patrick.net

I for one, welcome our iPad totting ex-home owners....

More evidence of a double-dip:

http://www.consumerindexes.com/index.html

I think it's all about how much private debt can be converted into public debt.

People walk away from their mortgages and the government or the Fed compensates the bank, increasing either the public debt or the money supply.

People drain their 401k plans and just count on the government to support them somehow when they're older.

It's interesting to see how far all this can go.

People drain their 401k plans and just count on the government to support them somehow when they’re older.

It's true. I've stopped contributing to my 401k plan. The incentive that my company gets to provide 401k to employees really made me think if it was a benefit to me, or were they just wanting to have propaganda that delivers this as a "benefit" and drain all your money into a blackhole (stock market). At this point, I rather take my 3% salary every month and go bet on RED on a roulette table. I've got better chances there.

Get a head start everyone! Stash your contributions else where and let the government take care of you when you retire. You'll also have your stash on the side :)

I sure wish we had 401k out here where I live let alone employer-matched 401k plans)!

The lack of it was one of the big reasons that I wanted to buy property as soon as possible.

As for these buffoons spending their retirement and hoping the government bails them out, I say let them eat dog food when they're old. Or whatever food is cheapest.

Michinaga says

I sure wish we had 401k out here where I live let alone employer-matched 401k plans)!
The lack of it was one of the big reasons that I wanted to buy property as soon as possible.
As for these buffoons spending their retirement and hoping the government bails them out, I say let them eat dog food when they’re old. Or whatever food is cheapest.

I think 401k is loaded with propaganda and they're trying to make it a norm so that it can replace social security. The employer match is just to bait you. Speak to employers and find out what their incentive is to give you 401k and match it for you.

The penalty that comes with withdrawing YOUR money early is stupid. I wouldn't mind so much if it just involved them taking back what your employer matched. Because they gave your employer more than what your employer gave you for suckering you into a 401k contribution. I'll take a 401k if the employer was willing to put in 3% for me without me putting anything in.

Don't get me wrong. I am totally for saving for retirement. But I'm just doing it another way.

I think it’s all about how much private debt can be converted into public debt.

Yup. Plenty of soulless deadbeats out there that want to gamble, keep the gains, and pass off the losses.

We really need to bring back public flogging.

But it's an iPad and it's made by Apple. Everyone has to get one. If you don't, you're a loser. If you go into debt to get one, that makes it all the more "special." Just like the Bay Area because they aren't making anymore land, if you don't buy now you'll be priced out forever, and the prices are so high here because it's such a very special place.

How much more stupid can the American consumer get? Time will tell.

Vain says

Michinaga says

I sure wish we had 401k out here where I live let alone employer-matched 401k plans)!

The lack of it was one of the big reasons that I wanted to buy property as soon as possible.

As for these buffoons spending their retirement and hoping the government bails them out, I say let them eat dog food when they’re old. Or whatever food is cheapest.

I think 401k is loaded with propaganda and they’re trying to make it a norm so that it can replace social security. The employer match is just to bait you. Speak to employers and find out what their incentive is to give you 401k and match it for you.
The penalty that comes with withdrawing YOUR money early is stupid. I wouldn’t mind so much if it just involved them taking back what your employer matched. Because they gave your employer more than what your employer gave you for suckering you into a 401k contribution. I’ll take a 401k if the employer was willing to put in 3% for me without me putting anything in.
Don’t get me wrong. I am totally for saving for retirement. But I’m just doing it another way.

It's a way for big corporations and giant capitalists to squeeze their workers again. 401ks were created so that big corporations and giant capitalists didn't have to fund guaranteed pension funds actually creating a secure retirement for their workers. Instead they raided these pension funds when going bankrupt, screwing people who worked for them for decades, then reorganizing and creating these monstrous 401ks which aren't guaranteed and force the worker to contribute to their retirement, which used to be a benefit back in the day.

Also the 401k is designed by Wall Street so that money is constantly invested in the financial markets via 401ks by people who are mostly uneducated about where to put their 401k funds. It guarantees market activity and fee generation paid to Wall Street financial firms because these funds are invested every pay period. It props up markets and allows for the fat cats to continue to suck the wealth away from the middle class as the fat cats screw up the markets, take the money, and run.

The reason why Republicans want Social Security to be privatized is the same reason that 401ks were created. It would be another way for their corporate and giant capitalist masters to siphon giant amounts of money away from the middle class and lower working classes through "management fees" and market manipulation.

The penalties placed on 401ks are designed to discourage the working class from tapping into that money, which is the working class's money, so that the money remains in financial markets ready for the sharks of Wall Street to take it.

No, the creation of 401ks in favor of guaranteed pensions wasn't a "favor" done for the "benefit" of the worker. It was done to benefit the bosses, fat cats, Wall Street, and the Boards of Directors of the Big Corporate masters we all serve now.

Social Security is the one last pool of guaranteed retirement money that has been mostly kept away from the fat cats, Wall Street and Big Corporations. Even though the funds have been used to balance Federal Budgets, against the founding principals of Social Security, it is still solvent and free from the raiding of Wall Street vultures.

Michinaga says

As for these buffoons spending their retirement and hoping the government bails them out, I say let them eat dog food when they’re old. Or whatever food is cheapest.

I'd dare to say that many of the "buffoons" to whom you are referring are out of money and have no other options. If people take the opportunity and use the tax advantages to contribute to a 401(k) and other retirement plans, I doubt that they would use their retirement unless they were desperate. I would also like to point out that they are losing money from the tax penalties, so they surely wouldn't take their money out unless they were desperate.

In my line of work I've seen people who did this - they applied for assistance to get by, but until they utilize every last option available to them they're not eligible for welfare (which doesn't pay much anyway).

Maybe it's crazy to sell off your retirement to sustain your lifestyle, but for many people there was no other option. They saved it for a rainy day - and for them, it's pouring out there. IMHO, of course.

...fyi, dog food is more expensive that chef boy-r-dee.

simchaland says

It’s a way for big corporations and giant capitalists to squeeze their workers again. 401ks were created so that big corporations and giant capitalists didn’t have to fund guaranteed pension funds actually creating a secure retirement for their workers. Instead they raided these pension funds when going bankrupt, screwing people who worked for them for decades, then reorganizing and creating these monstrous 401ks which aren’t guaranteed and force the worker to contribute to their retirement, which used to be a benefit back in the day.
Also the 401k is designed by Wall Street so that money is constantly invested in the financial markets via 401ks by people who are mostly uneducated about where to put their 401k funds. It guarantees market activity and fee generation paid to Wall Street financial firms because these funds are invested every pay period. It props up markets and allows for the fat cats to continue to suck the wealth away from the middle class as the fat cats screw up the markets, take the money, and run.
The reason why Republicans want Social Security to be privatized is the same reason that 401ks were created. It would be another way for their corporate and giant capitalist masters to siphon giant amounts of money away from the middle class and lower working classes through “management fees” and market manipulation.
The penalties placed on 401ks are designed to discourage the working class from tapping into that money, which is the working class’s money, so that the money remains in financial markets ready for the sharks of Wall Street to take it.
No, the creation of 401ks in favor of guaranteed pensions wasn’t a “favor” done for the “benefit” of the worker. It was done to benefit the bosses, fat cats, Wall Street, and the Boards of Directors of the Big Corporate masters we all serve now.
Social Security is the one last pool of guaranteed retirement money that has been mostly kept away from the fat cats, Wall Street and Big Corporations. Even though the funds have been used to balance Federal Budgets, against the founding principals of Social Security, it is still solvent and free from the raiding of Wall Street vultures.

You beat me to it. That's exactly why I don't contribute to a 401k plan anymore. I've done better in gold/silver/cash than all those fancy investment plans out there. Plus I hate giving the gov a chance to get more of what I've earned.

Had a buddy come over the other day, who was trying to sell me a debt consolidation plan through PFS or something like that. He was taken off guard when I told him I had zippo debt.

He then moved onto investments and other ways to maximize my $$. I asked him about this history of money, the stock market and so forth. Dude was a deer in headlights. Amazing that these companies (PFS) make any money hiring uneducated salesmen... not to mention salesmen who don't do their homework.

People are overleveraged. I had more debt in high school ($6k car loan) than I've had in the past 3 years. lol. Retirement is a choice, don't put all your eggs in one basket (especially the 401k) and expect to be rich.

joshuatrio says

You beat me to it. That’s exactly why I don’t contribute to a 401k plan anymore. I’ve done better in gold/silver/cash than all those fancy investment plans out there. Plus I hate giving the gov a chance to get more of what I’ve earned.
Had a buddy come over the other day, who was trying to sell me a debt consolidation plan through PFS or something like that. He was taken off guard when I told him I had zippo debt.
He then moved onto investments and other ways to maximize my $$. I asked him about this history of money, the stock market and so forth. Dude was a deer in headlights. Amazing that these companies (PFS) make any money hiring uneducated salesmen… not to mention salesmen who don’t do their homework.
People are overleveraged. I had more debt in high school ($6k car loan) than I’ve had in the past 3 years. lol. Retirement is a choice, don’t put all your eggs in one basket (especially the 401k) and expect to be rich.

Good for you Joshua......I had a great laugh reading your post when your friend found out you were debt free. I love it! Like i've said before on this site, don't take financial advice from broke people. Diversification is key. TSP, 457, 401k and Roth IRA's in the indexes so as to spread risk, cash, bonds, primary residence and rentals, and I even diversify there with condos and single family residences. The key to a happy stress free life and early retirement (going to work IF you want to and where you want to if you decide to) is living within ones means and debt free, or for the younger folks, as close to debt free as you can be until you reach the land of critical mass.

rob918 says

Good for you Joshua……I had a great laugh reading your post when youre friend found out you were debt free. I love it! Like i’ve said before on this site, don’t take financial advice from broke people. Diversification is key. 401’s and IRA’s in the indexes so as to spread risk, cash, bonds, primary residence and rentals, and I even diversify there with condos and single family residences. The key to a happy stress free life and early retirement (going to work IF you want to and where you want to if you decide to) is living within ones means and debt free, or for the younger folks, as close to debt free as you can be until you reach the land of critical mass.

Absolutely. The guy who was trying to sell me "his plan" did not have a real job, his wife worked part time, and they had a brand new SUV. The guy was broke and expected me to give him what I've worked for - especially since I was his friend. He sort of quit talking to me after I told him that his "plan" was a pyramid scheme and had no desire in taking part in it.

Do you have rentals? What are your primary investments? I'm currently all cash and metals, and have enough to buy a small 2 bedroom house in cash... But we're saving for a 3 bedroom - I don't want a mortgage over my head. But I thought about buying a small 2 bed now to rent it out.. I agree with you (and appreciate the encouragement) when you said:

"The key to a happy stress free life and early retirement (going to work IF you want to and where you want to if you decide to) is living within ones means and debt free, or for the younger folks, as close to debt free as you can be until you reach the land of critical mass."

I'd like to be mortgage free by 30 and only go to work if I wanted too. Retiring by 40 isn't rocket science. People look at me like I'm crazy, but it's possible. My wife and I together don't make very much, but we make it work. Money doesn't equal happiness, but it can cause a heck of a lot of stress...

joshuatrio says

Absolutely. The guy who was trying to sell me “his plan” did not have a real job, his wife worked part time, and they had a brand new SUV. The guy was broke and expected me to give him what I’ve worked for - especially since I was his friend. He sort of quit talking to me after I told him that his “plan” was a pyramid scheme and had no desire in taking part in it.
Do you have rentals? What are your primary investments? I’m currently all cash and metals, and have enough to buy a small 2 bedroom house in cash… But we’re saving for a 3 bedroom - I don’t want a mortgage over my head. But I thought about buying a small 2 bed now to rent it out.. I agree with you (and appreciate the encouragement) when you said:
“The key to a happy stress free life and early retirement (going to work IF you want to and where you want to if you decide to) is living within ones means and debt free, or for the younger folks, as close to debt free as you can be until you reach the land of critical mass.”
I’d like to be mortgage free by 30 and only go to work if I wanted too. Retiring by 40 isn’t rocket science. People look at me like I’m crazy, but it’s possible. My wife and I together don’t make very much, but we make it work. Money doesn’t equal happiness, but it can cause a heck of a lot of stress…

I can tell from your posts that you are on the right track to living a great, debt free life. You will get there if you stick to the plan and keep your eyes on the prize and stick to the budget every month. I grew up in a poor family so I knew that's not where I wanted to be so I kept my focus. To answer your question on investments, it's in IRA's, bonds, cash, rental properties, primary residence and other index funds.

I retired when I was around 40 and have been retired for about 12 years now. Your first home won't be the best, but no one I know started out in a dream home. I bought my first home when I was 24. Buy what you can afford with a fixed rate, 15 or 30 year loan with a nice down payment and attack the mortgage making extra principal payments to get it paid off. When you get more money, buy a bigger and better one and rent that one out making massive passive income and start the process over again. If in that time the neighborhood went downhill, do a 1031 tax free exchange to a better one.

Don't use your home as an ATM and don't take out 2nds on the property. The lawn under your feet feels so much better when it's paid for and yours. I guarantee you that you will feel like you over paid for every home you buy, but you will look back and laugh if you hold on to them and don't flip homes. I have looked back and laughed at every one of them, and if you ask most folks over 50, they will tell you the same thing. My parents bought their first home in a lower working class neighborhood in the East Bay and the principal and interest were $75.00 a month and wondered how they were going to pull it together every month but that turned out to be a great investment. Live below your means, have a 9 month emergency fund and the older you get, this fund will turn into a huge amount of money and it will last you forever.

Money doesn't buy happiness, but it takes stress off of you and your family. Money = options. Always have a plan A, B and C which will keep you out of trouble and will keep you sleeping soundly at night. When you have options that gives you happiness and then you'll have the world by the tail. When something comes up, like things will in life, being liquid with an emergency fund turns a crisis into an inconvenience.

When you're a landlord you'll have paid for homes so you don't have to worry if you have a tenant or not and you don't have to just take the first tenant that comes along. If you're a good landlord and have nice property, you won't be without a tenant except the time between painting and getting the new tenant qualified. You'll be out fishing or traveling or working a job that you want to go to and you'll be letting a property managment company take care of your property and finding you good tenants. When you run into successful people (not necessarily rich) ask them how they did it and I am sure they will be more than happy to sit down with you for a few minutes and give you some insight. I don't know where you live, but if I could do it in the SF Bay Area when I was younger, you can do it!

Looks like this thread headed into multiple directions.

I like 401Ks. Thanks to the tax break alone, cash in a 401K is a wiser decision than not using the 401K and putting the money in stocks (the historical highest performing asset class). Plus, I don't think there's a trading fee for putting into cash money market. Regardless, it's a good way for financially responsible people to save for the future and participate in the growing economy.

Are there better ways? Arguably yes, arguably no. The US taxpayer doesn't pay high tax rates relative to other countries. There's no such thing as a free lunch, so all things being equal, if you earn a regular income, save a lot in percentage terms, have low national tax rates, then you can sock money away nicely. When one generation crafts a beauteous plan to retire in luxury (our previous pension plans), it stands to reason that it's going to haunt future generations. Too bad we can't enjoy more moderation and sustainable programs - but we're rugged individualists, not more socially oriented.

Walking away from mortgages makes sense for a lot of folks. So they destroy their credit rating. Big deal. Yes, many lose money, but a good investor is able to cut losses. Those who walk away can operate with cash in the absence of a credit line, don't have to pay interest to the bank, and can redeploy income on things other than bank interest.

elkodruthers says

Looks like this thread headed into multiple directions

Sometimes that happens...

Bact to the OP... just this afternoon, a friend stopped by to show me his new toy. He's been saving his money by not making his house payment - about 6 months now - and he has a fancy four-wheeler in the back of his pickup. I see the point - instead of saving his money and changing his free-spending, over his head ways, he's buying new toys.

Vain says

People drain their 401k plans and just count on the government to support them somehow when they’re older.

It’s true. I’ve stopped contributing to my 401k plan. The incentive that my company gets to provide 401k to employees really made me think if it was a benefit to me, or were they just wanting to have propaganda that delivers this as a “benefit” and drain all your money into a blackhole (stock market). At this point, I rather take my 3% salary every month and go bet on RED on a roulette table. I’ve got better chances there.
Get a head start everyone! Stash your contributions else where and let the government take care of you when you retire. You’ll also have your stash on the side

A friend of mine withdrew all his money from his 401k to put down a down payment on a huge house in Daly City in 2005. When he told me what he did at the time I asked him what he was going to do for retirement, he said his house would be his retirement. He is now way underwater on that house and is thinking of walking.

elliemae says

elkodruthers says

Looks like this thread headed into multiple directions

Sometimes that happens…
Bact to the OP… just this afternoon, a friend stopped by to show me his new toy. He’s been saving his money by not making his house payment - about 6 months now - and he has a fancy four-wheeler in the back of his pickup. I see the point - instead of saving his money and changing his free-spending, over his head ways, he’s buying new toys.

I think my point was more that it makes financial sense to walk away from mortgage, so long as you don't mind the lack of access to credit. Just because someone isn't making their house payment, doesn't mean they're not saving. (I get that your friend may not be saving.) In fact, perhaps it's a fairly rational decision to take some of the savings that come from not overpaying the bank, and paying yourself for the hard work you do everyday.

i messed that quote up. sorry! I'm new :)

woggs1 says

Vain says

People drain their 401k plans and just count on the government to support them somehow when they’re older.

It’s true. I’ve stopped contributing to my 401k plan. The incentive that my company gets to provide 401k to employees really made me think if it was a benefit to me, or were they just wanting to have propaganda that delivers this as a “benefit” and drain all your money into a blackhole (stock market). At this point, I rather take my 3% salary every month and go bet on RED on a roulette table. I’ve got better chances there.

Get a head start everyone! Stash your contributions else where and let the government take care of you when you retire. You’ll also have your stash on the side

A friend of mine withdrew all his money from his 401k to put down a down payment on a huge house in Daly City in 2005. When he told me what he did at the time I asked him what he was going to do for retirement, he said his house would be his retirement. He is now way underwater on that house and is thinking of walking.

Hey, I didn't create this mess. Unfortunately I have to wade my way through it. I do contribute to my 401k to the max that forces my agency to contribute equal sums. The total invested equals 8% of my annual salary and 6% of it is entirely contributed by my employer. I felt that I could play with 2% of my income to be in the game just in case the fantasy of the 401k turns out to be something more substantial down the road when I'm ready to retire.

Beyond that, I'm saving about 8-10% of my after-tax salary in high-yield savings accounts. I don't have much yet, after just having finished getting out of consumer debt after grad school (I'm 40 and it sucks to be in that financial position after making way more money in a different field, but alas, I'm much happier). Once my high-yield savings accounts hold 6 months' worth of expenses I can start diversifying into a Roth IRA I have that I contribute to rarely at the moment and possibly commodities. That 6 months' worth of expenses in easily accessible cash is the key goal for me right now. So far I have 1 month of expenses in cash saved up.

There aren't too many great places to be putting your money these days anyway. At the moment I'm being conservative and later, once I have my 6 months' worth, I can gamble a little.

401ks suck compared to a guaranteed pension. But I use it as a way of getting 6% beyond my salary from my employer put into an account without being taxed on that money until retirement. Currently I am fine with risking 2% of my own pre-tax income to max out on my employer's contributions. I hope there's something there when I'm ready to retire. We'll see...

elkodruthers, I don't doubt the fact that walk away can be a financial sense whether I condon it or not.

However, some comments at your second posting irk me off.

You, as a mortgage holder, you pay exact amount you agreed on. Affordable or not, you thought you could do it or not, it didn't happened at gun point. That's legitimate contract and you can't call it overpaying. It just was a stupid or let say, unfortunate decison made by you. And now, you don't or can't pay agreed amount because situation has been changed. Too bad. But, saving money by not paying your agreed upon amount is paying yourself for the hard work you do everyday? What is this?

You know, this has been discussed over and over, so I got your point. But Man, you should've come up with better explanation.

Regarding 401k's - sure, they suck compared to a guaranteed pension, but if your employer gives you a match, you're a sucker not to contribute at a very minimum the maximum amount that will be matched. You're basically throwing money away if you don't.

Most 401k programs have a directed brokerage option, where if you feel you have the investment skills, you can manage your own 401k and buy/sell stocks, options, ETFs, mutual funds, etc. I prefer to do this myself because I can do a lot better than most mutual fund managers.

In any case, saying you don't contribute to a 401k because it's a scam is just cheating yourself of a tax free retirement option. I realize it is a scam foisted on us by the business owners, who made employees accept that guaranteed pensions are gone now, and everywhere except government jobs seem to have replaced them with 401k's, but if you choose not to contribute at all, what are you going to do when you need to retire?

Seriously, people need to take responsibility for their own retirement - I have my 401k, but I also diversify and invest in precious metals, bonds, ETFs, commodities, etc. I like what you guys are saying about saving wisely and retiring early. I plan on doing that myself but I got a little bit behind because I didn't save enough while I was in my 20s. I'm making up for that by saving a LOT in my 30s. Fully 50% of my income goes into savings. I wish I had been smart enough to start in my 20s though; the earnings would have been significant from starting at such a young age.

Vain says

Michinaga says

I sure wish we had 401k out here where I live let alone employer-matched 401k plans)!
The lack of it was one of the big reasons that I wanted to buy property as soon as possible.
As for these buffoons spending their retirement and hoping the government bails them out, I say let them eat dog food when they’re old. Or whatever food is cheapest.

I think 401k is loaded with propaganda and they’re trying to make it a norm so that it can replace social security. The employer match is just to bait you. Speak to employers and find out what their incentive is to give you 401k and match it for you.
The penalty that comes with withdrawing YOUR money early is stupid. I wouldn’t mind so much if it just involved them taking back what your employer matched. Because they gave your employer more than what your employer gave you for suckering you into a 401k contribution. I’ll take a 401k if the employer was willing to put in 3% for me without me putting anything in.
Don’t get me wrong. I am totally for saving for retirement. But I’m just doing it another way.

Vain,

There’s no propaganda with 401K accounts, it is the best tool to save for retirement with the exception of pension option. It is one of the tools and not the only tool. The other tools are paid for house to live and to rent and savings and other liquid assets. Social security is viewed as the extra boost and nothing more. It’s part of the financial security package. 401K's are incredibly expensive to the US treasury. The early withdrawal penalty is fair game, if not, you'll see all kinds of income shifting.

The most valuable aspect of contributing to a 401K is the pre-tax feature. Of course, because it is a pretax feature, your mileage may vary. I have seen students make 401K contribution which is financially not smart, but I have never seen one individual who makes more than 200K a year not max out or close to maxing out their 401K. This is obvious in a state like California where the federal 28% bracket and 9.8% state bracket is easily reached. (earning money with pre-tax dollar gives you a big head start) The thing about high earners is they also get high perks. I think the average 100K earner probably gets 6% match and another 2-10% incentive for retention (vesting) boost. Over a period of time, the returns are much more valuable than the contributions itself and the ultimate reason why pension is not always superior to 401K. I guess pension is superior in the fact that the payouts are defined which means they are protected from market collapse.

401K’s are a lot more controlled than it used to be. There are more choices than ever. In all honesty, they are all pooled money which are invested in some kind of fund and the fees does not match the service.

The trickier question is the ESPP plan, do you want to set aside pre-tax $$ to buy your own companies stock usually around 15% to 20% discount?, that could be a homerun (Saleforce.com) or a strikeout (Sun Micro).

401K is a retirement plan. It is to help people properly save, and shouldn't be considered a bank account to tap into. Thus the penalties for early withdrawal. If they weren't there, every time a new ipad device came out, everyone would be tapping into those 401K plans and drawing them down. They should be a one way depositing system with as much disincentive to remove money as possible. They are also one of many ways a person should save for retirement, not the only way as SFace pointed out.

I'm not positive, but I believe it would be possible to roll a 401k account and then purchase gold/silver, thus removing yourself from "stocks". It's also possible to use a 401K for other types of investments, but most people don't move away from the stock market.

It's probably one of the only plans I trust not to get screwed over.

Selection of funds in 401k can vary from employer to employer.
I used to work for a company that offered only 3 funds (performed horribly compared to S&P 500) to choose from despite having a match. Now I have about 40 funds (10 are targeted funds) but I have also setup a trading account within my 401k to trade stocks/ETFs/mutual funds.
Of course you can choose to put everything in a moneymarket/income funds.

One thing I don't like about the funds offered in 401k is that fees are not disclosed.

jobcat says

One thing I don’t like about the funds offered in 401k is that fees are not disclosed.

I think it depends on your 401k. Fees for managing each fund are disclosed in the prospectus in our plan. However, they don't disclose what the fees are for managing the plan as a whole. That would be interesting to know.