Prospering in today's economy

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Re: Prospering in today's economy

Postby SquarePeg » Thu Feb 28, 2013 5:41 pm

Scenario Thinker wrote:All mine are in retirement, no capital gains.

SquarePeg wrote: I continue to divert a portion of my salary into various funds in my 401(k) with a 30% employer match. That's no typo -- thirty percent match.

Do you mean a dollar for dollar match up to 30% of your pay, or 30% match on the dollars you put in?

The latter. They put in $0.30 for every dollar I invest. I'm fully vested, too.
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Re: Prospering in today's economy

Postby jcjm » Fri Mar 01, 2013 7:04 am

I understood that investors cashed out in December to take advantage of the lower 2012 capital gains taxes.


Recently, I only buy stocks or mututals funds in a retirement account so I don't have to fool around with changes in the tax code. Most is in Roth so there is no tax strategy involved.

The plan is to borrow against the 401(k) in the event that the teenager goes to college and needs help paying for it.


There are a lot of advisors and articles that say not to borrow against retirement accounts for any reason and especially for college tuition. They may be saying this because they don't want you to take money out because it will affect them, but they give some good reasons. For instance the penalty and risk that you child won't be able to get that great job when they graduate. Leaving you with no retirement and with them unable to help you out because they are barely getting along.
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Re: Prospering in today's economy

Postby jcjm » Fri Mar 15, 2013 5:59 am

The market keeps hitting new highs and has been up for 10 days in a row.

I keep thinking what goes up must come down and with 10 days in a row up, there has to be a large down day soon.

I've scaled back on stocks and what I do have are in a broader index. Like the Russell 2000 instead of the DOW 30. They say you get hit less when you have 2000 stocks than when you only have 30, because its a lot easier for 30 stocks to dive at the same time than all 2000.
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Re: Prospering in today's economy

Postby Scenario Thinker » Fri Mar 15, 2013 9:09 am

Even though it was purely coincidental, I had just gotten a chunk of money into a 500 index fund before the uptick. Even though it may go down below what I put in, it's been fun watching it grow for several days.
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Re: Prospering in today's economy

Postby SquarePeg » Sat Mar 16, 2013 11:16 am

Hi ST, even if it goes down, you can do well if the dividends are good and you reinvest them. The good thing about an index fund is that the fees are usually low. Speaking of fees, isn't it better to pay the fees from a cash account rather than cash in shares of the fund?
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Re: Prospering in today's economy

Postby SquarePeg » Sat Mar 16, 2013 11:28 am

jcjm wrote:-snip-
The plan is to borrow against the 401(k) in the event that the teenager goes to college and needs help paying for it.

There are a lot of advisors and articles that say not to borrow against retirement accounts for any reason and especially for college tuition. They may be saying this because they don't want you to take money out because it will affect them, but they give some good reasons. For instance the penalty and risk that you child won't be able to get that great job when they graduate. Leaving you with no retirement and with them unable to help you out because they are barely getting along.
That makes sense. Thanks. My wife is starting to notice books about paying for college.

I have a lot saved up in the account already, and the house has much equity, so hopefully a loan won't impact the account too much. BTW, I had the idea that the 401(k) advisor gets a cut of the fees involved in borrowing against the account, so maybe that's why he okayed my plan. I should ask him next time.
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Re: Prospering in today's economy

Postby Scenario Thinker » Sat Mar 16, 2013 12:54 pm

SquarePeg wrote:Hi ST, even if it goes down, you can do well if the dividends are good and you reinvest them. The good thing about an index fund is that the fees are usually low. Speaking of fees, isn't it better to pay the fees from a cash account rather than cash in shares of the fund?

It's a Roth IRA and in a Vanguard fund. The fee is pretty low (.17%). I guess I was just saying that theoretically it could go lower, but it's fun to watch it go higher for now. Since this chunk of money is all by itself in one fund, I can watch it relative to its starting point. I'm probably not going to add to it. I'll just count it as my "stocks" percentage in my total portfolio.
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Re: Prospering in today's economy

Postby Scenario Thinker » Sat Mar 16, 2013 1:11 pm

I borrowed against a 401(k) only once when my ex and I needed money for starting out with the house, etc. Not worth it. 10% penalty, that money can't earn anything any more, plus the money was taxed.

My nephew just graduated with a nice sizable student loan debt. I've read that that will be the next bubble, students being "under water" because they can't repay their loans and can't get a good enough job to even come close to helping.

That's why I look at the educational "industry" with such disdain any more. They're really out to rake in the cash on innocent people who are more or less desperate.

I was debating on getting another masters thinking it might help, but after hearing what one of my coworkers will owe ... AFTER some employer reimbursement, I decided it's not worth it. She is going to owe THOUSANDS (and I'm talking about 60K). It's really hard to believe. Classes are over 5 grand each. The company pays for about 2 a year. She'll end up taking about 6 per year for 3 years (18 classes, which is a lot. I usually see about 11 or 12 for a masters). Plus, if she leaves the company before 2 years, she has to pay the reimbursed classes back.
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Re: Prospering in today's economy

Postby SquarePeg » Sun Mar 17, 2013 11:35 am

Is it also true that tuition reimbursement is taxable as income?
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Re: Prospering in today's economy

Postby Scenario Thinker » Sun Mar 17, 2013 2:54 pm

The way I've seen it work is, if you go over the amount an employer will reimburse you 100%, they maybe will reimburse you for more, but count it as taxable income. I remember one person years ago where they limited the amount per course (now they limit per year), her courses were more than the limit, so they reimbursed up to the limit, then covered the entire class, but added the difference onto her income.

I did a quick search and keep seeing a Federal limit of $5,250, but I don't know how current it is. It's amazing that financial web sites don't put the date in their articles to see how current they are.

In the $60K example above, though, I'm pretty sure the excess will be paid for with student loans.
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Re: Prospering in today's economy

Postby jcjm » Mon Mar 18, 2013 6:22 am

There are many reason, as stated before why not to draw money out early on retirment money.

First you pay the 10% unless you are a first time home buyer or some other exception, but usually those have a cap. Last I heard it was $10,000. Then you don't earn money on that money while you are paying it back. Third, unless it is in a Roth or similar vehicle, you have to pay taxes on that.

So betwen taxes and penalties, you only get maybe 65-70% of what you take out.

The whole ecucational system is another issue on another thread, but I agree with you on that. The for profit online schools are just money machines. They make money and pass out degrees without a correlation between a degree and getting a job. They are good if you already have a job and just need the paper to get a promotion, but not much help with getting a job right after graduation. The brick and mortar schools aren't much better.

For example, our local colleges turn out more brodast journalism majors every year than their are broadcast journalists working. So even if every broadcast journalist retired or died, there would still not be enough jobs for all the graduates. Most graduates need to take a job in rural America, and work for peanuts in Idaho or the Dakotas until they get tired of living in poverty and find a new career.

I have a friend who had to file bankrupcy because of student loans and taxes. No other bills. They had do have a reorganization (ch 11 or 13) just to get the payments to a managable amount and wipe the balance out after 5 years.

If you have the money in cash, it is hard to re-coop your investment on education, but its really hard when you are taking a loan for it.

Back to investments. So, think hard and do an analyis of what that degree will get back before you take money out of a retirement fund to finance it.
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Re: Prospering in today's economy

Postby jcjm » Mon Mar 18, 2013 6:26 am

My prediction for the week. The markets will be down. Several reasons.

1 Greece is back in the news.
2 What goes up must come down.
3 Its getting close to the 2nd quearter which historically is the beginnin of a dip in stocks.
4 Like the weathermen, if you make the same prediction for long enough, eventually you will be right.
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Re: Prospering in today's economy

Postby Tituba » Mon Mar 18, 2013 9:31 am

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Re: Prospering in today's economy

Postby jcjm » Wed Oct 09, 2013 10:36 am

Inverse index funds seem to be a hedge agains market loses during this budget problem.

They go up when the market goes down, which it has.

Only problem is it may be too late now to get in. Don't know when the problem is going to be resolved, and when the market will go back up. But if your in them now, you would have made money while the DOW has lost.
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