DISCLAIMER – Take everything I say with a grain of salt and always make your own financial decisions. These are just some of my thoughts and advice, all is my own opinion. You might think I’m a genius or a stark-raving lunatic. That’s fine either way, I just hope I can maybe help some people out or at least get them thinking about how to handle their financial affairs.
Don’t know why but ever since taking a Dave Ramsey course about 10 years ago I have been interested in finances and investing. And although I don’t agree with everything I learned in the Dave Ramsey course now, it was a solid foundation to start from. That’s what I’m kinda hoping these posts will be for people. Anyhow without further ado here’s the first chapter.
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401ks & Retirement
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What I’ll suggest in this post will probably shock you. And it can differ a WHOLE LOT depending on your situation, age, goals etc. but again all my posting is to make you *THINK*. Thinking is good, thinking will make you take your financial affairs more seriously which is what most Americans need to be doing.
First off, I think most retirement plans are SCAMS. How could I say such a thing? Because the rate of returns from most are piss poor at best (and usually negative). You are charged fees by these “investment advisors” who merely look at your age and income, throw you into some pre-determined stock and bond allocations (20% in Small Caps, 10% in Bonds etc. etc.) and make you *think* you have some semblance of control. I think I lost a lot of faith in all this during the 08′ Crash when next to NO Fund Managers pulled their clients accounts into Money Market funds (which are basically Cash). If they didn’t see that crash coming with all the turmoil going on then that makes them stupid, and if they did see the crash coming but didn’t pull their clients to the side to avoid the huge downdraft, they’re lazy. Again a harsh opinion I know but it’s how I now feel.
So what do I suggest you do? Well at most jobs I’ve worked my employer has matched my contributions to a 401k up to a certain percentage. I always do this, and not a penny more. I then send 100% of it into a safe and boring Money Market fund. I instantly double my money and don’t have to worry about a market crash. But won’t I miss out on any rallies? Yep I guess I will… but pull up a 10-Year Chart of the Dow, Nasdaq, and S&P500. What do you see? We’re currently LOWER than we were 10 years ago!
Dow Jones Chart 2000-2010
Here’s another chart of a mutual fund from American Funds, down from where it was 10 years ago as well.
American Funds Washington Mutual Chart 2000-2010
So all that money was tied up for nothing, actually you lost a lot as well to inflation. Not very fun is it? Especially when you look at the fact that you could have paid off debt with that money saving you interest, or bought Gold which has gone up almost 5x since then.
Gold Chart 2000-2010
That brings me to another point. Try to find a mutual fund dedicated to gold in your 401k plans, you won’t. Most of the plans are very limited in what they offer, which is why if you’re serious about investing for retirement. You should just open up your own equity trading account. You get A LOT more freedom, and options to pick from. You can go long or short, play options (which I don’t recommend outside of selling covered calls), and your money isn’t locked up so tightly. Only bad thing is you have to file your stock trades with your taxes each year which could require an accountant. But it’s a small price to pay for the freedom. I recommend starting with a small amount though that you are more than prepared to lose, because you LIKELY WILL LOSE. This is how you will learn though, and first hand knowledge and painful experiences are sometimes the best teachers. This is also like I said why I suggest starting with a small amount to get the hang of it. Also pick up some investing books, and even find a message board or chat of fellow traders who can help educate you or give advice. Take all of it with a grain of salt of course.
Last thing I want to touch on is what to do with your 401k once you’ve left a job and have started another? Well you can always roll it over, which means you’ll take your funds that are in that account and move them to the 401k or retirement plan at your new job. There’s various ways to doing this, usually calling one or both fund managers your workplace has will get the ball rolling in the proper direction and avoid you taking a tax hit. But rollovers are boring and predictable, you want some crazy Hubz advice? If you want you could always cash out the 401k… “BUT BUT Hubz! What about the penalties?” Yep penalties suck, but remember if you were in Money Market funds whatever you have put in doubled, you can take a bit of a hit. If you have debt of some sort I would recommend this, the money won’t be growing anymore since your previous employer won’t be contributing to it. You could let it sit until you retire to avoid penalties but who knows what shape everything will be in by then? Will the dollar still be worth a crap? With the way things are headed (and the fact that inflation has steadily grown since we’ve left the gold standard) I highly highly doubt your dollars will get you as much in the future as they will now EVEN AFTER penalties. Again if you’re close to retiring you may not want to do this. But if you’re younger and have a ways to go and have some debts, use this money to knock em out. Or put a nice down payment on a home… Remember debt is the true enemy, don’t worry about retirement too much until you have debt knocked out.
Lastly for you tin-foil wearing peeps out there, there have been rumblings that the Government may eventually try to confiscate our 401ks and retirement plans to prop up our debt and buy treasuries or other such things with. This will be done of course for the “Good of the Nation” and they’ll promise it will work out better for you in the long run. But anything the government has to force you to do financially probably isn’t in your best interest, I mean look at the track record of these guys by going to – http://www.usdebtclock.org/ Not too good with the money are they? Maybe another reason to cash them out now before they can take control of them. Again just something to think about, it’s not confirmed at all… just rumors!
I’ve covered a decent amount for this post so I’ll stop here. I have plenty of things I mentioned in this post I’d like to touch on and go deeper into in the future. So stay tuned!
