My 401k plan

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401k plan is a type of retirement savings account established by an employer with the contributions from both employee and employer. The contribution of an employee is taken from his or her paycheck/ salary. Then, it is invested over time until one retires and decide to withdraw the money. The minimum age to withdraw is 59 1/2 years. My company’s 401k plan allows the participants to choose whether their plans are managed by professionals or by themselves. There are 9 funds to choose from: money market, bond fund, large-cap core, large-cap growth, mid-cap core, mid-cap growth, small-cap core, and international multi-cap core. Cap stands for capital, so large-cap companies are big companies with a market capitalization value of more than $10 billion. Mid-cap companies have market value of $2-$10 billion, and small-cap companies have value of $300 million to $2 billion. The key is to diversify my money in these 9 funds. I decide to manage my plan and I have to spread my savings among more than one type of investment.

Here is an example of asset allocations based on age:

Benefits of 401k:
-Tax savings: my contribution is not subjective to federal income taxes. About state and local taxes, I still have to find out. Depending on your location, you can save on those taxes as well
-Company matching: my company matches my contribution dollar-to dollar up to 6% of my pay per Plan year. The limit of 2011 personal contribution to employer’s 401k is $16,500. If I max out my contribution, the total will be $16,500 plus 6% of my annual pay.

There are some other concepts you need to know:
-Compounding interest: the interest of 401k or a savings account will be added back to the accounts to earn more money.
-Rate of return: money invested in 401k plan does not guaranteed gains over a period of time. The 2008 economic crisis probably destroys retirement funds of lots, lots of people. The people who take advantage are the fund managers. They take the administrative fee and do not care about their clients losing money. I highly recommend the documentary film “Inside Job” if you have not watched it. That’s the reason why I do not trust somebody to manage my investment and I want to learn how to invest by my own.
-More risk, more return but make sure you have to diversify to minimize your risk of losing money.
-Asset allocation: mix of investments in stocks, bonds, real estate, and cash.

You can also find out more about individual investing strategies at the website of the Department of Labor: http://www.dol.gov/ebsa/investing.html

One thing I want to point out about resource in the United States. It is plenty, like water in the sea but not everyone utilizes it. In contrast, students in my home country do not have enough books to borrow from library and sometimes cannot check out the available ones. Opportunities are always there, but you just need to realize and take them.

Do you have a retirement account? Do you have any kind of investment? Is it losing or making money?

How to read a basic lab (blood)

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It has been 2 years since my last blood work was done. It is recommended to have your blood sugar checked every year and your cholesterol checked every 5 yrs (if it is normal). But you may not know that healthcare providers do not check their blood on a regular basis (me :D). They tell patients to exercise at least 3 times a week, get your physical exam every year, do your pap smear every year, etc. but they themselves do not follow those recommendations. Anyway, I have dragged myself to the doctor’s office today to get an order for basic labs. I should have asked her to order the comprehensive metabolic panel (CMP) and complete blood count (CBC) but I forgot. Basic chemical panel only shows electrolytes, blood sugar and kidney function whereas CMP is basic panel plus nutrition status and liver function. CBC can tell you about red blood cell, white blood cell so that infection or anemia can be discovered. Also, my blood pressure (BP) at the office was 137/80 >.<, too high. It has been always high at that office. I did not know why. I checked my blood pressure at home before I came in and it was normal. They used the automatic machine while I used the manual monitor with the stethoscope. The normal BP should be less than 120/80. I have high risk of hypertension because both my parents and my grandparents both sides have it. I have been cautious on my sodium intake but I guess I have to exercise more. By the way, the medical assistant measured right after I sat down and made me talk while measuring. The right way to do is to let patient rest a little bit after they sit down and patient should not talk while the blood pressure is measured. She was just too busy to take time.
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Savings and the Wealth of Nations

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In Animal Spirits, Robert Shiller has mentioned that the saving rate of Singapore has been up to 50% until 1983. This rate is achieved through the Central Provident Fund program. Employees and employers each contribute to the fund and it is used for their retirement, healthcare and housing needs. Today, the rate is lower at 36% total but it is still among the highest rates in the world. This program was set up by Lee Kuan Yew, the first prime minister of Singapore. This high-saving economy has helped Singapore deal with inflation as it grew to a developed country and become an Asian Tiger. China has copied this strategy and its economy is growing extensively, almost 10% each year. China has personal savings, corporate savings, and government savings. It has promoted personal saving for decades. In contrast, United States has promoted consumerism with shopping malls and credit cards. Baby boomers do not have enough money for retirement. However, the X and Y generations in this country are getting more responsible to personal finance than we thought and young Chinese generation starts to spend more. Sales of brand name purses (Louis Vuitton), tech gadgets (iPhone, iPad), and cars (Mercedes, BMW) in China are even higher than in Western countries. Continue reading

Wedding and my home buying drama ep 2

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Last weekend was a big event for my family. My cousin got married, so everybody gathered together to celebrate. I had a chance to see my two uncles, one from Salt Lake City and one from Orlando, and other cousins. I have not seen them for a long time, so it was really really fun to talk to each other. We also have a new family member. My uncle from Utah adopted a little girl a few years ago but this was the first time he introduced her to the whole family. Her story was really heart-broken to me. Her mom was my aunt’s coworker. They have worked at a Chinese restaurant. That lady got pregnant with a married guy and had to raise this little girl by herself. He did not acknowledge this child as his daughter. Then the mom had cancer and died. Before she passed away, she asked my aunt to take care of this little girl. No one in China could take care of this girl (her mom was a Chinese immigrant), so my aunt and my uncle decided to let her live with their son and daughter as a family. When I met her, I thought she was my cousin’s friend. She rarely smiles, but she is very beautiful and I can’t wait to see her grow up and live happily and independently. This story reminds me that I am still happier than a lot of people and I should not take this life for granted.
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My Home Buying drama: ep 1

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I thought I would not be able to borrow a loan now because I did not have a 2-year working history but I was wrong. After filling out a prequalification form from Bank of America, I got a phone call yesterday from the bank. The bank person asked me about my income, my workplace, my maximum price of purchase, my down payment, the zip code of the home I intended to buy etc. and she said I was qualified for the amount of 200k which I asked for (I put the max price of 250k with 50k down payment). I received her email within 15 mins with a copy of closing cost estimation. She did ask me to fax her my 2010 W-2, a verification showing that I was in school, and the offer letter to work in California. I told her that I have not had an offer letter yet and asked whether I would be able to get the loan. She suggested to buy it as second home/ vacation home. She also referred two real estate agents working in the area that I wanted to buy. I already have recommendations from my friend and my mom’s insurance broker, so my next step is to choose an agent.
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