What Age Did You Put $ in a Retirement Acct?

[russ_watters]

This one has more percentiles:
https://www.bls.gov/oes/oes_perc.htm

[It appears that's 2010 data]

Edit: this one has a graph and newer data:
https://dqydj.com/income-percentile-calculator/

 

[StoneTemplePython]

Also...a quick question:

Do you all know of people who've had to withdraw from their retirement funds early and gotten penalized? How common is this?

It makes me wonder about the 3-6 months of life expenses saved up "rule," because with the economy so fragile

A couple thoughts.

1.) Something that isn't well appreciated: if you run the numbers, in the case of contributing to a 401(k) up to the maximum company match --- I assume the match is cash not stock--- if you run the numbers, you should still come out ahead even after numerous early withdrawal penalties. The math is simple but this is not widely appreciated. The idea is that penalties are high but a 100% match is higher. You of course have to run the numbers yourself for your specific situation and do your own homework. (Note: there are potentially some issues, though, if your company goes bankrupt and has been cutting corners with the 401k.)

2.) I don't think the staff at USA today are numerate enough to do a basic thing on personal finance correctly. Better sources are things like 538, The Economist, and the 'More or Less' podcast (though there is a very British orientation).

 

[Vanadium 50]

Hi Russ,

Those sites say the 25% point is $15/hr (1st site) and $20,000/year (2nd site). So I am going to stick to my guns: 'It may be that the authors have "saved the reader some time and effort" and have converted "less than $20,000 per year" to "less than $10/hour".'

 

[russ_watters]

Hi Russ,

Those sites say the 25% point is $15/hr (1st site) and $20,000/year (2nd site). So I am going to stick to my guns: 'It may be that the authors have "saved the reader some time and effort" and have converted "less than $20,000 per year" to "less than $10/hour".'

Ooops -- I might have lost track of what value we were trying to verify. It was $10, not $15 ($10 at 25%). So that means my two links contradict each other.

The BLS says *10%* is $11 or $22,880, but the other link says (roughly) *25%* is $20,000.

However, either way I think the BLS is still giving bad info because the link I provided also gives values of income for an assumed 40 hr work week(11*40*52). So unless the average hours worked were exactly 40 (unlikely: it's 38.6 overall and probably lower at the lower end of the pay scale), one of the numbers has to be wrong. If the annual wage is correct, the hourly wage is too low and if the hourly wage is correct, the annual wage is too high.

 

[WWGD]

I've seen compelling research that suggests managed stock funds are almost criminally bad, so you should pretty much never put your high yield/long term money in anything but an index fund.

Sorry if this is OT, but why do people keep paying for these for so long after knowing how they barely, if at all, beat the market?

 

[CWatters]

For UK readers... If you put money into a pension scheme the government will give you tax back of 20 - 40%. Even if you aren't earning and so not paying tax they will give you money "back". So it can pay for parents and or grandparents can set up a pension scheme for kids from birth. The most they can put in is currently about £2880 a year and the government will add another £700 or so a few months later. I might have the exact figures wrong they are something like that. In recent years they have made it easier to withdraw your money early but there are tax penalties that may apply.

At the other end of the age range... The elderly/ retired can still pay into a pension if they don't need to draw money from one to live on. This pension can be inherited by their children or grandchildren children on favaroble tax terms.

Seek advice from an IFA which I am not.

 

[jtbell]

why do people keep paying for [actively managed mutual funds] for so long after knowing how they barely, if at all, beat the market?

Most people really don't know this, or else they've been convinced that their fund has some "special sauce" that makes it better than the average actively-managed fund.

 

[CWatters]

Buying something that passively tracks an index isn't always a good idea either. For example the FTSE 100 is dominated by companies in the finance and retail sectors.

 

[jtbell]

Sure, you want something that tracks an index that is appropriate for your goals. For me that means an index that is broad enough to cover most or "all" of the market, because I don't want to try to guess which sectors are going to do better than the others.

 

[kyphysics]

I'm looking at the cover of the CBO Reporthttp://www.cbo.gov/ftpdocs/120xx/doc12051/02-16-WageDispersion.pdf and it has the 10th percentile just under $10/hr. Granted, $15/hr is the 50th percentile, so it's not mathematically impossible that the 25% point is $10/hr. But the distribution needs to be weird - 3% at $7.50. 7% between $7.50 and $9.50. 15% between $9.50 or so and $10, and then 25% between $10 and $15. It could be, as you say, a "market minimum wage" around $10, but even so I would expect geographic variations would make this less spiky. Much less spiky.

We can try to continue to parse out the specifics of how many people earn less than $10.00/hour, but a non-controversial figure is that half of working Americans make less than $30,000.

This is been reported on ad nauseum in recent years. At $30,000 or less a year, if you're young or of prime age, saving anything (let alone investing) is going to be tough. After basic necessities: rent & utilities/transportation/food/insurance (auto and health) ...you're pretty much done for.

 

[Vanadium 50]

Median annual household income is $45,000.

 

[russ_watters]

Median annual household income is $45,000.

$59,000... but individual looks about right at $30,000. Average household is 2 working age people and most of a kid.

 

[kyphysics]

$59,000... but individual looks about right at $30,000. Average household is 2 working age people and most of a kid.

Sounds like a good reason to get married!

Seriously, though, is it just me or do couples seem to get better tax breaks and "economic benefits" if you have two working people?

 

[Vanadium 50]

It's just you. Typically married couples with similar income pay a tax penalty, especially if they have children.

 

[russ_watters]

Sounds like a good reason to get married!

Probably the best situation is owning your home and having a [non-spouse] roommate who pays you rent.

 

[Vanadium 50]

Most people really don't know this, or else they've been convinced that their fund has some "special sauce" that makes it better than the average actively-managed fund.

To complicate things, there usually is a special sauce. Just not one that is always worth buying.

There are plenty of funds that beat the S&P 500. Even over a long period. The problem is that typically they have a very high expense ratio. Is buying advice on how to get 11% return instead of 10% return worth 1% of those assets? Not really.

There are still some funds that "win" - Fidelity Blue Chip Growth, for example, largely because it has a relatively low expense ratio for managed funds. Is this a better deal? Well, maybe. It has higher returns, but it also has higher risk. If you are willing to accept this additional risk, this can be accomplished by putting some of your money into funds that track asset classes with higher return but more risk: small cap funds and sector funds. This can often be accomplished without blowing up the expense ratio.

 

[jtbell]

If you are willing to accept this additional risk, this can be accomplished by putting some of your money into funds that track asset classes with higher return but more risk: small cap funds and sector funds.

Or, if you're not 100% invested in stocks, bur instead, have some fraction in fixed-income investments (bond funds or CDs or whatever), shift some of your fixed-income to stocks, e.g. go from 60% stocks to 70% stocks.

 

[CWatters]

It's also worth investing through a platform that refunds or discounts some of the costs.

Personally bit wary of fixed income investments at the moment because interest rates are low (so not great returns) and if interest rates rise there is a risk to capital.

I'm in the UK and my main regret this year was not investing in the USA. I've still managed to do better than the Dow but not the Nasdaq.

 

[Vanadium 50]

shift some of your fixed-income to stocks, e.g. go from 60% stocks to 70% stocks.

That's right. There are many ways of adjusting risk.

I would argue that the right way to invest is to set up a level of risk you are comfortable with, the purchase assets designed to maximize the (after taxes and fees) return within this level of risk. This has driven me to a small set of index funds, and a handful of single stocks. My overall IRR is 9.6% over the last 12 years, compared to 8.6% for the S&P 500, so I don't feel I am leaving money on the table with this strategy.

My strategy is not (unlike some people's) to "strike it rich".

 

[Michael Price]

I'm in the UK and my main regret this year was not investing in the USA. I've still managed to do better than the Dow but not the Nasdaq.

I'm also in the UK and have invested heavily in US tech stocks. The technology for reasons already discussed, and the US because Europe mostly does not 'get' capitalism and the Asia is very corrupt. Regards timing entry into the US stocks, now might not be so bad. Trump seems to be do doing his best to make US stocks affordable again.

 

[fresh_42]

I don't think it makes much sense to reopen a discussion from 2 years ago.

The subject might be interesting, but there hasn't much changed within the last two years, considering interest policies. If someone wants to discuss this further, please create a new thread - and leave politics off the table as far as possible, although I admit that this is basically impossible as politics defines the framework for economic decisions.

This thread is closed.