Comments on: Basics of Retirement Investing

By: thomas

thomas — Tue, 17 Feb 2009 18:46:16 +0000

Lots of information in one post! Good job.

By: frugalCPA

frugalCPA — Tue, 17 Feb 2009 15:37:59 +0000

I agree with Steve that taxes will probably go up, though it’s hard to predict to what level they’ll rise and how long they’ll stay high. My plan is to always have a good mix of 401k and Roth IRA.

By: Steven

Steven — Tue, 17 Feb 2009 05:21:25 +0000

You are wrong. Taxes in 30 years when I retire will be much higher. Taxes at the moment are at almost an all time low. With this defecit we are going into with all this money going to bailouts, we are going to have to pay for it eventually. Taxes will be much higher in maybe even the near future. On another note, Whole life insurance is not a bad way of growing and withdrawing some of that money tax deferred. Plus you have a death benefit. Usually what I recommend is putting into your 401k up to what the company matches the “free money” and then putting the rest in other investment vehicles.

By: TTFK

TTFK — Tue, 17 Feb 2009 02:56:36 +0000

I have the less common SIMPLE-IRA. This small-business option has several advantages for employees:

1. The employer must either contribute up to 3% matching to participating employees, or 2% of gross to ALL employees regardless of whether they are contributing themselves or not.

2. All employer contributions are 100% vested the moment they enter your account.

By: Jessica

Jessica — Mon, 16 Feb 2009 18:32:18 +0000

I disagree. You may pay higher taxes when you’re older BEFORE you retire but if you’re planning right, you won’t be in a higher tax bracket when you retire, which is all the more reason to max out your 401(k) first. What you’ll actually need to survive on in retirement will be much, much less than what you’re bringing in from your job right now (adjusting for inflation, of course, because remember that the tax brackets also go up every year with inflation). You won’t have a mortgage (hopefully it’s paid off by then), car payment, kids living at home, etc to cover, just the basics. Or do most people plan their retirement differently?

By: saladdin

saladdin — Mon, 16 Feb 2009 17:17:07 +0000

How do you figure you will pay more in taxes when you retire?

saladdin

By: Sun

Sun — Mon, 16 Feb 2009 17:11:20 +0000

Brokers usually charge a much higher fee to buy mutual funds than stocks. So it’s better to go with mutual fund companies directly if you want to dollar-cost averaging mutual funds in your retirement accounts.

By: Jim

Jim — Mon, 16 Feb 2009 16:15:39 +0000

The Roth IRA and Traditional IRA share the same limits, so when you max out your Roth contribution, you can’t contribute to a Traditional IRA.

By: Tarah

Tarah — Mon, 16 Feb 2009 15:58:02 +0000

If you’re going to go back to the 401(k) after maxing out your Roth and you still have money left over that you want to invest, would it make more sense to go 401(k)-Roth-Traditional IRA-401(k)? That way you have more choice with more of your money.

By: the weakonomist

the weakonomist — Mon, 16 Feb 2009 15:43:55 +0000

Wow, I’ve never read a better comprehensive look at retirement planning.

I always advise people to maximize their tax free contributions because it is very likely you’ll be paying more in taxes when you’re older than you do now. I max the 401(k) to get the company match, and then focus on the Roth IRA. My Roth offers better investment options as well.

By: Mr. GoTo

Mr. GoTo — Mon, 16 Feb 2009 15:21:10 +0000

Jim – Some of the larger 401(k) plans offer a self-directed brokerage account option which allows participants to use a broker to select from all available stocks and mutual funds, instead of just the few offered by the plan itself. Investors who are willing to do some research on their own should look into this option because it can lower costs and provide opportunities to create more diversity in asset allocation.

By: Jim

Jim — Mon, 16 Feb 2009 14:34:20 +0000

It’s not a bad idea, I don’t list it as the “safe path” because not every employer offers a Roth 401(k).

By: Suburban Dollar

Suburban Dollar — Mon, 16 Feb 2009 13:56:23 +0000

You mention that maxing out your 401(k) contributions and then putting your money in a Roth IRA, would you recommend maxing out your standard 401(k) matching and then put money into a Roth 401(k) if your employer offers it? It seems that may be pretty good way to go as well.

By: Beth @ Smart Family Tips

Beth @ Smart Family Tips — Mon, 16 Feb 2009 13:03:02 +0000

Excellent overview and very helpful. Thanks!