401k advice

[justang1997]

Does anyone use the managed funds that charge fees and return more intrest? Nearly everyone where I work just goes with the target date retirement plans.

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[Rem700]

for a 401k the target date funds are conservative, meaning not much risk of losing your principal but with that comes smaller returns. The managed funds are actively managed, which means they are constantly adding and subtracting new funds to accomplish there set goals. If your looking for more return then go with the managed fund, but with that comes more risk. The fee you pay is for the money manager, he or she basically gets paid regardless of it they make you money or not. So is risk vs reward and you gotta decide which is more beneficial to you.

[justang1997]

I had heard the target date funds are risky in the beginning for further out dates. I believe mine is 2050 so theoretically mine should be on the more risky side now but that's not what I've seen in the returns yet.

I'd assume you would want the intrest of a managed funt to be greater than the amount you pay to have it managed. Right? If I pay say $150 a year to a managed fund but only contribute enough to earn $100 from intrest then that's a bad idea obviously.

Trying to decide what percentage I want contributed to a managed fund.


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[justang1997]

I had heard the target date funds are risky in the beginning for further out dates. I believe mine is 2050 so theoretically mine should be on the more risky side now but that's not what I've seen in the returns yet.

I'd assume you would want the intrest of a managed funt to be greater than the amount you pay to have it managed. Right? If I pay say $150 a year to a managed fund but only contribute enough to earn $100 from intrest then that's a bad idea obviously.

Trying to decide what percentage I want contributed to a managed fund.


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[Rem700]

I had heard the target date funds are risky in the beginning for further out dates. I believe mine is 2050 so theoretically mine should be on the more risky side now but that's not what I've seen in the returns yet.

I'd assume you would want the intrest of a managed funt to be greater than the amount you pay to have it managed. Right? If I pay say $150 a year to a managed fund but only contribute enough to earn $100 from intrest then that's a bad idea obviously.

Trying to decide what percentage I want contributed to a managed fund.


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If you get an employer match then contirbute as much as possible that they will match (thats basically a larger slary for the year but you cant touch it until retirement age of 59.5 without a penelty (10%). If you dont get matched then a 401k is probably not a good option. Most likely an personal IRA would be a better option.

[Rem700]

Or a ROTH IRA depending on your gross income. These are after tax dollars that you can put away with tax deferred growth (you only pay tax when you start withdrawing from what it has earned, you wont pay tax on principal because the money was already taxed. For a Traditioanl IRA you contribute before tax dollars and get taxed as regular income on all of it when you start withdrawing at retirement.

[Rem700]

401k is the same as a traditional IRA in the respect that it is tax deferred until you start withdrawing form it. But IMO a 401k is only a good option if you get an employer match. If you dont then other options will most likely be more beneficial.

[justang1997]

Well it's maxed out at what they will contribute. And luckily the money is immediately vested.

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[Rem700]

Well it's maxed out at what they will contribute. And luckily the money is immediately vested.

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Thats a very good thing then.

[justang1997]

My gmother lost a whole lot in 2008 aand I'm getting nervous about how much is going in the 401k that I could loose. I think when I'm 40 I'll go full conservitave.

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[Rem700]

Just remember its all long term anyway. Even after market crashes things eventually return to "normal". It just sucks for anyone without the time horizon to hold out for the return.

[RecoilSensitive]

I am in a simple IRA but my employer contributes so I max that out. some people here add more to it, I dont i take the rest and dump debt and use it to not have car payments etc.

[Rem700]

I am in a simple IRA but my employer contributes so I max that out. some people here add more to it, I dont i take the rest and dump debt and use it to not have car payments etc.

Yep that is def another way to do it. Typically Simple IRA's are for self employed people, but they can also be used by anyone who wants to have their own IRA with contributions coming from a business. I know other people who have employers write a check to the IRA and it keeps the company from having to set up a retirement plan or from having to provide that beenfit to all employees. In that respect its usually after tax dollars so you will only get taxed on any gains and only when you start to withdraw after retirement age.

[Vividia]

The performance of the target date funds can be seen like any fund. Each platform offers different funds and they may perform differently. Check out your platform and see. On ours, the target date funds are at or above the so called "managed" funds lately.

When you are young, there is time to recover from the very natural cycling in the market, so be more aggressive. As you get older and closer to retirement, you won't have as much time to "make it back up" after a down turn, so trend more conservative in your choices.

After 2008 my 401k fund dropped by 40%, and now it has gone up to 30% higher than it was before the crash - I have made it back and then some. Although I am no longer young, I chose to be more aggressive to make it back quicker. Had the 401k been my only retirement vehicle, I would not have done that, I would have been more risk averse. Now that I have made it back, I am shifting to a more conservative investment model.

Above all, select a course and stay on it. Don't try to anticipate the market and treat it like day trading, that will always be a reaction to yesterday's news, not today's or tomorrow's trend. That is NOT how mutual funds work, and fund managers get paid the big bucks to do that for you. Several years ago, we had someone here who was constantly moving in and out of funds, and was always griping at how "piss poor our 401k is." I knew what my returns were, so I checked the overall plan and the average among all participants that year was over 15%, while this guy's was 3%.

[Rem700]

Viv has some good advice.

[inthewaterky]

VIV is right.. Hey VIV I pass by your work every day

And usually most 401k has a company match. Make sure you take advantage of the full match. I had guys that report to me who had never setup a 401k. My company matches .70 on the dollar up to 6%. My average returns year over year the last 5 years have been 18-25% add the match on top of that.. And well... I will be happy to pay a half to a full percent for a well managed fund. Look at the history of the last ten years. You should see a huge dip in 2008... I like to look for steady inclines year over year. Right now the market is inflated. But you can look at the information they provide and get a good idea of which ones to pick.

I like to stick to 4-5 funds and rebalance quarterly, reinvest dividends and let it ride. If you are young stick to moderate and aggressive funds. Also if you can take advantage of stock options, do so, as you usually get a 5-10% discount up front. Save now... Or pay later.