Everyone says to take advantage of the 401(k), because most employers will offer a match to your contributions. But some don’t, including mine, so I looked into which plan would be best for me — a recent grad with an optimistic fiscal future.

This brief overview by Ramit Sethi on iwillteachyoutoberich is great for getting the basic vocabulary down. After that, the most helpful article I found was on CNN Money, by Walter Updegrave. The Wikipedia entry on Roth 401(k)s also isn’t a bad resource.

I realized after reading all this that one should participate in both plans to “hedge your bets” — finance-speak for covering all your bases.  The real decisions are whether you’ll be putting more into one or the other and what your 401(k) allocations look like.  There’s usually too much un-funny funny in the Motley Fool for my taste, but their page on picking what goes into your 401(k) is very helpful.

Anyway, back to this Roth/traditional 401(k) business.

What Tax Brackets Have To Do With It

Updegrave shows that the tax savings are equal in the end if you stay in the same tax bracket, say, 25 percent. But if you expect to be in a higher tax bracket, say 33 percent, then why not get it taxed at 25 percent and withdraw tax-free when you’re old?  Furthermore, it’s not for certain that tax rates will increase in the future, but they probably will. We’ve all heard Obama say he’s increasing taxes for people who make more than 200,000, right? I’m not saying I will ever make more than that, but *just* in case…

You could you expect to be in a higher tax bracket if you are just starting your career and plan to be making a lot more money in the next forty years. You could expect to be in a lower tax bracket if you are already at the peak of your career and will be taking it down a notch in the next two decades or so.

How Much Can You Put In?

Then there’s the question if which one lets you put more money in from the get-go. max is 15,500 for both.

If Roth after-tax in 25 percent bracket, then you invest 15,500 pre-tax (which becomes 11,625) and even more (3,375 x 1.25 = 4,218.75) up to 15,500 to max it out. so you put more in from the start. If traditional 401k, then you max it out at 15,500 pre-tax and should invest the tax savings (4,218.75) in stocks. if your stocks do well then you end up with more!

For mid-career folks with a higher income, the Roth 401(k) is also pretty much the only way to take advantage of the after-tax feature of a Roth IRA. Before the Roth 401(k), you could only get a Roth IRA, which maxes out at $5,000 per year and is only available to people who make under $110,000 annually.

Final Notes

  • If your company does offer a match, the match goes into a 401(k), not the Roth 401(k).
  • You can roll the Roth 401(k) into a Roth IRA at any time, i.e., if you change employers, or to avoid making required withdrawals after age 70 or so.
  • There’s a Social Security benefit to the Roth 401(k), which is that the money here isn’t going to be taxed as income in the future.

What I’m Going To Do

I’m going to start out by giving the Roth 401(k) a (much) weightier percentage of my contributions. Given that I will probably end up in a higher tax bracket in the future, it’s definitely the better investment for a young person.  Furthermore, the absence of a company match (aka free money) gives me less incentive to put money into the company’s 401(k) plan, especially in this market.

I found an article saying that the Roth 401(k) is set to expire in 2010, unless Congress still looks favorably upon it. Not sure where this is headed, but don’t feel like looking into it.  Bottom line: take advantage of it while it’s there.

After the first couple months of savings-ness, I might also open a Roth IRA. I haven’t found a single article that hasn’t advocated for it as an investing essential for young people. Money from a Roth IRA is more liquid than these 401(k)s, and can be taken out tax-free for new family things like college, a house or even your kids’ education.

Christoph Niemann

February 3, 2009

Oh I like this!!  Creative and fun and honest and focused.

I Lego NY

a description of sunset at the winter garden.

Between me and the sun there’s a lamp and a tree.  The lamp is classic. Tall, dark, handsome, and capped, but its light is a stiff green-white glare. Probably energy-efficient LED, so I can’t complain too much. The tree is great; it looks like a naked bush on stilts. Naked because it’s leafless — it’s January — and the ends of the upmost branches all meet at the same point and flare out like an overgrown menorah.

What I really want to tell you about, though, is the sky. It caught me off guard, and probably also the four or five other people around me who just pulled out their cameras and cell phones. I’ve never seen anything like it, but I guess it’s been a couple of months since I’ve looked up.

It’s the color. Not the fluffy neon part. I know you’ve seen a lot of hazy pink and blue sunsets with the cotton balls that ripple out from the horizon. I don’t mean that.

Tonight’s sky, somehow, is shadowing the foreground.

First, the pink clouds break just behind the lamplight behind them this neutral greenish hue. It’s the ugly kind of color that doesn’t belong in this sky. Second, I swear the cloud bank behind the tree exactly follows the slight S-curve of the tree branch just in front of it.

It’s wonderful and all too rare that a view like that can make four people pause in their day. The casual European tourist who pulled out a cell phone. The Asian girl next to me waiting for someone who just can’t stop pulling her camera back out every two minutes.  She must have taken 20 or 30 already. The lady to the front waiting for a meeting, who slipped her cell back in her pocket just as her colleague came. And me, looking up again.

It was the classic instance of urban aloneness, in which four strangers paused in parallel at the very same thing and then exited the scene without any outward acknowledgment that the others had shared in their moment of truth.

You don’t often get such an expansive view in New York City.  To I don’t even know what’s on the opposite shore — a handful of skyscrapers huddled across the southwestern tip of Manhattan, or Newark accepting the late overflow of the greater city.  There’s this Jersey trashy neon clock, red and yellow at the foot of the tallest building.  It’s probably bigger than my house.  After sunset the skyscraper lights turn on and the clock blends in, like a reminder to gamble away your Wall Street losses in Atlantic City (just a coupla hours away, and you might come back a winna!)  A huge diagonal beam cuts through my view, all part of the Winter Garden Spectacular, along with the fifty-foot palm trees behind me. Just past the building is a stone-dead stone plaza, one of those flawless expanses built exclusively to pass through…

Anyway, this is what I thought while I wondered what they were thinking.

Late night?

December 10, 2008

This is an excellent very short story.

Things You Can Do With a Can of Campbell’s Soup, by Brock Adams
— Barrelhouse Magazine

What is multiple myeloma

December 9, 2008

Welcome to the Myeloma Beacon, a news resource for multiple myeloma.

I’ve been writing for them for about a month.  Although I read through a few general introductions to the disease, it’s taken me a few weeks to develop a comfortable familiarity with the subject.  Here are some informal notes on MM, summarized from the description at the Multiple Myeloma Research Foundation.

Notes:

Introduction. Multiple myeloma is a blood cancer; specifically, it affects the plasma cells that normally produce antibodies for the immune system.  Plasma cells are the counterpart to white blood cells in the immune system, and both originate from stem cells in blood marrow.

Symptoms. The disease results in osteoporosis of the pelvis, spine, ribs and skull, as well as a number of other symptoms, including hyperalcemia, anemia, renal damage, increased susceptibility to bacterial infection, and impaired production of disease-fighting antibodies.

Origin.

NORMAL ANTIBODY PRODUCTION
Stem cell in bone marrow >> lymphocytes (T cell & B cell);
B cell >> plasma cell >> antibodies (aka immunoglobulins)

IN MULTIPLE MYELOMA
Damaged B cell >> malignant plasma cell (aka myeloma cell) >> travel through bloodstream to accumulate in bone marrow >> more myeloma cells >> messed-up antibodies & bone damage

Mechanism. Myeloma cells send out cytokines, which inhibit natural cell death (apoptosis), and growth factors that create new blood vessels to feed tumors.  They also may fail to activate the immune system, so the tumors don’t have anything to stop them from growing.

Effects. Collections of plasma cells cause lesions in the hard outer part of the bone and masses or tumors in soft part of bone or soft tissues (plasmacytoma).  The affected bone marrow produces nonfunctional immunoglobulin, called M protein, that gets in the way of normal antibodies and may also shorten their lifespan.  Instead of M protein, patients with some forms of myeloma produce incomplete antibodies (Bence Jones myeloma) or none at all (nonsecretory myeloma).

Incidence. The second most prevalent blood cancer after non-Hodgkin’s lymphoma, multiple myeloma accounts for 1% of all cancers in white US residents and 2% of cancers in black residents.  There are 5 to 7 new cases out of 100,000 per year.  In the US, about 20,000 new cases are expected in 2008; about 56,000 people currently live with the disease.

Risk factors. Male, African American, over 70 years of age, and some occupations (agriculture, petroleum, leather, cosmetology industries).

_Postscript.  I am seriously digging wordpress’s new dashboard.

the global dow

December 3, 2008

I would NOT like to be the guy calling the shots on this beast (and by that I mean, how cool would that be??)

Link: http://www.djindexes.com/globaldow/

A few months ago, I wrote that I’d look into opening a high interest savings account at ING.  I mean, I thought it was pretty cool that a bank could exist purely online.  But in spite of its rave online reviews, my user experience with ING has been disappointing.

First, the blaring, ad-like home page just won’t stop asking me to buy more products to “Save Your Money!”  From product descriptions all the way down to the license agreement, ING talks to its customers like they’re simpletons looking for an easy way out.  I may be a lowly beginner, but stupid I am not.

Secondly, their layout is a mess.  At least 70% of the home page contains links I don’t need.  The go-to left menu is wasted on product advertisements.  Key links for accessing my account are strewn across an awkwardly horizontal menu.  And their Microsoft Publisher graphics need serious reconsideration.

To be fair, the Orange Savings Account is only a gateway to more expensive (and profitable) financial products.  They offer great deals for online CDs, mortgage and investment services, and an award-winning high interest checking account.  Should I open one of these, I might find that ING is the best bank around.  But honestly, my investment account is already set up, I’m really rather poor, and all I want is to get 3 to 4% interest on my meager savings.

So what am I looking for?  I want a bank that will respect its beginners, present relevant options for growing my money, and provide me with the tools I need to become a more sophisticated saver.  Of course, all these requirements are rather immaterial feel good effects of a well-designed user interface.  But what can I say, I like design.  If I’m getting the same service, I might as well choose the prettier one.

I’ve decided to go with ING’s competitor, HSBC Direct.  They have a clean, well-organized interface that’s appropriately monotone and rectangular.  All the links I need are neatly stacked in a left menu.  Like ING, I can transfer funds to and from my regular checking account for free and watch my interest grow.  But unlike ING, I’m not bombarded by silly advertisements and product offers.  What’s made me really happy is their neat customer service.  Instead of muddling through 10 minutes of robot phone menus, they call you!  A customer service representative can dial you at a chosen number, at any time of day.

Finally, a couple quirky details about HSBC that are not great, but not deal breakers:

  • This post has been so long in coming because of the two week lag time between registration and the snail-mail arrival of a temporary password, blech!
  • HSBC presents the additional formality of signing up for online transfers apart from your account, which is strange, but it’s no trouble at all.
  • HSBC accounts have two complete number/letter passwords, whereas ING requires a regular number/letter password and a number code.