Chocolate Lover
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Post by Chocolate Lover on Jan 10, 2017 16:47:12 GMT -5
I think that for someone trying to survive on minimum wage, especially not full time, saving for everyday emergencies is much more important than saving for retirement. Everyday emergencies take a large chunk of a poor person's income. Old cars tend to have more big repairs. And things like medical copays and parking tickets aren't adjusted for income. A parking ticket can easily snowball into a lost car, a lost job and an eviction if you aren't able to fork over a week's pay on the spot. Saving for a move to someplace with more opportunity or some kind of career training would be a close second. I read an article a while back that claimed that in one of the Scandanavian countries (I believe it was Finland but I am not sure) all traffic tickets were linked to income. The thought behind it was that the "pain" for bteaking the law should be similar for everyone. It made some sense to me, but I can just hear the howling over here if that idea were ever even just discussed Was it the one about the guy who paid some enormous amount of money for a speeding ticket because it was tied to an income percentage? I vaguely remember reading something like that.
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NastyWoman
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Post by NastyWoman on Jan 10, 2017 16:55:13 GMT -5
I read an article a while back that claimed that in one of the Scandanavian countries (I believe it was Finland but I am not sure) all traffic tickets were linked to income. The thought behind it was that the "pain" for bteaking the law should be similar for everyone. It made some sense to me, but I can just hear the howling over here if that idea were ever even just discussed Was it the one about the guy who paid some enormous amount of money for a speeding ticket because it was tied to an income percentage? I vaguely remember reading something like that. Yes that was it but I am too lazy to do the research and find a link. At least I was not the only one who remembered it though The thing that I liked about it was that it forced all people to think about what they are doing in traffic. A $1,000 ticket for speeding would be a big OUCH for me now, but if I earned 10X what I do now --- maybe not so much. Yet the danger I put others in would not be diminished just because I had the income to easily cover the fines...
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movingforward
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Post by movingforward on Jan 10, 2017 16:56:42 GMT -5
Most people have no clue how the computer has impacted things and when it started. We were very early adapters by having a computer in about 1996. Even in our very high end neighborhood (President of MSFT lived down the block) I would guess that less than half the homes had a personal computer. I dont think computers really hit the home till about 1999 to 2004 or later for most people. They were crude and unreliable. There was no Google. The search engine of choice was Alta Vista. It was not till after 2000 that average people started to be able to do their investing by computer. How quickly people forget. I remember guys going in to Merrill Lynch at lunch in the early 1980's to check the stock ticker that scrolled in the reception area. As late as 1996 to 1999, I was doing telephone orders when momentum trading by using the phone key pad, punching in the symbol, and using the key pad on the phone to enter my account, prompt buy and sell, etc. COME ON....Google was not even started till the end of 1998. We had computers in my house in the 1980's, computers plural. If you were just getting a computer in your house in 1996, you were a late adapter, not an early adapter. I can remember getting a TI computer in the early 1980's, it had BASIC loaded, and used cartridges for data storage. I graduated high school in 1991. None of my friends had computers. In college (1991 - 1995), I only had one friend who owned a computer. I had a word processor thing that was essentially a typewriter that showed the words per line on a tiny screen and when you hit return it typed out that line. This at least gave you the opportunity to read the sentence and make changes before it went into print. We had a computer lab on campus and it was full every night. I entered graduate school in 1998 and still had no computer; though I did know people by then who had them. I continued to use the computer lab and by the crowd in there, I am assuming a lot of other people didn't own a computer either. My parents purchased their first computer in 1999. I actually did not purchase a personal computer until 2008 .
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Tiny
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Post by Tiny on Jan 10, 2017 18:30:46 GMT -5
No one works for minimum wage their whole lives unless they have a serious problem. My kids first jobs paid over minimum wage for petes sake. Noted. The point is, even if all you ever made was minimum wage,or all you ever saved was minimum wage, you can still retire wealthy. I'm not sure if having 130K in investments and retiring today would make you exactly wealthy.... I think the average SS payment is about $1600 which is under 20K a year and you will need your 130K to last at least 20 years... definitely not awful and probably doable -- but not sure if it would qualify as "wealthy"
FWIW: I do firmly believe that saving something from every paycheck (even if it's $10 a month) will eventually be more beneficial than NOT saving at all. I also firmly believe that when you are starting out having a budget/spending plan that spans more than the next paycheck and attempting to stick to it (and revise it and to keep working at it) also is more beneficial than not having a budget/spending plan. Without a 'plan' which forces you to look into the future and to acknowledge where your money is going - your future is literally at the mercy of your next whim (spending money you shouldn't be spending).
Another interesting idea about living a life time in a low paying job would be the idea of "basic gaurenteed income" - where everyone? would get a fixed amount every month from the government... and then it's up to them to fill in any gaps with whatever other income they can get. If you don't aspire to a glamourous lifestyle and have some sort of work that you enjoy (that doesn't pay much long term) I imagine it could work rather well.
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beergut
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Post by beergut on Jan 11, 2017 3:26:21 GMT -5
Noted. The point is, even if all you ever made was minimum wage,or all you ever saved was minimum wage, you can still retire wealthy. I'm not sure if having 130K in investments and retiring today would make you exactly wealthy.... I think the average SS payment is about $1600 which is under 20K a year and you will need your 130K to last at least 20 years... definitely not awful and probably doable -- but not sure if it would qualify as "wealthy"
FWIW: I do firmly believe that saving something from every paycheck (even if it's $10 a month) will eventually be more beneficial than NOT saving at all. I also firmly believe that when you are starting out having a budget/spending plan that spans more than the next paycheck and attempting to stick to it (and revise it and to keep working at it) also is more beneficial than not having a budget/spending plan. Without a 'plan' which forces you to look into the future and to acknowledge where your money is going - your future is literally at the mercy of your next whim (spending money you shouldn't be spending).
Another interesting idea about living a life time in a low paying job would be the idea of "basic gaurenteed income" - where everyone? would get a fixed amount every month from the government... and then it's up to them to fill in any gaps with whatever other income they can get. If you don't aspire to a glamourous lifestyle and have some sort of work that you enjoy (that doesn't pay much long term) I imagine it could work rather well.
I once looked up a definition for 'wealthy' online, and it said if you had over $100k in investments outside your home, you are wealthy. Going by that definition, a person who saved and invested and had $130k is wealthy. I think someone who has $435k invested for retirement meets that criteria. Going by the definition of "you can afford your current lifestyle for the rest of your life without working to supplement your income", it is not wealthy.
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Deleted
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Post by Deleted on Jan 11, 2017 8:44:48 GMT -5
Noted. The point is, even if all you ever made was minimum wage,or all you ever saved was minimum wage, you can still retire wealthy. I'm not sure if having 130K in investments and retiring today would make you exactly wealthy.... I think the average SS payment is about $1600 which is under 20K a year and you will need your 130K to last at least 20 years... definitely not awful and probably doable -- but not sure if it would qualify as "wealthy"
FWIW: I do firmly believe that saving something from every paycheck (even if it's $10 a month) will eventually be more beneficial than NOT saving at all. I also firmly believe that when you are starting out having a budget/spending plan that spans more than the next paycheck and attempting to stick to it (and revise it and to keep working at it) also is more beneficial than not having a budget/spending plan. Without a 'plan' which forces you to look into the future and to acknowledge where your money is going - your future is literally at the mercy of your next whim (spending money you shouldn't be spending).
Another interesting idea about living a life time in a low paying job would be the idea of "basic guaranteed income" - where everyone? would get a fixed amount every month from the government... and then it's up to them to fill in any gaps with whatever other income they can get. If you don't aspire to a glamourous lifestyle and have some sort of work that you enjoy (that doesn't pay much long term) I imagine it could work rather well.
A few observations on this: Years ago our paper had a personal finance columnist. Someone wrote to him and asked that he be realistic and, instead of giving advice to people with half a million saved for retirement, provide advice to those "who would feel blessed to retire with $50,000 or $100,000". The columnist's advice: "Keep working". I'm 2.5 years into retirement and there's a lot of "stuff happens". Expenses of downsizing. Replace furnace. Replace A/C. This year I owe a boatload of taxes. Future "oh, crap" events will include replacing a car, maybe needing a dental implant or two, or blowing through my medical deductible. I can't tell you what or when but they'll happen. It would be very easy for that $130K to erode over the years, especially if you make the mistake many new retirees make and blow a lot on travel and hobbies early on. Guaranteed minimum income- isn't that what SS is? OK, there's no minimum benefit AFAIK, but the idea was to provide enough for basic needs (with a formula weighted to give lower wage earners a bigger % of their previous average wages). It was always intended that personal savings would supplement that. On traffic fines tied to income: I know that Switzerland does that. I also worked for a sub of Prudential years ago that had a higher medical deductible for lower-income workers. I had the higher deductible (I think it was $1,000 in the 1990s) and it made sense to me. Not perfect, of course since you could be a low wage earner with a spouse who made a lot of money working elsewhere, but it was a start.
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tskeeter
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Post by tskeeter on Jan 11, 2017 16:28:17 GMT -5
"From each according to his ability, to each according to his needs." As the Soviet Union learned, the "from each according to his ability" is a nice sounding idea that doesn't work. Outside the theoretical world, this concept becomes "from each according to his willingness to provide". And, in the absence of individual rewards for effort and performance, the collective need exceeds the collective willingness to provide. That's why socialism doesn't work over the long term.
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dannylion
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Post by dannylion on Jan 11, 2017 18:04:18 GMT -5
"From each according to his ability, to each according to his needs." As the Soviet Union learned, the "from each according to his ability" is a nice sounding idea that doesn't work. Outside the theoretical world, this concept becomes "from each according to his willingness to provide". And, in the absence of individual rewards for effort and performance, the collective need exceeds the collective willingness to provide. That's why socialism doesn't work over the long term. Yeah, in the FSU, that lofty goal turned into "We pretend to work, and they pretend to pay us."
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Tiny
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Post by Tiny on Jan 11, 2017 18:08:19 GMT -5
The "from each according to his ability, to each according to his needs" probably works pretty well for small groups over the long term. So, if it's applied to the extended family group OR perhaps a mostly isolated group of families eeking out a living (lets say up to 500 people to give the "size" of the group some sort of reference) it works moderately well. It most certainly doesn't work for large groups of people.
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zibazinski
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Post by zibazinski on Jan 11, 2017 18:29:28 GMT -5
It has been for generations now so who says it doesn't work. We don't let people starve who refuse to work.
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tskeeter
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Post by tskeeter on Jan 11, 2017 18:36:32 GMT -5
The "from each according to his ability, to each according to his needs" probably works pretty well for small groups over the long term. So, if it's applied to the extended family group OR perhaps a mostly isolated group of families eeking out a living (lets say up to 500 people to give the "size" of the group some sort of reference) it works moderately well. It most certainly doesn't work for large groups of people. I'd challenge the success of this concept even in family groups. Most families get to a point where they will not continue to provide for the needs of those who are capable, but refuse to provide for their own needs. Instead, relying on the family to support them. When non-contributors are cut off by their family, they often move on to mooching from well meaning friends and acquaintances. When those resources are exhausted, the group of people and organizations they put the touch on expands further. There are a surprisingly large number of people who consider being a professional social burden as a viable lifestyle choice. Some marginal social burdens will respond to peer pressure when encouraged to do for themselves. Others move on to a different group of resources.
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haapai
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Post by haapai on Jan 11, 2017 21:30:31 GMT -5
Although 401(k) plans now allow folks with pretty puny incomes to set aside painfully small amounts with every paycheck, it occurs to me that someone who expects to earn about an inflation-adjusted $15K a year might be better served by investing in a Roth IRA and that accumulating the seed money for a Roth IRA that earns a decent return after fees is kinda tricky. In order to get one of these things started, a low-income worker who doesn't have savings or windfalls would pretty much have to start by funding a 401(k) for several years and then really have their ducks in a row when they changed jobs and were able to roll the 401(k) into a traditional IRA and then a Roth IRA.
But if such a worker ever managed to get a feeless Roth started, and were able to contribute to it in small amounts on a monthly basis, they might be cooking with gas.
At an AGI of $15K a year, contributions to a traditional IRA or 401(k) account that reduce your AGI even further don't get you very far. They may reduce your state income taxes by an amount that seems quite significant, but they really don't affect the federal income taxes of someone filing single without dependents by very much. If you doubt me, please study the earned income credit for persons without dependents and the (non-refundable) saver's tax credit.
The ability to withdraw contributions from a sufficiently aged Roth IRA without penalty is huge and really lights a fire under a person's desire to save until it hurts but it's a hard thing to get set up.
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Deleted
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Post by Deleted on Jan 11, 2017 21:41:47 GMT -5
Although 401(k) plans now allow folks with pretty puny incomes to set aside painfully small amounts with every paycheck, it occurs to me that someone who expects to earn about an inflation-adjusted $15K a year might be better served by investing in a Roth IRA and that accumulating the seed money for a Roth IRA that earns a decent return after fees is kinda tricky. In order to get one of these things started, a low-income worker who doesn't have savings or windfalls would pretty much have to start by funding a 401(k) for several years and then really have their ducks in a row when they changed jobs and were able to roll the 401(k) into a traditional IRA and then a Roth IRA. But if such a worker ever managed to get a feeless Roth started, and were able to contribute to it in small amounts on a monthly basis, they might be cooking with gas. At an AGI of $15K a year, contributions to a traditional IRA or 401(k) account that reduce your AGI even further don't get you very far. They may reduce your state income taxes by an amount that seems quite significant, but they really don't affect the federal income taxes of someone filing single without dependents by very much. If you doubt me, please study the earned income credit for persons without dependents and the (non-refundable) saver's tax credit. The ability to withdraw contributions from a sufficiently aged Roth IRA without penalty is huge and really lights a fire under a person's desire to save until it hurts but it's a hard thing to get set up. At 15K AGI they'd be eligible for a 50% Savers Credit on their taxes, so there would be a bigger benefit to just doing Roth. Not that a single person making 15K is going to owe a lot, and the credit is not refundable, but it would be something. If they could put $500/year in they'd get half of it back in a credit.
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cronewitch
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Post by cronewitch on Jan 11, 2017 21:44:10 GMT -5
The trouble with giving a basic income is people who don't care much about money will just work less. I met a women in 1987 who was getting $900 a month from a trust, that was twice my house payment. She had a son and they did yard work for cash instead of her taking a job. A couple years later she was working in a community college green house part time. The trust gave her enough she only needed to fiddle with work not get a career or start a business. If she is still doing that her $900 won't even pay rent. I could see a lot of young adults never landing a full time job, live with parents and getting a basic income they don't need to ever work. My great nephew is finishing college in May and planning to go to Europe to play before looking for work, the more money he has the longer he will play.
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tallguy
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Post by tallguy on Jan 11, 2017 21:44:14 GMT -5
A very low-income worker should absolutely not be doing a 401k as their first option. The benefit is a tax savings up front, but with the Saver's Credit they have no tax liability anyway. The only thing that funding a 401k does at that point is to create a needless tax liability later. Do the Roth instead. As much as you can. The numbers (brackets) on the Saver's Credit really are stupid though. It is supposed to be a maximum $1000 credit, but it is designed so that you cannot maximize it. With the personal exemption and the standard deduction in place, you cannot have a tax liability anywhere near high enough to take the maximum credit. It should either be refundable or the break point should be higher. As it is, it's just dumb.
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haapai
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Post by haapai on Jan 11, 2017 23:34:39 GMT -5
Although 401(k) plans now allow folks with pretty puny incomes to set aside painfully small amounts with every paycheck, it occurs to me that someone who expects to earn about an inflation-adjusted $15K a year might be better served by investing in a Roth IRA and that accumulating the seed money for a Roth IRA that earns a decent return after fees is kinda tricky. In order to get one of these things started, a low-income worker who doesn't have savings or windfalls would pretty much have to start by funding a 401(k) for several years and then really have their ducks in a row when they changed jobs and were able to roll the 401(k) into a traditional IRA and then a Roth IRA. But if such a worker ever managed to get a feeless Roth started, and were able to contribute to it in small amounts on a monthly basis, they might be cooking with gas. At an AGI of $15K a year, contributions to a traditional IRA or 401(k) account that reduce your AGI even further don't get you very far. They may reduce your state income taxes by an amount that seems quite significant, but they really don't affect the federal income taxes of someone filing single without dependents by very much. If you doubt me, please study the earned income credit for persons without dependents and the (non-refundable) saver's tax credit. The ability to withdraw contributions from a sufficiently aged Roth IRA without penalty is huge and really lights a fire under a person's desire to save until it hurts but it's a hard thing to get set up. At 15K AGI they'd be eligible for a 50% Savers Credit on their taxes, so there would be a bigger benefit to just doing Roth. Not that a single person making 15K is going to owe a lot, and the credit is not refundable, but it would be something. If they could put $500/year in they'd get half of it back in a credit. It may be a potential 50% tax credit but it's non-refundable. It may not be worth what you think it is worth. Check out the federal income tax owed at that level of income. The last time that I checked, it reduced federal income taxes by something like $650 at maximum and it was slated to erode pretty steadily. (I haven't calculated the maximum RSCC for the last seven or eight years. Have you?) If you have, please tell me about any wrinkles that may apply to persons who have dependents that I may not be aware of. I seriously love the saver's tax credit. for years it was the closest thing to match that I got on my retirement contributions, but I've got a few doubts as to how much these incredibly generous-sounding tax credits help folks who are scraping by. ETA: The difference between what investment accounts and savings accounts can be expected to yield matters quite a bit when you have to save for years before being able to save in the higher-yielding vehicle. I'd definitely counsel anyone in this situation to grab the opportunity to invest in a 401(k) plan if that were the best option but it's possible that a Roth might be better for folks with similar incomes who could somehow access one. I'm having a spot of trouble analyzing the taxes that would be due on 401(k) and traditional IRA withdrawals for an individual of full retirement age with thirty plus years earnings of 40 X minimum wage. I can't imagine that those withdrawals would be taxed much, but I sure haven't drilled down either. Given what I know about the weird and wonky things that happen when a single taxpayer earns between $15K and $20K, I might be missing something big.
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Deleted
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Post by Deleted on Jan 11, 2017 23:44:37 GMT -5
At 15K AGI they'd be eligible for a 50% Savers Credit on their taxes, so there would be a bigger benefit to just doing Roth. Not that a single person making 15K is going to owe a lot, and the credit is not refundable, but it would be something. If they could put $500/year in they'd get half of it back in a credit. It may be a potential 50% tax credit but it's non-refundable. It may not be worth what you think it is worth. Check out the federal income tax owed at that level of income. The last time that I checked, it reduced federal income taxes by something like $650 at maximum and it was slated to erode pretty steadily. (I haven't calculated the maximum RSCC for the last seven or eight years. Have you?) If you have, please tell me about any wrinkles that may apply to persons who have dependents that I may not be aware of. I seriously love the saver's tax credit. for years it was the closest thing to match that I got on my retirement contributions, but I've got a few doubts as to how much these incredibly generous-sounding tax credits help folks who are scraping by. My example was for someone filing single making 15K. Standard deduction and personal exemption gets them to $5000 taxable at 10% so $500 tax liability (I'm assuming they have no deductible retirement contributions or medical insurance premiums being taken out pre-tax) They could put up to $1000 into a retirement account and get the 50% credit.
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naughtybear
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Post by naughtybear on Jan 12, 2017 8:40:15 GMT -5
We had a commodore 64 in '82. My uncle had a pc around that time too and we were fascinated by it.
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Deleted
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Post by Deleted on Jan 13, 2017 20:41:55 GMT -5
On traffic fines tied to income: I know that Switzerland does that. I also worked for a sub of Prudential years ago that had a higher medical deductible for lower-income workers. I had the higher deductible (I think it was $1,000 in the 1990s) and it made sense to me. Not perfect, of course since you could be a low wage earner with a spouse who made a lot of money working elsewhere, but it was a start. I'm glad this makes sense to you because it only makes sense to me if you typed "higher" when you meant "lower" for one of these. Either lower-income workers had lower medical deductibles or higher-income workers had higher medical deductibles. If there was a reason for punishing the lower-income worker with higher deductibles, please share!
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DVM gone riding
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Post by DVM gone riding on Jan 14, 2017 0:16:46 GMT -5
Although 401(k) plans now allow folks with pretty puny incomes to set aside painfully small amounts with every paycheck, it occurs to me that someone who expects to earn about an inflation-adjusted $15K a year might be better served by investing in a Roth IRA and that accumulating the seed money for a Roth IRA that earns a decent return after fees is kinda tricky. In order to get one of these things started, a low-income worker who doesn't have savings or windfalls would pretty much have to start by funding a 401(k) for several years and then really have their ducks in a row when they changed jobs and were able to roll the 401(k) into a traditional IRA and then a Roth IRA. But if such a worker ever managed to get a feeless Roth started, and were able to contribute to it in small amounts on a monthly basis, they might be cooking with gas. At an AGI of $15K a year, contributions to a traditional IRA or 401(k) account that reduce your AGI even further don't get you very far. They may reduce your state income taxes by an amount that seems quite significant, but they really don't affect the federal income taxes of someone filing single without dependents by very much. If you doubt me, please study the earned income credit for persons without dependents and the (non-refundable) saver's tax credit. The ability to withdraw contributions from a sufficiently aged Roth IRA without penalty is huge and really lights a fire under a person's desire to save until it hurts but it's a hard thing to get set up. You can start a roth ira for as little as 100 at schwab and invest as little as 1 as followup and they have very low fees so this shouldn't be a burden Plus there is now "my ira" which is ran by the government some how amd had even lowet start points but after you hit a certain level you have to roll it over to a regular service
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tskeeter
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Post by tskeeter on Jan 14, 2017 0:17:57 GMT -5
The trouble with giving a basic income is people who don't care much about money will just work less. I met a women in 1987 who was getting $900 a month from a trust, that was twice my house payment. She had a son and they did yard work for cash instead of her taking a job. A couple years later she was working in a community college green house part time. The trust gave her enough she only needed to fiddle with work not get a career or start a business. If she is still doing that her $900 won't even pay rent. I could see a lot of young adults never landing a full time job, live with parents and getting a basic income they don't need to ever work. My great nephew is finishing college in May and planning to go to Europe to play before looking for work, the more money he has the longer he will play. I think your great nephew has a decent strategy. Although, I might find a job, then arrange a start date that is after my European tour. I believe that it would be beneficial for most young adults to do some international travel. We, as a nation, are more insular than many other countries. (I think there are legitimate reasons why we don't get much exposure to other cultures.) An early 20 something is old enough to recognize and appreciate the cultural differences from the US and think about the reasons for those differences. This improves the traveler's emotional intelligence. An attribute that is much discussed as a key attribute for career success these days. I don't see travel so much as goofing off as I do a personal development activity.
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cronewitch
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Post by cronewitch on Jan 14, 2017 1:32:45 GMT -5
The trouble with giving a basic income is people who don't care much about money will just work less. I met a women in 1987 who was getting $900 a month from a trust, that was twice my house payment. She had a son and they did yard work for cash instead of her taking a job. A couple years later she was working in a community college green house part time. The trust gave her enough she only needed to fiddle with work not get a career or start a business. If she is still doing that her $900 won't even pay rent. I could see a lot of young adults never landing a full time job, live with parents and getting a basic income they don't need to ever work. My great nephew is finishing college in May and planning to go to Europe to play before looking for work, the more money he has the longer he will play. I think your great nephew has a decent strategy. Although, I might find a job, then arrange a start date that is after my European tour. I believe that it would be beneficial for most young adults to do some international travel. We, as a nation, are more insular than many other countries. (I think there are legitimate reasons why we don't get much exposure to other cultures.) An early 20 something is old enough to recognize and appreciate the cultural differences from the US and think about the reasons for those differences. This improves the traveler's emotional intelligence. An attribute that is much discussed as a key attribute for career success these days. I don't see travel so much as goofing off as I do a personal development activity. His aunt is American and his uncle Swiss. He will stay with them and his young cousin then travel to other countries as cheaply as he can. His uncle is a international hedge fund manager and there is talk of an internship so maybe he can learn something too. I am not against him going just for too long when he needs to start a career, easier than after he is paying rent and working.
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MJ2.0
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Post by MJ2.0 on Jan 14, 2017 7:37:13 GMT -5
I think your great nephew has a decent strategy. Although, I might find a job, then arrange a start date that is after my European tour. I believe that it would be beneficial for most young adults to do some international travel. We, as a nation, are more insular than many other countries. (I think there are legitimate reasons why we don't get much exposure to other cultures.) An early 20 something is old enough to recognize and appreciate the cultural differences from the US and think about the reasons for those differences. This improves the traveler's emotional intelligence. An attribute that is much discussed as a key attribute for career success these days. I don't see travel so much as goofing off as I do a personal development activity. His aunt is American and his uncle Swiss. He will stay with them and his young cousin then travel to other countries as cheaply as he can. His uncle is a international hedge fund manager and there is talk of an internship so maybe he can learn something too. I am not against him going just for too long when he needs to start a career, easier than after he is paying rent and working. He will have 35+ years to work, I don't think taking 6-12 months delay to travel is the end of the world.
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Deleted
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Post by Deleted on Jan 14, 2017 7:59:52 GMT -5
On traffic fines tied to income: I know that Switzerland does that. I also worked for a sub of Prudential years ago that had a higher medical deductible for lower-income workers. I had the higher deductible (I think it was $1,000 in the 1990s) and it made sense to me. Not perfect, of course since you could be a low wage earner with a spouse who made a lot of money working elsewhere, but it was a start. I'm glad this makes sense to you because it only makes sense to me if you typed "higher" when you meant "lower" for one of these. Either lower-income workers had lower medical deductibles or higher-income workers had higher medical deductibles. If there was a reason for punishing the lower-income worker with higher deductibles, please share! Oops. You're right- it was the reverse. Higher-income workers had the higher deductible.
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haapai
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Post by haapai on Jan 14, 2017 10:35:59 GMT -5
You can start a roth ira for as little as 100 at schwab and invest as little as 1 as followup and they have very low fees so this shouldn't be a burden Plus there is now "my ira" which is ran by the government some how amd had even lowet start points but after you hit a certain level you have to roll it over to a regular service Would an IRA with $100 invested in it be charged an annual "account fee"? Low trading fees and expense ratios are nice, but low-balance fees of as little as $20 a year can take a heck of a bite out of returns on small accounts. Ditto for a hypothetical $2 trading charge on a $25 a month investment. If you keep pouring small amounts of money into these accounts for long enough, the annual rates of return on that investment after fees will eventually turn from negative to something approaching the historical return for what you're buying but, by golly, those early can ROIs stink and stay stinky for quite a long time! I'd love to believe that the things that tiny and rukh had to say about how nobody with that little to invest was possibly getting annual rates of return anywhere close to what the Dow returned are no longer true "because technology", but I am having a spot of trouble believing it.
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Post by Deleted on Jan 14, 2017 11:24:58 GMT -5
You can start a roth ira for as little as 100 at schwab and invest as little as 1 as followup and they have very low fees so this shouldn't be a burden Plus there is now "my ira" which is ran by the government some how amd had even lowet start points but after you hit a certain level you have to roll it over to a regular service Would an IRA with $100 invested in it be charged an annual "account fee"? Low trading fees and expense ratios are nice, but low-balance fees of as little as $20 a year can take a heck of a bite out of returns on small accounts. Ditto for a hypothetical $2 trading charge on a $25 a month investment. If you keep pouring small amounts of money into these accounts for long enough, the annual rates of return on that investment after fees will eventually turn from negative to something approaching the historical return for what you're buying but, by golly, those early can ROIs stink and stay stinky for quite a long time! I'd love to believe that the things that tiny and rukh had to say about how nobody with that little to invest was possibly getting annual rates of return anywhere close to what the Dow returned are no longer true "because technology", but I am having a spot of trouble believing it. What's wrong with just saving up in a regular bank account until you meet the fund minimums? My first retirement investment ever came from cashing in a $2000 pile of savings bonds. But, there is also Betterment now that just has a few Vanguard index funds and has really low fees and minimum investments. A good place to build up the first $1000 or so then just transfer to Vanguard directly.
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haapai
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Post by haapai on Jan 14, 2017 11:57:58 GMT -5
Any sane person would save in a bank account before investing with projected negative yields after expenses but have you taken a peek at how long accumulating that amount would take? When you're talking about investing $500 a year, or even $1000 a year, those modest-sounding annual and per-transactions fees can produce scenarios in which investing in equities produces lower yields than Christmas Club savings accounts for the better part of a decade.
Please repeat that last part. No return for the better part of a decade. Now try the math again, let's try saving for three years and investing annually. I'm sure that this return is quite a bit better, but is it still anywhere close to what the index investment returned? That second return might be a lot better than bank savings rates, a lot better than what paying off a mortgage or an automobile loan early yields, and still pretty sickly when compared to what the Dow or S & P has done historically.
I get kinda bilious (although I have no idea which end that entails) when folks start talking about the market return during that period when I'm pretty sure that there was no return at all for the first five to ten years.
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tallguy
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Post by tallguy on Jan 14, 2017 12:25:00 GMT -5
They do have an option now with MyRA. You can apparently open one with any amount, and make small contributions as well. It pays a guaranteed interest rate (currently between 2 and 3%) and has no charges or fees. My recollection is that one can keep that account until it reaches $15,000, at which point it would have to be transferred to a real IRA. Not a bad way to start for some people, to at least get their foot in the door.
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zibazinski
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Post by zibazinski on Jan 14, 2017 12:28:28 GMT -5
Would an IRA with $100 invested in it be charged an annual "account fee"? Low trading fees and expense ratios are nice, but low-balance fees of as little as $20 a year can take a heck of a bite out of returns on small accounts. Ditto for a hypothetical $2 trading charge on a $25 a month investment. If you keep pouring small amounts of money into these accounts for long enough, the annual rates of return on that investment after fees will eventually turn from negative to something approaching the historical return for what you're buying but, by golly, those early can ROIs stink and stay stinky for quite a long time! I'd love to believe that the things that tiny and rukh had to say about how nobody with that little to invest was possibly getting annual rates of return anywhere close to what the Dow returned are no longer true "because technology", but I am having a spot of trouble believing it. What's wrong with just saving up in a regular bank account until you meet the fund minimums? My first retirement investment ever came from cashing in a $2000 pile of savings bonds. But, there is also Betterment now that just has a few Vanguard index funds and has really low fees and minimum investments. A good place to build up the first $1000 or so then just transfer to Vanguard directly. Because of the balance requirement that banks have for free savings accounts.
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Deleted
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Post by Deleted on Jan 14, 2017 12:38:44 GMT -5
What's wrong with just saving up in a regular bank account until you meet the fund minimums? My first retirement investment ever came from cashing in a $2000 pile of savings bonds. But, there is also Betterment now that just has a few Vanguard index funds and has really low fees and minimum investments. A good place to build up the first $1000 or so then just transfer to Vanguard directly. Because of the balance requirement that banks have for free savings accounts. That's just the big stupid banks like WF and US Bank. You can always go somewhere else. Our credit union doesn't charge any fees for a savings accounts. Online banks like Capital One 360 (previously ING) and Ally, don't charge fees. If you go to Treasury Direct you can still buy bonds or open a MyRA, with no fees or minimums. It's earning 2.375% now and you can invest as little as $2 at a time.
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