Question on finances, 401k stocks or whatever

[FishNHard 145]

Ok long story short, Ive been with this electrical company for 8 years I make a decent hourly rate but that's it . No 401k no profit sharing nothing , At 46 I either need to find a job that offers something which there are not that many anymore or need to find out what I can do . im not expecting to be filthy rich at 60 but I need to have something other then social security , I know nothing about finances like that and im sure theres a lot of folks on here that are in the same boat, So I was wondering if anyone on here that has a good understanding of those things maybe can shed some light on where a person in this position should begin .Thanks John

[Vlad G 345]

You should probably speak to a financial advisor or someone in your family that knows about these things. There are way to many variables, personal situations, personal goals, etc, that taking generic advise from the internet might be a bad idea. 

 

I would start by educating yourself on the differences between 401k's and IRA, and between the Roth and traditional versions of the two. 

 

Maybe spend some time here: 

 

http://www.investopedia.com/investing/investing-basics/

http://www.investopedia.com/dictionary/

[johnp 45]

If you are interested in putting together a stock portfolio, check out Vanguard. They have some of the cheapest rates available for managed portfolios.

[Kingsoverqueens 10]

If your employer does not offer a retirement plan than you need to establish one on your own.

 

Start researching IRA's and come to an understanding of the difference between a traditional IRA that allows you to save money pre-tax and Roth IRA that allows you to save money post-tax.  Each has its pros and cons.

 

For your first step focus on the vehicle (Traditional v. Roth IRA) and once you have a solid understanding of which might work best for you then and only then should you start considering the actual investments to hold inside the vehicle.

[Brisco 130]

Send a PM to Maksim (the owner of the site)

 

I have sat down with him as a self employed contractor.

 

He had some great ideas, was easy to work with.

[CMJeepster 2,780]

Send a PM to Maksim (the owner of the site)

 

I have sat down with him as a self employed contractor.

 

He had some great ideas, was easy to work with.

I believe that Wolfie works with / for him too.

[T Bill 649]

At your age you have a lot of catching up to do.  I concur with the others and suggest you see out a financial consultant on this.  DO NOT RELY ON YOU EMPLOYER. No matter what. Do what you feel is best for you, that is all you can do.  Will it work? Hope so, but nothing is cast in stone.  The way this world operates today, I would trust nothing.  Look at GM, and other companies, tossed their retirees to the curb. I feel government is next, as this spending is unsustainable.  Retirees will or are the largest voting block in the US, and I'm not sure even that will stop our government from changing the game midstream. 

[njpilot 671]

At your age you have a lot of catching up to do.  I concur with the others and suggest you see out a financial consultant on this.  DO NOT RELY ON YOU EMPLOYER. No matter what. Do what you feel is best for you, that is all you can do.  Will it work? Hope so, but nothing is cast in stone.  The way this world operates today, I would trust nothing.  Look at GM, and other companies, tossed their retirees to the curb. I feel government is next, as this spending is unsustainable.  Retirees will or are the largest voting block in the US, and I'm not sure even that will stop our government from changing the game midstream. 

Well, as you said, many, many major corporations have frozen their pension plans for people under a certain age. My last company did. I'll collect a couple hundred dollars a month when I retire.

 

The government needs to as well. We are the ones paying for it and not only can't we afford it, most of us don't get it.

[Malsua 1,422]

As has been said, you really have a lot of catching up to do.

 

You really need to make it as painful as you can tolerate to catch up.  In your position, I would get an IRA started and get much of it into a targeted retirement fund.  Those become more conservative as you near retirement.  Some of your money needs to end up in the riskiest thing you can get into.  It's too bad you didn't get started in 2009...you'd be well on your way but you have to do what you have to do.

 

I think the max contribution to an IRA in 2015 is $5500.  You need to hit that number.   You can use a traditional or Roth IRA.  A Roth is an after tax IRA but the money is liquid.  You can pull it without penalty, whereas a traditional IRA is locked in there and you can only make hardship withdraws until you're 59.5 Years old.

 

I'm not exactly sure what the government's "MYRA" plan is, but I think it's just treasuries which means you're not going to keep up with inflation so stick with the tradition or Roth IRA.

 

There are other things you can do, but at least get started right away with your IRA.

[gleninjersey 2,141]

1st and fore most you need to IMMEDIATELY begin to take some action NOW. NOT tomorrow, or this weekend. Stop making excuses. Open a Roth IRA and put $100 in it NOW. Put it into a money market account. The almost zero percentage you make there won't be much better or worse than sitting in your wallet. But at least you made a commitment.

 

After you open the account start reading some books that will explain the basics. Go to the library. The books are free but the information is priceless. Read, "The Richest Man In Babylon". Good book, very general ideas with no jargon. Then read one of the Idiots/Dummy's Guide To Investing. It will help you learn the difference about basic investment vehicles and you'll learn some of the jargon.

 

All of the above should take you a few days. You can now start making your money work for you. If you still feel overwhelmed or think you need help find a Registered Investment Advisor (RIA) who will align their goals (making themselves money) with your goals (having YOUR money make YOU money). They should charge you a small advisory fee based on you accounts growth or on your portfolios worth. You make money, they make money. No commisions, no upfront or deferred fees on mutual funds.

 

Good luck, get that account open & start taking control of your financial future.

[Tack Tickle 0]

Roth IRA'S can incur a 10% IRS penalty as well as income tax under the age of 59 1/2.

 

$5,500 is the maximum for 2015 under 49 years of age.

 

You definitely want to start now. The most important thing before investing any money is paying off any debts that are accruing interest. There is no sense in making 1% to 7% when you are paying 8% to 16.99%.

 

As has been said, you really have a lot of catching up to do.

 

You really need to make it as painful as you can tolerate to catch up.  In your position, I would get an IRA started and get much of it into a targeted retirement fund.  Those become more conservative as you near retirement.  Some of your money needs to end up in the riskiest thing you can get into.  It's too bad you didn't get started in 2009...you'd be well on your way but you have to do what you have to do.

 

I think the max contribution to an IRA in 2015 is $5500.  You need to hit that number.   You can use a traditional or Roth IRA.  A Roth is an after tax IRA but the money is liquid.  You can pull it without penalty, whereas a traditional IRA is locked in there and you can only make hardship withdraws until you're 59.5 Years old.

 

I'm not exactly sure what the government's "MYRA" plan is, but I think it's just treasuries which means you're not going to keep up with inflation so stick with the tradition or Roth IRA.

 

There are other things you can do, but at least get started right away with your IRA.

[FishNHard 145]

Thanks guys for your help .  I will get on that tomorrow about opening a roth ira

[Howard 538]

As others have said you are late to the game, and need to start saving quickly; but don't jump tomorrow and make a mistake.  While a ROTH is good in that you pay no taxes later, it sounds like unless you hit it big you are not going to be in a big tax bracket later, so it might be better to take the tax deduction on the contributions now while you are working and then pay the tax at a lower rate when you retire.  You have to do the math.  I would suggest you work backwards.  Figure out how much you will get from social security and then figure out what you will need to live the way you want to.  The difference is the income your funds will have to generate each year to provide you with that income.  Typical rule of thumb says once you retire you should be able to take that income plus 3-4% of the principal each year, but YMMV.  Find someone you can trust that knows some things and have a sit down as soon as practical.  You have waited this long so a few weeks should not kill you.  You can still get a deduction if you decide on a regular IRA as long as it is done before your tax return is due in 2015.  Good luck

[Vlad G 345]

Howard, I think ROTH makes sense, because there is no way we can now what the taxes will be in 20 years. We can't assume they will be what they are today.

[locochinoloco 0]

There is a new website called, LearnVest.com .... maybe give that a shot, its free to sign up and just plug numbers to see where you stand right now and there are a lot of resources on that site and everywhere else.

 

I'm sort of a investment/number nut, so if you want a spreadsheet that takes current age, retirement age, investments up to now, expected annual return, annual payment/distribution, # of payments and all this indexed to inflation what you will have in today's dollars in the future just shoot me a PM.  

 

I'm also a fan of ROTH as well for the same reason Vlad stated, we don't know what the taxes will be in 20 years.

[Newtonian 453]

IMO the stock market is over-valued. 

 

Be wary of financial advisers. They're eternal optimists. There are times, as you know, when the market falls. I have several friends who are financial advisers. I've never heard a single one say "the best place to be right now is in cash."

 

At this stage of your life job security is more important than a 401k. Even if you had one you'd still have to contribute to it right? So put that money aside anyway, in something ultra-safe, and hold on until you retire.

 

You have 20 years+ if you're lucky enough to hold a job until then. 

 

The key to financial security for 95% of us is working hard and saving. Hint: Spending $5,000 on Christmas presents is not the ticket to prosperity.

[Vlad G 345]

At any one time the stock market is overvalued or undervalued. Right this second is may be stupid, but that doesn't mean you can't save money. Bonds, treasuries, money markets, are all options to put some money aside. Putting it aside and giving you a chance to invest it differently lately beats putting it in the bank and using it one day cause you wanted a shinny.

[Malsua 1,422]

Roth IRA'S can incur a 10% IRS penalty as well as income tax under the age of 59 1/2.

 

$5,500 is the maximum for 2015 under 49 years of age.

 

You definitely want to start now. The most important thing before investing any money is paying off any debts that are accruing interest. There is no sense in making 1% to 7% when you are paying 8% to 16.99%.

 

 

Yes, a ROTH can incur penalties, however if you REALLY need it, there is no penalty.   It's as liquid as you can get in an IRA.

 

 

 

Age 59 and under.

You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. However, you may have to pay taxes and penalties on earnings in your Roth IRA.

Withdrawals from a Roth IRA you've had less than five years.

If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) in the following situations:

• You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
• You use the withdrawal to pay for qualified education expenses.
• You're at least age 59½.
• You become disabled or pass away.
• You use the withdrawal to pay for unreimbursed medical expenses or health insurance if you’re unemployed.
• The distribution is made in substantially equal periodic payments.¹

Withdrawals from a Roth IRA you've had more than five years.

If you’re under age 59½ and your Roth IRA has been open five years or more,¹ your earnings will not be subject to taxes if you meet one of the following conditions:

• You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
• You use the withdrawal to pay for qualified education expenses.
• You're at least age 59½.
• You become disabled or pass away.
• You use the withdrawal to pay for unreimbursed medical expenses or health insurance if you’re unemployed.
• The distribution is made in substantially equal periodic payments.¹

Age 59½ to 70.

Withdrawals from a Roth IRA you've had less than five years.

If you haven’t met the five-year holding requirement, your earnings will be subject to taxes but not penalties.

Withdrawals from a Roth IRA you've had more than five years.

If you’ve met the five-year holding requirement, you can withdraw money from a Roth IRA with no taxes or penalties.

[gleninjersey 2,141]

Thanks guys for your help . I will get on that tomorrow about opening a roth ira

Did you open it yet? Think about finances like guns. At one point you knew pretty much zilch. Probably before purchasing your first firearm you read a little bit about differnet types of guns (revolvers, semi-auto pistols, rifles, shotguns, etc). You read about safety, different calibers, etc. You started with something simple to understand, operate and maintain. You practiced with it to point you felt proficient. Maybe you read about or tried different guns via renting or trying someones at the range before making the next step to see what you would like or not like next.

 

Maybe at some point you thought about an AR but were intimidated by all the choices. You read more, listened to people and decided to try to build your own lower. At first it sounded impossible! Building a rifle!? What do I know about that!? But then after watching a few Youtube videos you convinced yourself it isn't brain surgery. Well, you needed to get a stripped lower to set the ship sailing. You can read & watch videos all day but until you take action you aren't any closer to starting your AR build.

 

Investing is the same thing. The first thing you need to do is START. Opening an account is your stripped lower. It sets you in motion for the next step. You don't have a rifle yet or an investment porfolio build you are now ready to do more.

 

One idea I like to suggest to new investors is "How would YOU like to be the bank!" Take money at low rates and lend out at higher rates. Their are investment vehicles that allow you to do that. I've used one (ticker PPR) that takes your money, pools it with others and loans it out to businesses. They keep a small percentage and you get the rest. There are also various mutual funds that do the same thing. They are generally called loan participation funds.

 

One thing I like about them is you aren't locked into a fixed rate. The fund is continually making loans. If rates go up (bad if you own a fixed rate bond and need to sell it) then new loans are made at higher rates. Yes there is risk (rates may go down, borrower may default/not pay back loan) but your risk is spread out.

 

Could be a good place to start. Many think rates are going up in the near future.

 

Again, the first thing to do is start. I would look at different low fee brokers (Charles Schwab, E-Trade, etc) that allow you access to a wide range of investment vehicles. They have low fees and low starting requirements.

 

Get things in motion. Action beats reaction. You can't catch fish without your line in the water.....be shooting, reloading or moving BUT NEVER STANDING STILL!

[Joe P. 4]

As Vlad said.

Get an advisor as everyone has different needs.

Contribute the allowable maximum to whichever instrument you choose

Best of luck

[1LtCAP 4,264]

at the risk of pooping on this thread, i have a (possibly) stupid question.

 

 

 i seem to recall reading last year, that this current administration was looking VERY hard at peoples ira's and 401k's. as in trying to find a way to "borrow" them to use the money to pay off the national debt. i also read that it's not the first time they thought of that.

 

 so my questions.......is there truth to that? secondly..........what protections are there for us against that? i'm pretty much in the same boat as the op........'cept a couple years older.........

 

 also....as for the "get an advisor" suggestions..........what incentive do they have to do good for US? they get paid the same either way, don't they?

[Vlad G 345]

I think that is always a possibility, but so is gun confiscation, gold confiscation, bank account confiscation, etc.

 

Just because someone might steal your savings one day, that doesn't mean you do save some money first.

 

Also, the national debt is never getting payed off. Now now, not next decade, never. Eventually it will be bought out, inflated, canceled, but not payed off.

[1LtCAP 4,264]

gold confisication happened i believe once. don't think that bank accounts ever were. re the national debt, i think the same thing. if it were going to, it could be paid off fairly easily by them tightening their own dam belts.........

 

 my concern with the possibility though, is that for you guys that started young.....you're set......and suddenly you got nothing 'cause uncle sam decided he deserved your money more. those of us that may start late........we'll hurt ourselves now, to be ok in the future. it would SUCK to do that, then suddenly have nothing.........

[njpilot 671]

 

 also....as for the "get an advisor" suggestions..........what incentive do they have to do good for US? they get paid the same either way, don't they?

It depends on the adviser. As was posted above, some make a commission on every trade, which gives them incentive to continuously move your money around. Not a bad thing to move money when it makes sense, but not just so the adviser can make money.

 

Many make a fixed percentage. The more money in your account, ie you're making money, the more they make.

The less in your account, ie you are losing money, the less they make as the account is worth less.

[Howard 538]

Howard, I think ROTH makes sense, because there is no way we can now what the taxes will be in 20 years. We can't assume they will be what they are today.

That is one read, but there is another.  Since you are right we can never know what they will do with the laws they could also change them so that the ROTH becomes taxable in the future.  You just never know, that is why it is generally a bad idea to make investment decisions based on what future tax policy will be.  Who ever thought you would be paying a medicare tax on unearned income?

 

My point was that based on the OP's situation as I understand it his tax bracket will probably be lower in the future than it is today so it might be more advantageous to pay the tax later at the lower rate while claiming the deduction today at the higher tax rate.  There is no one right answer to this and everyone's situation is different.  That is why it is generally not a good idea to get your financial advice from Internet "experts" that don't fully know your unique situations.

 

BTW - I am not a fan of fixed income or "bond-like" investments (like PPR) for a long-term investment.  With those investments you have some security but are only earning income and really have little or any chance to get capital appreciation.  Over the long haul equities will almost always out perform fixed income.  Further, many believe they need fixed income only when they retire and fail to realize that when one retires at 65 they probably have at least another 20 years (assuming good health) where some of their money needs to grow due to future inflation.  Thus to be all in fixed income is a mistake.  Attached is a chart of PPR performance versus the S&P500 over time.

[gleninjersey 2,141]

at the risk of pooping on this thread, i have a (possibly) stupid question.

 

 

i seem to recall reading last year, that this current administration was looking VERY hard at peoples ira's and 401k's. as in trying to find a way to "borrow" them to use the money to pay off the national debt. i also read that it's not the first time they thought of that.

 

so my questions.......is there truth to that? secondly..........what protections are there for us against that? i'm pretty much in the same boat as the op........'cept a couple years older.........

 

also....as for the "get an advisor" suggestions..........what incentive do they have to do good for US? they get paid the same either way, don't they?

I don't think they were looking at seizing IRAs, 401Ks, etc. They may have been looking at doing away with the tax beneifts of a Traditional IRA much like they've floated the idea of doing away with the tax deduction on mortgage interest.

 

There is always the possibility that the government could change the rules. It's also possible a plane may crash into your house or you may win the lottery.

 

Rather than planning on the remote and endless "what if" scenarios it is better to plan as if tomorrow, next week, next year, next 5 years, etc, will be the same as the prior day, week, 5 years, etc. You need to be prepared for the mundane as well as taking slight precautions for the extraordinary. Actually you should be MORE prepared for the mundane!

[Malsua 1,422]

I don't think they were looking at seizing IRAs, 401Ks, etc.

 

 

 

The were indeed looking at taking all of the 401k money and folding it into GRA accounts.  Teresa Ghilarducci did exactly that.

 

 

Ghilarducci, Oct. 7: I propose … that the Congress allow workers to swap out their 401k assets, perhaps at August levels, for a Guaranteed Retirement Account. Just a one-time swap, trading your 401(k) for a Guaranteed Retirement Account that will be composed of the equivalent of government bonds that pay a 3 percent real return.

 

The moment the government has that money on their balance sheet, they would immediately spend the windfall and write a bunch of IOUs and 30 years later, there would be another crisis.

[gleninjersey 2,141]

That is one read, but there is another. Since you are right we can never know what they will do with the laws they could also change them so that the ROTH becomes taxable in the future. You just never know, that is why it is generally a bad idea to make investment decisions based on what future tax policy will be. Who ever thought you would be paying a medicare tax on unearned income?

 

My point was that based on the OP's situation as I understand it his tax bracket will probably be lower in the future than it is today so it might be more advantageous to pay the tax later at the lower rate while claiming the deduction today at the higher tax rate. There is no one right answer to this and everyone's situation is different. That is why it is generally not a good idea to get your financial advice from Internet "experts" that don't fully know your unique situations.

 

BTW - I am not a fan of fixed income or "bond-like" investments (like PPR) for a long-term investment. With those investments you have some security but are only earning income and really have little or any chance to get capital appreciation. Over the long haul equities will almost always out perform fixed income. Further, many believe they need fixed income only when they retire and fail to realize that when one retires at 65 they probably have at least another 20 years (assuming good health) where some of their money needs to grow due to future inflation. Thus to be all in fixed income is a mistake. Attached is a chart of PPR performance versus the S&P500 over time.

The PPR / Loan Participation Fund idea is just so the OP sees the benefits of doing something NOW. I wouldn't suggest it as the only investment to build a retiremnt on. That would be crazy. It is a way to tip one's toe in the water to get started NOW. And then educate themself to make more decision on other investments as they build a diversified portfolio.

 

I whole heartedly agree that equities are the way to go for indivuals who have a long time horizon. While one may be starting late in the game you have to take into account the fact that you'll prob live into your mid 70s to 80s or later if your lucky. So even if you're in your 40s or 50s you still have quite some time to have your money working for you!

 

I don't think anyone suggested that the OP not seek guidance from a professional adviso or claim to be an expert themselves. He came to a place he felt comfortable sharing his concerns looking for some input and probably a nudge in the right direction.

[gleninjersey 2,141]

The were indeed looking at taking all of the 401k money and folding it into GRA accounts. Teresa Ghilarducci did exactly that.

 

 

The moment the government has that money on their balance sheet, they would immediately spend the windfall and write a bunch of IOUs and 30 years later, there would be another crisis.

Sorry, but I don't see the words "seize" or "force" there any where. Lets stay on the topic that the OP started.

 

Mabe you were thinking of this:

 

http://www.factcheck.org/2012/12/no-government-401k-takeover/

[Howard 538]

The PPR / Loan Participation Fund idea is just so the OP sees the benefits of doing something NOW. I wouldn't suggest it as the only investment to build a retiremnt on. That would be crazy. It is a way to tip one's toe in the water to get started NOW. And then educate themself to make more decision on other investments as they build a diversified portfolio.

 

I whole heartedly agree that equities are the way to go for indivuals who have a long time horizon. While one may be starting late in the game you have to take into account the fact that you'll prob live into your mid 70s to 80s or later if your lucky. So even if you're in your 40s or 50s you still have quite some time to have your money working for you!

 

I don't think anyone suggested that the OP not seek guidance from a professional adviso or claim to be an expert themselves. He came to a place he felt comfortable sharing his concerns looking for some input and probably a nudge in the right direction.

All true Glen.  The points I was trying to make are that too many people invest in "safe" things which don't offer growth that you need for the long term.  Second, if you are investing in major companies on a regular monthly type basis you should not worry if the market goes down.  Actually when the market goes down you are ahead of the game as your fixed dollar investment buys more shares.  You should not care what the share price is on a daily or monthly basis, in the long-term good companies will go up.  Thus, if you can buy shares at a lower price be happy.  Last, those that are retired still need to be partial in equities to avoid the ravages of inflation.