The Market 2021

Zeno

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The lack of teaching of people of any age about investing in school is pretty bad as is companies doing it. I have a friend who at least 18 months ago maybe longer asked me about moving an old 401K into an IRA. I helped her get that set up and I gave her the name of the person at Fidelity who manages mine. It appears her amount was too low for Advisor and she was told that and given some suggestions. I found out Friday, about 3pm so after close, that she had not done anything. She was wondering why the money wasn't going up while she kept reading the markets were way up. She had thought it transferred over from the 401K to the IRA in the same accounts, "in kind" but it didn't so it was in a cash holding account getting absolutely nothing. She even signed up for a Fidelity credit card that periodically gives bonuses which go to her account. So the only money she'd made that whole time was off the card.

So I got her signed up Friday but my assumption is that means it'll buy at close today and of course today is a big up day so if we had done this at lunch Friday, she'd have gotten the close Friday and been up today. I don't know the exact amount of time it was sitting like that but my guess is she'd be up at least 50% if she had put it into the accounts it's going into now because I'm pretty sure the impetus for all this was markets tanking due to Covid(not 100% sure of the timeline).

I feel bad I didn't push her more for information but I have asked her several times and it was never clear to me that Fidelity wasn't managing it for her it was just in Fidelity.

My 20 year old niece is still asking me for information she actually did find a class at Irvine she wants to take to help with this so that's good but she had absolutely no education in investing while in highschool nor did her older sister.

Yeah, the lack of education on finances, investing, etc is a terrible thing. I hadn't even heard of an IRA until I was in my 30's, I barely knew anything about stocks and bonds--and any talk of ETFs or mutual funds might as well have been a foreign language. I had to really self-educate, fortunately there are a ton of resources out there now for free that you can learn from on the internet but you have to go looking for it. It's no wonder you see articles out there all the time about the high percentage of Americans with little or no retirement savings.

Average retirement savings of American households in 2019: $65,000

https://www.fool.com/research/average-retirement-savings/

Age............Average 401(k) balance...........Median 401(k) balance
Under 25.....$5,419.......................................$1,817
25 to 34.......$26,839....................................$10,402
35 to 44.......$72,578....................................$26,188
45 to 54.......$135,777..................................$46,363
55 to 64.......$197,322..................................$69,097
65 and up.....$216,720..................................$64,548

https://www.businessinsider.com/personal-finance/average-401k-balance



I don't know how someone in the 55-64 age range can even think of retiring with around $200K in a 401K unless they have money stashed elsewhere. I invest for tomorrow much more than today and admittedly I am lucky that I will have a pension, a Roth IRA and a 401K when I retire. I do have a taxable brokerage acct to play with but I only put money in there if I can afford it after my 401K and Roth are maxed out.
 

BigRedRage

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Yeah, the lack of education on finances, investing, etc is a terrible thing. I hadn't even heard of an IRA until I was in my 30's, I barely knew anything about stocks and bonds--and any talk of ETFs or mutual funds might as well have been a foreign language. I had to really self-educate, fortunately there are a ton of resources out there now for free that you can learn from on the internet but you have to go looking for it. It's no wonder you see articles out there all the time about the high percentage of Americans with little or no retirement savings.

Average retirement savings of American households in 2019: $65,000

https://www.fool.com/research/average-retirement-savings/

Age............Average 401(k) balance...........Median 401(k) balance
Under 25.....$5,419.......................................$1,817
25 to 34.......$26,839....................................$10,402
35 to 44.......$72,578....................................$26,188
45 to 54.......$135,777..................................$46,363
55 to 64.......$197,322..................................$69,097
65 and up.....$216,720..................................$64,548

https://www.businessinsider.com/personal-finance/average-401k-balance



I don't know how someone in the 55-64 age range can even think of retiring with around $200K in a 401K unless they have money stashed elsewhere. I invest for tomorrow much more than today and admittedly I am lucky that I will have a pension, a Roth IRA and a 401K when I retire. I do have a taxable brokerage acct to play with but I only put money in there if I can afford it after my 401K and Roth are maxed out.
Two friends of mine, one that used to schwab tought me the basics of the market in 2019. I was 36 or something at the time. I had 401k and etc but knew nothing about the market at all until I ran into them. Since then I have searched out a lof of info and got fairly educated but I am still pretty dumb about it all.
 

Russ Smith

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Yeah, the lack of education on finances, investing, etc is a terrible thing. I hadn't even heard of an IRA until I was in my 30's, I barely knew anything about stocks and bonds--and any talk of ETFs or mutual funds might as well have been a foreign language. I had to really self-educate, fortunately there are a ton of resources out there now for free that you can learn from on the internet but you have to go looking for it. It's no wonder you see articles out there all the time about the high percentage of Americans with little or no retirement savings.

Average retirement savings of American households in 2019: $65,000

https://www.fool.com/research/average-retirement-savings/

Age............Average 401(k) balance...........Median 401(k) balance
Under 25.....$5,419.......................................$1,817
25 to 34.......$26,839....................................$10,402
35 to 44.......$72,578....................................$26,188
45 to 54.......$135,777..................................$46,363
55 to 64.......$197,322..................................$69,097
65 and up.....$216,720..................................$64,548

https://www.businessinsider.com/personal-finance/average-401k-balance



I don't know how someone in the 55-64 age range can even think of retiring with around $200K in a 401K unless they have money stashed elsewhere. I invest for tomorrow much more than today and admittedly I am lucky that I will have a pension, a Roth IRA and a 401K when I retire. I do have a taxable brokerage acct to play with but I only put money in there if I can afford it after my 401K and Roth are maxed out.


yeah this friend is below that 401K average but she's only 56 so she has 8 years to get to the mark for that age group but that's still way too low. She has an IRA, a 401K from her old job and a money market. The money market was my idea now of course it gets almost nothing but she was risk averse so I got her to put it there to get some interest. The 401K she has at her old company. She's in I think week 5 or 6 at a new job, highest salary she's ever made, she's not thrilled with the fit so far but I'm doing what I can to get her to stay there because of the money. When she can she'll roll her 401K into the new company one. I am not sure about matching. So I'm helping her which is honestly stressful I don't want to do anything that doesn't work out but given the time frame I actually think she should be MUCH more aggressive than we are being because she needs to make up for lost time.

I should add everyone should have some idea what their estimated social security is. My experience is most people vastly overestimate how much money they will get, and how far it will go. Most people think I'm retiring at 62 and I'm getting 4K a month, and it's really for most people 2K or under at that age unless you were a REALLY high wage earner. The people who need it the most are the ones who need to know.
 

Zeno

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I should add everyone should have some idea what their estimated social security is. My experience is most people vastly overestimate how much money they will get, and how far it will go. Most people think I'm retiring at 62 and I'm getting 4K a month, and it's really for most people 2K or under at that age unless you were a REALLY high wage earner. The people who need it the most are the ones who need to know.

Yeah I get my online social security statement once a year. I know the numbers for me won't be entirely accurate as I won't be working past 57 but it does give me a ballpark--I also don't plan to take it until 67. Being a Gov't employee I will get a supplement from retirement until 62 that is about equivalent to like 75% of what my Social Security will be and I think I can wait until 67 before I really need that extra.
 

elindholm

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I should add everyone should have some idea what their estimated social security is. My experience is most people vastly overestimate how much money they will get, and how far it will go. Most people think I'm retiring at 62 and I'm getting 4K a month, and it's really for most people 2K or under at that age unless you were a REALLY high wage earner. The people who need it the most are the ones who need to know.

The system isn't set up for the "average American" to enjoy a 20+ year retirement on the government's dollar. Maybe it should be, but that seems to me like a long time to coast, especially for someone who didn't start earning decent money until their early 30s.
 

Folster

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The wife and I are shooting for retirement for her at 50 unless she wants to continue to work. I'd like to join her, but a lot of that will depend on healthcare and other variables prior to medicare age. Right now, social security is not a factor in our planning. It will be icing on the cake if and when we get it if everything goes according to plan or at least close.
 

Russ Smith

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The wife and I are shooting for retirement for her at 50 unless she wants to continue to work. I'd like to join her, but a lot of that will depend on healthcare and other variables prior to medicare age. Right now, social security is not a factor in our planning. It will be icing on the cake if and when we get it if everything goes according to plan or at least close.


My goal was 55, to do that I have to retire before my birthday in Nov. My current goal now is 56 if things go well the next year I could do it. I could do it now but too much risk unless we move to a much cheaper country.

The single biggest variable is of course healthcare.

If I could talk to myself a few years ago I would say "don't sell Shopify, don't sell Match" and that alone would have me well ahead would be up 1254% on Match if I still had it. Shopify pretty close to the same thing and I owned more of it. over 23K profit in MTCH if I still owned it, like 30K profit in Shopify. Don't even want to compute how much I actually made, I made money but nothing like 54K combined.
 

Folster

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My goal was 55, to do that I have to retire before my birthday in Nov. My current goal now is 56 if things go well the next year I could do it. I could do it now but too much risk unless we move to a much cheaper country.

The single biggest variable is of course healthcare.

If I could talk to myself a few years ago I would say "don't sell Shopify, don't sell Match" and that alone would have me well ahead would be up 1254% on Match if I still had it. Shopify pretty close to the same thing and I owned more of it. over 23K profit in MTCH if I still owned it, like 30K profit in Shopify. Don't even want to compute how much I actually made, I made money but nothing like 54K combined.

There's always going to be ones that got away. Don't beat yourself up too much.

In addition to healthcare being the largest variable, I think housing/mortgage is also right up there. If you can get your house paid off and eliminate that huge expense, retirement can be much more manageable. It also opens up a lot of options like downsizing or moving to a less expensive region allowing you to unlock equity in your home.

We're currently accelerating our mortgage to pay off in 10 years to coincide with our retirement goals.

Obviously life can throw curve balls and up-end even the best plans, but the alternative is worse.
 

Zeno

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There's always going to be ones that got away. Don't beat yourself up too much.

In addition to healthcare being the largest variable, I think housing/mortgage is also right up there. If you can get your house paid off and eliminate that huge expense, retirement can be much more manageable. It also opens up a lot of options like downsizing or moving to a less expensive region allowing you to unlock equity in your home.

We're currently accelerating our mortgage to pay off in 10 years to coincide with our retirement goals.

Obviously life can throw curve balls and up-end even the best plans, but the alternative is worse.

All good points. Healthcare is less of a worry for me personally just because I will get to carry my same coverage in to retirement--only difference is instead of the insurance premium being spread out over 26 pay checks annually it will only be spread out over 12 months of pension. I will have to add Long Term Care Insurance, if I can find one that will covers me since dementia runs in my family, that will be an additional expense--I am hoping that my dividend income will be enough to cover the premiums for that in retirement.

I won't be free of my mortgage when I retire, far from it, but I am toying with the idea of cashing in my Roth at 59 1/2 and paying for a home in cash. I have talked to a few people about it, some say don't do it, other say it will be worth it in the end--I just have to do more research as the time creeps closer to see if it is a smart move or not.

I have become more of a saver and a planner in the past 5 years or so--I try to budget for everything, I use multiple retirement calculators--I want to be sure to have a comfortable retirement.
 

Russ Smith

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All good points. Healthcare is less of a worry for me personally just because I will get to carry my same coverage in to retirement--only difference is instead of the insurance premium being spread out over 26 pay checks annually it will only be spread out over 12 months of pension. I will have to add Long Term Care Insurance, if I can find one that will covers me since dementia runs in my family, that will be an additional expense--I am hoping that my dividend income will be enough to cover the premiums for that in retirement.

I won't be free of my mortgage when I retire, far from it, but I am toying with the idea of cashing in my Roth at 59 1/2 and paying for a home in cash. I have talked to a few people about it, some say don't do it, other say it will be worth it in the end--I just have to do more research as the time creeps closer to see if it is a smart move or not.

I have become more of a saver and a planner in the past 5 years or so--I try to budget for everything, I use multiple retirement calculators--I want to be sure to have a comfortable retirement.


I rent not own so I have that decision to make but at least for now our thinking is retirement may involve moving to another country she wants Philippines I prefer NZ so we have to make that decision before we decide. The advantage is we can do both we can stay rent free in the Philippines at her parents house if wanted so we could rent or buy in NZ and split time if we want.

My intention is to retire at 56.5. She'll be 54 then. So I'm 3 years away from being able to withdraw from IRA's without penalty, just income tax. So the first 3 years would be living off money market and CD's and interest earned on stocks. Then at 59.5 I can start withdrawing from my IRA. When I retire my investment person strongly suggests rolling the IRA's into ROTH IRA's because my income will drop so I'll be in a lower tax bracket, so you take an immediate tax hit, but then no more taxes after. I have a ROTH 401K at my current employer so I would probably convert that to an IRA, my understanding is it can be done tax free since it's a ROTH 401K so then I'd also be able to dip into that when I'm 59.5.

Right now my plan is when Lucy turns 62 she files for Social Security. I'll be 64.5 then so if I file I will get a higher amount then by not filing at 62.

So the real key in our plan is that 3 year period after retirement before I can withdraw penalty free. One thing is she may be allowed to WFH, if she is, she may delay her retirement a year or two to give us income and health insurance during that time. But right now the plan is retire at the same time not her continue working.
 

Zeno

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I can retire with full benefits at 55 1/2, but my current plan is to wait until my 57th birthday, it doesn't increase my pension by a lot (just $250 a month) but it lets me contribute to both my 401K and Roth for an additional year and allows me to stash more cash away and accumulate more leave to sell back. I know a lot can happen between now and then so I have created 2 separate retirement plans based on those 2 dates.

Either way this is my last decade of working full time and that is pretty cool to say.
 

Folster

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I rent not own so I have that decision to make but at least for now our thinking is retirement may involve moving to another country she wants Philippines I prefer NZ so we have to make that decision before we decide. The advantage is we can do both we can stay rent free in the Philippines at her parents house if wanted so we could rent or buy in NZ and split time if we want.

My intention is to retire at 56.5. She'll be 54 then. So I'm 3 years away from being able to withdraw from IRA's without penalty, just income tax. So the first 3 years would be living off money market and CD's and interest earned on stocks. Then at 59.5 I can start withdrawing from my IRA. When I retire my investment person strongly suggests rolling the IRA's into ROTH IRA's because my income will drop so I'll be in a lower tax bracket, so you take an immediate tax hit, but then no more taxes after. I have a ROTH 401K at my current employer so I would probably convert that to an IRA, my understanding is it can be done tax free since it's a ROTH 401K so then I'd also be able to dip into that when I'm 59.5.

Right now my plan is when Lucy turns 62 she files for Social Security. I'll be 64.5 then so if I file I will get a higher amount then by not filing at 62.

So the real key in our plan is that 3 year period after retirement before I can withdraw penalty free. One thing is she may be allowed to WFH, if she is, she may delay her retirement a year or two to give us income and health insurance during that time. But right now the plan is retire at the same time not her continue working.


You might want to research and talk to your tax advisor about the Rule of 55 and SEPP Exemption. Both are options that can allow you to take distributions prior to 59.5 and avoid the early withdrawal penalties. They have particular rules you have to follow, but could help.

https://www.thebalance.com/what-is-the-rule-of-55-2894280

How the Rule of 55 Works
If you are between ages 55 and 59 1/2 and get laid off, fired, or quit your job, the IRS Rule of 55 lets you pull money out of your 401(k) or 403(b) plan without penalty.2 This applies to workers who leave their jobs anytime during or after the year of their 55th birthdays.


There is a slight catch. The Rule of 55 only applies to assets in your current 401(k) or 403(b). That's the one you invested in while you were at the job you leave at age 55 or older.3

Money in a former 401(k) or 403(b), is not covered. You would have to wait until age 59 1/2 to begin withdrawing funds from those accounts without paying the 10% penalty.


There is a a strategy to use if you know you will be leaving the job. You can get penalty-free access to plans from former employers if you roll them into your current 401(k) or 403(b). Once done, you can leave your current job before age 59 1/2 and withdraw the money using the Rule of 55.

https://www.investopedia.com/terms/s/sepp.asp

What Is Substantially Equal Periodic Payment (SEPP)?
Substantially Equal Periodic Payment, or SEPP, is a method of distributing funds from an IRA or other qualified retirement plans prior to the age of 59½ that avoids incurring IRS penalties for the withdrawals. Typically, an individual who removes assets from a plan prior to that age will pay an early withdrawal penalty of 10% of the distributed amount.


With a SEPP plan, funds are withdrawn penalty-free through specified annual distributions for a period of five years or until the account-holder turns 59½, whichever comes later. Income tax must still be paid on the withdrawals.
 

Folster

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Yeah, the lack of education on finances, investing, etc is a terrible thing. I hadn't even heard of an IRA until I was in my 30's, I barely knew anything about stocks and bonds--and any talk of ETFs or mutual funds might as well have been a foreign language. I had to really self-educate, fortunately there are a ton of resources out there now for free that you can learn from on the internet but you have to go looking for it. It's no wonder you see articles out there all the time about the high percentage of Americans with little or no retirement savings.

Average retirement savings of American households in 2019: $65,000

https://www.fool.com/research/average-retirement-savings/

Age............Average 401(k) balance...........Median 401(k) balance
Under 25.....$5,419.......................................$1,817
25 to 34.......$26,839....................................$10,402
35 to 44.......$72,578....................................$26,188
45 to 54.......$135,777..................................$46,363
55 to 64.......$197,322..................................$69,097
65 and up.....$216,720..................................$64,548

https://www.businessinsider.com/personal-finance/average-401k-balance



I don't know how someone in the 55-64 age range can even think of retiring with around $200K in a 401K unless they have money stashed elsewhere. I invest for tomorrow much more than today and admittedly I am lucky that I will have a pension, a Roth IRA and a 401K when I retire. I do have a taxable brokerage acct to play with but I only put money in there if I can afford it after my 401K and Roth are maxed out.


I didn't see this post, but I have seen similar articles. The median is what is scary as is it shows higher balance retirement accounts are skewing the average upward when the majority of investors are well below the average. It does make me feel good about my personal situation and confident we are on track to hit our goals.
 

BigRedRage

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I should add everyone should have some idea what their estimated social security is. My experience is most people vastly overestimate how much money they will get, and how far it will go. Most people think I'm retiring at 62 and I'm getting 4K a month, and it's really for most people 2K or under at that age unless you were a REALLY high wage earner. The people who need it the most are the ones who need to know.


There is a max amount you pay into social security annually so even stupid high wage earners do not see a lot different SS check.
 

Russ Smith

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You might want to research and talk to your tax advisor about the Rule of 55 and SEPP Exemption. Both are options that can allow you to take distributions prior to 59.5 and avoid the early withdrawal penalties. They have particular rules you have to follow, but could help.

https://www.thebalance.com/what-is-the-rule-of-55-2894280



https://www.investopedia.com/terms/s/sepp.asp


Thanks I knew about SEPP but the rule of 55 is new to me I didn't know you could roll old 401K's in to take advantage. unfortunately all my old 401K's have been rolled into IRA's and are now managed so I think that's gone.

I do have an employer sponsored 401K, the Roth one I mentioned so Rule of 55 would likely apply to that but it's not going to be enough to last us 3 years still would need to dip into savings. I'm not overly concerned about dipping into savings that's why it's there to bridge that gap but obviously you want to conserve what you can .

So I have 2 multi periods to get through, 56.5 to 59.5 for penalty free withdrawal, and then 59.5 to 64.5 when I intend to file for social security. Of course I'm quite open to adjusting and filing earlier for SS. Until the last year my plan had always been file at 62 take less but get it earlier. Because of good success in the markets I've been thinking I might be able to wait until 64.5.
 

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