6 Retirement Moves for the Young

It kinda drives me nuts when I see the whole "Go Roth Always!" diatribe. If you're in the 25% tax bracket with any kind of state income taxes (or higher), it makes more sense for you to sock your money away in a traditional 401k than a Roth 401k because you'll not only likely pay a higher tax rate on the money now than you will in retirement with the Roth, but the t401k contributions reduce your current tax bill as well. If you're in that bracket and maxing your 401k it always makes sense to go to through Roth IRA over a tIRA, but you've got to look at the full picture instead of just going "Growing tax free sounds great!" There's pros and cons of each.

"A retirement account contribution of $5,000 today at age 23 will be worth nearly $300,000 when you retire at age 70, assuming a 9 percent return,"
What fantasy world is this guy living in? 9% returns on average? Please!

What 23 year-old who's saving diligently thinks 70 is a reasonable age to retire? The reason they're saving so much is because they don't want to work until they're 70.

Nice job Anon... and agree, this article has an audience that can benefit from its advice. We're also in the Cleveland area. At 40 with 3 kids and a modest combined salary of ~$65K, between retirement accounts, home equity and savings, we've got a net worth of $350K+. Since we OWN, make no payments on 3 cars, camper trailer and boat (all used), we're able to max out my 401K ($17K). And by this time next year, our mortgage will be paid off so we can begin maxing out our ROTHs as welll (12K total). We have little and spend little in comparison to many, yet we want for nothing. And like you, when we do spend, we take trips... family memories that will last a lifetime. There is much peace that comes from financial security. Our best to you and anyone else who reads this. The good life doesn't cost as much as you think it does.

Some people take these yahoo articles too seriously. The bottom line is save what you can so you can use these funds as a piece of your retirement puzzle. Every little bit can help.

"... assuming a 9% return."

Um... problem: "assuming" dude meant a 9% ANNUAL return rather than "a 9% return" (which is, apparently, what he said-- and a 9% return on $5000 will only get you up to $5450, NOT $300,000!), you actually can't "assume" a 9% average annual return. You actually have to be reasonably smart, or exceptionally lucky, to average 9% annually.

But yeah, let's go on "assuming". That is sure to work, right?

Young people need to understand that Social Security is not a retirement program. It never was. It was created as a safety net to prevent people from falling into poverty in their old age. That's all it has ever been. Somewhere along the line, the vast majority of Americans began to believe that they could retire comfortably on Social Security and stopped saving for retirement. Those people, many of whom are baby boomers, are in for a big surprise in a few short years. Even more amazing is that so many of these same Americans currently support politicians who are determined to raid and then destroy Social Security instead of fixing it.

I'm tired of people on Yahoo griping about student loan debt. Why did you borrow it? Did you ever ask your university, "why does your tuition keep going up, and your salaries, at twice the rate of inflation? Colleges keep ripping off some of the dumbest consumers on the planet - 18 year olds.

2 types of people in this world...those who PAY INTEREST and those who MAKE INTEREST. Who do you want to be?

Pray as if everything depends upon God. Act as if everything depends upon you, because in the end it does all depend on you.

this financial planner in denver projects nine percent. should i put money in italian bonds?

The biggest cancer to retirement investing is debt... Mortage debt is tolerable, we can almost make peace for having to finance a vehicle (almost), but no other debt is really acceptable if you want to truly build wealth. Once you can get past having to finance a vehicle then you're really off and going...

You can only bounce from 'good used car' to 'good used car' so long - buy if you can, do it. It's not the 2-3% interest you pay on those new car loans that hurt as much as the outrageous markup on them - losing 20% when you leave the lot is still the norm.

Do start young, do invest as much as you can afford and diversify.... with these actions you'll do well.

Another choice you have - do you want to be 65 and have many nice memories or 65 and have a bunch of money but be too sick to spend it?? It is very important to save but you also need to enjoy life from time to time. Go out to eat, save for a nice family vacation. You can do both.

You forgot the importance of diversification. My conservative formula for success the past 25 years has been 1/3rd equities, 1/3rd real estate and 1/3rd cash plus NO DEBT and that includes paying off mortgages as fast as you can.

the more I read of the euro mess, the more I wished I had bought gold pre 08

You're nuts if you think "Roth contributions grow tax free forever". Once the govt needs the money, and they do a study that shows that only the "rich" have them, they will do "means testing" for "fairness" and end up taxing some or all of the growth in your Roth.

This is always good advice, but the old assumption of 7-10% average returns simply doesn't apply anymore. I started saving 6 years ago in my mid 20's and the market has returned less that 1% annually since then. Meanwhile, inflation has increase 2% annually so I'm actually losing money in real dollars just getting market returns.

Saving for retirement is important, but when the markets have a "lost decade" then you lose the value of compounding interest.

Long term, the markets will pick up, but for people in their 20's and 30's, the enormous benefiit of compounding interest in those early years has vanished.

I have followed every one of the bits of advice in this article. Between our investment accounts, the properties we own, savings, etc, my wife and I have a net worth of half a million. We're in our mid 30's and make just above average salaries, have twins and have traveled to Europe a total of 7 times together. It can be done folks, this is great advice!

Wonder what $300,000 will buy this person 47 years from now 2059 a new car maybe? About 10x as much as today
Dont think so? A new car in 1965 was $2,650 and that was 47 years ago about 10x less

Point 6 should be to contribute to a traditional IRA. Currently, low-paid workers earn a tax CREDIT (better than a deduction) for contributing. Only fund a Roth IRA when you max your traditional IRA contributions. Also, bear in mind that grandparents who give you cash gifts will be especially pleased if you use that money to fund your IRA.