Don’t Max Out Your 401k Annually

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


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

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

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

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

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

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

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

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

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

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

The Weight Loss Bullshit New Year Resolution – Stop Talking and Just Act

It’s the time of the year when all we hear people talk about is new year resolution (I’ll type NYR from now on).

I hate it. There, I said id. I hate it.

I don’t tell someone to shut up if they do talk about it… I simply smile and nod.

The most talked about topic for NYR is losing weight. Probably the first on most people’s list.

But here’s what I wonder, if every year we are saying we are going to lose weight… that means people didn’t do it. And if people just don’t do it every year, why do they keep talking about it?

It’s like lying to yourself.

A lot of people just talk and won’t achieve it. Here’s what I propose:

Stop talking and just act. Achieve it, then talk.

You may argue “well, people lose the weight and then gain it back over the year…” And this takes me to my 2nd point…

Losing weight is probably not such a great goal after all!

Fine, you can set “losing weight” as an initial goal. But at some point on your way to it, you should switch that goal to something less ephemeral… A better goal would be…

“Staying healthy.”

There is no excuse around this one. It means for us to stay consistently healthy and it also includes working on the mind, the body, and the spirit.

Staying healthy is all around wellness. You monitor yourself. Everyday you’ll watch want to feel your body. Everyday you’ll monitor yourself the mental and emotional state. You learn to see and feel your body and mind so you act to stay healthy.

You’ll know when you feel toxic emotions. And then you act.
You’ll feel when your body’s worn and stressed. And then you act.
You’ll see where you stand in life. And you act to improve it.

You’ll learn that you need to act in all facets including balanced diet, exercise, and lifestyle to maintain this health that involves more than your physical components.

Staying healthy is a continuous process. If you make that your focus, you’ll always end up studying a lot and will learn a balanced diet means, a healthy fitness style that suits you, and your own approach to react to whatever your body tells you. You’ll learn to maintain this health that involves more than your physical components.

This is so much more than weight loss because weight loss is a shallow goal.

Forget weight loss and figure out what it means to stay healthy.

Stop talking and just act.

And one last tip, be consistent.

Originally posted 2013-01-07 00:44:31. Republished by Blog Post Promoter

Discover Your Limit

Have you ever wonder what your limits are? Physically? Mentally? Skill-wise?

Today I did leg-press at 235 lbs. More than I have ever done. Rar! More than I could barely do last week, which was 190 lb. Our body is truly an interesting and amazing piece of machinery.

By the way, some of you may think that is nothing… it maybe so, but keep in mind I weigh a little under 130 lb.

I mentioned the difference of 45 lbs in my ability to do leg press within a week’s period. Surely, my body hasn’t changed so drastically in a week’s time, and thus reveals how our mentality, attitude affects what we can do. This is the most amazing part about weight training. You start to discover what your body can do, what you are truly thinking, and what you, as a whole being, can do.

The process of weight training, not simply for health reasons, allows me to learn more about myself than ever. Of course it is a physical activity, but simultaneously, there is an internal aspect of it where you must be aware of your body (posture, breathing, [which] muscle tension), and also pay attention how your mind affects you during your routine.

Now the most interesting part…

At the point of exhaustion while moving some massive weights, when I feel that I am exhausted, the questions comes in… Is it truly physically impossible for me to move? Or is it that I am my mind affects me, or letting my mind acquit myself with excuses, and that if someone points a gun at me to move it, and will shoot me otherwise, I will muster up the strength to move agian? Which one is it? I need to be truly honest with myself. Can I move just once more to discover my limit? To overcome my limit? Despite the doubts. Despite the pain. Just to discover my own limit. And probably help myself grow.

This is the fun part to training. The process of growing and learning about yourself. I will be honest, that if it is only for the health aspect of it, I probably would not put myself in such god awful discomfort continuously. I will also be honest that, proper weight training WILL give you a better looking body :P

This idea of training is not only true for weight training. It is the same in just about any form of trainig… for physical activities and for art. You have to ask yourself and be fully honest, am I really reaching my limit? And if not, am I finding excuses? What is holding me back? How can I move beyond?

Originally posted 2009-02-16 22:23:52. Republished by Blog Post Promoter

Subprime Mortgage Crisis? Student Loan Crisis?

MSNBC has this article: Pricey student loans sow seeds of trouble.

While scholarship, grant money and government-backed student loans — whose interest rates are capped — have taken up some of the slack, many families and individual students have turned to private loans, which carry fees and interest rates that are often variable and up to 20 percent.

Consumer prices on average rose less than 29 percent over the past 10 years while tuition, fees, and room and board at four-year public colleges and universities soared 79 percent to $12,796 a year and 65 percent to $30,367 a year at private institutions, according to the College Board.

Meanwhile, complaints about marketing of private loans — like ads promising to approve loans worth $50,000 in just minutes — are on the rise. The complaints have made their way to lawmakers, who see a need to regulate the highly profitable and diverse group of companies and the loans they make to college students.

In other words, available government loans is not able to keep up with the increase in student tuition in the past years, forcing students to turn to private loans that have some very hefty interest rates.

“College students, you need a large sum of money for school? And have little to no credit? No problem! We will still give you the loan. (But we will take back a lot more from you later, in the form of interests, yeah!!)”

Wait…have I heard this before? I think this sounds similar to what they did in the subprime mortgage sector. Not only will students carry a bigger amount of debt out of college, they will also carry those debt at a much higher interest rate. This will clearly bring their monthly loan payment to double, triple, quadruple… than what their previous generations had to pay. And since I doubt future salary can increase at such a joyous rate, this gives birth to the question on how the future generation can afford their loan payments graduating from college. If they cannot afford them, they are going to start to default… oh crap…

And wait…have I heard this before? I think this also sounds similar to what’s going on in the subprime mortgage.

Despite this being pure speculation that I draw and agree with such a comparison from the article, I really wonder what are these people thinking? Is making instant or quick money all they care about now?

In short-term definitely, they will reap some heavy profits with the high interest rate, and probably packaging these loans to sell as collaterals also.

Now in long-term, I don’t know if it looks so good anymore, and I would say worse than what may happen in the mortgage sector because the people they screw over this time will be the whole future generation. Not only will all the investment and hedge-funds base on these student loans crash. These are the people who will be future consumers, the entire or majority of the population, unlike the subprime population that makes up a much smaller percentage.

So what these private loan companies will end up doing is crippling the future population’s spending power with these loans and probably destorying a good portion’s credits. Without spending power and credits, they can’t buy houses, they can’t buy services, they can’t buy consumer goods… Let’s see such a economy will work out then.

Again this is pure speculation and albeit pessimistic, I can’t help but see the resembling occurrence between the student loans and subprime mortgage. It seems like these people are just moving sector to sector aiming only to make a quick buck and to get instant gratification with no caring about other people’s lives. Where is their sense of decency and compassion? I don’t see any. They are now targeting 17-20 years old with little life experience and will probably make their life experience a sad and painful one before they have a chance to start it. I would rather live poor than having to sell my children’s life away like that, but actually in my standard, I would consider myself living rich the way I choose to live.

I sure hope they are ready for such a future.

Originally posted 2007-10-03 01:47:08. Republished by Blog Post Promoter

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