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striking-wolf posted:First, I heard in passing once that there might be a special tax write-off for contributions to a retirement account like a Roth IRA for low income individuals? Even though my total income is ~$34,000, because much of it is classified as "scholarship money" and is spent on expenses directly related to my education, I legitimately only pay taxes on ~$18,000. You are only eligible for this if you are not a student during the year, otherwise I'd be doing it too. 
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Feb 13, 2011 00:44
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Hi long term goons, On March 1 I'll have finally saved up enough ($3k) to open a Roth IRA brokerage account at Vanguard. I'd like to have it count for last year, so I can start contributing $416/month for the rest of the year. Is there anything special I have to do with my taxes in this regard? Once I open and fund the account with Vanguard, do they have to provide me with some kind of form that I send in with my 2010 taxes? Thanks all!
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Feb 13, 2011 06:53
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gp2k posted:Hi long term goons, When you fund the account there will be a section near the end where they ask you which of the eligible years you are funding. Any tax documents you need will end up in your message center after the transaction goes through. You probably won't need to worry too much about your 2010 taxes unless your MAGI is near the Roth phase-out limits (about 105k+ single, 167k+ joint), but I'm a bit fuzzy on that part.
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Feb 13, 2011 14:39
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At 44 I am looking at my retirement savings and considering what kind of advances will be made in pet food by the time I'm old enough to retire. I've been underemployed for much of my life and when I finally made enough money to contribute to a 401k the dotcom bubble ate up about 50% of it. I recovered a bit in time for the most recent crash and watched it melt away again. I've had a few jobs and I roll over the 401ks into an IRA at Vanguard. I also started a Roth with 4k in it a couple of years ago but it's only just now no longer underwater. I'm starting a new job and about to do my taxes so it has me considering what I should do with: a: rolling over my current work 401k (about 13k worth) b: contributing to my Roth (currently in a target 2035 fund) c: contributing (if it's possible) to my vanguard IRA (currently in a target 2030 fund) I only have about 35k in the IRA and with as terrible as my overall return rate has been since the mid 1990s I don't expect it to grow much. I've been contributing 6% of my salary to my work 401k. Is it too late for my choices to make much difference? Is trying to fluff up my IRA with money from my savings worthwhile or is the next crash just going to melt it all away again? I'd like to be hopeful about this stuff but my experience with retirement accounts has been negative and left me feeling like all options lead to the same result: not getting to retire.
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Feb 13, 2011 23:37
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Just finished reading Boglehead's guide to investing and this thread and looking for some advice here. Been saving up past couple years and decided to expand from CD's and savings accounts. A little info - 21 years old, in college, living at home so little expenses. Just getting my feet wet here investing so I do apologize. Just starting off with investing so I originally opened an account with fidelity (Dad has retirement/stocks through them). Opened an account and everything but haven't put the money into any funds or anything, but decided after reading here and the book definitely going to the vanguard route with their lower fees and everything. Couple questions - The Target Retirement funds have been mentioned quite a bit here and I do like the simplicity, would it be a bad idea to invest in one of those funds (2050? fund) and also separate funds/bonds where I can (should?) be more aggressive? Seems a little counter productive it I'm gong to invest in the same funds (VTSMX, VBMFX). Just curious how I should approach long term stuff verses short term. I do like the idea of the Target Retirement funds, so could I use that (already percentage split for funds/bonds) as a single aggressive fund? Just looking to keep it simple right now, but seems more I learn and read the more I feel overwhelmed. Thanks in advance, you guys are awesome.
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Feb 13, 2011 23:47
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velocross posted:I do like the idea of the Target Retirement funds, so could I use that (already percentage split for funds/bonds) as a single aggressive fund? Just looking to keep it simple right now, but seems more I learn and read the more I feel overwhelmed. Thanks in advance, you guys are awesome. Are you planning on putting this into a Roth IRA?
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Feb 14, 2011 00:54
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Dick Trauma posted:I've been underemployed for much of my life and when I finally made enough money to contribute to a 401k the dotcom bubble ate up about 50% of it. I recovered a bit in time for the most recent crash and watched it melt away again. Mistake #1: Focusing too much on the losses. You just got the opportunity to invest at a low point in the stock market...twice. Buying funds on the cheap is never a bad deal, especially if you're still more than 20 years out from retirement. Dick Trauma posted:I only have about 35k in the IRA and with as terrible as my overall return rate has been since the mid 1990s I don't expect it to grow much. I've been contributing 6% of my salary to my work 401k. Mistake #2: Focusing completely on the fluctuating dollar amount of your account. Remember that although the fund price might decline, you're still gaining shares each quarter as dividends get quietly reinvested. Take a look at the historical dividend transactions in your accounts and think about how that compounds over the long run. Then stop loving looking at your account every day. As to what you should do, pretty much everybody's going to tell you the same thing: 1. Invest in your company's 401k to get the maximum matching funds from your company. 2. Dump every extra penny you can into your Roth. Auto debit! Fund-wise you probably want to go with the appropriate Vanguard Target since you sound very risk-averse. If you can curb that aversion, try dumping some into V-500, V-Total Market Index or I'm sweet on V-Dividend Index personally (but only in a Roth).
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Feb 14, 2011 01:00
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Is it possible to also put money into the IRA, or can that only take rollover distributions? I'm sorry to seem risk averse. I just feel like I've been unable to put nearly enough into my 401k, and what little went in might never add up to anything truly useful. I'm not afraid of risk, I'm afraid that I'll never be able to catch up.
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Feb 14, 2011 04:00
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Merrill Grinch posted:Fund-wise you probably want to go with the appropriate Vanguard Target since you sound very risk-averse. Assuming retirement at age 67, the "appropriate" Vanguard Target retirement fund (2035) has 90% stocks/10% bonds. Not sure how that can be appropriate for a risk averse 44-year old.
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Feb 14, 2011 04:23
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80k posted:Assuming retirement at age 67, the "appropriate" Vanguard Target retirement fund (2035) has 90% stocks/10% bonds. Not sure how that can be appropriate for a risk averse 44-year old. Well, feel free to make a suggestion for a fund for him. And I was thinking more of the 2030 fund for about 20% bonds, but whatever. With either fund he won't have to think very hard about allocations. Dick Trauma posted:Is it possible to also put money into the IRA, or can that only take rollover distributions? You can add to a rollover IRA but doing so gets complicated if you want to move those funds around later(such as shoving them into your new employer's 401k). You can also convert it into your Roth, but you'll get a big tax bill for that. Or you can just let it sit there and max out your Roth and 401k contributions ($5000 and $16,500) if you can. Edit: changed url to the real calculator Merrill Grinch fucked around with this message at 05:07 on Feb 14, 2011 |
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Feb 14, 2011 05:02
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Merrill Grinch posted:Well, feel free to make a suggestion for a fund for him. And I was thinking more of the 2030 fund for about 20% bonds, but whatever. With either fund he won't have to think very hard about allocations. Sticking within Vanguard, splitting evenly between the target fund and VTINX (the already in retirement fund, 30%/62% stock/bond) seems like it could be a good idea for the risk-averse. A 50/50 split is easy to maintain, and the target fund component ensures he'd become more bond-centric over time without needing any input from him. Or if he wants even less stocks, he can weight more towards VTINX.
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Feb 14, 2011 08:31
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Yeah, the Vanguard target retirement funds have very aggressive stock/bond splits.
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Feb 14, 2011 17:12
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I need to buy one or the other soon, so if anyone knows why I shouldn't buy the ETF I'm all ears.
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Feb 14, 2011 23:51
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El Kabong posted:I need to buy one or the other soon, so if anyone knows why I shouldn't buy the ETF I'm all ears. Yes there is a downside. Bond ETF's are theoretically sound. Just as with stock ETF's, the price/NAV gap is eliminated through arbitrage activity. But the underlying issues (particularly corporate bonds) suffer from stale pricing and liquidity issues causing slower reaction by arbitrageurs. This happens just when it matters most (during high volatility, where you might be selling bonds to buy stocks). This phenomenon is not theoretical... it is precisely what happened during the 2008 financial crisis. For bonds, stick to open-ended mutual funds. If you do not want mutual funds, consider buying treasuries on the secondary market and at auction for the bond portion of your portfolio.
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Feb 15, 2011 00:13
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Thank you, that's good to know. I will stick to the bond index mutual fund.
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Feb 15, 2011 03:24
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So I just maxed a Vanguard Roth IRA for 2010 but like other people in here, I'm a little bit confused about which funds to pick. Right now it's just sitting in a money market, I guess I will peruse this thread a little more seriously and see what the deal is... Edit: VVV That's what I ended up doing as well. Just figured out what TR account was closest to me being 60 and went with it. While I'm not planning on it anytime soon, I suppose I should start saving for a house, marriage, etc. I guess I should start looking into budgeting all this fun stuff. I guess I need to figure out my credit score now etc. Woof. Lyon fucked around with this message at 16:55 on Feb 15, 2011 |
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Feb 15, 2011 15:17
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I stuck with the target retirement fund until I decide (if ever) to get more specific.
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Feb 15, 2011 16:19
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I have an 8%/4% match going into 401k, and 4% going into a roth. We keep a $1k buffer in the checking account as emergency, but have 9k in savings currently. The problem is the savings account is a whopping .33% I've been looking around the KC area but haven't had much luck in finding somewhere better for the savings account. I would like to keep it liquid as a 6 month type of fund and just contribute 1% annually anyways to see it grow. Am I really stuck with this .33% or are there better options/rates? I've looked around and even found a few websites that 'find you the best savings rates' around. How trustworthy are these? I'm a bit timid to drop 9k into a bank I don't know.
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Feb 15, 2011 16:55
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SomeGuyinIL posted:I have an 8%/4% match going into 401k, and 4% going into a roth. We keep a $1k buffer in the checking account as emergency, but have 9k in savings currently. The problem is the savings account is a whopping .33% I've been looking around the KC area but haven't had much luck in finding somewhere better for the savings account. I would like to keep it liquid as a 6 month type of fund and just contribute 1% annually anyways to see it grow. Am I really stuck with this .33% or are there better options/rates? I've looked around and even found a few websites that 'find you the best savings rates' around. How trustworthy are these? I'm a bit timid to drop 9k into a bank I don't know. I think smartypig is at 1.35% right now... I use it and I know several others do. I haven't had any problems, but sending/receiving money takes a few business days so keep that in mind.
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Feb 15, 2011 16:58
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SomeGuyinIL posted:I have an 8%/4% match going into 401k, and 4% going into a roth. We keep a $1k buffer in the checking account as emergency, but have 9k in savings currently. The problem is the savings account is a whopping .33% I've been looking around the KC area but haven't had much luck in finding somewhere better for the savings account. I would like to keep it liquid as a 6 month type of fund and just contribute 1% annually anyways to see it grow. Am I really stuck with this .33% or are there better options/rates? I've looked around and even found a few websites that 'find you the best savings rates' around. How trustworthy are these? I'm a bit timid to drop 9k into a bank I don't know. at HSBC Advance, ING Direct, and American Express's Online savings bank, you can get 0.9-1.1% interest. Another place I know has 1.3%. As long as they are FDIC insured, you're good to go. HSBC at least is a global bank with billions in combined assets, and American Express is American Express, so I guess pretty trustworthy? Edit: transfers in/out take a few days, true. HSBC gave me an ATM card to use with my savings account, so I can get stuff instantly if I absolutely need to, but that's about as liquid as you get for savings. Ironically, their online savings accounts usually have higher rates than most of their CDs!
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Feb 15, 2011 17:01
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Crosspost from stock thread, possibly fits better here: Okay, so I'm trying to do my reading to learn all this and so on, but I'm still at the very beginning. So, a quick question: I'm maxing a Roth IRA and contributing to the employer match in a 401k, both going into Vanguard Target Retirement funds. Money in there stays there. But I also have some other money/income left over that has been going into a few different Vanguard index funds, some US, some international, plus a bit in an REIT index, in a personal, non-retirement account. That money is my "just make it bigger" money - I'm relatively young and could be risky with it, I have no major purchases coming up, but I just don't know enough to be targeting individual stocks rather than index funds. Question is: given that I don't need the money for a purchase or anything, and am not yet ready to switch any of it to individual stocks, I should leave it in the funds, rather than trying to time the market or anything, yes? Even though, yeah, the market does seem kind of like it's nearing a top. Thanks for any thoughts.
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Feb 15, 2011 18:33
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kaishek posted:at HSBC Advance, ING Direct, and American Express's Online savings bank, you can get 0.9-1.1% interest. American Express is at 1.3%. If you have a Capital One card, they have a savings account at 1.25% and you get 10% back on interest earned or something similar. Interest rates just suck all around now a days, I have $40k in my Amex Account and made a whopping $500 in interest this year. You can also find reward checking accounts that go above 3% as long as you don't mind jumping through debit card/direct deposit hoops. Anything that's FDIC insured is going to be fine, there's nothing wrong with going for a smaller bank or credit union or something other than the big guys .
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Feb 15, 2011 18:49
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One thing to watch out for in the smartypig account is that if you go $0.01 over $50k, the interest rate on all of it drops significantly. Just something in the fine print I noticed when I was checking it out. So be careful if you have alot of cash in there (house down payment savings or something).
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Feb 15, 2011 19:00
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onefish posted:Question is: given that I don't need the money for a purchase or anything, and am not yet ready to switch any of it to individual stocks, I should leave it in the funds, rather than trying to time the market or anything, yes? Even though, yeah, the market does seem kind of like it's nearing a top. Thanks for any thoughts. Yes, as long as you keep investing through future down years, you should do fine. When your time horizon is measured in decades, and the biggest determinant of the size of your savings is earnings over the course of your career, market fluctuations in any given year mean little. Lots of people predicted a top in the bull market from 1982-2000, but most were off by years.
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Feb 15, 2011 19:29
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Fuschia tude posted:Yes, as long as you keep investing through future down years, you should do fine. When your time horizon is measured in decades, and the biggest determinant of the size of your savings is earnings over the course of your career, market fluctuations in any given year mean little. Thanks. I'm trying to do the best I can with my investments because my salary is pretty low -- I'm in a media field -- but I'm also relatively low on expenses, so I think I'm doing okay savings-wise.
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Feb 15, 2011 20:58
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onefish posted:Crosspost from stock thread, possibly fits better here: The REITs are a bad choice in a non-retirement account, due to its tax treatment. Other than that, the US and international index funds are fine, as long as your time horizon is long. I'd overweight international holdings in your non-retirement account to compensate for the low international allocation in the target retirement funds.
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Feb 15, 2011 21:42
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80k posted:The REITs are a bad choice in a non-retirement account, due to its tax treatment. Other than that, the US and international index funds are fine, as long as your time horizon is long. I'd overweight international holdings in your non-retirement account to compensate for the low international allocation in the target retirement funds. Thank you. I am really glad to get this advice. What's the problem with the REIT tax treatment (if you don't have time to explain, can you point me to where I should look for the info?) Is it just this, which I got by a bit of googling? http://www.financialpublishers.com/reits.html posted:REITs have high dividends. Unfortunately, the dividends are fully taxable and not subject to the special 15% income tax rate, which was enacted in 2003. On the positive side, occasionally, additional cash distributions are made that are non-taxable. These distributions are called return of capital for income tax purposes, which actually reduce cost basis leading to a larger capital gain when sold.
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Feb 15, 2011 21:58
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onefish posted:Thank you. I am really glad to get this advice. What's the problem with the REIT tax treatment (if you don't have time to explain, can you point me to where I should look for the info?) Is it just this, which I got by a bit of googling? Yea, that is the main issue: most of the gains in REITS is distributed (REITs are legally required to distribute 90% of their taxable income), so your gains are disproportionately distributed annually (as opposed to stock index funds which have low distributions and have most of their gains deferred until you sell). And they get no preferential tax treatment (so you pay your full marginal tax rate). Another reason is that REITs are notoriously troublesome during tax time because your 1099's will likely have mistakes (and require a revised 1099 a month or two later) or your 1099 will be delayed a couple of months. I know one REIT fund holder who got TWO revised 1099's (so 3 total) as a result of his REIT holding. If you file early and then get a revised 1099, you will need to file an amended return. Pain in the rear end to say the least.
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Feb 15, 2011 22:15
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80k posted:Yea, that is the main issue: most of the gains in REITS is distributed (REITs are legally required to distribute 90% of their taxable income), so your gains are disproportionately distributed annually (as opposed to stock index funds which have low distributions and have most of their gains deferred until you sell). And they get no preferential tax treatment (so you pay your full marginal tax rate). Thanks very much. Okay. I put money into them basically just because I read lots of advice that was like "diversify!" and then a few bits of advice that were like "REITs are a good way to diversify!". And all my other money was in stock indexes, so I wasn't sure HOW to best diversify otherwise (since I'm young, bond indexes didn't seem aggressive enough for what I wanted). So how do I get out of this position? Wait until a year has passed from initial purchases (so that I at least get capital gains rate on whatever I can from it) and sell the whole fund, redistribute to the indexes? Or what? I'm aiming for a relatively simple portfolio, unless I get really into this research, at which point I'll be able to figure it out myself. ButI don't want a tax pain-in-the-rear end in my life for the next twenty years.
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Feb 15, 2011 22:28
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onefish posted:Thanks very much. Okay. I put money into them basically just because I read lots of advice that was like "diversify!" and then a few bits of advice that were like "REITs are a good way to diversify!". And all my other money was in stock indexes, so I wasn't sure HOW to best diversify otherwise (since I'm young, bond indexes didn't seem aggressive enough for what I wanted). So how do I get out of this position? Wait until a year has passed from initial purchases (so that I at least get capital gains rate on whatever I can from it) and sell the whole fund, redistribute to the indexes? Or what? I'm aiming for a relatively simple portfolio, unless I get really into this research, at which point I'll be able to figure it out myself. ButI don't want a tax pain-in-the-rear end in my life for the next twenty years. i'd sell now if gains are minimal or else, yea, just sell as soon as you pass the 1 year mark for longterm capital gains treatment. You can redistribute to the other index funds you have or add another diversifier like international small caps (Vanguard's FTSE ex-US small cap). Bonds are still the best diversifier to stocks though.
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Feb 15, 2011 22:51
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My new employer won't have their 401k set up for another two months. I was looking forward to getting the ball rolling on that. I'm going to take a look at the difference between the Vanguard 2030 and 2035 funds. Like it was mentioned earlier I might stick with the 2030 on if it's not so gung-ho about stocks at the 2035 one. I don't mind continuing to roll over old employer 401ks into that Vanguard IRA. Too many times I've been at an employer where their 401k choices all blow so I want to retain some control over what represents my biggest retirement fund chunk. Thanks for all the info.
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Feb 16, 2011 19:17
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Ok, so I just opened up a Vanguard Roth IRA, I maxed out 2010. This leaves me with a little over $6k in cash. Right now it's just sitting in a PNC/Wachovia accounts which earn me next to nothing. I've setup a budget where I'm saving roughly $1k a month, which I've been pretty good at sticking to. Previous to a move in November, Christmas/New Years, then my girlfriend's birthday/Valentine's Day I had been saving $900 a month without fail. I'll also be getting $1k back for my tax return. I'm also supposed to get $2500/quarter in bonus from work, but I need to straighten that out so right now I'm not including it into my budget, it will just be extra when I get it. I think $5-6k should be plenty for an emergency fund, that would just about cover a years worth of my bills (rent, utilities, phone, car insurance) and I could theoretically bail on where I live and move home. I'd still have to pay rent but I wouldn't owe utilities then. This leaves me with roughly an extra $2k right now (after my tax return). Let's assume I manage to save $10k this year. That $10k + the $2k I'm sitting on now is $12k, minus the $5k for the 2011 Roth IRA, leaves me with additional savings of ~$7k over the course of 2011. I'd like to keep this fairly liquid in case I need it, but having it sit in a PNC Savings account earning nothing is making me sad now that I've started to explore this confusing world of investment. What are my options? What's the best book/resource to read from the OP to answer this question? Lyon fucked around with this message at 18:27 on Feb 17, 2011 |
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Feb 16, 2011 21:39
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onefish posted:Crosspost from stock thread, possibly fits better here: On this note, what are some of the best strategies for investing in taxable accounts vs. non taxable? As far as I can tell, having your dividend funds in your tax shielded accounts is the best bet. Any thing else that we should be aware of?
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Feb 17, 2011 23:38
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Ethereal posted:On this note, what are some of the best strategies for investing in taxable accounts vs. non taxable? As far as I can tell, having your dividend funds in your tax shielded accounts is the best bet. Any thing else that we should be aware of? http://www.bogleheads.org/wiki/Principles_of_Tax-Efficient_Fund_Placement
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Feb 17, 2011 23:51
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I'm a Canadian setting up a Couch Potato portfolio (basically a bunch of index funds). This is the model portfolio I have for reference: Canadian equity 20% TD Canadian Index – e (TDB900) US equity 20% TD US Index – e (TDB902) International equity 20% TD International Index – e (TDB911) Canadian bonds 40% TD Canadian Bond Index – e (TDB909) However, with the current state of the US economy, is it really wise to take 20% in the US index? Please correct me if I'm wrong and it's not actually going down the shitter, I'm really new at this. My other options for this index fund are European and Japanese. Would either of these make a better choice for that 20%?
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Feb 18, 2011 17:55
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How old are you? 40% in bonds is a lot.
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Feb 18, 2011 17:57
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I'm managing this for my husband, who's 34 and had some bad misconceptions about how a retirement fund works up until now. I'm a lot younger but still studying so I'll do mine later. This is just the reference guide I'm using, but I've heard a figure of "% in bonds should be roughly your age", so I was thinking around 35%? Or should it be different in this situation, as I'll probably still be working once he's retired?
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Feb 18, 2011 18:01
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Goddamn posted:I'm a Canadian setting up a Couch Potato portfolio (basically a bunch of index funds). This is the model portfolio I have for reference: Your portfolio is fine. Have you considered Canadian Real Return Bonds as another diversifier (for instance, you can do a 20/20/20/20/20 portfolio by doing 20 in Canadian bonds and 20 in Canadian real return for ultimate diversity). US is roughly 40% of the world economy so you have a good allocation there. Do not make investment decisions based on the state of the economy of any country, as it has no bearing on investment return (I know it is hard to believe but it is true). The Canadian equity is a significant over allocation to your home country (Canada being less than 5% of the world economy by market cap). But that is OK... the 20/20/20 is an easy way to stay balanced. 40% is not a lot in bonds if that is what makes you comfortable. The late Peter Bernstein (not the same as Bill Bernstein, another great financial writer) wrote a piece called the 60/40 solution in which he argues that that is the most suitable equity/bond allocation for just about everyone, young people and average joe's and professionals alike. The 60/40 solution Age-in-bonds is a fairly decent metric as well, and recommended by John Bogle who has been around the block in the investment world. The guru of value investing, Benjamin Graham, considered 25% bonds to be an absolute minimum, with 50% being closer to what is suitable for an average person. Unfortunately, despite all the wisdom from the financial writers and historians that actually know their financial history, you will constantly be pushed into riskier portfolios, or made to believe that young people shouldn't have bonds, or asked to change the "age in bonds" to "age minus 10" or "age minus 20". Ignore it. The current investment culture loves risk and is willing to accept lower and lower risk premiums, which inevitably leads to a collapse in asset prices, rinse and repeat. We are back to credit spreads that would make any seasoned value investor troubled. You don't need to follow the herd of risk junkies.
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Feb 18, 2011 18:43
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|Ziggy| posted:How old are you? 40% in bonds is a lot. 40% is fine for anyone. In fact I think it is better as a default then something like 20% for a new investor just because you really don't know how you will react when a giant bear market happens, and it is better to have erred on the side of caution to your reaction. If you go through another 2008/2009 crash and lose half your stocks and start feeling like you wish you had a higher percentage of stocks, maybe you need to readjust. But until then err on the side of caution. Goddamn, why do you think the US economy is going down the shitter? Why do you think the European/Japanese/Canadian economy is not going down the shitter? It is simple, pick you stock/bond split (60/40 is quite fine), pick your domestic/international stock split (right now that is 33/66 to you), and in each of domestic and international hold capital weighted allocations using something like this this.
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Feb 18, 2011 18:44
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followup: i saw your TD funds on the TD website and saw they are E-series with decent MER. But no Canadian Real Return Bond option in that series. The investor series has an option but the MER is over 1.4% which is not worth it. So unless you can find a cheap access to Canadian Real Return Bonds, I'd skip them and just do your original 20/20/20/40 plan.
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Feb 18, 2011 19:19
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