Category : 401k

how to choose 401k investments

This 401k Plan is a Joke! – How to choose 401k investments

I have been in the investment advisory business since the mid-1990s. I am a CFP (Certified Financial Planner) and I co-founded a wealth management firm from scratch to over $500 million of client portfolios. Despite all of this experience – when I look at this fund menu of 403b investment options below even I can’t figure out what most of these fund choices are!! What the heck is “VEEDOT” or “VALUE”? Prime Money Market sounds good but Premium Money Market sounds even better. What about Global Gold – is that better than cheap old US Gold?

My point here is this. If someone with almost 2 decades of in-the-trenches investment advisory experience can’t tell what the heck some of these 401k options are – why in the world would we expect the average person to be able to decipher these choices? Don’t forget, their future ability to retire will largely rest on the performance of their retirement savings. With all of this at stake – THIS mess is the best we can do for the Baltimore Public School employees on how to choose 401k investments!

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Bacon & Investing

I have to admit, I love bacon. I mean I really love it. If it weren’t for my cardiologist and my wife, I’d have a steady rotation of bacon wrapped everything.

So you can imagine my surprise when I was scrolling through my Facebook feed and found this glorious headline, “New Study Claims Eating Bacon May Prolong Your Life.”

Hallelujah! I was filled with a new-found hope – bacon isn’t actually bad for you! My theory that there’s anti-bacon lobby spreading negative propaganda all these years was starting to pan out. After my two second mini-celebration, I saw the next headline that Facebook tossed into my news feed: “Study: Pancreatic cancer risk increases with every 2 strips of bacon you eat.”

My bacon jubilation was squashed.

My point here is obvious; I and millions of other people are persuaded by the media. It’s natural and it’s normal.

When it comes to investing, the same holds true.

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Performing Surgery on Yourself

Many hundreds of years ago it was quickly determined that performing surgery on yourself wasn’t the most practical idea. (Remember as a kid when you tried to rub your belly with one hand while patting your head with the other? Now imagine doing that with a razor sharp surgical stone in one hand.) As a result the profession of Doctor was invented. At first, they might have been referred to as the village medicine man, but I think you get the picture.

It has been 40 years since the 401k was introduced and we are still asking retirement savers to effectively “operate on themselves” when it comes to managing their 401k balances. So far, most self-help solutions focus on providing more and more retirement planning tools, calculators and general education. This is like believing that if we can just produce a better manual or surgical scalpel, then finally people will be able to perform their own open-heart surgeries.

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The Power of Peanut Butter: how it can help you retire faster

We hear it all the time: “But I just don’t make enough to even think about putting money into my 401k.”

Who hasn’t felt this way at some point? After all, life happens – soccer fees are due, car needs new brakes, your long lost uncle needs bail money…etc. The list goes on and on.

So the real question becomes…where do you find the money to save? We have the answer.

The average American eats 5.8 commercially prepared meals each week (about 23 times/month) and assuming the average cost is $10 per meal, that totals $230 per month. If you have four people in your household, take that up to $920…in one month. That’s a lot of money.

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The Tax Man Giveth and the Tax Man Taketh Away

It’s that glorious time of year again: Tax Time!

At this point, the tax damage is done. There’s not a lot you can do…BUT did you know that the best time to start planning for your taxes isn’t in December? It is now.

If you find yourself in either of these scenarios, here are some actions you can take:

If you are getting a refund from the IRS

Number one, call your HR Department to adjust your W-4 form and raise the allowances you are claiming. This will increase the amount you get on your paycheck (after they get done taxing it).

Number two, raise the amount you are saving into your 401k. Once you do this, your after-tax paycheck will likely go back down to what it “used to be.” You may have to fiddle with the W-4 allowances and 401k savings rate to get the numbers to shake-out. Once you’ve done this, you will save more money into your 401k, pay less in taxes, and your after-tax paycheck should still be about the same! Boom! Painless saving. Granted, you’ll stop getting a refund each year (which is nothing more than an interest-free loan to the government,) but your future retirement thanks you in advance!

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