With the costs of retiring going up I find myself questioning the value of a 401K. I see people putting off medical care because they don't want to sell their homes to pay for it versus people on welfare going to the ER for a case of the sniffles. Maybe it pays off to be irresponsible?

401k?

Its a US thing where you save a percent of your check and invest it into the stock market where it generally increases in value. Some call it gambling. Ideally by the time you retire you have enough money to live off of with the welfare check the government gives you.

Its a US thing where you save a percent of your check and invest it into the stock market where it generally increases in value. Some call it gambling. Ideally by the time you retire you have enough money to live off of with the welfare check the government gives you.

do they pay in dollars or Euros?

do they pay in dollars or Euros?

The accounts are in dollars but you can use a 401k to invest in any kind of fund, including foreign stocks (if that's what you're getting at).

And that is why I hire a financial advisor. Last year I got 12% return on my 401k that he took control of.

And that is why I hire a financial advisor. Last year I got 12% return on my 401k that he took control of.

12% return was a LOSS if those were U.S. dollars.

OMG 401K are in the stock market??? LMAO I never knew that.

You 'mericans are sooooo fucked.

Yes, it is. 401k return is HUGE if you invest correctly. I was ineligible for 401k when I worked because I was not 21 and was I disappointed but I can get it now. 401k is something you just "put away" and hope it accumulates, it requires active gambling.

12% return was a LOSS if those were U.S. dollars.

That may be, but I had 12% growth. :p

12% return was a LOSS if those were U.S. dollars.How do you figure? Inflation ran about 3% in 2006:
http://www.inflationdata.com/inflation/images/charts/Annual_Inflation/Annual_Inflation_chart.gif

How do you figure? Inflation ran about 3% in 2006:

He's probably accounting it in terms of some currency that the dollar sagged against during 2006. Which would be meaningful for this discussion if Americans were planning to move to said country upon retirement. Since almost none of them will be, however, it ends up being a completely specious remark that displays nothing beyond oreodont's ignorance.

Are 401K tax sheltered like the Canadian RRSPs or you have to pay tax on the money you contribute to your fund?

What about group options? Do employeers offer to match your contributions there?

What about your pension plans? Are they defined benefit or defined contribution plan? Big difference there. One is guaranteed, the other depends on how the market performs...

Anyways... back to 401Ks.... I think it depends on how you use them. If you diversify your investments and have a professional taking care of them, it should be fine. Specially if you invest in foreign investments, such as the brasilian market... LOL!! :D

Are 401K tax sheltered like the Canadian RRSPs or you have to pay tax on the money you contribute to your fund?
Sheltered.
They are pre-tax deductions, but you pay tax upon cashing in.

What about group options? Do employeers offer to match your contributions there?
Genreally the employer matches up to a certain percentage (I believe the standard is somewhere between 3 and 6%) but not all employers match your contributions.
It also can depend on your salary and certain legal limitations.
That is a benefit to consider when looking at a job offer.

Anyways... back to 401Ks.... I think it depends on how you use them. If you diversify your investments and have a professional taking care of them, it should be fine. Specially if you invest in foreign investments, such as the brasilian market... LOL!! :D
Good advice. in my opinon.
Keep in mind, however, you can be limited to how many changes you make per fiscal year to your 401K options.
Choosing a solid fund to invest in is key.

Sheltered.
They are pre-tax deductions, but you pay tax upon cashing in.

There are also Roth 401(k)'s, where you contribute money that's already been taxed, and it's tax-free coming out.

I've heard of Roth IRA's, but wasn't aware that they had Roth 401K's too.
It seems to me you would be better off with pre-tax investments - you get to invest more and have the benefot of being taxed on less.
Am I missing something?

I've heard of Roth IRA's, but wasn't aware that they had Roth 401K's too.

Yeah, they're new, and a lot of companies don't offer them yet.


It seems to me you would be better off with pre-tax investments - you get to invest more and have the benefot of being taxed on less.
Am I missing something?

It all depends on how you think your income and tax rate will compare between now and when you're retired. If you think you'll see a higher tax rate than you do now, the Roth version is preferable, and vice-versa. Generally, there's a bias towards using the traditional 401(k), since the steam of income you'll be withdrawing during retirement stands to be smaller than your current income (hopefully you'll own a house already, and you won't need to be saving for retirement). On the other hand, it's unlikely that Congress is going to make taxes any lower than they are now, so it's always possible rates will have gone up before you retire.

Also, you don't have to choose one or the other. I put some of my contribution in a Roth 401(k), and some in a traditional 401(k). The idea is to have the flexibility to respond to whatever the taxes are, and whatever my income needs are, from year to year.