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slap me silly posted:If you give back the principal after grad school, you'd end up with 4-5 years' interest from what, $5000-10000? in a conservative investment. It's not worth the silliness unless there's a decent chance he'll just let you keep it. Ask for a $1000 outright gift instead, and use it to pay off your credit cards. Then with the next $1000 you save, start an IRA on your own and drop in $50/mo - you can handle that on your salary. Uh, depending on the situation with your wife's loans of course.
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# ? Mar 5, 2013 16:36 |
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# ? May 27, 2024 22:53 |
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Oh yeah, that makes sense...
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# ? Mar 5, 2013 16:48 |
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Seems like a good idea to me, if your relationship with your dad is as solid as you say. One option for you would be to invest conservatively with your "dad's money" so you don't lose it, and then go wild with the interest that's gained that's "your money" and won't result in fallout with your dad if it's lost. Just food for thought. Fake edit: Oh right, you're not going to give that money back ever, but pay your dad from your future salary. In your case I would go for higher risk investments for maximum profits.
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# ? Mar 6, 2013 07:20 |
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Hi All, Great thread, and I'd like to thank you guys for being so forthcoming with your knowledge and advice. Very helpful. I have a few questions about what to do with my accounts in order to maximize savings, but still have some liquidity for large purchases that are most likely in the next 5-10 years. Here's my Stats: -- $35K in liquid accounts -- $15K in former-employer 401K (Traditional), $3.5K in current-employer 401K (Traditional), employer matches 25% up to 6% of base salary -- Contributing 15% pre-tax to 401K, managed through Vanguard with lots of fund options -- No debt / student loans (thanks PokerStars) I have $35K basically just sitting in my checking / savings accounts due to being lazy and not really knowing what to do with it. I'd really like to put this money to work. However, major life moves are likely coming in the next 5-10 years including grad school, house down-payment, possible side-business ventures, etc. Here's my plan: -- Open a Roth IRA through Vanguard, contribute the max for 2012 before April of this year, and then contribute the max for 2013. This would tie up about $11K of the currently liquid funds I have. -- Put $10K into a taxable fund through Vanguard and purchase low cost mutual funds -- Keep at least $10K in savings for purchases / emergency fund My questions: -- Is opening a taxable fund a good idea with some of the cash I have? Or would you recommend I up the contributions to my 401K instead? I like the option of cashing out mutual funds out of the taxable account if I need to make a big purchase. -- I'd like to go ahead and roll over my traditional 401K funds to a Roth 401K account. Would it be a good idea to plan for this when I'm in grad school and my income is drastically lower? -- Any other good options for what to do with my cash on hand? I was thinking about putting 1-2K on Lending Club and trying out some P2P lending. Thanks!
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# ? Mar 6, 2013 16:22 |
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When you're young contributions vastly outweigh interest and returns. Since you're young and don't have a long term plan for that money you should be focusing on maximizing contributions and capital preservation while maintaining liquidity. Don't chase risk.
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# ? Mar 6, 2013 16:53 |
You could roll your old fund into your new one if the plan allows it for now. Converting it to a Roth IRA (can't do a 401k) when in grad school isn't a bad idea. For your 10k in taxable account, you're going to want to look for tax efficient funds to avoid paying ordinary income rates on it. I believe the Vanguard total market fund fits this description.
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# ? Mar 6, 2013 17:06 |
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Is there any reason to buy things in integer values of shares? My dad suggested you pay lower fees for this, but I couldn't confirm that. Does it vary by investment type?
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# ? Mar 6, 2013 17:46 |
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Untagged posted:Thanks for the help folks. The main reason I've stuck with my 457 instead of the other options, including a Roth (will likely one day bite me in the rear end with fees/taxes), is because I can withdrawal earlier if I retire earlier.
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# ? Mar 6, 2013 19:14 |
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I posted in the newbie personal finance thread here about my current financial situation. Basically, I'm 32 years old with 26k in savings and about $172k left on a mortgage at 4.5%. I'm trying to decide whether to start putting away money for retirement in a Roth IRA or to use that money to pay off my mortgage faster. Unless a Roth could meet or exceed 4.5% returns, I'd be better off putting it into my mortgage, right? I don't really know what kind of returns I can expect on an IRA, and I know there's really no way to predict long-term results. I guess my first instinct is always to pay off debt as fast as possible, so I've been leaning toward paying off the mortgage faster, but conventional wisdom is to put as much money away for retirement as possible. Any advice?
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# ? Mar 8, 2013 03:08 |
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Clint Howard posted:I guess my first instinct is always to pay off debt as fast as possible, so I've been leaning toward paying off the mortgage faster, but conventional wisdom is to put as much money away for retirement as possible. Any advice? 2) Max out Roth IRA ($5,500 this year) 3) Pay off the mortgage faster. This is how I did it. It's worked pretty well so far. Now that the mortgage is paid off I can max out all of my retirement accounts and still have enough left over for fun.
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# ? Mar 8, 2013 03:11 |
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nelson posted:1) Contribute to 401(k) up to employer match I read the OP, and I know that's the standard advice. I'm just wondering if that reflects more optimistic times when you could pretty much guarantee at least a 10% return on an IRA. Just looking at some Vanguard funds, I'm seeing quite a few that haven't broken 4% returns over 10+ years. If I can't expect at least 4.5% returns on an IRA, then I would think that it would be better to put that toward the mortgage. I may be oversimplifying, however, which is why I'm asking here.
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# ? Mar 8, 2013 07:38 |
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Clint Howard posted:I read the OP, and I know that's the standard advice. I'm just wondering if that reflects more optimistic times when you could pretty much guarantee at least a 10% return on an IRA. Just looking at some Vanguard funds, I'm seeing quite a few that haven't broken 4% returns over 10+ years. If I can't expect at least 4.5% returns on an IRA, then I would think that it would be better to put that toward the mortgage. I may be oversimplifying, however, which is why I'm asking here. It's really a 7-8% average expected return over a long period of time for risky things (here i mean 100% into stock). The less risk you take, the less you will get. See https://personal.vanguard.com/us/FundsSnapshot?FundId=0085&FundIntExt=INT#tab=0 as an example.
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# ? Mar 8, 2013 07:48 |
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ntan1 posted:It's really a 7-8% average expected return over a long period of time for risky things (here i mean 100% into stock). The less risk you take, the less you will get. See https://personal.vanguard.com/us/FundsSnapshot?FundId=0085&FundIntExt=INT#tab=0 as an example.
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# ? Mar 8, 2013 14:30 |
4.5% isn't some monumental amount of return to overcome over 30-40 years. Especially if you can take a deduction.
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# ? Mar 8, 2013 15:30 |
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Clint Howard posted:I read the OP, and I know that's the standard advice. I'm just wondering if that reflects more optimistic times when you could pretty much guarantee at least a 10% return on an IRA. Just looking at some Vanguard funds, I'm seeing quite a few that haven't broken 4% returns over 10+ years. If I can't expect at least 4.5% returns on an IRA, then I would think that it would be better to put that toward the mortgage. I may be oversimplifying, however, which is why I'm asking here.
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# ? Mar 8, 2013 15:38 |
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Harry posted:4.5% isn't some monumental amount of return to overcome over 30-40 years. Especially if you can take a deduction. Thanks for the reply. Yeah, after doing some more research, and considering I can deduct my mortgage interest, I think contributing the yearly max to a Roth is probably the best option. Unfortunately, my employer doesn't do 401k matching. I think I'll probably look into Vanguard's targeted retirement funds and hope for the best, although I am now also considering burning my house down and killing myself. nelson posted:Ideally you should have enough money for both. Ideally I would have more money, yes. Clint Howard fucked around with this message at 15:56 on Mar 8, 2013 |
# ? Mar 8, 2013 15:53 |
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Yeah, you really shouldn't be concerned about yearly returns so much as long as you've diversified and taken enough risk. The loser funds over the past decade could be the winners of the next and vice versa.
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# ? Mar 8, 2013 17:34 |
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You should look into refinancing your mortgage. Going rates are at or below 3.75%, although of course this depends on a lot of different factors. Depending on your situation, it might make sense. Check out the housebuying thread for stuff about refinancing.
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# ? Mar 8, 2013 20:09 |
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cowofwar posted:Past performance does not guarantee future returns. It doesnt but is good evidence when you take into account data from 1930. There is a reason that is called the total stock market fund.
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# ? Mar 9, 2013 00:28 |
I was offered a job that pays well and I am considering using a 0% APR credit card to max a Roth IRA before April 15. I have $27000 in student loan debt, so adding another $5000 seems crazy. On the other hand, I could easily afford the $417/mo CC repayment while also contributing to an IRA for 2013 and being on track to repay all of my loans in 3 years. Plus, even if I were fired (which seems unlikely), I could simply take the $5000 from the Roth out and pay back the credit card before the 0% APR ended and be where I started. Does this seem like a stupid idea?
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# ? Mar 10, 2013 19:21 |
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Yes. Well, not completely stupid, but you are adding some risk and it's just kind of ridiculous to be gaming things so hard. Let the 2012 IRA contribution go and put that $417/mo towards your loans instead.
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# ? Mar 10, 2013 20:39 |
I wouldn't say stupid, but I don't see the point. It would be slightly different if the market was super low or something.
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# ? Mar 10, 2013 20:43 |
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IAMKOREA posted:Does this seem like a stupid idea? Only do this if you already have an emergency fund and have begin investing other assets already. Otherwise there is a risk that you suddenly lose that job and have a ton of debt.
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# ? Mar 10, 2013 21:16 |
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Also keep in mind you need to have had at least 5000 in taxable income in 2012 to be eligible.
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# ? Mar 10, 2013 21:23 |
ntan1 posted:Only do this if you already have an emergency fund and have begin investing other assets already. Otherwise there is a risk that you suddenly lose that job and have a ton of debt. No emergency fund, but since you can withdraw contributions to a Roth anytime I think the risk of adding debt is minimal. I did have (just barely) $5000 in taxable income in 2012 so that's not a problem either. In any case, thanks for the input. I have decided it's not worth it, plus it seems like a headache to find a credit card that won't treat it as a cash advance and a brokerage that will accept a CC for IRA contributions.
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# ? Mar 10, 2013 22:04 |
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IS there a way to add funds to a broklerage account through a credit card like fidelity? I'd love to put money into my IRA and taxable account with a credit card so I could get more points/miles/etc for poo poo I'd be doing anyway. EDIT: I wish I could pay my rent with a credit card too but the landlord isnt cool with that.
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# ? Mar 10, 2013 23:15 |
BotchedLobotomy posted:IS there a way to add funds to a broklerage account through a credit card like fidelity? I'd love to put money into my IRA and taxable account with a credit card so I could get more points/miles/etc for poo poo I'd be doing anyway. Generally no, for pretty much exactly the reason you want to do it.
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# ? Mar 11, 2013 02:08 |
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Yeah seemed too good to be true. Welp.
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# ? Mar 11, 2013 02:11 |
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My employer just started offering me a 401k plan but none of the mutual funds offered seem particularly great and most of the expense rations seem obscenely high. What's my best bet for determining how to distribute my portfolio? Go with the lowest expense ratios?
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# ? Mar 11, 2013 05:32 |
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IAMKOREA posted:I was offered a job that pays well and I am considering using a 0% APR credit card to max a Roth IRA before April 15. Interesting, can you pay a mortgage with a 0% card? Sephiroth_IRA fucked around with this message at 13:24 on Mar 11, 2013 |
# ? Mar 11, 2013 13:06 |
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IAMKOREA posted:I was offered a job that pays well and I am considering using a 0% APR credit card to max a Roth IRA before April 15. Are you sure this wouldn't count as a cash advance? A lot of those 0% APR offers do not apply to cash advances and/or a cash advance would involve additional fees.
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# ? Mar 11, 2013 14:47 |
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So I get the impression there's minimally more risk/reward with a Total Stock Market Index over a 500 index. Any thoughts?
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# ? Mar 11, 2013 15:32 |
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Orange_Lazarus posted:So I get the impression there's minimally more risk/reward with a Total Stock Market Index over a 500 index. Any thoughts? If you're diversifying according to market cap (which you already would be by owning a 500 index), then you would want to own both the 500 index as well as some form of completion index or small-cap index. By owning a total market index you do both in one fell swoop without having to ever rebalance between funds. The advantage of the total market index really comes when you need to own something in a taxable account, because you would want to rebalance as rarely as possible. The advantage to separating out the different asset classes would be if you have multiple accounts (maybe IRA + 401k?) and one account has a 500 index that has a much better expense ratio than anything else you can pick. This is usually the case if you have a lovely 401k plan with lots of high expense funds, but maybe one decently cheap 500 index fund. Then you can buy the completion indexes in your IRA where you have more choice to shop around. If you're just flat out picking one from the other, then I think buying the 500 index alone would have (historically) a little lower return than including the small caps found in the total market index. Of course, past returns do not predict future returns and all that jazz.
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# ? Mar 11, 2013 18:45 |
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Orange_Lazarus posted:So I get the impression there's minimally more risk/reward with a Total Stock Market Index over a 500 index. Any thoughts? I would say so, but for all intents and purposes, most people will use either index to represent US large cap domestic stocks. Personally, I think if you want an asset pure Large-cap index fund, you should just get Vanguard's large-cap index fund. The S&P 500 is committee-based and subject to front running… Despite its fame, I see no reason not to just go with Vanguard's CRSP-based index funds, as they mix very well with their other indices (like small cap, etc) and designed for investing and not just to be in the headlines. One advantage of the total stock market combining all types of stocks, is that it is arguably more tax efficient, as you do not have to worry about stocks migrating from one index to another, forcing sales within the fund. Perhaps a total Stock market index, with some overweight of small caps in a separate fund would be the best combo in a taxable account.
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# ? Mar 11, 2013 19:10 |
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My grandmother set up a Roth IRA for me when I was 19 and put $12,000 cash in it. Then died. That was 7 years ago and it's still at $12,000. The account is at Schwab, but I am wondering if it is possible for me to open a Roth IRA with Vanguard, transfer the $12,000 over to it, and then make my 2012/2013 contributions of an additional $10,500? Is this possible? Do I need to do something to simultaneously close my old and open my new Roth?
GoGoGadgetChris fucked around with this message at 22:02 on Mar 11, 2013 |
# ? Mar 11, 2013 21:58 |
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GoGoGadgetChris posted:My grandmother set up a Roth IRA for me when I was 19 and put $12,000 cash in it. Then died. That was 7 years ago and it's still at $12,000. The account is at Schwab, but I am wondering if it is possible for me to open a Roth IRA with Vanguard, transfer the $12,000 over to it, and then make my 2012/2013 contributions of an additional $10,500? Is this possible? Do I need to do something to simultaneously close my old and open my new Roth? Are you sure it is an Roth IRA and not a more general taxable brokerage account? You can't generally put money in for other people, you need to have made an amount greater than the contribution in taxable income that year, and not that much at once. Anyway, you should be able to transfer it just fine, contact schwab and lookup/ask for a trustee to trustee transfer and fill out the forms. There is no limit on how many IRA accounts you have, just the yearly contribution limit. Your plan to put in both 2012 and 2013 now is fine. You can have them and the old one as separate accounts or combine them at your leisure. If the money from your grandmother is in fact not an IRA account, the process is the same, you just can't combine that into one account with your new Roth IRA. Xenoborg fucked around with this message at 22:12 on Mar 11, 2013 |
# ? Mar 11, 2013 22:09 |
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Xenoborg posted:Are you sure it is an Roth IRA and not a more general taxable brokerage account? You can't generally put money in for other people, you need to have made an amount greater than the contribution in taxable income that year, and not that much at once. It is indeed a Roth IRA. I made about $4,000 a year while I was in college and she just contributed for me without my knowledge for a few years. This was a surprise discovery a couple months ago. My parents have a financial planner and all I heard from them is that it currently has "$7,000 TIPS and $5,000 cash". All I need to do is find the Schwab account number and do Vanguard's online transfer process, right?
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# ? Mar 11, 2013 22:22 |
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GoGoGadgetChris posted:It is indeed a Roth IRA. I made about $4,000 a year while I was in college and she just contributed for me without my knowledge for a few years. This was a surprise discovery a couple months ago. My parents have a financial planner and all I heard from them is that it currently has "$7,000 TIPS and $5,000 cash". All I need to do is find the Schwab account number and do Vanguard's online transfer process, right? That should be it. I've never used Schwab so I can't safe for sure. Just be sure you do a trustee to trustee transfer and not a withdrawal or distribution.
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# ? Mar 11, 2013 22:43 |
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Well, it all worked out. I've now got a Vanguard Roth IRA with $22,500 in it. This represents all of my retirement savings. I'm 26 and can only save about $8,000/year for retirement for the next year. Let's say that I want to be at about 60% equity, 20% bonds, and 20% REITs for retirement planning. Since all of my savings right now is in tax-advantaged accounts, is it smart for me to just go with bonds and REITs at the moment and just buy stocks with a taxable account going forward? Or is hitting my ideal allocation right away more important than having my tax-advantaged accounts holding bonds/reits?
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# ? Mar 12, 2013 23:18 |
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# ? May 27, 2024 22:53 |
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GoGoGadgetChris posted:Well, it all worked out. I've now got a Vanguard Roth IRA with $22,500 in it. This represents all of my retirement savings. I'm 26 and can only save about $8,000/year for retirement for the next year. Get the asser allocation correct now… The fact that it is a tax-advantaged account means that changing allocations will be easy as there are no tax implications. As you get additional funds that need to go into a taxable account, you can start buying stocks, and then exchange the stocks in your tax-advantaged accounts into REITs and bonds.
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# ? Mar 12, 2013 23:25 |