I am 39 and have No money in my 401k -Help

[Stkilda]

I lost the plot guys and have partied all my life. I am in medical sales and spent every dime I have ever made.

I always thought I would die early, and never cared until now.

My question is at 39, and making around 60 to 70 per year.

How do I catch up so I am not a bumb when I retire.

you can laugh at me but no cheap shots ok? I need sound advice.

 

[John Galt]

Hello stkilda! You will get good advice here. Just so
you know it's not too late, I spent about everything I
made up to age 49, got a divorce (which halved the net worth) and still ERed. Creativity and motivation will
do it every time, although I confess a pile of money
can't hurt

JG

 

[Beachbumz]

Hi Stkilda! I'm not sure I would want to be a "bump" either at retirement, but IMHO being a 'bum' ain't all bad, if ya do it right. 8)

At least you woke up at 39, most people I've seen wait until their 50s before they realize they have no retirement savings.

If you are single, at 60K+ you are paying way too much in taxes, so you need to contribute big time to a 401k or other retirement plan if it is available. Always contribute enough to get the maximum company matching and if you are still in the 25% federal tax bracket contribute more. Depending on your state tax bracket (if any), this will save you 1/3 of what you contribute in taxes.

Do you own a house? If not, consider purchasing one; BUT, only not one bigger than you need to live comfortably.

Depending on when you want to retire, you may want to consider something that will provide you some leverage, like rental property, but you need to educate yourself greatly before doing that. I started my plan at age 29, with less that 100K net worth and retired at 36 using real estate.

Good luck,
The Beachbumz

 

[newellcr]

Stkilda,

Sounds like you are talking regular retirement. I'll assume age 65 and that you are eligible for social security. You have 25 years left to save/invest and can begin to collect SS around the same time. Invest $1000/month and you could have around $750k in today's dollars. That would add $30k/yr to your ss using a 4% SWR. You can save quite a bit in 25 years if you want to. If you want to go earlier, that will take greater commitment and lifestyle changes.

There are non-financial concerns too. Like what are you going to do all day. Again, you have 25 years to contemplate. Read the archives here, save a fixed amount routinely, and congratulate yourself for beginning to care.

Welcome to the board.

Cheers,

Chris

 

[JOhn Galt]

Hello Chris. That was good advice. Made me think of another advantage I had in ER. Many people have a
problem deciding what to do with all of that time.
I have so many interest/hobbies that I don't quite know
where to start most of the time. On top of that, I can spend a lot of time just daydreaming and thinking.
I joke that my brain is open all night, 24/7, never closes.
It's hyperbole, but not by much

JG

 

[Icandream]

No pot shots here from this lurker, now newbie poster

I lost my entire 401k in the stock market (year 2000) at the age of 38, so I feel your pain. The upside is you still have 25 years before retirement age. With rigor and determination with how you handle your finances starting right now, you CAN have a nest egg saved up before 60. I would immediately draw out a financial plan which includes a strict budget. I would immediately start make contributions in your company's 401k plan and start increasing your contributions over time. Also, you need to have a liquid fund in case of layoff or medical problems (as we get older, the risk of medical problems are much higher). I would have a goal of at the very least, 6 months of living expenses. Once you have solidified your 401k and emergency fund, then start thinking about some LT investment strategies like mutual funds and annuties.

Good luck!

 

[Cut-Throat]

I lost my entire 401k in the stock market (year 2000) at the age of 38,

Can you tell me how this was possible? - Did you have it all in one company stock that went to zero?

If so, that is why every investor should practice the investment basics. One of which is diversification.

 

[Icandream]

I rolled over my 401k plan from my previous employer into a Morgan Stanley account and was *advised* to invest my money in a company (now since vaporized along with my 401k) called "Copper Mountain" That was in 1999-2000, the dot bomb era. Never, ever again...

 

[Cut-Throat]

Can anyone name about 4 or 5 problems outlined in this thread that lie ahead with Private Accounts in Social Security?

I thought so. :

 

[rapoole]

Re problems with SS privatization- you're right, I think privatization could be ok for me personally (provided they did it right, which won't happen), but there are a lot of people out there who don't have the interest or skills to manage their own retirement funds.

I'll bet stkilda and icandream are well-informed, prudent folks in other respects. Both are fortunate to have some time to turn things around.

Jeremy Siegel's Stocks for the Long Run presented a pretty sunny view of long term returns on equity investment - part of which he has since backed away from. However, my takeaway from that book is that to smooth out the variability in equity returns, a holding period of at least 20 years is necessary. I am waiting to hear specifics of the privatization proposals, but in my view, recommending private accounts in lieu of traditional SS for anyone over 47 (current retirement age of 67 - 20 years) would constitute public policy malpractice.

rapoole

 

[Jarhead*]

I rolled over my 401k plan from my previous employer into a Morgan Stanley account and was *advised* to invest my money in a company (now since vaporized along with my 401k) called "Copper Mountain"  That was in 1999-2000, the dot bomb era.  Never, ever again...

Icandream:

Is the broker that recommended that you do that still with Morgan Stanley?
That is about the most inappropriate recommendation I have ever heard. (He should be drawn and quartered).
An expensive lesson, for sure, but in the long run, may go a long way towards you seeing the need for education in this area.
I would not count on a broker, or any other 3rd. party to put your interests ahead of theirs.

 

[gayl]

I owed more on my house than it was worth in 91, overextended on more credit cards than I care to remember, no money in the bank, 2500 in retirement savings. Upgraded my job & worked OT for 3 years until no longer eligible <moved into mgmt>, divided each raise & all OT pay into 3rds:

• 1/3 to debts
• 1/3 to mortgage refinanced to a lower rate, no idea why bank took a risk on me
• 1/3 to retirement savings

As each was paid off, I would take that amount and put 1/3 to remaining categories and 1/3 to fun. FIRE'd last year ... obviously it worked and I never really felt the pinch. It all depends on what you want.

Personally, I view SSA as an added 'bonus' and never really count on it being there for me.

 

[johnlw]

Right after I turned 40, I realized that I was in the same boat as you are. During the process of figuring out what I was going to do, I also evaluated what was important to me and what wasn't. I came to realize that except for possessions that had sentimental value (family pictures, things that my father had made and given to me, etc.) none of the stuff that I owned meant anything to me. Most of it was just junk that I had wasted my money (actually, my life, considering that money = my time) on. The only things that were really important to me were my family, my health and my time.

Accordingly, I made some changes to my lifestyle and spending habits. A few years down the road, things started to look better. I'm 47 years old now, and things look much better. Things don't look as hopeless as they once did.

Two years ago, I wrote a book about the changes I went through and what I did to make things better for myself and my family. And not to give my book a shameless plug, well OK, I'll give my book a shameless plug...

The title is: "I'm in Debt, Over 40, With No Retirement Savings. HELP!"

It's available on Amazon, if you want to check it out.

Remember that you've got plenty of time left to create a retirement nest egg and that even if it's a little late, you're much better off starting something now, rather than doing nothing.

John

 

[Icandream]

Icandream:

Is the broker that recommended that you do that still with Morgan Stanley?
That is about the most inappropriate recommendation I have ever heard.  (He should be drawn and quartered).
An expensive lesson, for sure, but in the long run, may  go a long way towards you seeing the need for education in this area.
I would not count on a broker, or any other 3rd. party to put your interests ahead of theirs.

I don't know if he's still around nor do I care. I've moved on and try not to think about. I've educated myself and the number one lesson that I've learned is I will never have an advisor or anyone else tell me where to invest MY money. If I'm going to have my savings vaporized, I'd rather do it myself!

 

[FlowGirl]

I don't know if he's still around nor do I care.  I've moved on and try not to think about.  I've educated myself and the number one lesson that I've learned is I will never have an advisor or anyone else tell me where to invest MY money.  If I'm going to have my savings vaporized,  I'd rather do it myself!

I'm going to save this and send it to a friend.

A buddy of mine, with a very average salary and who knows nothing about financial stuff, just started with a very expensive broker. He thinks that because they talk about baseball a lot and the broker calls him just to see how he's doing, that this guy is really looking out for him and is going to help him make a lot of money.

I never imagined something quite as dramatic as your story could happen, but figured at the very least he would get ripped off with fees and commissions without really understanding what was happening to his money. I offered to help him get started with a cheap index fund instead, but I guess that's not as glamorous. I'll pass this along your story, and hope that he doesn't have to learn the same lesson the hard way.

 

[farmerEd]

>>I never imagined something quite as dramatic as your story could happen,

It happens more than you think...which is why privatiing SS is not a very good idea for most people.

My neighbors were both on the verge of retirement in 99, (he was just retired, she was PT self-employed as a hobby)...they were advised (by who I don't know) to put a big part of thier ira money in JDS Uniphase when it was over $100/share if I remember correctly (I think its around $3 and they are still holding).

Now he works as a janitor and she has gone back to school to get certified as an Xray tech...probably not what they imagined for their retirement.

 

[SDY888]

Hello Stkilda and welcome.

Lots of sounds advice and wisdom from the sages round here.

You have recognised that your financial situation needs some serious attention and have sought out this board (and probably many other sources) for advice and guidance. Therefore, consider "Step 1" achieved and tick the box off as complete. You are on your way, congratulations.

Lots of advice will, I am sure, be forthcoming. Don't feel overwhelmed, study it and take the steps/measures that you feel most comfortable with, both financially and emotionally. There is more than one way to skin a cat, adopt the method you know you will be able to maintain over the long haul.

Set yourself small targets. Your income is good (although we don't know your expenses, liabilities or commitments) so saving your first $5000 should be easily achievable. Then go for 10k, 25, 50k etc. As many here will testify, once that ball starts rolling, it is surprising how the momentum builds and the numbers grow. Take all the free money you get via employers (fund matching and contributions) and any tax free saving channels available.

Be optimistic, it's never too late. Good luck.

 

[Helen]

Hi stkilda,

This may help you, it's pretty comprehensive:

http://socialize.morningstar.com/NewSocialize/asp/FullConv.asp?forumId=F100000002&convId=60825

Be sure and pay attention to designing a good asset allocation plan.  The get rich quick plans don't work - I've tried them ...

-helen

 

[lets-retire]

One of my financial advisors, put it simply. When investing pick what you like, but don't worry about researching ALL of the compaines in that area, there are way too many. For example, if your interested in investing in the manufacturing area pick one segment of that area, like auto makers. It is much smaller and won't have you sitting behind a computer/paper for months while your money is taking the vacation you deserve. The same goes for mutual funds there are so many out there that to research all of them would take forever and leave your money resting instead of working.

 

[Spanky]

My sister in law (stockbroker) takes the old rich widows out to lunch monthly and asks if they want more money in their monthly checks. Sends them flowers and birthday cards and skims a percentage off of each of their net worth.

She makes over $500K per year, and the old widows actually think she is doing a 'great job'.

I think I am in the "wrong" occupation. We all should get a job in Wall street or one of those high paying jobs, e.g., basketball player, lawyer, corporate executives, etc. I guess they are providing a valuable service that society is willing to pay.

 

[unclemick]

Hand holding - wherever you find it - never goes out of style.