Lainey

I've stated my gripe with retirement accounts before but here it is again. There is such an inequity when it comes to what people can/can't do to save for retirement.

Rick has no 401 or IRA plan at work, so he can only shelter $4500.00 in an IRA, and even though our income would allow a Roth, he has to select one of the two. Can't do both in the same tax year.

I have a simple IRA and can shelter up to 12K, and yet I could still have a Roth as well, as far as I know. That makes no sense to me.

Folks with 401 plans can shelter even more than the Simple IRA and obviously quite a bit more than a traditional IRA. Obviously we could make non deductible deposits to our IRA, but that is not the point. Not to get political, but the government is warning us to save, that SS may not be available, but IMHO these inequities need some work, so people would be on a more level playing field while saving towards retirement.

We are saving towards retirement, working with what is available to us and with Jerry funding a ROTH for me, the future is looking brighter all the time.

RedY2KS2k

I think that the tax-deferred vs Roth advice sometimes overlooks one point: many of us can allocate x dollars total to retirement savings. We need the rest to live on.

If I take $1,000 out of the tax-deferred allocation, I have $700 (assuming 30% marginal tax rate) available to invest in the after-tax account. That makes the decision a bit harder to call.

Of course, if I could afford to allocate $430 more to retirement savings, then I could pay the tax (again assuming 30% marginal tax rate) on $1,430 and put $1000 in the Roth.

Obviously, allocating $1,430 of current income to retirement savings should benefit me more than allocating $1000. And as I can better afford it, I'll do so. But I have to pay my current bills with my current after-tax income.

Lainey

^
Good point!

We do save towards retirement, but not to the point that we are "savings poor" or "ready cash" poor either. The cost of living, health insurance, etc., continually goes up faster than our paychecks. Decisions have to be made on how much to save and where, as well as how much to spend.

There is only so much cash to go around, (we've yet to find that pot of gold at the end of the rainbow) and a little fun, some travel and some good times with one another, and with friends is on the "to do list" just as saving towards retirement is. It's a balancing act, for sure.

ralper

Please bear in mind that your retirement savings will augment everything else that you have. Your non retirement savings, investments and assets don't dissappear on the day you turn 65. My point is that while it is very important to save towards your retirement, and as much as possible should be put into tax deferred accounts, this shouldn't be done to the point of not paying your mortgage. Your house will exist when you retire and it is oftentimes your best investment.

Lainey

with all you are saying, Rob.

I've a sister who tends to make herself "cash poor" by the amounts she was putting in her 401. She had very little cash on hand if the unexpected came up.

airgate

Folks have shared to only put into 401K what your company matches...which seems rediculous to me...the money is pre tax...and with a diversified portfolio, you can make that money work. My company matches 6% and I elect 12% per pay period.

I don't have the percentages of return...but I believe this is the best way to invest my money. Thoughts?

JonasM

Well, the theory goes that after contributing to a 401K up to the matching amount, THEN contribute to a Roth up to your maximum, THEN, add again to the 401K if there's any left. The idea is flexibility in tax rates and also flexibility in retirement, since a Roth does not have to be withdrawn from starting at a certain age like a 401K does.

As always, your personal situation may change things. If you make enough that a Roth is not available to you, then by all means max out the 401K. Your mileage may vary, as always..

JonasM

dlq04

Leading up to retirement I didn't do much planning - just the usual matching 401k plus an extra percentage when we could afford it. Still that combined with my decision to take a buyout over a pension left me with a few anxious nights. Thankfully, that's behind me now.

Planning for retirement is never easy and the closer one get's to it the more difficult it becomes for fear of the unknown. The year before I retired (planned retirement at age 60), I spent a LOT of time reading everything I could on the do's and don'ts. I picked everyone's brain, talked to at least four different financial planners in depth, and even took an investment course to refresh my mind on the options. I can say with certainty that had I gone with a couple of the planners, it would not have been a good financial move for me - maybe them - but not me.

I did my first portfolio review with a financial advicer from the company I selected today - five years later almost to the day. Other than my own annual rebalancing, I did not change a single investment during those five years. That was because I had a solid plan from the beginning. Today's changes were minor, which just reinforced that again.

The best advice I can share is to really do your homework and do not take the first advice you receive as necessarily the best.

Matt_in_VA

Our Financial Planner had me cash out of my previous whole life insurance policy that the person that sold it too my about twenty-five years ago was still enjoying their residuals while being retired in Florida. At her suggestion I now have a term life policy. Is it a coincidence that since I am now worth more dead than alive, my food has started tasting funny?

dlq04

Matt, my father worked for Prudential for 35 years or something like that and believe me when I say he could tell story after story where whole life insurance saved family after family in our town. He never sold them for the commissions; he sold them because he knew they did what they were intended to do. That was at time before term insurance became common place with employment. I always kidded my dad and said when ever things got slow he must have written up another policy for me. After he past on I cashed them out as I had an investment type policy (forget what they called it) that covered me. When I retired I cashed it out as well. I still believe there's a time and place for insurance, especially with new young families if you live on the edge (like motorcyle racing, flying, etc.).