Retirement -- Where to start?
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  1. #1
    Registered User Preston's Avatar
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    Default Retirement -- Where to start?

    So when our credit card debt is gone and the other debts are gutted beginning Jan 2 of next year I plan to start on a retirement plan and investing... trouble is I don't know where to start and I really don't know who I can even trust to give me good advice.

    I have thought about getting a few books out of the library but I don't even know which books I should look for.

    This is uncharted territory for me -- I don't even know what a 401k is or a roth IRA or anything.

    In other words... I'm clueless.


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    Registered User Greebo's Avatar
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    I have thoughts on this - remind me to post them later or bump this if I forget - since i read the thread it won't show upon new posts unless someone replies after this...

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    Registered User MaryCarney's Avatar
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    The Total Money Makeover by Dave Ramsey will tell you much of what you need to know. Very informative, written so you can understand it. We have dealt with one of his wonderful Endorsed Local Providers and recieved an education in money.

    www.daveramsey.com

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    I would find out first if your employer has a 401K plan. Sometimes your employer will contribute a % of your income to the plan if you contribute a certain % to the plan. That's free money being contributed towards retirement. So, at my husband's work, his employer will match his contribution up to 3% of his income. So he puts in 3% and his employer puts in 3%. The money you contribute is on a pre-tax basis. So, your Federal and State taxes (unless you live in PA) are taken out after your 401K contribution is taken out.

    If you don't have an employer sponsored 401K plan, you can contribute to an IRA (Individual Retirement Arrangement) set up with a bank or investment firm. There is a maximum amount that you can contribute per year and there are two types, Roth and Traditional IRA. Someone else may be able to talk about the differences or you can look it up on the IRS web site.

    Hope that helps!

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    Preston, I retired early, which was possible in part by the investments we made. I don't know your age, but begin as soon as possible to set money aside. The sooner you do, the sooner you retire!

    I echo the advice about the 401k. I had a 403b, which is similar. I put in every dollar that the law allowed, and my employer matched 3%. I also self-directed my account, so I monitored the markets and news daily. I was able to make on-line switches in the investments on a daily basis, based on the news. Most of the time I made decent calls on whether to add to or take away from various accounts; once in a while I made a clunker!! Bottom line: I worked at this job for 23 years and then was able to retire.

    The next thing I did was get a financial advisor to help me manage my "fortune"; it's one of the best steps I ever made. He steered me and my money through this recession.

    If your employer does not offer the 403 or 401, then the IRA is a good choice. Again, sock away every cent you can so that it will work for you overtime.

    Some may disagree with me, but I would NOT invest in annuities. I think you run a better chance with the 401, 403 or IRA.
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    Moderator mauimagic's Avatar
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    Mahalo all - bumping it up for you Greebo!!

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    Registered User Greebo's Avatar
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    Quote Originally Posted by Preston View Post
    So when our credit card debt is gone and the other debts are gutted beginning Jan 2 of next year I plan to start on a retirement plan and investing... trouble is I don't know where to start and I really don't know who I can even trust to give me good advice.
    Dave Ramsey's endorsed local providers have already been mentioned - I second or third or whatever that suggestion.

    I have thought about getting a few books out of the library but I don't even know which books I should look for.
    First off - take a deep breath and do not panic. You do not want to rush into this - and you have plenty of time before you are ready to invest. YOu want to be non-house debt free and have a good EF built up first.

    THEN you want to allocate 15% of your income to retirement planning, minimum.

    Dave recommends the following:
    1) If your employer matches 401k contributions, contribute to that ONLY up to the match. So if employer matches 5%, put 5% in the employer plan.
    2) Next, put as much as you can up to the 15% into a ROTH IRA.
    3) IF you have any % left over, put the rest into the 401k.

    Now if you DON'T have an employer, then the 401k is out - so start with the ROTH and then move onto other IRAs with a reputable brokerage (see the ELP list).

    This is uncharted territory for me -- I don't even know what a 401k is or a roth IRA or anything.
    401k - an employer based program where pre-tax income is put into a retirement account and allowed to grow w/o taxes. Taxes are collected when you withdraw money at retirement - so the risk is that taxes may go up (and they don't ever seem to go down, do they?) and by your retirement, ideally, you should be in a HIGHER bracket anyway ... so you lose more on the take-out.

    Only put money into a 401k FIRST if your employer matches - because that's an instant 100% rate of return on the matched money.

    ROTH IRA - another kind of retirement account (IRA: Individual Retirement Account) - here you put in money upon which taxes have already been paid. You take your tax loss up front. When you retire and withdraw, you pay NO taxes on this money. Since you will ideally be in a higher bracket at retirement, paying your lower bracket taxes now and contributing to the Roth is BETTER than a 401k if the 401k doesn't match.

    Investing: Mutual funds - never single stocks. Single stocks fluctuate wildly. Mutual funds diversify across entire markets of stocks. Generally speaking, retirement investing in growth stock, growth and income stock, income stock and international growth funds are higher yield. They are more volatile, but over the LONG haul, they go up the most.

    Real Estate- another great way to invest LONG TERM - but requires a whole additional area of knowledge. Fortunately, that knowledge is easy to get - there are tons of books out there.

    There's lots more - but that'll get you started.

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    I also wanted to add the The Motley Fool (www.fool.com) does a great job explaining the differences between all of the retirement options out there. Generally speaking, it is usually most advantgeous to use a 401K first up the maximum employer match (if you have one), then a ROTH IRA second. There are tax implications for everything though, and you'll have to check to see what's best for your situation.

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    Registered User Preston's Avatar
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    I set up initial retirement 401k last night just to get myself familiar with the process. The way this one is working is that my employer will match 20% the first year, 40% second, 60% third, 80% fourth, and 100% match fifth. I'm on my second year so I arranged to have 5% of my income taken out toward this plan.

    I'm not out of debt yet but I want to be familiar with this process before I really start plugging away.

    I'll keep this post updated from time to time.

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    Registered User CouponShelle's Avatar
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    Quote Originally Posted by Preston View Post
    I set up initial retirement 401k last night just to get myself familiar with the process. The way this one is working is that my employer will match 20% the first year, 40% second, 60% third, 80% fourth, and 100% match fifth. I'm on my second year so I arranged to have 5% of my income taken out toward this plan.

    I'm not out of debt yet but I want to be familiar with this process before I really start plugging away.

    I'll keep this post updated from time to time.

    I think what you plan means is that you're "vested" 20% the first year, 40% the 2nd year, etc not that they match that much. You might want to dig a bit further to see?

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