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ixo posted:I have a thrift savings plan through work, and in going to their site just now I discovered that they're offering a ROTH option in 2012. There isn't much info about it, but one of the things they tout is that it's not an all or nothing thing. You can apparently designate any percentage of contributions to be ROTH. I've never heard of being able to do that for 401k style accounts. I split 50/50 just for tax diversification. I have no idea if there is a particularly good reason to go one way or another.
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Feb 9, 2012 19:12
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So I have opened ROTH IRA with Vanguard, and have $5k to invest. Most of their funds have $3000 minimum. I have invested $3000 into S&P 500 index, but what do I do with $2000 for example? Put it in targeted retired funds (which have $1000 minimum) until I get $3000 so I can get next fund? I was looking for Total Int Market Index, which again, has $3000 minimum.
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Feb 9, 2012 19:15
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ixo posted:I have a thrift savings plan through work, and in going to their site just now I discovered that they're offering a ROTH option in 2012. There isn't much info about it, but one of the things they tout is that it's not an all or nothing thing. You can apparently designate any percentage of contributions to be ROTH. I've never heard of being able to do that for 401k style accounts. As I understand it, Roth IRA has a different income limit than a traditional IRA (the Roth has higher limits). The Roth IRA income limits are also not dependent on a 401(k) or other plan, like the traditional IRA is. Also understand that contributing to your 401(k) lowers your MAGI (modified adjusted gross income). So if you are over the limit, you can contribute more to your 401(k) until you get below the limit, and then contribute to an IRA. I suppose the reason to do factional contributions is if you want to manage your IRA through them or not, in addition to your 401(k). I would research the management fees to see if its worth it or not compared to other places. Edit: Realized you may be talking only about a Roth 401(k). In this situation, I would assume you would want to chose based on your current tax bracket, and what you think that tax bracket will be in the future. If you expect your tax bracket to be higher in the future, you may favor Roth contributions, but if you expect your tax bracket to be lower in the future, a traditional 401(k) may be best. Someone feel free to correct me on these as I'm still learning myself. Loan Dusty Road fucked around with this message at 19:21 on Feb 9, 2012 |
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Feb 9, 2012 19:15
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flowinprose posted:Am I misunderstanding something? You owe someone else $1000 at 5% interest per year, yet the buying power of that $1000 is eroding at a rate of 7% per year. So lets say you paid them back in one lump sum after 10 years: This is only true if you have the choice between repaying the debt and spending the money instantly (thereby realizing its buying power now). The question at hand though is whether it's better to pay off debt or save the money, and that depends on the rate of return rather than inflation. In your example, if I owe $1000 now at 5% I could pay it off now at a cost of $1000, giving me $0 in ten years. But if I saved it at a rate of return of 3%, in ten years I'd have $1344 and owe $1629 -- I'd be down $285 in 2022 dollars. Any inflation in the meantime just determines exactly how meaningful that loss is.
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Feb 9, 2012 19:33
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k3nn posted:This is only true if you have the choice between repaying the debt and spending the money instantly (thereby realizing its buying power now). The question at hand though is whether it's better to pay off debt or save the money, and that depends on the rate of return rather than inflation. In your example, if I owe $1000 now at 5% I could pay it off now at a cost of $1000, giving me $0 in ten years. But if I saved it at a rate of return of 3%, in ten years I'd have $1344 and owe $1629 -- I'd be down $285 in 2022 dollars. Any inflation in the meantime just determines exactly how meaningful that loss is. If you borrowed money, the assumption is that you needed it for something, so you used that buying power when you took the loan (a car or a house for example). Also I assumed if you were going to invest, it would be something with a positive expected real rate of return. I agree with you that if the only reason you borrowed the money was to invest, it would be quite foolish to use a vehicle with a lower rate of interest than you borrowed. I don't think anybody is buying CD's on margin... Maybe what I'm saying is really the same thing you're saying. Its just that neither one of us are pointing out what both of us are really implying, which is that the rate of return you can get at any given point in time is in most cases tied very closely to the rate of inflation. The only additional point I'm making is this: if you are a debtee and inflation goes up, you get screwed. If you are a debtor and inflation goes up, it is a benefit to you. So if you owe someone money in this situation, you would be helping them out more than yourself by paying that loan off sooner.
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Feb 9, 2012 21:25
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Deadreak posted:So I have opened ROTH IRA with Vanguard, and have $5k to invest. Most of their funds have $3000 minimum. I'm wondering why you don't just invest all of it into the target fund? In order, the bulk of their holdings are usually: Vanguard Total Stock Mkt Idx Inv Vanguard Total Intl Stock Index Inv Vanguard Total Bond Market II Idx Inv
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Feb 9, 2012 21:35
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bam thwok posted:I'm wondering why you don't just invest all of it into the target fund? In order, the bulk of their holdings are usually:
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Feb 9, 2012 22:16
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gvibes posted:Agreed, I would dump it all in a target fund. There should not be fees for the transfers. Dope, thanks guys!
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Feb 9, 2012 22:39
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Hashal posted:As I understand it, Roth IRA has a different income limit than a traditional IRA (the Roth has higher limits). The Roth IRA income limits are also not dependent on a 401(k) or other plan, like the traditional IRA is. Also understand that contributing to your 401(k) lowers your MAGI (modified adjusted gross income). So if you are over the limit, you can contribute more to your 401(k) until you get below the limit, and then contribute to an IRA. Yeah sorry I was talking about the TSP entirely. Like, if I'm already maxing out a Roth ira, would there be a reason to split TSP contributions between Roth and traditional if I'm not yet bumping against the income cap that would prevent me from maxing out my IRA. My understanding is that I should do Roth TSP and Roth IRA if my earnings are lower, traditional TSP and traditional IRA if I find myself making six figures, and some strange mix if my income hovers near or slightly above the ~90k or whatever limit for Roth Ira contributions.
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Feb 9, 2012 22:55
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flowinprose posted:If you borrowed money, the assumption is that you needed it for something, so you used that buying power when you took the loan (a car or a house for example). Also I assumed if you were going to invest, it would be something with a positive expected real rate of return. I agree with you that if the only reason you borrowed the money was to invest, it would be quite foolish to use a vehicle with a lower rate of interest than you borrowed. I don't think anybody is buying CD's on margin... Ah yeah sorry, it's just Niwrad had been discussing the repay existing debt vs. fund a Roth choice so I thought you were saying the decision depended on the inflation rate.
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Feb 10, 2012 00:13
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edit: sorry, wrong thread.
onefish fucked around with this message at 18:41 on Feb 10, 2012 |
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Feb 10, 2012 18:37
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ixo posted:Yeah sorry I was talking about the TSP entirely. Like, if I'm already maxing out a Roth ira, would there be a reason to split TSP contributions between Roth and traditional if I'm not yet bumping against the income cap that would prevent me from maxing out my IRA. I am really excited for the Roth tsp as a .025% e/r fund in my Roth sounds awesome. I am not quite sure what my combination will be but given historical context and fiscal climate I'm pretty sure tax rates will go up.
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Feb 10, 2012 23:36
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So as I understand it Index Funds are golden because they have minimal expense fees and automatically diversify you well, correct? If so which of these index type funds in my 401k options would you recommend? FID US EQ INDX - which looks like 90% S&P500, 10% other The Northern Trust Collective All Country World Index ex-US Investable Market Index Fund - um, some sort of International Index? Its only like 2 months old apparently. Vanguard Balanced Index Fund Institutional Shares - looks like 60% US stock 40% bond index Vanguard Total Bond Market Index Fund Institutional Shares - bond index Everything else in my 401k option list looks like a mutual fund with +0.5% expense ratios, so I should generally just avoid those I think? e: I suppose this would help: 26 years old, make about $100k annually, willing to park money and think longterm. Subvisual Haze fucked around with this message at 00:00 on Feb 12, 2012 |
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Feb 11, 2012 21:33
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Hi retirement thread! I had a mini-discussion in the newbie personal finance thread about a friend from Primerica trying to sell us things and I'd like to continue in this thread since my boyfriend and I decided the only type of services we would remotely consider right now were retirement savings. From the little bit of googling and yahoo answering (oh god I'm taking financial advice from yahoo answers please help me) I'm pretty hesitant to even consider Primerica. But the friend is coming back to our place tonight to, I guess, give my boyfriend an estimate based on the form he filled out last week. What can you guys tell me about the pros and cons about Primerica as opposed to, say, Vanguard in the OP? Are they even comparable or am I in different ballparks here? I don't even know what kind of savings accounts/funds we're looking at either. I'm not even sure what kinds of accounts just accrue interest or are based on stocks or other things! (Me caveman. Me get paycheck and remotely aware me will stop working in 40 years and will need moneys then) Maybe you guys could help give a recommendation if I give a breakdown of our situations? Firstly, we are not married, but have been living together for a while and may likely end up married later. I don't know tax brackets or anything like that but we both are 24 and each make a salary under $50k. No home ownership, no kids, some student loans (but plan to pay off within the year) Me: I just started at a company that offers a 401k plan and matches up to 3%. I am eligible for the plan starting in July. Boyfriend: Works at a family business and will likely co-own it with his brother when their parents retire in 5-ish? years. They only have like 8 employees and don't offer a 401k or anything.
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Feb 12, 2012 16:18
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drat Bananas posted:What can you guys tell me about the pros and cons about Primerica as opposed to, say, Vanguard in the OP? Are they even comparable or am I in different ballparks here? Ask your HR people for information about the kinds of funds offered through your 401k and report back here, we'll advise you on which funds are good ones for when you get to pick in July. You should both start Roth IRAs ASAP and contribute last year's maximum if you can afford to before April rolls around. Ask your boyfriend to see if his company would consider setting up a SIMPLE IRA option for their employees (it's made to be easy for small businesses to set up).
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Feb 12, 2012 19:41
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drat Bananas posted:Hi retirement thread! I had a mini-discussion in the newbie personal finance thread about a friend from Primerica trying to sell us things and I'd like to continue in this thread since my boyfriend and I decided the only type of services we would remotely consider right now were retirement savings. From the little bit of googling and yahoo answering (oh god I'm taking financial advice from yahoo answers please help me) I'm pretty hesitant to even consider Primerica. But the friend is coming back to our place tonight to, I guess, give my boyfriend an estimate based on the form he filled out last week. Do you know who pays for that Primerica salesman to go door to door and sell those funds to KennyG fucked around with this message at 20:05 on Feb 12, 2012 |
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Feb 12, 2012 19:50
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Thanks. I'll pass along the advice, but boyfriend still wants to hear what the guy has to say since the guy's already put in all this effort for us. I'm worried that anything I say will be met with a counter-argument and I don't know enough about these things to get out of it.  I guess our best bet is "Thanks. I'm going to do more research and number crunching and let you know later"moana posted:You should both start Roth IRAs ASAP and contribute last year's maximum if you can afford to before April rolls around. Feelin' so clueless. These are the type of things that needed to be taught in high school home economics classes! Not how to cook and sew 
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Feb 13, 2012 00:48
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If I recall correctly you can contribute to an IRA for the prior year during the current one up until taxes are due (April 15th). The maximum varies by year and your age (you can kick in an extra $1000 if you're over 50). From memory, the baseline max for 2011 was $5000. Don't worry about feeling clueless, it's just rules and stuff like any other game, only for this game the incentive for learning them is having a pile of money to swim in when you're older.   But more seriously, everyone starts somewhere, the only really dumb thing is not paying attention at all. Wikipedia generally has useful intro info for things and links to further info (assuming the pages haven't been vandalized, heh). As far as printed introductions go I kinda like Eric Tyson's personal finance books published under the (of all things) For Dummies banner, for what it's worth.Re: Primerica dude... Would you feel obligated to buy a lovely used car because the salesman took the time to talk to you, even though it's obviously a lemon that will explode causing your entire family to writhe in agony as they burn to death?  The guy is just trying to make a buck off you, and you can do better. At the very least commit to nothing.
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Feb 13, 2012 01:59
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drat Bananas posted:Thanks. I'll pass along the advice, but boyfriend still wants to hear what the guy has to say since the guy's already put in all this effort for us. I'm worried that anything I say will be met with a counter-argument and I don't know enough about these things to get out of it. What it boils down to is you'll be paying more in fees (expense ratio) with Primerica than you will with Vanguard. A signifigant amount if this is what you plan to use for retirement savings over the next few decades. He'll have a million counter-arguments for you and try to twist things around, but what we're all telling you is that you can do much better on your own. If you're buying some candy bars from the guy because he's a friend it's one thing, but when you're talking about retirement and potentially the difference in tens of thousands of dollars, just tell him you're not interested. If he continues to press, he isn't a friend and is just trying to leverage your friendship to make a buck off you. Companies like Primerica use these high pressure sales tactics for this exact reason. drat Bananas posted:Just curious, but why Roth vs traditional? I was reading that link in the OP and it confused me... for traditional you can only withdraw after you're 70? So it's only good for people who want to retire late? What? :/ And what's last year's maximum? What happens in April? Is this something that might be offered through my work? The major difference is when you are taxed. For a Traditional, you get a tax deduction for the amount you put away the year you make it (assuming you don't go over income limits). But when you take it out at retirement, you will have to pay the taxes on what you withdrawl. Traditional IRAs also have mandatory distributions. The Roth is money you pay taxes on now but don't pay taxes on the money it makes over the years. So if your $10,000 grows to $200,000, you got off on paying taxes on $190,000. There are also no mandatory distributions which means it can continue to grow late into retirement if you have other funds to live on. There are also some other benefits for benefactors if you pass away at a younger age (good if you have kids). To simplify things, I believe most people here feel the Roth IRA is the best option for people who don't have a huge tax burden and are relatively young. Just go to Vanguard and open a Roth IRA account and purchase the target fund for the year you plan on retiring. You can put away $5000 a year unless you make more than the income limit. When you build it up over the years you can look at getting picky with funds and trying some other stuff, but for now the Target 2045 (or whatever year) is a solid choice. Below is a more detailed breakdown of the two options. That site is good too for information on stuff if you're looking into reading up more: http://www.bogleheads.org/wiki/Traditional_IRA http://www.bogleheads.org/wiki/Roth_IRA Niwrad fucked around with this message at 01:16 on Feb 14, 2012 |
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Feb 14, 2012 01:12
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drat Bananas posted:Just curious, but why Roth vs traditional? I was reading that link in the OP and it confused me... for traditional you can only withdraw after you're 70? So it's only good for people who want to retire late? What? :/ And what's last year's maximum? What happens in April?
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Feb 14, 2012 02:21
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Niwrad: Don't worry, he's not pushing, he's honestly just offering all the information he knows. Some things are obviously salesman technique (Out of these 3 scenarios I've described, which do you fall into? On a scale of 1 to 10, how much would you like to be financially secure? - or whatever, hah) but he hasn't pushed. He did offer to compare other companies to Primerica as they apply to us - to help us pick what works best for us - but he hadn't heard of Vanguard and I kinda glossed over after that. Moana: Makes sense. I'm not sure I can afford much before April, so I might have to skip 2011. I recently set a personal budget to throw $1000/mo at student loans, and $500/mo into savings for a house down payment. Once the student loans are taken care of (this summer) I can re-purpose that $1000/mo: $400 -> IRA, $600 -> additional house savings? Question that hasn't been answered in all the links I've read: How do IRAs make money/How are they better than the average savings account? Other than what I put in each year of course, does it make interest? Is it invested in stocks? Black magic? 
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Feb 14, 2012 07:30
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How could someone be a financial professional and not have heard of Vanguard?
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Feb 14, 2012 07:46
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drat Bananas posted:Question that hasn't been answered in all the links I've read: How do IRAs make money/How are they better than the average savings account? Other than what I put in each year of course, does it make interest? Is it invested in stocks? Black magic? IRA and ROTH IRA are just like 401k. They aren't an investment in upon themselves, but rather the name for the TYPE of the investment's tax status. With IRAs you can invest them into stocks, savings accounts, bonds, etc. Dead Pressed fucked around with this message at 14:22 on Feb 14, 2012 |
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Feb 14, 2012 14:17
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taqueso posted:How could someone be a financial professional and not have heard of Vanguard? More importantly, how do you not straight up laugh in someone's face when they tell you this? I couldn't imagine sitting down to a sales pitch with someone so utterly misinformed and not saying something horribly condescending.
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Feb 14, 2012 14:29
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 I just found out my dad invested several hundred k with the local Edward Jones guy  Checked the funds, and yes, all front-loaded. Poof goes about 15k.
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Feb 14, 2012 17:01
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drat Bananas posted:Question that hasn't been answered in all the links I've read: How do IRAs make money/How are they better than the average savings account? Other than what I put in each year of course, does it make interest? Is it invested in stocks? Black magic?
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Feb 14, 2012 18:32
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Dead Pressed posted:IRA and ROTH IRA are just like 401k. They aren't an investment in upon themselves, but rather the name for the TYPE of the investment's tax status. With IRAs you can invest them into stocks, savings accounts, bonds, etc. 
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Feb 14, 2012 18:35
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taqueso posted:How could someone be a financial professional and not have heard of Vanguard? From what I've heard, Primerica is basically an MLM company. If that's the case, calling this friend a "financial professional" is probably a stretch.
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Feb 15, 2012 03:16
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Primerica is purely a MLM company veiled in 'taking charge of your future'. They are far from a financial professional. Here is a test. Ask the guy to explain the difference between marginal and effective tax rates and their implication for Roth vs. Traditional savings. Also ask him to explain why you should but funds through him when you can buy better fees with lower expense ratios on the open market. Basically ask him 'What value are you providing to me?'.
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Feb 15, 2012 04:09
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Daeus posted:Basically ask him 'What value are you providing to me?'. Investing expertise 
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Feb 15, 2012 17:10
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Forgive me, I've tried reading a bunch of threads in this forum, but I'm still not really sure where to start. I'm 26 and I currently have approximately 40-60k in savings, and investing it properly seems like a good idea. From my reading, investing in various Vanguard funds seems smart, but I just have no idea how to select the appropriate funds/mixture of funds. Picking a handful that have the best YTD Returns and Returns Since Inception seems to be too simple/easy to be correct. Any articles you can direct me towards or advice you can give me?
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Feb 15, 2012 20:38
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moana posted:Ask your HR people for information about the kinds of funds offered through your 401k and report back here, we'll advise you on which funds are good ones for when you get to pick in July. You should both start Roth IRAs ASAP and contribute last year's maximum if you can afford to before April rolls around. Start with this. Also, past performance is not indicative of future returns, blah blah. Just know that you have until tax day to contribute to your 2011 Roth IRA (5K limit). Also, someone correct me if I'm wrong, but I think if you're really that undecided then you can just put 5k into the money market and then buy shares in whatever fund whenever you want. This way, you get your 2011 contribution in but don't have to make the "difficult" decision of what fund to put it in, etc.
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Feb 15, 2012 21:36
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totalnewbie posted:Start with this. Dumb question, do you have until tax day or until you file your taxes?
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Feb 15, 2012 23:17
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Inertiatic posted:Forgive me, I've tried reading a bunch of threads in this forum, but I'm still not really sure where to start. If you are also saving for something like a house downpayment for example, you'll want to invest that money in something more conservative. One of the most important factors is how long you're investing for. When do you estimate you will be pulling out this money?
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Feb 15, 2012 23:41
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Inertiatic posted:Forgive me, I've tried reading a bunch of threads in this forum, but I'm still not really sure where to start. It is too simple to be correct. This is actually pretty much the worst way to pick an appropriate mixture of funds. Take moana's advice if it's for retirement.
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Feb 16, 2012 03:40
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We should change the thread title: Long-Term Investing: Past gains do not predict returns.
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Feb 16, 2012 03:57
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What you pick is going to come down to what your goals are, what your current financial situation is, and what risks you are looking to take. As moana pointed out, the funds you select for a retirement fund would be much different than funds you are saving to put a down payment on a house in a couple years. I would recommend giving us some more background. Without that it's tough to offer advice. Do you have a stable job you can live off of right now without touching that money? Do you have any retirement accounts? Do you have any plans for this money in the short or medium term?
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Feb 16, 2012 06:45
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KennyG posted:We should change the thread title: That was fast.
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Feb 16, 2012 18:22
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Thanks for the replies guys. I'm very new to this so I really appreciate the patience. Yeah, as mentioned, I'm currently 26 with about 40-60k in savings. I worked for a while after undergrad and saved my money, but now I'm back in grad school and will likely not have an income again until 2014-15. I'm currently subsisting on student loans, and I don't need to touch any of my savings to survive. However, this also means that I obviously won't have funds to invest beyond my current savings for another few years. In terms of goals, I would definitely prefer to have a majority of the money put away for retirement. I can't see myself trying to purchase a house for at least another 5-6 years, but I would want the option of pulling some funds out to do, so when the time comes. Given my situation, what are your recommendations? Inertiatic fucked around with this message at 22:14 on Feb 16, 2012 |
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Feb 16, 2012 19:42
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I recently quit my job where I was contributing to a 401k, managed through Fidelity. There isn't much in the account - about $4000. I'm fairly confident that I should roll this over into a personal Roth IRA...but I wanted to check. Is this what I should do?
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Feb 16, 2012 20:37
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