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Posted by Vernon27 on March 21, 2007, 11:13 am
I am a 40-year-old male with no children and in great health as of my
last physical two weeks ago. For most of my adult working life I have
had steady employment (only been laid off once but got a better job
about a month after my lay off); however, I have no investment (meager
savings and checking accounts) other than my current employer's
401(k) plan. Since I am fast approaching retirement age I will like to
know how and where do I start to invest so that I can have a
comfortable retirement.
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Posted by PeterL on March 21, 2007, 12:24 pm
> I am a 40-year-old male with no children and in great health as of my
> last physical two weeks ago. For most of my adult working life I have
> had steady employment (only been laid off once but got a better job
> about a month after my lay off); however, I have no investment (meager
> savings and checking accounts) other than my current employer's
> 401(k) plan. Since I am fast approaching retirement age I will like to
> know how and where do I start to invest so that I can have a
> comfortable retirement.
What's in your 401K?
To get started max out the 401K. Start getting educated by reading a
couple of personal financial planning books and investment books.
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Posted by on March 21, 2007, 12:24 pm
> however, I have no investment (meager
> savings and checking accounts) other than my current employer's
> 401(k) plan.
I have the same problem with cleaning my bathroom. I'm not going to
do it today, but I'll definitely do it next week. Of course, next
week I say the same thing. I at least get points for consistency.
You should set up automatic deductions. Yes, this lowers your
standard of living now, so that you will have more later. Keeping the
same standard of living by blowing up your credit cards gets you
nowhere.
Consider the tax consequences and fees associated with each type of
account. IRAs are taxable as ordinary income. So you don't get the
benefit of long term capital gains rate. So this is fine if you were
going to hold stocks for less than a year anyway. Matching funds make
IRAs quite attractive. Roth IRAs are taxed on the principle you put
in, but not on further income you get. So this is great for just
about any investment. CDs are paying good rates right now. US
Treasury's may be state tax free. A big deal in some states and not
in others. Why not autodeduct all your retirement money into a
retirement account with some safe CD/FDIC type account for a year.
Then take 10% and buy an S&P500 type fund with low costs. Try this
for a year. The big problem is greed and fear. You want to throw
your money into the hot investment of today that is returning 30% a
year (oil, foreign, gold, forex currency trading etc..). By the time
the average investor gets into these things it is usually too late, or
ever worse you get in just as it dumps. The other problem is fear.
You bought your stock after it had gone up and up and up and then when
it came back down you sold. This is buy high, sell low. A very
common technique. So the idea that you just can't predict the future
and just buy a divisified portfolio and forget it has some merit. It
avoids the whole fear and greed cycle. You can be assured that money
will become worth 3% a year less (conservative by my estimate) due to
inflation. As you get experience with index fund investing you can
put more of your money into it.
Your 401K is a great start. See, you can do it. You will be really
happy you saved when you retire!
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Posted by rick++ on March 21, 2007, 12:41 pm
Save and invest.
You have 27 years until standard SS age.
Religiously saving and investing 15% for 25 years will do it.
Or 20% for 20 years.
Note about half the people between 50 and 65
encounter a "life changing event" that slows down
their savings ability according a recent Boston College
Retirement Center report. These include illness,
career change, and marital change. So "more and
earlier" is better.
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Posted by jIM on March 21, 2007, 3:23 pm
> I am a 40-year-old male with no children and in great health as of my
> last physical two weeks ago. For most of my adult working life I have
> had steady employment (only been laid off once but got a better job
> about a month after my lay off); however, I have no investment (meager
> savings and checking accounts) other than my current employer's
> 401(k) plan. Since I am fast approaching retirement age I will like to
> know how and where do I start to invest so that I can have a
> comfortable retirement.
The "conventional wisdom" suggests saving 10% of gross income as a
starting point. "conventional wisdom" might also suggest a goal of
25X current income level as the savings goal.
Because of your age, a 15%, 20% or 25% savings rate might be more
appropriate. If you delay retirement age, you could feasibly only
need to save 20X or 22X your salary.
The value of your current 401k will greatly influence the advice
above.
If you are unsure of the "magnitude" of the issue, I suggest doing
some reading. Online sites such as T Rowe Price, Vanguard and smart
money all have resources to help "get you started".
My suggestions would be:
1) send 10% to 401k (make sure this is capturing entire match). This
also lowers your current tax bill.
2) Establish a savings goal, then implement 3-5 as needed
3) Open a Roth IRA
4) Open a taxable brokerage account
5) Research issues such as long term care insurance, SS benefits,
annuities, tax rates, inflation and other retirement factors.
An asset allocation should be developed as part of step 1, but I would
not wait to do step 1 because you don't know your proper allocation.
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