Retirement Investing strategeries

[1stTimeCaller]

The place that I work matches up to 5% of my contribution to a 401k. Next year it goes to 6%. I'm currently putting 6% into my 401k. I also put 10% into a dealio where at the end of the year I can buy company stock at 85% of it's value on the NYSE. What should I put my money into if I wanted to put a larger portion of my salary into a retirement fund? Should I put more into my 401k? Open an IRA? Traditional or Roth or both? Annuities? Mason jars?

[Frozen Sooner]

Don't put any money into annuities until you're capping out on 401(k) and IRAs. If you like the return on an annuity for whatever reason, set it up inside an IRA.

Do you itemize your deductions? If you don't, there's really no reason to be in a traditional IRA. In fact, even if you do I still recommend you get into a Roth at your age.

I mean, if you want to be REALLY smart then put 14% of your salary into your 401(k) and max out a Roth every year. You'll be broke, but you'll be able to buy and sell us all when you're 59.5.

[1stTimeCaller]

Don't put any money into annuities until you're capping out on 401(k) and IRAs. If you like the return on an annuity for whatever reason, set it up inside an IRA.

Do you itemize your deductions? If you don't, there's really no reason to be in a traditional IRA. In fact, even if you do I still recommend you get into a Roth at your age.

I mean, if you want to be REALLY smart then put 14% of your salary into your 401(k) and max out a Roth every year. You'll be broke, but you'll be able to buy and sell us all when you're 59.5.

Thanks. This year will be my first year to itemize. I'd read, I think, that you should only put the % that your company matches into your 401k and then if you want to do more use an IRA. I've also read what you just told me. 14's the magic number?

[Frozen Sooner]

14's the max you can put in.

I think the advice you've gotten before is that it's foolish to put money in an IRA if you're not taking full advantage of your company match in your 401(k). I mean, the IRA has a couple of advantages-it's easier to get at the money in an emergency, for one. It's also more portable-you can jump from brokerage to brokerage with it as needed.

However, that 14% above-the-line deduction can be really nice. If you're not going to max out both, then I'd probably suggest maxing the company match, dump money into a Roth, and then if you have money left over up your 401(k) contribution.

[1stTimeCaller]

$14,000 or 14% is the maximum amount to contribute to a 401(k)? You can now see why I have questions, I'm fairly stupid. What's the max on a Roth? Not that it really matters in my case.

[Frozen Sooner]

You know what? I was always under the impression that 14% was the maximum contribution, but I'm wrong. Your employer sets the maximum rate, with the government setting a hard cap of $15,000 for 2006. Not sure what it is for 2007.

Max on the combination of a Roth and Traditional is $4,000 this year and next year (if you want to contribute to a Traditional for 2006, you can still do so right up to tax day.) It'll go up to $5000 in 2008.

[SCOUT]

The max contribution for 2007 is $15,500 unless you are over the age of 50. If you are over the age of 50 you can add a $5,000 per year catch-up allowance.

[sooner_born_1960]

Mike is such a bastard for not addressing your mason jar question. ;)

[1stTimeCaller]

I'm not even sure that's his real name.

[Howzit]

Another max the 401k vote.

5% match is really good.

6% is 1% better.

[Vaevictis]

Always put into your 401k at least as much as your company will match. You're doubling your money right off the bat. What's not to like about that?

Roth IRAs are amazing beasts, especially if you think you're in a lower tax bracket today than you will be in when you make your withdrawls. You pay taxes on your deposit capital, and if you withdraw your money under the right circumstances, you never pay taxes on your growth. That's a great deal.

You mainly want traditional IRAs if you think you're in a higher tax bracket today than you will be in when you make your withdrawls.

[OUinFLA]

The place that I work matches up to 5% of my contribution to a 401k. Next year it goes to 6%. I'm currently putting 6% into my 401k. I also put 10% into a dealio where at the end of the year I can buy company stock at 85% of it's value on the NYSE. What should I put my money into if I wanted to put a larger portion of my salary into a retirement fund? Should I put more into my 401k? Open an IRA? Traditional or Roth or both? Annuities? Mason jars?


Think Enron.

[Okla-homey]

Just buy 100.00 worth of scratch-offs each week. That's the Hillbilly 401(k), plus, it helps the schools!;)

[OUAndy1807]

401K is nice, if your employer offers good investment choices, because you never see the money and it's pretax.

IRA is painful, because you see the money coming out of your bank account every month.

[Vaevictis]

IRA is painful, because you see the money coming out of your bank account every month.

Really? When I make a deposit, I send a check to USAA at the end of the year, it goes into a S&P500 tracker and that's the end of it.

Being that it's going into a Roth IRA, I feel no pain whatsoever -- you can withdraw your principal at any time without penalty. It's there if I have an emergency.

EDIT: Mind you, that may or may not be an advantage, depending on your self-discipline.

[soonerboomer93]

Dammit, add that to the list of the things I forgot to do while I'm in the states. If I roll over my 401k to an IRA does that count against the max limit?

[Frozen Sooner]

No. Rollovers are not contributions.

[OCUDad]

Another max the 401k vote.

5% match is really good.

6% is 1% better.Actually, if you think about it, it's 20% better.

But yes, max the 401k. Get as much into pre-tax investment as you can.

[Hamhock]

$14,000 or 14% is the maximum amount to contribute to a 401(k)? You can now see why I have questions, I'm fairly stupid. What's the max on a Roth? Not that it really matters in my case.


Tell them to put in a roth401k. best of both worlds. a guy like you prolly has enough clout to get it done.

[Dio]

Buy low, sell high.

YWIA

[jkm, the stolen pifwafwi]

my first suggestion to you would be to buy a subscription to money magazine. unless you are rich like nb and then you can hire an advisor.

personally, your better off finding some funds from vanguard or some other low cost brokerage. the commission on an annuity can be over 20%, thus the surrender charge. i also don't understand why you would put a tax deferred annuity into an IRA which is also tax deferred. that's like having your money in a municipal fund inside of your 401k.

normally, the way most people recommend you do it is like this

401k to match
fully fund ira
fully fund 6 months salary in a savings account or money market account
401k to maximum (to lower income)
regular investments

company stock should never ever be more than 10% of your portfolio. i have 33,000 worthless shares of williams communications to back that crap up.

[Frozen Sooner]

i also don't understand why you would put a tax deferred annuity into an IRA which is also tax deferred.

Annuities are funded with after-tax dollars. If you fund a traditional IRA with an annuity, you can fund it with before-tax dollars. If you fund a Roth IRA with an annuity, the earnings grow tax-free instead of tax-deferred.

That being said, it's not something that I'd recommend unless someone was absolutely risk-averse to the point of paranoia.

[critical_phil]

the IRA/annuity thing is something that i used to see a long time ago. in fact, it was something i sold in certain situations.

years ago, it was very difficult for the common person to stick 50 bucks/month into the market. insurance companies made it easy by taking smaller, systematic contributions into variable annuities.

a good VA has only marginally higher expenses than a loaded fund (~50-75 basis points) and doesn't have a 20% commission to the agent/reg rep/broker. at the time, it was a lot more convenient than telling a client to save up $5000 to open a brokerage account.

of course this doesn't make sense in today's world because many companies will take as little as a $25 monthly draft and put it into a fund. that's cheap as chips and something i wish i had access to 15 years ago.