Building a Portfolio for Beginners

[David in MN]

Interesting article on 401s...

https://www.yahoo.com/finance/news/5-interesting-statistics-americans-401-124500533.html

The average 401 investor has just 2.7 funds. 49% of all invested in 401s are "target date".

What I take away is that most people just don't want to be bothered. Put the money in regularly and dump it in a target date fund where you don't have to actively manage it. Actually makes sense. Even I tend to do simple broad market funds in the 401. It's just too hard to actively manage something that gets new funding every two weeks. Even very active investors struggle to really make good use of the 401 and prefer to do trading in either an IRA or a plain brokerage where funding can be better controlled.

But still it begs the question to me... I've never liked target date funds. They're too broad, offer little dividend income, and don't necessarily manage risk correctly. When I had a 401 I would do a barbell approach with dividend funds that were safe and boring and then risky funds like (one stands out) Pacific Rim small cap.

I wonder if some basic education would change this behavior.

[Smurf Hunter]

I wonder if some basic education would change this behavior.

Maybe.  Smoking is on the decline, as people gradually accepted it as unhealthy.
But a healthy diet and exercise is still something most Americans struggle to do properly (myself included).

I think education would help a bit, there'd be some small percentage that "wake up" and take an active interest in their investments, but for the majority I think it's just something else for them to put off.

[bigbear]

Interesting article on 401s...

https://www.yahoo.com/finance/news/5-interesting-statistics-americans-401-124500533.html

The average 401 investor has just 2.7 funds. 49% of all invested in 401s are "target date".

What I take away is that most people just don't want to be bothered. Put the money in regularly and dump it in a target date fund where you don't have to actively manage it. Actually makes sense. Even I tend to do simple broad market funds in the 401. It's just too hard to actively manage something that gets new funding every two weeks. Even very active investors struggle to really make good use of the 401 and prefer to do trading in either an IRA or a plain brokerage where funding can be better controlled.

I work for a large mutual fund company that does 401k recordkeeping for businesses.  I also work specifically with auto enrollment.  The 2.7 funds don't surprise me.  And neither does the 49% using a target date fund.  Prior to PPA in 2006, most 'default funds' were something more cash equivalent because companies were afraid to use a broad equity fund or index.  So it was fairly common to see a stable value fund or money market of some sort as the default.  PPA gave companies some legal protection from being sued if they used some type of qualified default investment arrangement (QDIA).  A retirement date fund is considered a QDIA (though a 100% clear definition was never put forth as to what else it covers).  Considering that 90-95% of people don't change any automatic election, I can only imagine that 49% number has been and will continue to be on the rise.

Personally, I'm with you on the target date funds.  But (as you mentioned) they serve a purpose and have a good 'target' audience.  They are better than other generic options. 

My company and our clients spend millions trying to educate employees who are in the 401k plans.  And it barely moves the needle.  A response rate in the 20% is a considered good...  But the best education starts at home and/or early.  And so many of people had financially illiterate parents (like myself), so they feel ill-equipped to train up their children in the home.  The average public high school graduate reads at a 5th grade level and math is in the same boat.  Not sure the answer is there... 

Many of the financial firms have some type of game targeted at children and teens for them to have fun while learning the market.  The technology is there for schools to use, it's just a matter of priorities and engagement.  Even Ramsey has a teen edition of his program that many homeschoolers use. 

[David in MN]

I work for a large mutual fund company that does 401k recordkeeping for businesses.  I also work specifically with auto enrollment.  The 2.7 funds don't surprise me.  And neither does the 49% using a target date fund.  Prior to PPA in 2006, most 'default funds' were something more cash equivalent because companies were afraid to use a broad equity fund or index.  So it was fairly common to see a stable value fund or money market of some sort as the default.  PPA gave companies some legal protection from being sued if they used some type of qualified default investment arrangement (QDIA).  A retirement date fund is considered a QDIA (though a 100% clear definition was never put forth as to what else it covers).  Considering that 90-95% of people don't change any automatic election, I can only imagine that 49% number has been and will continue to be on the rise.

Personally, I'm with you on the target date funds.  But (as you mentioned) they serve a purpose and have a good 'target' audience.  They are better than other generic options. 

My company and our clients spend millions trying to educate employees who are in the 401k plans.  And it barely moves the needle.  A response rate in the 20% is a considered good...  But the best education starts at home and/or early.  And so many of people had financially illiterate parents (like myself), so they feel ill-equipped to train up their children in the home.  The average public high school graduate reads at a 5th grade level and math is in the same boat.  Not sure the answer is there... 

Many of the financial firms have some type of game targeted at children and teens for them to have fun while learning the market.  The technology is there for schools to use, it's just a matter of priorities and engagement.  Even Ramsey has a teen edition of his program that many homeschoolers use.

Ah, so we're cut from the same cloth. Maybe we need to also start posting the funds we like.. Just an idea. But it seems the individual 401 investor needs the most help. Maybe we could provide a little value beyond a target date fund. I need to think. I get nervous about the distinction between education and advice.

[David in MN]

Now I will add that I am more active. I also follow a "dogs of the Dow" strategy where I look for wrongly beaten up companies. Recently, Verizon dropped to $45 per share and I bought like Audrey Hepburn at a little black dress shop. Again, the strategy is to get the best dividend possible from a company in a slump that will likely recover.

VZ cracked $50 today. 11% in a few months isn't bad (ignoring the 5% dividend I get). This strategy isn't foolproof and I do get some wrong but the example I used worked so I at least get to feel good about myself. 

[bigbear]

Ah, so we're cut from the same cloth. Maybe we need to also start posting the funds we like.. Just an idea. But it seems the individual 401 investor needs the most help. Maybe we could provide a little value beyond a target date fund. I need to think. I get nervous about the distinction between education and advice.

I'll take that as a compliment!    I'm not a math whiz though.  Just a project manager who happens to work in the retirement industry.  My mutual fund investments are limited to whatever is in my 401k.  My brokerage accounts only have equities. 

Starting to save, savings rate, lifestyle choices, what city/state you live in, and a few other things have greater impact on the retirement nest egg than what you invest in (for the vast majority of people).

[FreeLancer]

Starting to save, savings rate, lifestyle choices, what city/state you live in, and a few other things have greater impact on the retirement nest egg than what you invest in (for the vast majority of people).

That’s kind of been my suspicion, too, especially the saving early and often part.  Although how much harder is it to grow the nest egg without exposure to the stock market?

[David in MN]

I actually see it as a game of debt. Consider that the average monthly student loan payment is about $250 per month over 10 years. So the kid who graduated late and started work at 25 will make payments like this. Then add in a mortgage, auto loan, credit cards, all of it.

The point is that the earner starts in the hole. He's on the treadmill from the jump. That $250 per month in an IRA for a decade would be the necessary money to begin building real wealth as an investor. But it never materializes.

Not to minimize the fact that some of us are prohibitively taxed and some housing markets allow us to keep the monthly costs low and pay it off quicker. If you play this game right, as you age the costs go down while the salary goes up.

Maybe it's a one-two punch. No debt and managed costs. They kind of end up being the same thing, though.

[FreeLancer]

Debt is an enormous drag that must be eliminated ASAP, by whatever means necessary. For me that meant beater cars and tiny apartments until the student debt was gone.  Still can’t quite shake the beater car thing, though.

[Smurf Hunter]

Debt is an enormous drag that must be eliminated ASAP, by whatever means necessary. For me that meant beater cars and tiny apartments until the student debt was gone.  Still can’t quite shake the beater car thing, though.

"beater" may be relative based on various factors, but consider the Dave Ramsey approach.

I used to work with a dude who was frugal to a fault, but had the beater car thing dialed into a science.

He was rather meticulous and patient with his vehicle selection.  His favorite used car was one that JUST recently had a major service, like new timing belt/pumps/etc after 90K miles.
He noted that the blue book price didn't change whether that major service ($1500+ in many cases) was done.
He also liked Hondas and Toyotas and new what model years had various quirks or problems. This made him a savvy buyer.

So he'd get a $3500 car, drive the crap out of it for 2-3 years and sell it for $2000.  Then bought a $8K car, drove it, sold for $5K, and worked his way up to buying $25K used cars he paid cash for.
Each month he basically put the same amount aside into savings.  I forget if it was $100 or what exactly, but it was modest.

The beautiful thing with the above model, is you can exit the game at any time without much loss.  I wish residential real estate was as predictable.

[FreeLancer]

That’s clever.  I’m too lazy for that, though.  I drive it for 15 years hoping the thing will fall apart or get stolen so I can justify buying a nice car.  Of course, then, the damn things last forever.

[bigbear]

Although how much harder is it to grow the nest egg without exposure to the stock market?

Much harder no doubt.  Even more so considering the currency devaluation...  Investing in the broad equity index does address that concern because it basically keeps up with devaluation/inflation.  But having no assets is worse.  Savings doesn't just have to be stock market investment or brokerage account type stuff.  Those are just more easily tradable and measurable.  Other things (like a new table saw/tool or learned skill) can be just as valuable if used appropriately.  The trap many fall into is telling themselves that it's an 'investment' when it's just an excuse to get a new toy (not that those aren't good!  ).

I actually see it as a game of debt.

Yeah, sort of.  I think some people are lemmings and have bought into something that's not for them because of cultural/family pressure to 'succeed'.  College today is a risk/reward calculation.  But many see it as simply what you do after high school.  And too many people are being told they are 'college material' when they aren't in some way (intelligence, focus, etc...).  I wasn't focused my first 2 years and flunked out.  And I have paid the consequences living like a broke college student far too long (self-imposed responsibility at this point).  Some start college and feel like they have to continue or start paying back their student loans.  That's as much of a trap as anything.  Most people who have college debt have historically been able to turn that into a decent paying job after graduation.  But some having been told they 'college material' aren't hirable for whatever reason.

It seems the job market is bifurcating (to steal someone else's word).  Whether it be through producing overseas, robotics/AI, web-accessed jobs, concentration of workload/industry, or selective HB1 visas...  And college (as good and necessary as it is for some jobs) isn't the complete answer as an across-the-board solution. 

But we can also be so 'Western' focused and lose sight of the fact of how good we have in the US, Canada, Europe...  Even the majority of the poorest financially among us.

[Sailor]

More than 100 million U.S. adults are now living with diabetes or prediabetes, un-freaking believable.  Modern health cares solution to any chronic disease is "you have a deficiency in statins" or insert medication here.    Healthcare REIT's, may be worth looking into.

[Smurf Hunter]

More than 100 million U.S. adults are now living with diabetes or prediabetes, un-freaking believable.  Modern health cares solution to any chronic disease is "you have a deficiency in statins" or insert medication here.    Healthcare REIT's, may be worth looking into.

With so many diabetics (type 2 insulin resistant in particular), a naive outcome would be the price of insulin should be reduced with the expanding market.  Unfortunately the opposite is happening.
Two years ago in March my oldest was diagnosed with type 1 diabetes.  Learning the associated economics of insulin, and test supplies was like discovering the "dark web" or something.

Without violating forum T&C, I can tell you that I've observed the prescription grey market up close.
People with generous medical benefits will sometimes sell or trade their surplus insulin and supplies to those with no or minimal coverage.

With blood glucose monitors, a arrangement exists similar to inkjet printer or cartridge shaving razors.

The new meter costs $20, but each jar of 100 test strips retails for $50. Many diabetics test 10x each day.
That's ~$150 each month just for test strips.

Our insurance coverage is really decent, and we pay $50 for $900 worth of stuff. 

I recently added up the retail cost of all the crap we have to manage this ridiculous chronic disease:
In my fridge alone, we have about $6800 worth of insulin
In our cabinet we have over $2000 in insulin pump hardware, needles, test strips, alcohol pads, constant glucose monitor sensors (bluetooth sensor that subcutaneously inserts into the body), etc.

I could hypothetically fence all that on the grey market and buy a nicer car than what I drive daily.

It is nuts!

[theBINKYhunter]

I do the old car thing as well. My car is an 05 that we bought in 2010. I plan on driving it till the wheels fall off. Our van is a newer 2014 but we were able to pay that loan off after a couple years. I did buy a motorcycle earlier this year for fun but even that was an 05 and it was paid cash.

Now that I live ~4 miles from work and ride my bicycle a couple days a week the miles and use are hardly going on to my other vehicles. I'm hoping the car is rolling in 20 more years (although I will confess I'll readily upgrade the bike if an opportunity presents itself!).

[tipafo]

David in MN, thank you for starting this thread, and to everyone commenting. There is much here to consider, and some basic information and general strategies for investing would be welcome.

First, what is the difference between a 401(k) and an IRA?

I understand that the 401(k) is so named for its place in the regulatory statute that created it, but what is it, how is it structured to generate returns, what rules govern its use?

Likewise for the IRA.

How do they compare in doing what they do, or is the purpose of each different enough that such comparisons are useless?

Should I have both a 401(k) and an IRA? Can I have more than one of each? Can I have more than one of each kind (standard and Roth)?  Should I?

Where do I get them? I have a 401(k) through work, but I don't think that individual tinkering is allowed, even if I wanted to.

Should I get an IRA, continually fund it and the 401(k) and let them be, but then also buy choice stocks individually outside of those investments, just to experiment without disturbing the main game?

How do I choose which stocks, bonds, etc., to buy, without having to take up investment research to the point of writing it off as an expense? Is that even allowed?

How do I begin to wrap my head around taxes on all of this? Is reporting to the IRS automatic with these accounts, or is it all on the investor to keep himself out of the sausage maker?

How soon can some of these investments start kicking back more than it takes to buy in further?  At what point do I stop reinvesting the returns into more stock and take the profit? Are there generic formulas for this? Does it even work like that?

I seem to recall Jack saying once that if you didn't have $30,000 to invest then it was better to save up that 30k than to begin investing at a lesser amount.  Hopefully, I'm misremembering, or confused, because it will take a long time for me to save up that much money to then lay it on the table.

Any thoughts welcome. Thanks.

[David in MN]

David in MN, thank you for starting this thread, and to everyone commenting. There is much here to consider, and some basic information and general strategies for investing would be welcome.

First, what is the difference between a 401(k) and an IRA?

I understand that the 401(k) is so named for its place in the regulatory statute that created it, but what is it, how is it structured to generate returns, what rules govern its use?

Likewise for the IRA.

How do they compare in doing what they do, or is the purpose of each different enough that such comparisons are useless?

Should I have both a 401(k) and an IRA? Can I have more than one of each? Can I have more than one of each kind (standard and Roth)?  Should I?

Where do I get them? I have a 401(k) through work, but I don't think that individual tinkering is allowed, even if I wanted to.

Should I get an IRA, continually fund it and the 401(k) and let them be, but then also buy choice stocks individually outside of those investments, just to experiment without disturbing the main game?

How do I choose which stocks, bonds, etc., to buy, without having to take up investment research to the point of writing it off as an expense? Is that even allowed?

How do I begin to wrap my head around taxes on all of this? Is reporting to the IRS automatic with these accounts, or is it all on the investor to keep himself out of the sausage maker?

How soon can some of these investments start kicking back more than it takes to buy in further?  At what point do I stop reinvesting the returns into more stock and take the profit? Are there generic formulas for this? Does it even work like that?

I seem to recall Jack saying once that if you didn't have $30,000 to invest then it was better to save up that 30k than to begin investing at a lesser amount.  Hopefully, I'm misremembering, or confused, because it will take a long time for me to save up that much money to then lay it on the table.

Any thoughts welcome. Thanks.

Wow, lots to unpack. I'm going to go VERY topline so more detail is going to be needed somewhere.

IRA/401. You get 401 through employer. IRA is yours privately. Rules that govern 401s are set up by employer (what funds you have access to) and IRAs are a free for all.

They both do the same thing as in they create a tax advantaged savings account.

What you have depends on your situation. If your employer doesn't match funds the 401 is probably a waste. If it does, you likely want the match. Most people select Roths over traditionals because the money paid in can be taken out without penalty.

You can do individual stocks in an IRA. Again, your 401 is limited to employer's options (why they only make sense for a match).

To give you an idea of "how do I do this?" My 401 is checked quarterly, the IRAs (I have both) monthly, and my trading portfolio daily. That means the 401 is the least risky and the trading portfolio is the most. I structure it this way to make life easier. *Most* active traders do a similar structure.

As far as what to buy and sell and when, that's up to you. On this thread a few examples have been used but only as examples. No one has a crystal ball and the big winner next quarter might be something none of us see coming.

Taxes are pretty easy in a 401 or IRA. If you start trading individual stocks in a brokerage you will suffer a little. But the software has gotten better and it is manageable. When I do my taxes and they involve investing in multiple brokerages, Bitcoin transactions, a pass-through LLC, and such it does become a nightmare (that actually looks like it will be worse soon  ). For an IRA you shouldn't worry.

Brief anwers but I hope they get the ball rolling. Bear in mind there are specific examples that contradict the "general wisdom". You can find a lot of info online about starting an IRA.

[Jack Crabb]

Another 401k vs. IRA difference is the contribution limits.

For 2018, 401k allows $18,500/yr (+$6,000 if over age 50 yr.).

IRA is $5,500/yr (+$1,000 if over age 50 yr.).

[FreeLancer]

I’ve got a solo 401k, available to self-employed individuals with no employees, that allows me to contribute the $18k on the employee end plus an additional employer contribution, up to a combined $54k maximum.  It’s a side hustle business so I don’t earn enough to put away more than about $24k.

[Smurf Hunter]

In my adult life I've had 5-6 full time employers, each with a 401K.  As I've moved on to other career opportunities, those respective 401K balances have got rolled into my IRA.
I've personally never contributed directly into my IRA, but I could.

My present employer has a decent 401K match.  I contribute that and a bit more just for convenience.
It wouldn't be difficult for me to automatically contribute 1-5% of each paycheck into my IRA brokerage account.  Maybe I should start that in 2018 and not contribute past the match.

For arguments sake, if I have $100 (post match amount) each paycheck that I can buy some Vanguard fund in my 401K, or some equity in an IRA - does that make enough of a difference?

[Smurf Hunter]

I just read this:

IRA vs. 401k
To quash one common myth, you don't have to choose between an IRA and a 401k; you can have both. If you do have the option of a 401k at work, you lose the tax deduction benefits of an IRA once your income exceeds $70,000 ($116,000 if you're married filing jointly).

So if I want the pre-tax benefit and make above that amount, I cannot contribute to my IRA.  I feel silly I did not know this.

[bigbear]

What you have depends on your situation. If your employer doesn't match funds the 401 is probably a waste. If it does, you likely want the match. Most people select Roths over traditionals because the money paid in can be taken out without penalty.

Roth EARNINGS are subject to taxes and early withdrawal penalties.  Assuming the investment options are ones you would like to be in otherwise, your 401k will probably have access to lower fee structures than the normal retail funds.  Many times though with smaller companies, the funds aren't very good and the fee savings either aren't there or aren't worth it.  Many 401k plans don't offer Roth, but the adoption rate seems to be growing.

Maybe I should start that in 2018 and not contribute past the match.

For arguments sake, if I have $100 (post match amount) each paycheck that I can buy some Vanguard fund in my 401K, or some equity in an IRA - does that make enough of a difference?

I would for two main reasons:  1) accessibility and 2) more investment options (and commonly better options). 

Contribute enough to get the match. 
Contribute to a Roth IRA. 
If/when you reach the limit (or don't get the benefit), defer more to the 401k.

Granted all of this is in a bubble.  There are a gazillion other things to do with your money...

Can I have more than one of each kind (standard and Roth)?  Should I?

Where do I get them? I have a 401(k) through work, but I don't think that individual tinkering is allowed, even if I wanted to.

Should I get an IRA, continually fund it and the 401(k) and let them be, but then also buy choice stocks individually outside of those investments, just to experiment without disturbing the main game?

How do I choose which stocks, bonds, etc., to buy, without having to take up investment research to the point of writing it off as an expense? Is that even allowed?

How do I begin to wrap my head around taxes on all of this? Is reporting to the IRS automatic with these accounts, or is it all on the investor to keep himself out of the sausage maker?

How soon can some of these investments start kicking back more than it takes to buy in further?  At what point do I stop reinvesting the returns into more stock and take the profit? Are there generic formulas for this? Does it even work like that?

I seem to recall Jack saying once that if you didn't have $30,000 to invest then it was better to save up that 30k than to begin investing at a lesser amount. 

Yes you can have more than one account and more than one tax structure.  Most people (even more on boards like this) think that taxes will go up, either as your income bracket goes up with age or as the gov't wets the bed.  So younger people tend to use Roth more. 

Some 401k plans have a brokerage window where you can invest in most equities, bonds, and mutual funds.  Most only have between 10-20 funds to choose from. 

You can open an IRA at pretty much any financial institution.  From you bank or credit union (typically in CD's) to the huge banks and mutual fund companies.  For an IRA, I'd recommend an online broker.

http://scottrade.com/  - I use this one.
https://www.tdameritrade.com/home.page
https://client.schwab.com/Login/SignOn/CustomerCenterLogin.aspx?ErrorCode=ErrorEmptyLoginIdPwd
https://us.etrade.com/what-we-offer/our-accounts/?sr_id=BR&mp_id=41378076217&ch_id=p

Investing isn't a get rich quick scheme.  If you don't understand what you're buying, you're probably better off letting 'experts' do it.  Meaning choosing a mutual fund.  Or like David mentioned, rip off the experts knowledge by seeing what they hold in the top 10 holdings.  The top 10 holdings in a mutual fund are public information (you can find them on Yahoo Finance).  It's best to put the time in to learn a bit before tossing your money on the table.

A few years ago the IRS made some type of change that required brokers to report the tax basis, gains/losses, etc.  So taxes are much easier.  I will say that, if you have a taxable event (sale, divs...) you won't be able to use the free software though.  You'll need to upgraded TurboTax (or whatever).

How long it takes is the Magic 8 ball question.  Depends on your goals, cost of living, etc.  Some people use the dividends earlier than retirement to supplement their income. 

A good rule of thumb for dividend income (assume a 7% yield) is about $1,000/month for every $250,000 balance.  So if you want a $4k/month you need a $1 million balance. 

Personally, I would start with less than $30k.  And did.  I didn't hear the episode you're talking about, but I would assume it has to do with diversifying your risk.  $5k in 6 different industries/types of investments.  But at that point you're getting into modern portfolio theory with the goal of reducing risk with the same reward.

[David in MN]

I listened to the show about not bothering with less than $30k. The logic goes like this... Let's say you invest $5k and keep up fairly often (this is active investing) and do pretty good, say 10% return you've put a lot of effort into earnign $500. Could have done that easier with a side hustle in 2 weekends.

I was a little miffed by this concept. True you could do a side hustle that would yield more (I advocate doing one anyway) but it comes with a cost. I started in my early 20s with $2500 which wouldn't hurt to lose. And I made all my mistakes early on when it cost very little. If I gave myself my trading portfolio today with no experience I would shit my pants. It would be like moving from an apartment to a 200 acre farm with no experience.

Make mistakes early when they cost little. Right now I can look at hundreds of stocks and pretty quickly determine which fit my strategies and whether I'm interested. You get comfortable targeting bottoms or tops and you learn to ride the tide a little. And looking back there is some beginner's luck.

[Smurf Hunter]

Today this thread may have had it's best content bang-for-buck since it started. Thanks all who've shared guidance.

I just created a RothIRA account at TDAmeritrade where I have my traditional IRA and retail accounts.
One thing I just noticed are internal transfers. But not just cash, but the shares in equities.

Ignoring the traditional IRA for a moment, I can transfer N shares of some stock from my brokerage account into my Roth IRA.  That's kind of cool. 
Maybe you gurus do this all the time, and my excitement is unwarranted.

Starting in January I think I'll reduce my 401K contribution, and put the difference of that proverbial "10%" into the Roth each paycheck.
Thanks again.

[David in MN]

Today this thread may have had it's best content bang-for-buck since it started. Thanks all who've shared guidance.

I just created a RothIRA account at TDAmeritrade where I have my traditional IRA and retail accounts.
One thing I just noticed are internal transfers. But not just cash, but the shares in equities.

Ignoring the traditional IRA for a moment, I can transfer N shares of some stock from my brokerage account into my Roth IRA.  That's kind of cool. 
Maybe you gurus do this all the time, and my excitement is unwarranted.

Starting in January I think I'll reduce my 401K contribution, and put the difference of that proverbial "10%" into the Roth each paycheck.
Thanks again.

 

Nothing makes me happier than seeing someone find a better solution. It's a mess to start but once you know what to look for the best choices bubble up.

All thanks go to Freelancer. Had he not pushed me to start explaining how I think in realistic terms it never would have started. Of course I'm not the only finance guy around (and probably not the best) but it's easy to forget that when you are specialized you speak a foreign language.

I like how this thread weaves different forms (it started as building a brokerage portfolio) but it's been fun to double back a couple times and talk about funds and different options. I've re-examined my allocations and I have found as much value here as a trip to either my financial planner or my tax attorney.

I hope this one goes long, there are many (myself included) who will gain.

[FreeLancer]

 Yay!  Learning’s what it’s all about.

[xxdabroxx]

I have an IRA (they called it a simple IRA) from a previous employer that I haven't done anything with in a long time.  It has about 18k in it currently and was doing pretty good this year from what I remember of the last statement they sent me.  This was run through a local investment group, can I roll this over into something else or to a different company?  I kinda hate to mess with it because I think it grew almost 3k this year if I read the statement correctly.  I'm completely uneducated when it comes to investing. 

I also just started a 457 at work but I did half Roth and half traditional (I'm 32), think I should go all roth instead of splitting it up?  I was thinking the traditional would help allow me to invest more without seeing so much hit on my paychecks but that may be short sighted in that investing less in a Roth may equal more in the long run. 

FWIW, I also started working at a state facility this year and will get a retirement from that if I stay here long enough. 

[Smurf Hunter]

I have an IRA (they called it a simple IRA) from a previous employer that I haven't done anything with in a long time.  It has about 18k in it currently and was doing pretty good this year from what I remember of the last statement they sent me.  This was run through a local investment group, can I roll this over into something else or to a different company?  I kinda hate to mess with it because I think it grew almost 3k this year if I read the statement correctly.  I'm completely uneducated when it comes to investing. 

I also just started a 457 at work but I did half Roth and half traditional (I'm 32), think I should go all roth instead of splitting it up?  I was thinking the traditional would help allow me to invest more without seeing so much hit on my paychecks but that may be short sighted in that investing less in a Roth may equal more in the long run. 

FWIW, I also started working at a state facility this year and will get a retirement from that if I stay here long enough.

I'm not investment or tax professional, so this is just my Homer Simpson opinion...

Avoid withdrawing from a pre-tax account.  Massive penalties and taxes await.  Unless your child needs a kidney, leave your 401K and traditional IRA alone.
When you leave a company, you can of course roll-over a 401K, either into a new 401K or a traditional IRA.

1) If an employer match is available, frankly you're a fool to not advantage.
2) Next I'd max your pre-tax contributions.
3) If you have more after that, Roth IRA.

There is some debate on the order of 2 and 3.
I'm not an expert, and am ill-prepared to vehemently defend my position. I've done some casual research and that approach meets my needs for the time.

[FreeLancer]

I haven't figured out how to best allocate traditional vs Roth contributions, but I usually come down on the side of taking the tax break now, rather than trying to predict what my taxes will be like in 30 years.

At past employer I contributed about a third into the Roth portion and put the rest in the traditional side of the 401k.  Honestly, the reason why I did it was because my wife and I were only able to contribute into a Roth for a couple years after they first came out before we hit the income limits, so putting some into the Roth at work allowed me to roll those over into a Roth IRA when I left that employer.  In my current solo 401k I'm putting it all into traditional because my tax rate is high right now and I need to maximize my deductions.  Same with my wife's 403b plan, she maxes out her contributions and it all goes into the traditional.

[David in MN]

I'm a little odd here. I pay the taxes now. I know it's wrong mathematically but I can take the hit of a few points now without feeling pain (it's not that big if you understand what marginal rates mean). What I fear is a change to the tax code to really soak those of us who retire with a solid base. And we both feel retirement means no more math.

I like the Roth the best. Obviously a 401 match has to be maxed but after that the Roth seems to offer the best leverage. Since it's the only one that lets you withdraw the original investment without penalty you can use a Roth to pay off the house quicker or a vehicle to finance a new business. Risky, I know. But at least the opportunity is there.

I guess I could sum it up in a philosophy. I pay now knowing I can to avoid future uncertainty and I keep as much available to me as possible.