Interesting financial article on wealth

[DUKFVR]

Thanks for the article. Good read.

[Big pig]

Good article. Best money we ever spent was hiring a financial planner. I wished I would have at the beginning of my working career. I don't miss all the reading, researching, etc and they have us allot better situated for the long term with a good plan.

Yep. I would be retired now instead of fighting Houston traffic everyday!

[Merc]

OP,
Good stuff... basics that form a solid financial planning foundation.


This may or may not be a sound decision from a strictly financial perspective. There may be other reasons it makes sense for you, but if your mortgage is anywhere near what typical rates have been for years, you'd be better off diverting that truck payment money to 401(k), IRA, and then some fancier options if you are maxing those out, in that order.
You couldn't pay me to buy down my mortgage at 3.00% when market investments can perform at 8% easily... well I guess you could pay me more than 5% to do that.

Just getting back to this. I appreciate the advice, unfortunately I have a bit of a unique situation. I work overseas and max my 401k, will be doing a backdoor Roth this year, and still paying down the 4% mortgage which is my only debt at the moment since selling the truck which sat for more than half the year.

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[Ksbowhunter]

put retirement savings first and live off whats left over. everything else falls into place

[Elite0429]

what gets me about some people with 401K accounts is if your company matches up to a certain percentage, put what they match at least. to me if you don't its kinda like losing free money. my company matches up to 7 percent, im currently putting 10. and it automatically increases a percent every year. I found out the other day that some of my co workers are only putting 2 percent....why??

[TKK]

what gets me about some people with 401K accounts is if your company matches up to a certain percentage, put what they match at least. to me if you don't its kinda like losing free money. my company matches up to 7 percent, im currently putting 10. and it automatically increases a percent every year. I found out the other day that some of my co workers are only putting 2 percent....why??

think about it this way - a match by employer is an immediate 100% return on your investment. Where else will you ever get that?

[Elite0429]

think about it this way - a match by employer is an immediate 100% return on your investment. Where else will you ever get that?

Exactly, I don't understand that.

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[Heathbar_tx]

I am the OP - agree with you totally. I have done financial planning for 37 years.I have seen clients who make 300,000 plus who could not write a check for $10K. That is just being irresponsible.

What I have learned over my 37 years is this - there is NO cookie cutter way to be financially successful. Every persons situation and needs are different. But for me there are a few "rules" that can make a huge difference.

1. Pay yourself first - withhold a percentage (10-15% if possible) of your pay check into some type of retirement plan - IRA, 401k, Mutual funds - start early and leave that money alone. Do not pull some out for a vacation. It is sacred money.

When you say 10-15% would you included the company match or only what comes out of your paycheck?

[TxAg]

When you say 10-15% would you included the company match or only what comes out of your paycheck?

Out of your pay. Let the company match be the icing on the cake

[TKK]

When you say 10-15% would you included the company match or only what comes out of your paycheck?

Your TOTAL savings - 401k, mutual funds, etc. It does not matter where you save it as much as the fact that you simply save it - and once it goes into savings leave it alone. It is that old adage - Pay Yourself First. I also never counted my employer match into my savings percentage - that was just icing on the cake.

You may need to gradually reach that goal but inch it up by a percent each year until you reach at least 10-15% of each paycheck saved.

The other advantage of saving a percentage of your income rather than a specific dollar amount is that over the years as your pay/income goes up so does the amount you are saving.

Again, the most powerful financial tool on earth is compounding interest. Start young and stay with it and by retirement age you will have more than enough for a great retirement

[Heathbar_tx]

Your TOTAL savings - 401k, mutual funds, etc. It does not matter where you save it as much as the fact that you simply save it - and once it goes into savings leave it alone.

In other words, save that percentage of every paycheck. You may need to gradually reach that goal but inch it up by a percent each year until you reach at least 10-15% of each paycheck saved.

The other advantage of saving a percentage of your income rather than a dollar amount is that over the years as your pay/income goes up so does the amount you are saving.

Again, the most powerful financial tool on earth is compounding interest. Start young and stay with it and by retirement age you will have more than enough for a great retirement

I was told by a banker friend to be heavy on the roth and slowly move pre-tax 401k as your salary goes up. His reasoning was you will be taxed the least early in your career and the taxes will only go up from there. Would you advise that?

[Elite0429]

Your TOTAL savings - 401k, mutual funds, etc. It does not matter where you save it as much as the fact that you simply save it - and once it goes into savings leave it alone. It is that old adage - Pay Yourself First. I also never counted my employer match into my savings percentage - that was just icing on the cake.

You may need to gradually reach that goal but inch it up by a percent each year until you reach at least 10-15% of each paycheck saved.

The other advantage of saving a percentage of your income rather than a specific dollar amount is that over the years as your pay/income goes up so does the amount you are saving.

Again, the most powerful financial tool on earth is compounding interest. Start young and stay with it and by retirement age you will have more than enough for a great retirement

I just turned 27 this month, and just last year my 401k doubled. Have never even had the thought of removing money from it.

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[justintyme8303]

Which is better in invest in Pre-tax 401K or Roth 401K My company matches up to 5% on ether.

[TKK]

I was told by a banker friend to be heavy on the roth and slowly move pre-tax 401k as your salary goes up. His reasoning was you will be taxed the least early in your career and the taxes will only go up from there. Would you advise that?

a traditional or roth IRA depends on your situation. In general the younger you are the more sense a Roth makes. I am 63 and have always done traditional IRA/401k. At this stage it would cost me way too much in taxes to convert to a Roth.

I am also not sold on the assumption that tax brackets will be higher during retirement. Look at what is going on right now with Trump - they are trying to lower the tax brackets. Many people also have less earned income in retirement and therefore lower tax brackets than when they were in their peak earning years. So again, it depends on each persons situation and your belief if your taxes will be lower or higher during retirement. More important than a Roth or Traditional is to simply put money away systematically - can't go wrong if you do that no matter what the vehicle is

[Heathbar_tx]

a traditional or roth IRA depends on your situation. In general the younger you are the more sense a Roth makes. I am 63 and have always done traditional IRA/401k. At this stage it would cost me way too much in taxes to convert to a Roth.

I am also not sold on the assumption that tax brackets will be higher during retirement. Look at what is going on right now with Trump - they are trying to lower the tax brackets. Many people also have less earned income in retirement and therefore lower tax brackets than when they were in their peak earning years. So again, it depends on each persons situation and your belief if your taxes will be lower or higher during retirement. More important than a Roth or Traditional is to simply put money away systematically - can't go wrong if you do that no matter what the vehicle is

I don't think he was saying it would be higher during retirement, I am 32 and he said this probably 8 or so years ago. The way I took it was my taxes would rise though out my working days. So early on like when I was 24 be heavy on the Roth and the slowly transition to being heavy on the pre tax later in your career, say 45 and up.