"Tad Borek" <borekfm[at]pacbell.net> wrote in message
news:IBVNb.1739$6Y4.737[at]newssvr29.news.prodigy.com...
- quote -

The bulk of 401(k) plans, especially in the small to medium sized plan
markets, are dominated by Group Variable Annuities (Source: LIMRA, CFO
Magazine, PSCA). Most of the first 401(k) plans were GVAs.

The leading plan provider has been offering brokerage portals in their
defined contribution plans for several years now, so one can buy just about
anything that is publicly traded.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

Jim wrote:
- quote -

In a 401k there are practical limitations - directing those small,
regular contributions from dozens or even thousands of employees into
some type of investment. Really, mutual funds are the only viable
alternative.

In an IRA there's actually a lot of flexibility with investment options,
maybe even too much. There's all the things you mentioned, stocks,
bonds, mutual funds of every stripe, CDs. You can get small-company
stock and certain partnership interests in there if you really want to.
People put real estate in their IRAs, which I think is a bad idea, but
it's allowed.

Really, most of the investment limitations are there to stop people from
benefitting personally from their IRA dollars without paying tax on
them, not because of risk limitations. You can imagine the potential for
abuse - for example your coaching business, which no doubt is a real
one, but it doesn't necessarily need to be. Like, you could set up a
"coaching company" that's funded by an investment by your IRA, which
receives stock in the business in exchange for a lump of cash. You could
run up all kinds of business expenses (monthly travel to see ManU,
Hummer to carry equipment) and perhaps even pay yourself a small salary
that is low enough to escape tax...gradually run the company into the
ground, then declare the stock in the IRA worthless. You'd get that free
ride out of your IRA without ever taking a taxable distribution.
(Actually now that I think of it this would be a great scam to fund my
cycling career!)

So we see rules limiting, essentially, benefits/cash flowing from the
IRA to the IRA holder, even if through a business.

Another one in this category is buying a second home for yourself with
your IRA. Another is collectibles - artwork for the wall or a vintage
all-Campy bicycle.

Unfortunately it's the people that push the envelope that ruin it for
everyone else. It's not so much the risk factor, IRAs are wide open in
that category (you could go 100% into Chinese debt securities), it's the
self-dealing kinds of problems.

- quote -

I hear you on that one and it is a fundamental problem with the system
of investing for individuals - there's a learning curve to it, and paid
advice is costly.

On the flip side the information's there, and it's available for cheap,
it just takes time to get through it. Once you get past that the
investments are available for incredibly low cost. It's not necessary to
get to the level of analyzing individual stocks, and a few good books
could give an overview of what's going on and bring on the realization
that buying something like the Vanguard Balanced Index fund might just
be good enough to leave the topic behind and get back to something
interesting, like soccer. Book recommendation: "Random Walk Down Wall
Street" by Malkiel.

- quote -

I think it's essential that a retirement savings vehicle be extremely
liquid - that's the whole point really, to provide cash periodically
during retirement. That's why I don't like the real-estate-in-IRA setup,
you hit problems making minimum distributions - you can't distribute a
door to yourself! It's worse with small businesses which are usually
completely illiquid.

Also, those things have enormous tax advantages associated with them
already. In the small business you can defer a lot more of your income
and you have full control over the process. Also, depending on how you
set it up, you can essentially keep all your cash in the business rather
than paying it out to yourself; it's risky but your retirement scheme
would be to eventually sell the business or live off of its cash flow.
Actually it's a lot better done outside of an IRA.

-Tad

"Brent D. Gardner, ChFC" <bgardner20[at]cox.net> writes:

- quote -

[snip]

- quote -

Could you please remind Brent to at least try to act like
a professional and cut out the crap?

And I must admit -- I'm surprised and disappointed you guys let that
through untouched. It should have been rejected and Brent informed to
rewrite it if he wanted it posted.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

BreadWithSpam[at]fractious.net wrote in message news:<yobsmih6p1d.fsf[at]panix1.panix.com> ...

- quote -

I have a limited amount of investment resource, about 8 K per year. I
don't think that is enough to do as you suggest (invest in real estate
for example).

So I use my 401k, my 10% with 3% match, then put another 3k in my
Roth. It has now accumulated to something of substance, but it does
not appear this could be used to invest in something I understand.

I put work into nearly anything I do, so set it and forget it is not
my style. I like being in control of my finances and other aspects of
my life.

If people want to see the savings rate improved, young people need to
be able to

1) trust what they invest in- the fund scandals/stock scnadlas prevent
this trust from being created when someone does not understand
something

2) save while they are young to make it easy based on compounding and
have incentives to encourage this

3) not have so much #[at]!% student loan debt

If people save when they are in their 20's, the savings rate of all
will improve over time...

cya

Jim

Tad Borek <borekfm[at]pacbell.net> wrote in message news:<ZlENb.11403$Dt.3302[at]newssvr27.news.prodigy.com> ...
- quote -

Tad-

fair enough, maybe I used bad grammar/wording.

It appears the government is encouraging what to invest in by limiting
what an IRA or 401k can hold. It appears to be that the vehicles used
in IRA like tools are limited (stocks, funds, CDs, bonds). Shouldn't
other riskier investments be allowed based on what a person is
comfortable with and understands?

Giving a person control is a good thing if the average person can
understand how to manipulate what they control (in this case
manipulating stocks to plan for retirement). If people cannot afford
to consult for assistance, and there is no good alternative (a pension
for example), the system is broken.

I do not understand stocks, how they are traded and how the market
works, but yet I am relying on it heavily for retirement.

Yet if I could defer some of my salary to invest in my own real estate
endeavors (rental properties), soccer endeavors (coaching) or some
other thing I know better than the average person I'm sure I would
have much more control over my success in building wealth and
retiring.

cya.

Jim

"Mark0Young" <mark0young[at]aol.com> wrote in message
news:20040115233225.21232.00003557[at]mb-m13.aol.com...
- quote -

True Story: A local company with several hundred employees installed a
401(k) in the early 1990s. The plan was sold by a local pension rep that I
brought in for the purpose (I was young and didn't know much about qualified
plans at the time). Through our combined efforts, participation was just
over 91% the first year, and the highly compensated were able to contribute
9% (that's more than the pension company's own salaried managers could). We
accomplished this level of participation WITHOUT any matching whatsoever.

Skip a few years (to the fall 1999). We get a phone call. Company wants to
switch from our pension company (ranked #1) to a TPA and use No Help funds.
When asked why, we found out that a new entry level human resource manager
had just come over from academia (read: local private university), and was
fully infected with the Vanguard Virus. One of my mentors always said it
was a waste to chase after cases that were already decided to move somewhere
else, so I didn't bother with any conservation efforts. This was one time
where doing it the easy way -- sitting back, letting nature take it's
course -- was the best move.

In the fall of 2002, I received a call from the owner. His top managers
were angry, because they were scheduled to receive refunds of contributions
due to low participation in the 3 year old No Help plan. Upon further
investigation, participation was down to just under 20%, and the top hat
group were limited to 3%.

One might blame the market for this drop in participation, but I know that's
not the case. I work closely with several dozen medium sized companies on
their defined contribution plans, and collectively, our participation runs
in the mid 80% range, and that's during the bear market. Most of them don't
match, but of those that do, average contribution rates are higher than the
amont matched.

So, what was the real difference? Salespeople -- Persuading rank and file
employees in manufacturing firms to contribute to a retirement plan required
some salesmanship. It required a catalytic, empathic, persuasive agent of
change to make the difference.

Now the plan is back in a group variable annuity, where it belonged, and I
suspect, where it will remain for a long, LONG time.

Cheap didin't get the job done.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

mark0young[at]aol.com (Mark0Young) wrote in message news:<20040115233225.21232.00003557[at]mb-m13.aol.com> ...
- quote -


I contribute ~$5k to my 401k and I consider that a lot. My point is
that the tax breaks for saving need to be improved so the number of
people contributing is at 50-75%. For example, maybe we require
schools to automatically contribute 1% of a teachers salary their
first 5 years they work for that school (subject to vesting rules).

Many young teachers I know do not have the financial ability to save
for retirement- maybe this will kick start that.

In article <237a8ae7.0401150636.75c24587[at]posting.google.com> ,
msgrinnell[at]charter.net (Michael Grinnell) writes:

- quote -

A few years ago I casually asked the Director of Human Resources, and he told
be that, of about 800 staff qualified to participate in our 403(b) (we have
more on the staff, but those who are part time don't qualify), about 25%
actually do participate. Only about 1.5% of the 800 a few years ago contributed
$900 or more per month.

Furthermore, the only low-expense provider on the employer's list is TIAA-CREF,
and only 8 of us have our contributions going to TIAA-CREF. (The other
participants charge either significant M&E fees or loads--and, no, the loads
aren't completely waived.)

My discussions with others in our department lead me to believe that the
approximate 25% participation also applies to our department.

In two cases in our department, the individuals are edging up towards
retirement age, looked at the projected pension payments, and decided that they
couldn't live off of the pension alone, so now they are trying to contribute
and plan on working past the earliest age they can retire with full benefits.

The participation rate is higher among the more mature employees, less among
the younger employees. The younger ones complain they don't have the cash to
tie up in participation in a 403(b) (even when I mention that TIAA-CREF allows
one to start with just $25/mo., which, because it is pre-tax, would typically
reduce their take-home pay by only about $17/mo.), and the two who are edging
close to retirement age really don't have all that much time for compounding to
work for them.

Our employer has had a number of inservice sessions for saving for retirement,
description of various retirement plans, retirement planning (both for those
close to retirement and those further away), and I would have to say that most
of these sessions get the same 25 or so people who are already knowledgable and
are already participating, but only one or two new faces show up in those
sessions--at least that is my personal observation. (Yes, I usually show up at
those sessions to see if there is something I have overlooked or if there is
some discussion I can add.)

When concerns about our budget came down from the college president, a number
of people had tightened their belts, but this isn't the first budget shortfall
we have had. The best time to save for the tight times are really when times
are going well, but those of us who do so are considered "cheap". But when the
COLA is frozen or more drastic action is taken, those of us with savings are
considered very fortunate. But for many of us the difference isn't our income,
but how we decide to use (or abuse) our income.

Mark A. Young

Jim wrote:
- quote -

I disagree with your second piece there...that the nature of these
savings choices is speculative. Some are volatile, but they're not all
inherently speculative.

Some people do invest their savings in a speculative manner, but that's
by choice, and everyone is free to do it differently. And I'd hate to
consider the alternative, where somebody other than I made the choices
about how to invest those dollars. In my view, given the way employment
works now, the old pension system looks broken...I prefer the
self-directed route where the tax code creates ways of saving, and we
can make use of them however we want.

-Tad

msgrinnell[at]charter.net (Michael Grinnell) wrote in message news:<237a8ae7.0401150636.75c24587[at]posting.google.com> ...
- quote -

If the measure of savings rate is measuring how much a person has in
the bank, equities, IRA's or 401k's

AND

the nature of said choices for these savings is speculative/volatile


THEN

the system the government is providing for its people is fundamentally
broken.


for example:

This does not imply all who use the system will lose money
This does imply the average person who uses the system will come out
even-
This does imply smart people (able to understand and use the system)
will come out ahead
this does imply stupid people (ok, not smart people who don't
understand system or have resources to use system) will end up broke.


If we're complaining about savings rate, I'd comment that the vehicles
we use to save and the ability to have these savings grow are the
fundamental flaws.

noreplysoccer[at]hotmail.com (Jim) writes:

- quote -

Stocks, bonds, mutual funds mainly. Some custodians
will permit some other things, but self-directed accounts
are typically mainly mutual funds. Brokerage IRAs
give one a very wise selection - both funds and other
securities.

- quote -

That was an unverified and, I believe, incorrect comment.
The poster in question can correct me if I'm wrong, but
he meant, I believe, to say that most rich folks didn't
get rich on equities (many self-made rich folks did so
by starting their own companies. Other affluent types
both started their own companies, saved lots from whatever
they did, and/or inherited). Very very few folks actually
_made_ their fortunes in stocks. But once the fortune has
been made (or while it's being made!) they are a very
common vehicle for continued investment.

- quote -

First off, no. Why should they? 401k and IRAs are accounts
where one's investment is held in trust. Small-business/private
business/small-scale real estate businesses (ie. rental property)
are very difficult things to break down into the part which
is invested $$$ capital and the part which is self-employment.

And, contrary to what some folks might claim, small businesses
and real estate is at least as risky as equities - and quite a
bit more risky than a well diversified portfolio -- mainly
in the form of volatility. The likelihood of the S&P500 -
as a whole - going bankrupt is almost zero. The likelihood of
any individual small business going bankrupt is substantially
larger. Of course, the chance that the S&P500 will have a
couple of years where your money grows 10x is also miniscule,
where that sort of thing certainly happens with small businesses.

- quote -

They're not broken. Well, in some senses, they are - they
are generally vastly more complicated than they need to be -
there was agitation recently to clean up the alphabet soup
of retirement accounts (Bush proposed it) but that's not
likely to be happening any time soon.

However, there's nothing to stop you from investing in small
businesses and real estate if you like _in addition_ to using
a 401k/IRA. I heartily encourage you to do so. But bear in
mind the volatility and additional work that is involved.
The 401k/IRA is meant more for a "set it and forget it"
mindset and certainly, when set up right (ie. not 100% in,
say, tech stocks) a low-risk, very solid long-term investment.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

"Michael Grinnell" <msgrinnell[at]charter.net> wrote in message
news:237a8ae7.0401150636.75c24587[at]posting.google.com...
- quote -

Generally speaking, self-dealing is prohibited, although one can usually buy
their own company's shares if they are publicly traded.

It is possible to purchase real estate inside an IRA, but the requirements
make this a fools errand, IMO. The cost outweighs the benefits for all but
the smallest minority of investors, and I suspect that few have come out
ahead in these arrangments.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

On Thu, 15 Jan 2004 08:37:52 CST, msgrinnell[at]charter.net (Michael
Grinnell) wrote:

- quote -

Well, I'd sure like to get wealthy investing, but I don't think it's
realistic for most of us because of the relatively small amount of our
income that is invested each year.

My experience is that we are much more likely to become wealthy by
being successful in our careers. Which is a subtle pointer to where
we should spend our efforts. <grin

-HW "Skip" Weldon
Columbia, SC

- quote -

You can lead a horse to water but you can't make him drink. At least
where I work most people I know don't even contribute more than (at
best) a token amount to the 403b. I can't even begin to guess why
people don't save more other than many are short-sighted, many just
worry about what their neighbors have, and many just don't know the
first thing about how money works. Granted, some things are ludicrous
such as taxing people on interest earned in a savings account. Talk
about disincentives.....


- quote -

I guess given the overcapacity in many industries consumer spending is
all that's left to a certain excent. I suppose business investment
will pick up, but I actually do believe that with the government as
well as individuals generally running deficits eventually interest
rates will be pushed up. I'm hardly an economist, but supply and
demand leads me to believe that with more demanders chasing a limited
supply of savings interest rates will go up. That will hurt spending,
both business and consumer.


- quote -

I don't suppose you ever do. I suppose you might be able to save 2%
and if you get a good enough return, or you live on next to nothing,
or your rich uncle you never knew you had leaves you $10 million it
will be enough. Maybe. For myself, I spend time on this list and
reading some books to learn a little bit and do as much as I can given
a whole lot of uncertainty.

- quote -

I know a few PAW types and they are both happy and unhappy. They have
lots of assets and they have generally enjoyed what they do, but once
they get close to retirement the assets just keep them busy. The ones
I know have tons of assets on paper, but they are very illiquid. They
own businesses and trucks, and workshops, businesses, and stuff like
that. Hardly things you can easily sell and pay for a winter in
Florida.

- quote -

My goal is not to get rich. I'm too lazy to spend all my time making
money and I have other interests. I would guess that the goal of most
people who invest in 401ks and IRAs is not to get rich, either. They
want to put something away that will fund their retirement so they can
enjoy their free time, friends, family, etc. Actually, I want to quit
my job and get a medical degree so I can practice rural medicine in
developing countries. In another thread, someone mentioned that
people don't get rich in the stock market. I guess Warren Buffet does
not exclusively use the stock market, but he is an investor. Don't
know that he actually makes anything like widgets.

As for gambled away, the 'corruption' in the business world and in
some mutual fund companies is pretty bothersome, not to mention unfair
to those of us peons who are supposed to trust them. Whether the
whole market is a gamble, I suppose the inherent risk is a gamble, to
some extent. I accept as much risk as I feel comfortable with.


- quote -

Don't know. Anyone else? Maybe call your congressman/woman to find
out?


- quote -

If the savings plans are fundamentally broken, I would very much like
to know about it since I am depending on them.

msgrinnell[at]charter.net (Michael Grinnell) wrote in message news:<237a8ae7.0401131827.412a6f3e[at]posting.google.com> ...
- quote -


Is the job of a politician to tell us our problems or fix the problems
which exist? If people are not saving, then incentives need to be
made to encourage those who do not save to start.


- quote -

thinks I don't spend enough.

Consumer spending will drive the economy.


- quote -

how much it helps. For example, I put 10% in my 401k and have a Roth
IRA which is fully funded. How do I know it will be enough? I can
use calculators and guess how much I may need. I'm in my 30's, wife
in her 20's- how do we know 10% is enough.

It's a reasonable amount (we each put 10% in our 401k based on reading
we do).

32k in a 401k does not appear to be much... calculators suggest this
amount will grow.

so some savings questions:

What types of investments can be held in an IRA/401k

according to some, most PAW types/ affluent types own little
equities/no equities.

so am I saving using the wrong vehicles? Rhetorical question, but if
most people who get "rich" according to some study don't do it in the
stock market, but the average american is using a 401k/IRA in the
stock market to be their primary retirement savings vehicle, there is
a problem. We can't "save" right because our savings are gambled
away.

shouldn't their 401k be allowed to fund a real estate business,
private business or something else to allow a person to get richer
than the 10% historical return of the stock market?

just one engineer's opinion- the savings plans are fundamentally
broken.

cya

Jim

In the thread about PAW I think the context of the calculations was being
lost.

The case studies in the book also pointed out that the expectation that
people in certain professions and neighborhoods would expected to be PAW
were probably more likely to be UAW.

The calculation was to find the common denominator. I would use it to assess
what track a person was on, I favor it more as a motivator.

"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote in message
news:m8h800t0oskepr3ra5r7vuctpo04ipfar5[at]4ax.com...
- quote -

- quote -

Knee-jerk anti-Washington reaction. Who else do you think keeps
statistics on these sorts of things?

- quote -

There is spending and then there is SPENDING. Personally, I would
rather be someone who spends some and saves some before retirement
than someone that just SPENDS before retirement.
- quote -

If you save in a 401k or 403b or other tax-sheltered vehicle then your
taxes would be lower. Win-win.

"Ignoramus14640" <ignoramus14640[at]NOSPAM.14640.invalid> wrote in message
news:bu1flq$bb$5[at]pita.alt.net...
- quote -

Individual results vary as much as the temperature does in Oz, and is almost
as unpredictable.

- quote -

Paid advice -- including salespeople -- is why you enjoy your returns.
Eliminate the middle man, and demand all but vanishes.

- quote -

Most mutual fund investors paid to get in. Those that didn't pay would have
done better in a CD, according to DALBAR. That's a huge indictment of the
DIY method.

- quote -

Dividends are good things. Double taxation was a crime that should have
been punished (a few congress critters in jail would be a good thing).

I'm not sure how you plan to spend retained earnings that aren't yours --
they can always disappear just as fast as they appear. I know this for a
fact, because one of the things I do is help companies make retained
earnings disappear, using tax loopholes.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"Ignoramus14640" <ignoramus14640[at]NOSPAM.14640.invalid> wrote in message
news:bu1g20$bb$6[at]pita.alt.net...
- quote -

I don't fault the index. I fault the lay media that touted them like they
solved every problem under the sun. Several authors have nothing to write
about anymore, because they put so much faith in a false religion.

- quote -

Myself, and most of my more successful peers. We pointed out the downside
risks. Those that listened -- clients -- avoided the meltdown, or are in
vehicles where they can afford to ride out volatility because they've hedged
their assets.

- quote -

I'll wager Stanley and Danko against anyone you can think of, any day of the
week, and twice on Sunday.

- quote -

He's active in ALL of them. They aren't the same thing as an investment in
something that he can't control, like public securities.

- quote -

Incorrect. One the owner controls, the other the owner does not. A VAST
difference.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote in message
news:m8h800t0oskepr3ra5r7vuctpo04ipfar5[at]4ax.com...
- quote -

Amen!

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.