The 401k/Retirement Thread

[DrumNFeather]

I've come to realize that I'm a relative novice when it comes to the whole 401k retirement planning arena. I have a good friend who is younger than I am who has already banked a significantly more amount into his retirement account than I have (it helps that he works overseas for months at a time in dangerous places so the gov't helps him). I have a pretty standard 4% contribution to my 401k right now, which is just about all I can afford as I pay off other debts.

I pretty much have a handle on all other areas of my financial situation...budget etc...but I would really like to better understand 401k related items, especially investments and how best to select them in order to start to set myself up for eventual retirement which, admittedly is many, many years away.

I thought this might be a good thread for advice related to this kind of stuff.

So my first question is, how does one go about evaluating their 401k situation and how to improve it, select investments, etc...?

[Mormon Red Death]

Why not set up a meeting with a retirement advisor? They can help you how to setup your account

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[Mormon Red Death]

http://www.reuters.com/article/2013/04/11/column-miller-investing-idUSL2N0CY1BT20130411

[ATCUte]

Weird place for a first post, but eh...

I found this documentary by Frontline to be particularly helpful. It discusses how fees affect the growth of your money and the differences between managed and unmanaged funds.

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

I hope that's a helpful place to start your adventure!

[U-Ute]

A couple of thoughts:


Just thinking about it and putting away what you are puts you ahead of 90% of the people out there.
If your company matches, do anything you can to maximize the match. At 4% you're probably close, but I worked at a company once that matched 50% up to 6% (meaning if I put in 6%, they matched it at 3%). It is free money.
Do you have any funds that you can choose based on your estimated retirement date? I think every company calls them different, but basically you just tell them when you are planning on retiring (or calculate it based on your age) and they automatically rebalance your portfolio as you get older.
How are you at understanding some basic financial terms such as stock vs bonds, and large cap vs small cap?

[eldiente]

Check out bogleheads.org for excellent educational materials and advice. Indexing is the way to go IMHO.


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[UTEopia]

As someone on the end of the earning phase of life, I wish I would have consulted with a financial consultant in my 30's as opposed to waiting until my 50's. I think that the right people could have helped me create a strategy that would have put me in a better position than I now find myself.

[Mormon Red Death]

Interesting article about how the Dutch are the best at Pensions (http://www.nytimes.com/2014/10/12/business/no-smoke-no-mirrors-the-dutch-pension-plan.html?action=click&contentCollection=Movies&module=MostEmailed&version=Full&region=Marginalia&src=me&pgtype=article).

[chrisrenrut]

Interesting article about how the Dutch are the best at Pensions (http://www.nytimes.com/2014/10/12/business/no-smoke-no-mirrors-the-dutch-pension-plan.html?action=click&contentCollection=Movies&module=MostEmailed&version=Full&region=Marginalia&src=me&pgtype=article).

Very interesting, thanks for posting.

[401k Ute]

Interesting article about how the Dutch are the best at Pensions (http://www.nytimes.com/2014/10/12/business/no-smoke-no-mirrors-the-dutch-pension-plan.html?action=click&contentCollection=Movies&module=MostEmailed&version=Full&region=Marginalia&src=me&pgtype=article).

That was interesting, but in the end the Dutch will run into the same problems that every other pension, both public and private, eventually runs into. As stated in the next to last paragraph, “Everybody wants safety and everybody wants an affordable system, and you can’t have both." Demographic trends are the natural enemy to traditional pensions. How can you estimate your real costs when the population is living longer (more beneficiaries receiving payments) and fewer children are being born and eventually entering the workforce (fewer people contributing to the system). This is exactly the issue that is hurting our own social security system.

Then there is the issue of how the pensions are invested. Typically you see a large portion of the portfolio invested very safely due to the low volatility, but low interest rates have cut drastically into returns and many are arguing that the next big investment bubble in the US will be government securities, which injects a level of risk that many who invest in these securities are unaware of.

It seems that the one thing the Dutch have done that US companies have moved away from is that they have accepted the cost pensions (18% of payroll) as an acceptable cost of doing business. US companies have said no in a massive way which has resulted in the steep decline in the number of workers covered by pensions. That puts the onus on saving for retirement on the individual through 401k plans and IRA's, which is flawed since neither employees or employers are required to contribute to a retirement plan.