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Retirement

Can you make after-tax contributions to a 401k-- wouldn't you be paying tax twice on the money?
 
The Central Scrutinizer said:
Exactly. Do you buy the 60 inch LCD flat screen now for $2000 and enjoy it for 10 years, or do you invest that $2,000 for the next 20 years where it turns into $20,000 which pays for a Mediterranean cruise?

There is no "right" answer.
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Yikes! That's a pretty negative rate of return!
 
You may be asking the wrong question.

Try this one. How long do you expect to live in retirement?

If people in your family live healthy lives into their nineties you may need a rather different strategy than one for someone likely to drop off the perch at 66.
 
Michael Redman said:
I plan to work until I'm 98.
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.
One of our mechanics was 80 or so.
A slight amusement at the end of the break period during the day was watching to see if he'd wake up at all.
A vigorous flight line supervisor who devoted his life to Lockheed retired at 65, (with 1-1/2 -years! of accrued unused retirement) in 1980.
I still see and talk to him at the Mall.
But work.. no, he's not capable of working.
OTOH, many people at Lockheed who retire at 65 die within a year.
That's why the company ceased the early-out option.
Too many of us old fogies who got out early are -still- getting those pension checks after many years. :)
 
I Ratant said:
.
One of our mechanics was 80 or so.
A slight amusement at the end of the break period during the day was watching to see if he'd wake up at all.
A vigorous flight line supervisor who devoted his life to Lockheed retired at 65, (with 1-1/2 -years! of accrued unused retirement) in 1980.
I still see and talk to him at the Mall.
But work.. no, he's not capable of working.
OTOH, many people at Lockheed who retire at 65 die within a year.
That's why the company ceased the early-out option.
Too many of us old fogies who got out early are -still- getting those pension checks after many years. :)
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When did they do that?
I retired 2 years ago from there--early (age 57) and involuntarily--I figured if they were going to lay me off, they would pay me for the rest of my life.
 
Many of the people I know that are still there moan about early retirement not being an option.
I took it at a layoff opportunity back in '92 when you could retire with 25 years and age 52 or older.
The gal at the Credit Union boggled at the size of the check I got from the employee savings plan at the time.
She'd never seen a check that large!
 
Personally, I would never trust a mutual fund. I go with index funds, but I'm pretty conservative as an investor. Sorry to hear that happened to you IR. :(
 
The Central Scrutinizer said:
Huh???

Turn $2,000 into $20,000 in 20 years? I'll take that every time.
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I took it to be $2,000 for 20 years as a $2,000 per year investment. It seemed entirely likely since I had just been looking at the Japanese stock market.

OTOH, for a single investment the return beats Bernie Madoff's.
 
Doing some numbers.
To retire today at 65 and receive $25,000 a year for 26 years requires $650,000. (Assumptions: ~100% safe investment, hence interest ~= inflation/CPI rate).
The number of Americans 65 or older in 2008 est. was 39 million.
While half of them die by age 78, and therefore don't need 26 years of savings, they still need that investment.
And since those actually over 65 will of course need less than $650,000 left in their savings, those under 65 still have savings and can be thought to "balance" it out for the final equation:
Total amount of safe savings required to retire American population at age 65 at $25k/year: $25 Trillion.

That's a big Savings Account. Too big for our economy, regardless of any plan we can think of.
 
78 is life expectancy at birth. Those who manage to survive until age 65 have a life expectancy of about 83.
 
daenku32 said:
Doing some numbers.
To retire today at 65 and receive $25,000 a year for 26 years requires $650,000. (Assumptions: ~100% safe investment, hence interest ~= inflation/CPI rate).
The number of Americans 65 or older in 2008 est. was 39 million.
While half of them die by age 78, and therefore don't need 26 years of savings, they still need that investment.
And since those actually over 65 will of course need less than $650,000 left in their savings, those under 65 still have savings and can be thought to "balance" it out for the final equation:
Total amount of safe savings required to retire American population at age 65 at $25k/year: $25 Trillion.

That's a big Savings Account. Too big for our economy, regardless of any plan we can think of.
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I'm not sure of the purpose of the above analysis, but it is quite flawed. First, the present value of a $25,000 annual annuity, using very conservative actuarial assumptions, is under $300,000. Second, when one considers all 39 million current retirees, a huge number have only a few years or even months left to live. Third, for such a huge renewing population, there is no need for a "savings account." A "pay as you go" system with a reserve for a few years (perhaps two or three) of payments works quite well.
 
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bpesta22 said:
Can you make after-tax contributions to a 401k-- wouldn't you be paying tax twice on the money?
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No. When you withdraw money from a 401(k), after tax contributions are not taxed again. You pay tax on all employer contributions, all before tax contributions and the investment return on all contributions.
 
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