401k

http://govtslaves.info/retirement-crisis-the-great-401k-experiment-has-failed-for-many-americans/

 

People not taking full advantage of the 401k doesn't make it a bad program. It does indicate, however, that those not taking full advantage are foolish.

 

Your statement is ignorant because it doesn’t consider an individuals financial acumen.

For example, I choose not to participate in Mercks 401k and forgo the company match. The limited investment possibilities last year averaged about a 9% return. The 2030 retirement blended fund returned 8.95%.

Instead, have a self directed IRA with Fidelity. Because I don’t participate in the 401k, the IRA has the same tax advantages. Many of their mutual funds produced returns much greater than those options offered by Merck. The Merck fund options produced an average of around 9% return last year. However, for example, the Fidelity Health Care sector portfolio has shown performance of 11% YTD, 25% last year, 36% average three previous years, and 27% five years. I am ahead of the game even after giving up the company match.

When I have accumulated enough money at Fidelity, I clean the account for a down payment for real estate rental property that is income producing. It also is a part of my self-directed IRA. Then begin building the cash account again. The real estate offers additional tax advantages. The neutral cash flow income makes the payments. My assets are growing on the total value of the property, rather than the initial investment. After a mere 15 years, I own 10 rental properties worth nearly two million dollars.

At age 60 my assets will be many times greater and throw off much more income than the Merck 401k.

But one has to be smart enough to do it.

 

You use broken logic. Do the math. You HAVE TO put the 6% into 401k because of the 75 cents to a dollar match. Who cares if the "limited options" make you 8% when you could possibly earn more elsewhere. By forgoing the 401k match, you are forgoing an upfront 75% return on YOUR money that you put into 401k plus the additional 8% or whatever it earns on YOUR MONEY and THEIR MONEY which is now YOUR MONEY. It's idiotic. You could definitely argue that anything beyond the 6% could be better invested elsewhere.

 

Put in the 6%. Not a dime more. The 401(k) here sucks, but you have to take the matching funds.

 

I agree with last 2 posts. Not investing into 401K up to the match is idiotic. I retired a few years ago and I'm glad for my 401K which was huge from investing in it over 20 years.

 

You can maximize your 401K by putting in the max Merck allows which is 25% (if you can afford it) I believe. This will shelter your income from current year taxes. Also select the after tax payments after you max out the yearly allowable contributions. The after tax will continue thru the year and this will guarantee you receive the company match every month. What you will find is that any money you put in after tax in your 401K, that will become a Roth IRA once you leave Merck. The Roth IRA can be withdrawn tax free and if invested well you will have a significant appreciation and net funds.
In my case due to income limits, I was unable to open a Roth IRA while working for Merck. Since I left Merck the after tax gave me that opportunity in retrospect by converting after tax funds into a Roth IRA. To get the lowdown give Fidelity a call for details.

 

I do the math. So does my CFP. So does my CPA. So does my banker.

But while you are doing second grade math with a pencil and Big Chief tablet, my financial advisors have me doing calculus on spreadsheets.

The Merck 401k program is generically designed to encourage low wage employees to at least save something. Do you really think the high income level executives depend on it for financial planning??

I don’t “HAVE TO” accept the 401k. By simply paying income taxes on Merck contributions on April 15, it essentially becomes a forced saving account. That enables me to have a self-directed IRA having the tax advantages, with unlimited options.

You get a cheesy limited match from the company. When I buy property in my IRA and put down 20%, the renters are essentially matching me at a 4 to 1 ratio, as they pay off the loan. With no limit or ceiling on the amount. But again, 100% of the asset appreciates.

My next property in my IRA portfolio will be vacation property. I will rent it out 48 weeks a year to others. I will rent it to myself the other four weeks.

My property management company mows and shovels my residence, and it is billed to the rental investment. I just bought a new high dollar refrigerator, and billed it to the IRA investment as I put the old one in a rental.

When you buy a car, you can borrow money from your 401k, as you pay the interest “to yourself”, but you sacrifice the lost opportunity of returns on the money. When I buy a car, I use the property as collateral, and lose nothing on return opportunity costs.

But you have to be smart enough to do it.

Now who is the idiot??

 

I early retiried at 53. Yes, I was downsized but it was a blessing. I was not high earner. After 26 years I accumulated over 1 million in 401k. In addition I own morgage free rental property. Beetween 401k, rental property, pensions and investments in Vanguard I am set for life. To prepare for retirement you need to come up with multiple sources of income and limit or pay off all loans. That way you can maintain good standard of leaving and not worry about going back to work. Life is to good to be wasted.

 

So how much per year are you allowed to contribute to your self-directed IRA? Also, are you getting the maximum tax benefits off the expenses and depreciation of your rental properties? One big assumption you are making is that real estate will appreciate in the next few years. What if it tanks or stagnates? Will your income from those properties cover the losses through expenses and depreciation, the latter of which the IRS will make you recapture?

 

do the math. So does my CFP. So does my CPA. So does my banker.

But while you are doing second grade math with a pencil and Big Chief tablet, my financial advisors have me doing calculus on spreadsheets.

The Merck 401k program is generically designed to encourage low wage employees to at least save something. Do you really think the high income level executives depend on it for financial planning??

I don’t “HAVE TO” accept the 401k. By simply paying income taxes on Merck contributions on April 15, it essentially becomes a forced saving account. That enables me to have a self-directed IRA having the tax advantages, with unlimited options.

You get a cheesy limited match from the company. When I buy property in my IRA and put down 20%, the renters are essentially matching me at a 4 to 1 ratio, as they pay off the loan. With no limit or ceiling on the amount. But again, 100% of the asset appreciates.

My next property in my IRA portfolio will be vacation property. I will rent it out 48 weeks a year to others. I will rent it to myself the other four weeks.

My property management company mows and shovels my residence, and it is billed to the rental investment. I just bought a new high dollar refrigerator, and billed it to the IRA investment as I put the old one in a rental.

When you buy a car, you can borrow money from your 401k, as you pay the interest “to yourself”, but you sacrifice the lost opportunity of returns on the money. When I buy a car, I use the property as collateral, and lose nothing on return opportunity costs.

But you have to be smart enough to do it.

Now who is the idiot??


Sounds great except for a few tiny tiny issues. Differential and Integral calculus aren't usually done on a spreadsheet. By law, you are not allowed to live in, or use for vacation a property that has been purchased through a self-directed IRA. I'm pretty sure it's also against the law to buy a new refrigerator and install it in your private residence, yet write it off on the rental property. You are not allowed to borrow money from a self-directed IRA to purchase a car without paying a 10% penalty. Only hardships, education, and medical bills exceeding 7.5% of AGI are allowable exceptions. I won't call you an idiot like others did. Your text speaks for itself.

 

Wow

 

Wow is right! That post was spot on. I only wish I had the patience to delve into the details like the other poster did. Great post...and accurate too!

I think I will continue to encourage my tax clients to get the "free" 4.5% raise from Merck. In my case, as a former Merkie with another company, it's a 6% raise and a $10,000 gift to the 401k at the end of the year.

Good luck with the rental properties. I hope you have tenants who maintain your mortgage payments and that they don't go under water. And I hope the calculus you talk about doesn't cause bodily pain as it does in some.

 

If I am reading this correctly, this article espouses creating another big buracracy (the ACA has been a huge success) being created by our very efficient U.S. government. Let's continue to hand hold every American that lives beyond their means so that they don't have to worry about accepting responsibility for their spendthrift ways. Sounds like a plan! (Read the amount of sarcasm as you wish.)

 

"Sounds great except for a few tiny tiny issues. Differential and Integral calculus aren't usually done on a spreadsheet. By law, you are not allowed to live in, or use for vacation a property that has been purchased through a self-directed IRA. I'm pretty sure it's also against the law to buy a new refrigerator and install it in your private residence, yet write it off on the rental property. You are not allowed to borrow money from a self-directed IRA to purchase a car without paying a 10% penalty. Only hardships, education, and medical bills exceeding 7.5% of AGI are allowable exceptions. I won't call you an idiot like others did. Your text speaks for itself."

___________________________

You being so anally retentive, you have certainly found a home at Merck. I am sure that you have all the policies memorized by chapter and verse. And can quote them all. I have worked with people like you. They annoy others.

But I will address your questions of tiny issues.

When I referred to calculus and spreadsheets, it was simply to illustrate a comparison of something simple versus complex.

With the potential vacation property and other write offs to rental property, it is all a matter of proper documentation. Should I buy the vacation property, when I am there a check and a rental contract will exist from a family member with another name, such as an in law. I have a receipt for a refrigerator along with all the other receipts for the properties in a rather extensive file.

Didn’t write I borrow or withdraw money from the IRA to finance a car. I wrote I could use the assets for collateral. That is a result from a financial relationship with my banker. Personally, I don’t buy a car without paying cash. To borrow money from the Merck 401k, one must deal with an unknown person on the phone.

Sometimes, I also put my garbage at the curb a few hours before I am supposed to, and don’t turn off all electronics before takeoff. If it is safe, I have also been known to exceed the speed limit.

I think it is wonderful that some people are satisfied with what Merck gives them and accepts it without question. After all, it is what Merck teaches.

Now go study some more Merck policies, because as you know, “ failure to comply could result…..” blah, blah, blah.

 

OH MY !!! What if the stock market tanks or stagnates??

Regarding the other questions, I would refer you to a good Certified Financial Planner. It is what they do. Mine also has a practice as a tax attorney.

 

Um, I am a financial planned and tax accountant. Oh, the money we have saved on those fees. Yes, former Merckie. Left by choice. However, one rule in financial planning is that you should never use stock or home equity to fund a depreciating asset, such as a car.

Second, I know my way around financial tricks and loopholes. Not to brag, but this is the reason we became millionaires at age 45...and not on a sales rep or whatever (CTL is it?) salary. This is on one scientist salary...and a talented one who is using the God-given talents at a biotech firm with a pretty amazing pipeline. Thank goodness they are too expensive for Merck to buy in order to toss away employees.

Third, a self-directed IRA allows you to contribute how much per year...$11,000 as a couple if you are under 55 and do not exceed the income limitations. Besides the free match on the 401k, a 4.5% bonus right off the bat, you save a minimum of 15 cents per dollar of taxes that you contribute. If you contribute the max, which I believe is $17,500, you save $2625 in taxes.

Are you under the income limit to write off rental losses, because the IRS closed that loophole years ago.

I would have to agree with the majority here. While not great, the 401k is better even if the fund choices aren't the greatest.

 

Thanks for the response #15. How do you figure I work for Merck based on my response? I don't, haven't for years. I see you have a lot of support for your views....NOT. After rethinking my original response, I want to change my view. You ARE an idiot!

 

If you haven't, then why do you care so much about the 401k offerings? It doesn't apply to you. Are you a plant for Merck trying to save them more money by encouraging employees not to take the company match?

As for me, many of my clients are Merkies. I do have a vested interest in all financial aspects of their lives.

 

Yeah, right. Of course you are a current Merckbot.

Or, you must have one sad, pathetic, lonely life to spend your time responding to an anonymous board about a company you have not worked at for years.