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Comments about ‘Are 401(k)s too risky to depend on for retirement?’

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Published: Tuesday, April 30 2013 1:35 p.m. MDT

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1aggie
SALT LAKE CITY, UT

"As for financial advice, Martin Smith, a correspondent for the Frontline article, said financial advisers use something called the suitability standard."

What Frontline "article" is she (and some of you) talking about? I watched a Frontline documentary, but have not seen an article written by Frontline. I assume DN knows the difference between a documentary and an article, so please enlighten me as to where I can find the article.

Max
Charlotte, NC

Mark,

Yes, really! While it is very unfortunate for those who lose their jobs before they want to retire, most people have the option to work as long as they want. Because of increasing life expectancy, they would be foolish to retire before before their 70s.

lost in DC
West Jordan, UT

through three "corrections" in the market (1994, 2002, 2008-9) my 401(k) balance has never dropped below the combined employer/employee total, let alone come anywhere near what I have contributed. I am MILES and MILES ahead of the game.

yes, I know my tax rates will be higher when I retire (especailly with the current mistake in the WH), but you do get an extra exemption when you reach age 65. So when my wife and I reach 65, we will get two more exemptions, almost making up for losing the exemptions for my three kids.

and yes, my mortgage will be paid off, but giving up a 25-35% deduction on the interest and not having to make mortgage payments puts me miles ahead.

the GREATEST threat to 401(k)s in the dems' designs to steal them to fund unions' underfunded pension plans.

luv2organize
Gainesville, VA

OK Sammyg I need to comment on what you said about whole life insurance. Do you sell it my friend? Whole life is way over priced - the money you could buy term and then invest the rest would grow much much more. If you die before you cash out your policy it only pays at face value so all of the money you invested just disappears.

Next: Yes, most lost a ton of money in 2008 but guess what? If you kept your money put you would be ahead of the game right now - no loss - just gains.

mark
Salt Lake City, UT

Carman, I know the math. My question was, what is the reality? You have someone on this thread claiming they are a financial planner, Zelph, and he, or she, says in their experience they have only encountered one person in many many years that has been able to save a million dollars.

That's why I was asking where you are at in your retirement savings. Are you near your three million? I wonder how many people you think make 60K a year, from the age of 24 to 67. You think there are a lot of people out there that do that? Are there many people that can put away 700 a month into their 401? (Including employee match). Can you?

Now don't get me wrong, I think these retirement vehicles are a fine way to save money and I would recommend people take advantage of them. My beef comes with the argument that because of them we can do away with social security and Medicare. (Pensions have already been eliminated) you know, privatized Social Security accounts and vouchers for Medicare.

carman
Wasatch Front, UT

mark:

The "reality" is that I am slightly ahead of schedule. If I had paid off debt more slowly, I would be further ahead (but wouldn't be sleeping). We saved much more than 10% early on (with no children, low school debt), but also lived a lifestyle well below most of our peers. We at out less, borrowed movies for entertainment, took inexpensive vacations, etc. So while income was lower in my early years (below average of our peers even), the percent of income saved was much higher, resulting in similar inflation adjusted dollars being saved then and now. We save more than $700/month now, but not without sacrifices.

Zelph has the wrong clients :). Look at the latest Forbes article (The 4 Fundamental Priorities For Financial Success). It has an example of a guy who made little, but saved/invested to prosperity.

The problem is NOT that there aren't enough pensions or government safety nets. The problem is a lack of education about about saving, investing wisely, about avoiding debt, etc. I don't/won't rely on safety nets to solve the problem for me. I prefer things I can control, like controlling spending, saving and making wise investments.

The Taxman
Los Angeles, CA

As a CPA/MBA/ tax processional, I have strong opinions on this subject.

Mark's threshold question (do most people realistically have money to invest?) is a good one. But it is way beyond the scope of this 401(k) discussion. So assuming one has money, and sticking to the question of whether 401(k) plans are a good investment, I strongly recommend investing in 401(k) plans and other tax-deferred investments. When you invest your money outside a tax-deferred vehicle, the earnings are taxed each year (leaving less to compound for the future). Inside a 401k plan, the earnings compound on a pre-tax basis, which is very powerful. The tax rate can be much higher when you take money out (than they were when you put it in) and you will still probably out way ahead.

The most important thing to watch with any investment, tax deferred or otherwise, is fees. You can't beat the market, and financial planners are for the most part frauds. The best investment, inside a 401(k) plan or not, is a no-load index fund. Watch the Frontline documentary if you can. It is excellent.

lvnthedrm
South Jordan, UT

luv2organize:

You give the typical, "mainstream" response that most give then someone talks about whole life insurance. I don't sell life insurance but I am a consumer 10x over. I agree that SOME whole life insurance is overpriced. What most people don't understand, is that a policy can be structured in 100's of different ways. Typical life insurance is structured so you get the most death benefit for the least premium. What if I were to reverse this? So get the least death benefit for the most premium...why? because then I dramatically accelerate my cash value and the in turn get DOZENS of HUGE advantages within this savings vehicle, tax free growth, tax free withdrawal, guarantees of no loss, tax free transfer heirs to name a few. Try passing your 401k and IRA money onto loved ones and see them enjoy maybe 25% of the money after tax.

Most people hear a lie perpetuated by "gurus" and soak it in and run with it. Too bad life insurance is the most misunderstood asset class in this country. Dig a little deeper into this and you will be surprised what happens when people start thinking outside the box.

The Taxman
Los Angeles, CA

Insurance is a horrible investment because of the high (hidden) fees. A most important aspect of good investing is to minimize fees. Period.

tdwds
South Jordan, UT

The taxman:

Unfortunately that is a generalization that is not true, again, if the policy is structured correctly it outperforms traditional investments over and over. Luckily I don't have to sell you on it for it to be profiable for me.

Insurance is the most misunderstood asset class, learn the way it really works and you'll be way ahead.

The Taxman
Los Angeles, CA

@tdwds

I know exactly how insurance products work, which is why I warn investors from them. Insurance products carry high fees that enrich the insurance salesperson at the investor's expense.

The following billionaires have made their fortunes investing in equities (stocks): Warren Buffett, Carl Icahn, George Soros, Leon Cooperman, Bill Ackman, Steve Mandel (the list goes on and on).

Now please name me some billionaires who have made money investing in insurance products!

let's roll
LEHI, UT

Carman, thanks for the thoughtful comments. I wasn't touting CDs as a great investment vehicle (at least not for more than 5-10% of anyone's portfolio, but only saying if market volatility is so daunting to someone that they'd not use a 401(k) at all, better to have one with CDs than not have one at all.

BTW, I seriously doubt Zelph is a financial planner. He's worried about a retired person with a $1 Million 401(k) balance losing $200K if there's a 20% market correction? No competent financial planner would have a 100% of their client's portfolio in equities at any stage of their investment horizon, and certainly not after retirement.

The keys to success have been mentioned in a number of posts: start early, be consistent, live below your means, take full advantage on any employer match, diversify, look for no-fee or low fee investment vehicles, and don't raid your 401(k).

Everyone needs to take ownership of their financial well-being. Relying on the government (which you don't control) is far riskier than relying on yourself (who you can control).

tdwds
South Jordan, UT

Taxman:

This discussion is about the vehicle to invest more than the products. Show me a billionaire that has a 401k (vehicle).

I'm honestly glad there are people so opposed and ignorant about these products because it doesn't draw attention to them therefore keeps the governments hands out!

The Taxman
Los Angeles, CA

tdwds

"This discussion is about the vehicle to invest more than the products."

I could have given that deflective answer that to your 11:51 p.m. May 3, 2013 post and to the several other posts discussing insurance products, but I chose to discuss the merits/disadvantages.

I note that you did not address the high fees and the fact that the most successful investors (like Warren Buffet) recommend equities over insurance or anything else.

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