IRA, 401K, money purchase pension plan: “O my lord”

So my first class was government vessels. The TRL van would pick me up every morning. The first day the door opened up and there sat 3 old men. They started in with jokes and talking shit. I felt right at home. They started talking about working at MSC. One of the many topics they would cover with me during our week of van rides is saving my money. That’s what this post is about. The guys told me do not waste your money. They also said do not let other guys on the ship take you to Thailand and start drinking and have hookers 3 deep at the bar. I’ve had guys from all the unions say the same thing. MSC, SIU, SUP all have said save your money. The problem is this: “how and where to save it.” One of the things I’ve learned about myself in the past couple of years is that I’m at my best when I set goals and set forth on a fluid plan to achieve them. As obstacles come up I have to adapt to handle that particular problem, still keeping in mind my original goal. I’m trying to set some goals with my money, and stay on a course of responsibility. Of course I have the internet, the google bar is one of my best friends; however, there is so much information out there that I don’t know how to make sense of it all. I need a book or a person to help me out with this. I’m really looking for something simple. Something that says OK you make this much and you should have x amount in savings. You should give x amount to your IRA and 401K. I have been working on my credit and I’m up 229 points and should be near an 800 by the end of this year. If you can help me connect with some of this information, please let me know. Thanks

Read “A Random Walk Down Wall” by Burton G. Malkiel and “The One-Page Financial Plan” by Carl Richards.

Two books I highly recommend to obtain financial peace is “Financial Peace University” by Dave Ramsey & the much simpler “The Richest Man In Babylon” by Clason.

If you are not married, give the “Richest Man In Babylon” to any future girlfriends. (It’s been published in 30+ languages) If the girl doesn’t read or blows off saving for the future as something lame then dump her. No matter how thrifty you are or how much you save, it will be for nothing if your spouse isn’t on the same page.

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Always choose a woman who is MORE frugal than you.


Lots of books written on the subject, too numerous to mention. But I think your approach here is a little out of order. You can’t know how much you need to save until you have an idea of how much you’re going to spend. So if you’re starting off at square one, I would recommend drafting a budget for yourself first. That will give you a reasonable place to start extrapolating how much you’ll need to have saved in an investment/retirement vehicle. Then you’ll be able to start playing with variables like retirement age, aggressiveness of investments, inflation, etc.

If you’ve never done a budget for yourself, start by just writing down what you spend for three months. That should give you a pretty good idea where your money goes. And leaving aside any comments about trafficking in persons, take the old guys’ advice with a grain of salt: budgeting/saving is like dieting; if you constantly deny yourself you’re eventually going to fail. So have some room in your budget for leisure pursuits/fun.

All that being said, save as much as you reasonably can. If you’re 22, save at least 10% in your 401K. If you’re older, and closer to retirement, you’ll have to save more - compounding interest is working against you now. Set a goal of maxing it out one day (the deferral limit this year is $18,500). Absolutely do not leave any matching contributions on the table (if you get them) - that’s turning down free money. Every time you get a raise, plow most of it into your 401K/IRA - you won’t miss it if you never see it. Also in that vein, use automatic contributions if possible, make it so you aren’t having to set the money aside yourself.

I have written an article on the most a sailor can contribute in one year to their retirement. If you are very ambitious you can max out both a 401(K) and a Roth IRA.

With the MEBA 401k plan after the $18,500 pretax contribution you can contribute after tax to the 401k up to the federal employer match/employee which has combined maximum of $55,000.

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I say put the whole pile in the hands of Jack Hearns and his team of financial experts

you’re guaranteed returns of dozens of dollars…enough maybe even for a lunch at Denny’s with a friend (but only the earlybird special)

I didn’t know MEBA offered an after-tax 401k contribution, very few companies do.

The strategy to roll over the after-tax 401k money into a Roth IRA once you leave your company. This could save you a tremendous amount of money if you leave the company with decades before retirement and allow your money to grow.

The downside to after tax 401k contributions is that the growth on the after tax contributions are not able to be withdrawn without penalty until you turn 59 1/2. I recommend a financial advisor if you want to perform this financial manuever because of the high amount of money involved and the IRS penalties if you interpret the sequence or rules incorrectly.

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Dave Ramsey has great advice on getting out of debt but horrible advice on investing, do NOT listen to Dave Ramsey’s investing advice. In fact, if you use one of his “recommended advisors” you’ll get ripped off by fees, loads, and commissions.


Paul Merriman is a former financial advisor and now that he’s retired he’s a retirement planning educator. His book Financial Fitness Forever is an excellent read and will change your life. He also writes for MarketWatch with lots of good information, like his updated Ultimate Buy and Hold Strategy and his website,, had recommended portfolios and more excellent educational material. I highly recommend starting off by buying and reading his book.

The Bogleheads forum is full of people way smarter than us in long term investing and they can show you anywhere from a really simple to a really complex plan to do that.

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Rule 1. You should enjoy some of your life. Almost everything you buy will depreciate in value. Even real estate after taxes and insurance appreciates in most cases no more than the rate of inflation. Memories last forever. Hookers 3 deep is not necessary, one should do. Respect them but keep in mind they are in business, never forget that. They are business people kinda like used car dealers.
Rule 2. No investment adviser gives advise for free. One way or the other you will pay.
Rule 3. The wisest people do three things. They get out of debt. They bank enough money to cover their living expenses for one year and after that they invest in a world stock index fund until they are 50 years of age, 10% of your salary should do it if you’re under 30. After 50 they put 50% in treasury bonds and leave 50% in index funds.
In the end you either have enough to be self sufficient or you die trying with fond memories.

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“They are business people and kinda like used car dealers.” This gave me a chuckle.

I think one year of living expenses is a bit extreme. I maintain 6-months worth in an emergency fund that is readily accessible… but not too accessible if you catch my drift. It stays in a 12-month CD that requires a phone call and at least 24-hours to access. It has saved my stern gate several times already.

Best advice I have received is to max out a 401k and IRA every year and throw 10% into an inexpensive S&P 500 index fund. I realize this is a huge stretch for those with wife and kids and other responsibilities, but that’s my line on it as a single man with no attachments.

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Index funds.


How to invest for dummies:

How to be cheap

Also look into the many FIRE (Financial Independence Retire Early) communities on the web.

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