Whitestripe Posted September 9, 2015 Share Posted September 9, 2015 High fees for bad performance, which is the same as for any bad funds. The special thing about TIAA-CREF is they have a virtual lock on some sectors of the market -- some public sector DC plans and a lot of non-profit 403( B) plans (mainly people working in education) -- by virtue of institutional relationships rather than any scrutiny of merit. So a lot of people who work in education don't have any alternatives available to them. Monopolies rarely encourage good performance or low fees, unfortunately. Not being an expert, (and I know this is your job) I do have to say is that my TIAA-CREF account is much more robust than my husband's alternate 403 b plan. I have no idea how other plans work (I've only ever worked in academia) I like the fact that I can pick and choose which funds to invest in. P only has the option of "The Fund" (company investment plan) plus optional pre-tax personal investment account but no say in what the portfolio actually is. That said, I'm stuck with TIAA-CREFF, (after all, they contribute 10% of my salary) and his company's investments really suck, so there we are. Link to comment Share on other sites More sharing options...
Iskaral Pust Posted September 9, 2015 Share Posted September 9, 2015 Offering a choice of bad funds is a very low bar. Every plan should offer a choice so that you can fit your risk preference, especially as you age. If I am interpreting your description properly, it sounds like your husband only has a company stock fund. I really, really hope that is not the only choice. If it is, then I would drop it and use an IRA or Roth IRA instead. I opted out of employer 401k plans for the first 4 years of my career because they only had employer stock available. Enron fixed that for all of us but too late for my colleagues who lost >50% when our stock price collapsed in 2002 for an idiosyncratic and diversifiable event. I didn't think any 401k plans continue to offer only company stock. That's just begging for a class-action lawsuit by employees. Is it an ESOP rather than a 401k? At a minimum, they cannot force employees to invest their own contributions in company stock. The employer match can be company stock but the employee contributions in a 401k plan must, by law, have an investment choice other than company stock. I hate seeing company stock as a significant investment allocation. No single stock concentration is a good idea but especially not one that has a correlation of 1.0 with your probability of avoiding a messy and expensive break in employment. Link to comment Share on other sites More sharing options...
White Walker Texas Ranger Posted September 9, 2015 Share Posted September 9, 2015 Offering a choice of bad funds is a very low bar. Every plan should offer a choice so that you can fit your risk preference, especially as you age. If I am interpreting your description properly, it sounds like your husband only has a company stock fund. I really, really hope that is not the only choice. If it is, then I would drop it and use an IRA or Roth IRA instead. I opted out of employer 401k plans for the first 4 years of my career because they only had employer stock available. Enron fixed that for all of us but too late for my colleagues who lost >50% when our stock price collapsed in 2002 for an idiosyncratic and diversifiable event. I didn't think any 401k plans continue to offer only company stock. That's just begging for a class-action lawsuit by employees. Is it an ESOP rather than a 401k? At a minimum, they cannot force employees to invest their own contributions in company stock. The employer match can be company stock but the employee contributions in a 401k plan must, by law, have an investment choice other than company stock. I hate seeing company stock as a significant investment allocation. No single stock concentration is a good idea but especially not one that has a correlation of 1.0 with your probability of avoiding a messy and expensive break in employment. My friends have joked about buying put options on the company stock instead. Link to comment Share on other sites More sharing options...
Whitestripe Posted September 9, 2015 Share Posted September 9, 2015 Isk: There is no stock. We both work for non-profits and have 403 b (I'm leaving out the parentheses to get rid of the stupid smiley face) accounts. Anyone can see the company's Retirement Fund portfolio, it's just the same for all. You either participate in it or your don't. If he wants the 7% they put in, he has to kick in 2%. Any personal contribution above that goes into a separate account. Link to comment Share on other sites More sharing options...
Iskaral Pust Posted September 9, 2015 Share Posted September 9, 2015 Isk: There is no stock. We both work for non-profits and have 403 b (I'm leaving out the parentheses to get rid of the stupid smiley face) accounts. Anyone can see the company's Retirement Fund portfolio, it's just the same for all. You either participate in it or your don't. If he wants the 7% they put in, he has to kick in 2%. Any personal contribution above that goes into a separate account. Sounds like a bad design but 2% to get 7% is a deal you can't pass up. At least the fund itself will be well-diversified and presumably a balanced fund (a mix of stocks and bonds, not a riskier all stock fund). It may even use alternative assets, like hedge funds, private equity, core real estate, etc, which is a plus. I'm surprised that a 403b plan isn't required to offer choices that at least allow for age-based risk preference, but 401k is the area I know better. Link to comment Share on other sites More sharing options...
Guest Posted September 9, 2015 Share Posted September 9, 2015 Here's a question for the thread stemming a bit from where this conversation started: What would you do if interest rates went up and things like savings accounts actually started offering returns? And here's a question for Iskaral or anyone: I've been living in very low interest rate territory for a long time. To what extent if at all does a significant change in the Fed's rate compel employers to provide different options (if at all)? Link to comment Share on other sites More sharing options...
MercenaryChef Posted September 9, 2015 Share Posted September 9, 2015 This thread fills me with dread. I have no money at all. My income is decent, but our cost of living and quality of life doesn't leave a lot of money to save. At near 39 I should be thinking of retiring and shit but I just know it is never going to happen. Link to comment Share on other sites More sharing options...
Iskaral Pust Posted September 9, 2015 Share Posted September 9, 2015 I've been living in very low interest rate territory for a long time. To what extent if at all does a significant change in the Fed's rate compel employers to provide different options (if at all)? Nothing at all. It might cause some problems for stable value funds if lots of people try to switch out of them into regular bond funds or money market after rates have gone up, but no requirement for your employer to offer you anything new or different. Link to comment Share on other sites More sharing options...
Kelli Fury Posted September 10, 2015 Share Posted September 10, 2015 I have no student loans (I was not a student), and I am self employed. So, any money I would be saving goes to the IRS since I do not have tax withheld. Since I pay both halves of the payroll tax, I am taxed at a way higher rate than normal people, and being self employed means no benefits. I buy my own health insurance, and if I had a retirement plan, it'd just be a thing I had to set up myself. So, I have no savings of any kind. Link to comment Share on other sites More sharing options...
kairparavel Posted September 10, 2015 Share Posted September 10, 2015 I had retirement savings. Then I didn't. Life happens, even with the best planning and strategies. It's all fine to talk about how you're going to live in the future, but you also have to live in the now. Unemployment, among other things, will ruin one's plans. Particularly long periods of unemployment, especially when you're over 35. It is what it is. I'm almost five years in to starting over. I put 6% of my salary into a 401K with employer matching up to 3%. I make a meager savings contribution per pay. It's not enough to sustain me when I'm 65. On the other hand, I need to get to 65 so... I'll need to be more aggressive in my planning but not just yet. Link to comment Share on other sites More sharing options...
all swedes are racist Posted September 10, 2015 Share Posted September 10, 2015 I put about 7% of my earnings into my 401(k), and my employer contributes a further 4.5% match (100% vested off the bat, so that's pretty nice), but that's about it. I will likely bump that up a little more soon, as I can't save shit otherwise, but am currently paying off a loan borrowed against that I used to help with the wedding. It's the one thing I can be fairly satisfied im doin ok with in regards to my wife's retirement, as (if our family histories are anything to go by) she's likely to outlive me by a good 60 years or so. Might want to look into moving some funds around to some safer bets (ie bonds and shit, or whatever) if I can manage to find my paperwork for the new plan administrator and how to log on to my account. So while I could likely manage to put 30-50% of my income into savings/retirement, I prefer to spend most of that on what quality time we can have together. She can sell my records once I'm dead though. Link to comment Share on other sites More sharing options...
Tears of Lys Posted September 10, 2015 Share Posted September 10, 2015 You're not the only one, Chef. I know that doesn't make you feel any better, though.I know Suze Ormond wasn't the be-all/end-all of stock advice, but she did give n00bs some good basic advice. Number one of which was that you should have at least six month's worth of your salary as an emergency fund in case you find yourself out of work for some reason. That way you can at least cover your bills if the worst should happen. Link to comment Share on other sites More sharing options...
ithanos Posted September 10, 2015 Share Posted September 10, 2015 Anyone who expects to work far beyond age 65 to supplement retirement savings is probably kidding themselves. Unless we see huge changes in our economy (demand for and health of older workers), there will be a lot more supply of than demand for older workers. In fact the opposite is true: many older workers cannot work even until age 65 at the salary level they imagined and many get discouraged and start retirement much earlier than they planned. World population ageing will force changes no? The missed opportunities of our youth - I had glimpsed the future and joined a voluntary pension plan in my early 20s and was saving regularly until life threw a lemon, and I failed to make lemonade, and instead broke into my savings eventually depleting it and opting out of the plan. Oh if I could revisit myself then and knock some long term focus into that fool. I had massive credit card debt through my 30s and no savings. Since then I've cleared all credit card debt and learnt to use my credit cards regularly and wisely and have not paid interest on them in 3yrs. For savings I opted for our national 'kiwisaver' plan where our Govt contributed $1k as kick-start and 4%/4% employer/employee contributions (however political meddling saw the current Govt get rid of the kick-start and reduce the employer contribution down to 3%). My only debt is my mortgage, but like my c/cards, I've got that sorted and have been making annual lump sum payments on top of regular repayments for the last 3yrs with relative ease. Link to comment Share on other sites More sharing options...
Drowned Crow Posted September 10, 2015 Share Posted September 10, 2015 I'm shocked by the number of people who apparently know exactly what percentage of their income is going to savings. I honestly couldn't even give a good approximation of what percent I'm saving or what that adds up to in dollars per months. The amount I save is...whatever I don't spend. Still, I'm 30 and I've got the equivalent of a bit more than two years of my current income saved. Considering that three years ago I was making less than a quarter of what I'm making now, I'd say that the system works. Link to comment Share on other sites More sharing options...
all swedes are racist Posted September 10, 2015 Share Posted September 10, 2015 I'm shocked by the number of people who apparently know exactly what percentage of their income is going to savings. I honestly couldn't even give a good approximation of what percent I'm saving or what that adds up to in dollars per months. The amount I save is...whatever I don't spend. Still, I'm 30 and I've got the equivalent of a bit more than two years of my current income saved. Considering that three years ago I was making less than a quarter of what I'm making now, I'd say that the system works. Well, for myself, I'll say that's because I filledmoutba form that required me to put an exact percentage amount Link to comment Share on other sites More sharing options...
Guest Posted September 10, 2015 Share Posted September 10, 2015 But seriously it's also simply because a lot of these plans have electronic systems that quite literally ask you what % you want to contribute and then it does the math for you. Link to comment Share on other sites More sharing options...
Drowned Crow Posted September 10, 2015 Share Posted September 10, 2015 If your 401k is equivalent to your savings I guess that makes sense. I just contribute the amount necessary to get the full employer contribution (5% from me, 10% from them) and deal with the rest in a totally haphazard way. Link to comment Share on other sites More sharing options...
lessthanluke Posted September 10, 2015 Share Posted September 10, 2015 I have no student loans (I was not a student), and I am self employed. So, any money I would be saving goes to the IRS since I do not have tax withheld. Since I pay both halves of the payroll tax, I am taxed at a way higher rate than normal people, and being self employed means no benefits. I buy my own health insurance, and if I had a retirement plan, it'd just be a thing I had to set up myself. So, I have no savings of any kind. Self employed people in the US pay more tax? Link to comment Share on other sites More sharing options...
baxus Posted September 10, 2015 Share Posted September 10, 2015 My only financial plan is to pay off our apartment as soon as possible. Mortgage is 30 years, but I expect to make it 10-12, which would save me lots of money in interests. The best part is that, every time I pay a part of it ahead of time, my monthly mortgage amount goes down, letting me put more money aside. At least that's the plan, and in theory it should work like a charm but, as someone said - life happens so I'll have to see how things go. ;) Link to comment Share on other sites More sharing options...
Alarich Posted September 10, 2015 Share Posted September 10, 2015 Seems strange to me too that self employed should have a higher tax-rate than employees. Without knowing the US tax code (just extrapolating from Germany), I guess that the "employer"-half of payroll taxes is simply withheld from the salary and paid to the IRS by the employer but against the tax debt of the employee (as an advance payment). Whereas self-employed people don't pay "advances" on their taxes so that their annual payment just looks higher because it is all in one lumpsum. My financial plans for retirement are: - paying the mortgage and save rent asap (or sell) - selling my firm - put some (tax-exempt) savings into different private, pension funds - participate (that's obligatory) in the public pension fund of the German chamber of CPAs - maybe invest in housing/flats Link to comment Share on other sites More sharing options...
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