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Medikit posted:I recently started a Roth IRA. I'm heavily invested in Bonds as I plan to use some of it for downpayment on a house in the next 10 years. Well, interest rates are rising (albeit slowly) as the economy recovers. Rising interest rates will knock down bond prices; interest rates and bond prices have an inverse relationship. VFSTX will be affected negatively by rising interest rates. HOWEVER, it is worth mentioning that because VFSTX is a short-term bond fund with a low "duration", your losses will be pretty minor. Because you won't need your money for at least a few years, you are essentially "immunized" against a rising interest rate environment. You are pretty safe.
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Apr 15, 2010 04:00
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I opened a Roth IRA with Fidelity tonight - I've been planning to do it but I found out that the deadline for 2009 contributions is tomorrow, so I just hurried to their website, filled out an app and contributed $3,500 for last year. Of course, I don't know what to do with the cash sitting in the account now. I just didn't want to miss the chance for the 2009 contribution (since the earlier you start saving/investing the better). I'm reading The Boglehead's Guide to Investing to hopefully that will give me some tips.
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Apr 15, 2010 07:14
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I just opened a Roth IRA and threw in $5k for 2009. To take advantage of my last minute 2009 contribution, would I need to dump in another $5k into 2010 as soon as possible? Because would waiting until April 2011 to contribute be the same as if I missed the 2009 deadline and just dumped $5k into 2010, then $5k into 2011 a year from now? I am self employed so I'm trying to figure out a good contribution schedule.
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Apr 15, 2010 18:39
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Is someone that got an IRA (VFIFX) in 2007 on Oct 12th (the highest price it's been at in a while) just completely screwed for that year's investment?
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Apr 15, 2010 18:56
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ynotony posted:I just opened a Roth IRA and threw in $5k for 2009. To take advantage of my last minute 2009 contribution, would I need to dump in another $5k into 2010 as soon as possible? Because would waiting until April 2011 to contribute be the same as if I missed the 2009 deadline and just dumped $5k into 2010, then $5k into 2011 a year from now? I am self employed so I'm trying to figure out a good contribution schedule. You are overthinking this. Just contribute another $5k before the 2010 tax year deadline, which is April 15, 2011. If you want to get on a regular schedule, contribute $625/mo for the rest of 2010 (that's your 2010 contribution), then contribute $416/mo thereafter. Someone who bought VFIFX in Oct 2007 and regrets it had better diversify his contributions in the future.
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Apr 15, 2010 20:32
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Simple question: If I am laid off, can I withdraw from my Roth IRA without penalty for living expenses once I've burned through my emergency fund? Google has too many different answers, does anyone know how it works? the_reading_rainbow fucked around with this message at 05:43 on Apr 16, 2010 |
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Apr 16, 2010 05:36
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the_reading_rainbow posted:Simple question: If I am laid off, can I withdraw from my Roth IRA without penalty for living expenses once I've burned through my emergency fund? Your contributions can be withdrawn at any time tax free (since Roth contributions come from after tax income). Earnings can be withdrawn with a penalty.
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Apr 16, 2010 05:48
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GamingHyena posted:Your contributions can be withdrawn at any time tax free (since Roth contributions come from after tax income). Earnings can be withdrawn with a penalty.  So I can dip into my $5102.93 and not get hit with taxes or penalties? sweet I was going to keep 6 months of living expenses in my ING savings, however, I didn't realize I could withdraw my Roth IRA contributions w/o penalty. It would probably make more sense then, to keep a low (2 month) emergency fund liquid - and put the other 4 months in my Roth IRA (of course there is risk involved, the mutual fund I have in my Roth is somewhat volatile.) thoughts?
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Apr 16, 2010 06:01
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You can use a money market fund in your Roth, but that sacrifices possible returns. A Roth IRA really isn't good for "standard" emergency money because your contribution opportunities are so limited.
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Apr 16, 2010 06:16
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slap me silly posted:You can use a money market fund in your Roth, but that sacrifices possible returns. A Roth IRA really isn't good for "standard" emergency money because your contribution opportunities are so limited. Well, I use Vanguard 2050 retirement VFIFX as my primary Roth fund. I plan on maxing my Roth contribution into this fund indefinitely. After living expenses I have about $1000/mo left over. Once I fund my 2010 Roth I'll be putting the excess money into a 401k. I figure I'll keep two/three months of expenses liquid. Then if I get laid off again I can withdraw contributions from my retirement accounts to make ends meet. This way I don't have $3000 sitting in ING savings when instead it could be earning me more interest in a retirement account. Or is this a bad idea?
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Apr 16, 2010 06:25
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Yes there is more potential for return, but you pay for it with risk. Suppose you contribute $5000, then its value drops to $3500 one month later - like VFIFX in Sep 2008 - then you lose your job. Such things happened to many people recently. And it's not just market risk; once you withdraw a contribution from a Roth IRA, you can never make it up. In other words, yes, I think it's a bad idea. Edit: That said, you may judge that 3 months expenses is enough to cover a job loss. Kind of depends on your situation. I would suggest planning not to dip into the IRA for foreseeable stuff like that, though. slap me silly fucked around with this message at 06:55 on Apr 16, 2010 |
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Apr 16, 2010 06:41
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You should also consider that you only get to contribute $5000 a year, forever. So if you have 30 years before you retire, that's 30x$5k=150k. If you withdraw money, you don't get to just put it back; putting money in counts towards your annual limit. So in this respect, a Roth IRA is not just a tax-advantaged savings account. Yes, you can use it as an emergency fund, but you're robbing your future retired self of tax-free income when you do.
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Apr 16, 2010 09:45
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The only reason that you would want to keep an emergency fund in a Roth IRA is if you wouldn't be able to contribute to the IRA otherwise. The specific instance I'm thinking of was where a person became employed in late fall: rather then forever losing the contribution that they could make for that year, they split their emergency fund apart and threw 5k into a money market account in the IRA. If they needed it, it would be there, but it gave them the ability to grow the "real" emergency fund back without needing to worry about the contribution window. As the fund was replenished, they started moving money out of the MM fund and into whatever they wanted it, and got the best of both worlds. Since it sounds like you've got enough money to fully fund the IRA and still have a decent chunk lying around, I'd probably not count the money for emergency fund purposes unless you could "pay it back" within a short period of time.
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Apr 16, 2010 10:36
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Should be able to roll it over back into your IRA if it's within 60 days of the distribution
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Apr 16, 2010 14:30
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Well the $5000 limit on contributions to a Roth IRA I'm sure will continue to be increased slowly to go along with inflation
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Apr 16, 2010 16:23
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Koirhor posted:Well the $5000 limit on contributions to a Roth IRA I'm sure will continue to be increased slowly to go along with inflation True, but no matter what the number is, if you miss it for the year then it's gone. That's the real point.
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Apr 17, 2010 15:57
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This might be a stupid question, but if you plan on retiring early, doesn't this partly make contributing to a Roth IRA probably worse than just putting it into a (carefully selected) set of non-tax advantaged investments instead? Because the early withdrawal penalties are pretty crippling and I'd really hate to be 50 totally hating life, and sitting on $8 million (inflation-adjusted), completely scared of withdrawing early and getting dinged to the extent that I might as well have just not bothered with a retirement account (all signs point to the US raising tax rates on the rich and all). There's some talk of raising the federal retirement age for these tax advantaged accounts and I'm just worried I'll actually regret putting money into a Roth IRA instead of just using the same Vanguard funds outside an IRA. Does anyone know about planning for early retirement that could help here?
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Apr 17, 2010 17:19
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If you want to retire early and have bajillions of dollars to live on for forty or more years, $5k a year (or whatever, maybe assume the max will increase to keep up with inflation) is not going to get you there, even with the most wildly optimistic estimates of earnings. So, no, I don't think it's that big of an issue: put the max you can into tax-advantaged plans, and then put three or four or five times that much into more liquid investments. By the time you're fifty (or whatever) you'll have your $7.5 million or whatever ready to withdraw right away, and your comparatively small Roth IRA can wait till you're old enough to withdraw without penalty.
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Apr 17, 2010 18:44
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With regard to emergency funds, I've been reading that I need 6 months living expenses. That's fine, and I've been lucky enough to have saved just about that much up. The problem is I now have a huge amount of money that's suppose to be "liquid", but I have a very hard time believing that its a good idea to keep ~15-20k even close to truly liquid, given the trivial rate of return that would entail. Any advice on what to do? The internet seems content to leave it in CDs or some other such thing, since obviously if it's invested in securities you may need to sell at a depressed price at the worst time, realize losses, gains, etc. Thoughts? ghost biscuit fucked around with this message at 20:27 on Apr 17, 2010 |
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Apr 17, 2010 20:21
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Variance vs. expected return is a fundamental tradeoff. You just need to find the point on the curve that you're comfortable with. If you're single and life is uncomplicated, you might not need a ton of cash. My rule of thumb has ranged from 3 to 6 months' expenses, but always accounting for the fact that I can drastically trim a lot of expenses for a while if I need to. At least the online savings accounts are more or less keeping up with inflation. If you're renting month to month and can go stay with your parents in an emergency, the story is different than if you just took on a mortgage with a 95% loan, etc.
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Apr 17, 2010 20:51
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Benminnn posted:With regard to emergency funds, I've been reading that I need 6 months living expenses. That's fine, and I've been lucky enough to have saved just about that much up. Well, you definitely don't want the money sitting in a checking account earning 0%. At the very least, put that money into an online savings account (like ING Direct) where you will earn enough interest to counter act inflation. You could also ladder a couple CDs or short term bills/notes. It really depends on just how liquid you want to be.
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Apr 17, 2010 22:44
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necrobobsledder posted:This might be a stupid question, but if you plan on retiring early, doesn't this partly make contributing to a Roth IRA probably worse than just putting it into a (carefully selected) set of non-tax advantaged investments instead? Because the early withdrawal penalties are pretty crippling and I'd really hate to be 50 totally hating life, and sitting on $8 million (inflation-adjusted), completely scared of withdrawing early and getting dinged to the extent that I might as well have just not bothered with a retirement account (all signs point to the US raising tax rates on the rich and all). There's some talk of raising the federal retirement age for these tax advantaged accounts and I'm just worried I'll actually regret putting money into a Roth IRA instead of just using the same Vanguard funds outside an IRA. Does anyone know about planning for early retirement that could help here? This is a goofy scenario. If you have $8 million real dollars at age 50, you don't really need to worry about a 10% early withdrawal penalty. You's be loving set for the rest of your life anyway. It is also worth noting that with a Roth IRA you can withdraw your contributions (but not earnings) penalty-free at any time. That being said, there is NO way you will be able to build up $8 million in an IRA. Well, unless you dump all your retirement money into one stock and that stock soars like a motherfucker a la Microsoft.
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Apr 17, 2010 22:50
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Ravarek posted:Well, you definitely don't want the money sitting in a checking account earning 0%. At the very least, put that money into an online savings account (like ING Direct) where you will earn enough interest to counter act inflation. You could also ladder a couple CDs or short term bills/notes. It really depends on just how liquid you want to be. Right now it's already sitting in an ING Direct savings account and I still feel like I'm missing some opportunity. Provided single and young with no mortgage, how liquid do you really need to be? I'm considering simply putting 4 months it into securities that would be considered more stable over the short term and keeping the rest in high-yield savings or something similar.
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Apr 17, 2010 23:44
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Ravarek posted:This is a goofy scenario. If you have $8 million real dollars at age 50, you don't really need to worry about a 10% early withdrawal penalty. You's be loving set for the rest of your life anyway. It is also worth noting that with a Roth IRA you can withdraw your contributions (but not earnings) penalty-free at any time. I don't know anyone who wouldn't worry about an unnecessary $800k hit to the portfolio, but yeah it is a goofy scenario because you aren't gonna have that much in your IRA in the first place.
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Apr 18, 2010 01:52
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greasyhands posted:I don't know anyone who wouldn't worry about an unnecessary $800k hit to the portfolio Probably someone with 8 million dollars
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Apr 18, 2010 02:32
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waar posted:Probably someone with 8 million dollars I dunno if you're joking because the original comment was so clearly retarded, but that would be 10% of their net worth... c'mon
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Apr 18, 2010 04:17
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Ravarek posted:This is a goofy scenario. If you have $8 million real dollars at age 50, you don't really need to worry about a 10% early withdrawal penalty. You's be loving set for the rest of your life anyway. It's not like you'd withdraw the whole 8 million dollars at once anyway, soooooo feel free to pay more tax to help the rest of us out, I guess? 
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Apr 18, 2010 04:51
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Someone who has $8,000,000 in savings at 50 is likely* the kind of person who has been frugal and meticulous in their savings and expenditures and thus would not take a voluntary 10% hit. Also they probably have other vehicles they can withdraw from without taking a huge hit. *Excluding entrepreneur, lottery winner, etc.
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Apr 18, 2010 16:24
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Benminnn posted:Right now it's already sitting in an ING Direct savings account and I still feel like I'm missing some opportunity. Well, there is no real answer to this question. It really depends on how risk averse you are. That being said, if you are young and single and all that jazz, you probably don't need more than just a couple months worth of living expenses in liquid assets.
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Apr 18, 2010 19:09
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This $8 million debate is kinda stupid, IMO. Besides, Roth IRA contributions can be withdrawn penalty-free at anytime. A wealthy 50 year old could probably thrive off these contributions and other investment vehicles for 9½ years (in which he'll be old enough to withdraw his Roth earnings with no penalty).
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Apr 18, 2010 19:15
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Ravarek posted:This $8 million debate is kinda stupid, IMO. Besides, Roth IRA contributions can be withdrawn penalty-free at anytime. A wealthy 50 year old could probably thrive off these contributions and other investment vehicles for 9½ years (in which he'll be old enough to withdraw his Roth earnings with no penalty). Yeah, that's true as well. It really is sort of silly example. Also: necrobobsledder posted:I'd really hate to be 50 totally hating life, and sitting on $8 million (inflation-adjusted), completely scared of withdrawing early and getting dinged to the extent that I might as well have just not bothered with a retirement account Haha, reading your original post again, I really don't think that's a scenario that would be worth worrying about.
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Apr 19, 2010 07:05
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I'd like to meet person who has the work ethic to save $8 million (in an IRA, lol) but is ready to retire at 50.
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Apr 19, 2010 14:14
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Don Wrigley posted:I'd like to meet person who has the work ethic to save $8 million (in an IRA, lol) but is ready to retire at 50. As best I can tell, if you started at age 18 and wanted to have $8,000,000 by age 50, even assuming a 10% return you'd have to put away more than $67,000 a year (excluding taxes). So basically you're going to need to be a wildly successful teenage entrepeneur or marry money.
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Apr 19, 2010 19:54
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Ok people, I threw out $8 million not because I'm expecting that but to exaggerate my point that you could have a lot of money in retirement locked away and emotionally ready to retire. Who knows how legislation will change in the future anyway? Roth IRAs didn't even exist 30 years ago. I consider saving aggressively for retirement partly an insurance policy against the possibility that one might all of a sudden want something completely different and need a lot of money. The option of early retirement has been a goal for me since I was 16 or so because I didn't really have any particular goals. Even now I just blindly contribute with the possibility I might just want to say "gently caress it," cash out, and jump out of a plane with $100 bills strapped to me in the middle of a random city I really like. Ravarek posted:Besides, Roth IRA contributions can be withdrawn penalty-free at anytime. To contribute max to a Roth IRA, 401k + matching, and other investments, you may approach the (rather high, yes) AGI where you can't even contribute to a Roth anymore as well, so it makes it even more foolish for that $8M @ 50 in IRAs assumption. Also, an employer I interviewed with before offers basically 200% 401k matching for the first 8% of your salary, so that's about $45k / yr contribution possible just in a 401k. Furthermore, the IRS is allowing rollovers from 401k to Roth IRAs for this and maybe the next couple years, so Roth IRAs could look a lot bigger than the usual sort. Chernori posted:Haha, reading your original post again, I really don't think that's a scenario that would be worth worrying about.
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Apr 19, 2010 21:54
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necrobobsledder posted:Also, an employer I interviewed with before offers basically 200% 401k matching for the first 8% of your salary, so that's about $45k / yr contribution possible just in a 401k.  I've never heard of a company offering such a generous retirement match before. Also, wait, does that mean 8% of the offered salary was ~15k? Because that would mean the total salary was over $180,000/year.
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Apr 20, 2010 06:51
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Chernori posted:
281k to be exact. maybe he's really going to retire at age 50 with 8million
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Apr 20, 2010 09:02
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Chernori posted:
BTW, non-profit organizations with long-term business goals that happen to make money hand over fist are where you should look for jaw-dropping benefits. No way am I going to make $280k+ at 26 there though - that's probably reserved for the director-level guys. On the other hand, promotions are handed out readily there and if I had worked on a PhD with it, I could be at $160k+ / yr by the time I'm 30. Alas, I wasn't hired and will have to suffer with 50% matching up to 8% of my salary here with a 15% off stock option plan 
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Apr 20, 2010 14:34
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Dr. Jackal posted:281k to be exact. I know he already clarified, but here's the math: The 45k would be 1/3 real salary and 2/3 matching. So 15k would be 8% of his salary, meaning his real salary would be a bit over 180k (15x12.5=187.5).
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Apr 21, 2010 18:48
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Chernori posted:I know he already clarified, but here's the math: hurr, basic arithmetic seems to escape me these days. Here I was thinking 70k would be great.
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Apr 21, 2010 22:02
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Right now I got about 28k in my employer's 401k plan, it's split up as follows 88% in Target Retirement 2050 10% PIMCO Real Return Bonds 2% Money Market I've been wondering if I should just dump everything into the Target Retirement Fund for now and just leave it alone. Which is what I'm currently doing with my Vanguard Roth IRA
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Apr 24, 2010 11:24
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