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The Adama posted:I hope hypothetical questions are cool here. How much money would it take to have it earn you $100K a year in relative security? Into retirement age, sure, but lets say you won the lottery at 35, how large would the winnings have to be to make that $100K for the next 60 years? If you have Excel installed, the relevant formula is +pv(rate,periods,payment), in your case +pv(x%,60,-100,000). It comes out to the rate of return you are expecting (you can just subtract out inflation for convenience). So, if you are banking on 2% real returns, you would need $3.5mm. If you think you can pull off 5%, that shrinks to $1.9mm.
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Sep 5, 2012 20:56
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The Adama posted:I hope hypothetical questions are cool here. How much money would it take to have it earn you $100K a year in relative security? Into retirement age, sure, but lets say you won the lottery at 35, how large would the winnings have to be to make that $100K for the next 60 years? As a young guy it would cost you something like 3 million to buy an inflation-protected 100k a year annuity. I'd ballpark 3-6 million if you were personally investing it, depending on how much risk you wanted to shoulder, and how much inflation you wanted to protect against. You could do it with less by investing more aggressively, but the more risk you take, the more risk you shoulder of zeroing out at some point.
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Sep 6, 2012 03:17
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I'm looking to bump up my ROTH IRA contributions, currently I just have money taken out each month and put into the Vanguard total index and international index. I am thinking of contributing more and buying into the vanguard REIT ETF so that the dividends won't be taxed, and using them to just buy more shares. Does this make sense?
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Sep 6, 2012 17:04
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I think the answer you'll get is that it depends on the rest of your portfolio allocations. It makes sense if you have other investments besides your Roth and setting your entire Roth to REITs makes sense from a diversification standpoint. Putting dividend bearing stocks into your Roth makes sense from a tax standpoint, the big picture is more important though.
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Sep 6, 2012 17:06
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Dial M for MURDER posted:I'm looking to bump up my ROTH IRA contributions, currently I just have money taken out each month and put into the Vanguard total index and international index. I am thinking of contributing more and buying into the vanguard REIT ETF so that the dividends won't be taxed, and using them to just buy more shares. Does this make sense? It makes sense in that you should try to keep high dividend bearing investments like REITs in your tax advantaged accounts precisely so the dividends aren't taxed so you are left with more to reinvest as you mentioned.
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Sep 6, 2012 17:11
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Thanks for the input. That equation is very helpful.
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Sep 6, 2012 21:06
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The Adama posted:Thanks for the input. That equation is very helpful. Yup, just keep in mind the equation assumes a drawdown of assets - using the same example, you would end up with nothing at the end of the 60 year period, and you may be in trouble if you live a 61st year. If the question is instead how to make some level of income last indefinitely, you would divide the target income by the rate of return. Again, you can just subtract out inflation to keep things simple. So let's say you want $100k indefinite income, and you're assuming 3% inflation and 5% nominal returns. You would divide $100k by 2%, giving you a result of $5.0mm (as opposed to $3.5mm if you're drawing down the initial amount). With 5% real returns, you would need an initial amount of $2.0mm instead of $1.9mm. That is not a mistake - the higher the assumed rate, the less of a difference there is between discounting across a moderately long period and an infinitely long one.
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Sep 6, 2012 21:24
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AreWeDrunkYet posted:Yup, just keep in mind the equation assumes a drawdown of assets - using the same example, you would end up with nothing at the end of the 60 year period, and you may be in trouble if you live a 61st year. Probably also should take into account adjusting your 100k stream for inflation as well. 100k in 60 years might be poverty level!
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Sep 6, 2012 22:54
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Dial M for MURDER posted:I'm looking to bump up my ROTH IRA contributions, currently I just have money taken out each month and put into the Vanguard total index and international index. Just a random though here, but I really don't like the international index VGTSX. I have some money in it and it STILL is not worth more than what I paid for it in 2010 and is down over the past year. Meanwhile the total index (VTSMX) is up 15% for the year and 20% over the past year. A 20% difference in return! My vanguard target retirement fund would be doing a lot better too if it wasn't getting dragged down by this dog. Yeah I get the whole long term thing, but even though they are even over like 10 years, the total is still beating the int. by 25% over the past five and 25% is a lot. Is there some other international vanguard fund that doesn't suck?
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Sep 7, 2012 13:50
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Baddog posted:Probably also should take into account adjusting your 100k stream for inflation as well. 100k in 60 years might be poverty level! He did. Nominal return - inflation = adjusted return, doesn't it?
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Sep 7, 2012 14:57
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Julio Cesar Fatass posted:He did. Nominal return - inflation = adjusted return, doesn't it?
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Sep 7, 2012 15:00
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Realjones posted:Just a random though here, but I really don't like the international index VGTSX. I have some money in it and it STILL is not worth more than what I paid for it in 2010 and is down over the past year. Meanwhile the total index (VTSMX) is up 15% for the year and 20% over the past year. A 20% difference in return! HAHA I am thinking the same thing. My uncle set up my ROTH account like 15 years ago with the index and international. Every time I look at the statements I think to myself "I should just get out of it." I don't know really enough about it to decide though. Maybe I'll just move that over to the Reit fund and split it that way or something.
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Sep 7, 2012 15:25
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Realjones posted:Just a random though here, but I really don't like the international index VGTSX. I have some money in it and it STILL is not worth more than what I paid for it in 2010 and is down over the past year. Meanwhile the total index (VTSMX) is up 15% for the year and 20% over the past year. A 20% difference in return! Okay so here's the question you have to ask yourself: what would you move your money to instead of that fund? VGTSX is a total international index fund. It is comprised of a combination of emerging markets (~23%) as well as developed markets (~77%) in a thusly accurate representation of the market-cap of said international markets as a whole. Its expense ratio is 0.22% which is excellent for its category in my opinion. I doubt you will find a better representative total-international fund with a comparable expense ratio. Even if you do, if it tracks the index as well as VGTSX does, it will have nearly identical returns. The fund you are comparing it against (VTSMX) is a domestic total-market fund. This means it has zero international holdings. Clearly it has some international "exposure" due to the fact that many of the large companies in the fund have operations in other countries, but that doesn't give exactly the same diversification as holding an international equity fund. So you're really comparing apples to oranges there. So the bottom line is that you have to decide on a diversification strategy between domestic / international funds. If that doesn't match up reasonably well to the target-retirement fund you are in, then you will need to separate your money out into the individual funds that match up better. If you don't have enough money to meet the fund minimums you should be able to purchase equivalent ETF's for the 3 components of the target retirement funds. Whatever choice you make, I think VGTSX (or its ETF) is a fine choice for simplicity of international equity holdings. You just have to decide whether or not you want to alter your balancing between that and domestic equities.
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Sep 7, 2012 16:28
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Baddog posted:Probably also should take into account adjusting your 100k stream for inflation as well. 100k in 6 years might be poverty level! Fixed it for you.
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Sep 7, 2012 17:08
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The real question is where you're going to find 5%-plus average nominal returns over the next 30-50 years. There was a conference of Nobel laureates discussing economics and retirement a couple years back (you can get the minutes for free on Amazon) where the general consensus was that easy money from equity growth looks like a historical anomaly. One laureate, when asked what his retirement advice was for young investors, said (paraphrased) "Learn Black-Scholes and study your calculus." But I'm almost 100% in fixed income until I finish rebalancing, so what the gently caress do I know?
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Sep 7, 2012 17:35
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Julio Cesar Fatass posted:He did. Nominal return - inflation = adjusted return, doesn't it? Yep, you're right. I know this stuff too, but for some reason I got my head flipped around to thinking that those numbers were just going to preserve your capital in inflation adjusted dollars and guarantee a 100K stream in perpetuity in *current* dollars. I did actually run all the numbers out in excel too just to be double sure, haha. For anyone who is interested, with (5 mill start, 3% inflation, 5% nominal returns, withdrawing 100K in inflation adjusted dollars a year) in 60 years you will have 29.5 million, and be pulling out 589K a year. Pretty boggling numbers with fairly mild expectations for inflation over such a time period. This is why you can't leave your money in cash!
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Sep 7, 2012 19:50
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flowinprose posted:I think VGTSX (or its ETF) is a fine choice for simplicity of international equity holdings. Totally agree and that's why I put the money in there in the first place. The whole point of diversifying is to limit your risk, right? Yet VGTSX dumped just as hard in 2008 and has returned essentially nothing since mid 2009. Meanwhile VTSMX is up nearly 50% during the same time period. The fund is a great idea for someone looking to diversify, but the returns just aren't there for me to warrant holding it as a single fund anymore (I still have ~30% in the target retirement fund). Of course I could sell it and it could shoot up, but three years of no returns is enough for me.
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Sep 8, 2012 01:31
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Realjones posted:Totally agree and that's why I put the money in there in the first place. The whole point of diversifying is to limit your risk, right? Yet VGTSX dumped just as hard in 2008 and has returned essentially nothing since mid 2009. Meanwhile VTSMX is up nearly 50% during the same time period.
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Sep 8, 2012 01:50
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Well, there's diversification and all but really just look what the international stage is at the moment. Europe has been on the brink of disaster for a year now (or something like that), China is supposedly headed that way as well, and there's some rumblings in India.
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Sep 8, 2012 05:23
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Harry posted:Well, there's diversification and all but really just look what the international stage is at the moment. Europe has been on the brink of disaster for a year now (or something like that), China is supposedly headed that way as well, and there's some rumblings in India.
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Sep 8, 2012 06:44
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This is more middle-term than long-term, but this thread seems like the right place. I live and work in the US, but in the middle term (1-2 years) I'll probably be moving home to Canada. Roughly 1-3 years after that (so 2-5 years from now), I'll want to buy a house. I have about $200k USD saved for a down payment right now - mostly cash, a bit of stock - and will continue saving aggressively until I'm ready to buy. The strong Canadian dollar and QE3 announcement yesterday have sort of been a rude awakening to me that maybe I should start moving my savings into Canadian dollars, since I've exposed myself to foreign exchange risk by saving for a CAD purchase in USD and it seems like QE3 will lead to a strong CAD (well, a weak USD right now - but Canada keeps threatening "modest withdrawal of the present considerable monetary policy stimulus"). I'm undecided re: whether I should dollar cost average or just convert all my US dollars in one fell swoop, but even if I do it all at once I'll still have my monthly recurring savings to take care of. I don't have great options CAD exchange and savings. My primary broker takes 1% off the rate they get (which isn't actually too terrible) and XE.com is worse. If I convert the money and leave it in the US, it'd likely be stuck in an account that will pay little or no interest. I could move it to a Canadian savings account, but there are tax implications and the transaction costs might make dollar cost averaging expensive. That said I'm willing to put up with something complicated if it can save me money. Thoughts/recommendations? laffa fucked around with this message at 18:00 on Sep 14, 2012 |
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Sep 14, 2012 17:43
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1% sounds horrible, can't you just do a wire transfer? Unless the rate the broker gives you is much better than your bank.
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Sep 14, 2012 21:01
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mister itchy posted:That said I'm willing to put up with something complicated if it can save me money. This could be right up your alley then: http://www.finiki.org/wiki/Norbert%27s_Gambit EDIT: There's even an ETF which can be a pretty handy way to do it: http://www.canadiancapitalist.com/horizons-betapro-us-dollar-currency-etf-tsx-dlr/ big shtick energy fucked around with this message at 23:06 on Sep 14, 2012 |
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Sep 14, 2012 23:03
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DuckConference posted:This could be right up your alley then: http://www.finiki.org/wiki/Norbert%27s_Gambit Funny you bring this up. I actually looked into this months ago and don't think I can do it as a Canadian US resident. Canadian brokers won't let me buy securities outside of retirement accounts. When I called my US broker (Fidelity) to ask if they would, they said no. I guess it's worth calling TD Ameritrade who I also use, but I'm not expecting much. If I take the large lump sum approach, this works out in my favour - a few months ago I did the math and using this nets more money once I'm moving between $10-15k. Below that, the fixed costs for trade commissions were larger than the better exchange rate would save. sanchez posted:1% sounds horrible, can't you just do a wire transfer? Unless the rate the broker gives you is much better than your bank. It's actually not horrible relative to the retail alternatives - 1% means Fidelity is giving me a rate 1% worse than their wholesale rate, not that they're taking a 1% commission off a retail rate. XE.com is substantially worse, and the preferred exchange rate at my Canadian bank (TD Canada Trust) is a little worse. US banks, especially retail banks, are generally worse than that. Here's a snapshot I just took of what I'd get from various places when selling 1 US dollar:
The per-transaction costs make things more complicated. Option #1 has none, but I'm left ~$5000 worse than the best option because of the poor rate. #2/#3/#4 (realistically only #3/#4) are better, but I can't take advantage of the exchange rate until I spend ~$25 on wire transfers to get the money to a Canadian bank. $25 is immaterial for a one-time $200k transfer (I can even park some of those USD in a Canadian bank to dollar cost average in to CAD at no incremental cost), but at $25 per wire transfer it's too expensive to do for new monthly savings. If the above 4 options are all I have, it sounds like the best strategy is this:
laffa fucked around with this message at 01:23 on Sep 15, 2012 |
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Sep 15, 2012 01:21
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I'm completely new to investing and need some advice. My financial situation is somewhat unique and I can't really afford a full service broker or advisor, but I want to start contributing to some long term investments. Disclaimer: my knowledge is limited to spending a week or so combing heavily through Investopedia, so forgive me for any naive statements. I make roughly $37k US annually, with a fluctuating monthly income due to the nature of my work. I'm 26, and I've managed to save about $10k since I finished college that is currently just sitting in a savings acct. I don't have access to a 401(k) option right now, though that may change soon. Am I best off opening a Roth IRA? If it matters, I do anticipate my income to increase pretty steadily as I enter my mid 30s. Additionally, if I open an IRA and meet my max contribution for this year, how should I invest the rest? I'm willing to take on long term growth investments with some risk involved, but I don't have the time or experience to actively manage investments for the time being. One final consideration: my fiancée is entitled to a $100k inheritance. We just found this out and aren't certain what sort of fund if any the money is in, or if there are any restrictions to her access, but assuming it's free for her use, what would be a good way to handle this sum? Again, long term growth with up to moderate risk would be pretty acceptable. We aren't planning to buy a house or anything, but would like to leave some of our funds accessible in 5-10 years, possibly for private investing. I guess all this boils down to the question, "where do I start?"
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Sep 15, 2012 02:19
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MockingQuantum posted:I'm completely new to investing and need some advice. My financial situation is somewhat unique and I can't really afford a full service broker or advisor, but I want to start contributing to some long term investments. Disclaimer: my knowledge is limited to spending a week or so combing heavily through Investopedia, so forgive me for any naive statements. Start reading some of the books and links in the OP.
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Sep 15, 2012 03:04
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MockingQuantum posted:I guess all this boils down to the question, "where do I start?" Since you don't want to actively manage your portfolio, put your money into the Vanguard Target Retirement Fund that matches your expected retirement date. These funds adjust their balance of investments over your life to start off with high growth but shift to lower risk as you get closer to retirement. $5k now and $5k in January (for next year) will eat up your $10k. That said, don't forget to leave enough savings for an emergency fund. If any of the inheritance your fiance will be getting is taxable (my understanding is that it is usually NOT unless it is from the sale of income or untaxed accounts) it would be a good idea for her to put it in a regular IRA to avoid the tax burden. Untaxable inheritance would be a great candidate for her Roth IRA, then a regular IRA, then a non-tax-advantaged account, in that order. Maxing out a Roth IRA and regular IRA for the year would leave her with a pretty decent start on her retirement savings and still with a bunch of money left over to do with as she pleases. Do note that Roth IRAs generally allow you more freedom with your money, such as the ability to use the content of your Roth for the down payment on a house once in your life. As you start making more money and shifting into higher tax brackets (make sure you understand how they work!), start transitioning your savings into a regular IRA so that you can deduct the money and lower your overall tax burden. Note that I am no expert, especially on tax issues, you should do your own research and listen to other opinions.
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Sep 15, 2012 04:50
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Question about reinvesting dividends in my accounts. I recently added a REIT index to my Roth IRA based on some comments from this thread. Should I be splitting dividends between the REIT and something else? Leave it 100% REIT for a while then split? Just leave it alone? If I leave dividend earnings as 100% REIT reinvestment, I'm curious how that plays out in the long run. Sure, during good times the thing is going to grow really quickly (especially since it is in a Roth). However, I imagine that at some point over the next 30 years, real estate is going to tank again. If the fund is 100% reinvested, the whole thing is going to zero out when the REIT crashes. If I had split reinvestment between the REIT and regular funds, that would hedge me against a big real estate crash while still gaining some of the value of having a higher-risk, high-dividend REIT in my Roth. Right? I guess I've never thought about reinvestment before and have only left them as the default. How do people deal with this?
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Sep 16, 2012 14:17
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polyfractal posted:Question about reinvesting dividends in my accounts. I recently added a REIT index to my Roth IRA based on some comments from this thread. Reinvest so that REIT is the percentage of your total that you want it to be. Basic rebalancing.
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Sep 16, 2012 14:31
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Chin Strap posted:Reinvest so that REIT is the percentage of your total that you want it to be. Basic rebalancing. Hurp durp that makes sense. This is why I don't post things before drinking coffee in the morning 
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Sep 16, 2012 14:46
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Is there a good automated tool out there to track your portfolio? I use Mint.com for my personal finance, but it mega sucks for anything related to investments (still shows funds I've sold years ago, performance profile doesn't match Vanguard.com's, etc etc). I know there are a plethora of tools out there where I could manually enter my investments, but is there anything out there that could pull in my Vanguard profile and run with it? I'm sure Quicken does this pretty well, but I would rather have something web-based.
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Sep 18, 2012 22:59
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I use Google Finance, but I'm not sure if there's something better out there. It does support importing from exported data files.
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Sep 18, 2012 23:21
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SuperCaptainJ posted:I would rather have something web-based. Excel and Dropbox.
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Sep 18, 2012 23:51
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Alereon posted:I use Google Finance, but I'm not sure if there's something better out there. It does support importing from exported data files. Yeah, that's probably the way to go until Mint gets their poo poo together. Still will have to manually update it for my monthly contributions, but whatever.
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Sep 19, 2012 02:23
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AreWeDrunkYet posted:Excel and Dropbox. Or Google Documents. Best part about them is you can share the Doc with your significant other and both keep up to date on your state of finance. GCal is also great in this way.
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Sep 20, 2012 16:52
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Just fishing for some opinions on my newbie portfolio: Vanguard IRA: VGTSX - 52.1% VTSMX - 45.9% (EDIT: I'm dyslexic. VTSMX = Vanguard Total Stock Market Index, not VTMSX) VMMSX - 1.8% I also invest a meager amount ($25 monthly) into LendingClub which is a peer to peer lending which supposedly is earning ~10%. I usually end up with ~$1000 left at the end of the month. I really don't know what to do with it so I've been putting into dividend stock in a taxable brokerage account. My workplace does not offer 401k. I have a pretty stable job and 6 months of emergency funds in an ING savings account (0.80APY). Suggestions? Sleepy Robot fucked around with this message at 20:42 on Sep 20, 2012 |
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Sep 20, 2012 20:10
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Sleepy Robot posted:Just fishing for some opinions on my newbie portfolio: Dividend stocks should be in your tax advantaged accounts. If you can, I'd recommend swapping the assets in your taxable brokerage account with the Tax Managed Small cap fund in your IRA.
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Sep 20, 2012 20:25
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sorry that's VTSMX, total stock market index fund-- not VTMSX. Would your advice still be to exchange it? Is it generally better to hold index funds in a taxable account and dividend stock in an IRA? If so, why is that? Sleepy Robot fucked around with this message at 20:57 on Sep 20, 2012 |
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Sep 20, 2012 20:52
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Sleepy Robot posted:Is it generally better to hold index funds in a taxable account and dividend stock in an IRA? If so, why is that? No capital gains tax in an IRA. In the case of the RIRA, no tax on gains ever since the contributions were already taxed. In a TIRA, you won't pay capital gains taxes but you will eventually pay taxes on the withdrawals since the contributions were tax-deductible. Both are advantageous compared to a normal taxable brokerage account where you pay capital gains taxes on every dividend distribution, whether it be a cash distribution or a DRIP. Guinness fucked around with this message at 21:34 on Sep 20, 2012 |
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Sep 20, 2012 21:23
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Capital gain dividends (Qualified) in your taxable accounts aren't bad, it's the ones that count as ordinary gains (Ordinary) which you want in your tax advantaged accounts.
Harry fucked around with this message at 22:29 on Sep 20, 2012 |
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Sep 20, 2012 22:26
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