than burying it in your backyard?

I have a personal meeting coming up with my 401K company, and I'm coming up with some questions to ask.

 

[aps45819]

If I could go back I would buy gold, silver, Microsoft, Apple and Oil stocks

 

[Baja28]

401k

Start earlier and contribute the max.

 

[aps45819]

Harley's IPO

 

[RPMDAD]

If I could go back I would buy gold, silver, Microsoft, Apple and Oil stocks

Same here.

 

[EmptyTimCup]

- after wining some super bowl pools


anything Class III prior to 89 ? was it ?

 

[bcp]

in 1983, I had just got out of the navy, I bought a house. I rented a room to a guy from Arkansas that told me the company his dad worked for that was a public trade was about to expand, it was pretty small at the time and the shares were cheap, but he told me that they had showed growth over the last 10 years.. so I put the money I had from leaving the Navy into it. I know, I was a fool.. Wal-Mart would never amount to anything.
I get some pretty nice dividend checks now.
but if I had been smart and not just trying to show off to a friend, I would have sunk some cash into google.. but I didnt.
So now my dividend checks, while helpful, will not cover my living expense.

 

[ProfMoneyWise]

Looking back:

I would not have invested until I was debt-free and had a fully funded emergency fund of at least 6 months worth of living expenses set-aside in a not to be touched boring savings account.

I would have funded (or started to fund) a car maintenance fund, a car replacement fund, and set-up any "sinking funds" for known expenses not on a monthly schedule.

I would have made sure I was properly insured, and stayed that way.

I would then have read Proverbs (the best money guide out there) and followed this advice in terms of "the borrower is slave to the lender" and "in the multitude of counsel there is safety."

Meaning I would have sought out cousel in all things money and made sure what I was buying I fully understood and could re-explain it to a 7th grader in language he/she and I could understand.

Then I would have read another good investing guide, "The Tortoise and the Hare"

Then I would have made sure I took advantage of any tax-deferred retirement investing available to me (401K, IRAs) and invested the rest in good growth stock mutual funds and if left to my own selection strategy I would have invested in funds that had track records of 10 years of solid growth that matched the long-term track record of the market since it's inception (10 - 12%).

A good asset allocation for money I invest (money I don't need in the next 5 years) would be:

25% - Small Cap
25% - Mid Cap
25% - Large Cap
25% - International

Looking back I would realize that as John Lennon said, "life is what happens when you are making plans" and I would have realized the USMC "Improvise, Adapt, Overcome" mantra would always have to be at the ready. I would realize that "slow and steady" does indeed win the race and not to take advice from broke people. I would realize that risk encouraged by others is usually for their own profit or worse yet . . . entertainment.

Yes, looking back I would have followed my own advice. In fact looking forward I do follow my own advice and if it comes across as unsophisticated or simple I applaud myself and pray I keep it that way.

Investing while debt-free allows for singles and doubles to equal the homeruns many must have to make any noticeable progress.

 

[czygvtwkr]

Looking back:

I would not have invested until I was debt-free and had a fully funded emergency fund of at least 6 months worth of living expenses set-aside in a not to be touched boring savings account.

I would have funded (or started to fund) a car maintenance fund, a car replacement fund, and set-up any "sinking funds" for known expenses not on a monthly schedule.

I would have made sure I was properly insured, and stayed that way.

I would then have read Proverbs (the best money guide out there) and followed this advice in terms of "the borrower is slave to the lender" and "in the multitude of counsel there is safety."

Meaning I would have sought out cousel in all things money and made sure what I was buying I fully understood and could re-explain it to a 7th grader in language he/she and I could understand.

Then I would have read another good investing guide, "The Tortoise and the Hare"

Then I would have made sure I took advantage of any tax-deferred retirement investing available to me (401K, IRAs) and invested the rest in good growth stock mutual funds and if left to my own selection strategy I would have invested in funds that had track records of 10 years of solid growth that matched the long-term track record of the market since it's inception (10 - 12%).

A good asset allocation for money I invest (money I don't need in the next 5 years) would be:

25% - Small Cap
25% - Mid Cap
25% - Large Cap
25% - International

Looking back I would realize that as John Lennon said, "life is what happens when you are making plans" and I would have realized the USMC "Improvise, Adapt, Overcome" mantra would always have to be at the ready. I would realize that "slow and steady" does indeed win the race and not to take advice from broke people. I would realize that risk encouraged by others is usually for their own profit or worse yet . . . entertainment.

Yes, looking back I would have followed my own advice. In fact looking forward I do follow my own advice and if it comes across as unsophisticated or simple I applaud myself and pray I keep it that way.

Investing while debt-free allows for singles and doubles to equal the homeruns many must have to make any noticeable progress.

Prof, I have read you posts through the years and you seem to have suffered some sort of financial setback that made you very adverse to debt. This puts emotion into your money decisions, and emotion being injected into financial choices is never a good thing.

If someone chooses to be debt free before investing (which also includes contributing to a 401k) then they are giving away free money in the matching funds.

If you take a reasonable mortgage out by not buying your "dream house" and contribute to your 401k you have a much better shot of coming out ahead of the game when all is said and done.

 

[bcp]

If you take a reasonable mortgage out by not buying your "dream house" and contribute to your 401k you have a much better shot of coming out ahead of the game when all is said and done.

this is a big part of it right here, the mortgage/
We bought a crap house, but it was on property in Davidsonville, When I sell upon retirement, I will most likely bulldoze the house, and sell just the property as an improved lot,, as in Driveway, well, septic and electric already in place.
The property alone would pay of anything owed and leave enough for me to head to Florida or something and buy a retirement house for cash with some left over. At that point, investment and retirement income will be more than enough to live comfortable complete with 25 year old hookers around the ,,, oh wait, everything but the hookers...

 

[ProfMoneyWise]

No real emotions when it comes to debt it's just that I think it is stupid.

I've also seen the power of focus and while the math leads one to beleive investing while in debt makes sense on paper I believe that investing while in debt and before a fully funded emergency fund is unwise.

As for buying a house I believe a reasonable home loan can be obtained. I do believe the follwoing criteria should be met before buying however:

1. Be debt-free

2. Have a fully funded emergency fund.

3. Have at least 20% down to avoid PMI.

4. Take on no more than a 15yr fixed with a total PITI+HOA of no more than 25% of monthly take-home pay.

Use number 4 as a guide. May require more down or less house to meet the limit.

I also believe that if one cannot fathom paying off the the house they live in they are in to much of a house.

I also believe that a home is a place to live and not an investment. If someday a persona makes money on it that is wonderful but it is a place to live first.

We all have our own beliefs and mine bring me Financial Peace.

 

[czygvtwkr]

So did you say to not contribute to your 401k until you have your house paid off?

I have been out in the real world for 12 years, in that time I amassed more than the purchase price of my home in my TSP (401k). In that same time I probably could not have saved enough to buy my house outright with cash.

I also agree with you that a home is not an investment but a place to live, as an investment it sucks.

There is nothing wrong with certian types of debt, one just has to use them wisely.

 

[TPD]

If I could go back, I would never have bought a single new vehicle - they would all be used. That 25% plus savings would have been invested in common stocks.

 

[ProfMoneyWise]

So did you say to not contribute to your 401k until you have your house paid off?

I have been out in the real world for 12 years, in that time I amassed more than the purchase price of my home in my TSP (401k). In that same time I probably could not have saved enough to buy my house outright with cash.

I also agree with you that a home is not an investment but a place to live, as an investment it sucks.

There is nothing wrong with certian types of debt, one just has to use them wisely.

Let me clarify.

Debt Free except the house and a fully funded emergency fund before investing.

Debt is debt in my opinion and debt is not a tool. I see it as necessary to buy a home but it is not to be kept forever.

I subscribe to the BabySteps as taught by Dave Ramsey (Dave Ramsey Homepage - daveramsey.com).

and his philosophy on debt as follows:

The Truth About Debt - daveramsey.com

 

[bulldog]

Debt free is great, but not the end-all-be-all.

You won't convince me that having some debt is bad and will be the ruin of me or anyone else who manages it wisely.

My wife and I have nearly polar opposite approaches to money, but we make it work. We each contribute equal amounts to out "joint" account and that goes to pay our mortgage, utilities, emergency fund and vacation fund. Jointly, the only debt we have is the home.
Beyond the home, my wife does not believe in and has zero debt. She buys what she wants and socks a bunch-o-cash away into investments and savings.
Besides the home, I have one debt which I recently took on to buy my new motorcycle. I bought it because I wanted it, because I can afford it and because I got an interest rate below 1% for the loan.

Beyond the home and bike, I have no debt. Truck is paid off, credit cards are paid in full each month, my personal emergency fund is set, I contribute the max allowed to my thrift savings plan, fully fund an IRA, have money going to an annuity and a long term savings account.

Sure, I could have waited on the bike until I socked away enough in another fund to pay cash for it. I could have taken money out of another account to pay for it, but when my interest rate on the loan is less than what I'm getting back on my money, I'd be losing.

Debt is not always bad.

 

[ProfMoneyWise]

Debt free is great, but not the end-all-be-all.

You won't convince me that having some debt is bad and will be the ruin of me or anyone else who manages it wisely.

My wife and I have nearly polar opposite approaches to money, but we make it work. We each contribute equal amounts to out "joint" account and that goes to pay our mortgage, utilities, emergency fund and vacation fund. Jointly, the only debt we have is the home.
Beyond the home, my wife does not believe in and has zero debt. She buys what she wants and socks a bunch-o-cash away into investments and savings.
Besides the home, I have one debt which I recently took on to buy my new motorcycle. I bought it because I wanted it, because I can afford it and because I got an interest rate below 1% for the loan.

Beyond the home and bike, I have no debt. Truck is paid off, credit cards are paid in full each month, my personal emergency fund is set, I contribute the max allowed to my thrift savings plan, fully fund an IRA, have money going to an annuity and a long term savings account.

Sure, I could have waited on the bike until I socked away enough in another fund to pay cash for it. I could have taken money out of another account to pay for it, but when my interest rate on the loan is less than what I'm getting back on my money, I'd be losing.

Debt is not always bad.

Financial Peace University

Your attendance would be fun and spirited for us both.

I do not profit from this and Vrai ok'ed me mentioning the class as long as I pointed that out. Alice and I volunteer and the $95 cost is for the course material and provides the attendee with a lifetime membership.

Family is defined as Husband and Wife and teen's in the home, individual, or engaged couples who plan to marry in the next year.

We have room at present for the September 12 class start and also plan on running one in early 2013.

 

[bulldog]

Financial Peace University

Your attendance would be fun and spirited for us both.

I do not profit from this and Vrai ok'ed me mentioning the class as long as I pointed that out. Alice and I volunteer and the $95 cost is for the course material and provides the attendee with a lifetime membership.

Family is defined as Husband and Wife and teen's in the home, individual, or engaged couples who plan to marry in the next year.

We have room at present for the September 12 class start and also plan on running one in early 2013.

Thanks, but I have already achieved the objectives of the course. I am at 100% financial peace. The fact that I chose to take out a lone, at a lower interest rate than what my savings money is making, does not a bad decision make. It was a choice, not a necessity. My retirement is funded at over 100%++ and so is my wife's. No worries for us at all. Honestly, disaster could strike us and after shaking off the initial blow, we'd be fine.

Have fun at your seminar.

 

[Tilted]

What things would you do differently as far as retirement funds are concerned?

Would you you keep a 401K? Roth, Traditional, or both?

What other retirement options are there that are sound, other than burying it in your backyard?

I have a personal meeting coming up with my 401K company, and I'm coming up with some questions to ask.

The advice I would give would be this: Do not let anyone talk you into putting money into anything, and don't make any investment on your own, unless you yourself understand what you are investing in and why it is a good investment for you and your situation. If, e.g., you were going to put money into an individual equity - it shouldn't be because someone told you it was a good investment, it shouldn't be because analysts rate it as a buy, it shouldn't be because everyone else is buying it, it shouldn't be because you got a tip from someone. It should be because you've looked at the stock yourself, you've looked at the financials, you've thought about the business' operations and why it may or may not do well. It should be because you have you own thesis about why the investment makes sense. If you can't explain to someone else why a particular investment is a good one, and in particular why it is a good one for your circumstances, then you probably shouldn't make it. Ultimately, investment decisions should be the result of conversations we have with ourselves (and other interested parties, e.g. spouses), not the result of what someone else tells us. Others can help us - they can give us ideas, they can explain concepts, they can help gather information, they can give us tips about what to look at, or even recommend a specific investment. But the final decision should be based on our own thoughts, not on blindly trusting someone else's advice.

Beyond that, I would recommend that - to the extent possible - you pay for the financial guidance and advice that a professional gives you, not for the transactions they lead you into or do for you. The advice is worth something. Pay for it, not for the transactions (beyond what is really necessary). You don't want them to be giving away the thing that is of real value (the advice), and needing to be paid based on convincing you that you should do X, Y, or Z. That's an age-old business model - people give away things that are of value but are not perceived to be, and have to be paid based on things that aren't of as much value. When that happens, it jeopardizes the quality of the thing (e.g. the advice) that we should be paying for, the thing which we really want to be of high quality. Pay for that which has value - in this case, the advice, understanding, and research that a professional can provide you with. That's the business they're in and should be the focus of the services they provide.

 

[Chris0nllyn]

Thanks for all the answers. I met with my 401K advisor, and he says I'm on the right track.

Right now I'm in a moderately agressive 401K, and after talking with him, I immediately went and bumped up my Roth contribution by 1% (I'm going to keep bumping the percentages up during each raise). So far, 6% in traditional, and 4% in Roth. He showed me different plans where the return was a bit more, but I'd be paying a person to make my stock decisions for me, and in turn paying the management fee (which was pretty high). I told him I wasn't comfortable paying someone to try and outsmart the market for the next 35+ years until retirement. He actually agreed, and feels the same way.

He made me think it was best to put all my eggs in one basket (Roth) as I wouldn't be paying the tax on it later, and can pay the "historically low tax rate" now.

I disagreed, and told him, I want to spread it out a bit.

I pressed him about other possible options including cash, and precious metals. Cash, obviously being a savings account of some sort. Unfortunately they don't deal in the precious metal biz.

Luckily, I started saving when I was 22, so I hope I'm a bit ahead of the game.

 

[rmorse]

......
As for buying a house I believe a reasonable home loan can be obtained. I do believe the follwoing criteria should be met before buying however:

1. Be debt-free

2. Have a fully funded emergency fund.

3. Have at least 20% down to avoid PMI.

4. Take on no more than a 15yr fixed with a total PITI+HOA of no more than 25% of monthly take-home pay.

Use number 4 as a guide. May require more down or less house to meet the limit.
.......

I also believe that a home is a place to live and not an investment. If someday a persona makes money on it that is wonderful but it is a place to live first.

.....

Had I done that, I wouldn't have gotten my house. My stance is, you need to figure out what the house is to you. I bought my house as an investment, not as a place to live. I hate my house and I'm looking to move. I have always planned on moving.

But here's the deal....I had zero debt when I bought the house and about $2k cash. I borrowed the downpayment from my older brother, and paid him back when I got my first homebuyers tax credit. But, by not waiting until I met all of your criteria, I was able to buy the house at 23 years old.

I bought an investment, and it's paying off.

I was paying $1,100 in rent each month at my old apartment. I bought a foreclosure, at $140k. My mortgage is less than $1k a month. I am currently renting out one of the rooms for $800 a month. That's with me still living there. If I move, I can rent out the place for ~$1500 a month.

Now let's say I can't get a reliable renter. Fine. I turn to the government and go section 8 on it. I now have a reliable renter, guaranteed to F stuff up. That $$$$ I get, I put in a seperate business account and use to pay the mortgage, as well as repair what the renters explode.




I am now 25, about to turn 26. I believe, had I followed your advice as to when to buy a house, I would be in a worse financial position than I am now.