Don’t Max Out Your 401k Annually

These days, every time I read a blog or some online article where people simply preach about 401k or are celebrating their annual max out of 401k contribution, I… just chuckle. That’s me being polite.


People, please stop blindly echoing and following each other. Do some studying, learning, thinking for yourself. There are certain things you need to consider, keep reading.

First thing first, if your company provides 50% or 100% matching of certain amount or percentage of your contribution, by all means, take advantage of it. Beyond that, perhaps you should re-consider the benefits and the (over)hype of 401k.

Now, pay attention to the points below. For each, take a minute and pause and see if it makes sense. Don’t just take my words for it.

  • The MAJOR premise of using [traditional] 401k is for the delay of income tax so that more of our money can grow until we withdraw. However, at the rate our national debt is going, do you think a bet on having low income tax rate in the future is a smart bet? Especially when income tax rate for low to medium income households are very low currently.
    Update 03/24/2012: A counter to this point would be to use Roth 401k if that’s available in your plan
  • Following previous point, withdrawal from 401k account is taxed at income tax rate, versus, withdrawal from taxable account and only its gain is taxed at capital gain tax rate. If government must raise taxes, which is likely to be increased more? Which is likely to be lower in the future? Seeing the trend of the United States government, the answer is that income tax rate will likely increase more while capital gain tax rate remains lower.

    “But 401k grows with pre-tax money, blah blah blah…” Yes I know. But with 401k, we are trying to plan for a future that is VERY far down the road, and therefore, we should make a more conservative plan. I would rather bet on the a taxable account outside because there is less variables, meaning, I know the taxed principal will be there (I should have a good percetage back to “cash” near “old age”). Better to overestimate than underestimate.

  • Depends on the 401k account management, the chance for shady, kick-back, and “hidden” fees is not negligible.
  • Many 401k accounts do not provide “good” selection of funds.
  • A common argument for 401k is that it’s forced-saving. BUT! Generically speaking, if you need you money to be locked up in order to save, there is a bigger situation about yourself that you need to confront and handle. Namely, responsibility, discipline, foresight…
  • The population is aging. More people are retiring than people joining the workforce. That means likelihood of more people selling (whatever that’s left in the account) stocks and bonds in the 401k than people buying in. This adds more downward pressure against future stock growth. Plus, we have to be cautious with our belief in future growth in general.
  • Lastly, we don’t live forever and can very well die before 60s. I am not sure about locking up all that money, that I cannot access and use without penalty except for some very “dire siutations” (ahem, hardship withdrawal…). There can be good argument against this, but I still think there is value in this thought. Mainly, we are not immortal. Stop living and behaving like we are.

So now you have my skepticism with 401k. Again, if there is matching from your company, get it. That’s “free” money. Otherwise, it would be a good idea to spread things out some in taxable accounts than having full belief and your $$$ in the 401k basket. It’s not that difficult… just following the same allocation in both places. You do have some ideas of your portfolio allocation, right?

Meanwhile, I contribute to my company’s matching. Maxing out my 401k yearly? I’ll pass.

Update: Thanks Meg for pointing out my confusing comments with Roth IRA which is corrected. It is my own decision not to. If interested why I don’t, read comment.

Originally posted 2012-03-24 23:33:23. Republished by Blog Post Promoter

The Angering Facts from Japan’s Nuclear Problem

Update on 2011/04/04: Japan seeks Russian help to end nuclear crisis (Reuters). What do you know? It seems I was quite accurate after all…

I had taken some time away to let myself marinate in a lot of thoughts and feelings that I have for awhile, and also because a project in my job is sucking the life out of me. However, there is something about what is going on underneath the surface of the Japan nuclear problem that disturbs me so much that I feel like I have to write.

If you hadn’t been watching the news, basically the nuclear problem in Japan has been worsening since day 1 and how it will completely unfold remains unseen.

These seem to be where we stand right now globally regarding this:

  • Some countries had sent some units to help with the rescue. (token humanitarian effort? — no insult to the people who actually went to help. I have utmost admiration and respect for them.)
  • All countries with residents in Japan are telling them to flee.
  • United States media is taking the opportunities to report as much as possible and hopefully get better ratings (euphemism)
  • The nuclear panic had led to a hoarding of salt and some other every commodities in China
  • The nuclear panic had led to a hoarding of potassium iodide pills in the United States

Here is where Japan stands:

  • some 50180 plant workers heroically (and I do mean heroically) stayed behind to work on the different reactors… (but think about how many people are needed to deal with an exploded pipeline on the street? while there are 4 nuclear reactors malfunctioning…)
  • They are now down to dropping water from helicopters to try to cool and prevent a nuclear meltdown.

Do you have any idea what that implies? That implies, if not for certain, that Japan is down to its last trick to try to stop things from getting worse. They may have the will but they are at the limit of their abilities. They are at their wits’ end. The question we may ask, “How’s that related to me?”

Maybe you’ll answer “crap, we’ll have a gigantic nuclear disaster”. It is a minor-partially correct answer because the true correct is that we will have another world economic problem in our hands. This deal is sealed the day people decided “globalization” is the next greatest thing.

With a nuclear disaster on who-know-what-scale, Japan economy is shot, companies with bases in Japan are hampered, all global resources(food, energy…) will need to be further divided, and who know what other consequences.

I am not saying it will or has to happen, but with this pending problem… instead of addressing this real problem, which also includes risking of thousands, if not millions of lives, the mighty nations of our globe and leaders of big nations decide this is what they will do…

finance ministers from the Group of Seven nations announced a coordinated intervention in the currency market to prevent the yen from rising further

Despair, anger, frustration, speechlessness, darkness… are a few adjectives that describe how that makes me feel. These global power instead of sending specialized units that deal with nuclear contamination (they have to have these units, especially countries with nuclear weapons…) to help prevent and mitigate the real nuclear problem, they decide… “oh, let’s just make sure to keep the money flowing. Money is what matters, and that is above the significance of humanity… we’ll get to the saving human life part later [and only perhaps… if there’s something we can call we save…]”.

Is it me or this is f#@$-ing retarded? When it is time for global population to do right, this is what we have?

Solving the real problem not only will keep the money flowing down the road (because Japan will rebuild herself and probably into something better than before) but will also save lives… and lives that had yet been born…

The only hope is that, what is said here is ALL wrong and things do not actually worsen because otherwise, we will have some very horrible situations in our hands due to some very very terrible man-made errors that will make the earthquake and tsunami pale in comparison.

Speaking in a different context, the decisions that are being made by people world-wide throughout this situation had already demonstrate a very narrow narrow model of thinking prevalent in our human culture (because observe what most people are ONLY concern about…). How little we truly, genuinely care about each other… The path this current human culture is taking is not good, but this should be the subject for another day.

People who know what these last few words mean will already know what they mean.
People who don’t know what they mean, well, feel free to email me and with questions and I’ll be happy speak and respond and have a conversations.

Originally posted 2011-03-17 18:51:28. Republished by Blog Post Promoter

Dilbert’s 9 Points on What You Need to Know About Personal Investing

I’m surprised I’ve never seen this article mentioned in any of the PF blogs out there. It’s the exact same thing that everyone always talk about in the PF blogsphere. Kudos to Scott Adams.

  1. Make a will
  2. Pay off your credit cards
  3. Get term life insurance if you have a family to support
  4. Fund your 401k to the maximum
  5. Fund your IRA to the maximum
  6. Buy a house if you want to live in a house and can afford it
  7. Put six months worth of expenses in a money-market account
  8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
  9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

Everything except point 8 to the last is a common theme echoing what most PF bloggers emphasize out there, with point 8 being argued that you should tweak the percentage of your portfolio in stocks and bonds as you approach your planned retirement age. Notice he promotes the use of index fund too. Good stuff.

Originally posted 2007-12-05 18:39:35. Republished by Blog Post Promoter

Proper Posture for Health

I talked about learning “better” breathing before. Closely relating to that, posture is almost equally important for our daily lives and health. Actually, getting the breathing down will depend on having better posture. Several factors together prompted me and helped me to fix my own postures: back pain from sitting in office (major), gym’ing, playing piano, and singing. Not only will better postures improve our health and make us feel better in general, with better posture, there will certainly be improvement in all activities/exercise.

By no means am I an health expert, but here are some pointers that I follow personally and have great results:

  • Spread and relax the shoulders so they’re slightly angle downward
  • Arms on the side of the body
  • Straighten up the neck and tuck the chin in, so the head does not stick forward
  • Push the sternum outward slightly so the rib cage is opened

These last 4 will help you not to slouch.

  • Don’t lock the knees while standing
  • Spreading your legs to shoulder width apart while standing
  • Feet pointed forward, not diagonally. To allow the hips to relax and consequently, the spine also
  • While sitting at a desk or in front of computer, maintain a straight back do not lean your body forward or backward
  • Relax muscles around the buttocks when sitting
  • Balance the weight of the body more towards the balls of the feet instead of the heels

These last 6 steps will help to reduce the strain on th back tremendously.

  • Finally, together with everything, try to feel and monitor the body so you know when your body is tense and try to relax. Deep breathing will help to do that. Drinking more water will also help.

Those are the things I do, and I am noticing how it has helped me in everything. It’s the fundamental in all the things we do, be it piano, dancing, working out, singing, basketball. Fix and improve your posture, then keep it consistently to live a better life :)

Originally posted 2007-04-16 22:05:43. Republished by Blog Post Promoter

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