Today I attended a Pre-Retirement Seminar at work. It was an all day meeting and well worth the time. There was a lot of information presented, some of it was relevant for me today, and other bits of info will not be relevant to me for a while. I thought I would make a list of a few things that I thought were really good "take-aways". Some of these things you will have heard, maybe all of them, but either way, here is my list:
- The first debt you should pay off is the one with the highest interest rate, not the one with the lowest balance.
- If you own a home and like to "double up" on payments, you are better off putting the "extra" payment into an account that makes some kind of interest. Then when your account has the same amount of money that you owe on your home, you can pay it all off. You will STILL pay off your house early, but now, you've made interest on that money.
- Roth IRA's are not exactly "tax-free" as they seem. You put money into them AFTER you pay your taxes so when you take the money out, it's tax free. When you put money into a "tax-deferred" 401k, it's BEFORE you pay taxes but you have to pay taxes when you take the money out. Ok, most of you already knew that. Here is the new thing I learned. You pick what type of stocks your Roth IRA's and 401k's are in. So if you put them in the same type of stocks, they grow at the same rate. **If you are in the same tax bracket when you invest your money as when you take your money out at retirement, YOU END UP WITH THE SAME AMOUNT - it doesn't matter if you did the "tax-free" Roth IRA or the "tax-deferred" 401k. Now this next thing is important: there is a good chance you will be in a lower tax bracket AFTER you retire and if so, you will actually pay less taxes on the 401k than the Roth IRA. Something to consider.
- Stocks are not as "risky" as people think when it comes to long-term investing. When looking at stock growth in 25 year increments at any time in history the stock growth rate was 8% at it's lowest and 13% at it's highest. That means that if you are investing long term, you can expect to at least make 8% on the money you invest in stocks - even in this economy. (Can I just add that I just did "spell check" because I thought I spelled 'increments' wrong but I totally spelled it correctly! One point for me).
- We "waste" the most money on little purchases, not big ones.
- It really is more economical and cost effective to buy a used car instead of a new one (there is a whole break-down that I am not going to type up. You will have to either a) trust me or b) ask me to mail you a copy of the break down - if I can find it)
Those are the main things that stuck out to me. Now, I am ready to take on the world!
I should probably say the speaker was from Ernst & Young.
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6 comments:
we have actually paid off our credit cards the opposite way. the dave ramsey way is to pay them off starting with the low balance. we've gone from 8 down to 3! the good thing is that the ones we paid off had the higher interest rates.
that's a good idea about paying off the house at one time. i hope that someday when i own a house i remember that!
I'm pretty sure that buying a car new is next to retarded, especially an American made car. If you drive a brand new Escalade off the lot you will reduce its value by at least $10,000 (don't look this up and reply $9,999 please). Go buy a used Honda :)
ROFLMTushO:
"there is a good chance you will be in a lower tax bracket AFTER you retire"
I'm not laughing at you -you presented an EXCELLENT post- just myself because we thought we'd be comfortable at retirement. Rick took an early retirement from his 30-year long government job. Who knew that the housing market would dry up and shrivel away, and the stock market would come crashing down? Both of those things have directly impacted us. Add to that a 16% unemployment rate (yes, that's right. Our county leads the nation in unemployment) and Rick's prospects of reentering the job market are dismal. Thank God for ebay!
Young people: Life passes swiftly. Your retirement season will be here before you know it! Be wise.
Charlie, I TOTALLY agree.
1) Buy Used
2) Buy Japanese
(And, yes, I know Toyotas, Hondas and etc. are manufactured here in the U.S. But, they use Japanese technologies and better parts.)
Yes, Japanese cars are the best...just ask Dan how many miles he has on his Honda...you won't believe it...also be wise regarding your money...put away as much as you can...if you put something on a CC,plain on paying it off when it comes due...no int.
If you become anymore wiser I will barf, you make me look bad, especially with your amazing writing skills:(
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