Jon wrote:
- quote -

If you think about it now, retirement might come sooner. If you think
about it later, it might seem even farther away, because it'll BE
farther away.

The market doesn't really care that you're 27. It just cares that
if you put $X into savings every month, and you want $Y out when you
retire, then (given some certain set of investments) it will take
you Z years to build up that $Y.

If you start putting in $X/month at age 27, you can retire at age
27+Z. If you start putting in $X/month at age 35, you can retire
at age 35+Z.

- Logan

John A. Weeks III wrote:
- quote -

This is very true Jon (the OPer) and an excellent point.

Some of the other guys have mentioned Roth's and it is probably a good
idea to take a second look at them. I remember when I was just out of
college thinking that regular IRAs weren't that great of a deal because
I was already in such a low tax bracket that I didn't save much by
going pre-tax.

Because Roth's allow you to tax exempt the earnings and your future
income levels may shut you out of them, now is the best time to start
one. I also had the luxury of being fairly certain that I would retire
in a much higher tax bracket than the one I was in at the time, which
alsoreduces the advantage of traditional IRAs. This may or may not be a
consideration for you.

In article <1169189283.106173.60170[at]38g2000cwa.googlegroups.com> ,
"Jon" <jonshin2003[at]yahoo.com> wrote:

- quote -

This is a case of a simple error in judgement, which, when compounded
over time will result in a huge financial blunder. Due to the time
value of money, your 20's is exactly when you get the biggest boost
from savings for retirement. As an illustration, if you save from
20 to 29, then never save again, you will have more retirement money
than if you start a 30 and save until you are 65. You are young
enough to still catch this wave, so don't screw it up. You don't
want to end up 70, broke, and fighting the stray dogs and alley
cats for the scraps of food that folks leave in the dumpster.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

"Jon" <jonshin2003[at]yahoo.com> writes:

- quote -

Which makes it the ideal time to think about it because you will need
all that time to let compounding do its work. :-)

- quote -

Nice.

Don't forget to add ploppin $4k into a Roth IRA each year for both you
and your spouse to the list of stuff to do before your household
income grows to large to be able to contribute. In a Roth IRA, your
gains are tax-free, which is a big plus.

- quote -

Get educated on the asset classes, the notions of risk vs return,
asset allocations for someone your age, rebalancing investment mixes
and the like. If you're prospectus averse and want to benefit from
very low costs of management, consider index funds. Your money grows
along with the market at a mix determined by a computer formula. No
expensive human managers to pay management fees to, and there's a lot
of research that say managed funds quite often underperform the index
they're trying to match/beat anyway.



--
Todd H.
http://toddh.net/

Sorry it took me so long to get back on this thread.

I'm 27, have combined income of 140K, save about 2-4K a month. Not
really thinking about retirement savings too much, since it seems so
far away.

I think I'm going to take the advice of doing both things: putting more
into my 401, at least to max out my employers match, and pay off more
on my mortgage, which is down to about 140K and 29 years left on it,
about 1k, month minimum payment. I will probably move this coming
December to a bigger house, kids coming soon So that may change,
but the new mortgage will probably be around 200K. I just bought a
house that is now worth about 160k more then when I bought it - I'm
planning on selling this one and getting a bigger one in a nicer
neighborhood for a 60K mortgage diff.

I really do not want to read any prospectus' docs or anything like
that. I just don't have time. There are some financial seminars at my
work that I'll probably go to get some more advice.

This thread is quite interesting, I'm glad you all have kept it going


Take care
Jon




On Dec 29 2006, 2:02 am, t...[at]toddh.net (Todd H.) wrote:
- quote -


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

"kastnna" <kastnna[at]auburnalum.org> wrote in message
news:1167865096.415359.111680[at]s34g2000cwa.googlegroups.com...

- quote -



Agreed, risk tolerance is important. I am objecting to a blanket comparison
of "5% in CD's" to "10% in stocks" without considering anything else. If
someone understands risk, realizes that a 10% return in stocks refers to a
long historical period and that during shorter periods the return can be
either positive or negative, has a long investing horizon, has little or no
consumer debt, certainly no credit card debt, and knows that when someone
says "15% return guaranteed" the risk is enormous, then certainly stocks are
a good choice for some (but not all) of the investment money. To put it
another way: Don't invest more money than you can afford to lose in anything
risky.

Sorry Joe,

"Errant use of the reply button on kastnna, five yard penalty, repeat
1st down"

I was responding to Don.

Thanks

kastnna wrote:

- quote -

You seem to have replied to me, the way the thread is nested, but since
we're in 100% agreement, I think you're aimed at someone else.
The issue we're having, in general, are answers aimed at the masses, vs
targeted clients. If someone understands the nature of risk and return,
the bell curve centered on 10%, STD of 14%, and makes a rational
decision to choose it over a fixed 6% return, that's their decision. Not
all clients are right for one choice vs the other.
OTOH, you can talk to the individual and understand their risk tolerance
to a degree, even though it's their decision, it's our job to make sure
they understand the choice they are making.

JOE

What part of "within the clients risk tolerance" am I not covering?

I am not implying he dump the money in a penny stock that MIGHT make
him 30% or cost him everything instead of the mortgage. I am simply
saying that if there is another investment that does not carry a risk
that makes the OPer uneasy (IOW, WITHIN HIS RISK TOLERANCE) then it
should be considered.

I personally would rather take on a riskier investment (i.e. the
S&P500) that has historically yielded higher returns. But that's just
me.

Maybe a 5% guarantee does not fit the clients risk profile. MAYBE he
sleeps uneasy knowing that there are other investments that carry a
risk he is comfortable with, but could yield higher after tax returns.
MAYBE he feels more comfortable knowing that he is getting 5%
guaranteed from investing in the mortgage.

I stand by my statement that neither you nor I can decide which
"investment" better suits the client. That can only be decided by him.
You are imposing a highly risk averse profile on the client that may or
may not fit his financial goals. I am not suggesting he take the other
extreme and invest in a high risk vehicle.

Sgt.Sausage wrote:
- quote -


Sgt. - Is it the wording you object to? It would seem to me that when
advising someone on debt and saving you'd ask them to list their debts,
and then adjust them for tax status. Just listing 4 interest rates and
balances means little unless you know that one or two are a deductible
expense, and adjust accordingly.

Holding on to debt for the deduction alone makes no sense, you are right
about that. It's a bit like making a contribution "for the tax
writh-off". I'd assume one would/should be charitable regardless.

JOE

"Todd H." <t[at]toddh.net> wrote in message news:84irfq83pk.fsf[at]ripco.com...

- quote -


What? You can't seriously consider : Pay a dollar in interest, save
33% <or whatever your marginal tax rate is> in taxes to be something
worth holding onto can you?

***

That argument has never made sense to me. So what. I lose a
deduction that's *costing* me 67 cents on the dollar. Good
riddance if you ask me.

If you actually *like* that arrangement -- I can keep it going for
you as long as you want. You can have my address. Just mail
me as much money as you want, and I'll return your money at
33 cents on the dollar -- heck, I'd even bump you up to a
whole 75 cents on the dollar. A far better "deal" than Uncle Sam
gives you with your deduction.

I'll be waiting by the mailbox for your checks! Send as many
as you want! <grin
***

The *only* thing that deduction should be doing for you is
adjusting your "real" numbers when determinining the return
on your investment. If you've got a 5% mortgage, depending
on tax rate, with the mortgage interest deduction that is adjusted
in "real" terms to ... say ... 3.7% after factoring in money saved
on taxes.

"Todd H." <t[at]toddh.net> wrote in message news:84y7onynhi.fsf[at]ripco.com...

- quote -

Sheesh! It's all in "the spin" ain't it? Spin it as "Oh My! 40 % of
folks are losers" and it's "look out ... don't make that mistake".

Spin it for what the facts really mean, and it's a completely
different story.

Using the facts of that very cited article ... 60% of the folks
who pay down the mortgage are *not* "making a mistake" and
are better off. That's a 20% edge for "the house" (pun intended).
Vegas has made many-a-billionaire on a far slimmer edge in
favor of "the house". I'll take those odds any day.

The fact is ... you've got to run your own numbers. The above
spin on the 60/40 just goes to show you how truly innumerate
the AverageJoeAmerican really is. Run your own numbers, don't
trust what some article is saying, don't trust what you hear in some
newsgroup, and, more specifically, don't even trust what I'm telling
you here and now.

Do the math yourself, and learn something along the way. <grin

bo peep wrote:
- quote -

No offense, John, but isn't that somewhat irrelevant? Look back at a
chart of the S&P from 1990 to 2000, Except for a few minor blips, it
basically was at an all time high right through that decade. Of course
the crash was nothing to brag about, but if you market timed, and got
out in 95, thinking it's been too high too long, you'd have missed a
200% gain those next five years.
JOE

"bo peep" <cowartmisc1[at]yahoo.com> wrote in message
news:1167794294.943297.235350[at]n51g2000cwc.googlegroups.com...

- quote -

Sure, when the stock market is at high point, it is easy to assume it will
just keep on getting better and scoff at the idea using money to pay off a
mortgage. Taken to the extreme, some people might say get in on stocks right
now and don't worry about paying off credit card debt first. That would be
like preferring a risky 10% or so return to a guaranteed higher return.

Don wrote:
- quote -

Plus, the individuals in this newsgroup who are advocating stocks are
doing so at a time when the market is near it's all-time record high!

John Cowart

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:nP6dnX7f-P0AdQfYnZ2dnUVZ_tadnZ2d[at]comcast.com...

- quote -

True, but too often a comparison is made between a product with negligible
risk and one with substantial risk, solely on the basis of yield. For
example, someone will say: "You are paying 5% on your mortgage, but the
market historically has paid 10% over time, so it makes no sense to pay off
the mortgage when you could put the money into stocks." This logic assumes
that the 10% is a sure thing just like the 5% rate (among other questionable
assumptions). I would prefer to pay off the mortgage first and then use the
former monthly payments to invest in stocks.

Don wrote:

- quote -

Agreed

- quote -

'large' is relative. Even though the use of a bell curve is somewhat
imprecise, the market (typically the S&P) is described as a bell curve
with a mean of 10%+, and a standard deviation of 14%(?). One can tinker
with the mix to bring down STD along with the return.
I understand that as exhibited by the VIX, volatility has dropped, along
with expected returns on the market as a whole. Either way, there is a
trade off between a fixed return, and a risky return.

JOE

"kastnna" <kastnna[at]auburnalum.org> wrote in message
news:1167758430.163038.59560[at]48g2000cwx.googlegroups.com...

- quote -

For that very reason it is misleading to simply compare yields without
considering risk. As an extreme example: No one would switch from a
conservative investment yielding 5% to an extremely risky investment having
some chance of yielding 5.25% but probably no more. Or to put it another
way, it would make more sense to pay off a loan with a rate of 5% than to
invest the same money in something very risky that promises 5.25% but
probably could never do better. So, if someone claims that a product can
yield 10%, it is best to look at the risk factor, which is probably large,
before comparing it to the 5% mortgage interest rate.

Elizabeth Richardson wrote:
- quote -

Sure, I live to serve. And given his wording "For them [the
'Abundants'], a mortgage can be a good thing. They are exceptions" I
believe I've provided you a reliable author in support of your position.

- quote -

Not that I can speak for Mr Burns, but it appeared to me that given the
number of variables involved, and the way the question to him is
phrased, he was really answering to what one should do the day they
retire, keep or pay off the mortgage. BTW, since the Prudent's mortgage
is so small, and interest so little, I agree they should pay it off, and
more so, I agree with you, they should have planned to have it paid
prior to retiring.

I like Scott Burns style on this matter, his reply shows some good
insight, and that one size doesn't fit all. He both proves your point,
and allows that there are exceptions which support my view.
JOE

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> writes:

- quote -

Lots of possibilities... if you paid off your mortgage in 15 years on
a house your bought when you were 35, you'd be 15 years from
retirement age and unable to draw on your retirement assets without
penalty. Just because your mortgage is paid off doesn't mean you're
able to retire 15 years sooner than your classmate with the 30 year
mortgage (which you cited as a benefit upthread).

My point is simply that retiring as soon as the mortgage is paid off
is a goofy definition of when it's time to retire.

- quote -

One certaintly can, and should. And if you're likely to yield a lot
better than your mortgage's fixed rate of return in the 401k,
personally, I'll be putting a lot more into 401k than into
accelerating my mortgage payoff.

I'm happy to hear your retirement has worked for you and your family,
but I stand by my original point: paying down a mortgage that's at a
low fixed rate is less of a good idea than the Cult of Paying Down the
Mortgage folks think it is.

I think this is especially true for people with more than 10 years to
go until they hit retirement age.

Best Regards,
--
Todd H.
http://www.toddh.net/