Need INVESTING advice

[Quantrill]

Ok, so my employer is about to set up a 401k for me and I think they match a ridiculously low amount (like half a percent or something).  I have a meager amount of money in a savings account (pays like .20%).  I'm trying to figure out the best way to save what little extra money I'll have at the end of the month. 

Here's my line of thinking and please help/criticize me on it:  Even if I do live to retirement, our money probably won't be worth much as it's constantly losing value.  So I'll put a little money in the 401k each month but not a lot.  I'd rather have money to spend before I retire/get shot by the feds.  That's where the savings account comes in.  Problem is, if I understand the numbers right, for every $1000 I have in savings I'll get 2 dollars at the end of the year!?!?  Damn.  (I hope I'm just misunderstanding the meaning of .2% APR)

My immediate goal is to get enough money to have a small patch of land to call my own.  Hopefully 5 acres or so.  It looks like a few people here may be open to pooling resources to get a better cost per acre.  I want to do this ASAP.

Sooooooo - in your opinion what is the best way to scrape up enough money to get this done?  I know enough about the stock market that I would prefer a no-load index fund as opposed to handpicking a few stocks to throw money at (in other words, I know very little).  Should I go with perhaps a Vanguard index fund, a CD or two from my bank, or just put everything in my savings account which doesn't earn very much at all?

[slim]

Oh investing advice thats like someone trying to tell you what is going to hapen in the future. I do like the advice of deversitify your investments. The investments you do make should fit your personality, if they dont then you will be worrying about them all the time. I personally am a fairly conservitive investor My curent employer does offer a 401k with matching .5% to my 1% up to my 6%. I do use that benefit from my employer because I see that as part of my compensation package also 401k programs are tax free until you pull the money out so I think the less I give the government the better I am off. But you need to look at yourself and figure out what type of risk you want to take.

[Lloyd Danforth]

Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.

[cathleeninnh]

I wouldn't participate in the 401k beyond the matching level. If you want more retirement savings, explore IRA options. Sounds like a lousy savings account. Even your bank should have cd options better than that that you can get in $500 amounts. Then there are money market accounts of varying kinds.

That's just the simple stuff.

Cathleen

[Rochelle]

Here's what I would recommend:
Build up first an emergency fund of $1,000; then contribute the maximum to your 401(k), even if they only match a little bit. My company doesn't let me go in on the 401(k) until I've been there a year, so count yourself lucky!
Even if contributing the maximum means you have less money to live on now, look on the bright side: it decreases the amount you'll pay in income taxes now.
Of course, you will have to pay taxes on the earnings from the money you put in your 401(k), so another good option would probably be to contribute half of the maximum to the 401(k) and put the other half in a Roth IRA, which is not tax deductible but you never have to pay taxes on the earnings.

I just opened a Roth IRA; if I join the 401(k) at work I'd probably contribute as close to the maximum as possible. You also need to figure out what amount of money you want to have when you retire. Also, how long does it take until you're vested at that company? At mine, it takes 5 years; but after two I'm 20% vested, then 40% than 60% and so on. If you leave teh company before you're vested, none of the matching funds will be yours. You'll just get what you put in originally.

Btw, if you're interested Matt Robinson (FSP, livesi n Manchester) is coming over Monday at like 5 or so to give me some practice financial advice You can sit in if you want, or have him go through it with you. My finances are pretty non-existant so....

[Quantrill]

Thanks to everyone for their responses!

[Pat McCotter]

I wouldn't participate in the 401k beyond the matching level. If you want more retirement savings, explore IRA options. Sounds like a lousy savings account. Even your bank should have cd options better than that that you can get in $500 amounts. Then there are money market accounts of varying kinds.

That's just the simple stuff.

Cathleen

ING Direct CD's have no minimum.

[Rosie the Riveter]

Call my hubby-- ask him to have another beer with you -- and discuss it with him.... We can both answer finance/investing questions with excessive depth, but he beats me as the pro on the paper money making stuff hands down.

[Quantrill]

ING Direct CD's have no minimum.

It says I have to link my checking account to the CD.  They're not gonna rob me blind, are they?


Rosie, yes yes.  Beer is always good...

[error]

You're also assuming the dollar will be worth anything by the time you reach retirement age, which is possibly not a safe assumption anymore.

[Pat McCotter]

You're also assuming the dollar will be worth anything by the time you reach retirement age, which is possibly not a safe assumption anymore.

Well, it will still be worth a dollar, no?

[Quantrill]

You're also assuming the dollar will be worth anything by the time you reach retirement age, which is possibly not a safe assumption anymore.

That's why I'm more focused on the short term:

Even if I do live to retirement, our money probably won't be worth much as it's constantly losing value.

[penguins4me]

I'm in a similar situation, and although I am no investor, I'm seeing the price of land where I'm looking shoot up much faster than any measily interest rate any non-billionaire could hope to acquire. In my case, since I don't have many financial obligations, I'm shovelling as many FRNs into a liquid account (a.k.a. savings) as possible until I either meet the down payment, or have the whole wad in-hand, depending on when a suitable parcel is found.

Although unlikely, the last thing I'd want to happen is to have a dip in the market smash the value of another type of liquid-ish investment just when it is needed most. Old Man Murphy hates me. I figure the measily amount earned at a tiny interest rate isn't worth the hassle (nor risk, depending) if the capital is to be turned around into real estate as quickly as possible...

[Rochelle]

You're also assuming the dollar will be worth anything by the time you reach retirement age, which is possibly not a safe assumption anymore.

If you assume 3% inflation (which is what is aimed out, and should be average), I've figured that a dollar 40 years from now will be worth what a dime is worth today. It's a scary thought, but don't let it turn you away from investing:
IT DOESN'T MEAN NEW WEALTH WON'T BE CREATED

--It doesn't mean that investing in technological advances or new businesses won't pay off
--It doesn't mean you won't get any return on your stocks or mutual funds.

Average rate of return on the S&P 500, for example, has been 10% historically. If you assume 3% inflation, that's 7% you still earn. Compare to if you don't invest...that means that the $1 you have today in 40 years now has the purchasing power of a dime, where as if you invest, it could have the purchasing power of $1.07. Not big if you just look at a dollar, but if you have a larger amount (say, "several dollars") it matters

You could, of course, just get a whole bunch of gold or silver and that sort of thing, which I think would be a good idea for diversification anyway, but I don't think they have as high of a return as gold and silver.

[cathleeninnh]

Inflation is worse than 3%. Remember that they remove from the calculation anything that is "volatile".

Cathleen