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80k posted:Betazoid, I do not understand that linked post at all.  My dad set up the GNMA as a college savings account for me and then turned it over to me during college. I've been adding to it since that time. What exactly are they good for, if not retirement savings or things like a house payment?
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Aug 19, 2011 00:08
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Incompl posted:So I'm a 24 year old that started working full-time about a year ago. Right now I'm contributing to both my company's 401K (at 8%) and Roth 401K (7%). I don't receive a match, however my company contributes X number of dollars according to the profits for that year. Additionally I am looking into Roth IRAs so I'm planning to open one up with Vanguard. Not a huge difference either way though. Regarding your split between regular 401(k) and the Roth accounts, I really have no idea. It depends on your expectations regarding future income and tax rates. Say you are: maxing one conventional 401(k) (16.5k) maxing one 401(k) that has Roth and conventional options (16.5k) Investing an additional ~40k in taxable accounts. What do you do with the one 401(k)? Max Roth?
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Aug 19, 2011 00:45
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Betazoid posted:I do not understand that linked post at all. They are OK for retirement savings (though I still do not like them myself). But they are not good for short-term funds.
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Aug 19, 2011 00:57
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Niwrad posted:It's not really worth participating if they don't contribute anything. Most company plans have limited fund options available and often with higher expense ratios. You'd have much more versatility opening it on your own at Vanguard or Fidelity. To quote the GBS Bitcoin thread, VERY MISLEADING. If you have more than $5k to contribute, and don't expect to stay at that employer for the rest of your life, it's worth putting up with some lovely E/R for a few years. Also, he said there were good options. The general assumption that all 401(k)s are poo poo is just a little bit misleading. Obviously be skeptical and investigate, but really, if you have already maxed your ROTH IRA your ER needs to be off the charts before it loses to a taxable account. Quick Example: If you had $10k extra to invest and could chose an IRA or a crappy high E/R 401k... 25% bracket, 30 years to retirement - general S&P index, avg 7% return. Stay in that job for 10 years. Even ignoring state taxes you'd get $7,500 a year into the IRA, with a .05% E/R you'd have $102,379.42 after 10 years... Tax Free. If you had a 1% Expense Ratio in your company 401k, when you rolled it over after 10 years, you'd have 143,715.60. Even if you just stopped your analysis right there, you could deduct 25% and have more than 102,379.42. The important thing to remember though is that (1) you are still compounding and your money is working for you and (2) You will be able to take that money out over time and use deductions and credits and not pay anywhere near your marginal rate on your 401k. The general wisdom about pre-paying your tax at the high brackets is that tax rates are at nearly all time lows. Despite what the Republicans say, they will go up. If you are at a high bracket, you should already have your 401k maxed, but a roth is a good hedge.
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Aug 19, 2011 04:31
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What are typical expense ratios on employer-offered 401ks? I'm wondering if I should move more of my retirement portfolio to my employer's plan because the fees on my employer's fund range from .02-.2%, while the portfolio my financial planner has me in are more like .6-1.1% for some of the index funds and ETFs.
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Aug 19, 2011 05:00
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KennyG posted:To quote the GBS Bitcoin thread, VERY MISLEADING. My comment wasn't necessarily arguing Roth vs 401k. It was that you can often get the same benefits from a Traditional IRA that you could from a 401k. I know there are certain income eligibility issues that could come into play if you have a plan offered by an employer. But if those don't come into play in his situation, I don't see any benefit to using the employer plan over one you setup on your own at Vanguard.
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Aug 19, 2011 05:26
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Bastard Tetris posted:What are typical expense ratios on employer-offered 401ks? I'm wondering if I should move more of my retirement portfolio to my employer's plan because the fees on my employer's fund range from .02-.2%, while the portfolio my financial planner has me in are more like .6-1.1% for some of the index funds and ETFs.
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Aug 19, 2011 16:43
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Bastard Tetris posted:What are typical expense ratios on employer-offered 401ks? I'm wondering if I should move more of my retirement portfolio to my employer's plan because the fees on my employer's fund range from .02-.2%, while the portfolio my financial planner has me in are more like .6-1.1% for some of the index funds and ETFs. Your employer plan is definitely among the best if those ER's are true. But you can roll into a Vanguard IRA and get great fund choices with very low ER's as well. Why do you use that financial planner?
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Aug 19, 2011 17:53
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Niwrad posted:My comment wasn't necessarily arguing Roth vs 401k. It was that you can often get the same benefits from a Traditional IRA that you could from a 401k. I know there are certain income eligibility issues that could come into play if you have a plan offered by an employer. But if those don't come into play in his situation, I don't see any benefit to using the employer plan over one you setup on your own at Vanguard. A Traditional IRA has a very low income cutoff for tax deductible contributions... ~50k for an individual. Also it has a total contribution cap of $5,000 per year that's shared with a Roth IRA so it's an either/or proposition. If you've already maxed your Roth IRA, a traditional IRA is not available to you. The advantage of a 401k is that you can put 16.5-21.5k in per year (excluding match) on top of your Roth contribution. This allows you another avenue. I don't see how your comment makes any sense given those facts. Yes. A traditional IRA and a 401k will behave the same as far as tax treatment once the funds are in the account, however an individual can load up to 3x more into a 401k than an IRA and a 401k does not share the same limites of contribution with a Roth plan as a traditional IRA does. The only reason you would want to contribute $5,000 to a non-deductible IRA is if you made over the Roth contribution cap and already had maxed your 401k - also, as soon as you made that contribution you should just roll it into a Roth using the Bush Loophole.
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Aug 19, 2011 22:23
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80k posted:Your employer plan is definitely among the best if those ER's are true. But you can roll into a Vanguard IRA and get great fund choices with very low ER's as well. Why do you use that financial planner? It's the family business.
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Aug 20, 2011 03:07
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Bastard Tetris posted:What are typical expense ratios on employer-offered 401ks? I'm wondering if I should move more of my retirement portfolio to my employer's plan because the fees on my employer's fund range from .02-.2%, while the portfolio my financial planner has me in are more like .6-1.1% for some of the index funds and ETFs. Bastard Tetris posted:It's the family business. What? Is your last name Jeremy? Because your family is loving you! .6% for any index fund that isn't a Micro Cap Emerging Market fund is just highway robbery. The only thing that makes me suspicious is that a small brokerage isn't really able to offer it's own ETFs so it's not like they are the ones benefitting... Would you be willing to post the funds that your in so we can see if there's another fund that you'd be better off with. The difference between $100,000 invested for 30 years in a 7% fund at .1% ER vs one at 1% ER (even with no further investments) is $165,000 https://www.cpf.gov.sg/cpf_trans/ssl/financial_model/expense_cal1.asp?prof=
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Aug 21, 2011 02:05
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I was expecting this post- most of the holdings I had there actually were in small-cap emerging market funds, but the returns (and conversely the risk) were pretty nuts. We've done pretty well, I turned a surplus college fund into a house with the returns from 1999-2011. I'll get a list of the funds up in a bit, the ER was primarily the reason I stayed far far away from target date funds.
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Aug 21, 2011 07:09
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I'm looking around for a new broker. I was using Zecco, but they screwed up a cash transfer request*, and now I don't want to do business with them anymore. I like mutual funds, and I'm looking for a broker that has low fees for buying and selling them (Zecco's were $10 to buy or sell), they must support DRIP (that's automatic dividend and capital gains reinvestment without additional fees), and, of course, they must have a large selection of mutual funds (Sharebuilder, for instance, has only a limited selection of mutual funds). I tried Optionshouse, only to find that 80% of the mutual funds I wanted to buy "cannot be traded through the platform". I'll call them tomorrow to find out what that means, but I'm guessing it means that either I can place an order but it'll have to be over the phone, which means much higher fees, or that I just flat out can't buy those funds through them. Would any of you handsome fellows know of a broker that meets my needs? E-Trade: Mutual Funds not eligible for DRIP TD Ameritrade: $50 commission to buy or sell a mutual fund Zecco: Horrible cash transfer mishap Option House: 80% of the mutual funds that I like "cannot be traded through the platform." Scottrade: No DRIP Think or Swim: is TD Ameritrade Fidelity: $75 commission to buy or sell a mutual fund Sharebuilder: Limited selection of mutual funds *I put in an ACH request, got a message that the ACH failed and was cancelled, waited till the next day, put in the ACH request again which did go through, and then the next week, lo and behold, turns out their message that the first ACH request failed and was cancelled was incorrect, because both transactions posted to my bank account, leaving me overdrawn and requiring a personal visit to the local bank branch manager to deny the transaction, and further delays in getting the Zecco balance right. Edit~Or is The Stock Picking, Analysis, and Trading Megathread (rich jerks itt) the right thread for this question? Dr. Gaius Baltar fucked around with this message at 19:07 on Aug 21, 2011 |
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Aug 21, 2011 17:04
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I'll be honest, I've been using ToS for a few years now (now TD Ameritrade like you said), and I've been extremely happy with them. I don't use them for mutual funds, but the quality of the service has been top notch. My biggest question would be, why is a $50 commission too high? How many times per year are you buying/selling? For a retirement account, it shouldn't be more than a couple times per year, max.
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Aug 21, 2011 22:46
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A more general question, I'm 25 and looking to start up my retirement savings. Is Vanguard still (the most) highly recommended people to go to? There's a Fidelity office in town and I plan to stop in there on Monday but are there any strong reasons I should not consider Fidelity?
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Aug 21, 2011 23:18
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Shooting Blanks posted:I'll be honest, I've been using ToS for a few years now (now TD Ameritrade like you said), and I've been extremely happy with them. I don't use them for mutual funds, but the quality of the service has been top notch. I'm happy with my Ameritrade account too, except for their high commissions. $50 is too high because I'm very diversified (am I too diversified?), I have 10-11 mutual funds. To buy (and subsequently sell) all of them would be an expenditure of $1,100, which is $900 more than what I was accustomed to at Zecco. The 3rd rule of acquisition is "Never spend more for an acquisition than you have to." If I were buying and holding for the next 50 years, or if I were as rich as an astronaut, that sort of commission would be a drop in the bucket. But on rare occasions you need to go to cash, as the experience of the last month or so has shown. Convinced that there was a very very small, teensy tiny teeny weeny chance that congress might blow up the global economy by defaulting on the US national debt, or selectively defaulting, I got out of the market in early July when the DOW was at 12,700, one of the few good decisions I've made in a while, even if it was mere happenstance. Even if I hadn't gotten out of the market then, I would have gotten out a bit before the DOW fell more than 1,000 points below the 200-day moving average. And when that happens, those $1,100 buy/sell cycles can really eat into your profits. I'm willing to absorb the sort of drop we saw in the summer of 2010. Any more than that and I flee. That or economy-destroying defaults.
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Aug 22, 2011 00:03
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Dr. Gaius Baltar posted:I'm happy with my Ameritrade account too, except for their high commissions. $50 is too high because I'm very diversified (am I too diversified?), I have 10-11 mutual funds. To buy (and subsequently sell) all of them would be an expenditure of $1,100, which is $900 more than what I was accustomed to at Zecco. The 3rd rule of acquisition is "Never spend more for an acquisition than you have to." Timing the market definitely doesn't belong in this thread.
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Aug 22, 2011 13:51
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totalnewbie posted:A more general question, I'm 25 and looking to start up my retirement savings. Is Vanguard still (the most) highly recommended people to go to? There's a Fidelity office in town and I plan to stop in there on Monday but are there any strong reasons I should not consider Fidelity? I'd be interested in hearing some responses to this question too. I've got most of my investments at Fidelity right now. Rates wise they seemed competitive with Vanguard (even beat them on some index funds) and I felt their Customer Service was incredible. But everyone boasts about Vanguard so I'm wondering if I am missing something big.
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Aug 22, 2011 14:02
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Niwrad posted:I'd be interested in hearing some responses to this question too. I have a major issue with Fidelity's bond management. Quite frankly, Vanguard's bond funds have the most consistent, asset-class-pure, and responsible management in the retail industry. Fidelity is below average, verging on incompetent. Their expenses are higher, and with low returning assets like bonds, it means having to reach for yield to make up for it. With Vanguard, a TIPS fund is a TIPS fund. With Fidelity, a TIPS fund may have (and did have) 20% subprime exposure. During good times, Fidelity keeps up with Vanguard (since yield will compensate for higher expenses). But during bad times, Fidelity will lag. This is unacceptable for a bond fund that is supposed to help your portfolio weather storms. This has been an issue with several of their bond funds, from TIPS to short term bonds to muni funds. Fidelity is liberal in their interpretation of their prospectuses' mandate (at least 80% of securities will be invested blah blah literally means the other 20% is play money. A good management team will have the same language in their prospectus but will have a greater resolve to stick to the fund's core objective). Source discussing Fidelity's TIPS fund This kind of thing should NEVER happen with responsible bond management. And even among the crappy bond funds out there, Fidelity stood out. Among 6 TIPS funds that Morningstar reviewed, only one fund had suprime exposure: Fidelity. In a later 2009 report, it indicated that Fidelity's bond managers have learned their lesson from the 2008 crisis and will never make those mistakes again. Well I expect professional managers to learn from a century's worth of market history and stick to their mandate. I can't help but feel Fidelity's bond funds are run by children.
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Aug 22, 2011 17:23
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Chin Strap posted:Timing the market definitely doesn't belong in this thread. Ok, nevermind timing the market. Say you're putting money into your TDA account little by little, over time. Every time you put in $1,000, you use that money to buy shares of a mutual fund. Bam, goodbye $50. I see what everybody means about ETFs being awesome. Under such conditions, I would choose ETFs over Mutual Funds also.
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Aug 22, 2011 18:34
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Dr. Gaius Baltar posted:Ok, nevermind timing the market. Say you're putting money into your TDA account little by little, over time. Every time you put in $1,000, you use that money to buy shares of a mutual fund. Bam, goodbye $50. yea don't spend $50 commissions on mutual funds. You should try to be more flexible in your mutual fund selections. Stick with low costs and zero commissions since you can control those. Future performance is not guaranteed. All those boutique funds you chose are affecting your ability to manage your portfolio while minimizing transaction costs. And you have no guarantee that those funds will continue to outperform, so all effort you are putting in right now is not worthwhile. For instance, your bond fund choices are way too complicated and gaining you very little in diversification. Keeping a simple but potent (safe and stable) bond portfolio to balance the risk of the equities in your portfolio is all you need. What you are doing with those bond funds you mentioned in the other thread is a complete waste of time and exposing yourself to complex aspects of the bond market that the average investor simply does not need (the credit and call risks of intermediate corporates, the equity like risks of emerging debt, the extension risks of mortgage bonds). These do not give you valuable diversity and are poor diversifiers for equity risk since those risks show up at the worst time (they increase correlation with equities). Once you understand proper portfolio design, you will find that you can develop a good longterm plan without all those boutique fund choices and worrying about transaction costs. You are truly bogging yourself down with unnecessary bullshit.
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Aug 22, 2011 18:48
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80k posted:yea don't spend $50 commissions on mutual funds. You should try to be more flexible in your mutual fund selections. Stick with low costs and zero commissions since you can control those. Future performance is not guaranteed. All those boutique funds you chose are affecting your ability to manage your portfolio while minimizing transaction costs. And you have no guarantee that those funds will continue to outperform, so all effort you are putting in right now is not worthwhile. I really appreciate all your helpful advice. Vanguard does look like a good broker for ETFs, what with their free Vanguard-branded ETF trades, and decently priced non-Vanguard ETFs. You're right in that there is no guarantee that mutual funds which one selects that have historically outperformed will continue to outperform in the future, and that sticking with mutual funds that have a history of outperforming may be too restrictive. Where can I go to learn more about selecting a simple but potent bond portfolio? And to learn more about proper portfolio design? I don't mind the higher risks of emerging markets debt, I consider that to basically be like a stock fund.
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Aug 22, 2011 19:48
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This was alluded to before, but I wanted to flush it out a bit. Interested in the more-so hypothetical case of somebody who already has an emergency fund, maxed out their 401k, and aren't eligible to contribute to the roth ira due to income limits. They also aren't eligible for any deductions on the contributions to a traditional ira. A popular idea seems to be to put money into a traditional ira and immediately convert to a roth ira. Does this seem like a great idea over just putting money into a taxable account? I.e., you're already not getting the deduction and (unless I'm interpreting this wrong), you're paying additional taxes on it?
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Aug 22, 2011 20:06
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Dr. Gaius Baltar posted:I really appreciate all your helpful advice. Vanguard does look like a good broker for ETFs, what with their free Vanguard-branded ETF trades, and decently priced non-Vanguard ETFs. You're right in that there is no guarantee that mutual funds which one selects that have historically outperformed will continue to outperform in the future, and that sticking with mutual funds that have a history of outperforming may be too restrictive. I'd say read Swensen's Unconventional Success and Larry Swedroe's The Only Guide to a Winning Bond Strategy You'll Ever Need to understand how bonds balance equity risk. Remember to account for all risks, so if you have risks on the bond side, then you need to reduce equity to compensate. And vice versa... a safe bond portfolio allows you to take more equity risk. So that is why you do not need to burden yourself with all those bond risk factors (emerging debt risk, call risks, extension risks, credit risks). They do not diversify your portfolio in a meaningful way because they are so well correlated with equity risk that you can just build a diverse equity portfolio and balance it with a good short-term or intermediate-term bond index fund and TIPS fund from Vanguard. You do not need to maximize return on every asset class in your portfolio (since high returns mean high risk... there is no free lunch). Assets are first chosen for purpose and mixed accordingly. You need to design your entire portfolio holistically to meet your needs and keep commissions and costs down. Just because you "don't mind" the higher risks of emerging debt does not mean it serves a useful purpose in your portfolio.
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Aug 22, 2011 20:49
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neuropunk posted:This was alluded to before, but I wanted to flush it out a bit. You are not paying additional taxes on a conversion of nondeductible traditional IRA assets because conversion of nondeducted traditional contributions are tax-free (except for the earnings). If you have no commingled deductible IRA assets, then a nondeductible contribution and immediate conversion is a backdoor Roth. In other words, it is pure awesomeness that you should take advantage of. http://thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html
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Aug 22, 2011 20:59
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I have some questions! First, the background. My, uh, not-quite-fiance and I are in our mid-20s. Between us we make right around $100k (and based on some classmates in the same field, my pay is below average and I could expect to make $10k+ more in another job). She's got the option of a 401k through her job, though it doesn't do any employer matching of contributions, and we both plan to open IRAs, which we can easily max out. We've also got ~30k currently sitting in a money market account that serves as an over-large emergency fund (more on that in a bit), and I have 26.5k in student loans. So, my questions! -IRA: Roth or traditional? As I understand it, the big difference (aside from when it gets taxed) is the income limits. Traditional has no limit, but the deduction becomes pro-rated and then goes away entirely past a certain AGI, whereas Roth can be contributed to less and then can't be at all past a certain AGI (aside from backdoors like what 80k posted, anyway). We're close to the 89k joint filing point, and being young and optimistic expect our income to rise over the years. So, is a Roth IRA (well, a pair of them, rather) a no-brainer, or is there a better route (like 80k's backdoor or something?) e: Forgot the standard deduction as well, whoops, so we're further from the limits unless I land a higher paying job. -401k: As mentioned, her employer doesn't match contributions. It's certainly within our means to max it out now, but we definitely won't for a few years (in favor of annihilating student loans) and possibly won't for a few years after that (in favor of saving for a house downpayment (we'll skip over the merits or lack thereof of houses as an investment for now, I think)). Given that, same question as above; Roth or traditional? If it matters (maybe someone has a 401k with them, I dunno) 401k is from ING. e: Alternatively, would it be to our benefit to drop a chunk into a traditional 401k first for the deduction in addition to our IRAs? -High-yield savings: Just in general, I see literally no downside to us partially or entirely ditching our existing respective banks and opening a joint checking account (for general expenses use) and a savings account (for, well, savings) with an entity like ING or similar offering high-yield accounts. So, uh, what's the catch? What am I not seeing? I think that's all for now. Thanks goons. mynnna fucked around with this message at 05:20 on Aug 23, 2011 |
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Aug 23, 2011 05:01
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I'm 25 and now things have settled down in the employment front for me to start planning for the long term future. For the record, I am a very hands off investor. I want my money to sit and grow until/if I can retire. Currently I make 40K a year and I was not eligible for the matching 401k before they took it away. I do have a simple and a rollover IRA at American Funds from a previous job that I contributed to and a Fidelity 401k that came as a special contribution (previous owners didn't inform the interns they were eligible for this and new owners are giving this to all former interns as a meaculpa). As it stands I have $3630.27 total with 896.25 at Fidelity and $2734.02 at American. Both at American are socking up fees and not doing much. I'm new at long term investing, but I want to start hitting my yearly contributions to my IRA. I'm not sure if I can/should roll everything into either a traditional IRA or a Roth. I think the traditional may suit me better as I'm not going to be taking this money out until I retire and I won't have to pay the interest (correct me if I'm wrong) on converting my simple IRAs to Roths. I was thinking about setting up at INGDirect, but I've heard such good things about Vanguard from everyone here that now I'm leaning to Vanguard. Should I stick with my original plan of going the traditional IRA with ING or look into a Roth with Vanguard?
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Aug 23, 2011 05:29
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waloo posted:Haha thanks for the reply and it seems I certainly don't have those to worry about, neither having that much money nor planning to expatriate. Sorry for the late reply. First you can look into domestic options if your employer isn't offering anything. Here in Japan, paying into the national pension system is required by law. Personally I don't consider that "retirement savings" since I'm 90% sure I will never see that money: the future of the Japanese economy isn't so bright. But hopefully where you live things are better. IRAs and Roth IRAs simply don't exist here, but I think there's something equivalent in the UK? And so I would assume a lot of the Commonwealth has similar options. The point is to reduce your taxation as much as possible. Apart from that, yes, my plan is to buy some indexes and hold indefinitely  On the (very) negative side, it's a regular investment account so taxed as a regular account. On the plus side, there are no penalties for early withdrawal so it's more liquid than a IRA/401k. zmcnulty fucked around with this message at 09:22 on Aug 23, 2011 |
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Aug 23, 2011 09:17
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Torael_7 posted:I have some questions! First and foremost. You said "not-quite-fiance" so let me just back the financial truck up a step. The government does not care about how close you are to your 'roommate.' Until you say "I Do" you are Single. Period, full stop. This is my living situation as well so I don't want you to feel like I'm diminishing the significance of your love for your not-quite-fiance, but for the purposes of taxation (and really for finances in general) the law does not care if you aren't legally married. Don't even look at the Married filing jointly rates. They do not apply to you, yet. All that said, as gets covered about every page in this thread, contribute to a Roth IRA. It provides nice flexibility and gives great tax advantages, especially for those paying a lower tax rate today. Double bonus in that it allows a hedge against future tax increases (assuming they don't implement a ROTH tax at some future point). Once you max out your IRA which even for two people is only $10k a year and will not likely get you there, even without a match you are MILES ahead to utilize a 401k, especially if you are like the average 20 something who can expect to change jobs 7+ times in their career. The 401k gives you the ability to save an additional 16.5k a year that you would otherwise have to pay tax on before investing into a generally taxible account. You are reducing your tax burden today and giving yourself tax sheltered earnings that can compound and when supplemented with a Roth IRA can provide a great strategic advantage in retirement to withdraw enough to maximize deductions and credits available to retirees. Finally, as to the HYS and Online Checking, there are no catches if you are internet savy, can plan ahead and don't often find yourself going to bank branches. I would recommend keeping a free checking account at a credit union in the off chance you receive a check from your grandma and need to cash it. A word of warning though if your finances aren't yet completely merged. There is ZERO protection if you open a joint checking account as an unmarried individual. You are essentially giving all your money to your soon to be fiance and hoping that they reciprocate. I know it's all sunshines rainbows and lollipops now, but things can change in an instant and there are no divorce proceedings where you could recover your 'fair share.' I personally keep a checking account for myself and my girlfriend does the same. We share the visibility into each others finances and openly discuss things, but we keep separate legal accounts for just this reason. If for any reason, things go bad the other isn't left holding the bag. I will turn in my soap box now.
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Aug 23, 2011 15:02
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I have a 457 plan, but there is no employer match. It's with ING, and they also have a self-directed brokerage window, State Street, which has roughly 2,000 no transaction fee mutual funds (sadly none of them Vanguard). Stock purchases carry a $20 commission fee, and it's a $34 commission for regular mutual funds. So no low-cost Vanguard ETFs, really. Am I correct in noticing a pattern that index funds are great? I noticed that the OP recommended Vanguard target date funds for passive investing. Are these still a good recommendation? Would a wise course of action be to attempt to piece together a facsimile of a Vanguard target date fund, using index funds from the 2000 available mutual funds that have no transaction fee, selecting those which have low expenses? The regular ING account, not the self-directed brokerage window, also may have some good funds. The ING account is good in that it has automatic investing. You tell it how much of your paycheck you want to deduct, and what percentage of each paycheck contribution you want to go to which funds. The self-directed brokerage window is all manual. Here are some funds in the ING account which I think may be good: SSgA U.S. Bond Index Fund - Class II - 0.12% expense ratio SSgA S&P 500 Index Fund - Class III - 0.16% expense ratio SSgA Russell Small / Mid Cap Index Fund - Class I - 0.02% expense ratio SSgA International Index Fund - Class II - 0.29% expense ratio They also have Blackrock Lifepath target date funds, but those appear to have high expenses (0.6%), and contain actively-managed assets. Am I correct in assuming the recommendation here would be to open a Roth IRA at Vanguard, maximize contributions, and do the above with the 457?
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Aug 23, 2011 15:45
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Dr. Gaius Baltar posted:I have a 457 plan, but there is no employer match. It's with ING, and they also have a self-directed brokerage window, State Street, which has roughly 2,000 no transaction fee mutual funds (sadly none of them Vanguard). Stock purchases carry a $20 commission fee, and it's a $34 commission for regular mutual funds. So no low-cost Vanguard ETFs, really. Yea I think you would be on the right track with the above plan. Did you notice that once you decided that low cost index funds is a good way to go that your situation became so much simpler (you can just use the funds in your 457 plan and open your IRA at Vanguard and be done)?
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Aug 23, 2011 18:21
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KennyG posted:First and foremost. You said "not-quite-fiance" so let me just back the financial truck up a step. The government does not care about how close you are to your 'roommate.' Until you say "I Do" you are Single. Period, full stop. This is my living situation as well so I don't want you to feel like I'm diminishing the significance of your love for your not-quite-fiance, but for the purposes of taxation (and really for finances in general) the law does not care if you aren't legally married. Don't even look at the Married filing jointly rates. They do not apply to you, yet.
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Aug 23, 2011 19:32
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80k posted:Yea I think you would be on the right track with the above plan. Did you notice that once you decided that low cost index funds is a good way to go that your situation became so much simpler (you can just use the funds in your 457 plan and open your IRA at Vanguard and be done)? Yes, it is much simpler now. Vanguard's Target Retirement 2050 is: 10% Vanguard US Bond Index 63% Vanguard Total Stock Market Index 27% Vanguard Total International Stock Index I *think* a good way to replicate that with the funds I have at hand would be: 10% SSgA US Bond Index 31.5% SSgA S&P 500 Index 31.5% SSgA Russell Small/Midcap Index 27% SSgA International Index Why does Vanguard seem to favor US stock funds so heavily? Would not an equal distribution of US to International stocks be better, such as 10/22.5/22.5/45?
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Aug 24, 2011 00:18
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Dr. Gaius Baltar posted:Yes, it is much simpler now. Vanguard suffers from home country bias. I agree splitting US and international stocks 50/50 is better.
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Aug 24, 2011 00:40
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Is an expense ratio of .98 and 1.02 really high? I'm looking at Vanguard in comparison and I was shocked at how high the two funds in my 457 are, even at a "non-profit" administrator. Also, since there is no company match -- is there a way to just stop paying pre-tax in to the company sponsored 457plan and contribute pre-tax to a plan of my own? Potentially to somewhere like Vanguard or similar funds and opening up my own retirement account. Or will they only let me take out post-tax dollars for that.
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Aug 24, 2011 08:26
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80k posted:I have a major issue with Fidelity's bond management. Quite frankly, Vanguard's bond funds have the most consistent, asset-class-pure, and responsible management in the retail industry. Fidelity is below average, verging on incompetent. Their expenses are higher, and with low returning assets like bonds, it means having to reach for yield to make up for it. With Vanguard, a TIPS fund is a TIPS fund. With Fidelity, a TIPS fund may have (and did have) 20% subprime exposure. During good times, Fidelity keeps up with Vanguard (since yield will compensate for higher expenses). But during bad times, Fidelity will lag. This is unacceptable for a bond fund that is supposed to help your portfolio weather storms. This has been an issue with several of their bond funds, from TIPS to short term bonds to muni funds. Thanks for the information. I guess that leads to another question. I've got my Roth at Fidelity right now. I'm in the 2045 Freedom Fund (FFFGX). But I noticed that the expense ratio on it is .79%. I then noticed the 2045 Fund at Vanguard (VTIVX) is .19%. Now I know they aren't identical, but I'm wondering if I'm missing something here. That seems like a rather large jump in expense ratio and something that could be costly over the next 30+ years (assuming it remains the same). Would this be something I should look at doing right away? Is there something to account for the different that I'm not seeing? One other question, how is the customer service at Vanguard? I think Fidelity has amazing support and knowledgeable help with little to no wait.
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Aug 24, 2011 09:20
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80k posted:Vanguard suffers from home country bias. I agree splitting US and international stocks 50/50 is better. Is this over-weighting internationals? (I guess depending on your definition) 60% of the equities are in the USA. You obviously want some exposure to other countries but a home country bias, especially when it's as large as the US is not as dangerous as a home corporation bias (hitching a large percentage of your portfolio to your employer) over the LONG term. If you're not doing amazing because of the US stock market, chances are others aren't as well (assumption generally only valid for index investors) This will lead to market pressures or more likely other forces that can re-balance. It is more likely that forces in the US will do things to improve conditions for the large amount of retirees that have been hit with poor US investment performance. If on the other hand you weight heavily in other non-us markets and they substantially under-perform the US, it would mean that you would be behind everyone else. It's sort of a pascal's wager. The bad in over-weighting US is significantly less bad than the over-weighting non-us as a US investor. Does the carrot of better returns outweigh the risk premium associated with non-US returns. Also given the significant information barriers, liquidity issues, and other risk premiums associated with OUS investing, I'd say 50/50 is not sound/prudent/conservative/long-term investing but a significant deviation into high risk investing. Untagged posted:Is an expense ratio of .98 and 1.02 really high? I'm looking at Vanguard in comparison and I was shocked at how high the two funds in my 457 are, even at a "non-profit" administrator. Non-Profit does not mean poorly-compensated-individuals. To answer your question, the only thing you can do is put $5,000 year into a traditional IRA (if you qualify). After that you're screwed. That is why they charge such ridiculous fees and offer such poor choices. Captive audience. I'd start by talking with the HR people at work if possible. Do research and find out what other options are from their perspective. All in all, as a general rule you should still stick with it. A personal ROTH IRA should be first and foremost, but even the 1% expense ratio beats paying tax (for most). Edit: I just looked up that 457 is gov't and special non-gov't employees. Basically your hosed. KennyG fucked around with this message at 14:00 on Aug 24, 2011 |
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Aug 24, 2011 13:47
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Niwrad posted:Thanks for the information. I guess that leads to another question. No you are not missing anything... Over the longterm, it is hard to justify the higher expense ratio of Fidelity, especially since Fidelity management are mostly index huggers. I imagine that due to their desire for mass appeal, Fidelity management is far more benchmark focused than, say, Fairholme or Longleaf or First Eagle or IVA. You can more or less expense index like performance minus higher fees. Customer service at Vanguard? I hate to say it but it probably depends on how much money you have. I have been Flagship since '06 and have a personal rep. I get fabulous service with amazing follow up. I've heard lower tier services leave something to be desired and that Fidelity is superior. Just being honest. But I will say that since McNabb took over the reins, the changes at Vanguard have been overwhelmingly positive in favor of the small shareholders (reduced brokerage commissions, lower minimums for admiral shares). Also I know that since McNabb has taken over that Vanguard has been listening to the public and addressing longstanding issues (like improving website and customer service, which have been longstanding criticisms). KennyG posted:Is this over-weighting internationals? (I guess depending on your definition) 60% of the equities are in the USA. You obviously want some exposure to other countries but a home country bias, especially when it's as large as the US is not as dangerous as a home corporation bias (hitching a large percentage of your portfolio to your employer) over the LONG term. Actually cap-weighted, 60% of equities are overseas so even 50/50 has a bit of home country bias. Of course a home country bias is not as risky as home corporation bias. Not even sure why that has to be mentioned. But given the easy access and availability of low cost international funds, I feel maximum global diversification is the best starting point. KennyG posted:If you're not doing amazing because of the US stock market, chances are others aren't as well (assumption generally only valid for index investors) This will lead to market pressures or more likely other forces that can re-balance. It is more likely that forces in the US will do things to improve conditions for the large amount of retirees that have been hit with poor US investment performance. If on the other hand you weight heavily in other non-us markets and they substantially under-perform the US, it would mean that you would be behind everyone else. This sounds more like tracking error regret, which suggests investing most if your equity portfolio in the S&P500. No tilt to small caps or value stocks or international stocks. If you really have that issue, then by all means go for it. You need to know thyself to know the best portfolio that will help you stay the course. If the US heavily underperforms the rest of the world for the next two decades, will you have a hard time staying the course with a US-heavy portfolio? On the other hand, if the US outperforms the rest of the world and you are globally diversified 50/50, will you have a hard time staying the course? I'd say your above point suggests underweighting your home country. If the US does worse than other countries, you might have low job prospects but hopefully have superior performance from the overseas portion of your portfolio to compensate. If the US economy does great, hopefully you are experiencing good career growth and can afford investing into cheaper overseas stocks that hopefully will earn a good return in the future. KennyG posted:It's sort of a pascal's wager. The bad in over-weighting US is significantly less bad than the over-weighting non-us as a US investor. Does the carrot of better returns outweigh the risk premium associated with non-US returns. Also given the significant information barriers, liquidity issues, and other risk premiums associated with OUS investing, I'd say 50/50 is not sound/prudent/conservative/long-term investing but a significant deviation into high risk investing. Overseas investing does not offer higher risk premiums. Over the past century, the risk premium for developed country stock markets have been comparable. Your belief that overseas investing carries high risk sounds to me like home country bias rationale, as long as we are talking about developed markets. With emerging markets, of course that should carry higher risk and higher returns. But I still think it is best to diversify broadly as a starting point for equity allocations and then balance that risk with bonds. Everything you are concerned about with overseas investing can be mitigated by a reduction of equities in your portfolio, other than the tracking error regret mentioned above.
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Aug 24, 2011 17:21
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BTW, KennyG, I think one of the best discussion of global investing is Triumph of the Optimists by Dimson, Marsh, and Staunton. It pretty much sealed the deal for me in adopting a close-to-globally weighted portfolio going forward.
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Aug 24, 2011 18:46
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80k posted:BTW, KennyG, I think one of the best discussion of global investing is Triumph of the Optimists by Dimson, Marsh, and Staunton. It pretty much sealed the deal for me in adopting a close-to-globally weighted portfolio going forward. I'll check it out.  Well gently caress me sideways, we're both wrong. It's about 30%... KennyG fucked around with this message at 14:12 on Aug 25, 2011 |
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Aug 25, 2011 13:44
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