WWYD on retirement savings?

iVillage Member
Registered: 12-12-2004
WWYD on retirement savings?
10
Fri, 06-16-2006 - 9:51pm
Hi, all. Need opinion, please. Havent scheduled an evaluation yet with someone to review my host of savings plans, but here's the Q---I was putting the max into the 401K. You can change the amount or percent at any time on the website. Well, the 401k isnt doing well at all. 2% return-on anything. Sooo-should I cut back on this and put what I was saving into the ING savings? (4.30%, I think?) The max is about $15K-$18K/yr on the retirement plan, but does anyone know if there is a max on the ING account (the one with the orange ball?), and can you put in as much as you want? I have it set up for $200/month now. Whiz.
iVillage Member
Registered: 02-12-2006
Sat, 06-17-2006 - 9:29am

Hi Whiz! If your ING savings account is just a normal money market savings account, there should not be a limit to how much you can put into it. FDIC insurance cuts off at $100k, so if it gets to be close to that you should open up a 2nd account.

As for your 401k, I would look into changing the mix of your investments to get a higher return. Perhaps there is someone at work who can help you? My company offers advice through a company called Financial Engines, and they re-mixed my 401k portfolio for a higher return. Be careful about putting too great of a percent in your company's own stock (ala Enron).

As far as the amount you contribute to the 401k, Suze Orman (the Finance lady on CNBC) always says to contribute at least the amount of your company's match, and then start contributing to a Roth IRA if you are eligible.

It sounds like you are doing a great job of saving for your future. Congrats!!!

Hope that helps!

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iVillage Member
Registered: 05-14-2003
Sat, 06-17-2006 - 9:39am

Whiz-

I agree with Miss Daisy. Put as much into your 401k as they match and then move onto a Roth. We don't have a Roth right now so I am not familiar with them. DH work matches up to 6%(with a vesting scheduled!) so we are maxing that out right now and that is all we can do. He promised me 2 years at his job so we can get 2% matched. That is the lowest level on the vesting schedule. But it is the deal we negotiated when he left his other job(immediate matching of 4%).

If you decide to learn about Roth's let me know!1 That's our next step.

iVillage Member
Registered: 05-09-2005
Sat, 06-17-2006 - 12:06pm
Hi Whiz,
I totally agree with the other posters. Remember that your contribution to the 401K $$
is not taxed so your taxable income per year is less. That said, I personally would only contribute the amount that is matched by your company. I would put everything else into a Roth -- yes , the money you put into a Roth is AFTER TAX dollars (different from the BEFORE TAX dollars going into the 401K) BUT that Roth money grows tax free and you pull it out tax free when you retire. Nice!
Megan
iVillage Member
Registered: 01-25-2006
Sat, 06-17-2006 - 1:55pm

Whiz,
ING is not a retirement savings vehicle unless it is an IRA (I think they offer those but I'm almost positive that is not what you set up). A retirement vehicle should give you some sort of tax-advantage either now (401k or Trad. IRA for example) or when you withdraw after retirement (Roth IRA for example). Your ING account has no tax advantage. Not that it isn't an appropriate savings vehicle but it isn't a retirement savings vehicle.

I agree with all the PP's. First of all, you'll want to look at what your 401k investment mix is. Remember those are stocks. You cannot look at your return over a short term period (one month, 6 mos., one year) because they fluctuate all over the place and the stock market has been UGLY for the last couple of months (I can only WISH I had made 2% on my 401k the last 8 weeks. I lost at least that much). That being said, you might be in the very lowest risk investments (I suspect that is where the money is defaulted to go if you haven't told them otherwise). Unless you are older than I think you are, it is unlikely that you should be investing that conservatively so you definitely need to look at that and I would strongly encourage you to get some professional help with that.

I also agree that you want to look at contributing up to the matching amount and then roll to a Roth and then back to the 401k with any additional you can afford to save beyond that. Now, you might want to accrue those dollars in your ING account and then make investments a few times a year (you can only put $4k in a Roth this year) so that you limit the commission costs, etc. Again, strongly recommend some professional help with this too.

Whiz, it seems sometimes like you are confused about some of the personal finance basics. Have you read any general personal finance books like Personal Finance for Dummies or the one I really like but it is sort of daunting because it is soooo comprehensive is Suze Ormans Road to Wealth? Or maybe you might consider a Personal Finance course through your local community college? I hope you'll consider boning up a bit on that sort of stuff because while we can't know everything about personal finance and will need professional advice at times, it is important to know enough to make the decisions they'll ask you to make and also to know enough they can't take advantage (ask me how I know this!). I realize that it is a lot and sometimes it seems like once we start asking questions, the answers just bring up more questions (which is why I like Suze's book so much because she probably answers those questions too! LOL) so I totally understand how easy it is to get confused.

You're in a great position to be in with the debt falling rapidly and the saving climbing rapidly. I myself am jealous of the fact that you've managed to get yourself to the point you are saving that much for retirement. That is just an awesome place to be in. Just now a matter of becoming the best steward you can be. :)

Peg

iVillage Member
Registered: 12-12-2004
Sat, 06-17-2006 - 11:53pm
Hi, Megan, 2loc, Peg, and everyone. I really appreciate your help on this. It is hard to hold investments when the market is going south, so to speak. I had one friend who went to a financial planner when she left her one job (she had to retire for health reasons),and she lost about 1/2 of her hard-earned savings! Thus, I am very cautious. My concern stems from the fact that we owe $345K on mortgage, AND need to be saving about $5K per month if we want to retire in 10-15 yrs or so. That said, if we sold our house, we would be off to a good start, but we would have to find another place, etc. Will look into the books suggested. I REALLY like it when everyone lists titles, authors, etc, then I can go to websites and check it out, appreciate it greatly. (i.e., Orman, Ramsey, etc.). Thanks again for feedback, as always. Fondly, Whiz. PS--I am going to step up the contributions to the Roth, but I want to have that ING thing at least with a few thousand in there. Whiz.
iVillage Member
Registered: 05-10-2006
Mon, 06-19-2006 - 12:34pm

Whiz, I can totally understand wanting to be cautious and you need to do what you feel comfortable with. I am just sharing thoughts and such that I have learned.

If you aren't retiring for at least 20 years, put your 401K money in a moderate risk plan. I put 6% (max company match and sometimes more IF my ex was bothering to work!) of my income into my 401K at high risk/high return (I had 40 years till retirement) and ended up with almost 40,000 after 6 years, that was around a 40% return I think. The company also put our profit sharing in the account as well so that helped the account grow. Some statements from my plan made me a bit nervous with the losses but I realized that even when the market is down, I was doing good. When the market is down, you buy more shares with each paycheck deduction than you did when the market was doing better so when the next upswing comes, you make out much better. You need the mix of market lows and highs to make your account grow.

You do want to look into earning more than 4.25% on your savings if it is for retirement because after inflation, you end up with less money than you saved.

Good luck deciding where you are putting everything. Right now I don't have any retirement savings and I am anxious to get my debt paid off, get working full time for a company that offers a retirement plan and start my Roth account.

Sarah

iVillage Member
Registered: 07-11-2001
Mon, 06-19-2006 - 3:46pm

Just wanted to add Whiz that a retirement portfolio needs a mix of investments. Cash savings, bonds, mutual funds, stocks. Find a financial planner through a referral, never on your own especially since your friend had a bad experience. My financial planner is excellent. She has a Masters in Finance and is very helpful. I chose a female FP, as I feel more comfortable talking to someone who specializes in assisting women.

Remember that any money in savings is subject to tax at the end of the year. I had to report my enormous $42 earnings on my savings in my taxes. That's why you are better looking at a Roth IRA.

I also have heard that the contributions to a Roth will be increasing. A financial planner will give you advice on how to start diversifying your retirement savings to reach your financial goals. Your bank will have financial planners, if you would feel safer.

My biggest recommendation, find a financial planner or someone who can assist with your specific needs. You don't need to navigate these waters alone.

iVillage Member
Registered: 12-12-2004
Tue, 06-20-2006 - 12:58am
Hi, Sarah--I loved your wise advice. You're right "on the money" (LOL)--DH and I got burned once with stockbrokers (way back when) and lost it. Then, I took everything out of what I had left to live on after surgery. Didnt realize the savings is taxed a "lot". I just want to find someone impartial that isnt going to do a song and dance of their company's investment stream. WHiz.
iVillage Member
Registered: 07-11-2001
Wed, 06-21-2006 - 11:06am

Choose a financial planer who can offer a portfolio of products. American Funds is probably one of the best fund groups at the moment. My FP works for Mass Mutual, but as I said I have American Funds with my Roth IRA, diversified in 2 different funds.

For my rollover, I have a Traditional IRA with Oppenheimer. Again diversified in 3 different funds.

Don't put your eggs all in one basket. Just dealing with a stockbroker means that you were dealing with one type of investment, not the mixture I mentioned in previous post. Interview different FPs and see which one gives you the advice you most like.

I like mine because she has sound advice and works within my means. She doesn't try to sell me insurance as my situation does not need it (not married, no kids). Why waste the money better putting those $$$ in a Roth IRA instead of making an insurance agent rich? I won't be bullied into that at the moment. When my mortgage broker suggested putting refinance $$$ into stocks she advised against it, saying it would not mak emoney now and that you really need a lot of money to buy stocks. Your best with mutual funds until you get older then maybe look at stock and bond options.

Don't just choose a fly by night, or somebody's friends brother who has just started out. Don't feel 'obliged' to give someone a chance.

We don't have the expertise on the board to look at your investment portfolio, so I would suggest either reading Money magazine religiously or find a good FP. It is too important to rely on information posted just on wensites.

Best of luck.
Beach

iVillage Member
Registered: 12-12-2004
Thu, 06-22-2006 - 12:41am
Hi, Beach--Thanks for the tip. I do read Money-actually, I subscribe). I have made the mistake of putting a little here and there. For now, I want to build up the ING thing, and have the TIAA-CREF mutual funds (100/month to start). My goal is to first pay off the big cc, and then start funding as much as I can. WHiz.