Retirement Planning

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Retirement Planning

Postby RiverDog » Wed Oct 28, 2015 12:22 pm

Kal brought up a subject in the main forum pertaining to Marshawn Lynch helping out "No E" on his 401K stuff that hit a raw nerve with me. I am astounded at the number of otherwise brilliant people that do not have a clue as to how to make smart investment decisions regarding their eventual retirement. Case in point: I recently had a new supervisor that I was mentoring, very bright, college educated, good parents, and so on. He's in his 20's, married, no kids, wife has a well paying job. They both have college loans they are paying off and one car payment they're working on, but otherwise, they are not hurting for money in the least and probably have more disposable income now than they will when they start punching out kids.

I asked him how much he was contributing to our company sponsored 401K and he said 2%. My jaw about hit the floor, as we have a 2 to 1 company match up to a maximum 4%, meaning he was getting just 1% from the company. He was unaware that he could get as much as 4% if he contributed 8%. We quickly got his contribution rate up to 8% as he had no problem being able to afford it. Then I asked him which type of fund he had his contributions in, the pre tax conventional 401K or the after tax Roth. He looked at me as if I were talking a foreign language.

One of the differences between a conventional and a Roth is that the conventional 401K is tax deferred, meaning that you don't pay taxes until you are ready to use it, the logic being that when you retire, you will be at a lower income and will pay taxes in a lower bracket than you would had you paid them when you were employed. In the Roth, you pay taxes on it up front at what ever bracket you happen to be in at the time.

But that's only one of the differences. Most people, especially our younger folks, do not realize that on a Roth, none of your account, including the earnings, is subject to taxes while on a conventional, the entire value of your account is subject to tax. And for me, it's beginning to look like when I retire, I might not be able to get my income low enough to where I could benefit from withdrawing my conventional 401K at the lower rate, so I won't be able to take advantage of the reduced tax anyway. Moral of the story is that if you have a Roth option, be sure that you're taking advantage of it.

Sorry to go into all those boring details, but my pet peeve and purpose for starting the thread is that neither employers or our schools and universities are teaching our younger generation the basics of sound retirement planning. I told the above story to our HR manager, said that we really need to get some people in here to educate our employees, and she said "great idea!". That was two years ago, and nothing ever happened. I have a 29 year old daughter, 7 years of college and who is now an RN, that is just as naïve as the supervisor I was mentoring. With more and more companies opting out of defined benefit programs, ie pensions, more and more responsibility for retirement planning is being passed onto the individual and they are not prepared, moreover, and what's worse is that no one seems to care.
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Re: Retirement Planning

Postby burrrton » Wed Oct 28, 2015 1:52 pm

I consider myself *painfully* naive about financial planning, but I do know enough to pay enough into retirement to max out any matching contribution that's available.

Good points, and you've prompted me to look more closely at my accounts (I switched jobs 2 years ago, and my new employer has now joined a larger organization, so I have a lot to mull over).
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Re: Retirement Planning

Postby RiverDog » Wed Oct 28, 2015 4:20 pm

burrrton wrote:I consider myself *painfully* naive about financial planning, but I do know enough to pay enough into retirement to max out any matching contribution that's available.

Good points, and you've prompted me to look more closely at my accounts (I switched jobs 2 years ago, and my new employer has now joined a larger organization, so I have a lot to mull over).


A lot of employers don't offer the Roth option with their 401K's. My wife's employer doesn't have a Roth option and mine didn't until about 5 years ago. But if they do, I'd put 100% of my contributions into the Roth. I don't think employers can offer a Roth option on the company contribution as I think it's required for them to put it into the conventional side in order for them to get a tax break, or so I was told.

I'm meeting with my financial "team" in a couple of weeks as my wife is going to be applying for disability and I have a bunch of questions about social security, which is another complicated road map that most people don't know about... like being able to get 132% of your Full Retirement Benefit (what you would get at age 66)if you wait until age 70 to start receiving benefits.

Anyway, there's just tons of stuff out there that most people are not aware of.
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Re: Retirement Planning

Postby Old but Slow » Thu Oct 29, 2015 7:41 pm

Thanks, Dog, for some pertinent info. I retired a few years ago, and I wish that I had better counseling and information prior to that. I am surviving, OK, but I could have done things much better with better information. I would love to be able to afford a meal in a restaurant once in a while.
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Re: Retirement Planning

Postby RiverDog » Fri Oct 30, 2015 3:24 am

Old but Slow wrote:Thanks, Dog, for some pertinent info. I retired a few years ago, and I wish that I had better counseling and information prior to that. I am surviving, OK, but I could have done things much better with better information. I would love to be able to afford a meal in a restaurant once in a while.


It really is a travesty that so many people forgo benefits simply because they are unaware of them. Many people make the assumption that the government is going to take care of them when they retire (not saying that's you), but the fact is that SS has a written policy of not making any recommendations to applicants, they only answer questions. They don't tell them about things like spousal benefits unless they ask. The damn thing has taken a simple concept from 80 years ago and perverted it into a hugely complicated maze (one of my arguments against government programs). The thing that's really unfair about social security is that they've made it so complicated that only an educated person, usually fairly high income to begin with, can figure out which path is best for them. The poor slob that's broke his back working at unskilled or semi skilled jobs doesn't take advantage of his optimal path simply because he's not aware it exists and leaves tens, sometimes hundreds of thousands of dollars on the table.

I attended one of the free seminars on social security that pop up occasionally in my mailbox and in the local newspaper and it really opened my eyes, then I talked to a friend already on SS and he recommended a book that I bought and it opened them even further. It was the best $10 I ever spent.

http://www.amazon.com/Get-Whats-Yours-S ... 1476772290

I'm not sure how much of it applies to you as you might have already passed some decision points, but for anyone between age 55 and 70, it's a must read.
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Re: Retirement Planning

Postby NorthHawk » Wed Nov 04, 2015 2:21 pm

You make some really good points, RD.
I hope some of the younger posters on this forum read this thread.
Making some small financial sacrifices now can lead to a big return later in life.

The other area that I would suggest is they also find out the basics of how investing works - how the stock and bond markets work as well as the impact of debt load and credit.
It all goes together and will help people decide which plan works best for them and their financial goals. Nobody should be put in a position of having to work the rest of their life because they didn't know the opportunities that were available today.
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Re: Retirement Planning

Postby RiverDog » Wed Nov 04, 2015 2:50 pm

I probably ought to mention that the link I posted is now out of date. There was a very big change in Social Security just a few days ago that renders some of the information in that book I linked obsolete. You can no longer file and suspend benefits, or so I was told my investment team earlier this week (I haven't had a chance to research it myself). That was one of the strategies my wife and I were going to use. It doesn't hurt us all that much but it's going to really impact the little guy. The politicians are going to keep chipping away at SS, so anyone under about 55 needs to make sure that they have their own nest egg, and an alarming number of people don't have a thing. SS may not be there at all in another 25 years, and there's going to be a real calamity when they finally do away with it and a bunch of people are left with nothing. More and more companies are doing away with pensions, too. Boeing just replaced their pension with a 401K, as they can't control a pension like they can a 401K. The younger generation really needs to pull their heads out or else they're going to be picking chit with the chickens.

My wife just filed for disability. She's been working as a nurse and had to quit a few weeks ago as she simply can't fulfill everything her employer is asking her to do. She's been diagnosed with MS and RA for years, so hopefully she can get on it. The outcome of her application could make a difference on my own retirement plans, whether I continue to work another couple of years or hang it up about this time next year.
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Re: Retirement Planning

Postby burrrton » Wed Nov 04, 2015 7:54 pm

She's been diagnosed with MS and RA for years, so hopefully she can get on it. The outcome of her application could make a difference on my own retirement plans, whether I continue to work another couple of years or hang it up about this time next year.


Your wife's situation is exactly what our safety net is there for- I'll keep my fingers crossed for her application to be approved as it should be.
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Re: Retirement Planning

Postby EmeraldBullet » Thu Nov 05, 2015 1:19 am

RiverDog wrote:Boeing just replaced their pension with a 401K, as they can't control a pension like they can a 401K. The younger generation really needs to pull their heads out or else they're going to be picking chit with the chickens.


They actually replaced it with a 401k+, which offers the second best matching rate of any business in the nation, so it isn't that bad. Lots of companies are getting rid of pensions and don't offer any 401k matching, which is terrible and your general point still stands.

BTW, wishing you luck with your wifes application. I've heard that lots of times they reject you the first time you file but if you file again you get accepted. Not sure if that's true or not but it's what I've heard form other people that have gotten disability. Either way wishing your family the best.
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Re: Retirement Planning

Postby RiverDog » Thu Nov 05, 2015 7:06 am

EmeraldBullet wrote:They actually replaced it with a 401k+, which offers the second best matching rate of any business in the nation, so it isn't that bad. Lots of companies are getting rid of pensions and don't offer any 401k matching, which is terrible and your general point still stands.

BTW, wishing you luck with your wifes application. I've heard that lots of times they reject you the first time you file but if you file again you get accepted. Not sure if that's true or not but it's what I've heard form other people that have gotten disability. Either way wishing your family the best.


Thanks for the well wishes, guys. My wife is 61 (as am I) so if she doesn't get approved, she only has another year to wait before she can start drawing 80% social security, so it's not like we'll be standing in the soup line if she doesn't get it. One of the things that will help if she gets disability is that 18 months after she's approved she'll be eligible for Medicare, meaning that if I retire before I reach 65 and Medicare age, would relieve me of having to buy insurance for her, at least nothing more than supplemental insurance.

I hadn't heard the details of what Boeing's 401K is, but it had to be pretty sweet in order to get their union to give up the pension. But I can guarantee you that it won't remain lucrative forever. The first excuse they get, such as a downturn in business, they'll be cutting it. My company quit accepting new members into their salaried pension plan several years ago. I read quite a while ago that if you bought a new car from Ford, $800 of the sales price went directly to their pension fund. Honda and Toyota do not have that kind of expense to cover. If Ford wants to be competitive in the world market place, which is more and more the case nowadays, you can't be giving your competitors an $800 price advantage. So you can't blame companies for wanting to get out from underneath pension plans. The problem with pension plans is the same problem social security is facing....more and more people taking out of the fund and fewer and fewer contributing. Particularly in the blue collar industries, they've been forced to become more efficient to remain competitive and have cut their work force, meaning there are fewer employees contributing to their pension while increasing life expectancy keeps more people drawing from it.

Someone really does need to get this information out. When you're young, you don't think long term, you think you're going to live forever. Heck, there's a lot of younger people today that don't sign up for company sponsored medical insurance not to mention participate in a 401K. IMO personal finance should be a required course in order to graduate from high school, but you never hear anyone arguing for it.
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Re: Retirement Planning

Postby EmeraldBullet » Thu Nov 05, 2015 1:53 pm

Fully agree with you RD. I also would like to point out though that any info you want to learn about that is out there for free online. I am very upset with how few people, of my age group and younger especially (i'm not old but not young really either, just like to hold onto what little of my fleeting youth I have left), take advantage of the free knowledge out there.
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Re: Retirement Planning

Postby Seahawks4Ever » Mon Nov 09, 2015 10:03 pm

RD, if your wife only has to wait one year before drawing 80% S.S. wait the year. It isn't worth what you will have to give up by applying for disability, especially for only a year.

What you are not taking into account is that the FED. government is going to go after the money YOU still make to "pay" for the disability payments she will draw. Check it out.

My wife was forced to go on disability because of diabetes 13 years ago and they creamed me. I have had to pay, and pay, and pay some more.
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Re: Retirement Planning

Postby RiverDog » Tue Nov 10, 2015 5:45 am

Seahawks4Ever wrote:RD, if your wife only has to wait one year before drawing 80% S.S. wait the year. It isn't worth what you will have to give up by applying for disability, especially for only a year.

What you are not taking into account is that the FED. government is going to go after the money YOU still make to "pay" for the disability payments she will draw. Check it out.

My wife was forced to go on disability because of diabetes 13 years ago and they creamed me. I have had to pay, and pay, and pay some more.


My understanding is that it shouldn't take more than 8 months for my wife to get disability. We're reasonably confident she can get on it as she's been diagnosed with both MS and rheumatoid arthritis, both diseases that they commonly approve without much fuss. The advantage of her getting it is that after being on disability for two years, she'd be eligible for Medicare A and B, which would relieve me of having to pay for her insurance if I decide to retire at that time.

If she doesn't get on disability by next year at this time, then we'll consider having her file for the 80% SS as she turns 62 in October 2016.

But I will check it out. My financial advisor is well versed in SS/disability as his wife is disabled, too. My wife and I are both the same age and there's a good chance that I'll retiring at about the same time.
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