My Grand Financial Plan...Help Please! - Page 3

ChromePony · #21 09-09-2006, 01:08 PM

So I just whipped up a quick excel sheet to approximate this 401k effect without any match and it certainly wasn't very pronounced. I think a lot of this comes from the fact that I'm in the 25% tax bracket now but I'm projecting that I'll be taking 35% out of my 401k when I withdraw it...is this accurate? If so theres about a 2% difference between the two portfolios after 40 years which I think is not enough to convince me to contribute the full amount (until next year when I get matched of course).

I did this with an 8% return assuming my salary stays the same for 40 years (I hope not) compounding monthly. Feel free to poke any holes in my logic, Im going to check the numbers again.

Scorpion Man · #22 09-09-2006, 07:16 PM

When you said 2% over 40 years...did you mean gross? or did you mean annually? I don't see how its possible to be 2% gross, even with the tax difference. Also, are you putting the money in the IRA with pretax or aftertax? If its pretax, you have to be comparing to a return that starts on the lower base, and also pay tax on the gain on that piece at the end.

ChromePony · #23 09-09-2006, 08:50 PM

[ QUOTE ]
When you said 2% over 40 years...did you mean gross? or did you mean annually? I don't see how its possible to be 2% gross, even with the tax difference. Also, are you putting the money in the IRA with pretax or aftertax? If its pretax, you have to be comparing to a return that starts on the lower base, and also pay tax on the gain on that piece at the end.

[/ QUOTE ]

Ah, I meant 2% gross but I forgot to pay taxes on my gains from the regular investement...the 401k is pretax though so yeah I thought it should have been more of a difference than what I got. I'll check it out again.

ChromePony · #24 09-10-2006, 03:51 PM

When I add the tax effect on my non 401k earnings theres about a 30% difference after 40 years. This is definitely less pronounced over a shorter time span of course. Anyway its worth considering still maxing out even without the match, its just hard for me to put off all this money for so long, but technically I can probably afford it right now so its not a bad idea.

arsoisaen · #25 09-13-2006, 03:30 AM

imo D

dont have time to in depth but simplified reasons...

15% bond is good, think a little high on emerging markets, i would divert 7-10% of this into intl/small cap, maybe large cap too assuming its more value weighted

aceupthepants · #26 09-14-2006, 11:41 AM

I was wondering why buying a house wouldn’t be a good option for a person in his shoes. My friend had a similar amount of money and bought a multiunit home where he now lives for free as his tenants pays his mortgage. Is this not a good option to take?

zimmer879 · #27 09-14-2006, 01:35 PM

If you're not planning on touching the money until retirement, do yourself a favor and stay away from bonds. Any longterm period in the history of the stock market would have trounced whatever return you can get from a bond fund.

ChromePony · #28 09-15-2006, 01:22 AM

[ QUOTE ]
I was wondering why buying a house wouldn’t be a good option for a person in his shoes. My friend had a similar amount of money and bought a multiunit home where he now lives for free as his tenants pays his mortgage. Is this not a good option to take?

[/ QUOTE ]

A house might be good from a purely investment standpoint, but there are a number of complcations that are keeping me away for now. First I live in the Bay Area and would have a pretty hard time affording any place I would actaully want to live in. Also Im still young and not at all settled down, I want to have the freedom to move around, travel, go to school and quit my job if I want without having to worry about making mortgage payments. Someday a house for sure, but thats gotta be a little bit down the road for me.