401k? Or pension?

Roth 401k if offered, traditional 401k if not. Pension you have absolutely no control over how it’s invested and you can lose it at any time for no reason at all.

You start by making sure you have absolutely no debt but your house. List all debts smallest to largest, pay the minimum all but the smallest and attack it 100%. Then take everything you threw at the smallest and move up to the next one. Do this until you’re completely out of debt. Cut up all your credit cards. Don’t take out loans etc... that 350 dollar car payment is 3 million dollars over a working lifetime if you’d have made monthly investments instead of a stupid car.

Now you invest 15% of your gross into your 401k. Spread it over 4 types of growth stock mutual funds. Growth, aggressive growth, growth and income, emerging markets/international.

Pick the funds based on their 20 year track record of beating the S&P500, which the 30 year average is 11%. You can do this EASILY. Go find an investment calculator and do a calculation based on what 15% of your monthly income would be with a consistent return of 11%. You’re a multi millionaire in 20 years. Guaranteed. Now you have no debt except your house, you’re investing 15%. Now work on paying your house off in 7 years. Once your house is paid off, you have absolutely no debt, you live on half your income or less and you then begin to throw everything you have at retirement.

With this very very simple process the door greeter at Walmart could be a millionaire in 20 years.

#### a pension. Growth stock mutual funds.

 

And before someone chimes in... I’ve paid 70k in debt off over the last 18 months. I’m completely debt free, house and everything. I drive a cash car and there are education savings accounts for the kids. I’m living on less than half of my 70k income.

I’m putting an average of 2917 monthly into Roth 401k and IRA and a market account.

Assuming a MODEST 11% return(I’m getting 23% this last year and a half)... I’m 35 now and plan to retire at 67...

ESTIMATED RETIREMENT SAVINGS
In 32 years, your investment could be worth:

$9,609,621

That’s with the assumption that I’m starting from zero today and that I never get a raise in my life...

That pension won’t even begin to touch a 401k.

 

The creators of the 401k plan say it was never intended to replace pensions. It was just supposed to supplement pensions and other means of retirement investment.

To add to the diversification talk....putting your money in stocks in different sectors isn't really being diversified.
Being diversified is investing in stocks, maybe some bonds precious metals, more physical assets like real estate etc.

But if you want to rely solely on a 401k, you better have a few million in your account if you want to rely on it the rest of your life after retirement.
If you were to live 20 years after retirement and were to draw $50000 a year, you would need around $1 million+ today.
20-30 years from now you would need $2-3 million to have the same buying power due to inflation.

This is one of the reasons the creators of the 401k say they created a monster. And never meant this to be the sole retirement program for people.
But since it saved companies a bunch of money offering 401ks instead of pensions, 401ks are now predominantly offered by employers.

 

Just for the record. Since I was the one to start the diversification subject I take this to be directed to my commment. Right now I am living comfortably on solely my retirement income. My advisor's over the years has put me into many different investment strategies. I never said mine were all stocks. I juat stated different sectors of the economy. My investments are private and something I keep close. For the record there is a myth out there that everybody invested in the stock market during the 29 crash lost everything. This is a myth. In fact on a personal note because of some fantastic market advice I made some great picks in the days after the 87 crash. Very close to half of my investment portfolio balance today is made up of securities bought that Oct. I'm also not eating into the corpus of my portfolio today either. My money is working for me each and every day. I have 2 fantastic advisors whom keep in touch with me regularly. One thing they are doing for me now is lowering my exposure to what some experts is calling a major market correction coming by 2020. They are looking at Land and/or Gold. However right now a lot of money can be made or lost in the markets.

 

Is this Dave Ramsey??

 

Pensions are usually guaranteed by the Federal govt Pension Benefits Guaranty Corp. (PBGC) 401k’s have very little protection when it comes to the money you put in. There is a reason why companies have slowly been getting rid of defined Pension plans and it’s not because they care about the financial security of their employees.

 

Tell that to the members of the central states teamsters fund.

 

All members are still getting paid a pension as of this moment?

 

As of this moment yes, the letters I’ve received don’t sound promising.

 

Well right now you have a guarantee of something through the PBGC. Employees of Enron through their 401ks lost it all