Retirement: Invest or Save?

[1adayParticipant 4]

Hi guys,

I’m a guy in his late 20’s just getting out of debt (Student loans, Credit cards, Overdrafts etc.) and it feels great to be nearly free of the debt burden.

Now I have been faithfully paying off my loans for the past half dozen years, finally I will have some extra cash to either save for retirement or to invest for retirement.

My question relates to what would be the best way to use this money?

I’m sure that pension plans and retirement funds are some kind of a scam, as I’m sure the return on your investment is never equal to that of your payments in. That said, the investing plan is also uncertain to me because I am not very knowledgeable about the stock markets.

I am wondering what to do now that my debts are nearly paid off, and the extra cash I have become used to paying off I will now be able to use for other purposes, ideally a nest egg type of rainy-day fund, or some other kind of long term investment that I can rely on what I am in my late 60s as a retirement income.

I’m from the UK and we have a tax free saving scheme similar to that of a RothIRA, called a Cash ISA. You can save tax free with a government backed savings plan, up to £15,000 per year (Roughly $25,000 at time of writing). It is safe and secure but offers a very low rate of return at around 1.5-2% per year depending on which type of ISA you choose (there are various offers at different banks). I also, cannot currently set aside the full amount of £15k per year, only a fraction of that. Would it be wise to start to save in this? Or should I start to think about other investments?

One investment I looked into was a DPP (Direct Stock Purchase Plan) whereby you invest regular amount a month into a company directly with the company, thus avoiding any broker fees or portfolio management fees. There are quite a lot of big name corporations that already offer these plans, but it does depend on their stock price always rising and this is uncertain.

Finally, another option I have considered is P2P lending. You can lend your own funds to other people within a peer to peer lending exchange like Zopa or LendInvest or RateSetter, and act as a sort of bank. You loan your money using the infrastructure of one of the p2p lenders to someone who wants to borrow. You can expect 4% return pa over 3 years and up to 5.8% return pa over 5 years. This is personally what I am looking at right now as it is simple to understand and the returns seem to beat the stock market and ISA rates. Also, I have been on the other side of lending for a long time after lending money for my student loans, personal loans and credit cards and faithfully paying it all back at around 9% interest for the past half dozen years, so I know that there are good people to lend to who do pay back their loans, and the loans are backed by the p2p lending company as they have a vested interest in everything going smoothly as they have their reputations to secure as well as 1% fee from every p2p loan/borrow trade.

Anyway, long and starting to ramble so I will leave it at that

Any advice would be great!

[Crazy CanuckMember 4215]

Not a good idea to lend money since the economy isn’t doing that great. Sure the media make it look like does but it isn’t. I wouldn’t get into investments at least not right now. Your safest bet is buying gold and silver because it holds value. It’s more of an insurance that anything else.
You might wonder why precious metals? When inflations increases every year and it’s pretty high your currency actually loses value. This is why buying precious metals is ideal because it holds value. When the economy really does well you can sell it as quickly as possible.

Do not buy paper gold and silver stocks you want the real deal.

http://www.market~~~ch.com/story/peter-schiff-reckless-fed-may-push-gold-to-5000-2014-04-25

"If pussy was a stock it would be plummeting right now because you've flooded the market with it. You're giving it away too easy." - Dave Chapelle

[1adayParticipant 4]

Interesting. A lot of newb questions incoming, sorry in advance!

Do you own any physical Gold and Silver yourself?

How do you go about purchasing it? Do you go into jewellers shops?

How do you know the market price, and how to do you know if the price you are paying in a shop is fair?

Are you thinking just buy as much gold as possible, then slowly sell it off as a retirement plan?

Thanks

[Total LeeParticipant 1573]

Read the book “the Wealthy Barber” and always pay yourself first. Get used to that a and MAKE yourself do it. If you can’t afford movies , then so be it and don’t go. In your 20s, paying yourself a minimum 10% of everything you make (even if you are an average income earner) will mean you will be able to make yourself a millionaire. Cut everything out of your life necessary to save at least that 10%, and forget about that money. If you don’t know what to do with it, that’s fine! Wait until you do. Just keep making that 10% and maximize your IRA / RRSP every year. You will get a nice little refund for that which you can also sock away. If you make this 10% every year you will be amazed.

ASIDE FROM THE ADVICE I JUST GAVE YOU (BECAUSE IT’S IN YOUR BEST INTEREST) DO NOT LISTEN TO ANYONE ELSE ABOUT WHAT TO DO WITH YOUR MONEY. They would love nothing better than to see you broke. Build good credit. Buy gas and things you absolutely need with your credit cards and pay it off on time every month. Refuse to give credit card companies your money in interest. They are a tool to use ONLY TO BUILD CREDIT.

And don’t get into lending people your money.

[1adayParticipant 4]

Thanks Total Lee, I wish there was a rep system!

[Total LeeParticipant 1573]

Hey @AnuvaBruva

Totally my pleasure. “Total Lee”. Get it? (lol) Im sure they are working on a rep system and lots of new features here. I know the forums basically just opened a few days ago, but the guys in charge take recommendations and are super busy with other aspects of the site.

No need to thank me, because you will be rewarding yourself. Best of success to you and all good things!

[DocParticipant 112]

@totallee Thats some sensible s~~~ right there!

@anuvabruva Paying yourself first is the best advice you can get and all I can give you. Looks like Lee already beat me to it.

[Crazy CanuckMember 4215]

No I don’t have any gold yet. You will have to do your home work since I don’t know where you live. You will need to find a reputable gold dealer. If you have more than $20 000 saving from what I read gold is the way to go. If you have less than $20 000 US dollar then go for silver. I need to pay off my student loans I need to save a little more. If I had more money right now I would buy some silver coins.

Some banks sell gold bars and coins with a certificate. For example Scotia Bank in Canada sells them.

6 Ways to Not Get Ripped off by Your Bullion Dealer
http://www.uncommonwisdomdaily.com/6-ways-to-not-get-ripped-off-by-your-bullion-dealer-16721

http://www.storyleak.com/how-to-buy-silver/

"If pussy was a stock it would be plummeting right now because you've flooded the market with it. You're giving it away too easy." - Dave Chapelle

[Crazy CanuckMember 4215]

Just to add buying gold and silver isn’t a investment but an insurance, due to high inflation the value of currency is weakening that’s why everything is so expensive. Don’t trust what I say do your own research.

"If pussy was a stock it would be plummeting right now because you've flooded the market with it. You're giving it away too easy." - Dave Chapelle

[Gone SurfingParticipant 216]

Hello AnuvaBruva

As you live in the uk i would buy Moneyweek magazine. it will tell you all the latest best investments from their experts points of view, it is a very informative read.

[Primus_PilusParticipant 41]

I’ll second that silver / gold purchase advice.

I prefer silver because the Silver to Gold ratio is really out of balance and silver has a lot more upside than gold. It’s also going to be more volatile but buying PM’s is a strategy for retirement or long term investment (20 years) versus playing stocks. Avoid ETF’s for PM’s as well.
Feel free to diversify of course.

My preferred vendor is this company. Be prepared to spend some $$$ (50 ozt minimum) but he has always delivered.
http://www.silver50.com/

Why silver or gold? Because as it stands right now we have governments talking about bail-ins, banks treating you like you are an unsecured creditor and the stock market is utterly out of whack with fundamentals and geo-political risk.

When the financial system inevitably implodes just remember one rule.
“If you dont hold it, you dont OWN it”

[Rock St.EddieParticipant 129]

I can’t bring myself to invest in American companies any more. Oil, gas, gold, silver, currencies, whatever, but stock in American companies…

On a scale of 1 to even, I can’t.

[SoldanoParticipant 108]

Money in itself is just numbers on a paper, it has no value in the long term.
Investements have no log term value.
Just look at how companies appear and disappear all the time.
Facebook didn’t even exist 10 years ago and GM will probably disappear ten years from now…

Houses have some value, but the governement could potentially decide at any time that it doesn’t and could take it from you.

Gold you can’t tell, but it’s always going to be worth something and it’s going to work wherever you go.

[Richard FordParticipant 7]

My own approach (I run a manosphere finance blog) is to worry about cash flow before all else. It is quite possible to go broke with profitable investments if you run out of cash and cannot pay the rent. Remember that cash flow is the money that you can spend.

A couple of years ago I was in a very bad place. I had a flat that in theory was worth money but I was about to lose it because I could only find part time work as a security guard- in London. One of the most expensive cities in the world. By careful budgeting it was possible to pay off my arrears and start saving. Actually.. if you have a strong cash flow and you spread your money around you will do OK no matter what happens to the economy.

Interest rates will rise eventually while the market in the short them will probably fall. This does not mean you should avoid stocks as the market is always going up and down.

[mgtow_85Participant 752]

I’m thinking of saving for my retirement. Not sure of what I would want to invest in, but if it ended up being the wrong thing, I could lose everything I put into it. So I just pile on the savings instead!

[MadmanParticipant 772]

Most people will lose all their money if they try to time the market or day trade. Thats why I am a big fan of Mr. Money Mustache who says the same advice as Warren Buffett. Its really more about saving than being a great trader. Maximize your savings and put it into the lowest cost index funds you can find. You have to be able to ride out the market downturns though. Dont sell, just keep buying the index on whatever schedule you set for yourself. You are investing for the long term so dont freak out when the market tanks, a few years later it will be up again, and the market generally keeps up with inflation as well. Mr. Money Mustache advises to get your money into the market as fast as possible so you dont miss out on the dividends, etc.

At the end of every month my Vanguard account is set up to withdraw money from my bank account and invest it into VTIAX, which is their international stock index fund. I would do VTSAX the US index fund, but I am already buying it through my employer 401k plan.

Just save your ass off. It takes time, years, but you will be happy in the future when you have $1k in dividends rolling in every month.

[Governor Megachris%Participant 3584]

It’s interesting that I’m reading older topics like this to get some good financial wisdom, and that Total Lee above recommended “The Wealthy Barber.”  My mother had that book for years until she moved out of her house, and gave the book (along with many others) to me.  It’s been sitting in my apartment lately, as I had no idea what it was actually about.  Sounds like it would be worth checking out!

[Cipher HighwindParticipant 1144]

I take an opposite approach – the risk accrued by accumulating capital is too great.  Better that it be spent and enjoyed now rather than plundered.

IRAs and pensions of one variety or another are sitting ducks in the cross-hairs of a bankrupted regime and stand to be plundered in order to divy spoils; as H. L. Mencken put it, elections are an advance sale of stolen goods.

If one approaches this by the numbers, 25% of Americans aged 46-64 have no retirement savings.  Of those who do, 46% have less than $10’000, and 60% have less than $25’000 saved.

Those with pensions who can be plundered are outside of the ruling party’s voting bloc. The GAO estimates, as of 2011, that this booty is worth north of $5 trillion.

While I am fond of gold, there is the risk it can be stolen, either by the Washington regime in 1933 or by another gang of thieves. The more likely outcome would be a punitive tax on metals; this is already in place as capital gains on bullion are taxed at the “collectibles” rate of 28% which is in all cases higher than the ordinary long term capital gain rate. For metals to take off, a deeper black market must emerge, otherwise, the direct transactions needed to liquidate one’s metals for goods directly will simply not take place.

Cash under the mattress is less portable as a $100 bill takes up the same space as $815 in gold, and is subject to the same limitations as gold except for small transactions. Furthermore, under most state’s asset forfeiture laws, the burden of proof as to whether cash was obtained legally is upon the owner, not the regime.

My plan for retirement is very simple – a bullet to the head. Why should I suffer the ravages of old age on account of a diktat some oligarchs decreed years ago?

sources:
http://www.aarp.org/work/retirement-planning/info-02-2011/many_boomers_report_no_savings_at_all.html?cmp=BAC-OUTBRAIN-WORK_9041529_Boomers-Report-No-Savings-at-All
http://www.foxnews.com/opinion/2012/10/14/america-looming-retirement-crisis/
http://www.gao.gov/products/GAO-15-16
http://www.ebri.org/pdf/surveys/rcs/2011/FS2_RCS11_Prepare_FINAL1.pdf
http://www.wolframalpha.com/input/?i=price+of+gold+*+volume+of+%24100+bill+*+density+of+gold

[Anonymous 2]

Stop making so much sense Cipher!

I save money for when I wish to initiate the “Final Decade”. After this period I will end my life gracefully. There IS no retirement for us! The gov just reasoned that “people get older so they can work longer” and bumped retirement age up by five years! So I’m already operating within a changing ruleset, one that will be completely modified when I hit 70. Do you know any 60 years olds in the programming business? I sure don’t, and I suck at entrepeneurship, so there is going to be a moment I will be so dependable on state wellfare (if it still exists) killing myself before povery and sickness can kill me sounds like a nice, clean exit. I don’t expect to have a family that would take care of me, what reason do I have to extend my life beyond functional adulthood? What reason do I have to sit there and lose all my self esteem s~~~ting in a diaper?

I’d rather be dead then incapable of providing for myself. The moment the world leaves me to die, I will spend my last treasure on the things I enjoyed best, and kick the bucket when the money runs out. They wanted a world running on money? I’ll run along then, ditching everything useless that costs me money (marriage, mortgage) as to improve my Final Decade.

[Governor Megachris%Participant 3584]

Ya know, realizing how my State job takes a decent amount for retirement each from each check, it’s making me realize how useless it might be.  I have about $2,000 in retirement that I won’t be able to touch…but I won’t be in my mid-60’s for another 40 years.  Something tells me $2,000 (or however much it will be by the time I’m that age, and assuming I stick with the State for a while longer) will not be worth much later on. 🙁

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