What about other investments like 401k's and cds etc.
Real Estate Investor · Millsboro, DE · Member since 2008 · 120 posts · 7 votes
Im curently 19, in college with a full time job making alright money; at my age i guess you could say :mrgreen: . Im also always looking toward the future making sure I have everything under control to come.. For instance if rei doesnt come through or starting my own business doesnt work out I can still look toward my degree in college. Well I've been thinking.. i know i probably wont need a 401k but it would be nice to have a little something extra pop up in the near future, I dont have much experience with this stuff and I understand its not fast money like most of us like to get here.. but it seems like a good idea to me. can anyone help me on the subject? im 19 and could put away 500 a month easy. ( unsure what the 401 k would be a month) i think there's some for 1mill then 2 mill? I dont think my job has it ( i havent asked either) but if I go to my bank? maybe they do but also Im thinking is this the best place to go to at the same time. Id like to start early guys... :D
Well crazy you've got the biggest advantage working for you, TIME. Any time you can get tax deferred, or tax exempt investments you want to do it.
A 401k is an employer instituted program. If they don't have it, you can't do it on your own. You can and should though do both an IRA and a Roth IRA. I won't go into the differences here, but I would suggest a (discount) brokerage firm and/or a mutual fund "family" rather than, or in addition to a bank. There is no 10 year period where the equities market hasn't made at least 9 or 10% per year.
Remember though the money you put into your tax advantaged programs cannot be touched, without major penalties, until you're 59 1/2 years old. So don't put money into it thinking "hey I might need this for graduate school.
all cash
All cash-- if you don't make 10% on the cash you invest in purchasing a property let alone the increase in value because of long term appreciation and loan paydown you are not doing something right.
If all you can do is get a passive return then an IRA of either kind is a great place to save for retirement.
75% of my retirement is in RE, as a mater of fact all my RE cash goes to retirement. IF nothing more keep your money in a money market account at your local bank. Stocks would be the best thing as long as you know what your doing. Most financial institutes that I talked to don't want to help you to much unless you got a few hundred thousand invested with them. I know I have to check my mutual funds monthly and make sure the trend is still at least even. 2 months of decline I'm calling my guy on the phone and asking questions like "Whats up with this fund"? If you get in with a company that matches 401k then max out at what they match with.
Your best bet is to interview 3 financial institutes write down questions and compare the answers.
Here are some ideas or things to consider.
1. 401K is a tax wrapper. It is not an investment. The program is set up to offer tax advantages if you and/or your employer are contributing to your future retirement.
Some companies have a matching program. For ever dollar you contribute they will match up to some level. Check the details before deciding what you want to do.
2. Most pension programs with a tax advantage will have strict restrictions on your ability to withdraw the funds. For the most part you have to wait until you reach 59.5 of age. There are some exceptions.
3. If you build up the cash in tax deferred account you may be able to use the funds when investing in real estate. A self-directed IRA (SD IRA) is the best example. If you open a 401K with your employer, build up some cash there and then leave the company you can roll the funds from the 401K to a SD IRA.
There are pretty strict rules for how you can invest the funds in real estate when it is in an SD IRA.
4. In many or all cases a pension fund is protected from a lawsuit against you. It can be a good way to protect your retirement even if you get divorced, are sued, etc. There are exceptions but still much better than just having cash or other investments outside of a pension wrapper.
5. For some pension accounts you can withdraw capital if you are buying a house or other targeted activities. Check the rules and expect the rules do change over time.
John Corey
Thanks John and all the others that have replied to my thread. Im currently still living at home with my parents untill i am done college.. which is one of the reasons why i get to save most of the money i earn. I'll be honest with you guys cause why should I hide it.. but I make about 30k a year which i dont think is too bad but most of you im sure earn a lot more. In my opinion 59.5 years old is way too late in the ball game to be able to crack open the account.. Who knows what could happen up untill then.
Also how come it isn't considered an investment? I put money into it, and earn more then i put in. I kinda looked at it as a profit in the long run. I'll have to do some researching on the banks around here. I think there are banks online that offer some of the best % rates for ira's.
Making that kind of money while living at home. Thats a ton when you think about it. As long as you keep your spending habits in check. You could use the time to build up cash and get more familiar with REI as well as other types of investing and see which one is best for you. But I mean making 30k a year and living with parents thats ton.
When a friend I wrestled with turned me onto REI I was at home with my parents making around maybe 23k a year and going to school. I was able to save up alot of money. Just by watching my spending and keeping my goals in mind.
yeah i should watch what i spend more often but the goal was to save around 15-20k a year while still at home, then move out when i have an easier job with more pay but use the extra cash into rei.. Might even be able to do that before I move out which I would really prefer ( still have about 2-3 years in college, working soo much it tends to be tough doing many classes at the same time)
Reiguy, Im curious to see how you approached rei? Like what have you mainly focused at in the rei business? If I could work with say 15-30k range in rei that could turn out to be a nice profit success that would be awesome.. just knowing what to do and how to do it, i have a lot of hands on skills.. built cabinets, a secretary, a shed at school.. so refurbing would be a good direction if I came acrossed a house. Do people usually go for houses to refurb that the land is owned or rented? Or it doesnt matter if you're in and out fast? Because I work for a guy that ownes a lot of developments.. im talking 6 or so, they're all rented and I could get half off on lot rent when in my name. They're mostly single and double wides with not too much land but a little. Just a note I wanted to point out.
I know im off topic here with the title to my thread but we can jump around :lol:
What... You don't want to be able to retire before 59? I don't blame you. Could you retire if you had 10 cashflowing properties that made you $500 a month each? I think that will be more than SS will give you. Who knows those properties might rent for $1400 a month and give you a $1000 cash flow each month when you turn 40. Or they could give you nothing.
I would look at a money market account at your local bank. You can only make 3 with drawls a month from it. They make about 4% but until you get rolling I would do it that way. You never know when you might need that money then you would either have to take a penalty to get your money out of an IRA or use a credit card charging you 18%. I made the mistake by putting lots of money in my 401k then I needed something I put it on the credit card.
I just read a book by Dave Ramsey. "The Total Money Make Over". I would highly recommend you read it. Yes some of it is boring when those people send in letters. I like his idea, "live like know one else now, So you can live like know one else later".
Like anything else in life, balance is the key to investing successfully. I've been investing in RE for about 29 years, always had a good "savings ethic" and once 401ks (and later SIMPLE) became available I always slammed every nickel I could into it.
I just checked my portfolio (end of quarter) and I have about 28% of my net worth in RE including my residence. Even though my mutual fund portfolio has done really well I've always kept some of my (both retirement and non-retirement) investments in bonds and other fixed investments.
Always look at your risk adjusted rate of return.
all cash
I checked with the company I work for and they don't offer 401k's untill im 21, and Im full time and all... bummer
You certainly will want both, RE & cash. We all hope to retire early, so cash in and out of retirement accounts is a good call. We started retirement savings early, at your age, and never touched it. It is nice to know if all else fails, you have something... Life is uncertain.
My advice: put as much into it as you can, that you can and still live without, and design it so you will not be tempted to touch it at all, ever! Put it out of sight and out of mind. If it is readily available to you, you will most likely use it in a pinch instead of buckling down and eating hot dogs, mac & cheese and ramen noodles... that is character building stuff and great stories to tell the kids and grandkids!
Do check into the ROTH IRA, even as a savings account of a sort. It is post tax dollars, but you can use the principal without penalty anytime for any reason, so it is like a savings account. The big difference is that it grows tax free. Beware if you touch the earnings though, you will be slapped with the penalty & taxes, but your principal is fair game since you've already paid taxes at your current rate.
Good Luck!
buyandsellv is right about life not being certain. it is important to have a nest egg set aside incase you make some bad decisions (and you will) along the way. There is also peace of mind in knowing that you have some money set aside... and there is power in momentum. You may start small now, but that means you wont have to start later.
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Also how come it isn't considered an investment? I put money into it, and earn more then i put in. I kinda looked at it as a profit in the long run. I'll have to do some researching on the banks around here. I think there are banks online that offer some of the best % rates for ira's.
Putting money into an account that has tax benefits if not investing. It is parking the money in an account.
Most accounts offer investment choices. Some of the time the choice is very limited to a savings account. Other times there is a basket of choices like stocks and bonds (including mutual funds). In a few rare cases you direct the investments and then you can buy houses or notes plus other things.
401K is the name of the tax code published by the IRS. The trustees who administer programs that fit the code decide what investment options to make available to customers. The same with the IRA tax code and IRA accounts from trustees.
John Corey
welp, the company I worked for recently had a big lay off, and guess who was on the list. Yep, I was one of them.. Kinda sucks. So now once I have enough money for a downpayment on a home, I doubt I'll be eligible for a loan. I'm sadly collecting un-employment. This really sucks... I wanted to set aside enough money for a down payment (20-30k) Purchase the home using a commercial loan in my LLC and do it correctly. Dont want to be 60 by the time my rentals pay their self off ya know?
Life is uncertain!
A gift from Congress nobody knows about. A pension plan specifically for Individual and or husband/wife business owners. The Solo 401K plan. Not only is it a self directed plan but also it is self managed/no outside custodian. Buy/Sell/exchange Real Estate tax deferred or tax free (Roth K). There are some restrictions of course, but the Solo K plan is truely the Ultimate Retirement Plan for building long term wealth and financial security.
Matt Mathews
Mathews Associates LLC
Real Estate Investment Services
Man, I wish I had your brain when I was 19, Sean!
Even though you got laid off you're still miles ahead of most of the pack.
The future is pretty uncertain, which is why the wise diversify. You can do worse than following the wise.
Were I you, I'd use my downtime to read up on investing and build up your investing smarts. Remember, the deal of a lifetime comes around about once a week for the knowledgeable. Trump made his dough in real estate, Buffet in equities, Ted Turner made his first million in billboards, and so it goes.
We are approaching some very turbulent times and opportunities will be abundant for the prepared.
Best of luck and I hope you'll keep us posted!