This is just peachy

[Harry Seldon]

I think 401k is maxed at 11,000. The roth is getting bumped up to five or six thousand. I thought the amount put there had to be deducted from 401k. I gues that wouldn't make sense, though. Damn, I hate finance and accounting!

[Japher]

Doesn't contributions to your 401k affect how much you can contribute to your Roth? I had thought about starting a small Roth account but I thought there were restrictions.

Yes, they are unrelated. Yet, you can only contribute to a IRA if you make less than 95k (single) and than only so much a year (yes it is 3k, and it will be going up).

You can contribute as much as you want to your 401k regardless of what your employeer tells you, yet the max is 11k, set by the IRS... Your match (5%) is based on your salary however.

I think that your aunt and dad are right... Give it all you can. I am just saying that you should also max out your IRA (since you too will be making more than 95k/year one day).

Also, I really want a house, so I am saving for that, taking it from contributions I would normally give to my 401k. A 401k is a nice investment, but you can't touch it until your 59.5 y.o. I know that I will have financial needs before than; kids, college fees, etc... Housing prices also compound, plus I can use my home's equity to borrow against it at a lower rate than would my 401k... Also, a 401k is not weighed as heavily as is proeprty when figuring in equity for loans to a) invest in more property, b) finance my kids college, or c) retire early...

[Harry Seldon]

What do you do that you'll be making over 95k a year?

edit - and more importantly, are they hiring?

[Japher]

I'm a Chemical Engineer for the Pharmaceutical Industry

[Dinner]

I'm a Geologist and I'm hoping to make about $40k this year. Pathetic isn't it? Still, I'd like to follow my parents into the realeaste business by buying a couple of rental properties over the next few years. It's a really great part time way of increasing your income and assets.

Longer term I'd like to start my own consultancy though first I'm going to have to build up my experience a bit.

[Arrian]

I'm 26, too. Fifty percent of my 401k is invested in the Vanguard 500 index. High risk is nice but I had a friend that lost everything by going high risk. He's mid-thirties now and starting over.

Half of my 401(k) is going into an S&P 500 Index, 25% into high-risk growth (oversees investment), and 25% in something else I forget now. I also have a chunk of money sitting in a fund that I can no longer add to (they got rid of it, but allowed those that had money in it to keep their money in it), which is also a stock fund - and that's been my best one.

I'm throwin' down 15% of my income into my 401(k). The max, IIRC, is 20%.

My IRA... well, I need to get on that for this fiscal year. Time to scrounge up a few thou.

-Arrian

[Japher]

That is why I am saving, Oerdin. I don't have parents that will help me get into that kind of field, if your parents will help you to increase your cash flow sometime in the future than max out that 401k to the best of your ability (also max out the IRA).

[Dinner]

My current distribution for my 401k is:

20% mid cap aggressive growth
30% large cap growth and income
20% small cap agressive growth
20% international
10% High yield bonds

I'm debating on ditching the high yield bonds and distributing that 10% amoung a few of the other funds. Opinions?

My Roth IRA is 100% Aggressive Growth

[Harry Seldon]

There's some good rental properties around town here I've looked at but I don't even own my own house yet so that'll probably have to wait unless something gold comes along.

[Dinner]

Originally posted by Japher
That is why I am saving, Oerdin. I don't have parents that will help me get into that kind of field, if your parents will help you to increase your cash flow sometime in the future than max out that 401k to the best of your ability (also max out the IRA).

Their help would be limited to co-signing and they most certainly would want a cut of any income and properity appriciation. The reality is I think they want me to manager their properities for them while they retire and simply collect the checks. Still...

I'm planning on buying my own home by the 1st of the year. So far I've saved $10k for that purpose and I have my VA home loan benifets from when I was in the Army. I'm hoping that will be enough even if I do have to rent out a couple of the spare rooms.

[Harry Seldon]

I heard bonds are as low as they've been since it started being recorded. Drop em and grab an index; it's as safe as bonds and will probably do better in the long run.

Of course, this is coming from someone even his mother wouldn't label as a financial genius...

[Japher]

small cap growth

most economic recoveries (which I think we are in now) begin with small cap growth. I also like investing in these funds since I don't like investing in individual small cap stocks... This way I cover that basis.

I am currently invested in 50% small cap and 50% fixed interest (large cap, bonds, and money market funds). I am up 10% on the year thus far...

[JohnT]

This Vesayen thread might help you a bit: If you had $500,000 to put in stocks, what would you put it in-also stock stories!

The encapsulated version:

1. Do not buy managed mutual funds, as over 98% of all funds, including those that failed, underperform the market over a long-term period when you include maintenance and transaction costs. Of those that do not fail, just 95% of them underperform the market.

2. Buy index funds, especially Vanguard funds. If you must buy a managed fund, Dodge and Cox are highly recommended if you can get in them.

3. Do not forget to rebalance your funds once every year or so. "Rebalancing" means ensuring that your asset allocation remains at the same level over a long period of time.

For example, let's say that I put 60% of my portfolio in stocks and 40% in bonds. If the stock market shoots up so that in two years we have a 65%/35% split, I will want to rebalance my accounts by selling off 5% of my stock holdings and buying 5% into bonds, therefore "rebalancing" my portfolio.

Rebalancing forces upon you the discipline of selling your winners and buying into losers - in short, selling high and buying low.

4. There is no point 4.

[Dinner]

Japher: 10% is an impressive return these days.
I'm going to do as everyone has suggested and max out my contributions. It will require belt tightening but in the long run it will be worth a little sacrifice now.

Harry: I also agree the bond fund isn't a smart investment. I'm going to cut them.

JohnT: I really don't know how index funds work and I'm reluctant to invest in something I don't understand. Care to explain how they work and why they are better?

[Boris Godunov]

Oerdin, for pete's sake, you are my age! Why the hell are you worried about your 401(k) now?!

Calm down, relax, and take deep breaths. The stock market will fluctuate a lot over your lifetime, so don't put any credence on what things are like now.

Your SS payment will also go up considerably as you put more into the system.

Chill!