No 401k from work.. what should I do until I get one?

[LordJezo]

Maybe put a few hundered dollars a month into something.. but I have no idea what.


All I have now is a savings and checking account.

 

[MattCo]

Roth IRA is a good option.

-MC

 

[EagleKeeper]

Any type of IRA is good. Just fund it before 15 April to get credit for 2003.

 

[Zombie]

I am in similar situation where work offers it but there is no match from the company.

 

[Homerboy]

Toss it into a Roth... pretty much no question there.

If your company doesnt match, that sucks. But it is still a VERY good idea to utilize it as your donations are pre-tax. So Mr. Gov't wont ever get his cut (pending you dont withdraw from it early).

Make your $ work for you... period.

 

[EagleKeeper]

Originally posted by: Zombie
I am in similar situation where work offers it but there is no match from the company.

401K with no match from the company is a pain. Only benefit is that the money can be withheld from the paycheck before you see it and the amount that is tax free.

You may wsh to talk to the HR people. I think that the gov has tax breaks for companys that assist with the 401K vs those that just provide one to the employees.


/edit - See feathers post below regarding limits.

 

[Zombie]

Originally posted by: EagleKeeper

Originally posted by: Zombie
I am in similar situation where work offers it but there is no match from the company.

401K with no match from the company is a pain. Only benifit is that the money can be withheld from the paycheck before you see it.

You may wsh to talk to the HR people. I think that the gov has tax breaks for companys that assist with the 401K vs those that just provide one to the employees.

We are small company and the HR person also happens to be a part owner in the company so will have to figure out how to be smooth about it otherwise it can sound like I am complaining about benefits .

 

[Blain]

Find a good mutual fund that has an investment strategy that you like, and setup an IRA with automatic monthly deductions.

Another method of retirement investing is to setup a "self directed" IRA account with a good broker, and pick your own investments.

I like the self directed option, myself.

 

[Homerboy]

We are small company and the HR person also happens to be a part owner in the company so will have to figure out how to be smooth about it otherwise it can sound like I am complaining about benefits .

Well I doubt you will get them to change their policies, but you could at least "suggest" it to them (cant hurt right?... well unless you get fired...)

I still think a Roth IRA is the best way to go. It depends on what you want to use this money for in the future, how much you plan on putting aside etc etc. But you should, if you can afford it, put SOMETHING aside. Like I side earlier this is all pre-tax money and in reality your only true hope for a remotely respectable retirement. (SS aint gonna carry you too far in 40yrs).

Get somebody local that can help you. Ask friends or relatives, or others at work if they have any recommendations of investment analysts, brokers whatever. I had $40k sitting in a 401k from my old job before I was laid off and had to roll it over or get sucked into some default account BS. I asked around, and found a money manager that is 2nd to none. Hes become a good freind and is growing that 401K as we speak. Now... 30 more years of work and Im done

 

[Zombie]

How much does your 2nd to none investment guy charge? I have about 20K in my savings account and 22 something in my checking just sitting around doint nothing. Lot of guys here at work are in stocks and needless to say losing money right now. I have some cisco stocks and I am up 5% right now.

Would Roth IRA be best investment for my 20K savings account money? I know a little bit about ROTH IRA and I don't think I can put in more than 7/8 K counting both 2003/2004.

 

[StageLeft]

Originally posted by: Zombie
How much does your 2nd to none investment guy charge? I have about 20K in my savings account and 22 something in my checking just sitting around doint nothing. Lot of guys here at work are in stocks and needless to say losing money right now. I have some cisco stocks and I am up 5% right now.

Would Roth IRA be best investment for my 20K savings account money? I know a little bit about ROTH IRA and I don't think I can put in more than 7/8 K counting both 2003/2004.

Yeah, you're limited with the ROTH IRA. I think it's $3k/year. Needless to say you need to take that money out of your savings/chequing accounts, because you're losing potential gains keeping them in there.

 

[Homerboy]

Im NO EXPERT by anymeans... thats why I went out and got one. I dont really know squat about invetments and such except what I read, hear am told etc...

$20k in savings? Wow...

If you want I can get more info from my guy (he'll be back from vacation on monday). I need to talk to him anyway about opening up a 529 fund for my kids.

Where are you located?

 

[Zombie]

NH. thanks. I don't really trust the investment people at bank. I believe that they work for the bank and not for you thus bank gains more than you.

Acutally as of today I have more in my checking than my savings .

I have my saving totally detached from other accounts so the only way I can touch that money is to go the bank between 9 and 5 Mon-fri and write myself a cheque. I guess for once my laziness has paid off and I was able to save some money .

 

[EagleKeeper]

Many of the mutual funds have IRA (Roth & Normal) accounts available.

Any of their funds can be designated for the account.

Check on the quality of the fund using the current financial news and/or Money magazine for recomendations.
Main thing is to avoid the funds that recently have been identified as being targeted by the SEC for mis-behaivor.
Banks brokers are biased and some brokererages have also been paying in the mud recently.

A fund group that I use is American. They have come up clean

 

[Homerboy]

Just as an FYI he works for/at The Mony Group (no typo).
Honestly, and I know this sounds impossible, but I do pay anything. Ive never received a bill or anything. I simply went in there, and rolled over my 401k from Fidelity to Mony and bam. I get quarterly statemtns from them (and a nice Holiday card to boot) and each quarter the $ goes up and up.

I think they make $ off the transaction fees and such. Its something Ive always wanted to ask him. So this will be my chance and reminder I guess.

 

[FeathersMcGraw]

Originally posted by: EagleKeeper

401K with no match from the company is a pain. Only benifit is that the money can be withheld from the paycheck before you see it.

Um, that's a pretty big benefit. You're allowed to contribute up to $12K of your salary (was there an increase for 2003? I can't remember if the limits changed) all of which is pre-tax. If you're in a 25% bracket, that's $3K of your money that doesn't get taxed.

If you stow that in a Roth IRA, you're paying that money in taxes, and your maximum contribution without penalty is only $3K. Remember, the benefit of the 401(k) is tax-free compounding. Assuming equal rates of growth, $12K/year is going to grow a lot more than $3K. I'd much rather pay taxes on that $12K contribution than no taxes on the $3K one at retirement.

 

[LordJezo]

How does the pre-tax thing work?

With a roth isn't it pay tax now, not later, while a traditional ira is the opposite?

I have to do all my own taxes so how would I do all that.. or does TaxCut 2004 or what have you have options for all that?

 

[LordJezo]

You think ING is any good for the IRAs? I have them for the savings account..

 

[Blieb]

Originally posted by: FeathersMcGraw

Originally posted by: EagleKeeper

401K with no match from the company is a pain. Only benifit is that the money can be withheld from the paycheck before you see it.

Um, that's a pretty big benefit. You're allowed to contribute up to $12K of your salary (was there an increase for 2003? I can't remember if the limits changed) all of which is pre-tax. If you're in a 25% bracket, that's $3K of your money that doesn't get taxed.

If you stow that in a Roth IRA, you're paying that money in taxes, and your maximum contribution without penalty is only $3K. Remember, the benefit of the 401(k) is tax-free compounding. Assuming equal rates of growth, $12K/year is going to grow a lot more than $3K. I'd much rather pay taxes on that $12K contribution than no taxes on the $3K one at retirement.

Uhm ... if I can get a good return ... I'll take the roth over the 401k any day, any time.

I mean, if you're young enough ... the tax benefits over the long haul will smoke the hell outta the 401k ...

 

[Blieb]

Originally posted by: LordJezo
You think ING is any good for the IRAs? I have them for the savings account..

I thought about using ING for mutual funds or other stuff ...

but I have things separate ...

BOA - local / billpay
Fidelity - investments/roth ira
ING - savings

 

[EagleKeeper]

Originally posted by: Blieb

Originally posted by: FeathersMcGraw

Originally posted by: EagleKeeper

401K with no match from the company is a pain. Only benifit is that the money can be withheld from the paycheck before you see it.

Um, that's a pretty big benefit. You're allowed to contribute up to $12K of your salary (was there an increase for 2003? I can't remember if the limits changed) all of which is pre-tax. If you're in a 25% bracket, that's $3K of your money that doesn't get taxed.

If you stow that in a Roth IRA, you're paying that money in taxes, and your maximum contribution without penalty is only $3K. Remember, the benefit of the 401(k) is tax-free compounding. Assuming equal rates of growth, $12K/year is going to grow a lot more than $3K. I'd much rather pay taxes on that $12K contribution than no taxes on the $3K one at retirement.

Uhm ... if I can get a good return ... I'll take the roth over the 401k any day, any time.

I mean, if you're young enough ... the tax benefits over the long haul will smoke the hell outta the 401k ...

As Feathers stated (in correcting my vagueness ) the more $$$ you can put aside tax free, the better you are.
The 401K will allow you to sock away much more than a IRA will.

The original IRA were intended for those that have no pension or 401K available.

 

[Zombie]

but who knows what the tax rates would be like when you are ready to cash your 401k ??

 

[FeathersMcGraw]

Originally posted by: Blieb

Uhm ... if I can get a good return ... I'll take the roth over the 401k any day, any time.

I mean, if you're young enough ... the tax benefits over the long haul will smoke the hell outta the 401k ...

I'm not sure how you arrive at that conclusion. For one thing, you're reducing your taxable income with a 401(k), so you're saving money now over the Roth, which has no tax benefit until you're eligible to take withdrawals.

But even neglecting that benefit and assuming that the only difference is a $12K per year contribution versus a $3K per year contribution, using the compound interest calculator for a simple one-time contribution of $12K, compounded once annually over a 30-year time frame at 5%, compared to a single one-time contribution of $3K using the same rates, etc., you have final balances of $51,863.31 (taxable) versus $12,965.83 (non-taxable). Even if your tax rate is 50% when you retire (not too likely even for the most liberal politicians) you're still ahead from the sheer difference in the size of the annual contribution.

Of course, the difference is that the 401(k) likely gives you fewer investment options than the Roth IRA, so you might be able to get a higher rate of return on your investments, but the real power of these tax-deferred vehicles is the ability to let a lot of money compound without taxes reducing the principal during the compounding phase. People who think that tax-free alone is the holy grail for retirement investing aren't seeing the forest for the trees.

But better yet, invest in both.

 

[Pepsei]

get a piggy bank, or better yet, a japanese bobtail bank.