Leah Volpe, How I Long to Support Your Golden Years with my Taxes!

Wow, that’s a dumb thing to do and say:

At lunchtime in downtown Boston after Christmas, the streets were thick with people dashing around to stores and going out to eat. Leah Volpe was carrying a shopping bag in one hand. And she was about to do something that might make her financial planner quit in protest — she’s pulling out money from her 401(k) so she can go to Bermuda on vacation.

“I’m going to enjoy myself,” she says “I’m only 31 so I don’t really care about retirement yet.”

That’s because you’re not very bright, dear.

If you invested your $1200 for the next 34 years at an 8% return, it would be worth over $18,000*.

At a 10% return, an assumed stock market average, it would be worth over $35,000.

If you did even better and managed to earn 12% per year, you’d have over $69,000 at age 65, without having ever added another penny.

Naturally, you’d be adding a lot of other pennies along the way, unless Bermuda beckoned you to bronze your bosoms and buns every Boston winter.

More:

Here’s an example: If you start saving $300 a month — or $3,600 a year — when you’re 25, and earn an 8.5 percent annual return and reinvest your earnings, that money will be worth $1,064,457 when you’re 65.

But if you wait until you’re 35 to start saving the same amount, you’ll only have $447, 173. If you wait until you’re 45 you’ll have even less — $174,000. Think about that. If you start when you’re 25, you’re saving for just twice as long, but earning more than eight times as much money.

The reasoning skills of such people are the single, best argument against privatizing Social Security. Don’t get me wrong: I would love to have all of my share of FICA back to invest as I see fit for my own future. However, I fear that if that were the case, I fear I might be hit with an even bigger burden toward the end of my years when the government sees fit to bail out those who could save, but did not do so.

And you know it would (heck, did you sign up for a bad mortgage deal because you thought you could work at Winn-Dixie and afford a $500,000 house with no money down and 100% financing? Well, you’re an idiot and Uncle Sam gonna come make it all better now baby).

Meanwhile, I’m 36 years old and (currently, stock market gods be honored and praised) on track to retire at age 65 with nearly $2 million. However, I’ve never been to Bermuda, so I guess Leah has that on me.

Shorter version: save for your retirement. The sooner the better. Because I would rather, given the choice, support those who really could not afford to save much rather than those who blew it all on cabana boys.

Depending on the investment calculator you use, you will get different results based upon when it the investment is compounded, when contributions are counted, etc. Regardless, the lesson is the same: don’t take money out of your 401(k) for stupid stuff.

7 Responses to “Leah Volpe, How I Long to Support Your Golden Years with my Taxes!”

  1. Angie Says:

    But what if I want a really kewl “glass toy” … 😉

  2. Leah Says:

    WOW! such opinons. I am not very bright? Who are you to cast judgement on my personal decisions? I feel bad for someone who is concerned more with dollars and cents than living life. We are all individuals in the capitialist country. I have my money working for me. I chose to use some now. Fear not judgemental do gooders I have a pension and thousands more where that came from. I love to get a rise out of people who do not appreciate life as they are too busy fretting over the little things. Do you think this is a dry run? Maybe you think I am not bright, 31 spending foolishly. Perhaps though when you are old with all your money and noone to share it with, then you may realize what life is really about.

  3. andy Says:

    Leah, pumpkin, my sweet… I live a full life of joy and happiness, accentuated by my lovely wife and my three wonderful children, none of which has anything to do with the dumb things you said.

    You have THOUSANDS more? At your age, if you expect to retire comfortably, it should be TENS OF THOUSANDS MORE. Don’t be so cocky, as was evidenced by your “who cares about retirement” quote.

    As for how I will spend my fortune when I am older? On my family and my children and my (I hope!) grandchildren… I can’t even begin to imagine the joy it will bring me.

    Short version: Yes, Leah, you’re still kind of dumb.

  4. Kelly Slater Says:

    You sound like a pretty insecure person. Who cares what Leah does with her money? Here’s a profound idea…people do’t have to invest every nickel they make. It’s their money to play with. If she says she has tens of thousands more, what’s the problem? You’re just mad because not everyone plays by your rules, or shares your lifestyle, which I must say sounds pathetically boring. You talk about your wife and three kids like their trophies from your Men’s softball league. If you think 2 million is a fortune, you’re the one who dumb. I heard the interview on NPR and thought Leah was being honest. I am skeptical of people who think they can categorize someone by listening to them speak on the radio for thirty seconds.

  5. andy Says:

    Here’s a profound idea: pulling money out of your 401k for a vacation, thereby having to pay taxes and an early withdrawal penalty, is STUPID. Even taking a loan against the 401k for such a thing would be pretty dumb. To feed your starving family? Sure, smart move. To sun yourself on the beach? Not very smart.

    Trust me, Kelly, I’m not mad about this. Leah’s poor choices have only crossed my mind 4 times – once when I heard it on the radio, once when I wrote the post, and now twice responding to you folks when the site emailed me about the comment.

    P.S. Since you apparently don’t read for content (I think they offer classes for that, probably at a local community college or something), I mentioned my wife and kids as a response to Leah’s “no one to share it with” assertion. Thanks for keeping up.

    P.P.S. As above, I don’t see where I said $2 million is a fortune. It is, however, enough to provide for a comfortable retirement with a smart approach to withdrawals (note: fear not, I won’t be asking you or Leah for advice on this).

    Have a nice day!

  6. Kelly Slater Says:

    “Poor” choices in your opinion. A single woman wasting some of her own hard earned money is nothing to get your blog panties in a bunch about. So answer my question…why is a young women with thirty thousand in her 401k wasting 1000 for a trip that perhaps she wouldn’t be able to afford otherwise and perhaps desperately needed such a “dumb” move? Is she going to regret it for the rest of her life? You act like she has broken a commandment or burned an American flag.

    I guess you’ve never splurged on something…ever. Give me a break.

    I know brilliant people who spend their money foolishly. Still don’t see how you can judge her intelligence on her spending habits? Haven’t some of the most brilliant investors lost millions on bad deals?

    Leah is doing just what the banks and financial advisors don’t want her to do, spend her own money while they are playing with it.

  7. andy Says:

    “Poor” choices in your opinion.

    Well, yeah. I never said otherwise.

    A single woman wasting some of her own hard earned money is nothing to get your blog panties in a bunch about.

    As I implied in the original post, it isn’t just about a single woman but an attitude I have found among others, namely “retirement is really far away so who cares?” These are many of the same people who will be crying for the government to help them out when they can’t afford retirement. When do these folks plan to worry about retirement? When they’re 50? Good luck with that.

    So, not really about Leah the person, but she did sort of become the poster child for the cause.

    So answer my question…why is a young women with thirty thousand in her 401k wasting 1000 for a trip that perhaps she wouldn’t be able to afford otherwise and perhaps desperately needed such a “dumb” move?

    If she can’t afford it otherwise, maybe she shouldn’t be taking it. Just my opinion.

    Taking money out of a 401k and incurring penalties in addition to taxes is not a smart move. She’d have been better off sticking it on a credit card with an 8% interest rate and paying it off within a year; it would still be less than the 10% penalty the withdrawal got hit with.

    I guess you’ve never splurged on something…ever. Give me a break.

    Of course I have, but I’ve done it out of non-retirement monies that don’t slap me with penalties. If I have used credit for any part of it, I’ve booked it on a card that gives me miles and then quickly transferred the balance to a very low or no interest card (and I just did the same with several thousand in medical bills – I don’t want to lose any more of my money than necessary).

    I know brilliant people who spend their money foolishly. Still don’t see how you can judge her intelligence on her spending habits? Haven’t some of the most brilliant investors lost millions on bad deals?

    Yes, but the losses are due to unexpected or unknown aspects of the deal. Not much surprise when the government hits you with early withdrawal penalties is there?

    As for judging her intelligence, it’s a rant, that’s all. She could be a rocket scientist for all I know. However, in the few responses I have seen her leave on different blogs, it’s all about digging in her heels rather than say “Yeah, I could probably have found a better way to pay for the trip.”

    But, you know, she’s only 31 and retirement isn’t really a worry. (By the way, $30K in retirement savings at age 31 really isn’t that much… it’s not uncommon, but that doesn’t mean it’s right).

    Leah is doing just what the banks and financial advisors don’t want her to do, spend her own money while they are playing with it.

    Letting them play with it is the way to make it grow (that sounds almost dirty, I apologize).

Leave a Reply