Saving for the future.

[AKmoney]

I am not ever playing that game again. To me it seems like sanctioned organized crime. My backup plan is that I have some ideas I should be able to bring to market and benefit from. I have not had time to pursue them while doing my regular day job. Eventually I will give them a try though.
My primary plan is to collect my annuity from my current job.

You shouldn't solely rely on a single source pension. It's too risky.

My employer offers us a "cash balance defined benefit" pension plan. Here's how it works: They contribute $X to a cash balance every year, where X is based on a percentage of salary and the employee's age. The older the employee, the more they kick in. If the employee could somehow survive at the company until their early 60s, the last few years of the plan were quite lucrative. When the employee retired from the company, they could elect to take the entire cash balance and roll it into their own IRA or they could choose an annuity based on how much cash accrued.

But here's how it really works: Last year, "The Two Bobs" (aka consultants) came in and told the board of directors "WTF are you thinking paying so much money into this pension plan?" End result: Employer contributions to the pension plan were whacked in half. On top of this, the company is now offering "voluntary separation" packages to employees 55 and older. It's clear they don't want the older folks around. They cost the company too much money.

Lastly, *if* the company were to go the way of Enron or the pension plan went bust, it would get handed over to PBGC - Pension Benefit Guaranty Corporation. Think of government insurance (like FDIC) for pensions. PBGC is in sorry shape. They have the power to whack the size of the pension benefit in the event something catastrophic happens. They can, and they will...if it came to it.

Bottom line: Don't put all your eggs in one basket.

 

[AKmoney]

Didn't get to respond to last thread. Was laid off July 2016. 32 years with them. 5000 workers lost jobs. Company moved everything overseas. Have 401k through Fidelity that is still making 12%. I let them manage it. A lot of guys I worked with were doing their own thing and couldn't keep up with what I was making. The market is definately on a run. Eventually I'll roll it over to something else. But with that amount of return I just can't move it just yet.

Check which funds Fidelity has you invested in. If you're paying them them an advisory fee to manage it for you, you may consider to "roll your own" and save the money. It's really not difficult to do. If anything you could just put the entire 401k into a Target Date fund. Most 401k plans tend to offer them.

 

[Muzzle of Bees]

You shouldn't solely rely on a single source pension. It's too risky.

My employer offers us a "cash balance defined benefit" pension plan. Here's how it works: They contribute $X to a cash balance every year, where X is based on a percentage of salary and the employee's age. The older the employee, the more they kick in. If the employee could somehow survive at the company until their early 60s, the last few years of the plan were quite lucrative. When the employee retired from the company, they could elect to take the entire cash balance and roll it into their own IRA or they could choose an annuity based on how much cash accrued.

But here's how it really works: Last year, "The Two Bobs" (aka consultants) came in and told the board of directors "WTF are you thinking paying so much money into this pension plan?" End result: Employer contributions to the pension plan were whacked in half. On top of this, the company is now offering "voluntary separation" packages to employees 55 and older. It's clear they don't want the older folks around. They cost the company too much money.

Lastly, *if* the company were to go the way of Enron or the pension plan went bust, it would get handed over to PBGC - Pension Benefit Guaranty Corporation. Think of government insurance (like FDIC) for pensions. PBGC is in sorry shape. They have the power to whack the size of the pension benefit in the event something catastrophic happens. They can, and they will...if it came to it.

Bottom line: Don't put all your eggs in one basket.

They will get notice that if they **** with my money I will spend every penny and hunt them down.

 

[Muzzle of Bees]

Whats your annuity? Whats the payout, what happens if the company goes under? Your primary plan should not be relying solely on someone else?

They will get notice that I will spend every penny and hunt them down.

 

[AKmoney]

They will get notice that if they **** with my money I will spend every penny and hunt them down.

Good luck with that.... Even Tony Soprano and Paulie Walnuts got screwed over when the big corporations started taking over the mom and pop coffee shops

 

[wadle5]

They will get notice that if they **** with my money I will spend every penny and hunt them down.

They will get notice that I will spend every penny and hunt them down.

What money...the money you were banking on them supplying you? In regards to pursuing them, they are closed went under...nothing you could do or that they could reimburse you for. A company that shuts down cannot be pursued?

 

[JayceeP]

My opinion & this is not advice:

Pen is mightier than the sword. Unless you have a government pension, I would really review the pros and cons of keeping the defined benefit pension vs taking the commuted value/lump sum or whatever you guys call it in the states. All it takes is a signature to whack your benefits. A state or federal government is a lot less likely to go belly up than a company in the cowboy capitalist US (and no, Canada isn't immune from this stuff either... it happens. Remember Nortel?).

Also, just because you are old it does not necessarily mean you should not own good dividend paying stocks either in the form of mutual funds, ETF's, or individually. A lot of your retirement money won't be touched for years. You still have a long time horizon for a lot of your money. Just don't chase stupid returns. Stay prudent. Own the kind of companies you read about every quarter that consistently make "record profits". In Canada, this is primarily associated with the banks (we have much stricter regulations) and people love them. Telecoms and utility type companies come into play. Additionally, fees are really only a big factor IF the investments you are comparing are invested identically. Don't go with one company or one product over an other based on fees alone. It shouldn't necessarily be top on your list.

 

[theesotericone]

I agree that at some point, we're going to have a correction, if not a crash. Everything is cyclical. For someone in retirement, the main thing you can do is adjust your asset allocation to a more conservative position, say, for example, 50/50 stocks/bonds. For a working stiff like me with 15+ years left to go, I'm holding at 80/20. I'll tank if there's a market tank, but I've also got plenty of time left to recover.

We've been do for a correction for years now. It'll come. To what extent? Ask ten traders and you'll get ten different answers.

I'm in the same boat with having plenty of time left to recover. I've got 20 years before I can draw anything without penalty in my IRA. I manage my own account via OptionsHouse(now E-Trade). I can't not be in this market right now. Returns are 20% and that's just on stock positions. Take the occasional options trade into account and I'm pretty happy to manage my own money. When the house of cards comes crashing down I'll just hold and wait.

In 15 years that will change but for now it's a fun game to play.

 

[CXS]

My opinion & this is not advice:

Pen is mightier than the sword. Unless you have a government pension, I would really review the pros and cons of keeping the defined benefit pension vs taking the commuted value/lump sum or whatever you guys call it in the states. All it takes is a signature to whack your benefits. A state or federal government is a lot less likely to go belly up than a company in the cowboy capitalist US (and no, Canada isn't immune from this stuff either... it happens. Remember Nortel.

Exactly! I know people who lost their corporate pension (United Airlines, Qwest come to mind) and these guys are now working until they drop dead. Seeing one’s defined pension balance drop to nothing has to be a horrible experience. My wife had a nice defined benefit pension and worked for a Forune 500 company that was in the merger & aqusition phase for years and nobody knew if they’d have a job or not as the months past and another deal was being made. She made it to her 30th year and bailed taking her pension as a lump sum. Whew!

Be careful folk, there aren’t any sure things around these days.

 

[Oldmanb777]

Guess I will jump in here. Why not, its fun to hear other ideas on this subject.
We went through some rough years. Airline deregulation act pretty well destroyed our future, as an airline worker. Or at least what we expected to have for a future. So after some pretty rough years, I decided that wasn't going to happen again. We started "paying us first" and looking for several income streams. I think we you need more than one, and probably 3 minimum. I'm probably a Harry Dent, MMM, and Suzzy Ohrman fan. that's probably where my financial philosophy is. So we do for ourselves, live debt free, pay ourselves first, and invest where we think demographics will drive the economy. Here is a big one.........It's just as important how much you keep, as how much you make. Maybe not totally true, but close. And don't rely on someone else to provide for you. It's ALL up to you. I have worked more than one job most of my life, always saved/invested the majority of the second income, and lived on only one. If your spouse works, live on one income, save/invest the other. In a very few years, you will have some financial security. Thats one of the biggest pillars of freedom and happiness. You can't have freedom if you owe, and its hard to be happy without feeling free. We are at an age that our investments are starting to pay off. It takes time, and some took lot more time and effort and work than better investment might have. But now we will have 4 income streams when I retire. Any one of them would at least keep us from starving, not much more, but that's probably good enough. Good luck to all of us, hope it all works out for you..............

 

[Koko4]

I'll chime in here, too. I am 29 and have been growing a savings account for the past few years (living below my means, trying to put some away each month). My company matches 3% of my income into a 401k, which came out to me depositing $250/mo and the company puts in about $103/mo. Other than that, I had nothing.

I started looking into investing into the stock market / bonds. I read a bit on the Bogleheads forums, and also got a basic understanding of how the stock market works and why it can be a good idea to use an index or mutual fund to track the entire market, rather than just individual stocks. The Boglehead's "Beginner's Guide to Investing" is a short video series that really helps break it down if you have little-to-no prior knowledge, like me.

I decided to go with a robo-advisor, and specifically chose Wealthfront because they manage the first $15,000 for free (used Nerdwallet as my referrer). Each referral I get adds $5,000 to that balance. Anything over that has a 0.25% rate (VERY reasonable compared to any actively managed funds). I opened an individual investment account because I want to be able to access that money when needed, although I don't plan on touching it until I'm ready to put a down-payment on a home.

I also opened a Roth IRA through them, and contributed the maximum $5,500/yr to that. I'm looking forward to making regular contributions and watching these accounts grow.

For someone completely new to the stock-market and investing, I think this could be a good option. I read that it's a good idea to invest to at least keep up with inflation rates, otherwise your savings will have less and less buying power each year.

 

[Engineer]

I started looking into investing into the stock market / bonds. I read a bit on the Bogleheads forums

You are already well above many of our peers - I love Bogleheads ,my only knock is that as a whole they are a very conservative bunch and i can see how the average person would feel very discourage reading some of the posts.....I have 5million can I afford to retire? GTFO - you can, maybe not with a private island and plane but you can haha

The best thing I ever did was start at a very aggressive 401k savings rate for my wife and I on day one, we never saw/had that extra money so we never missed it and after 7 years of work we have very healthy retirement portfolios for our age.

The second best was getting a healthy emergency fund - We have had plenty of events over the years from a couple hundred to a couple thousand dollars or more and every single time we look at each other, cringe at the cost and then say "thats what the fund is for" so we don't have to stress over money or worrying about life unexpected events.

Finally, I can not thank my parents enough for teaching me financial management - my very 1st allowance was divided into 4 parts, tithing 10%, Long term savings 30%, mid term savings 30% and short term 30% and I was given different interest rates on each - I loved it and it brings a smile to my face as I still remember checking/counting it in the envelopes. Got my own checking account very early as well as brokerage (minimal funds but the idea of investing in index funds stuck).

*last plug - Low Cost, well diversified investments! (My preference is total market index funds is key - just like pensions are a lot of eggs in one basket, so is having a life savings in 5 stocks that you just "know" are going to beat the market. I also do not believe in market timing to the magnitude of pulling money out , the most I would ever do is to redistribute new contributions, assuming thats enough to keep allocation in desired range 90/10, 80/20 etc.

 

[leftyguns21]

using loans to invest. since there seems to be a lot of smart people on here maybe someone has more insight. I come from a poorer up bringing and it wasn't until my late 20's (I am 38 now) I started to better myself. I've been pretty fortunate to find jobs that pay well since my late 20's. Then by pure dumb luck I bought a townhouse on the down market, 2009. I paid $158k for it. Over the last 3 years I started making 3 extra payments a year so its getting paid down nicely. My neighbor just sold the same floor plan as mine with far fewer upgrades for $300k+, so I have a lot of upside now. I finally started a 401k about 4 years back and have been contributing 13% while my company matches 4%(in stocks). Its growing rather quickly, averaging 12% annually. According to the portfolio I am on track now to retire and live comfortably by 65. I have a savings but its not huge, I have expensive hobbies now that I have money. I have no other debt except normal bills. My question is, a co-worker informed me to re-fi my home or do a HELOC and use the equity to my advantage. Take out as much as I am comfortable with and play the stocks with it. The thing of it is, a $70k HELOC is around $300/month and with interest Ill pay back over $140k (assuming it goes the full length of the loan). Wouldn't I be smarter just using that $300 paying my house or putting it some where else? Starting with $70k in stocks/high interest accounts will grow faster but I am also paying an additional $70k in interest. I did a quick calculation of high interest, $70k at 12% interest adding $1000/year in 30years would be over $500k Which in theory makes sense, I would gain over $300k. His thinking is why am I trying to pay off a house to save $800/month (my mortgage) when I could be earning a lot in higher interest. He also says the house could go down at any time losing all that equity that I could have stuffed some where else. I am trying to decrease my monthly debt not add to it but at the same time I would like to have a plush savings to retire on. Having a 401k doesn't seem to be enough, do I bite the bullet and take on debt, or is using debt to invest a bad idea?

 

[wadle5]

using loans to invest. since there seems to be a lot of smart people on here maybe someone has more insight. I come from a poorer up bringing and it wasn't until my late 20's (I am 38 now) I started to better myself. I've been pretty fortunate to find jobs that pay well since my late 20's. Then by pure dumb luck I bought a townhouse on the down market, 2009. I paid $158k for it. Over the last 3 years I started making 3 extra payments a year so its getting paid down nicely. My neighbor just sold the same floor plan as mine with far fewer upgrades for $300k+, so I have a lot of upside now. I finally started a 401k about 4 years back and have been contributing 13% while my company matches 4%(in stocks). Its growing rather quickly, averaging 12% annually. According to the portfolio I am on track now to retire and live comfortably by 65. I have a savings but its not huge, I have expensive hobbies now that I have money. I have no other debt except normal bills. My question is, a co-worker informed me to re-fi my home or do a HELOC and use the equity to my advantage. Take out as much as I am comfortable with and play the stocks with it. The thing of it is, a $70k HELOC is around $300/month and with interest Ill pay back over $140k (assuming it goes the full length of the loan). Wouldn't I be smarter just using that $300 paying my house or putting it some where else? Starting with $70k in stocks/high interest accounts will grow faster but I am also paying an additional $70k in interest. I did a quick calculation of high interest, $70k at 12% interest adding $1000/year in 30years would be over $500k Which in theory makes sense, I would gain over $300k. His thinking is why am I trying to pay off a house to save $800/month (my mortgage) when I could be earning a lot in higher interest. He also says the house could go down at any time losing all that equity that I could have stuffed some where else. I am trying to decrease my monthly debt not add to it but at the same time I would like to have a plush savings to retire on. Having a 401k doesn't seem to be enough, do I bite the bullet and take on debt, or is using debt to invest a bad idea?

That is something you would want to talk to a tax advisor about. I should specify a good tax advisor. Because we debated paying off our house, but the advisor did point out that having a house payment does help when filing taxes(this area is way over my head, tax laws are insane). But this is definitely something I would recommend even looking over at www.biggerpockets.com. The amount of knowledge and actual people who have been in the exact same situation as you is astounding. while moreso directed at real estate investing the guys over there within an hour would give you the best answer in regards to your HELOC payment. The main thing you have to realize is 12% return consistently isn't entirely true as that is most likely taking into account your monthly contributions and your company match. Also 12% return consistently is a pretty lofty goal unless you are full on aggressive and are okay with a market correction(read -30% return randomly in a year.) The reality is the market is doing great and a great time to be in it, but my question to you would be what would you do if next month you lose half of your account value due to market drop. Would you stay level headed and ride it out or would that squeeze you and make you panic? Either way as pointed the housing market isn't a guarantee either. I would definitely consult biggerpockets for a little more in depth discussion on your HELOC question and see what feedback you get there and see what you end up going with.

 

[Bumbo]

I absolutely respect the decision to have children but raising them right is an enormous responsibility - and expense. I'm 100% certain they're not for me.

Other retirement/savings advice: Become a cop or a fireman, especially in California. CalPERS has a really nice defined benefit pension plan waiting for you.

I should probably quit now before things get too controversial

I really respect and admire when people are sure about how they want to run their life with respect to kids... and that goes for both... that are for, and against.

To be honest I am kinda in the same boat right now... both my wife and I have decided together that we will most likely not be having children.

Even after 13 years of being together... neither one of us are really up for it... we are both working professionals and if I can't raise the kit myself and be a parent, what's the point. Not interested in having a nanny or a parent or other family member raise my kid.

having a kid was/is most wonderful investment of my life so far.
You childless egocentrics wouldn't understand.

I personally believe people who know they don't want kids are doing everyone a favor...

There are plenty of people in this world who are NOT equipped to raise kids, are not responsible, and create a strain on our social dynamic because they are too stupid to be a responsible/good parent... yet those are the ones who procreate and neglect their offspring.

I won't lie... there are times I have sat down with my wife and asked, are we making the right decision.

Things may change in the future, but probably not... but I take some offense to "egocentrics not understanding". It's simply a calculated life choice, and it's a choice you might not understand, but it makes perfect sense to me. Everyone leads different lives...

 

[Bumbo]

Did your portfolio have to 'recover' from the 07-08 mess?

I was actually fully invested at that time of the 07-08 housing market / stock market crash... and when I say fully invested I probably had about 5-10% cash and 90-95% Equity.

Needless to say my portfolio wasn't looking so hot...

But I had smart people around me, good investment advisers, and enough family in the know to help provide direction.

You haven't lost it till you sold it...
Don't sell, buy more...

My biggest regrets:
...not having more cash (less equity at the time) to jump into the market at this new low entry point
Not buying investment property...

I should have been more aggressive with investment around that time, but I wasn't. I was too afraid to spend the little cash I had on something.

But to answer your original questions... 10 years from the crash, my portfolio has recovered and is back on track.

For those who exit the market because it crashed are the ones making poor financial choices and selling on emotion.

We may never see another buying opportunity like that again, at least not in my lifetime.

 

[theesotericone]

Also 12% return consistently is a pretty lofty goal unless you are full on aggressive and are okay with a market correction(read -30% return randomly in a year.)

If you get hit with a -30% year your not paying attention to your portfolio. That scenario happened in 07-08 and it crushed a lot of folks that where preparing to retire. There's a valuable lesson from that recession. Manage your money yourself. Big firms are great when the bull market is chugging along but as soon as bear markets hit they hold the same positions waiting for the bull to come back. That's how you loose 30% or greater in a year.

I manage my own accounts. I follow the market daily. I have all my holdings set to a stop gap measure to automatically sell if they loose more than 5% of value in a day. All I had to do was put the parameters in the program and it'll take care of the rest.

Theoretically I could still suffer a 30% loss in a year. If there was a strong decline but none of my holdings lost 5% that day. Say they loose 3% a day over 2 weeks, that could happen. Since I follow the market I'd see it and pull the plug way before it ever got there.

 

[JayceeP]

If you get hit with a -30% year your not paying attention to your portfolio. That scenario happened in 07-08 and it crushed a lot of folks that where preparing to retire. There's a valuable lesson from that recession. Manage your money yourself. Big firms are great when the bull market is chugging along but as soon as bear markets hit they hold the same positions waiting for the bull to come back. That's how you loose 30% or greater in a year.

I manage my own accounts. I follow the market daily. I have all my holdings set to a stop gap measure to automatically sell if they loose more than 5% of value in a day. All I had to do was put the parameters in the program and it'll take care of the rest.

Theoretically I could still suffer a 30% loss in a year. If there was a strong decline but none of my holdings lost 5% that day. Say they loose 3% a day over 2 weeks, that could happen. Since I follow the market I'd see it and pull the plug way before it ever got there.

The market tanked in a matter of weeks. The only issues with trailing stops is you can get whip-sawed out of the market. Then, when do you buy back in? Will you? What if the market rallies back before you convince yourself to buy back-in? You are subjecting your portfolonand investment decisions to events well beyond your control: so many things can cause a 5% dip in the market. Remember when BP tanked? How about Equifax this week? Is it really a company worth 15% less? Hurricanes, political noise, terrorism etc. Research will show that even IF you are good at timing the market, your efforts will put you no further ahead over the long term, especially when you factor in missed dividend payments. Research also shows that just missing the 10 best days in the market can have an absolutely detrimental impact to your long-term returns.

Having said all of that, peace of mind surely comes first

 

[AKmoney]

How many here max out their Employer 401k plans? How many have Roth IRA accounts?

I recently learned about something called the Mega Back Door Roth IRA. You can do this if your 401k allows you to do these two things:
1) Make after-tax contributions (not to be confused with Roth 401k)
2) Do in-service rollovers

The long and short of it is you can roll over your after-tax contributions from the 401k into a Roth IRA as often as you want without penalty. This has the potential to allow you to contribute to your Roth IRA well beyond the standard $5,500/year limit set by the IRS.

More info on this here:

Mega Backdoor Roth | Mad Fientist

 

[dawudih]

Work for about 30 years, save about half of what you make. Don't borrow money. Done!