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401k and Personal Finance

Lessons learned from sad 401k story

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WSJ ran an interesting article “Retiring Boomers Find 401(k) Plans Fall Short” over the weekend (link here, if not work please google the article to get it). I felt sorry to read this:

…Gloria Moss has been contributing to a 401(k) since 1985, when she went back to work after having children. Especially after divorcing, she wasn’t able to contribute as much as she wished and when her children finished college, she focused on repaying college loans. She says she lost more than half her savings in the recent financial crisis, then shifted heavily to bonds and missed the stock rebound…

Two things quickly came to my mind:

1) It’s hard for people nearing retirement age to hold on their investment when the market drop like a rock, during the recent financial crisis (Fall 2008 to Spring 2009) I knew I would not hold on to my 401k if I were 20 years older. In order to sleep better at night, they sold their investments at the market low, because they just could not take it any more. I can fully understand the emotion here. For instance, someone used to have $600,000 in his/her retirement account before all this happens, and in financial crisis it dropped to $300,000, the person still prefer to have $300,000 over the potential “nothing left”.

2) The second point, by the same token, people who bailed out at low are unlikely to jump back into market, when the market turns. On the other hand, people who are in the loop (wall street?), and young people are more likely jump back in. The former took the cue from all the government and fed actions, the latter can take more risk because they have more time (to invest and recoup the loss).

Long story short, it seems the boomers got squeezed in this financial crisis. One plus side they have, is for those near retirement age, they can be sure the social security will still be there.

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401k and Personal Finance iPhone app

Looking for a few good reviewers and bloggers for iPhone app

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I am looking for a few good reviewers and bloggers for my 1st iPhone app, myNestEgg ~ the retirement calculator. Here are a few basic requirements for the reviewer/blogger:

1) An iPhone, iPod Touch, or an iPad device with iOS 3.1.2 or above.

2) Has an iPhone app review site or a personal finance blog web site. More importantly, are willing to try out my app and write independent reviews.

How to get the app?
The app is at “Wait for review” stage. I can build ad hoc version of the app and send it to you (about 500k). Email me if you are interested. My email address is .

What you will get besides the app?
Well, I can not promise anything significant because they will affect your opinion. But I can come up with something appropriate later after seeing the review.

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401k and Personal Finance

What is American Funds and my 401k choice

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It’s 401k enrollment time, because of my recent job change. I have lived life without 401k contribution for several months now, although I tried to keep up with buying mutual fund Scottrade IRA account. But I found this IRA thing is not as easy my good old 401k account. Couple reasons:

1) Automatic payroll deduction and investment in 401k vs. manually deposit/buy fund in IRA;

2) Dollar average cost (DCA) for the investments (mutual funds) in 401k, vs. picking the best time to buy mutual fund cheap (not easy to time the market);

3) Choosing from about 10 mutual funds vs. choosing from thousands of mutual fund Scottrade offers (a daunting task, which I talked a bit in my earlier post).

Anyway, here is the new mutual funds and their respective weight I chose for my new 401k plan.

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401k and Personal Finance

401K, IRA, Roth IRA

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How to deal with 401k when leaving a job?
Some options:
1) Take it out, with 10% penalty, and potential income tax later on. This is usually not recommended.

2) Rollover to an Rollover IRA; or Rollover to the new employer’s 401k.
I did this once: not because of change of job, but because of change of company ownership, I have opportunity to rollover some of the 401k money into Vanguard Rollover IRA in year 2007. That money didn’t recover to the initial value so far.

3) Leave it alone (until 59 1/2 years old).
I did this when I left my former employer in Oct. 2008 (the middle of financial crisis), it turns out to be a good move (or no-op), as the value recovered from the crisis.

Should I open a traditional IRA or Roth IRA?
Tax deduction: IRS publication here.

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401k and Personal Finance video

Is 401k a scam?

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As millions of American workers saw their 401k became 201k since last year, this 401k thing suddenly becomes a hot topic. CBS 60 minutes did an excellent report on this topic.

Watch CBS Videos Online

My thoughts

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401k and Personal Finance

Q1 2009 Results: 401k and Rollover IRA

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They are all in stock funds.

Old 401k (Hewitt): down 11.8%
Rollover IRA (Vanguard): down 11.78%
New 401k (Vanguard): up 133.97% (this is due to new contribution, I started new 401k in Nov 08, so there is an easy comparison here)

Noticed my portfolio balance in Vanguard is about even compared to the end of 2007, when I started the Rollover IRA. Consider this is after I made signigicant new 401k contribution since Nov 2008. So much for long term investing concept. I need to rethink how to better managing my retirement account.

S&P is down about 11.7% in this quarter.

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401k and Personal Finance

My 401k strategy

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New 401k in Vanguard
Two weeks into working for new employer, today I am able to make my 401k selections from Vanguard. Sweet! It only took me a few minutes to make my choices:

(30%) S&P 500 index fund (VFINX)
(30%) Winsor II (VWNFX)
(40%) International value (VTRIX)

If there is one thing I learned from the recent market drop, that is: DO NOT chase the short term gains, pursue the long term gains instead. Along these lines, I pass over all the sexy names such as Dodge Cox (which lost quite a bit because of Fannie/AIG), Goldman. I am stay with good old Vanguard.

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401k and Personal Finance CFA

CFA, 401k, Berkshire shareholder meeting

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I printed out the CFA exam admission ticket yesterday, the test will be hold on June 7. Still got to read up the economics (my least favorite topic). So far I have read “financial management and statement analysis”, “quatitive methods”, “equity analysis and portfolio management”, and I’ve almost completed the “Options and derivatives”. Another thing I need to read is “Ethics”: I intentionally put it off and prepared to read it right before the test. As I get older, my memory is not as good 🙂

401k
I checked out the 401k and Rollover IRA at Vanguard this morning. I was surprised to find, after all these craziness, my portfolio is down 3.77% YTD. One thing I noticed is April was a good month for stocks. All the major indices went up.

Berkshire shareholder meeting

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401k and Personal Finance Life

Vested in Amerca

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Yesterday was a quite amazing day for stock market. The US market (Dow, S&P, and Nasdaq) went up the most in 5 years, after the dear friend of Wall Street (Mr. Ben Bernanke) cut the interest rate by 0.75%. Here are details in the news (Dow 416 points gain, Fed rate cut sends market soaring). This means the interest rate lowered from 5.25% to 2.25% since last Sept. That’s 300 basis points in 6 months!. While I was happy to see my little portfolio went up 4.8% yesterday, I think the US dollar will worth less and less (vs. Yuan), considering the reckless US economy policy and the fundamental problems underlining the economy (high labor cost, addition to consumer spending, etc.).

Fed rate cut 031808
(Source: Kansas City Star)

Green Card
Incidently (remember March 17 is St. Patrick’s day, the green), yesterday I received an email from USCIS telling me that my permanent residency application has been approved (after almost 6 years). I don’t think too much of this green card thing, at least that’s what I felt when I went to work this morning (see I still got to work).

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401k and Personal Finance

New 401k, $25 from MasterCard, Staples Rebate

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401k
My new 401k plan did first purchase yesterday. I got 0.47 shares of company stock plus other mutual funds. If this rate holds, I am going to get 12 shares this year 🙂

MasterCard CCF settlement
I registered for $25 settlement fees. Now waiting its arrival to my mail box…I understand it will take a while.

CCF_settle

Staples easy rebate