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RangerScum posted:I can already think of things I could do with the extra $ per paycheck. Your question is better suited for the stock-picking thread. Anyone here who is more than 10 years away from retirement will tell you that dips are a long-term investor's best friend.
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Oct 19, 2011 20:41
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bam thwok posted:Your question is better suited for the stock-picking thread. Anyone here who is more than 10 years away from retirement will tell you that dips are a long-term investor's best friend. Just so I don't panic, are there any particularly good discussions of why we are probably NOT heading into a Japan-style 20-plus-years recession? My baseline emotional feeling is that some sort of long-term "the U.S. is no longer exceptional" economic failure (of the sort we have not had since the stock market came into being) is relatively close, but I am so extremely non-expert that I know that emotional feeling means zilch, and am continuing to do index investing like the personal finance books tell me to. But, like, is there anything well-written that will convince me on a deeper level that it's a good idea to continue to invest in American or worldwide economic growth?
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Oct 19, 2011 20:57
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KennyG posted:It may not belong here but if they do lock you in to universities inside a given state, Iowa is a much better choice. Wait wait wait... I live in Michigan and chose the Nevada plan for my son. This means that my son will have to go to a certain set of schools? I suppose I thought these were less restrictive, please add some clarity for me! Thanks!
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Oct 19, 2011 21:12
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onefish posted:Just so I don't panic, are there any particularly good discussions of why we are probably NOT heading into a Japan-style 20-plus-years recession? My baseline emotional feeling is that some sort of long-term "the U.S. is no longer exceptional" economic failure (of the sort we have not had since the stock market came into being) is relatively close, but I am so extremely non-expert that I know that emotional feeling means zilch, and am continuing to do index investing like the personal finance books tell me to. But, like, is there anything well-written that will convince me on a deeper level that it's a good idea to continue to invest in American or worldwide economic growth? The "sky-is-falling" papers and news will always outshine the "keep-calm-carry-on" stuff, even in good times, since there's always someone hoping to cash in on being the guy who called the next big collapse. Don't put too much stock in it. Even if the US entered a period of 30 year period of deflation and asset price decline, you'd STILL want to keep investing since you won't need the money for 40 years (probably more once the retirement age goes up). The only real way to earn a healthy return in the stock market is to buy low and sell high. How do you intend to do that if you get skittish when prices threaten to go low? You're 26; even if the stock market faceplanted and your portfolio fell 80% tomorrow, you'd still have four decades to earn it back.
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Oct 19, 2011 21:22
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TraderStav posted:Wait wait wait... I live in Michigan and chose the Nevada plan for my son. This means that my son will have to go to a certain set of schools? I suppose I thought these were less restrictive, please add some clarity for me! As far as I know, unless it's some type of pre-paid tuition plan, it is not locked into any particular set of schools. The only advantage to investing in a particular state is typically if your own state provides some type of tax advantage for enrolling in their plan. For example, in Arkansas, any amount I contribute to Arkansas' 529 plans can be deducted from my state income tax. Also, Arkansas residents are exempted from the ~$20/year service fee. You can live in Michigan, invest in a 529 plan in Nevada, and use it to pay for school in Ohio. Or any other combination of states. Just read the plan information for the one you invested in, it should explain all this.
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Oct 19, 2011 21:29
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flowinprose posted:As far as I know, unless it's some type of pre-paid tuition plan, it is not locked into any particular set of schools. Thanks, I did when I set this up years ago, but this comment threw me for a loop thinking that I missed something critical as he was comparing the NV Vanguard vs IA Vanguard...
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Oct 19, 2011 21:32
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bam thwok posted:The "sky-is-falling" papers and news will always outshine the "keep-calm-carry-on" stuff, even in good times, since there's always someone hoping to cash in on being the guy who called the next big collapse. Don't put too much stock in it. Okay. Right. Always good to hear that again. Thanks. And if we have a genuine apocalypse, retirement savings will be the least of my worries.
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Oct 19, 2011 21:54
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TraderStav posted:Thanks, I did when I set this up years ago, but this comment threw me for a loop thinking that I missed something critical as he was comparing the NV Vanguard vs IA Vanguard...
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Oct 20, 2011 03:17
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KennyG posted:I have no children so I know zip about 529s. I was only reacting to the post above mine that certain plans (not necessarily 529s) are restricted to instate schools. In such a case U of Iowa is far better than UNLV unless you want to get your gamble on during parents weekend. Besides there's always the riverboats. Well poo poo, I took that up to about a ten unnecessarily.
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Oct 20, 2011 03:26
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flowinprose posted:This is a big deal, because can you imagine what you would've done at 18 years old if you suddenly had access to thousands of dollars? I don't have to imagine it. I went to college. Since I went to a state university with a low tuition I had enough money left over for my first car which I bought my junior year (it was a used car, but new to me). And a 3 month trip to Europe after I graduated and before I entered the work force. Back then, backpacking and sleeping in hostels was a pretty cheap way to travel over there. I considered that part of my education plus it was a hell of a lot of fun. nelson fucked around with this message at 05:57 on Oct 20, 2011 |
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Oct 20, 2011 05:49
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I went back a page or two, but since this is a huge thread, I'll just throw it out and hopefully no one gets annoyed if it's been answered a bunch. I have ~$3700 in the Vanguard STAR fund for my RothIRA. I put it there because I moved from a different RothIRA to this one, and didn't have the 3k max to put in anything else. Should I move it to another fund or leave it? Should I stick it in one of the target retirement ones or elsewhere? I'm 31, so won't be retiring anytime soon, and I'm not super risk-averse, but I don't want to put it in 100% stocks. I stick $100/mo in. Any suggestions on what to do with it?
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Oct 20, 2011 06:07
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The Star Fund is a 60/40 split of stocks to bonds. I'm guessing many would argue that's too much invested in bonds for your age (120 minus your age is a rule a lot of people go by to determine the percent of stocks). Especially considering income made in a Roth is tax-free (thus you want this to be where you are aggressive). The easiest solution would be to pick one of their target retirement funds and forget about it. Vanguard will adjust allocations as you age and you don't need to worry too much about it. The expense ratios are also really low so you'll save some money there long term as opposed to the Star Fund. However, their 2040 or 2045 fund is 90% stocks at the moment. So if you're looking for more bonds in your portfolio, it might not be for you.
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Oct 20, 2011 07:28
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RangerScum posted:At this point with certain sources saying that there will be another crash/dip, would it make any sense to stop contributing to my 401k until that point is reached? I wouldn't try to time the market with a 401k, between decades of compounding and dollar cost averaging it still makes sense to pay into it in both good times and bad.
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Oct 21, 2011 04:42
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Still trying to wrap my head around all the different options out there. Replies were very helpful last time I posted, I'm hoping for more of the same. My situation, briefly: beneficiary of a trust, I get a $1500 check on the first of every month from my grandfather. I only need about 1k a month to live off, so I try to save $500 a month. Currently: 11K in savings @ 0.85% and 15K of stock. I work when I'm not in school and make ~7.5k/yr in cash. Everywhere I look, the prevalent advice seems to be to set up an IRA and I'm happy to do that, but do I put the stock in it or the cash? Can I even contribute to an IRA? I have no reported income. The primary advantage of a Roth IRA is that I can withdraw from it tax free yes? How is this different from a savings account? I don't think I've ever paid taxes on withdrawals before...
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Oct 21, 2011 08:58
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If you have no income, you can't open a Roth. Your income needs to be equal to or greater than your annual contribution.
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Oct 21, 2011 09:12
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bam thwok posted:The "sky-is-falling" papers and news will always outshine the "keep-calm-carry-on" stuff, even in good times, since there's always someone hoping to cash in on being the guy who called the next big collapse. Don't put too much stock in it. Count me among, well, not the chicken littles but as someone who feels a heavy downturn is coming. I plan to keep investing, but there have been a LOT of indications of a crash soon such as BofA's FDIC move. With that in mind, wouldn't "buy low and sell high" would mean sell now, and re-buy after the crash? Not "keep calm carry on." This raises the main question I came into this thread for: what options does a small-timer (like many of you, I'm mid 20s and have a vanguard roth IRA with 10-15k in it) have to get to safety for a few months? I read things (I'm not advocating these, just giving examples) like running into Swiss francs, Gold, or government bonds. Are these options even possible to a small-timer like myself, particularly without taking the money out of the IRA completely and incurring the penalties?
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Oct 21, 2011 12:48
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Nosre posted:Count me among, well, not the chicken littles but as someone who feels a heavy downturn is coming. I plan to keep investing, but there have been a LOT of indications of a crash soon such as BofA's FDIC move. With that in mind, wouldn't "buy low and sell high" would mean sell now, and re-buy after the crash? Not "keep calm carry on." This presumes that a crash will indeed occur. In the past ten years, I have seen at least a dozen instances where it 'was plainly obvious' that a huge crash was coming, only to have the markets rally to new highs in the following months. Do not let fear get the best of you, create a plan, and stick to it. If it were indeed guaranteed to happen, it would have already. The markets are deadly efficient in that regard.
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Oct 21, 2011 13:04
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Nosre posted:Count me among, well, not the chicken littles but as someone who feels a heavy downturn is coming. I plan to keep investing, but there have been a LOT of indications of a crash soon such as BofA's FDIC move. With that in mind, wouldn't "buy low and sell high" would mean sell now, and re-buy after the crash? Not "keep calm carry on." I think the issue is that it's incredibly difficult to time the market even if you're a stock market guru. Trying to do it on your own is likely going to end in frustration. While you talk about a crash, there are some who see top companies bringing in nice returns right now and that maybe some stocks are undervalued. It's a difficult thing to predict. The other thing is what are you really looking to gain by this. $10-$15k is a real nice start for your age, but even if you time the market just right, it's not likely going to lead to a huge windfall. You're much better off focusing on continuing contributions, that's where the real money comes from in time. The best advice I've seen is to simply set your contributions to monthly and forget about it. Sometimes you'll be buying at bad times, sometimes at good times. Over the course of 40 years, it should all even out. As for safety, if you're talking about months, I don't really know of anything. I guess their money market or something similar, but you're barely looking at making 1%. You could get into something like TIPS, but that's a longer term prospect and again, not looking at much upside in an account that is supposed to be aggressive at your age. Not trying to be discouraging, I just think you're not looking at the big picture. It's a very long term investment.
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Oct 21, 2011 13:46
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Nosre posted:Count me among, well, not the chicken littles but as someone who feels a heavy downturn is coming. I plan to keep investing, but there have been a LOT of indications of a crash soon such as BofA's FDIC move. With that in mind, wouldn't "buy low and sell high" would mean sell now, and re-buy after the crash? Not "keep calm carry on." If you're talking about months - you could simply convert your stock in your IRA to cash/money market and then re-buy stock after that point. The transactional penalties in this situation might eat much if not all of your return depending on which Vanguard accounts your in. Assuming 0 costs, and your 'guaranteed' crash, that's the easiest way. HOWEVER, let me warn you, as you have thrown a red flag up to me that you are unprepared and underinformed. The Swiss frank is not the hedge it was thoguht of 2 months ago. The Swiss gov't pegged it to the Euro in early September. http://en.wikipedia.org/wiki/Swiss_franc#2011_appreciation The upside of the CHF is .83/Eur. Right now it's ~.81 - slightly overvalued to the peg. Either you think the peg is failing and they will give up soon (unlikely) or you are working from stale information.
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Oct 21, 2011 15:39
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I had just started contributing to my 401k before the recession hit in 2008, and my hours/income were reduced by 25%. This lasted 18 months before I was finally put back to full time, I now earn a modest (~$45k / yr) living and have been with my company for 6 years. When my hours were cut I had to set my contribution to $0, up to that point I had contributed $1200. In 2010 the balance had crawled back up and even peaked around $1300, but in the last year I've seen it fall again and it's now at $1000. I've yet to start contributing again because a) in my mind this performance is terrible, and b) I've been living paycheck to paycheck for 3 years now and have tightened my belt as much as possible. I know this is a terribly small amount of money to have in a 401k, and at 29 I should have more invested for retirement. I'm being promoted and expect to be earning more starting next year, but don't expect to contribute anything to retirement until I can clear out my ~$10k of debt, which I've managed to consolidate through my credit union at 3%. Given all of this, I've decided I want to clear out this 401k completely, withdraw every last cent and put what I can get towards my debt consolidation loan. I know that isn't what a 401k is for, and I've googled and looked online and the prevailing wisdom is to leave the 401k alone and eat ramen instead. I'm already eating ramen every night (actually quinoa and costco salmon with frozen veggies, but yes I've gone over my finances over and over again and am living as humbly as I can). I'm just fed up with this account. I've watched it for 4 years now, it is still at a loss, and even if there are penalties I want as much of my money back as I can get. My question is, how do I go about getting this money back? I've contacted the 401k provider and they're telling me I can't withdrawl the money, and are referring me to my plan manager at my company. She doesn't really know what to do either. What are my options?
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Oct 21, 2011 18:27
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RivensBitch posted:My question is, how do I go about getting this money back? I've contacted the 401k provider and they're telling me I can't withdrawl the money, and are referring me to my plan manager at my company. She doesn't really know what to do either. What are my options? Let me spell it out for you, that could be the worst thing you could do. You have contributed $1200 (asuming a worst case 0% match). You have $1,000 now. Your account is pre-tax in a 401k. To take it out, you'd need a 10% penalty so you're down to 900. Making ~45k a year, you're going to pay another 25% in Fed tax on the $1,000 (double tax on the penalty) and perhaps another ~5% or so in state. Call it 30% and you'll clear just over $600. Now, don't forget that your plan manager is going to take a withdraw fee and you are down to $550. Your 1200, is now less than 50%. It's a terrible financial move for such a small amount of money. If it was the difference between losing your hose and saving it (not prolonging the foreclosure, but actually saving it) I'd have a different opinion. Markets go up, markets go down, but the worst thing you could do right now is withdraw that ~$1k, what you should be doing is adding more in. Once you leave your current company you should roll it into a personal IRA at a low expense company like Vanguard. You've had a rough go as you lost the benefit of contributing when your income dropped that would have actually amounted to a significant gain over the period had you been contributing through 2009 and 2010, but don't give up now. Everyone says the biggest step in investing for retirement is starting, well the second biggest step is not giving up after a downturn. E: drat that sounds like the advice from the bitcoiners. But in this case it actually has facts and reality to be based upon. KennyG fucked around with this message at 20:42 on Oct 21, 2011 |
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Oct 21, 2011 20:38
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RivensBitch posted:I had just started contributing to my 401k before the recession hit in 2008, and my hours/income were reduced by 25%. This lasted 18 months before I was finally put back to full time, I now earn a modest (~$45k / yr) living and have been with my company for 6 years. Terrible idea. Down markets are the best possible thing for long term investors. I count my lucky stars every time the DJIA takes a three digit loss. As Kenny pointed out you are taking a massive loss to get money out. It's not even like you are paying some 30% APR credit card. You have a super cheap 3% loan. Do not withdraw.
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Oct 21, 2011 20:42
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KennyG posted:Making ~45k a year, you're going to pay another 25% in Fed tax on the $1,000 (double tax on the penalty) and perhaps another ~5% or so in state. My effective tax rate (state and federal combined) last year was less than 10%. I typically have a lot of deductions, and this year is going to be even better tax wise as my work related expenses have shot through the roof and I wont be seeing an increase in salary until next year. This is another reason why I want the money, I'm actually making less right now and wont see the benefits for a while. I definitely am not interested in watching this $1000 shrink any further, and when I do start contributing again (there's no matching from my employer btw) it will be to to vanguard or something similar. But right now, I don't have any confidence in this investment firm and would rather take a hit and have something, than just watch it continue to dwindle and be nothing. I really appreciate the advice and understand why you are telling me to not take it out. I would really appreciate advice on how to take it out anyways. Right now the 401k provider isn't saying I shouldn't do this, they're saying I CAN'T. So far in 4 years they've lost $200 for me, I want out and I don't appreciate them telling me I can't get out. Even if I only get $750 of it after their fees and the taxes, I could drop it on black at the casino and I would feel better with the outcome whichever way it went. RivensBitch fucked around with this message at 21:03 on Oct 21, 2011 |
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Oct 21, 2011 21:01
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RivensBitch posted:So far in 4 years they've lost $200 for me This is what has happened to literally everybody's 401k in the last 4 years. You didn't get saddled with some incompetent, malevolent manager. If you want to gamble away your money, fine. Don't pretend it's because anyone screwed you over but yourself.
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Oct 21, 2011 21:31
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RivensBitch posted:My effective tax rate (state and federal combined) last year was less than 10%. I typically have a lot of deductions, and this year is going to be even better tax wise as my work related expenses have shot through the roof and I wont be seeing an increase in salary until next year. This is another reason why I want the money, I'm actually making less right now and wont see the benefits for a while.
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Oct 21, 2011 21:31
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bam thwok posted:This is what has happened to literally everybody's 401k in the last 4 years. You didn't get saddled with some incompetent, malevolent manager. If you want to gamble away your money, fine. Don't pretend it's because anyone screwed you over but yourself. I didn't say they were incompetent or malevolent. I just said the account has lost $200, which is absolutely undeniable. cowofwar posted:In the future you should only ever invest in online savings accounts or bonds. It's nice to learn that you are absolutely risk adverse and have zero tolerance for loss with $1000 and not with $100,000. Look, I appreciate what you're saying and I understand. But I don't consider this an investment as I never really had a chance to invest. I got pre-empted before I even started. Even if/when I start making more money next year, I'll be lucky if I'm in a position to start contributing again until 2013 or 2014. So right now, for the next 2 years, I'm stuck with $1000 in a 401k. I don't consider that a serious investment, and I don't see the economy turning around until more like 2015 or 2016. What I do see is my savings account is empty, and it's very hard to put anything in there right now. In my mind the utility of having $750 on hand for rainy days far outweighs any potential gains that this $1000 by itself might possibly make in the next 2 years, even with the $250 it will cost me to pull it out. If my car needs any serious work in the next year and I don't have any money on hand, I'll have to get another credit card and now I'm not just losing $250 on $1000 (or $200 on $1200), now I'm paying 30% interest on $600-$700 (or more) of car repairs. So please, lecture me on how I should be less risk averse. I don't think you understand the risks I'm dealing with and trying to protect myself against. I have some serious deductions coming this year. It's October and just looking at the numbers, I can see my tax liability is going to be very small. Worst case scenario I'll pay the feds and state 15%, but I'm thinking it will be even less just looking at my expense reports. What I need to know is, can the 401k provider actually keep me from getting my money? Right now they're saying they wont do it, period.
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Oct 21, 2011 22:09
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RivensBitch posted:I didn't say they were incompetent or malevolent. I just said the account has lost $200, which is absolutely undeniable. You have yet to tell us what you're invested in. A 401k is just a container, it doesn't make or lose money. List the funds you have, and have access to. You may have a good option in there.
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Oct 21, 2011 22:19
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Why do you want the money out? From what I can tell you seem to have two reasons for wanting to withdraw the money, correct me if I am wrong. 1) Performance, portfolio is down 20% and you're not happy with that. 2) Pay down debt, your consolidated 3% rate loan. Both of these are very bad reasons for withdrawing early from a 401k. As I said before, a down market now is the best possible thing for a long term investor. You want stocks to be cheap now! Yout loan rate is incredibly low. You would take a 10% penalty at the minimum plus your tax rate. It's also important when calculating the tax rate you should use your MARGINAL rate and not your effective rate. Any income you add for the year will go on top. Is there more to the story than in your first post? This line jumped out at me: RivensBitch posted:I don't think you understand the risks I'm dealing with and trying to protect myself against. What risks are you trying to protect yourself against? Unless you didn't mention something critical (e.g. you need $500 next week to prevent someone from breaking your knees) I still don't see a good reason. Daeus fucked around with this message at 22:44 on Oct 21, 2011 |
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Oct 21, 2011 22:41
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^^ Daeus has some good points.RivensBitch posted:The important thing is not whether you pull this money out or leave it in. It's "only" $1000 and at most you'll lose another couple of hundred dollars at present*. The really important thing is how this impacts your investment strategy in the future. cowofwar had a point, if you were 50 and wanted to pull all your money out this would be a very bad idea. This thousand dollars does not matter as much as all the thousands you will be investing over the next half century. You're young and time is still on your side but you need to do some serious thinking about your investment strategy and pick a less volatile one where you can stay the course indefinitely. Otherwise this will happen again. *although over a longer term you could lose much more in compounded interest. The one thing that really worries me in your posts is RivensBitch posted:Look, I appreciate what you're saying and I understand. But I don't consider this an investment as I never really had a chance to invest. I got pre-empted before I even started. Even if/when I start making more money next year, I'll be lucky if I'm in a position to start contributing again until 2013 or 2014. So right now, for the next 2 years, I'm stuck with $1000 in a 401k. I don't consider that a serious investment, and I don't see the economy turning around until more like 2015 or 2016.
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Oct 22, 2011 00:56
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Daeus posted:Why do you want the money out? No one seems to think my reasons matter or are important enough. I suppose the fact that this is my money and I should be able to do what I want with it isn't relevant to anyone, so how about a hypothetical scenario: let's say I just found out I have cancer and have 6 months to live and no family. My 401k manager just told me I can't have my money. What are my options? quote:Is there more to the story than in your first post? This line jumped out at me: I have no safety net, one visit to the mechanic or flat tire and I have to break out the credit card. Credit card debt is part of what has kept me from contributing these past 2 years. I want to be debt free ASAP and I want a safety net to protect me from having no choice but to use credit cards again. I want the money that belongs to me. T-1000 posted:^^ Daeus has some good points. My investment strategy for the past four years has been to pay $700/mo in debt maintenence, and to watch my $1200 be reduced to $1000, all while being unable to contribute any money towards my 401(k). Can you tell me what I'm doing wrong? Or just pretend I have cancer and I'm dying. Can I please have my money? My 401(k) manager says no, I can't. Is he right? RivensBitch fucked around with this message at 02:10 on Oct 22, 2011 |
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Oct 22, 2011 02:06
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What do you mean no one seems to think your reasons matter or are important enough? You gave your reasons, we explained what it was bad, now you change your reasons to be contradictory to your first reason.RivensBitch posted:Given all of this, I've decided I want to clear out this 401k completely, withdraw every last cent and put what I can get towards my debt consolidation loan. RivensBitch posted:I have no safety net, one visit to the mechanic or flat tire and I have to break out the credit card. If you needed the money for life saving treatment no one would be suggesting you don't do it. The reasons are important and that's why we ask - financial decisions aren't made in a vacuum. In your first post you yourself specifically said you wanted to pull it out to pay down the loan and because you were unhappy with the performance. Now you say you need it out because you want to have cash as a safety net. If you pay down the loan, you won't have the cash as a safety net. None of those are good reasons for incurring the large penalty of 10% plus marginal tax rate plus fees. You've gone this long with it stuck in the 401k and you only have a few more months until you get a raise, why not just stick it out? People post questions all the time in BFC asking for some little piece of advice (hey how can I get my car loan down to $500/month). Then it turns out its a 23 year old in his first job buying a luxury car for more than half his gross income and financing for six years at 11%. Then the thread turns into real financial advice, don't buy that loving car. I don't understand why you are getting whiny with us. We understand it is your money, you should be able to withdraw it from the 401k after filling out some paperwork. We're giving you good financial advice, sorry it is not what you wanted to hear. Daeus fucked around with this message at 06:44 on Oct 22, 2011 |
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Oct 22, 2011 06:41
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RivensBitch posted:No one seems to think my reasons matter or are important enough. I suppose the fact that this is my money and I should be able to do what I want with it isn't relevant to anyone, so how about a hypothetical scenario: let's say I just found out I have cancer and have 6 months to live and no family. My 401k manager just told me I can't have my money. What are my options? You can't have your money. That's part of the deal in place between you, your employer, and the provider. There are ways to take out loans against it which you can ask your fund manager about. Some plans are more restrictive than others regarding this.
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Oct 22, 2011 09:30
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RivensBitch posted:I now earn a modest (~$45k / yr) ... and I've been living paycheck to paycheck for 3 years now and have tightened my belt as much as possible. You have not tightened your belt as much as possible. I started out at 53k, put 15% (which was the max allowed at the time) into the 401k and still had more money left over than I knew what to do with. I advise you to start a new thread asking for help paring down your budget and in your first post list all the things you spend money on every month. We'll find some savings for you.
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Oct 22, 2011 14:41
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Yeah, if I can save $5,000 a year on a $18,000 a year income after taxes you can probably find some places to cut expenses.
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Oct 22, 2011 16:05
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cowofwar posted:Yeah, if I can save $5,000 a year on a $18,000 a year income after taxes you can probably find some places to cut expenses. This is me as well. I don't know whether to be baffled or amused by his attitude that he's enduring such hardship by tightening his belt so much he can't save $5k a year out of a $45k salary.
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Oct 22, 2011 16:08
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Thanks for the replies. I know it's impossible for someone like myself to time these things, but just leaving it sitting there while it looks like Europe is going off the deep end just seems silly. I'm not trying to trade myself into a windfall or micromanage things, just minimize loss. Maybe I should have framed this situation more in terms of rebalancing. Basically, I am not balanced with a plan at all: a few years ago when I could put money away I just threw two thirds into the S&P 500 Index fund and a third into the Target Retirement 2045 one. That means I'm currently 91% large cap US stocks and feel completely exposed to a downturn. I know I am supposed to be aggressive when young, but again--decent chance of a European meltdown sometime soon. I wasn't seriously proposing gold or swiss francs, even if there was a way to buy those in a vanguard IRA. More like one of the bond EFTs such as BSV or VGLT. How dumb is this sounding?
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Oct 22, 2011 17:54
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Nosre posted:Thanks for the replies. I know it's impossible for someone like myself to time these things, but just leaving it sitting there while it looks like Europe is going off the deep end just seems silly. Well, here's at least one popular theory's take on this: The information that makes you think Europe is going off a cliff? That's available to everyone else, too, including the pro investors who spend all day analyzing this information. They've already sold off and bought things to account for this risk, and current prices already reflect the possibility of Europe crashing - that is, they're lower than they would be if prospects in Europe were bright. You can't time the market because you don't know anything everyone else doesn't know. At best you can BET that you'll be right, in exactly the same sense that you can bet on the Redskins beating the Panthers this week by more or less than the Vegas spread. The spread (stock prices) will change some as more information becomes available, but it doesn't matter if it's dead obvious that the Skins will win or lose this week, it's by HOW MUCH (the change of the stock price relative to your purchase) - and the betting houses have already taken into account the rational information you could be basing this on when setting the line, including probably insider info you don't have. You want to bet that Europe crashes, but even if you're right, you have to 'beat the spread' consistently for you to make money in that game. On the other hand, you can long-term index invest, and in that case you make money as long as someone keeps winning somewhere, eventually. berzerker fucked around with this message at 19:55 on Oct 23, 2011 |
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Oct 23, 2011 12:12
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I'm 24. I make $70/year and live at home with parents rent free with little expenses. I recently found out that I'm eligible to receive a deferred vested pension benefit payout from a previous employer I worked at for two years. I'm eligible for this since the that option is available if the balance is under 10k, it is currently $4,729. The plan lets me either wait until 2052 to begin withdrawing $755 a month or pull the present value $4,729 out. Two questions: #1 I didn't even consider waiting until 2052. It's so far away that I have no idea what inflation might be, so waiting until 2052, $750 a month may be peanuts. It seems like a smarter idea to pull the money out now. Am I looking at this the right away or is there any point not pulling the money and waiting for a pension? I didn't ask, but assumed, the payout is not inflation adjusted, could it be? If so, I need to ask. #2 I didn't pay anything into this plan while working and to be honest completely forgot it even existed until I received this letter. I initially treated is as bonus income I didn't have 5 minutes ago and started thinking about taking $5k. I would be subject to a 10% penalty, fed income tax (25%) and VA income tax (5.75%) so I'd only get $2800 cash on hand. I'm starting to think rolling this over into an IRA would make more sense but I'm just not sure about the market right now and the direction its going. #3 Does this money effect my yearly limit on IRA contributions? I had a 401k with a $8k balance from my previous employer that I'm about to roll over into an IRA but I understand that is considered a "rollover" and does not contribute to limits. How would a withdrawl from a deferred vested benefits be treated and what would be the correct way to maximize tax advantage? Can I "rollover" the pension into an IRA? I do contribute to a Roth IRA on a regular basis in order to hit a yearly $5k limit. problematique fucked around with this message at 01:40 on Oct 25, 2011 |
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Oct 25, 2011 01:38
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problematique posted:#1 I didn't even consider waiting until 2052. It's so far away that I have no idea what inflation might be, so waiting until 2052, $750 a month may be peanuts. It seems like a smarter idea to pull the money out now. Am I looking at this the right away or is there any point not pulling the money and waiting for a pension? I didn't ask, but assumed, the payout is not inflation adjusted, could it be? If so, I need to ask. Is there a time limit on when you have to pull it out? If they'll let you pull it out later, I would wait. As long as interest rates are low, the pension is probably one of the best returns you can get. If rates rise, that calculation would change. If you could get a 4% guaranteed return today, in forty years that $4,729 turns into $22,704. Compare this to the pension which would give you $9000 per year ($750/month x 12 months). As long as you don't die early the pension would be the better deal (and if you do die early, you won't need the money anyway). But if interest rates do go up (say to 10%), then you'd probably be better off investing it outside of the pension.
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Oct 25, 2011 07:08
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| # ? May 15, 2024 04:10 |
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problematique posted:I'm 24. I make $70/year and live at home with parents rent free with little expenses. I recently found out that I'm eligible to receive a deferred vested pension benefit payout from a previous employer I worked at for two years. I'm eligible for this since the that option is available if the balance is under 10k, it is currently $4,729. The plan lets me either wait until 2052 to begin withdrawing $755 a month or pull the present value $4,729 out. Two questions: 1. Running the math (value of 9000/year for 20 years (safe guess?) discounted for average inflation of 3.88%, and then discounted again for the fact that you're waiting 41 years to get to it), that pension fund is offering you more than 8% growth on your money. If you don't need it right now to pay off debt, that's a pretty drat good rate of return. Obviously subject to the usual caveats: pension must remain solvent, terms can be changed later, past returns are not indicative of future results, yadda yadda yadda. 2 & 3. I'm not sure if you can roll pensions into IRA, but if you can, it would not count as a contribution and you could still put the full 5000 in for the year. Regarding the "not sure about the market right now" you can hold anything you want, including cash, in an IRA, so if you don't want to invest in the market then you don't have to. That said, if you're investing for the long term, when the market is doing poorly is a great time to get in: all the stock is on sale!
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Oct 25, 2011 12:51
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