| Author |
Message |
J.Lef
Guest
|
 Posted:
Sun Oct 30, 2005 11:46 pm Post subject:
Is 8,25% bad? |
|
|
I am investing for the long haul for retirement, and have over thirty
years remaining, till I will start using funds. Question I have is that I
have been putting a lot of my funds in a plan that guarantees me 8.25 per
cent interest a year, by the city.
I know a percent or two can mean a lot over the course of a few
decades, up and down.
But in general would you put your money in a guaranteed or would you
try to earn more at a risk?
I currently put 15 percent of my paycheck into this guaranteed fund,
and fully fund a roth ira, using vanguard mutual funds.
I am considering dropping the mutual funds, and increase my payroll
deduction an equal amount as I was funding an ira.
Any opinions.
Much regardss
|
|
| Back to top |
|
 |
Elle
Guest
|
| Posted:
Sun Oct 30, 2005 11:52 pm Post subject:
Re: Is 8,25% bad? |
|
|
"J.Lef" <j.lef@verizon.net> wrote in message
news:RF79f.1729$cg6.328@trndny04...
| Quote: | I am investing for the long haul for retirement, and have over thirty
years remaining, till I will start using funds. Question I have is that I
have been putting a lot of my funds in a plan that guarantees me 8.25 per
cent interest a year, by the city.
I know a percent or two can mean a lot over the course of a few
decades, up and down.
But in general would you put your money in a guaranteed
|
If I had 30 years to go to retirement, I wouldn't. Mostly because these
plans lack flexibility (by way of severe penalties if one withdraws), and I
want to call my own shots.
Is this some kind of annuity?
| Quote: | or would you
try to earn more at a risk?
I currently put 15 percent of my paycheck into this guaranteed
fund,
and fully fund a roth ira, using vanguard mutual funds.
I am considering dropping the mutual funds, and increase my payroll
deduction an equal amount as I was funding an ira.
|
Does your employer offer a 401(k)? |
|
| Back to top |
|
|
Ed
Guest
|
| Posted:
Sun Oct 30, 2005 11:59 pm Post subject:
Re: Is 8,25% bad? |
|
|
If this guaranteed 8.5% is in a 40X-k, the money may be taxable at
withdrawal.
The Roth will be tax free. 8.5% is attractive but you may be able to do
better in a Roth unless your employer is giving you some percentage of
matching contributions.
"J.Lef" <j.lef@verizon.net> wrote in message
news:RF79f.1729$cg6.328@trndny04...
| Quote: | I am investing for the long haul for retirement, and have over thirty
years remaining, till I will start using funds. Question I have is that I
have been putting a lot of my funds in a plan that guarantees me 8.25 per
cent interest a year, by the city.
I know a percent or two can mean a lot over the course of a few
decades, up and down.
But in general would you put your money in a guaranteed or would you
try to earn more at a risk?
I currently put 15 percent of my paycheck into this guaranteed
fund, and fully fund a roth ira, using vanguard mutual funds.
I am considering dropping the mutual funds, and increase my payroll
deduction an equal amount as I was funding an ira.
Any opinions.
Much regardss
|
|
|
| Back to top |
|
|
Maurice
Guest
|
| Posted:
Mon Oct 31, 2005 12:57 am Post subject:
Re: Is 8,25% bad? |
|
|
Opinion; ya I have an opinion. You need to check out the ins and outs
of the "guaranty". Remember Enron. Those employees had everything in
one basket; their jobs, Enron stock in the 401k plan. And what did
they end up with?
Is there an actual pot of money that is being invested in the hands of
an administrator or is there an IOU with a promise that they'll pay in
the future? Ever hear of an unfunded pension plan obligation? City
and state governments have a lot of these. Just like those pesky
airlines. If you don't know the answers to these questions, you're
playing with fire.
Mo |
|
| Back to top |
|
|
j.lef
Guest
|
| Posted:
Mon Oct 31, 2005 1:01 am Post subject:
Re: Is 8,25% bad? |
|
|
| Quote: | Opinion; ya I have an opinion. You need to check out the ins and outs
of the "guaranty". Remember Enron. Those employees had everything in
one basket; their jobs, Enron stock in the 401k plan. And what did
they end up with?
I should be more specific. The 8.25 percent guaranteed is an |
a 403b plan, guaranteed by the city of new york.
There is no matching by my employer. So the money is guaranteed no matter
what the market does.
I can also contribute to a 457 and a 401k plan, but
they dont have the guarantee that the 403b plan has.
My Roth Iras are with vanguard .
thanks |
|
| Back to top |
|
|
Bucky
Guest
|
| Posted:
Mon Oct 31, 2005 1:01 am Post subject:
Re: Is 8,25% bad? |
|
|
Ed wrote:
| Quote: | If this guaranteed 8.5% is in a 40X-k, the money may be taxable at
withdrawal.
The Roth will be tax free. 8.5% is attractive but you may be able to do
better in a Roth unless your employer is giving you some percentage of
matching contributions.
|
Given the same tax rate and return rate, 401K and Roth IRA will have
the exact same results. |
|
| Back to top |
|
|
Ed
Guest
|
| Posted:
Mon Oct 31, 2005 1:01 am Post subject:
Re: Is 8,25% bad? |
|
|
"Bucky" <uw_badgers@email.com> wrote in message
news:1130714728.859178.170430@g44g2000cwa.googlegroups.com...
| Quote: | Ed wrote:
If this guaranteed 8.5% is in a 40X-k, the money may be taxable at
withdrawal.
The Roth will be tax free. 8.5% is attractive but you may be able to do
better in a Roth unless your employer is giving you some percentage of
matching contributions.
Given the same tax rate and return rate, 401K and Roth IRA will have
the exact same results.
|
Right. |
|
| Back to top |
|
|
Mark Freeland
Guest
|
| Posted:
Mon Oct 31, 2005 9:00 am Post subject:
Re: Is 8,25% bad? |
|
|
j.lef wrote:
| Quote: |
Opinion; ya I have an opinion. You need to check out the ins and
outs of the "guaranty". Remember Enron. Those employees had
everything in one basket; their jobs, Enron stock in the 401k plan.
And what did they end up with?
I should be more specific. The 8.25 percent guaranteed is an
a 403b plan, guaranteed by the city of new york.
There is no matching by my employer. So the money is guaranteed no
matter what the market does.
|
I'm guessing that you are talking about NYC TRS TDA (or something
similar, like BERS TDA).
Guaranteed Income Contracts (GICs) in general are guaranteed by the
insurer issuing the contract. TRS is different, as you said, it is
guaranteed by the City of New York, that sponsors the plan.
http://www.ins.state.ny.us/acrobat/20trsfld.pdf (p. 5, pdf p. 7).
Whenever one talks about a GIC (or this variant), one must give not only
the current rate, but the guaranteed floor. In the case of these TDAs,
it is set by NYS constitution to be no less than 7%.
http://www.rssa-nyc.org/news/nov2004/nov2004.pdf (p.2, right column).
Unless one is expecting another round of late 70's - early 80's type
inflation, that's a very attractive return. Even the 7% floor compares
well with the historical return of bonds, and you get that with less
risk.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
There is a downside with the NYC TDAs in that your investment choices
are limited to this fixed income annuity and (depending on the program)
just a couple of variable annuities; also that you are limited in how
quickly you can reallocate funds (I believe it takes a year to move
funds out of the fixe income annuity).
Overall, I think that this is a good choice, and one that I would use
for the fixed income portion of my retirement savings.
--
Mark Freeland
nNeEwTs@sonic.net |
|
| Back to top |
|
|
J.Lef
Guest
|
| Posted:
Mon Oct 31, 2005 5:02 pm Post subject:
Re: Is 8,25% bad? |
|
|
| Quote: |
I'm guessing that you are talking about NYC TRS TDA (or something
similar, like BERS TDA).
|
Thanks Mark for the input. Yes I am talking about the
teachers retirement system. (My spouse is a teacher). You are right about
the bottom being 7 percent, but it has just been renewed for another year
and looks like it will stay the same into the foreseable future.
I work for the city also and contribute the bulk of my
money into a 457 plan, into a portfolio of 80 percent stock,20 percent other
less risk mix. I also make voluntary extra contributions towards my
retirement at 8.25 percent interest, guaranteed to stay at that level,
which will increase my pension. I contribute a total of 7.5 percent towards
my pension. which hopefully will pay me almost two thirds my final salary
for pension.
Much regards
|
|
| Back to top |
|
|
David Efflandt
Guest
|
| Posted:
Wed Nov 02, 2005 8:51 am Post subject:
Re: Is 8,25% bad? |
|
|
On Sun, 30 Oct 2005 18:44:35 -0500, Ed <friday@fishinthe.net> wrote:
| Quote: |
"Bucky" <uw_badgers@email.com> wrote in message
news:1130714728.859178.170430@g44g2000cwa.googlegroups.com...
Ed wrote:
If this guaranteed 8.5% is in a 40X-k, the money may be taxable at
withdrawal.
The Roth will be tax free. 8.5% is attractive but you may be able to do
better in a Roth unless your employer is giving you some percentage of
matching contributions.
Given the same tax rate and return rate, 401K and Roth IRA will have
the exact same results.
Right.
|
Wrong. Entire tax deferred distributions are taxed when withdrawn and
required to begin periodic withdrawls by age 70.5. Roth IRA contributions
are taxed the year they are entered, but there is NO further tax on
contributions, and no tax on gains (if qualified). There are also no
required withdrawls for Roth IRA, making it more flexible for desired or
unforeseen major expenses without affecting retirement tax rate.
The unknown is the future tax rate. Unless someone is retiring soon, even
less than 100% of today's income in tomorrow's dollars (inflation) could
be same or higher marginal tax bracket instead of lower. So whether the
same gain would result in same overall tax is unknown, but the Roth offers
some flexibility and estate advantages. A combination of both may net
the lowest tax. |
|
| Back to top |
|
|
Ed
Guest
|
| Posted:
Wed Nov 02, 2005 4:03 pm Post subject:
Re: Is 8,25% bad? |
|
|
"David Efflandt" <efflandt@xnet.com> wrote
| Quote: | Given the same tax rate and return rate, 401K and Roth IRA will have
the exact same results.
Right.
Wrong. Entire tax deferred distributions are taxed when withdrawn and
required to begin periodic withdrawls by age 70.5. Roth IRA contributions
are taxed the year they are entered, but there is NO further tax on
contributions, and no tax on gains (if qualified). There are also no
required withdrawls for Roth IRA, making it more flexible for desired or
unforeseen major expenses without affecting retirement tax rate.
|
If you use the same expenses, rate of return, tax rate it's very close.
Don't forget that the Roth offers tax free withdrawal but it's after tax
money going into it.
If you invest the tax savings realized by the pre-tax contributions of the
401-k, say into a Roth, the end result is pretty close. I worked it all out
once and it does give different results for different tax rates but if I
recall it was very very close.
The Roth may be more flexible but it doesn't offer employer matching and the
contribution limits are much lower. |
|
| Back to top |
|
|
Guest
|
| Posted:
Sat Nov 05, 2005 5:00 pm Post subject:
Re: Is 8,25% bad? |
|
|
I'd take the Roth over the 401k, if given a choice and able to fund
either w/o hassle. The reason I pick a Roth is that I would just want
to avoid any taxes later on when things will already have been inflated
in price, thirty years from now. Short of having a crystal ball, the
Roth has an edge of freedom built in to it it I guess. Who wants to
worry about taxes and crap when the cost of a car, home, food, etc.
will be maybe 4x as much as it is going for now ( assuming maybe a 5%
annuall inflation rate from now on, but hey, fuel and insurance will
probably be way off the map for that one). |
|
| Back to top |
|
|
Doug
Guest
|
| Posted:
Tue Nov 08, 2005 9:01 am Post subject:
Re: Is 8,25% bad? |
|
|
If I could get an GUARANTEED 8.25% return, I'd put ALL my bond
allocation plus some of my stock allocation in it. That is a pretty
good return. Damn good, in fact. Load up if it's for real. I can't get
it, so it makes me wonder. But maybe you can with your NYC and GIC. |
|
| Back to top |
|
|
|
|
|
|
FAQ
Memberlist
Register
Profile
Log in to check your private messages
Log in