How did your 401k work out for you?

[Mobilesport]

This question is for those of you that have retired and cashed out.
I ask because I've always heard how such a great deal Its supposed to be but this always came from people that are still putting money in ,  not the people that have actual experience with the end result.
Also when I look online there's alot of people talking about the 401k like Its a scam.
Thanks everyone for taking the time.

 

[speedhighway46]

I have been retired since 1999 and also started getting SS at age 65 in 2011. Had my healthy 401k invested in the stock market mostly in mutual funds. I took a big hit in the tech bubble burst in 2003, and another hit in the depression of 2009.

If I had it to do all over again I would put the entire bundle in treasury certificates and even with the lower returns I would be a couple of hundred thousand ahead of where I am now.

One last comment: Wall Street is fast too volitale for the average person to win in the long run. Looking back on it, all I did was give some of my money away to support the corporate greed. All the investor ads on TV about being in the stock market for the long haul and protect yourself by diversifying is not proven out by my experience.

I made a bundle in the market from 1976 to 2003 when the economy was booming; since then it has been a disappointing experience.

Just my opinion . . .

 

[Stargazer]

^^^ What (s)he said.

I am 65 and receiving SS benefits on my late husband's account.  My full retirement age for SS is 66.  I will wait until then to draw on my benefit.

Here is what I have learned.  When I was young, I had plenty of deductions with house/kids/etc.  Now I have none--just the standard deductions.  I have filed the short form the past two years.  And I'm paying income tax on 35% of the Social Security benefit.  When I start taking money out of my retirement account (it's a 457b, like a 401k), it will raise my taxes to the maximum bracket and I will pay income tax on 85% of the Social Security benefit.  Also, the Medicare premium is based on the previous two years income.

I would have been better off if I had paid taxes on the income at the time I earned it instead of deferring it until now and invested it myself in blue chips or bonds, depending on the market.  Even CDs would have been better than the high fees of mutual funds available in tax deferred accounts.

And yes, when you play with the Big Dogs, you will be bitten.

 

[AngryVanMan]

We are savers. We use the 401k as well as Traditional IRA to get our taxable base down now, as well as a joint HSA. The tax deferment and paying off our housing in a few years will decrease our expenses so much that the standard deduction and personal deductions will exceed it - allowing us to begin rolling over the tIRA balances into Roth accounts and avoiding all tax on that income and the gains. Tax Sheltered accounts and a >75% savings rate is how we are hitting the road full time in a few years.

We were pushed into poverty-level spending by student loans, once those were paid off, we continued to live the same lifestyle and saved all the rest. Our housing expenses never exceeded 6% of our income. I bought an old house off a close friend to save them financially, it was nothing that we wanted, but put us on stable ground financially.

 

[LadyJo]

A family member has a bit over 100K in an IRA, will get $400. mo when they roll it into an annuity at 66. 25 yrs of putting in the max, with a match of some sort.

 

[mayble]

It would have worked out much better if I'd started at 20 instead of at 35.
Edit: Not yet retired, tho hoping it won't be long. I'm thinking of taking the cash at 55 (<2 years) and chucking it all. No debt, fresh start, etc.

 

[DannyB1954]

The Union pension plan sent me a letter today. They are going to ask the Treasury Dept. for permission to reduce retirement benefits.
I heard it said that if you put $200 a month away in 20 years you will have a million with interest compounding. Back in 1978 $300 was going into my pension, then $400 about every 5 years it got kicked up a hundred. For about the last 5 years $700 a month was going in. So where did all that money go?
The pension plan is blaming the stock market crashes, but I think administrative fees also ate up a lot of it.
I will be OK. Starting at the end of the year I will start my Social security, (at 62), and at 65 what I pay for medical insurance will drop.

 

[Every Road Leads Home]

If invested wisely, everyone should be able to ride out the stock market crashes and come out ahead on the other side. My accounts dropped by about 40% in 08 and have all rebounded and then some since. The last year or so they've been a bit stagnant neither rising or falling much but if you ride out the ups and downs in the long run you should be ahead. One of the hardest things to do is resist pulling out when they take huge hits and find a financial adviser you are very comfortable with and has a good reputation. One other piece of advice when choosing a financial adviser.....never pick one that holds your money in their own accounts. All my investments are in Schwab accounts and they are listed as custodians. I can remove them from anyone of my accounts in about two minutes with a simple phone call.

 

[nobodyG17]

I'm not retired and drawing on my 401K so I'm not sure if you want my input.

401K's are not scams.  The reason people feel that way is because so very few people understand anything relating to money, economics, or the stock market.  99% of people will say they do though. 

Compounding interest is your friend.  So is any tax break you can get.  Anyone NOT taking advantage of an employer who will contribute free money to you is a fool.  It's part of your compensation and you are leaving money on the table if you are not using it. 

If you contribute money to something with low fees that closely mimics the stock market you should do just fine over time.  The best thing to do is get a few books on investing and saving.  If you google there are a few titles that will teach you most of what you need to know.

The people who lost money over time sold at a time when they should not have, made poor choices in their accounts, or paid too high of fees. 

Here is an example of compounding interest. 

 

[speedhighway46]

Please tell me where I can invest my 401(k) and get 10% as in the assumptions made in the chart. I will move my money TODAY. Check the past 10 years of the Dow and NasDaq; not even close to 10%.

"Oh yes, but you need to look at it for the long term." That doesn't work either!

I sound bitter, and Im really not. Its just that the rosy picture painted by the various investment companies is not current reality. It was up until about 2001 when the first bubble burst.

I want to caution people about looking at forward projections of contributions and compounded interest and assume that's the way its going to end up; Please understand there is a real potential of significant downside. Plus, the global economy is extremely fragile; and the world is a lot more turbulent now than it has been in years. Great Britain voted to get out of the EU; the stock market dropped 600 points.

Just my opinion . . . based upon my experience of having lived through it . . .

 

[AngryVanMan]

From July 2006 to July 2016 the S&P 500 went from 1270 to 2095, an increase of 65%, or 6.5% average per year. The actual CAGR for the time period is 5.133%.

For returns over long periods of time, the CAGR of the S&P 500 is roughly 10% - from Jan 1957 until Dec 2011 the CAGR was 9.62%. People often hear this number or the "12%" quoted by pop-advisors like Dave Ramsey and get excited, but neither of these numbers are adjusted real returns. Adjusted for inflation, the historical returns are closer to 7%.

Individual investors are also subject to sequence of returns risk, which means that if you started investing at a particularly high point and then retired at a low point, your returns will be dramatically lower than anticipated. The best way to prevent this is to have a flexible spending/withdrawal plan that doesn't require you to "sell low" because you need the money right away.

 

[ldmccain]

My employer matches 100% up to 6% of my salary. So my returns to date are about 104%. I don't watch it as I might do something stupid. I just check once a year and whatever the return is I'm happy.

Wandering Larry

 

[drysailor]

^^^ What (s)he said.

I am 65 and receiving SS benefits on my late husband's account.  My full retirement age for SS is 66.  I will wait until then to draw on my benefit.

Here is what I have learned.  When I was young, I had plenty of deductions with house/kids/etc.  Now I have none--just the standard deductions.  I have filed the short form the past two years.  And I'm paying income tax on 35% of the Social Security benefit.  When I start taking money out of my retirement account (it's a 457b, like a 401k), it will raise my taxes to the maximum bracket and I will pay income tax on 85% of the Social Security benefit.  Also, the Medicare premium is based on the previous two years income.

I would have been better off if I had paid taxes on the income at the time I earned it instead of deferring it until now and invested it myself in blue chips or bonds, depending on the market.  Even CDs would have been better than the high fees of mutual funds available in tax deferred accounts.

And yes, when you play with the Big Dogs, you will be bitten.

Stargazer, I'm not a financial pro but, I don't think withdrawl from a retirement acct affects the SS tax base. Anyone else knowledgeable on this?

 

[LadyJo]

withdrawl from a retirement acct affects the SS tax base.

It does if you have income, interest income etc of over (iirc) $14K per year. A percentage of your SS is taxable. The percentage increases as the other source income increases. Once you hit your full retirement age the tax increase ends.
Although they just changed something about taxing high income earners.
I can't keep up, they change tiny things that have a large effect on some people.

 

[nobodyG17]

The stock market dropped 600 points.  And it's already over that 600 points already.  

The stock market is driven by stupidity.  I threw a few thousand in when it dropped.  Did not even take a few days to rise.

Past performance does not indicate future results or something like that.   The numbers are just numbers and everyone are different but there is not a better vehicle out there for most people than getting a tax break and some extra money from your employer. 

You should be diversified.  If your 401k sucks only contribute up to the max that your employer matches, then use a Roth IRA up to 5500 a year, then fund a Roth. 

I hate to say this but most of the people who say that their 401K took a hit at my work made a ton of bad decisions with their investments.  They got scared during a crash and pulled their money which only locked in their loses.  If they put more money in during those down times they would have come out far far ahead.  The older guys at my work who put in a small amount when they started 35 years ago and never changed anything have half a million dollar accounts.

The only one who is going to look out for you is you.  It's worth it to educate yourself a bit.

 

[Mobilesport]

Nobodyg17 wrote
[font=Verdana, Arial, sans-serif]"Anyone NOT taking advantage of an employer who will contribute free money to you is a fool"[/font]

[font=Verdana, Arial, sans-serif]Have you ever stopped to think that maybe your employer is in cahoots with the people running the 401k system and that there tricking you into shoveling loads of money into there system so in the end they sit back and divide the money among themselves. [/font]
[font=Verdana, Arial, sans-serif]The only people that can tell you whether its a scam or not are the people that have retired and cashed out , did they get there payout or not ,  All the people that retired that I have talked to so far say that it didn't work out for them , including the people posting in this thread , the only people I hear say how great it is is the people that haven't retired yet , how would they know???????[/font]

 

[nobodyG17]

I'm not quoting that bolded abortion above.   So what is the best course of action?  Bury your head in the sand and cry about the evil bankers or some such nonsense? 

Go over to the boggleheads forum and do some reading.  Tons of people who invested wisely, retired, and live very well after investing in their 401K's their entire life.  You want advice from broke people screaming conspiracy theories or do you want advice from people who are successful and thrive?

Don't take  advice from broke people who made stupid money mistakes their entire life. Everyone reading this thread should be an adult.  They should educate themselves, learn from others, and make an informed decision on what is best for them.

Funny and informative video.  For those with limited bandwith it's 22 minutes long, a funny but informative look at some retirement stuff.  If you have no knowledge in regards to retiring it might be helpful and a tiny bit funny.



Edit:  Cahoots huh?  A giant conspiracy?  They just get paid large fees because people would rather watch American Idol than spend a week learning about finances, money, and their retirement options.  My 401K has grown in value every year I have had it even in a downturn.  My company puts over 3K per year into it as part of my compensation.  My fees are extremely low as I chose the lowest fee options.   The video above actually talks about most of that stuff.

 

[jester]

I'm not quoting that bolded abortion above.   So what is the best course of action?  Bury your head in the sand and cry about the evil bankers or some such nonsense? 

Go over to the boggleheads forum and do some reading.  Tons of people who invested wisely, retired, and live very well after investing in their 401K's their entire life.  You want advice from broke people screaming conspiracy theories or do you want advice from people who are successful and thrive?

Don't take  advice from broke people who made stupid money mistakes their entire life. Everyone reading this thread should be an adult.  They should educate themselves, learn from others, and make an informed decision on what is best for them.

Funny and informative video.  For those with limited bandwith it's 22 minutes long, a funny but informative look at some retirement stuff.  If you have no knowledge in regards to retiring it might be helpful and a tiny bit funny.



Edit:  Cahoots huh?  A giant conspiracy?  They just get paid large fees because people would rather watch American Idol than spend a week learning about finances, money, and their retirement options.  My 401K has grown in value every year I have had it even in a downturn.  My company puts over 3K per year into it as part of my compensation.  My fees are extremely low as I chose the lowest fee options.   The video above actually talks about most of that stuff.

Yes. Take the time to educate yourself and don't allow others to run your money. I'll have around $500k in my 401ks by the time I start drawing it out (about 8 years from now) despite putting in less than $80k of my own money. Sounds like it works to me.

 

[ArtW]

I contribute 2.5% (of my income)
My employer matches at 4%
yup, they toss in 1.5% of what i do, up to 2.5% (4% their part)
It's a small bit,. but for now I'm paying off dept and trying to get going ion my portable building
now beyond employer match, I'll do my own investing, but had I understood the 'time value of money' (do yourself a favor and google that if it's a new phrase to you) I could've had a lot better deal with investments / 4.1ks
How I wish I'd payed attention BITD

 

[Wanderer]

I only wish I had invested years ago....I am pondering that is it worth me to invest $200 a month and in what?

We have a employer match at work, but it's

20% Year 1
40% year 2
60% year three
80% year 4
and 100% year 5....

I kind of feel that the 401K doesn't work for me as will doing it after tax.

Anyone ever heard of Waddell and Reed? They had some kind of investment where you put in $1K and "Maybe" you got it back and wads more, but I wasn't too sure I'd have as much luck at the casino...