I know it’s the right thing to do, but I was wondering who else out there has had thoughts that they could do better on their own without using the company specific plans. Im currently doing all the right stuff, 2014 will be my first year putting in the max. I’m at a point in my life where financially any raises I get, I don’t need to keep up my lifestyle. If I kept them, uncle Sam would just take it away during tax season anyway. I’ve always been pretty disciplined and I have a good little nest egg built up so far. I turned 35 in April and I want to make sure I’m doing as much as I can to retire comfortably at a realistic 62. I’d love to retire at 55, but that’s just not in the cards for me… Unless the wife wants to downsize, but I don’t see that happening. I made 12% last year and I think that’s pretty darn good, but are there other things I should be looking for? Any long term investments that can bring more than 10% on a regular basis? In years prior, I’ve averaged between 5-10%, but that’s me not being very proactive. Realistically I have 25 years before I really start to take a serious look at retirement.
No kids, just me and the wife. Two paid for cars. One new car payment. Two mortgages, one of which we have good renters that pay 110% of the note monthly including taxes and insurance. I figured if someone else is willing to pay my mortgage while I accrue equity, I’ll let them. That house will be paid off in ten years.
Is it with taking some money and investing in very risky stocks right now? Or is what I have going as good as it gets?
23 if you did 12% last year you did pretty good. Most investments rebounded last year so many of us did well. Good for you on the 401K. Always contribute at least as much as your company matches because that is free money. Obviously anything you contribute above this is pretax which is nice, but remember you will have to pay taxes on it when you pull it back out; therefore. you also need to see about a ROTH IRA as it will be tax free when you go to draw off of it at retirement. If you are getting year end tax returns of any significant amount talk to your tax advisor. Rather than getting a big return each year either adjust your W-4 so you can invest the additional money through out the year or see about transferring some of your 401 K to a ROTH. You will have to pay taxes on the transfer but much better to pay the taxes at today’s rate than when you start drawing off 30 years from now in retirement because I can pretty much guarantee you that the tax rate will continue to rise. Another advantage of the ROTH is you can pick your own families of investments perhaps adding more diversity than your company 401K offers. I used to try and handle all my investments on my own and read as much as possible, Kiplengers and Money Magazine both have good info; but these days my time is limited so I use an advisor through Edward Jones. We meet a couple of times per year and he reviews all my investments and provides advice. I still try to stay on top of as much of it as I can myself, but having him there takes some of the pressure off which is nice. My guy also has helped me determine exactly what I will need at retirement based on my input, he helps me review where I am in the race to retirement. One final thing; I echo what DobuleN said on SS; don’t count it into your equation!
Ricky
I put the amount in my company 401k that the company matches - 6%
I put an additional 9% into Roth IRA’s and get good advice from one of Dave Ramey’s local ELP’s. My guy’s name is Clay Abel, we did a little better than 12% last year in a mix of 4 funds.
I meet with him yearly and we have a mid year call to check progress and decide if we want to adjust any direction or shift % in different funds. We’re working toward full retirement at 59 1/2 drawing the equivalent of my current take home pay with annual inflation increases.
Get a good / qualified guy to help. They are worth every penny.
Hey 23, when I was at Microsoft we used Fidelity. In that account, we had several in the box options (mutual funds and a few index funds). We also had something in Fidelity called “BrokerageLink” which was inside the shell of my 401k (tax benefits), but let’s me buy\sell individual stocks. If you have never done so before, I recommend you go with one of the “index funds” that mimic the S&P as best as possible. That will give you market performance. It’s VERY tough to beat the market year in and year out (that’s the goal), especially if you are well diversified. Can you pick a homerun and beat the market by 400% on year by putting all of your eggs in one basket? Sure, but for every home-run you have, you will have losers as well, so you will want to diversify across many stocks. The more you diversify, the more you mimic an index (i.e. get closer to S&P performance). I have about 38 stocks in my portfolio right now. So, if any one of them goes to zero (and YES, it’s happened several times before), I only lose a small chunk of my portfolio, but I will live.
That being said, I can trade as much as I want and I typically do quite a bit. I get charged $7 every trade, so I take that into account when I buy and sell. So, I would never buy $100 worth of stock at once. If I did that I would pay $7 when I buy it (automatically lost 7%) and then another $7 when I sell it (lost another 7%). Therefore, I rarely buy less than $2500 at a time. That’s only a half a percent roughly lost from charges ($14 is 0.56% of $2500).
Anyway, investing in the stock market is gambling. If anyone tells you anything different they are lying… However, it’s definitely safer than playing texas holdem’. You are essentially placing bets on which companies will continue to grow! You can do research and look at their financials (all available through MSN.com, finance.yahoo.com, etc) and get a feel for if you think they will continue to grow. Remember, it’s not about picking great companies. It’s about getting great compa
PS… The best thing about a 401K is it’s a tax shelter and can lessen your tax liabilities today. Money goes in untaxed. Likely, by the time you retire you will be in a lower tax bracket which means you pay less money on that 401K. Roth IRA’s are great, but you can’t participate in them unless you make less than the salary cap ($112K-$127K) or $178K-$188 if filing jointly.
If you do make less than those thresholds, a ROTH would be the way to go for investing, since it opens up all investment options (mutual funds, index funds, stocks, bonds, etc).
Last but not least… There is a perfect stock for you: RICK. Has the same name and actually looks pretty good on the books!!! DISCLAIMER: I bought this stock in December and I am down 13%. I’m hanging on though!!! I still think that it will go up (good valuation, decent growth, fun to own).
CAGR 5-yr: 13.36% (A bit lower than I would like, but OK)
P\E: 10 (15 is standard for the S&P, so 10 is “cheaper” or a better value).
Market Cap: 100 million (small cap with room to grow!)
Sales : 118 million. (So, if I bought this company for 100 I would have 118 million in sales next year. Not bad)
Income (profit) 9.92M (So, if I paid 100m for this company, I would have my money back in 10 years which is pretty average for the S&P).
Balance Sheet: cash + property MINUS liabilities = 102M… So, theoretically, if I bought the company for 100M (market cap), then I could sell off all of the property and assets the next day and still make 2M in profit. Means, downside is limited if these numbers are accurate.
Performance against S&P over 5 years = Pretty close!!!
Performance against S&P over last 6 months = horrible… (I am betting that it will eventually catch up to the 5 year average of “break even”)
My expectations… I think this will “catch up” to the S&P once more which means that it’s due for a little boost from here (maybe 20%). Over the past 5-6 years, this stock has “spiked” up well above S&P. I’m hoping to catch a spike and then sell when it get’s out of whack again (pricewise).
PS, before you rush out and buy this stock, it’s probably not my best investment idea. I am not expecting anything huge out of it and I have only a very small % of my money in there. I just think it’s a fun one to own and talk about.
If you consistently beat the S&P by a point or two, you are winning the game. I would contribute the max that your company matches into your 401k, then open a stock/investment account and put any extra that you can into that. It is my firm belief that a good financial advisor is worth every penny that they earn. Find someone you trust that has some experience, and listen to them.
13ft Whaler with 25hp Johnson
If you’re lucky enough to be fishing, you’re lucky enough.
Dear Sailfish…Lordy that’s quite a lot of well intentioned advice, but I fear it doesn’t truly address you questions. Investing through a company sponsored 401K(IRS Code) makes sense when the plan is sound, diversified, and inexpensive, and you also get a match from your employer. I don’t assume that your plan meets all of these criteria. There are crappy 401K plans out there…a lot of them. Your plan sponsor should be a brokerage company, and not an insurance company. ie. Fidelity, Vanguard, Schwab all feature “No Load Mutual Funds”, and they are extremely competitive on fees. Insurance companies.ie. Hartford, Prudential, Mass Mutual kill you on expense ratios and sales charges…“Loads”. Any amount you spend in fees deducts from your year over year return and retards your long term compounding. Hiring a financial adviser is not free…Look into Futurebroker.com for help and advice…standard package is free, and they will advise specific to the products within your specific 401K plan. The compounding effect of time mitigates the risk of the market…all investments have risk…stocks(Market Risk), bonds(Interest Rate Risk), cash(Inflation Risk) so you can’t avoid risk, but you can manage it. You have the advantage of youth, so time is on your side, and you can assume more risk on that basis alone…higher risk poses greater reward(stocks vs. bonds vs. cash). That poses the next risk management rule…diversification retards risk. A mixture of stocks+bonds+cash will be less risky over time than a concentration in just one asset class, and a diversification within each asset class provides even more risk management. Your own personal risk tolerance is predicated on how you traditionally view money and security, and that is based on how you were raised, and your level of financial education. I can’t define your risk for you, and nobody else should either. However, you being only 35 should allow you to invest more heavily in stocks vs. bonds vs. cash than me who is 62, and who doesn’t have enough ti
I find the whole “investing game” (yes, I know, not a game) rather frustrating and confusing. Ask 10 different people what you should do with your money and you get 10 different strategies. I invest most of my investible money in a 401K through the State Deferred Compensation Program. I just checked and since my last statement, it is performing at 17.95% and averaging over 16% for the previous 12 months. I am happy with that but often wonder if there was something else I should be doing with my money. Going to a “Financial Advisor” scares me because I personally know 2 that have filed for bankruptcy. How could I trust someone that can’t manage their own money to tell me what I should do with mine? There are so many out there, how do you know who is good and who isn’t? Sorry 23, not trying to steal your thread.
“Apathy is the Glove into Which Evil Slips It’s Hand”.
Dear DF…“Financial Adviser” is a loose term that can have little meaning, and oft disguises the true qualifications of the advice provider. I would never pay for advice from someone who didn’t have a CFP (Certified Financial Planner), and would prefer that they have a CFA (Certified Financial Analyst)license. There are resources to check the regulatory records of all licensed “registered representatives” for disciplinary actions as well. I spent 18 years in the industry, mostly with Charles Schwab. I’d be happy to steer you in the right direction.
Couple of things, when I said max, i was referring to the most I can put into 401k, which for me is 17,500 annually.
I work for a large defense contractor and do have a company match at 6% and we use Vanguard.
There is a wealth of advice here and I sincerely thank you all for it…but i’m still confused with what I should do. There’s a lot of reading in my near future
Bossdog, I might take you up on that. Send me your contact info?
Boss, I use the term “financial planner” loosely. I know at least one of these guys is a CFP, not sure about CFA. The thought that this guy is telling others what to do with their money is scary. 23, you have a problem I don’t, a fair amount of money to invest. I have 2 kids, one starting college so I put as much as I can away. I invest/save what amounts to approximately 22% of my gross salary. My wife slightly less. It is hard to find the extra money so when you do, it is agonizing trying to do the “right” thing.
“Apathy is the Glove into Which Evil Slips It’s Hand”.
Dear DF…Don’t let anyone “tell” you what to do. Suggestions are the norm. By the way…To clarify my offer…I’m not offering to advise you…just steer you to a reputable professional who is currently in the financial service business…I’m not…retired from it several years ago. A Certified Financial Analyst would be of a caliber to run a mutual fund, a pension fund, an endowment, etc. What I would refer to as a “Heavy Hitter”. A Certified Financial Planner is a retail adviser with meaningful credentials, but by no means a heavy hitter. Stay away from Insurance Agents selling investments…bad conflicts of interest in that combination.
Stick with index funds. Picking stocks are for the birds. You will lose your money. That’s the way it works. Set it and forget it. The market is getting fairly bloated, once it starts to get rocky don’t hesitate to go to all cash.
The market is getting fairly bloated, once it starts to get rocky don’t hesitate to go to all cash.
Meanwhile, timing the market is probably THE most difficult thing to do!!! It’s easy to understand the concept of “buy low sell high”. The trouble is knowing what is low and what is high.
