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Almost universally ignored in the comparisons of annuities to higher growth-rate, less expensive, options is risk, as understood by the efficient market theory and the CAPM model. I don't consider standard deviation and correlation with the market to be perefect indicators of risk, but in some cases, I do think they quite accurately describe the risks investors are concerned about. I think they are particularly applicable when investors want a steady income stream -- that is, want to dip into an account on a regular basis. In this case, volatility over the time-period from one distribution to the next is very important. A portfolio of mutual funds, corporate bonds, and high dividend-paying stocks, designed for regular payout streams, is very likely to be more risky than an annuity. Of course, one can overpay for additional security... An alternative to annuities that does consider risk is to invest in "risk-free" securities, namely government bonds (t-bills, I-bonds, etc). These do not include "death benefits".

allancoleman, Thanks for your reply. As for benefits of annuities, the only one I perceived was a life-insurance like option in your Roth, thus if you die, producing a huge payment, which would be tax-free. However, looking through annuities, I haven't seen one that offers a truly "life-insurnace-like" benefit; all they do is offer the maximum your investment ever was, your premium back, etc. Regarding them being "expensive", I believe that they're expensive because of the benefits they provide. I tend to think the market is pretty efficient, so I think that they're probably price about right for the additional benefits (in terms of risk-reduction) they offer. The question is, do specific individuals need these benefits? The Motley Fool had an interesting article discussing the possible drawback to a 401(k) or Traditional IRA, Don't Max Out Your 401(k). The summary argument comes from a paper by Kotlikoff, who argues that because of the lower capital gains tax rates, if you invest long term in a few stocks that reinvest or engage in share-repurchases (instead of paying out dividends), this will be more beneficial than investing the money in a 401(k) or Traditional IRA. The key assumption there is that you rarely, or never, sell the stocks and incur capital gains along the way. This is not always a realistic assumption, as noted in the follow-up article, Dont' Max Out Your 401(k): Part 2. Right now, I'm working on an excel model for the benefits of Roth => Traditional conversion, and possibly incorporating MC simulation into it. After that, I'm going to create a model comparing 401(k) / Trad. IRA investments to regular account investment, with one input for the probability of selling (thus incurring a capital gain or capital loss) in any given year, to figure out how rarely you have to incur capital gains in order to come out ahead with a regular account vs. a 401k or Trad. IRA. I copy below my response to someone who noted the drawbacks of Traditional IRAs (which also apply to 401(k)s for the most part). I tend to agree, but had qualifying considerations...

I replied in response to the comments made at this blog-thread on the drawbacks of IRAs. One of the listed cons was that there's no death-benefit. I noted that one can invest in an annuity within an IRA, but that I didn't think you could buy a life insurance policy within one (further research verified this). However, of course, annuities are expensive relative to mutual funds, as you're paying for the benefits. Regarding annuities in a retirement plan, the only possible benefits I can think of are: (1) To guarantee an income stream from the retirement plan after retirement; (2) To provide a tax-advantaged death-benefit, should you die early, for the advantage of your spouse's saving for retirement. Specifically regarding #2, are (or can) death benefits from annuities within IRA's (be) kept within the IRA and treated as all other funds in the IRA? Upon some further research, I went to a site describing a "time bomb" for the elderly hoping to pass on their money to their heirs, that is present in both annuities and traditional IRAs. Neither of these vehicles, unlike stocks and bonds, has a step-up basis feature upon your death. This, of course, isn't applicable to Roth IRAs. So, curious, what's the analysis of those here on the effects of this? It seems to me that, to the extent that one can convert to a Roth, this isn't applicable. (and after 2010, there will be no income limitations on conversions). Thoughts?

It would be quite nice if you could contribute non-cash assets to Roth IRA's, especially those which have appreciated in value and on which you would owe taxes. However, unfortunately, it is most likely for this reason that you aren't allowed to do such.

Good question. There are some downsides, though I think they're outweighed by the upsides: 1. The tax-benefit is in the future, thus uncertain. At one point, it was thought that Social Security payments would never be taxable; they now are. It is possible that Congress may at some point decide to tax Roth IRA distributions. That said, there'd be a lot of opposition, and there would probably be a Constitutional challenge. 2. As I noted in this thread, if you are close to a breakpoint for obtaining the retirement savers credit, placing money in a Roth vs. a Traditional IRA would not reduce your AGI, thus not help you out in meeting the breakpoint. If you're within a couple hundred dollars of a breakpoint, it may be worth it to divert that money to a Traditional IRA (that said, many companies have large minimums for establishing Traditional IRAs, relative to what would be optimum for you). 3. If you expect your income to decline from the date or Roth IRA contributions, or taxes to decline, it may be more wise to contribute to a Traditional IRA. 4. If your employer matches your contributions, you should contribute to a 401(k) up to the point of matching, then, with your remaining disposable income, contribute to the Roth IRA up to the limit, then with whatever's left over (if anything) contribute to the 401(k). That is: 401(k) to max out matches => Roth IRA up to max => 401(k) as much as possible. All that said, I still think a Roth IRA is the best way to go (with the one exception for 2, and that would mean contributing as little to a Traditional as you could). With a Roth, the longer you leave your money in, the greater the benefit becomes, because of tax-free (not tax-deferred) growth. Since you're 24, it is highly unlikely that your income in retirement will be lower than it now is. Furthermore, it would take a monumental leap of Faith to believe that somehow taxes aren't going to be getting higher and higher. Other benefits of a Roth IRA: (1) there are no minimum required distributions during your lifetime, so you don't have to start taking money out at 70.5 if you don't want to; (2) You can always take out your basis in a Roth IRA without any taxes or penalty.

GBurns, What I mean is that in alot of these kinds of things, you're prevented from investing in the company if your percentage ownership is larger than a certain %. The article cited states that a disqualified person would include (among other things) "any corporation, partnership, trust or estate in which the IRA holder has a 50 percent or greater interest". In other words, if the IRA holder is 1/1000th of a share short of having a 50% interest, the transaction would not be prohibited (presuming that that is in fact the correct % quoted, and assuming that they don't round when determining whether or not your % ownership makes it a PT; otherwise, it would have to 1/1000th of a share short of 49.5%). Just like in my prior thread, where I noted the difference between an AGI of 15,000.49 and 15,000.50 for the retirement savers credit: it's a difference of $600 in terms of the tax-credit. The person with 15,000.49 can claim a credit of $1,000; the person with 15,000.50 can only claim a credit of $400; in other words, earning one penny more can make you 600 dollars poorer. (This is the correct way to do it, since if you round, you'd have to round down for .49 and up for .50; normally, a rounding error producing an $1 difference in AGI would not get one in trouble; I'm not sure about this case). Other things would also count as "squeezing by"; e.g., regarding family relations. Someone who is "like a son" or "like a brother" to one, but not adopted, for example.

QDR, their margin of error may be smaller in such cases, but it still comes down to either prohibited or not prohibited. There is no in-between. If they just squeeze by by one cent, or a small percentage factor, or whatever, then it's completely legit.

The Retirement Savers Credit can be claimed using form 8880. Depending on one's marital situation and income (no-more than $50k), one may be able to obtain the savers credit. This credit can reduce the taxes the IRS will expropriate from you to $0, but it cannot get you a subsidy (State-payout). It can be used whether or not you itemize your 1040 or 1040A, but cannot be used with a 1040EZ. However, there are a few snags to think about when planning ahead. Before explaining them, let me briefly over-view what is required to be able to claim the credit: Adjusted Gross Income must be less than: $25k if single, widow(er), or married filing separately $50k if married, filing jointly $37.5k if head of household [*]Must have made contributions to a qualified retirement plan, such as a Traditional IRA, Roth IRA, 401(k), 403(b), etc. [*]Cannot be claimed as a dependant on someone elses' tax-returns. [*]Cannot be younger than 18. [*]Cannot be a full-time student. The way the tax-credit works is that you get a credit for a fraction of the lower of either your contributions to retirements savings plans or $2,000. What fraction is multiplied by $2,000 or your retirement-contributions (whichever is lower) is determined by your income and filing-status. Here's a table summarizing it: <Because I cannot figure out how to make a table on these message-boards, I provide this link to a post of this very same entry on my website, which has the table on it.> Many of you probably already see what I'm about to talk about. If you're single and your Adjusted Gross Income is $15,000.49, you can get a maximum of an $1,000 credit; this is because you're allowed to round on your 1040 or 1040A, so it rounds down to $15,000 (the choice to round or not round has to be for all fields). However, if you're single and your Adjusted Gross Income is $15,000.50, your maximum credit is $400: A 600 dollar difference for one extra cent! (This is something I find extremely idiotic). It is highly unlikely that many will be that close to the margin; however, it is entirely within the realm of probability that there will be many $10, $20, $50 away from the difference between a $1,000 credit and a $400 credit. One way to get around this grave annoyance would be to see if you can lower your AGI. Tax-deferred contributions to a Traditional IRA, 401(k), 403(b), etc would be one way to do that. A common strategy for the forward-oriented is to max-out contributions to a 401(k)/403(b) and max out contributions to a Roth IRA (the contributions of which are not tax-deductible, but grow tax-free not tax-deferred). Currently, the maximum that one can contribute to a Roth and Traditional IRA together is $4,000. This means that money contributed to a Roth IRA reduces the possible money one can contribute to a Traditional IRA. Thus, for someone on the margins of a percentage-break in this tax-credit, it may be adviseable to consider diverting the minimum amount of Roth IRA contributions to a Traditional IRA so as to set one up (see this thread on BenefitsLink for a discussion of the minimum required startup amounts for IRAs). Thereafter, you can contribute solely to your Roth IRA; if you foresaw falling on the margins of a break-point again, you could divert the minimum amount from you Roth IRA (which does not lower AGI) to your Traditional IRA (which does lower AGI) so as to make the breakpoint. This obviously makes tax-deferred retirement contributions more valuable, ceteris paribus; thus, you may have to re-evaluate the desireability of Roth IRAs vs. Traditional IRAs, if you are at the margins of the saver's credit breakpoints, or within $4,000 dollars of being at a breakpoint. Consider, for example, if you're single and your income is $33,000. Maxing out 401(k) or 403(b) contributions would provide a downward adjustment of $14,000 (AGI would thus be $19,000). You now have $4,000 dollars to contribute to a Roth IRA or Traditional IRA. An $4,000 contribution to a Traditional IRA would reduce your AGI to $15,000, while a $4,000 contribution to a Roth IRA would not change your AGI. You now have to decide if the benefits of the Roth IRA's tax-free growth are worth (to you) the costs of a $4,000 tax-deduction (which lowers your taxes by a fraction of $4,000, depending on your tax-rate) and a $1,000 tax-credit. I say to you, because the subjective costs may be different to two different people in the exact same situation, because of differing time-preferences. The more you value that $1,000 tax-credit and $4,000 deducitlbe now, the less the subjective benefits of tax-free growth (which will be reaped in retirement) will be. The shorter your time-horizon on your retirement funds, the more attractive the benefits of this course of action, as well. How well you expect your investments to perform, and whether you expect taxes to go up or down (the safe bet's on the former) also play into the decision, along with your current effective tax-rate and your expected future effective tax-rate. Moving away from that example, the other thing you have to decide is if figuring out all of this stuff is worth it to you ex-ante: That is, do your expected subjective costs of doing such exceed your expected subjective benefits. Put another way, the work of all this may be worth it to many people to save $1,000; but it probably won't be worth it to anybody -- except someone with an extreme neurosis -- to save $1. Recharacterization: Up until Apri 15th, you can still recharacterize Roth IRA contributions for the prior year (the year for which you're paying taxes) to Traditional IRA contributions. If doing this and opening up a new Traditional IRA with that company, you'll have to recharacterize the minimum to open up a Traditional IRA (varies from company to company, but again see my prior ref to a BenefitsLink thread). Thereafter, to engage in this kind of strategy, you'll only have to recharacterize the precise amount that you need (or the nearest rounded up amount thereof that your financial institution will allow you to recharacterize) in order to get your AGI down to a Retirement Savers Credit breakpoint. It is probably most wise to figure out what you need to recharacterize (if anything) after the year for which you're paying taxes ends, so that you don't recharacterize anything more than you need to in order to get the credit.

They are both merely proposals, unfortuantely. Hopefully, they'll be on the books soon.

shanna, Fidelity allows you to start with $200 (provided regular contributions). Most Vanguard funds allow a $1000 minimum initial investment for Roth IRAs. If you really want to go with one company in particular, but their initial fee is too high, try calling them up and seeing if they'll lower it.

Happy New Years eve, everyone. Anyone have any financial resolutions they wish to share, general or specific to Roth's? My financial New Year's resolutions: 1. Contribute $14,000 to my 403(b), via renewing my salary deductions to max out contribs. 2. Contribute $4,000 to Roth IRA, using $154 biweekly contributions. 3. Of money left over after contributing to 403(b) and Roth IRA, save at least half of it. 4. I keep track of my finances using GnuCash in a double-entry fashion; right now, the accounting equation isn't balancing out, so I must have made a mistake at some point. Thus, my modest goal is to correct this discrepancy. The Motley Fool has a nice set of Retirement Resolutions.

Regarding the large number of references I provided, I think it is important to become as educated on the topic as quickly as one can. This is based on my simple observation that the investor who does not have thorough understanding will be prone to be panicky and shift around. It is not my intention, however, to suggest that one should not invest until one has read through every text on the subject. Rather, I suggest that while one is reading and learning, one invest in what one is most comfortable with, whatever that may be, based on what one knows at the time of placing one's money. If you're looking at a fund with a good 10-year track-record, find out that fund's worst quarterly and yearly performance. If you'd experienced that kind of loss in a quarter and year, would you still hold onto the fund? If not, you shouldn't buy it now. I previously posted an overview of Fidelity vs. Vanguard for the new investor here. My conclusion is that Fidelity is slightly better, for the reasons I listed in that post: 1. Fidelity does not charge a yearly fee for the maintenance of the Roth IRA. Vanguard does charge a maintenance fee ($10), if the balance of your Roth is less than $5,000. That fee is waived for people who have $50,000 or more in assets at Vanguard. Maybe I'm being too much of a miser on this, but it is an expense. 2. Vanguard requires a minimum initial investment of $1,000 to open up a Roth IRA. Fidelity allows you to build up your Roth IRA in $200 dollar increments, via Fidelity SimpleStart IRA: 3. Fidelity now has lower expense ratios than Vanguard on its Spartan Index Funds, $10,000 or more See Expenses as Low as 10 Basis Points on Fidelity Index Funds. The expense ratios for these Fidelity Spartan Index Funds is 0.10%, vs. 0.18% for Vanguard 500. On $10,000, that would be a difference of $9. For Spartan Index Funds Fidelity's non-Spartan index funds do not have lower expense ratios than Vanguard, though they are close and competitive. Fidelity's 500 Index Fund has an expense ratio of 0.19%, Vanguard's of 0.18%. On $10,000 of funds, that would be an $1 difference. 4. Though both companies offer considerable choice, Fidelity is choice-deluxe. There are some important considerations to remember for opening a Roth IRA to make contributions for 2004. See Important Deadlines for Your 2004 IRA Contribution. Summarily, make sure you've completed your online application and contributions before April 15, or make sure your mail is postmarked before April 15. Search Fidelity for more specific information. See How to Contribute to a Traditional/Roth IRA. Via Moneyline, you can make your 2004 contributions in 2005. Make sure to make them 3 days before the April 15th deadline, as it takes 3 days to process. See Electronic Funds Transfer. Meanwhile, you can automatically be building up your 2005 Roth IRA to $4,000 by Fidelity Automatic Account Builder. Regarding investment choices, my favorite Fidelity fund (Fidelity Low-Priced Stock) is closed to new investors. Another fund I like, Fidelity New Markets Income, is not however closed to new investors. It is an aggressive international new markets bond fund. This provides you with diversification from stocks and from the US. However, I would recommend this fund later on. The funds John highlighted are all reasonable choices, though I particularly like the Contrarian and Value funds. Look at manager tenure and volatility.

You are going to be investing for way more than 40 years (40 just gets you to retirement age, you will likely live many decades beyond that point) so you can get good results with even a fund that has a stock/bond blend. Don't worry too much about what you choose initially, you will learn more as you go. I would mirror this sentiment, but suggest that you don't pursue gaining investment and finance knowledge in a lackadaisical matter. Time is a one-way arrow. Once it goes by, you can never get it back. Knowledge gained earlier can serve you longer than knowledge gained later, and once an opportunity passes you up, you never get a chance to go back in time and grab it. You said you'll probably be investing $2,000 initially in your Roth IRA. If at all possible, I'd suggest you make it $3,000. Once a year goes by in which you haven't invested the maximum in your Roth, you lose that opportunity forever. If there is anything that you can do without, do without it. In 40 years, you will almost certainly not care about the things that you diverted an extra $2,000 from your Roth IRA to obtain. If you become a customer with Fidelity, you will be in the fortunate position of getting a magazine discussing money matters. Fidelity also has articles on their website, which are helpful. On personal finance, I would recommend books by Suze Orman (particularly The Road to Wealth, which is organized like a FAQ). Useful websites include: The Motley Fool RothIRA.com 403(b)wise 401(k)HelpCenter Dept. of Treasury Health Savings Accounts Roth401k LifeTimeSavingsAccount FinancialSense.com (a really good website for investors) For specific books on investing, I recommend Common Stocks and Uncommon Profits and Other Writings (Philip Fischer) The Intelligent Investor (Benjamin Graham) Security Analysis: The Classic 1934 Edition (Benjamin Graham and David Dodd) One Up on Wall Street (Peter Lynch) The Warren Buffet Way (Robert Hagstrom) The Essays of Warren Buffet: Lessons for Corporate America The Theory of Investment Value (John Burr Williams) Tomorrow's Gold: Asia's Age of Discovery (Marc Faber) I would also recommend some excellent books on economics, for a broader background. These books cover money, banking, the gold standard, inflation, and the business cycle: The Theory of Money and Credit (Ludwig von Mises). Probably the best book ever written on money, online here On the Manipulation of Money and Credit (Ludwig von Mises). Probably the best book ever written on the business cycle, available online here America's Great Depression (Murray Rothbard), online here The Austrian Theory of Money (Murray Rothbard). A very brief overview of The Theory of Money and Credit A History of Money and Banking in the United States: The Colonial Era to World War II (Murray Rothbard). Available online here. The Mystery of Banking (Murray Rothbard). Available online here. The Panic of 1819: Reactions and Policies (Murray Rothbard) What has goverment done to our money? (Murray Rothard)

As John said, you won't and can't look at all 10,000 mutual funds. So, you need to narrow down the funds your considering. I suggest using various fund-search tools. Things you should consider include 1. Manager tenure 2. Expense ratio 3. Fund category 4. Fund rating and long-term performance You may want to use Fidelity's fund evaluator tool to look for mutual funds that are right for you. Click on Advanced for more options. You can also look at Vanguard's Advanced Fund Search. Both are very useful tools. While discussing Roth IRA maintenance fees, Fidelity has no fee for yearly maintenance.

ahighland, I apologize for my previous non-topical response. I hope that this response is more useful to you. You have something that many people don't on your side: about 4 years of time before you graduate from college, which works for you. You are right that time is your best friend. The minimum to start a Roth IRA will be limited by the minimum that a particular fund allows you to invest in it. Usually, it is $1,000 or $2,000. Many mutual fund companies allow you to start out with very small amounts (e.g., weekly or monthly contributions) as long as by the end of the year, you're up to that minimum amount. For some good information, see this website from Fidelity*, then click on the Traditional / Roth IRA link. You can look through Which IRA Is Right For You and Frequently Asked Questions. You can also click on the other links, all of which contain information on IRAs. I would not recommend an Traditional IRA, since your income is low now, and will be higher later. Because you anticipate it will be difficult for you to come up with large sums of money at once, I particularly recommend looking at Fidelity's Fidelity SimpleStart IRA. You can also go to Vangaurd's Retirement Center: Vanguard IRAs and look at the links pertinent to Roth IRAs. However, because you think it will be difficult to come up with large sums at once, you may find it difficult to meet the initial $1,000 requirement of Vanguard's to open a Roth IRA. Vanguard's traditional advantage has been to be the lowest cost provider: their expense ratios are usually the best. However, Fidelity has recently challenged them in that regards, and now has expense ratios on its major index funds of 0.10%. However, this is only on Fidelity's Spartan Index Funds, which require investments of $10,000 or more. It probably will not be of any possible benefit to you for a while. Despite that, for several reasons, in your case, I would recommend Fidelity over Vanguard: 1. Fidelity does not charge a yearly fee for the maintenance of the Roth IRA. Vanguard does charge a maintenance fee ($10), if the balance of your Roth is less than $5,000. That fee is waived for people who have $50,000 or more in assets at Vanguard. Maybe I'm being too much of a miser on this, but it is an expense. 2. Vanguard requires a minimum initial investment of $1,000 to open up a Roth IRA. Fidelity allows you to build up your Roth IRA in $200 dollar increments. The latter should be beneficial to you, for two reasons: a. You don't expect to have large sums of money at once. b. It allows you to dollar cost average into your positions. 3. Fidelity now has lower expense ratios than Vanguard on its Spartan Index Funds ($10,000 or more). Fidelity's non-Spartan index funds do not have lower expense ratios than Vanguard, though they are close and competitive. Fidelity's 500 Index Fund has an expense ratio of 0.19%, Vanguard's of 0.18%. However, the difference is just 0.01%. On $10,000 of funds, that would be $1. 4. Though both companies offer considerable choice, Fidelity is choice-deluxe. The maximum contribution limits to a RothIRA are as follows, and you should try your hardest to max out contributions. One year of opportunity forgone can never be regained: 2003-2004: $3,000 2005-2007: $4,000 2008: $5,000 After 2008, the limit will be adjusted for inflation in $500 increments. A Roth IRA is an excellent choice for an investment vehicle. You can always take out dollar amounts up to your net contributions (without any penalties), if you are in an intractable situation. I would recommend you strive as diligently as you can to max out your Roth IRA contributions. Saving is a virtue. Investment Advice: Because you are very young, you have a long time-horizon. You should be focused on the long-term. I would thus advise you to invest aggressively, though not carelessly. This means you do not simply invest in the fund that's been returning the highest in the past year. When looking at specific mutual funds, here are some things you consider. 1. Manager experience. How long has the manager been with the fund? What portion of the fund's success did the manager preside over. A 10-year track record of success is always meaningful. However, it is most meaningful (for your purposes) if the present manager presided over it. 2. Expense ratio. You want funds that have lower expense ratios than the industry averages, ceteris paribus. Of course, all else is rarely equal, so you have to use your judgement. Around 1% or lower is great. You should be willing to pay for quality, but if you're paying a higher expense ratio, you should make sure that you think its worth it: Do you really think this fund manager is good enough to warrant a higher expense? With index funds, however, expense ratios are much more important. An index fund at Fidelity is the same as one at Vanguard, or anywhere else, except for the expense ratio. 3. Look at long-term track-records. Long-term track-records that span ups and downs are the most meaningful, especially if one manager presided over the fund for the entire time. 4. Understand what you're investing in. There's alot more to a fund than just its average returns and expense ratios. You have to understand the fund's investment strategy and what sectors it's invested in. Is it a value fund? A growth fund? Blend? Or a sector-specific funds? 5. Be patient. Funds may have significant down periods, or periods of underperformance. You should be willing to weather that. 6. More specific advice. I would recommend considering a position (10-20%) in hard assets (gold, silver, oil, water, etc; real-estate is in a bubble at the moment). No-one has ever gone broke investing in gold. That's because it has a 2,000 year history of being money. Hard assets cannot be enronized. However, most companies do not allow you to invest directly in hard assets in a Roth IRA. There are, however, mutual funds that invest in companies in these industries, and even partially directly in the hard-assets. There are also holding companies that simply buy hard assets and hold them. You may want to consider investing in these things outside of your Roth IRA, both for appreciation potential and protection from inflation. Some more general advice: There are two books that everyone should read: The Intelligent Investor by Benjamin Graham, and Common Stocks and Uncommon Profits by Phillip Fischer. I'd also suggest the classic 1933 edition of Security Analysis by Graham and Dodd. * Note: I'm using Fidelity's website because that's the one I'm most familiar with.[

GBurns, I would've thought the benefits of a Roth 401(k) would be obvious, for essentially the same reasons that a Roth IRA is generally superior to a Traditional IRA. If you look at the math of HSA's, they're going to be to the benefit of employees, because a large chunk of it won't go towards low-deductable health "insurance". Instead, a small portion will go towards a high-deductible health-insurance plan, and up to the deductible could be invested in an HSA. This is good for employees, as it gives them more choices, and more money to save for the future. The unfortunate aspect of HSA's is that if your employer provides you with as Low-deductible insurance plan, you're stuck. You can't get an HSA if your employer provides a low-deductible insurance plan. This is extremely unfair to individuals who have no choice in the matter, thus can't get the savings benefits of HSAs. Likewise with the Roth 401k. For the vast majority of people, taxes will be higher during retirement -- even if their income is lower -- due to raised taxes. Thus, the Roth 401k investment is the better deal. Even if one's taxes are lower in retirement, if money is put in a Roth 401k long enough, it could still be better. These 2 additional plans would add 2 additional requirements for separate recordkeeping. The benefits to employers they offer is that they make them more competitive among prospective employees -- who weigh the advantages of these plans -- and reduce costs. HSAs will most likely greatly reduce the expenses employers have to pay to provide health-care for their employees.

GBurns: the reasons for a Roth 401(K) over a traditional 401(K) are all of the same reasons for a Roth IRA over a Traditional IRA. Simple as that. It is essentially the same comparison. I never said that any employer has to implement HSA's. I simply have said (elsewhere) that HSA's are to the employees benefit and should be implemented.

I was talking to my Fidelity representative about SEP IRAs, SIMPLE IRAs, and self-employed 401(k)s, and he mentioned that there would be a new kind of retirement plan coming into effect in 2006 that will be much to my (and others') benefit: the Roth 401(k). I've done some searching on the internet, and have found some useful websites, most notably Roth401k.com, which is a sister site of LifeTimeSavingsAccount.com, which is a sister site of RothIRA.com. I'd suggest everyone check it out. It will be a very beneficial plan. It appears that essentially what will happen is it will be possible for employees to contribute after-tax dollars to a Roth 401(k), which would grow tax-free (instead of tax-deferred, where you pay at the income-tax rate upon withdrawal in retirement). However, employer's won't have to allow their employees to contribute to a Roth 401(K), so talk to your employer's about it, and those you work with. The university I work for hasn't even implemented Health Savings Accounts yet. Any thoughts, articles, or comments are appreciated.

Abraham Lincoln came up as a tangent to a point I made (that the USSC doesn't have any enforcing power, and does nothing during the worst of times). Hans, that's a weblog, or journal. You do know of the concept, right? But, thanks for reminding me about that journal; I didn't know I still had it linked. I was a worthless socialist when I was writing in my K5 journal, and don't write anything there anymore.

Yea, good point. There's a lot of crap out there on Lincoln. Essentially, many historians have formed a cult of worship around Lincoln. It's their profession. Henry Jaffa writes some of the worst crap trying to justify all of Lincoln's various immoral and unconstitutional actions.

joel, Perhaps you could kindly inform me what the hell your getting at. The man was essentially a dictator in the US and a racist, despite all the propaganda that's taught in high-school about Lincoln, the slave-freeing hero (in reality, he wanted to deport all of the slaves back to Africa). He certainly wasn't a great champion of African-American rights (some of the strongest abolitionists, like Garrison, Tucker, and Spooner harshly criticized him on the issue). Then of course there was his ridiculous specious argument that the Union somehow magically preceded the States (an argument that Hitler approvingly cited in Mein Kampf) Iin reality, at the time, there was a proposed Amendment to ban secession -- if it wasn't constitutional, why make an Amendment to ban it? Also, Northern States (I believe New England) had been planning secession, and recognized the right to secession, long before the Civil War. However, the point is that the USSC didn't stop him from violating the Constitution numerous times.

read through some various stuff on King Lincoln. The best is Thomas DiLorenzo's The Real Lincoln.

I'm not referring to anything extraordinary here. People seem to have very little perspective on these things. Hyperinflation has been a very common thing since the inception of fiat-money. An obvious example that comes to mind is post-WWI Germany under the Weimar Republic. It can happen at any time. The US is particularly susceptible to it now, given the enormous debt from the war on terrorism. Inflation is the easiest way for the State to fund its new projects. It is obvious that anyone who has the power to print out money will do it to his own advantage. Furthermore, the fractional reserve system magnifies the inflationary problem. Now, fiat money is particularly vulnerable to this, because it can be printed out without abandon. Hard money -- gold and silver -- is not. You can't "print" out gold. It is expensive to mine gold and silver, and we're always approaching the point where all of the gold/silver that exists has been mined (some argue that it's very possible that almost all of the gold that's existed has already been mined). Which is why I think it important to have a large position in real money. In a portfolio of $100k, 10-20% of gold will hedge against inflation, particularly against the disastrous situation of hyperinflation. Regarding the USSC, they have a very questionable history of striking down unconstitutional laws. The USSC routinely held up the constitutionality of slavery, for example, despite the fact that it is obviously contrary to "pursuit of life, liberty, and happiness". Of course, some lawyers say there is no problem, since the Constitution is whatever the USSC says it is. That's all fine and good for legalesse types, but for those of us who read real English and live in the real world, it doesn't matter. The USSC was particularly worthless during Lincoln's Presidency, as Lincoln violated the Constituion in every way imagineable, using the opportunity of the Civil War to elevate himself to dictatorial status.

A friend of mine has a credit-card problem. I'd like to help him out with what to do. Here's his problem: My friend's father took out $225K in his name and convinced the credit companies that he was 30 years older than he actually is, and that he was a professor at the University of California. Now, he can't get any student loans. I'd imagine his credit-rating is shot, and I'd also venture that he'll be turned down for any credit-cards or loans he applies for, or if is accepted, will only get them accepted at very high APRs. So, my question is, what can he do? Surely, there has to be some way that he can insure that this kind of fraud is corrected, and doesn't reflect him. My suggestion was to contact the 3 major credit unions and try to get it straightened out, and to also submit a written request in writing explaining what happened and demanding that his credit-reports be fixed. Any other suggestions? What can be done to correct this false information that is out there about him as quickly as possible?

Lame Duck, Thanks for the advice, and thanks for the tip on the Self-Employed 401k, which'll offset my 403(b) contribs. I was wondering that in the beginning. Someone told me they offset, then I asked Fidelity, and they said that they didn't offset (that I could stack one atop the other). I guess I need to call up my legal firm