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Author: TRYSTERO Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: HELP! DID I WAIT TO LONG? Date: 10/23/1999 6:28 PM
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I guess I'm an idiot, but I would like to become a Fool. I'm fifty one years old and I just woke up to the harsh realities of being old and poor. I don't want to spend my old age living under a bridge with a shopping cart full of aluminum cans. I had a 403B from a previous job with about $18,000 in a stock fund.When I noticed that the DOW was melting down a few weeks ago I pannicked, after spending two days trying to find my paper work, and had the fund (Prudential) transfer my holdings to a money market. When the transfer was completed at the end of the day, my holdings were around $14,500. Since then I have opened an account with Scott Trade, and filed the paperwork to roll over the 403B into a self directed IRA with Scott. It will probably be another seven to ten days, before I have access to the funds so I've been trying to learn all I can. Yesterday I stumbled across this website. All the examples I've read so far are about the 25 or 30 year old who invests for 30 years and is a multimillionare. What can I do in the next 15 or 16 years to stay out of the shelter. My wife and I have just bought a house and we have about 20K in credit card debt to pay off, but Ive been making double and triple payments as often as I can.
Is there any hope of becoming a Fool from the bottom of a pit like this. Till we pay off the plastic, all I have to work with is the IRA. Where do I start?
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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14742 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/23/1999 10:10 PM
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Hi, TRYSTERO, and welcome to the boards from a merry poster. Ordinarily I would say that a professional TMF'er would be along soon to greet you, but TMFPixy is at a convention and is sort of incommunicado.

What I suggest is that you go and look at the "money saving" boards. These are Budgeting, Credit Cards, and Living Below Your Means. The latter two have FAQ areas that will give suggestions. Budgeting is a fairly new board, and you could just start at the beginning there.

I've got no good advice, but those boards are a good place to start looking. I think everyone will tell you not to mess with the IRA. It's just too costly in a number of ways.


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Author: carylanne Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14751 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/24/1999 9:11 PM
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I for one would tell you to definitely consider the IRA. Why would anyone say it is too costly? You need all the help into retirement that you can get. Myself, I would fund an IRA for myself and my spouse before I would ever buy a house - if I had to choose that is. Take a deep breath, read the info on this website, don't panic. Go the library and check out the Motley Fool books and also a book called "The Wealthy Barber". You are late to the party, but a dance has been saved for you. Make sure that you and your wife are singing from the same song sheet.

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Author: gofsguy Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14754 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/25/1999 12:43 AM
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Take a breath Fool! If you truly are looking at a 15 year horizon you have time, but it will take discipline. Like the previous replies, I suggest you start reading. In terms of the IRA, get it working for you as soon as possible. Don't be afraid to invest in stocks with the potential for better returns. In order to make it work, however, you have to be careful. Your credit card debt is a serious problem if not handled correctly. You may think of a few things, though the decision is ultimately yours :

1. Stop paying triple on your cards. It is important you make payments and whittle away at it, but the extra money invested properly could get you better returns than what you pay in interest, which in the long run (your 15 years) could pay off. Not only that, High credit card balances are generally a detterrent to future use.

2. You need to start living "below your means". Read the book "The Millionaire Next Door". it is a pretty good book that will show you that the rich in America are generally middle class Americans who know how to manage their money. It is not too late for you. If you want to retire in 15 years, you can do it if you are committed to it, but it is not an easy task.

3. Obviously, your IRA will start growing Tax-defferred. Take advantage of this and manage it appropriately. The worst thing you can do is panic and try to get in and out with maximum gain. Find good stocks (there are lots of tips here) and be ready to hold them for a longer period to optimize your gain. Adding to your investments on a monthly basis will help you dollar-cost average. This can be a godsend in your situation.

Good Luck to you, and study Foolishly!


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Author: ElSupremo Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14779 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/25/1999 5:04 PM
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Hi trystero,

I haven't posted to this board before but I just can't resist this one!

Some folks with good intentions wrote:
1. Stop paying triple on your cards. It is important you make payments and whittle away at it, but the extra money invested properly could get you better returns than what you pay in interest, which in the long run (your 15 years) could pay off. Not only that, High credit card balances are generally a deterrent to future use.

WHAT! I've never read anything so ridiculous in my entire life. The first thing to do is pay off the credit debt. I would take every extra penny and pay off that debt first. If you have a good income you could do it in a year or so. Make that a crucial goal. Even if you can't make this years IRA contribution. The only deterrent of a high credit card balance is you won't have a retirement!

2. You need to start living "below your means".
Absolutely! Tighten your belt so tight you can hardly breath. You have to find ways to save every penny you can. After your credit debt is gone, you throw all those saved pennies into your retirement portfolio. Keep one or two credit cards and if you use them, pay them off every month. NEVER PAY ANOTHER DIME OF CREDIT CARD INTEREST AS LONG AS YOU LIVE!

3. Obviously, your IRA will start growing Tax-deferred.
OK, I'm no CPA but you need one! You need to take full advantage of every deduction. Depending on your CPA's advice, check out the Roth IRA, with 15 years it could be a good move.(After the CC debt is history of course) On the other hand you may be better with the regular IRA deduction, ask your CPA.

Adding to your investments on a monthly basis will help you dollar-cost average. This can be a godsend in your situation.
Good advice but that's not enough! Plan to invest X dollars per month but if there is any extra, put that in too!

We are talking total commitment here, there is no halfway if you want to reach your goal. Make a realistic budget that you can live with, leave enough for entertainment but no waste. You've got to live below your means but still have a life.

When you finally start socking that money away I have two words for you "INDEX FUNDS". Start with VFINX(Vanguards S&P fund). That would be a good place for your IRA funds until you get your feet on the ground. If you do nothing more than invest in a good index fund your miles ahead of the game.

By all means, read, learn, this stuff can be fun, but you don't need to be a broker to know that an index fund like VFINX is all you really need. And don't take my word for it, spend some time on the "Index Funds" board.

I've done what your about to do. I was out of debt at 40 and have been piling it on ever since. You've got a late start but you can do it. And once the fever hits, you will.

Remember, the most important thing is to invest all you can. And as far as being a Fool goes, you already are one, WELCOME!

ES




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Author: 39dopey One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14790 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/26/1999 9:17 AM
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I guess I'm an idiot, but I would like to become a Fool. I'm fifty one years old and I just woke up to the harsh realities of being old and poor. I don't want to spend my old age living under a bridge with a shopping cart full of aluminum cans. I had a 403B from a previous job with about $18,000 in a stock fund.When I noticed that the DOW was melting down a few weeks ago I pannicked, after spending two days trying to find my paper work, and had the fund (Prudential) transfer my holdings to a money market. When the transfer was completed at the end of the day, my holdings were around $14,500. Since then I have opened an account with Scott Trade, and filed the paperwork to roll over the 403B into a self directed IRA with Scott. It will probably be another seven to ten days, before I have access to the funds so I've been trying to learn all I can. Yesterday I stumbled across this website. All the examples I've read so far are about the 25 or 30 year old who invests for 30 years and is a multimillionare. What can I do in the next 15 or 16 years to stay out of the shelter. My wife and I have just bought a house and we have about 20K in credit card debt to pay off, but Ive been making double and triple payments as often as I can. Is there any hope of becoming a Fool from the bottom of a pit like this. Till we pay off the plastic, all I have to work with is the IRA. Where do I start?

Well, it doesn't look good on just the IRA, but it's not hopeless either. Run an Excel or similar spreadsheet, and you'll come up with something like the following:

Social security will exist, and you'll be able to afford cat food on what you receive from Uncle Sam. Check with the Social Security Administration to see what you can expect from them, so you'll know whether to plan on generic cat food or name-brand.

In 16 years, at a reasonable 100% stock portfolio annual return of 12%, your $14,500 will grow to almost $89,000 even with no more investments. At a 5% withdrawal rate, that's an extra $370 per month. That's not great, but it's enough to move up from cat food to real food in a frugal lifestyle.

If you invest an additional $2000 per year in the IRA, at the same return, you'll end up with $185,000 in 16 years, or $770 per month beyond social security - real money and enough to visit grandchildren without hitch-hiking. With both you and your wife adding $2000 per year to the IRA at the same returns, you will have about $1170 per month beyond social security. That's real money, enough for cautious comfort.

I do not recommend taking extreme risks to have a chance at higher returns on your investments, for example, stay away from options, futures, day trading, penny stocks, and other attempts to out-smart people with more money and more information. I do recommend learning all you can about investing. Keep your money in either the money market or an index fund like the Vanguard Index 500 until you know what you are doing and are comfortable with individual stocks. It may be best to avoid stocks until after the new year, both to allow time to learn and to avoid the volitility they may experience with Y2K approaching, but that's your decision.

After you are ready to invest, do your own research and choose stocks that you are comfortable with. There are several portfolios tracked at this site, but you have to make the decision whether to use one or more of them or choose individual stocks on your own. You may want to move your IRA to a discount broker. I use Waterhouse, but you should do your own research including checking out the discount broker board here to see who best meets your needs for avoiding annual fees, low trading fees, and providing the service you want.

I haven't touched the topic of paying off your debts, but you should figure out how to accomplish that and make it as high a priority as investing more for retirement. The Living Below Your Means board may help you there. If you have trouble finding any board, just ask. Good luck, and don't lose hope - it's not as bad as it sounds.

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Author: gofsguy Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14825 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 1:18 AM
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1. Stop paying triple on your cards.....

WHAT! I've never read anything so ridiculous in my entire life.

My point on this is simple. With 20k in credit debt you give me the impression that either 1) you are a spend thrift, in which case it will be hard to overcome this, but you can do it...or 2)You are living above your means and need them to live. Elsupremo took me to task. We will agree to disagree. I think you may be able to make more in the market with that money than you save in finance charges. Your call.

2. You need to start living "below your means".
Absolutely!

Glad we agree here. this is essential.

3. Obviously, your IRA will start growing Tax-deferred.
OK, I'm no CPA but you need one! You need to take full advantage of every deduction. Depending on your CPA's advice, check out the Roth IRA, with 15 years it could be a good move.(After the CC debt is history of course) On the other hand you may be better with the regular IRA deduction, ask your CPA.

I agree, ask a tax prefessional. In terms of your roll-over, my guess is do not convert it into a Roth. You may lose valuable principal and affect performance due to the taxes you will pay immediately. On a 15 year horizon it is tough to say, but check out that possibility. In terms of your contributory IRA, I would guess Roth is right, but again, get another opinion on it. Run a comparison between them and see which is the best scenario. Good luck

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Author: TRYSTERO Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14829 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 8:57 AM
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I want to thank the comunity of Fool for their input, but I feel that I need to clarify a few points on the spend thrift issue. Two years ago we were living in a large northern city that we hated, I was in a job that
required 65 to 75 hours a week in a very high stress situation. I was on medication for depression and on the verge f burning out or going postal. An oportunity to move to a small town in the south and still practice my profession arose.jumped at the chance, even though it ment a 25% reduction in salary. Now I love my job and only have to work about 30 hours a week. The relocation, however,cost us just under 10k on plastic. After we were here a year, we bought a home, and some furnature (lived in apts for 22 years)
another 6k. After relocating we also found out that my wife would not be able to work in this state, (They dont recognise physician assistants or surgical assistants in MS)so that dug our hole a bit deeper.
Christmas came and having 4 kids and 12 grandkids out west the plastic got heavier about.5k. So here we are now, wife has gone back to work for her old group in IL on a locum tennens basis, she travels to another state for three weeks and is home one week. (It's like having a wife that works on an oil rig at sea.) but they pay her travel and room and board, and she makesthree times what she could make here at a lessor job. I've signed up for the max contribution in the hospital 403B here, which matches up to 4k(in an index fund). As soon as my other 403B is rolled over to Scott trade, about ten working days, and I can invest the funds, about 14k, I plan to put them into one of the Foolish stock plans(I'm confused about what happened in the DOW yesterday) Wife will be opening a 401k in January, with max contribution. And I'm still trying to pay 2X or 3X on the plastic. Now that is the whole picture as it stands today, but damn it Christmas is comming up and we still have all those rugrats in Arizona we haven't seen intwo years...Oh well no one said it would be easy.

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Author: ElSupremo Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14848 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 1:04 PM
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GOOD! Now I get to follow up:

tryestro wrote:
And I'm still trying to pay 2X or 3X on the plastic. Now that is the whole picture as it stands today, but damn it Christmas is comming up and we still have all those rugrats in Arizona we haven't seen intwo years...Oh well no one said it would be easy.

I sympathize with your situation, but most of us have problems similar to these, this however changes nothing if your goal is to recover in time for your retirement. Go back and re-read my response to your first post(10 or 20 times!) That plan or a plan like it is your only path with the time you have left before you retire.

Oh well no one said it would be easy.

Your just not getting it! You have your work cut out for you. It's going to be damn hard! If your really want this, it has to become the #1 goal in your life.
Understand that and you can do it.

I hope you do.

gofsguy wrote:
Elsupremo took me to task. We will agree to disagree. I think you may be able to make more in the market with that money than you save in finance charges. Your call.

gofsguy,
I was not taking you to "task", just trying to make a point. But, now I have to since you've done it again! Lets say for arguments sake that you pay 16% interest on your credit cards(yuck!) Most are around that. Do you think a novice investor is going to run out and make %16 on his investments? NO WAY. Do you think he's going to do that for 15 consecutive years? DOUBLE NO WAY!(sorry) And that's just to break EVEN! I'm sorry but your DEAD WRONG about this. You pay off the credit debt first. PERIOD!

The first rule of FOOLISH investing, pay off the debt.

Cheers,

ES







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Author: Helter Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14849 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 1:21 PM
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Earning 16% in the market vs. saving 16% on the credit cards is NOT breaking even - you PAY TAXES on Gains - you are not taxed on money you SAVE!

Pay off the debt first!

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Author: ElSupremo Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14850 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 1:36 PM
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Helter wrote:
Earning 16% in the market vs. saving 16% on the credit cards is NOT breaking even - you PAY TAXES on Gains - you are not taxed on money you SAVE!

The point is the same, I just didn't feel like writing a book.

Cheers,

ES

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14869 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 5:06 PM
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That investing the extra sounds good when the market is bullish. But what about in a time like this year? Or 1990? Or 1972-74? That 16% credit card interest really gets larger compared to that market loss.

Paying off the credit card interest is like a "guaranteed" return. You have definitely "saved" that 16% where as the market is an uncertain risk for the short term.

Pay the debt off as fast as you can without killing yourself.

Of course the best time to have planted a tree was 20 years ago. However, one planted today in 15 years will still give some nice shade.

JLC

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Author: zgriner Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14871 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 5:14 PM
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Is there any hope of becoming a Fool from the bottom of a pit like this?


We're glad you found TMF. I hope you have taken the time to read through the Fool school, www.fool.com/school, and educate yourself. Please don't get discouraged about starting late. In this case, better late than never works well. Recognizing you have a problem and determining to solve it helps you alot.

TMF recommends you to get rid of your debt before you make added investments, except in the case of a 401k where you have matching employer funds. In your case, decide the maximum you can afford to pay consistently on a monthly basis towards your CC debt and pay this. This will help you budget your monthly expenses.

Regarding your house purchase, you didn't indicate whether you have a 15 or 30 year mortgage. Remember that Social Security won't provide more than 30-40% of your base salary, so you need to make sure can pay that mortgage if you still have it when you retire.

Of course, you can always do the drastic thing and move into a cheaper house.

Zev

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Author: ElSupremo Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14873 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/27/1999 5:49 PM
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JLC's thoughtful reply:
That investing the extra sounds good when the market is bullish. But what about in a time like this year? Or 1990? Or 1972-74?

JLC,
If you noticed my recommendation of VFINX(Vanguards S&P 500 fund) that has returned an average over 10% per year, that's with good and bad years. For the long term investor it's an easy decision. The important point is not so much what you invest in, it's that you consistently invest.

You can't win if you don't play the game.

Cheers,
ES



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Author: Pat609 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14914 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/29/1999 12:05 AM
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Trystero...you ask what you can do to put yourself in a better position for retirement.

If you haven't already done so, may I suggest that you request an estimate of your Social Security benefits. You can do so online at the Social Security Administration website:

https://s3abaca.ssa.gov/pro/batch-pebes/bp-7004home.shtml

They will send you a copy of your lifetime earnings record and an estimate of your future benefits based on the retirement information you give them. It's a good planning tool. I get a new estimate every couple of years so there are no surprises.

Good luck to you.

Pat




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Author: dan2 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14934 of 76418
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/29/1999 12:49 PM
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Hi Trystero,

I don't think you waited too long. Compounded returns tax free are very powerful. Over on the Foolish Workshop Board they discuss very high yielding investment strategies.

One in particular is called PEG, which was originated by Moe Bruin, a contributing writer for the Motley Fool. Using a four stock selection and selecting and rebalancing on a semi annual basis, this strategy has been backtested to 1986.

Since 1986, admittedly a bull market, this method of investing has returned a 47.9% compound annual growth rate.

That means that if you invest $14,000 today and receive the same returns over the next 15 years, you will have $4,961,930. Of course, you probably will not get those returns over the next 15 years.

Suppose the returns on this screen drop by 1/3. That would give a 31.93% rate of return per year. At that rate, in 15 years your $14,000 becomes $893,885. If you continue to put money into your retirement account your accumulated amount will be still higher.

Check out the Foolish Workshop Board. It may be the answer to your worries.

Regards,

Dan

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