Today is a guest post from my father. He wanted to emphasize a few points about saving for retirement
He Says:
"I would recommend that one first invests in a 401(k) up to the
company match limit. You can't beat an instantaneous 50% (or in some
cases 100%) return on investment.
Next, I would invest up to the max limit in a Roth IRA. This is
especially true for those who are early in their career. Early on,
you're not making much and your marginal tax rate may be, for example,
10-15%. The fact that you must use after-tax dollars is not a big hit
early in one's career. And 40 years from now, if they have followed
your advice, the income they derive from investments might be
substantial. Sure is nice to be tax-free....
Next: if any of your 401(k) is paid in company stock, diversify at your
earliest convenience. The law now allows you to do so. All of my
company match is in Crane stock....and at least once a year I go in and
transfer it to a different diversified equity fund.
After that, it gets a little hazier. I continue to fund my 401(k) to
the max because I am so fortunate to be in a 25% tax bracket now. It
makes sense for me to shield income now, as I don't expect to make
nearly so much in retirement. Also, in true couch potato fashion, it's
just a mindless way to invest. I never see the money, so it doesn't
get spent. The downside of 401(k) investments is they are not
accessible until retirement, or you pay a 10% penalty to access the
money. So it's not for everyone."
Thanks for the advice Dad. He also recommends (and so do I) the Scott Burns articles. He's a writer for the Dallas Morning News where He answers questions and has common sense financial advice for the average person. Check it out at Assetbuilder
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