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scrivener
March 6th, 2005, 07:55 AM
What are you doing about your eventual retirement from work? Does your place of employment have some kind of retirement plan? How much of a priority is retirement-savings for you?

I'm pretty much responsible only for myself right now, so without kids or whatever, I put a high priority on my own retirement. I'm a teacher at a private (non-profit) school that contributes 3% of my salary to a 403(b) account with an organization called TIAA-CREF (http://www.tiaa-cref.org). 3% isn't much, but it's free money and it's all mine without a vestment period. I also put an additional $150 a month in this account.

The last school I taught at contributed 5% and matched up to an additional 5%, meaning that if I contributed 5% of my pay to my retirement account (http://www.absbc.org), I'd actually be getting 15%, two-thirds of that free. There was a five-year vestment period, which, thank goodness, I hit just before I switched schools.

I'm still paying for college and therefore my take-home pay isn't very much, so that hundred-fifty I have taken off the top is something I feel. Still, it amounts to thirty-seven bucks a week and I should be able to do without it. Meanwhile, the market has been kind to both my accounts and I find it encouraging.

So, what have you got set up?

pzarquon
March 7th, 2005, 06:35 AM
I had a 401(k) through my previous employer much like the one you mentioned, which was so extraordinarily generous that I knew I'd have been a fool not to participate. When I changed jobs, though, things stalled, and after having forgotten about it completely for a while, I ended up talking to a few money folks and just cashing it out to pay down debt. Being broke in old age sucks, but being in the red sucks more.

I carry life insurance and am looking to add "long-term care" insurance (since the "wait for your kids to strike it rich and buy you a house" plan isn't particularly relaible), but I do want to start saving for retirement again. Sadly, the urge to get out from under the past, and to live in the now, is pretty damn strong.

Albert
March 7th, 2005, 09:20 AM
Well, I didn't do anything about it.

That's one reason I strongly oppose Bush2's scheme to "privatize" Social Security. I never thought I'd live long enough to worry about it, and most young people I now know also don't think they will, and won't do anything about it either.

So, of course, I'm grateful for that Social Security check each month and only wish I could confidently trust Bush2 when he says people over 55 won't be affected by his plans.

808_m3
March 7th, 2005, 02:10 PM
Although my spouse and I have quite a bit of time to go before going into retirement, planning for that day is very important to us.

My current employer provides a somewhat generous package where they match your contribution, up to 4%. For me, I take it as high as we can go, which is currently 15%. We also have a profit sharing program where depending on the companyís performance, an additional amount is deposited into your 401K account. Itís certainly nice to see it grow when the stock market is doing well.

Iíve heard of other companies who give you an automatic percentage even if you contribute a small portion. One company I heard of gives you 8% no matter how much you contribute. By then, it would be a crime to not even contribute anything at all.

U'ilani
March 7th, 2005, 02:26 PM
Having paid off my college debt several years ago, I am now able to contribute 10% of my gross into a retirement savings plan, and my employer (the Federal government) contributes an additional 5%. My plan is to retire at age 56.

Like most gen-Xers, I'm not counting on social security being available for me when I retire.

1stwahine
May 9th, 2010, 04:04 PM
K-den. I dunno where to put my question so I bumping this thread.

Taking out from 401K, good or bad?

Leo Lakio
May 9th, 2010, 04:14 PM
Taking out from 401K, good or bad?Not so simple to answer. Depends on the circumstances - what it's for, how close to retirement you are, what penalties you might face for early removal of funds, etc.

In general, it's not wise to think of a 401(k) as a glorified savings account. Again, depending on many factors, sometimes borrowing against it can be advantageous, though.

If you've got a good chunk in there for retirement, get pro advice - this is not money you want to screw up, especially if it's a primary source for retirement income.

1stwahine
May 9th, 2010, 04:20 PM
Mahalo Leo Lakio. ;)

Auntie Lynn

scrivener
May 9th, 2010, 06:46 PM
I borrowed against one of the accounts I mention above. Then I defaulted. The money I borrowed was then considered a withdrawal from the account, and it was counted as income. Despite some of it being taken out in advance for taxes, the tax hit I took that year for that withdrawal was enormous. ENORMOUS. I know other people who've cashed out their retirement accounts to start businesses that are now paying them much more toward their retirement than they would have had if they'd left the account alone.

So as Leo says, there's no easy answer. If my friends' business had not worked out, they'd be pretty hurt. In their case, since they owned another successful business at the time, they still would have been okay, in all likelihood, but still. You can see how it was a gamble.

1stwahine
May 9th, 2010, 06:55 PM
Scriv,

One option for us is to leave part of it inside and taking
some out. We'll be finding out more tomorrow.

Mahalo

Lynn

Mike_Lowery
May 9th, 2010, 07:57 PM
I too have a 403(b). 6% of my gross gets put into it (managed by Fidelity), and company matches up to 8%.

I also manage my own stock portfolio on sharebuilder.com. I put $200 per paycheck into ETFs, and companies in diverse sectors. I reinvest dividends into whomever paid me.

Whenever I have reimbursement checks from work, I throw that into my savings account. Water cooler bets get thrown into savings as well. :)

matapule
May 10th, 2010, 03:54 AM
Lynn, I want to echo what those have said above. It really depends on your personal situation, so personal you would not want to divulge here on HT. If you do borrow against your retirement account you should have a realistic plan to pay it back as quickly as possible and that withdrawal will be taxed as ordinary income too, so you will have taxes on that income at the end of the year.

In general, it is NOT a good idea to withdraw from your retirement account. My guess, and it is a guess only, is that living a comfortable retirement is going to be more difficult in the future than it is today. Best to sock away as much as you can now (and keep it there) to make things easier in your future retirement.

On another note, I was unaware of this thread. It is interesting to read the musings from 5 years ago and realize how much has changed since then. Although the same general strategies are the same as 5 years ago, it is a completely different ball game today with regards to volatility of the stock market. Had SocSec been privatized back then, beneficiaries would have taken a big hit within the last 3 years. Personally, my 401k went to a 201k. Yes it has rebounded since then but not to its original high. I expect that the worst is not over with regards to the economy, not only in the US but throughout the World. What happens iin Greece or Iceland, DOES affect each one of us in the USA. This world-wide economic situation is something new and it is going to be with us for a long time to come and that is going to require new ways of thinking in planning for retirement. It appears that the mega corporations and super wealthy of the world are making a bold run on the assets of the world community (I'm generalizing). The "middle class" of America is under financial assault at this time. The growth of the middle class after WWII is now starting to wane. I see a future with the wealthy becoming wealthier supported by a growing number of poor people who were once middle class.

We have been discussing with the daughters how they can best plan for their future. I still think that diversification in stocks, bonds, prime real estate, collectibles (not something trendy like bubble gum wrappers but fine art), and rare metals is still the best strategy.

I have some ideas for fixing the US economy that are not entirely in agreement with Obama's program, but that's the subject of a whole 'nother thread.

Nords
May 10th, 2010, 03:58 AM
What are you doing about your eventual retirement from work? Does your place of employment have some kind of retirement plan? How much of a priority is retirement-savings for you?
In three weeks I'll have been retired from the Navy for eight years. We live a beach-bum lifestyle, so my pension pays most of the bills. Consuming our investments will pay the rest of the bills until spouse's retirement starts in 2022, and then the cash flow should turn positive again. We also own a rental property, and landlording got a lot better when spouse's parents decided to move out of it and return to the Mainland.

Our kid starts college in just 13 weeks, and she nailed down an NROTC scholarship that takes care of three-quarters of the expenses. But we'll see how she feels about that in 20-25 weeks.


One option for us is to leave part of it inside and taking some out. We'll be finding out more tomorrow.
As Scrivener says, if the money is just withdrawn from the 401(k) then the tax hits (both federal and state) and penalties will be impressive.

Many 401(k) owners are interested in a shorter-term loan. It's eventually paid back to the 401(k) with interest and so the money's not "lost", but it's also not invested in whatever your 401(k) asset allocation tries to achieve. If your 401(k) has a very good year and is up 15% but you've been borrowing from it and repaying at 6% then you miss out on the other 9% of the market's returns.

The 401(k) withdrawal rules get a bit more flexible at age 55 (if you leave the employer) and again after age 59.5. Federal legislation gives limited options for penalty-free withdrawals between ages 55-59.5 if you leave he employer, and just about anything can be done after age 59.5. But it's never simple.

http://www.investmentnews.com/article/20090426/REG/304269998?template=printart

Another option would be roll a 401(k) over to an IRA and then to start a withdrawal plan of "substantially equal periodic payments" known as 72(t). This is also in the "seek professional advice" category. It's a popular way to tap an IRA before age 59.5, especially with early retirees. But employer rules may also control whether a 401(k) can be rolled over to an IRA while the employee is still with the company. No problem after the employee leaves the company.

There are usually good reasons for taking a 401(k) loan, such as a medical emergency or to avoid mortgage foreclosure, but the problem is that the vast majority of 401(k) loans are inspired by consumer debt. If the behavior that led to the debt doesn't change then the 401(k) loan doesn't solve the long-term problem... it just makes the problem more severe by allowing the owner to dig a deeper hole.

1stwahine
May 10th, 2010, 08:18 AM
Lynn, I want to echo what those have said above. It really depends on your personal situation, so personal you would not want to divulge here on HT. If you do borrow against your retirement account you should have a realistic plan to pay it back as quickly as possible and that withdrawal will be taxed as ordinary income too, so you will have taxes on that income at the end of the year.

I knew I could come to HT and ask. ;)

We've read each post and made a decision
that is best for us at this time.

Mahalo,

Lynn and P.K.