Tag Archives: 401k

Investing, Other, Retirement

2014 401k Almost Maxed Out!

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One of my goals for 2014 was to live on my savings and max out my 401k before obtaining access to any new funds. The good news: as of February 15 I am $550 away from maxing out my 2014 401k! The bad news is that the markets haven’t fared that well in the first few weeks of 2014, thus my $17500 investment has immediately shrunk. Boo. At least I’ve managed to survive on my “life fund” from late 2013. I’m now down to about $3000 so it’s great news that I’ll be seeing some of my salary in my next paycheck!!!

It was important for me to get the 401k out of the way early on because I am concerned I may be laid off from my job soon, and chances are I will find another position at a small company that will not offer access to a 401k. While I’ve never had access to a 401k with a match, I’ve taken full advantage of tax deferred savings when available. I’ve only had access to a 401k in 2010, 2011, 2012, 2013 and 2014. My first full-time job even brought in a 401k specialist to talk to us and then decided it wasn’t worth paying to administer the retirement plan, so we didn’t get one. I know a 401k is a luxury and I take full advantage of it when possible.

As of mid February, my networth is around $259k (including my maxed out 401k.) That kind of sucks because at the end of 2013 my networth was $250k, so I’m only “up” $9k right now (or down $8500 if you count the total amount of money I’ve put into my accounts!) Hopefully the market will rebound and I actually purchased these 401k shares on the cheap. We’ll see. It would be nice to see the $17500 earn 10% this year and conclude being worth at least $19250. Right now my current employer 401k has $59296.43 in it for 3 years of investment, worth about $19765 per year.

The good thing about maxing out my 401k early is that if I do lose my job I won’t have to worry about finding another job for this year to get tax-advantaged investments. I can start worrying about that again in 2015!

Investing

High 401k Fees: Time to Rollover to Vanguard

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For the past three years, I’ve let the ~$25k accumulated in an old company 401k account sit there after I left the company. I knew the expense ratios were probably high, but wasn’t paying that much attention and also thought it would be a hassle to rollover the account to an IRA.

Then I recently realized the expense ratio on my $25,000 was an average of 1.50% over four different funds (whereas my Vanguard expense ratios are around .20%) — Yikes! I took a few minutes out of my lunch hour today to figure out how difficult it would be to rollover the accounts to Vanguard. It turns out this wasn’t hard at all (or at least it didn’t seem to be, it’s all in transfer right now so I’ll let you know if it was as easy as it seemed.) Continue reading High 401k Fees: Time to Rollover to Vanguard →

Investing

Wikinvest / SigFig Teaches Me About Investing

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Incredibly enough, I’ve added nearly $150k to my investment accounts across my IRAs, 401ks, and taxable accounts. While I’m still not sure if taking the “select companies” vs index fund route makes a lot of sense, I know I end up putting more money into investments when I feel like I have some control over the fate of my networth, and at the very least, an opportunity to learn more about business and how public markets work.

Of all the finance sites I use, my favorite is Wikinvest (soon to be SigFig, which I received an Alpha invite to this week.) Wikinvest is awesome because, as seen above, it offers a really easy way to track your stocks (and ETFs), including information on P/E, Rev Growth, P/S, etc. These are probably fairly basic things to look at when deciding to purchase a stock. Above, you will see the six stocks I own with the lowest P/Es (and how many shares I own of each).

It’s fun to look at how AAPL, while $493.42 a share, still has a relatively low P/E and its revenue growth was 67.6%! Now, I wish there was more data here regarding what that revenue growth represents (Qtr over Qtr? YoY?) but regardless, this data shows that AAPL stock, despite being pricey per share, may be worth a lot more than some other stocks. I’m still concerned AAPL will lose value (can it sustain such growth) but seeing that it made $3.60 per share vs say, GE’s $1.35 per share makes me feel confident in a long-term AAPL investment. As you can see, I’ve made $15k on AAPL (on paper) with just 79.94 shares.

Let’s sort by my stocks owned by P/E in the other direction. AMZN has the highest P/E — 135! Compared to AAPL, it’s Revenue Growth was only 40.6%. Even Google, which has a P/E of 20.50 (not too bad, but still higher than AAPL) only increased 29.3%. But it also has a P/S of $5.20, which is better than AAPL. This is where my knowledge lacks and I don’t fully understand the factors which make that possible, or our P/S is determined. More research on my end is required.

In a related note, I am annoyed that I have .44 shares of FTR. That happened when VZ split  with them. .44 shares is pointless, to sell them will cost $8 (more than they are worth) and they just clutter up my account. Looking at FTR, however, they seem to have a 79.7% revenue growth, I wonder if I should just purchase $100 worth of FTR shares and see if they can run up enough where I can sell the stock so it doesn’t clutter my portfolio and I don’t lose $8 on it.

In case you’re wondering, in my taxable account, here are the stocks and ETFs which have been performing best so far:

Investing, Retirement, Savings

Selling GLD *Before* My Profits Are Too High

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I’m not a day trader, or even a month trader. But I’ve started to realize if I want my portfolio to have any serious upside, I need to rebalance every now and again. I’ve sold off most of my cleantech investments including PBD, ENOC, and COMV, and put that money into a mix of large-cap tech companies (AAPL, CSCO), international funds (HAO, EWZ, EDIV), and food (MCD, CBOU, SBUX, WFM.)

Up until today, I’ve only sold small cap losses that seem to be destined for failure or, at best, growth after years of retreating even further, while that money could be in a large-cap dividend stock earning income. Today, however, I decided to sell one ETF where I have turned a profit.

So long GLD, at least from my taxable account. After making an early $500 investment in GLD I found out that gold, even in an ETF, is taxed at a collectors rate. That means 28% capital gains tax. Instead of letting my $500 sit in my taxable account (it is at about $900 now) I’ve decided to sell the 5 shares and move my investments into other funds that belong in my taxable accounts. And after today’s AAPL earnings news, I’m tempted to put the $900 into purchasing two more shares of the company that made the computer I’m currently writing on and the phone I’ll be making calls on in a few minutes. I only own 70-some odd shares of AAPL stock, my goal is to get to 100 shares before the company hits $500 a share. Since AAPL doesn’t pay dividends, this is the perfect company to hold in my taxable accounts.

Meanwhile, I invest regularly in GLD in my Roth IRA account. It seems GLD is fairly expensive right now (afterall, I nearly doubled my initial investment from just a few years ago) so I might hold on aggressively investing in it. My Roth account is my “play” account, since I can only put $5k in it per year. I put that mostly into high-dividend ETFs and rebalance by adding more funds in new sectors the following year. For instance, this year I’ve already invested about $2k into XLE (oil) and XRT (retail companies) as well as GLD. I only have $3k left for my Roth this year, but I plan to start contributing to my 401k (no match) soon, and trying to max that out this year. I’m hoping for a significant raise, which in the ideal world will be enough to cover maxing out my 401k without noticing those contributions too much, but I’m not sure yet if that’s actually going to happen. Fingers crossed.

In the meantime, I have $900 liquid that I can invest somewhere. Oh goody. I think it’s pretty crazy that I currently have $149339.25 in my investment accounts right now, not counting about $10k liquid (though taxes are going to eat some of that up I think.) Even though $150k doesn’t seem like a lot of money, I’m proud that in the last 6 years since I’ve graduated college I’ve been able to go from $5k in savings to over $160k. Still pushing for that $200k this year — if the economy decides to recover and I manage a sizable raise it will help lift me up there, otherwise I’ll probably end up at $180k for the year. Really would like to see that happen, I’m so set on entering my 30s with $250k in the bank, I’ll be pretty peeved at myself if I don’t make that goal.

Investing

Overfunding my Retirement Contributions?

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This year I’ve done much better than in previous years, so I decided to get a jump on my retirement savings. I’m maxing out my 401k and my IRA. I still don’t know if I’ll qualify for the Roth IRA or not (depends on whether I keep my job through Oct, Nov & Dec) so right now I have a regular IRA and I’ll reclassify if needed at the end of the year.

What I’m most excited about is being able to max my 401k. My company doesn’t match but the good news is that I’m funding the 401k in preparation of a Roth conversion. Being 26, I have plenty of time to let the tax laws work their magic. Sure, $13k is not a huge amount of money, but that’s a good thing because I’ll still have to pay taxes on it when I convert. I plan to wait to the year I go to grad school to do all the conversions because surely I’ll be making very little money then, if any, and be in a low tax bracket.
Now if only my boyfriend would start saving for retirement, I’d worry a bit less about it.
I’m also a little concerned that I’ll never be able to afford a house, but oh well, at least at this rate I should be able to retire. Hopefully I’ll live that long.
Investing, Retirement

IRA or 401k? Is it too late?

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When I realized I would be earning too much this year to qualify for a Roth IRA, I cried a little bit. Ok, that’s overly dramatic, but I have been so proud of myself for saving my pennies each year of my $20k to $50k / year income to max out my Roth IRA that I felt a little empty knowing my savings this year could not be invested in tax-free growth.

So I thought I’d do the second-best thing… open a traditional IRA and deduct the money now, pay taxes on it later. Not the best option in the world, but at least I’d get to deduct the money from my rather high single tax rate.
This morning I found out that I was completely wrong about that. I admit it’s my fault for not doing my research appropriately, but now I’m totally bummed. Apparently the income you’re allowed to have to get the benefits of a traditional IRA is LOWER than that of a Roth IRA. This makes absolutely no sense to me right now because why would anyone want to invest in a traditional IRA if you are in a low-ish tax bracket?
I guess if you do not have a retirement plan at work you are allowed to deduct up to $5k for your traditional IRA in each tax year. Funny how this is the first year of my life I will have access to a retirement plan… a 401k (no match or anything, of course, god forbid I work for a company that would match my contributions.) I signed up for it, and I am supposed to start making contributions in mid July. I wanted to max out my 401k and my IRA for the maximum deduction to reduce my AGI. But it looks like that’s not happening.
The only reason I can see a traditional IRA having some benefit is that I think I can still put up to $5k in there each year and $16.5k into the 401k and later, when I’m not making a lot of money over the year, I can convert both of those accounts to a Roth IRA and pay taxes in a lower tax bracket. Given that I obviously don’t understand tax law very well, I may be off on this logic as well. At least then I can see why a traditional IRA has some value. But as this conversion thing is fairly new – why would anyone want to open a traditional IRA? Is there ever a good reason for this?
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Passing Down Wealth From Generation to Generation

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My father is dying of cancer and has a short time left to live. While his health is ok now, his medicines will stop working at some point over the next few years and from then on the cancer will take over and he will get sicker until he passes.

This post is not about my father’s health, but it’s important to note to put this into context.

Previously, many of my readers have left comments offended by a post I wrote about expecting an inheritance. A conversation I had with my dad this weekend over the phone continues this topic.

He told me how “I” need to get my mother to understand that she needs to live off the interest on the 401k. They get $7000 a month and there is no reason that they can’t live on that. (My mom is a spendaholic.)

My dad went on to tell me how he spent his whole life building wealth for the family so it could be passed down to his kids (me and my sister) and that we could pass it down to our children. Both him and my mother grew up in the lower middle class and did not have wealth. Their parents will not be passing down a great deal to them. So he wanted to build wealth up for our family, for the future. He wasn’t trying to make my sister or I rich, but he did want to make sure we didn’t have to worry about not having enough funds to get us through life. Once you have wealth, living off the interest becomes feasible. It’s not about luxury, but it is about having a lofty security blanket for your family – as in – your children and their children and so on.

But it makes me sick to my stomach to think about how in the future, I will be in such an odd spot — when my father passes, it will be up to me to try to make sure his dream lives on. Yet that dream is for my sister and I to obtain an inheritance. My sister has a learning disability and while she can comprehend some of this she is also younger and I don’t think she will understand a great deal of the financial situation (other than wanting the money.) My mother will want to spend it all. I understand finances, saving, living off interest – I could probably teach my mother to do this, but ultimately it would be so that I could get money after she dies.

My mom didn’t work once I was born, so all of the money in savings is from my dad’s years of working many hours to build this wealth. On one hand I feel the responsibility to make sure that the reason my dad worked so hard his whole life (probably causing unnecessary stress and part of the reason he gained so much weight and got sick) lives on, and part of me feels like this isn’t really my business at all besides making sure my mom doesn’t spend everything too quickly – she does need enough money to survive for many years. She’s in her mid 50s so hopefully she’ll be around for a long time.

I do want to make sure my mom doesn’t go crazy with spending, but she could very easily live a luxurious life and spend every penny if she wanted to in the future. And who am I to stop her?

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Dreams of a 401(k)

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Oh 401(k), when I think about you, I touch myself.

Employers matching contributions? That’s a truly beautiful concept, and one I’ve never been able to take advantage of.

At the moment, my freelance career prohibits me from obtaining full benefits at one company. That’s how I chose to live my life, so I have to deal with the fact that my Roth IRA has lost significant amounts of money this year, while if I had been able to contribute to an employee-match 401(k) I might have at least broke even amidst this recession mess. However, I just have to go it alone. That’s my choice.

But that wasn’t always the case. My first full time job at a magazine showed me how even full-time gigs at companies don’t always equate to earning the luxury of a 401(k). That company was a bit, how-do-you-say, confused in terms of organization. We had a meeting about getting 401(k)’s where the financial companies came in and presented our options, then they came in another day and we met with the reps and signed the paperwork. Of course, since the company was not making any money, our 401(k) was not going to include a match at all. So ultimately the only benefit was that it would encourage employees to start saving (but tax-wise, most of us would probably be better off with a Roth anyway).

Next up on my job history resume, I obtained another full-time gig at a startup where I was to get stock options instead of a 401(k). I never actually earned any of those stock options because I left the company after three months. I was fired. I was bored with the topics I was writing about. And I couldn’t keep up with the pace. It was for the best.

I worry a bit about my retirement. I know it’s many years off, but I won’t have the security that my dad has. He retired early so my family is living on a tight budget now, but in a few years he’ll have access to his pension and he and my mother can live off that. What will I have to live off of in 2058? Or whenever it is I end up retiring?

Thus far I put $4000 into my Roth IRA (started in 2007). It’s down to $3600. I know… I know that investing is a long term thing. Still, I can’t help but be concerned about what my future holds. Maybe the smartest thing to do would be to get a stable full-time job at a public company or government agency. But I’m trying to balance my happiness and my future. It’s hard to find that balance. I’m worried I’m leaning too far towards happiness right now.