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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76079  
Subject: Re: Thinking about retirement...plans Date: 1/31/2004 7:23 PM
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Any advice on what to look for in the plans would appreciated.

As you can see there are lots opinions, all of which are pretty good in one-way or another. Hopefully one more won't confuse you any more.

Here are a few points;

1) Contributing enough to get any employer match is a no brainer, even if it means paying off the other loans slower. (The possible exception is extremely high interest credit cards)

2) If you are saving more than the employers match and your marginal tax rate is still low then contribute to a Roth IRA, if you can, before you contribute more to the employer retirement account. The tax-free income 40 years from now will be great. If you might not have the discipline to save up and actually make the contribution to the Roth then stick with the payroll deduction because it is so easy to do and you won't miss the money if you never see it.

3) Until you have a significant amount in your retirement account it really doesn't matter which fund you invest in since the difference in the performance of even vaguely similar funds is usually just a few percent. Say you have $3,000 in your retirement fund, 1 percent is 30 dollars, not enough to loose sleep over. What does matter is what asset class you invest in like, stocks, bonds, real estate, etc. This is another no brainer, for a 28 year old with a small retirement account, go with 100% stocks. An S&P 500 index fund or the Vanguard total stock market index funds are good choices. When your retirement account gets up to five digits plan on researching this more. Each year increase your retirement savings by one half of any raise.

3) The biggest pitfall in many peoples retirement planning isn't the mechanics of retirement investing; it is lousy financial management outside their retirement account. After getting any employer match, you need to save up an emergency fund of about six months take home pay. You will have financial bumps in you life and this will allow you to get through these.

4) Don't get caught with perpetual car loans. If you do need to get a car loan then buy a modest car and plan on saving up to pay cash for your next car. I know people who have had car loans for 30 years. That is a lot of interest to pay, especially when you consider how much money this would be it was ivested instead.

Greg
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