Retirement Thread

[Thomas More]

Is the consensus here that this is sound advice? I ask because I just started a new job which will match up to 4% which is doable in my budget.

I have some concerns though, as I view 401K as gambling with your retirement savings. However, given the company's matching funds it seems like it'd be foolish to not invest.

I just keep thinking if I lost it all due to a stock market crash I could never forgive myself for not saving for retirement in other ways that may offer less upside, but have less risk.

Thoughts?

IRA contributions are highly advantageous at least up to the point where you max out the matching that's on offer from your employer. That's extra money in your pocket. Every dollar you put in makes an instant 100% gain.

In addition, that money is pre-tax. So, you might put in $400 a month, but your paycheck only goes down by $300 a month post tax, and meanwhile your 401K balance is having $800 a month added including the matching.

You can put more than 4% of your income in and gain additional tax advantages. The maximum contribution goes up even higher for people getting close to retirement age.

You have to pay tax on 401K funds when you take them out during retirement, but the expectation is that you'll be in a lower tax bracket as a retiree than during your earning years, so it makes sense.

Some say there's a risk the rules will change and the advantages will disappear by the time you are old enough to use the funds, but I don't think that risk is too high. It would be too unpopular politically.

Overall, I think maxxing 401K contributions is a good idea for retirement savings.

 

[chance vought]

Is the consensus here that this is sound advice? I ask because I just started a new job which will match up to 4% which is doable in my budget.

I have some concerns though, as I view 401K as gambling with your retirement savings. However, given the company's matching funds it seems like it'd be foolish to not invest.

Yes, do the maximum that they will match...if thats 4% do it.

I just keep thinking if I lost it all due to a stock market crash I could never forgive myself for not saving for retirement in other ways that may offer less upside, but have less risk.

What would offer less risk? (I agree, there are lower risk things...what do you consider those to be for your situation?)

Think about what you are buying when you buy a stock...or a house, or anything. Does it matter if your house goes down in value, or your car, or your business if you own one? The only thing that matters is this: is it providing you the utility and/or income that you bought it for.

Owning a stock is a piece of a business: it should pay you in some way to own it. Owning a stock hoping that the share price goes up forever in value, in the hopes of selling it later to a greater fool for fiat money, is the wrong way to think about stock ownership.

 

[chance vought]

Some say there's a risk the rules will change and the advantages will disappear by the time you are old enough to use the funds, but I don't think that risk is too high. It would be too unpopular politically.

Overall, I think maxxing 401K contributions is a good idea for retirement savings.

If that were to happen, the rule changes will be telegraphed far in advance. Enough time to resign from your job, liquidate the 401k and keep all your money hopefully. If you are good at your job, you might talk to your employer in advance to re-hire you after your "resignation".

The other risk would be an illegal seizure by the government, or possibly a private lawsuit against you. In either case, money in banks, on your property, or in retirement accounts (and your property itself) is at risk. The US currently has some of the strongest private property rights in the world, but anything is possible given time and the inexorable growth of government.

 

[JayR]

I just retired and have a fun story.

My employer 401K was with Vanguard and represents the majority of my entire net worth (I've been maxing out for the match for 23 years). I initiated a direct rollover to my IRA at the end of March. The only rollover/termination option Vanguard offers is for them to cut a check and snail-mail it to my IRA provider. I was quite annoyed that my money would be in cash/out of the market for the 7-10 days Vanguard said it would take for the funds to be moved.

My Vanguard balance changed to $0.00 on April 2, so the out-of-the-market clock started ticking on the very day that Trump's tariff moves started tanking the market. With my money in cash as the check was in USPS's hands, I was no longer annoyed as I watched the market tank historically hard.

The money eventually hit my IRA on April 9, so by pure luck -- and thanks to Vanguard's lame/old school rollover policy -- I was safely parked in cash during a historically bad week for the market.

I can't stand Vanguard (no Bitcoin options), but they sure did me a solid this time!

And retired JayR lived happily ever after, The End.

 

[Laner]

My wife and I are now 20 years away from "official" retirement at 65. Our conversations are more often about the next step in life and what it will look like, as retirement actually seems like such a strange concept to our generation.

The main thing is to be as close to our son as possible in the hopes that he has his own family soon so we can help out with his children. We didn't have help from family in the day to day, and it made our lives so much more difficult, so we want to be able to offer that.

Our home will be paid off in the next five years and unless we upgrade, then that will give us a tidy sum of paper wealth. To rent it out also would give us a nice retirement fund in a cheaper country - but that conflicts with our priority.

Since we have both been in business for ourselves for so long, we don't have pensions or much for retirement savings. This is becoming a more stressful middle age realization.

At the end of the day I really don't know. Living in the city as a retiree is very convenient, but it's also becoming increasingly dangerous and of course way more expensive.

I will be following this to try and get some sort of idea of what this next 20 look like for us from a planning perspective.

 

[bubs]

Is the consensus here that this is sound advice? I ask because I just started a new job which will match up to 4% which is doable in my budget.

I have some concerns though, as I view 401K as gambling with your retirement savings. However, given the company's matching funds it seems like it'd be foolish to not invest.

I just keep thinking if I lost it all due to a stock market crash I could never forgive myself for not saving for retirement in other ways that may offer less upside, but have less risk.

Thoughts?

Absolutely go with 4% and take the 4% max from your company. Higher risk investments while you are young then transition to lower risk investments as you get closer to retirement so if a stock market crash happens within 5 years of your retirement you aren’t losing that much. Before going up to maxing out retirement, make sure you have an emergency cash fund available (I know this is Dave Ramsey stuff), but emergency fund is essential to prevent needing to get a loan or using credit card. Avoid interest payouts to lenders.

 

[jayco]

With all the tech advances, robotics, etc people should work 4 hour days max and retire at 45. But the whole corporate and consumerism scam makes people work, often boring and very harmful to their health jobs, until they drop dead. I had retired at 45 but I'm a downshifter and moving out of the States too, to a place with free healthcare among other things, if I chose to live here I'd have to work until old age. Glad I had lived interesting life to the max doing what I wanted, living out my dreams. People postpone good stuff until retirement but there might be no living until retirement and no chance to do all these things. Or, one might be sick and living miserable life constantly doing chemo and stuff. I will draw reduced social security at 62 if I live until then, if I wait unti 67 pretty sure they will rag pull people of my age by then. Never trusted 401k, I grew up in a different system, where things are very different.

 

[Get2choppaaa]

With all the tech advances, robotics, etc people should work 4 hour days max and retire at 45. But the whole corporate and consumerism scam makes people work, often boring and very harmful to their health jobs, until they drop dead. I had retired at 45 but I'm a downshifter and moving out of the States too, to a place with free healthcare among other things, if I chose to live here I'd have to work until old age. Glad I had lived interesting life to the max doing what I wanted, living out my dreams. People postpone good stuff until retirement but there might be no living until retirement and no chance to do all these things. Or, one might be sick and living miserable life constantly doing chemo and stuff. I will draw reduced social security at 62 if I live until then, if I wait unti 67 pretty sure they will rag pull people of my age by then. Never trusted 401k, I grew up in a different system, where things are very different.

Most people don't develop spending habits to live within their means and invest accordingly.

As far as the 401k. If you look at the returns over time, it's around 12 percent for the last 50 years, and about 8 percent of you adjust for inflation.

I wouldnt put all my eggs in just your 401k but it's the way the majority of folks build a retirement. Or better yet a Roth IRA if you're able to do that. Obviously individual tax situations are a factor here.

Here is a quick discussion video on that.



Ideally you can have 2 or 3 streams of income, at least one of them should be passive.

 

[Douglas Quaid]

401ks and IRAs are great. IRAs generally have more flexibility and better options, and the max yearly contribution for IRAs should be higher. Even a regular non-tax advantaged brokerage account is great just investing in an index fund long-term, and taking advantage of long-term capital gains.

If all someone did for retirement is put the max in an IRA (currently $7000) for 30-40 years, they'd still be doing really well. In theory that should be very doable.

 

[bubs]

401ks and IRAs are great. IRAs generally have more flexibility and better options, and the max yearly contribution for IRAs should be higher. Even a regular non-tax advantaged brokerage account is great just investing in an index fund long-term, and taking advantage of long-term capital gains.

If all someone did for retirement is put the max in an IRA (currently $7000) for 30-40 years, they'd still be doing really well. In theory that should be very doable.

Agree IRAs are great. But most companies and government positions offer a 401-k match, so I think think a person should always maximize your percent contribution to what the employer is willing to match, otherwise your leaving money on the table. If you are disciplined with your spending, have a solid buildup of an emergency /liquid cash fund, then go for the IRA route next. Just my recommendations. Beyond that if you want to get into crypto,gold, real estate etc, go for it if you have the means.

For all the single guys, all of this talk about minimalism, spending within your means etc goes out the window when you have a wife. There are some frugal outliers budget conscience women out there but vast majority are consumers and are hard wired to acquire stuff perpetually so achieving financial goals when married will become exponentially more difficult than all the advice YouTubers will give you.

 

[Australia Sucks]

For all the single guys, all of this talk about minimalism, spending within your means etc goes out the window when you have a wife

Yet another reason to get rich before looking for a wife which is what I have always advocated.

 

[Get2choppaaa]

Agree IRAs are great. But most companies and government positions offer a 401-k match, so I think think a person should always maximize your percent contribution to what the employer is willing to match, otherwise your leaving money on the table. If you are disciplined with your spending, have a solid buildup of an emergency /liquid cash fund, then go for the IRA route next. Just my recommendations. Beyond that if you want to get into crypto,gold, real estate etc, go for it if you have the means.

For all the single guys, all of this talk about minimalism, spending within your means etc goes out the window when you have a wife. There are some frugal outliers budget conscience women out there but vast majority are consumers and are hard wired to acquire stuff perpetually so achieving financial goals when married will become exponentially more difficult than all the advice YouTubers will give you.

Yeah it depends a lot on the woman, if she's working then she may understand money and how that works as well...but generally women are not good with money. I give my wife now an allowance for weekly groceries and basic stuff but anything on a single purchase item level over $100 she wants we have to talk about it.

The best thing people can do on the 401k is put money in and don't touch it. You can also look at Roth conversions for tax benefits. Unless you have tons of debt you need to aggressively attack, you're missing out by not contributing assuming there's a decent match at your company's.

Crypto/Gold/real estate can work. Generally the point is to make sure to not invest in things you don't understand.

For instance, I don't really understand the validity of bitcoin well enough to trust it. I understand at a high level how it works, but I don't have much trust in it.

Vs something like Dividend Kings, I understand that these companies have paid dividends for generations. If I put a small sum in there every year (say $2k) over the next 20 years I'll continue to get dividends and growth. That provides a passive income which, when added to my other investments should carry me well into retirement. Over time that 50 or 100 dollar yearly return on the dividends grows and grows until you're getting a couple thousand back every quarter.

Dividend Calculator: Returns on Reinvested Dividends - NerdWallet

Our dividend calculator can estimate your long-term returns and tax liability on a dividend stock, assuming dividends are reinvested.

www.nerdwallet.com

One thing worth noting....Day trading individual stocks (not what you advocated for but just mentioning it) is a bad idea. Most people don't know what they are doing and lose money.

Also on retirement, you shouldn't have to pay house payment, should be reducing the amount of money spent on cars and be paying cash on big purchases, when you have to make them, which should be seldom.