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Old 05-06-2010, 08:03 PM   #1
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Anybody buying BP?

Or am i the only one?
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Old 05-06-2010, 08:55 PM   #2
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Hell no. They pretty much ruined my summer.
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Old 05-06-2010, 09:03 PM   #3
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I am sure they will recover, but this is a big big big $$$$$ deal, they screwed up bad, that being said, it probably is a good value right now. The low price will tempt a lot if investors, thinking the same thing we are...after today's crazy ride I am scared to death of the market.
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Old 05-06-2010, 09:19 PM   #4
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Today I just moved half of my 401k to the most conservative account. Lost enough money already. BP will be a good value once they stop the oil leak, until then the risk is too large IMO.
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Old 05-06-2010, 09:26 PM   #5
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Quote:
Originally Posted by Juggernaut View Post
Today I just moved half of my 401k to the most conservative account. Lost enough money already. BP will be a good value once they stop the oil leak, until then the risk is too large IMO.
At 25, you need to be in the most aggressive funds possible. By the time you'll go anywhere near that money, the market will have completely changed.

Remember folks: When a stock you already hold is losing value, that's the time to buy MORE shares of it, as long as you're holding them long term.

Also: Please tell me you also have some money in a Roth account of one kind or another? Young as we are, we need to be looking for tax-free earnings, not tax-deferred contributions. That's playing on the wrong side of inflation when talking about numbers as big as 40 years of dividends.
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Old 05-06-2010, 09:32 PM   #6
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People at work call me a SINK. Single income no kids. I also have no deductions, so I figure 401 is not a horrible investment, & work doesn't offer Roth. Have any recommendations as to where to buy a Roth?
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Old 05-06-2010, 09:45 PM   #7
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Quote:
Originally Posted by Juggernaut View Post
People at work call me a SINK. Single income no kids. I also have no deductions, so I figure 401 is not a horrible investment, & work doesn't offer Roth. Have any recommendations as to where to buy a Roth?
I'm the same.

Most credit unions have excellent Roth services for members, so you may want to look into joining one. They also tend to have better interest rates on credit cards, mortgages, car loans...overall, they're just a better way to handle your finances.

Anyway, the reason you, I, and anyone else our age needs to be in a Roth account as early as possible is because of earnings and dividends on our retirement money.

401k is good to be in to a degree...the match is free money from your employer, and free money is always nice.

BUT:

Regular 401k contributions lower your taxable income for that year only, meaning you MIGHT save a few hundred to a few thousand dollars off your income tax (depending on how much you contribute) that year only.

The downside is that down the line, when you withdraw that money (and whatever it has grown into over the years), you have to pay taxes on it at that time.

With Roth accounts (IRA or 401k), the contributions are made AFTER you pay income tax...so it doesn't help you on your filing for that year, but the kicker is that whatever it turns into you get to take out later TAX FREE.

Given that our retirement money will be invested for 40+ years, that is a LOT of money that's going to be taxed or tax free. Just for reference, 10,000 dollars invested in the fund my Roth IRA is in back in 1973 would have grown into just under 1,000,000 by today. If that money were in a 401k, the retiree would be responsible for income tax on 1 million over the period they lived off that money.

So, do the math: Would you rather have a 10k tax deduction on one year's income tax, or pay tax on that 10k and then take the million tax free? It's a pretty simple answer.

Also, remember inflation here: By the time we get around to spending our retirement fund, each dollar will BUY LESS than it does today. This is why simply saving money in the bank doesn't work for retirement, and another good reason NOT to have to pay taxes on your retirement funds...that's less money available to you to live off of then.

Also, direct contributions to a Roth IRA (I am unsure about a Roth 401k off the top of my head) can be withdrawn at ANY TIME WITHOUT PENALTY, effectively functioning like a savings account. While you obviously want to leave it in there so that it can grow and be waiting for you when you retire, in the event of a major financial emergency, it's nice to have that option available. Dividends, if withdrawn early, are penalized heavily just like 401ks.

So, there you have it...a crash course on why you want a Roth account of some type, and way more than I originally intended to type. Hope it helps.


Edit: I realize this post makes 401ks sound bad. That's not the case. They just make a lot more sense for people that are much closer to retirement (<20 years) than us because those folks don't have as long to compound their earnings and thus need to be making bigger contributions every year. For them, the employer match makes more sense because otherwise they wouldn't be able to meet their contribution targets each year and would come up short on their retirement funds no matter which way the taxes fall.

If you're more than 25 years from retirement, you need to put the majority of your retirement savings into a Roth account and dabble lightly in a 401k, and then slowly reverse those positions as you draw closer.
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Old 05-06-2010, 09:58 PM   #8
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^ Awesome post. I was planning on Investing in a Roth once I get a home (writeoff!) but now I want to get one tomorrow, haha. I think Roth is limited to 5k a year, which I guess is about all I would invest anyways, since it is after tax $ and I pay taxs thru the nose in CA, but at least the weather is nice and coed beach volleyball is awesome, so it is worth it.
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Old 05-06-2010, 10:05 PM   #9
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Bought in a couple of days ago around $52. Down a little bit now, but the way the whole market has been the past few days it is not that bad. Especially since I got in before the dividend
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Old 05-06-2010, 10:23 PM   #11
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Quote:
Originally Posted by jandrews View Post
At 25, you need to be in the most aggressive funds possible. By the time you'll go anywhere near that money, the market will have completely changed.

Remember folks: When a stock you already hold is losing value, that's the time to buy MORE shares of it, as long as you're holding them long term.

Also: Please tell me you also have some money in a Roth account of one kind or another? Young as we are, we need to be looking for tax-free earnings, not tax-deferred contributions. That's playing on the wrong side of inflation when talking about numbers as big as 40 years of dividends.
very very good advice +1
remember guys and gals you buy things when they are on sale!
plus with 401k you can use the 1st time homebuyer exemption were you can take that money out TAX FREE and buying a house/land is the best investment (as long as it passes inspections/in a decent area) that you could ever get.
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Old 05-06-2010, 10:26 PM   #12
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Dang. I started my 401k here about six months ago and its about $3500. Company matches up to 8.?% of my paycheck, and I put 10% of my check towards the 401k. So 18.something% is being put away before taxes. Sweet deal.
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Old 05-06-2010, 10:31 PM   #13
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Jandrews,
I like your thinking about Roth in 40 years being a million bucks. But if you invest in the 401K you would have 2 million because you will have more money growing.
If someone has 5k to save a year. You put your 5k after tax in Roth.
My 5K is pretax so I get tax right off 28% fed 8% state. I can put 7k in and company will match so I can save 10K and only see 5K less in my take home. I'm not sure but I think I don't pay medicare tax either. I feel if your company will match take it first with pretax money.
Why not do both, I do. 5k roth , 16,500 401k, and I have a HSA medial savings 3K.
Save now and retire at 50.
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Old 05-06-2010, 10:44 PM   #14
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Quote:
Originally Posted by jw72 View Post
Save now and retire at 50.
Word.
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Old 05-06-2010, 10:45 PM   #15
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invest in gold. it will be worth more when obama makes it so americans wipe their ass with c notes
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Old 05-06-2010, 10:52 PM   #16
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^You sound like that blond guy on Fox News. No politics here, only advice to make me rich please.
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Old 05-06-2010, 10:55 PM   #17
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haha glen beck? i am in the same high school he went to. no wonder he came out the way he did, theres only both extremes in bham.. hippies or christian consevatives.
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Old 05-07-2010, 05:10 AM   #18
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Quote:
Originally Posted by jw72 View Post
Jandrews,
I like your thinking about Roth in 40 years being a million bucks. But if you invest in the 401K you would have 2 million because you will have more money growing.
Not necessarily. Most companies match 50 to 100 cents on the dollar up to a limit, usually either a flat amount (say, 5 grand) or a percentage of the employee's pay (say, 10%).

Most people don't save heavily for retirement - or can't afford to, so in the end their slightly higher 401k contributions/dividends due to matching end up getting eaten by taxes when they go to withdraw the money.

The higher the raw number of earnings/dividends, the more dollars you lose the government when you take the money out, as taxes are a percentage.

For some people, it does make sense to go into a 401k early. For most people, especially younger people, it doesn't.

Quote:
If someone has 5k to save a year. You put your 5k after tax in Roth.
My 5K is pretax so I get tax right off 28% fed 8% state. I can put 7k in and company will match so I can save 10K and only see 5K less in my take home. I'm not sure but I think I don't pay medicare tax either. I feel if your company will match take it first with pretax money.
This is a good example of why it's good for each individual to talk to their financial planner. I could max out my company's 401k each year and it wouldn't change my tax bracket. Again, it would reduce my obligation a little bit overall (slightly larger tax return), but I make more money long term by using a Roth IRA.

Quote:
Why not do both, I do. 5k roth , 16,500 401k, and I have a HSA medial savings 3K.
Save now and retire at 50.
Many people do do both - the question is the balance. I am in both, but the majority of my retirement savings go to my Roth IRA. As discussed, it makes more sense for me to do so right now. That will not always be the case, but I'll burn that bridge then and just change my contributions.


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i am in ...high school...
This is the primary reason you are not allowed to have an opinion about anything.
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Old 05-07-2010, 05:49 AM   #19
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Or am i the only one?
I jumped in at $49
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Old 05-07-2010, 06:06 AM   #20
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jandrews said perfectly what I was going to say while I read through the first few posts.

One thing I don't think he emphasized enough is that you can get a Roth account just about anywhere. There's nothing magical about it. You can open an IRA if you open an account with Ameritrade, Scott Trade, Vanguard, Merrill Lynch, (many) local banks/credit unions, etc. I happen to like Vanguard b/c of their low fees and their great selection of investment options.

My opinion is that if you don't put money into your 401k up to your company's match limit (assuming it's a decent match), you're literally throwing money away. My company matches 75% of the first 6%... so if I make $100k (I wish) and invest 6% of that ($6,000), my company will throw in $4,500 (which is 75% of $6k) of their money. You IMMEDIATELY make a huge return (in my case a 75% return). Even given the tax effects of Roth over IRA, you're foolish not to take advantage of the match.

We 'max out the match' at my company, and put the rest in Roth IRAs. When we make enough to save enough to max out our Roths, we'll start into Roth 401ks, which my company started offering last year.
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