INTENSITY²
Politics, Mature and taboo => Political Pundits => Topic started by: Pyraxis on January 05, 2009, 07:40:58 PM
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Anyone know anything about them? For the first time in my life I have the option of enrolling in one. I don't trust the government further than I can throw it when it comes to money; I plan to save enough privately to cover my own retirement.
But I know 401k plans are popular and standard, though I know very little about how they actually work or what benefits they'd give me. I may be being too paranoid and it would actually be a good investment.
I also don't know, if I did enroll, whether a regular plan or a Roth plan would be a better idea.
Can anyone from the USA give me advice?
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Might be worth looking at this:
http://money.howstuffworks.com/personal-finance/financial-planning/401k1.htm
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Um, Hadron, if I wanted to read webpages I would have googled it. Please think before responding.
I have, actually, googled it and read some official literature. But I can get more valuable information from talking to people I actually know.
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Um, Hadron, if I wanted to read webpages I would have googled it. Please think before responding.
I have, actually, googled it and read some official literature. But I can get more valuable information from talking to people I actually know.
Unless they are investment experts, which AFAIK no one on here is, then you would be really foolish to seek investment advice here. Not quite as smart as you think you are.
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Why? There are several people here who do well for themselves financially. Technically there's even the chance that McJagger would show up and throw in his two cents, and he's very well off.
Also, in a case like this I am much better at filtering information through what I know of people's personalities than by reading webpages or official pamphlets written by people I don't know. Companies who write guides will be serving their own self-interest, whether they are investment firms, private consultants, etc. Webpages of unknown origin could have been written by people with less financial knowhow than those here. Not to mention, people's advice doesn't have to be good to be helpful. If an idiot earnestly tells me to do something, I now know what not to do.
At any rate, I can't think of any reasons for you to be casting aspersions on my intelligence unless you are hypersensitive about your own lack.
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What is 401k plans? ???
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It's a type of retirement account in the USA, where you can choose to have a portion of your salary deposited, and the company you work for may match a percentage of what you contribute.
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It's a type of retirement account in the USA, where you can choose to have a portion of your salary deposited, and the company you work for may match a percentage of what you contribute.
In Sweden the state made all that for us before. Now we pay the same taxes but have to save in retirement funds as well if we want a good life when we get old. :grrr:
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Why? There are several people here who do well for themselves financially. Technically there's even the chance that McJagger would show up and throw in his two cents, and he's very well off.
Earning a large salary does not make someone have a clue about the ins and outs of investment options. I know some well off people who are not investment experts, including within my own family. When they need to invest something they (a) talk to an expert on the matter and (b) know the stock market is little more than gambling. The only way they can help you, not being investment experts themselves is give you insider tips on their company and even then I really would not rely on them.
Also, in a case like this I am much better at filtering information through what I know of people's personalities than by reading webpages or official pamphlets written by people I don't know. Companies who write guides will be serving their own self-interest, whether they are investment firms, private consultants, etc. Webpages of unknown origin could have been written by people with less financial knowhow than those here. Not to mention, people's advice doesn't have to be good to be helpful. If an idiot earnestly tells me to do something, I now know what not to do.
I know that in the UK, financial products are required to have a factlist accompanying them, so anyone who understands financial markets cannot get ripped off too easily - and they know what they are buying. You certainly should be able to drag out the facts from any company literature. As for the webpage I linked, it only contains the very basics and no real advice - which is why I linked it.
Though before you invest in a 401(k) - you might want to read a little into Enron and co to see what can happen if you invest in stocks.
At any rate, I can't think of any reasons for you to be casting aspersions on my intelligence unless you are hypersensitive about your own lack.
Be a prat if you like - its your money you burn if you get it wrong.
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It's a type of retirement account in the USA, where you can choose to have a portion of your salary deposited, and the company you work for may match a percentage of what you contribute.
In Sweden the state made all that for us before. Now we pay the same taxes but have to save in retirement funds as well if we want a good life when we get old. :grrr:
To be fair anything other than a basic state pension is totally unsustainable these days, the older systems rely on the next generation having enough children to ensure a certain population expansion rate. You should see the current mess in Japan, its partly why the UK and Sweden are both allowing mass immigration.
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It's a type of retirement account in the USA, where you can choose to have a portion of your salary deposited, and the company you work for may match a percentage of what you contribute.
Its really about tax avoidance, above anything else.
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It's a type of retirement account in the USA, where you can choose to have a portion of your salary deposited, and the company you work for may match a percentage of what you contribute.
In Sweden the state made all that for us before. Now we pay the same taxes but have to save in retirement funds as well if we want a good life when we get old. :grrr:
To be fair anything other than a basic state pension is totally unsustainable these days, the older systems rely on the next generation having enough children to ensure a certain population expansion rate. You should see the current mess in Japan, its partly why the UK and Sweden are both allowing mass immigration.
The thing is that one thing that people payed through their taxes until 1997 something, was their retirement. My parents have, so to speak, made a deposit from which they will never get more than 60% back.
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Well they can be good now with the market going down not so much. Things to consider how much does your employer match, you can only get it out at 65 without penalty, how stable is the company. I have had them in the past and they are transferable company to company. You can also transfer it to an IRA. The returns are based on the investments you make usually they give you several options with different risks best to spread them out. I worry that the government is going to do a big money grab when SSI goes under. My 401k was turned into an IRA and since the market went down I have lost 33% and have not put anymore in it. I am looking into alternative investments coins, metals physicals things I can touch till the market comes back
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Earning a large salary does not make someone have a clue about the ins and outs of investment options.
Oh, very much agreed. I've seen several really sad cases of people making six-figure incomes and then losing most of it because they never learned how to handle money. But I wasn't talking only about large salaries. Really, I don't know what anyone on here is making except McJ, who's brought it up. I was also basing the conjecture on people who own houses, people who travel a lot, etc.
I know that in the UK, financial products are required to have a factlist accompanying them, so anyone who understands financial markets cannot get ripped off too easily - and they know what they are buying. You certainly should be able to drag out the facts from any company literature.
I don't know about "should" - most of the terminology is new to me and so are the common pitfalls.
So many of the pitfalls also have to do with people making poor decisions based on emotion. The way my mind works, I meet emotion with emotion and logic with logic - so if I also want to avoid emotional pitfalls, it's helpful to have emotional conversations with real people about the subject. Telling myself that a regular 401k would earn me xxxx vs a Roth's yyyy because I read it on Schwab's site won't help me with decisions that would have a far greater impact, like whether to trust the stock market at all or just hide everything in a box in the back yard. :P Or what percentage of my salary to save.
As for the webpage I linked, it only contains the very basics and no real advice - which is why I linked it.
You linked it because it offered no real advice? ???
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I worry that the government is going to do a big money grab when SSI goes under.
Yes, that's exactly the kind of thing I'm also worried about. If I don't take the common route, I may be able to avoid that.
I am looking into alternative investments coins, metals physicals things I can touch till the market comes back
I've thought about gold but I'm not very good with trusting physical objects any more I am with trusting the goverment, and then I'd have to carry it around when I travel and worry about it getting stolen.
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Get a safety deposit box in an out of the way town were nothing will ever happen but is close by. I already own my own safe two actually a little gold some coins and about 10 pounds of silver and cash always have some cash that's not in the bank but that's me I'm paranoid
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Earning a large salary does not make someone have a clue about the ins and outs of investment options.
Oh, very much agreed. I've seen several really sad cases of people making six-figure incomes and then losing most of it because they never learned how to handle money. But I wasn't talking only about large salaries. Really, I don't know what anyone on here is making except McJ, who's brought it up. I was also basing the conjecture on people who own houses, people who travel a lot, etc.
Eclair is making I think - but she is Aussie. The thing with most of these six figure salary people is because they often don't invest anything at all, instead they live to their means. In Britain especially we have a lot of people like that, which is partially why we are being hit quite hard by the credit crunch.
I know that in the UK, financial products are required to have a factlist accompanying them, so anyone who understands financial markets cannot get ripped off too easily - and they know what they are buying. You certainly should be able to drag out the facts from any company literature.
I don't know about "should" - most of the terminology is new to me and so are the common pitfalls.
So many of the pitfalls also have to do with people making poor decisions based on emotion. The way my mind works, I meet emotion with emotion and logic with logic - so if I also want to avoid emotional pitfalls, it's helpful to have emotional conversations with real people about the subject. Telling myself that a regular 401k would earn me xxxx vs a Roth's yyyy because I read it on Schwab's site won't help me with decisions that would have a far greater impact, like whether to trust the stock market at all or just hide everything in a box in the back yard. :P Or what percentage of my salary to save.
If you want to get a general idea on investments, I reckon this book might be good (I swear by this series of books for my degree, its the only way I get through it without actually having to work really hard)
http://books.global-investor.com/books/13828/Jack-Clark-Francis/Investments-(Shaum%27s-Outline)/
People do make investment decisions based on emotion, true. But by far the biggest factor is their own cluelessness and especially their arrogance in making investment decisions.
As for the webpage I linked, it only contains the very basics and no real advice - which is why I linked it.
You linked it because it offered no real advice? ???
Yes - it largely is facts. I am not claiming to be a financial advisor here.
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Get a safety deposit box in an out of the way town were nothing will ever happen but is close by. I already own my own safe two actually a little gold some coins and about 10 pounds of silver and cash always have some cash that's not in the bank but that's me I'm paranoid
You have to be careful that you don't lose money by inflation - the safest place for your money these days is still more or less a bank.
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I worry that the government is going to do a big money grab when SSI goes under.
Yes, that's exactly the kind of thing I'm also worried about. If I don't take the common route, I may be able to avoid that.
Absolutely nothing to stop them changing the tax benefits on a 401(k) - asides political opposition.
I am looking into alternative investments coins, metals physicals things I can touch till the market comes back
I've thought about gold but I'm not very good with trusting physical objects any more I am with trusting the goverment, and then I'd have to carry it around when I travel and worry about it getting stolen.
If you want something physical I hear wine is becoming popular. No idea how good an investment it actually is though.
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The thing with most of these six figure salary people is because they often don't invest anything at all, instead they live to their means.
Yeah, and then some tragedy hits and it all goes to shit. That's what happened to one of my friends' fathers. Dirt-poor family, first to make it big and really climb the career ladder, so there was no one from whom to learn financial sense by example. Seems to be common among first-generation rich.
If you want to get a general idea on investments, I reckon this book might be good
http://books.global-investor.com/books/13828/Jack-Clark-Francis/Investments-(Shaum%27s-Outline)/
Dunno if I'm ready to do that much study in it yet. I actually have a similar book which my father gave me when I got my first full time job, and I've read parts of it, but haven't been able to get the information to penetrate very far.
People do make investment decisions based on emotion, true. But by far the biggest factor is their own cluelessness and especially their arrogance in making investment decisions.
Emotion, cluelessness, arrogance, same deal. :P
Yes - it largely is facts. I am not claiming to be a financial advisor here.
:laugh: I totally misinterpreted that. My mistake.
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The thing with most of these six figure salary people is because they often don't invest anything at all, instead they live to their means.
Yeah, and then some tragedy hits and it all goes to shit. That's what happened to one of my friends' fathers. Dirt-poor family, first to make it big and really climb the career ladder, so there was no one from whom to learn financial sense by example. Seems to be common among first-generation rich.
At least over here there is the comfort of the welfare state to fall back upon. :)
If you want to get a general idea on investments, I reckon this book might be good
http://books.global-investor.com/books/13828/Jack-Clark-Francis/Investments-(Shaum%27s-Outline)/
Dunno if I'm ready to do that much study in it yet. I actually have a similar book which my father gave me when I got my first full time job, and I've read parts of it, but haven't been able to get the information to penetrate very far.
The point of the Schaum's series is that you could plough through the book in an evening or two and have a pretty good grasp of most of the topics. Really its just an outline, which cuts the crap.
People do make investment decisions based on emotion, true. But by far the biggest factor is their own cluelessness and especially their arrogance in making investment decisions.
Emotion, cluelessness, arrogance, same deal. :P
:laugh: I dunno, the latter one has brought me quite a bit of success as a strategy at times. But then I don't fancy doing investments too much, not because I would not enjoy the investing side itself but the unbearable people I would have to be be around. 4 years with them will be way too much as it is.
Yes - it largely is facts. I am not claiming to be a financial advisor here.
:laugh: I totally misinterpreted that. My mistake.
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My Local Union has a 401a plan that I put $1.70 an hour into to supplement my other retirement plans. Some people have moved their stuff around to try and maximize return, but I have left it at the safest, least likely to take a dive level because I got burned back in early 2000. The market will turn back up and it is important to consistently put money into retirements. Whatever sector of the market that your retirement is tied to will determine the proportion it will go up relative to the market when the market bounces back. I don't have expertise in investments Pyraxis so take this acvice as being worth what you paid for it. :thumbup:
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It's a type of retirement account in the USA, where you can choose to have a portion of your salary deposited, and the company you work for may match a percentage of what you contribute.
Its really about tax avoidance, above anything else.
Now who looks stupid, again?
The word for which you desperately search is, deferral.
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It's a type of retirement account in the USA, where you can choose to have a portion of your salary deposited, and the company you work for may match a percentage of what you contribute.
Its really about tax avoidance, above anything else.
Now who looks stupid, again?
The word for which you desperately search is, deferral.
Nope - avoidance. The idea is you are in a lower tax bracket when you retire than when you are earning, so in practise most people pay less tax.
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Interesting!
How many people do you know with investment plans who made LESS money towards the end of their careers than when they started out?
:LMAO:
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Interesting!
How many people do you know with investment plans who made LESS money towards the end of their careers than when they started out?
:LMAO:
::)
Typical pensioners are not in employment, they move on to a stage called retirement. So for example you earn a salary of $150,000 whilst single (33% tax) and then when you retire withdraw an income of $70,000 then you would only pay 25% tax as your maximum rate. You also get the first $30,000 or so a lot cheaper.
But carry on showing your totally ignorance.
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Interesting!
How many people do you know with investment plans who made LESS money towards the end of their careers than when they started out?
I don't know. :-\ I'm paid fairly highly for my skills at the moment and I'm not sure that it would get much higher without me moving into a supervisor role, which I really don't want to do - I want to be hands-on. I also may drop this corporate thing and get back involved with startups when I've made enough to cover living expenses without an immediate income.
It makes me wonder if I should take the plan type that counts on now being as good as it gets.
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Interesting!
How many people do you know with investment plans who made LESS money towards the end of their careers than when they started out?
:LMAO:
::)
Typical pensioners are not in employment, they move on to a stage called retirement. So for example you earn a salary of $150,000 whilst single (33% tax) and then when you retire withdraw an income of $70,000 then you would only pay 25% tax as your maximum rate. You also get the first $30,000 or so a lot cheaper.
But carry on showing your totally ignorance.
Again, the basis.
We are all so lucky to have a resource such as you around. All anyone has to do is type some stuff and you type more stuff.
It's awesome!
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It makes me wonder if I should take the plan type that counts on now being as good as it gets.
This is old news (http://online.wsj.com/article/SB122477680834462659.html) now, but no one has Killed (Ghilarducci or) The Plan, yet.
"The Plan" will remove the advantages offered by this type of investing.
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Interesting!
How many people do you know with investment plans who made LESS money towards the end of their careers than when they started out?
:LMAO:
::)
Typical pensioners are not in employment, they move on to a stage called retirement. So for example you earn a salary of $150,000 whilst single (33% tax) and then when you retire withdraw an income of $70,000 then you would only pay 25% tax as your maximum rate. You also get the first $30,000 or so a lot cheaper.
But carry on showing your totally ignorance.
Again, the basis.
We are all so lucky to have a resource such as you around. All anyone has to do is type some stuff and you type more stuff.
It's awesome!
:LMAO:
I don't know shit about how 401 (k) works. Would you like some random advice from me too?
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Get a safety deposit box in an out of the way town were nothing will ever happen but is close by. I already own my own safe two actually a little gold some coins and about 10 pounds of silver and cash always have some cash that's not in the bank but that's me I'm paranoid
You have to be careful that you don't lose money by inflation - the safest place for your money these days is still more or less a bank.
Also, when you take physical possession of a bullion metal, it immediately loses about 10% of it's value, since it's no longer guaranteed to be free from loss of material or debasement, whether deliberate or accidental. Financial institutions trade gold via the Good Delivery System, which is a tightly regulated system of storage and transport of Good Delivery bars; this means that the gold doesn't have to be reassayed every time it changed ownership, and often isn't even moved, which greatly reduces the cost of transactions. There's at least one company that enables small private investors to buy Good Delivery gold, but it means that the gold stays in a vault somewhere, rather than being delivered to your door.
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My employer(s) have matched the first 5-6% I put in, so "my" investment is up, despite the current downturn. My private investments are down about 22% the past few months. However, I am buying these days because the prices are low. This way I cost average what I bought at the higher prices the past few years. When the markets go back up, I should be in good shape. I have 8-1/2 years before my first kid goes to college, so I have time. The employer match is free money, so long as you can do without what you invest until you're older you should be fine. In an emergency, you can always access the money for a heftier tax burden.
I also invest in Star Wars toys. If the economy completely collapses, I will likely be a world leader based on that little nest egg.
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(b) know the stock market is little more than gambling.
The stock market isn't gambling. Certain high-risk investment strategies are similar to gambling, but medium-high risk strategies have a risk profile that's similar to investing in land or property, while medium risk strategies like using an index tracker (which I do) are very safe on a timescale of a decade or more, since your investment won't be wiped out by anything short of the apocalypse due to it's coverage of 100, 250 or 500+ companies and will rebound from crashes, recessions and bankruptcies given a little time and a hands-off approach.
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(b) know the stock market is little more than gambling.
The stock market isn't gambling. Certain high-risk investment strategies are similar to gambling, but medium-high risk strategies have a risk profile that's similar to investing in land or property, while medium risk strategies like using an index tracker (which I do) are very safe on a timescale of a decade or more, since your investment won't be wiped out by anything short of the apocalypse due to it's coverage of 100, 250 or 500+ companies and will rebound from crashes, recessions and bankruptcies given a little time and a hands-off approach.
The risk in investing in land or property is as much gambling as investing in the stocks, you should see what is happening to all those buy to let people who have bought those apartments which seem to be springing up left right and centre. Yes the stock market can be educated gambling, but you are still placing a bet. In the same way a good poker player can increase the chance that they will win, but they can't guarantee it.
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(b) know the stock market is little more than gambling.
The stock market isn't gambling. Certain high-risk investment strategies are similar to gambling, but medium-high risk strategies have a risk profile that's similar to investing in land or property, while medium risk strategies like using an index tracker (which I do) are very safe on a timescale of a decade or more, since your investment won't be wiped out by anything short of the apocalypse due to it's coverage of 100, 250 or 500+ companies and will rebound from crashes, recessions and bankruptcies given a little time and a hands-off approach.
The risk in investing in land or property is as much gambling as investing in the stocks, you should see what is happening to all those buy to let people who have bought those apartments which seem to be springing up left right and centre. Yes the stock market can be educated gambling, but you are still placing a bet. In the same way a good poker player can increase the chance that they will win, but they can't guarantee it.
Gambling implies a net negative return when summed over a large number of attempts. While investing in property or investing in stocks carries risk, the return on the average investment is positive, and the degree to which it is positive or negative and the probability of a single investment being positive varies depending on the investment strategy. An investment in a single house or a single company can evaporate if that house or company falls foul of any of a range of catastrophes, but a diverse portfolio is resistant to single points of failure and as the diversification increases, the probability of it providing a positive return at the end of a given time period also increases, with a corresponding decrease in the probable magnitude of any positive or negative return. With enough diversification, investments in the stock market match government bonds (vulnerable to government or currency collapse, Armageddon), bullion kept at home (theft, Armageddon), cash at home (theft, inflation, Armageddon) and cash in the bank (bank bankruptcy, Armageddon) for security while providing a much better average return.
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(b) know the stock market is little more than gambling.
The stock market isn't gambling. Certain high-risk investment strategies are similar to gambling, but medium-high risk strategies have a risk profile that's similar to investing in land or property, while medium risk strategies like using an index tracker (which I do) are very safe on a timescale of a decade or more, since your investment won't be wiped out by anything short of the apocalypse due to it's coverage of 100, 250 or 500+ companies and will rebound from crashes, recessions and bankruptcies given a little time and a hands-off approach.
The risk in investing in land or property is as much gambling as investing in the stocks, you should see what is happening to all those buy to let people who have bought those apartments which seem to be springing up left right and centre. Yes the stock market can be educated gambling, but you are still placing a bet. In the same way a good poker player can increase the chance that they will win, but they can't guarantee it.
Gambling implies a net negative return when summed over a large number of attempts.
If you are not an expert, or following very good advice then it fits the gambling definition you gave.
While investing in property or investing in stocks carries risk, the return on the average investment is positive, and the degree to which it is positive or negative and the probability of a single investment being positive varies depending on the investment strategy. An investment in a single house or a single company can evaporate if that house or company falls foul of any of a range of catastrophes, but a diverse portfolio is resistant to single points of failure and as the diversification increases, the probability of it providing a positive return at the end of a given time period also increases, with a corresponding decrease in the probable magnitude of any positive or negative return. With enough diversification, investments in the stock market match government bonds (vulnerable to government or currency collapse, Armageddon), bullion kept at home (theft, Armageddon), cash at home (theft, inflation, Armageddon) and cash in the bank (bank bankruptcy, Armageddon) for security while providing a much better average return.
Except around say now, where you should take a look at how much most endowments have fallen by. Unless you know what you are doing (and factor in the time and resource involved in planning out a diverse array of investments) then you are gambling. More to the point, putting your money in a bank (backed by a government or several) is still the safest option.
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(b) know the stock market is little more than gambling.
The stock market isn't gambling. Certain high-risk investment strategies are similar to gambling, but medium-high risk strategies have a risk profile that's similar to investing in land or property, while medium risk strategies like using an index tracker (which I do) are very safe on a timescale of a decade or more, since your investment won't be wiped out by anything short of the apocalypse due to it's coverage of 100, 250 or 500+ companies and will rebound from crashes, recessions and bankruptcies given a little time and a hands-off approach.
The risk in investing in land or property is as much gambling as investing in the stocks, you should see what is happening to all those buy to let people who have bought those apartments which seem to be springing up left right and centre. Yes the stock market can be educated gambling, but you are still placing a bet. In the same way a good poker player can increase the chance that they will win, but they can't guarantee it.
Gambling implies a net negative return when summed over a large number of attempts.
If you are not an expert, or following very good advice then it fits the gambling definition you gave.
Successfully investing in the stock market doesn't require a great deal of expertise. Take a look at some historical charts for the various markets; they have a general upwards trend with fluctuations around that trend. If you invest in a tracker for that market, your gains or losses will follow that trend; you don't need to do any 'expert' stuff, unless you consider buying a tracker as 'expert'.
While investing in property or investing in stocks carries risk, the return on the average investment is positive, and the degree to which it is positive or negative and the probability of a single investment being positive varies depending on the investment strategy. An investment in a single house or a single company can evaporate if that house or company falls foul of any of a range of catastrophes, but a diverse portfolio is resistant to single points of failure and as the diversification increases, the probability of it providing a positive return at the end of a given time period also increases, with a corresponding decrease in the probable magnitude of any positive or negative return. With enough diversification, investments in the stock market match government bonds (vulnerable to government or currency collapse, Armageddon), bullion kept at home (theft, Armageddon), cash at home (theft, inflation, Armageddon) and cash in the bank (bank bankruptcy, Armageddon) for security while providing a much better average return.
Except around say now, where you should take a look at how much most endowments have fallen by. Unless you know what you are doing (and factor in the time and resource involved in planning out a diverse array of investments) then you are gambling. More to the point, putting your money in a bank (backed by a government or several) is still the safest option.
Trackers are diverse-portfolios-in-a-package, and are the ideal instrument for someone who wants a low-risk, low-hassle, long-term investment vehicle that doesn't require much knowledge on their part. They even outperform most other fund packages, since their fees tend to be very low, which gives them a significant head-start over managed funds; I use the Fidelity MoneyBuilder UK Index fund, which has a fee of 0.1%. All you need to be successful with a tracker is a decade or two and the nerves to not panic and pull out your money when the market takes a dip.
The stock market is not a zero-sum game; the losers don't have to balance out the winners. If you want a market that's akin to gambling, look at the currency exchange market. In that market, every pound of profit is matched by a pound of loss for someone else, minus the spread (so it's really a negative sum game, just like gambling), but in the stock market, people buy a share of a company, which generates profit over time and pays this profit back to the shareholder as a dividend, in much the same way that a bank pays interest on deposits. The situation is a little more complicated, since the ability of the company to pay dividends can vary over time and the value of a share in the company varies with the market's assessment of it's present and future ability to pay dividends, but if you're investing in a tracker that tracks an entire market, it's not necessary to deal with that level of complexity.
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Anyone know anything about them? For the first time in my life I have the option of enrolling in one. I don't trust the government further than I can throw it when it comes to money; I plan to save enough privately to cover my own retirement.
But I know 401k plans are popular and standard, though I know very little about how they actually work or what benefits they'd give me. I may be being too paranoid and it would actually be a good investment.
I also don't know, if I did enroll, whether a regular plan or a Roth plan would be a better idea.
Can anyone from the USA give me advice?
Isn't your dad an economist?
If it were me, I would invest as much as the company will match in a 401k, because the match is a good return on your investment assuming that you will stay in the job long enough for their contributions to vest. I don't know what your actual choices would be as far as what the 401K would be invested in, but there are usually more conservative choices as well as the somewhat riskier ones, depending on your acceptance of or aversion to risk. However, unless the money is primarily invested in company stock, it should be safe from your company going bankrupt since it is invested through a brokerage house. Beyond the amount that the company will match, I would invest in a Roth IRA up to the maximum allowed, which I think is $5000, assuming of course that you can afford to make that investment. If you have a choice between a traditional 401k and a Roth 401k and you would still get matching funds from your employer for both, I would choose the Roth 401k.
Choosing between a regular IRA and a Roth IRA depends on whether you would rather have a tax break now or have both the earnings and principal tax free in the future, when the government's tax rates are likely to be higher than they are now even if your income in the future is lower, IMO. A Roth IRA offers more freedom when it comes to taking out your initial investment (but not the earnings), so if you have an emergency that is not one of the few approved ones for penalty free withdrawals from a traditional IRA, you can still get the money without penalty. If your company offers a 401k, then you can receive the tax deduction for a traditional IRA only if your income meets certain guidelines (around $50,000) anyway. For that matter, the ability to contribute to a Roth IRA is also subject to income guidelines. If you are earning over around $100,000 a year, you won't be able to get a Roth IRA for the full amount, although you could buy a traditional IRA with no tax deduction.
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My dad's a computer scientist with a pure math background. He does know some things about finance but he's hard to approach because, well, he's my father, and because financial things have always been a close secret in my family.
I'm not sure if I get matching funds for both the Roth and the regular, but I will find out. I didn't realize a Roth was easier to take money out of in an emergency.
Thanks for the info :)
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Interesting!
How many people do you know with investment plans who made LESS money towards the end of their careers than when they started out?
I don't know. :-\ I'm paid fairly highly for my skills at the moment and I'm not sure that it would get much higher without me moving into a supervisor role, which I really don't want to do - I want to be hands-on. I also may drop this corporate thing and get back involved with startups when I've made enough to cover living expenses without an immediate income.
It makes me wonder if I should take the plan type that counts on now being as good as it gets.
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