Pru 401(K) just started showing up in paycheck?

[Bagels]

A few pointers to our younger readers:

-- 401K defer taxes, thus a driver will realize tax savings. For example, a driver in IL would realize 30% savings on his contributions last year; when he retires in FL, he will only pay 10-15% of it toward taxes. Most part-timers will already be in the 10-15% bracket, therefore most will not realize any tax savings from their deferrals.

-- 401K aren't free; they contain maintenance, management, brokerage & other transactional fees that aren't always transparent. These fees grow as your account swells. For a driver with a balance of nearly $1M, how much are these fees? Higher than his annual gross pay. These fees are why financial advisors/investment firms push so hard for you to contribute to a 401K.

-- Yes, you should be saving for retirement. But life gets in the way. Interest rates will never be this low again, so saving for a down payment on a new home will likely be a much stronger investment. And then life gets in the way.... college debt, braces for the kids, etc. Paying high interest loans is arguably a smarter idea than contributing to a 401K.

-- Be weary of stated returns. My mutual fund has done very well over the past 7 years (20% return). My GF's dad had his pension paid in a lump sum then rolled the $ into an aggressive 401K ... he lost most of it (2007-2009) and even with strong returns will never catch up to his principal. It just varies based upon the specific situation you're in. And many people are bracing for a market correction...

 

[Babagounj]

Most of the fees are paid for by UPS in the UPS 401K plan .
Always check out the fee posted with each commodity listed to access your risks .
All are a % anywhere from .01 to 10 or higher , based on every $1000.00 in that holding .

 

[UnconTROLLed]

You will never make it back up completely.

I agree, but if you can afford to max (or close to) out the contributions for a while, it wouldn't be a huge hit.

 

[UpstateNYUPSer(Ret)]

I agree, but if you can afford to max (or close to) out the contributions for a while, it wouldn't be a huge hit.

If he can afford to max out the contributions for a while then he can certainly afford to save for his down payment rather than borrow from his 401k.

Time and compounding are the two biggest selling points for 401k's.

 

[brownmonster]

Bagels, you are a little off on your fees. Fees are nowhere near 10%.

 

[oldngray]

Bagels, you are a little off on your fees. Fees are nowhere near 10%.

Agreed. I have never heard of 10% fees. If you are in a fund that charges that much get out now. The worst I have heard of is more like 3 or 4% and even that is too much. You shouldn't pay over 1-2% for the highest managed funds but you can do just as well with other funds charging about 0.1 to 0.2%. Well under 1% anyway.

 

[brownmonster]

Agreed. I have never heard of 10% fees. If you are in a fund that charges that much get out now. The worst I have heard of is more like 3 or 4% and even that is too much. You shouldn't pay over 1-2% for the highest managed funds but you can do just as well with other funds charging about 0.1 to 0.2%. Well under 1% anyway.

Index funds beat the majority of managed funds for a fraction of the cost. At least for us poor people.

 

[oldngray]

Index funds beat the majority of managed funds for a fraction of the cost. At least for us poor people.

Index funds are usually close to or better than actively managed funds with lower fees. Too many actively managed funds churn stocks to run up their own fees. Only a few managed funds are better and it is higher risk for you to gamble you pick one that does perform better.

 

[Babagounj]

Within the UPS/Teamster 401K plan the highest fees are for all Bright Horizon Funds , .09% .
Most other funds range from .01 to .05 .

 

[watdaflock?]

Because the government allows companies to match, this should be part of the purpose of a 401k. I think it's terrible that UPS can't even throw a dirty dime at us for each dollar. They do sell their stock for a 5% discount, however, which is why I invest in both plans for diversity reasons.

No doubt about it. Discover Card at one time matched every penny you invested into them. A while later they did a split and many of us ended up happy.

Until UPS makes it worth while, I won't bother.

 

[MendozaJ]

Hey guys, I'm still young and really don't know much about 401k, I've gotten a lot of papers from UPS through the mail talking about starting a 401k, I've kind of blew it off, I already save money each week via my savings account, I was wondering if it would be a better idea to start a 401k? Does this draw interest over time? How long does it draw interest for? Will I be able to withdraw any of this money anytime I want in case of emergency? Am I better off to continue to contribute 25$ each week to my savings account as I'm part timer, and then contribute more as I go full time? I plan to stick with the company as long as possible, I'm 20 now and want to save money as it doesn't look like I can count on a pension by the time I retire in 2055 or something like that lol, thanks.

Do it. Everyone will tell you they wish they started when they were younger. It's not an either/or situation (savings/401k). You need both because you do not want to withdraw from your 401k. I did it at a younger age when I walked out of my crappy office job to travel. I don't entirely regret it, but it's a very bad thing to do.

A few caveats. The market won't go up forever. Everyone is waiting for that correction, but after that happens 19,000 is the next stop. The cycle will continue so there will be periods where you actually lose money. The biggest caveat is Congress eyeing those Roth accounts as a source of tax revenue.

The numbers are daunting, but I got sound advice from a couple of my buddies in the finance field.

13% contribution (the suggested minimum). 10% Roth and 3% 401k. Generally, it should be a 3:1 ratio, but you can only enter whole numbers.

Bond Market Index (Fund) 10%
Balanced 10%
S&P 500 Equity Index 30%
S&P 400 Midcap 15%
Russell 2000 20%
International Index 10%
US REIT Index 5%

 

[Babagounj]

Almost a Third of Those with Savings Have Less Than $1,000 for Retirement

Study after study shows that Americans are not saving for retirement like they should, and a new survey finds that nearly one third of people who have some sort of savings plan have amassed less than $1,000 for retirement.

The survey titled “Preparing for Retirement in America,” by Employee Benefit Research Institute (EBRI) and Greenwald and Associates, finds that only 65 percent of workers have any savings for retirement, a number that fell below the 75 percent figure from 2009.

But 28 percent of workers report that they have saved less than $1,000 for retirement, and almost 6 in 10 Americans say that their financial planning needs improvement.

Additionally, 34 percent say they have made no effort at all to saving anything or make a retirement plan. Still, most say that they intend to start saving at some point.

Many say that the average person needs to save one million dollars for retirement, but a recent piece by David Marotta, president of Marotta Wealth Management in Charlottesville, VA, noted that a 20-year-old in 2015 may have to amass up to $7 million to retire comfortably.

“Someone retiring now in 2014 with $1 million at age 65 can safely withdraw $43,600 a year,” Marotta wrote last May. “However, [because of inflation], today’s 20-year-olds will need over $7 million to have that same lifestyle when they retire. In 1970, they would only have needed $166,000 in retirement to have a similar purchasing power for the rest of their life.”

 

[IVE GOTTA PACKAGE 4U]

Almost a Third of Those with Savings Have Less Than $1,000 for Retirement

Study after study shows that Americans are not saving for retirement like they should, and a new survey finds that nearly one third of people who have some sort of savings plan have amassed less than $1,000 for retirement.

The survey titled “Preparing for Retirement in America,” by Employee Benefit Research Institute (EBRI) and Greenwald and Associates, finds that only 65 percent of workers have any savings for retirement, a number that fell below the 75 percent figure from 2009.

But 28 percent of workers report that they have saved less than $1,000 for retirement, and almost 6 in 10 Americans say that their financial planning needs improvement.

Additionally, 34 percent say they have made no effort at all to saving anything or make a retirement plan. Still, most say that they intend to start saving at some point.

Many say that the average person needs to save one million dollars for retirement, but a recent piece by David Marotta, president of Marotta Wealth Management in Charlottesville, VA, noted that a 20-year-old in 2015 may have to amass up to $7 million to retire comfortably.

“Someone retiring now in 2014 with $1 million at age 65 can safely withdraw $43,600 a year,” Marotta wrote last May. “However, [because of inflation], today’s 20-year-olds will need over $7 million to have that same lifestyle when they retire. In 1970, they would only have needed $166,000 in retirement to have a similar purchasing power for the rest of their life.”

That's sad.

 

[upschuck]

Bond Market Index (Fund) 10%
Balanced 10%
S&P 500 Equity Index 30%
S&P 400 Midcap 15%
Russell 2000 20%
International Index 10%
US REIT Index 5%

Too much in bonds, if you got time. IMO

 

[oldngray]

I had more than usual in bonds recently when the market was down and they did very well. Now I am more into growth stocks.

 

[Browndriver5]

Just read everything Dave Ramsey. If you want to be set up he is a very wise man

 

[Premonition23]

Quick questions, I have 28 shares in UPS stock, the problem is its on the UPS savings plan site and Im having trouble finding ways to sell it, and I don't have stocks on my computershare account, does this mean I would have to buy new stocks via computershare? or is there a way to sell it from the UPS savings plans website?

 

[upschuck]

I had more than usual in bonds recently when the market was down and they did very well. Now I am more into growth stocks.

That was good timing on your part. I don't tinker too much with it, but maybe a couple times a year max.

 

[upschuck]

Just read everything Dave Ramsey. If you want to be set up he is a very wise man

Kind of extreme, but generally good advice

 

[oldngray]

That was good timing on your part. I don't tinker too much with it, but maybe a couple times a year max.

I don't tinker much either. I just adjust things a couple of times a year normally.