grack posted:

Hey, I'm a professional advisor!

...and unfortunately it's mostly true. You can't imagine how many portfolios I've seen churned on a yearly basis to generate new commissions. It's disgusting.

quote:

A parade of studies has shown why: Index funds, which try to simply match the performance of a broad market sector, have consistently beaten “actively managed” funds, where professional money managers attempt to outperform the market by picking the hottest stocks and bonds.

Over the 23 years ending in 2009, actively managed funds trailed their benchmarks by an average of one percentage point a year. If a benchmark like the Standard & Poor’s 500 returned 10%, the average managed fund investing in similar stocks would therefore have returned 9%, while an index fund would have returned 9.8% to 9.9%, giving up only a small amount for fees.

Gold and a Pager posted:

What up fellow American-in-Germany goon! I have been looking into how to best invest for retirement while living in Germany and it doesn't look so great. Vanguard exists in Germany, but the fund selection is greatly reduced and I think you then run into FACTA issues since it's a foreign account. On the other hand, if you continue to invest in some sort of retirement account in the US, the fund you use has to be a "transparent" fund, registered in Germany or it could be subject to punitive taxes. There is some more reading you can do about it here.

I've been meaning to go to an accountant here and/or paying for 30 min consultation with a US accountancy firm specializing in expat taxes to see what my best options are, but I just haven't gotten around to it yet

gvibes posted:

Fidelity Freedom 2050 isn't a terrible option for a 401k. You can see the composition https://fundresearch.fidelity.com/mutual-funds/composition/315792416 - It' 63 domestic, 23 international, 15 bond, which seems pretty reasonable to me. It just has a significantly higher expense ratio than the Vanguard target retirement funds, so it takes some flack here.

gvibes posted:

I'm guessing a portfolio like you are suggesting would have a lower effective expense ratio, but you didn't provide expense ratios, so who knows.

berzerkmonkey posted:

If anyone could offer some advice to a 40 year old who has never done any sort of saving whatsoever, I would appreciate it!

berzerkmonkey posted:

....If the 457 isn't a logical choice (and I don't know why it really would be) what's a good selection of investments for starting off the IRA?

Inept posted:

Is the 457b a governmental or non-governmental one? In any case, being worthwhile really depends on what funds are available in that account. As for a Roth IRA, you can start those with just about any company. Many people here recommend Vanguard. Schwab and Fidelity aren't bad choices either.

Madbullogna posted:

Madbullogna posted:

...My retirement/pension plan will provide a very, very large sum of money, an amount almost four times my current salary. Despite only making ~37k/year gross, the miracle of 7% compounding interest, 2.25:1 match, and what will be close to 40 years of service (ie; 40 years worth of deposits), will mean I can walk away at 60yoa with around a 125k/year benefit.

Madbullogna posted:

My pension alone will bump me into a higher bracket.

berzerkmonkey posted:

EDIT: Wow - the Vanguard has an .18% fee? That looks better than .60%...

Fancy_Lad posted:

Monkey, the OP's rules on where to invest still apply to you - just substitute your 457b with the 401k. Some people will also have access to a 403(b) *and* and 457(b) - if this is the case you may contribute the 17.5k max to each of them.

Revised chart for you:
1) Contribute to 401(k)/403(b)/457(b) up to employer match
2) Max out Roth IRA ($5,500 this year)
3a) Max out 457(b) ($17,500 limit this year)
3b) Max out 401(k)/403(b) ($17,500 limit this year)
4) If you were able to finish Step 3, you will end up rich in all likelihood. Start a taxable savings account, or go out and blow some money at a strip club or something.

Since you are getting a late start, it is that much more important to save what you can into *something*...

Fancy_Lad posted:

For your Roth IRA, I'd highly recommend Vanguard and their Target Retirement funds. They are a great choice if you don't want to mess around with it too much w/o getting bent over for fees. Also, you have access to some of the best expenses for anything else if you utilize the resources in the OP to learn about your options down the road.

You just need to initially save up $1000 to open the account with a target fund - From there you can do automatic investments into it. Just don't forget to sign up for paperless statements to save yourself the $20/year account fee.

berzerkmonkey posted:

Welp, my employer doesn't contribute *anything* to the 457(b), as I get a pension. So should I even bother with that at all? Honestly, with the wife not working, I'm not sure about being able to max out a Roth IRA after this year, let alone both the IRA and a 457(b), so should I just concentrate on the Roth?

berzerkmonkey posted:

I've got the initial $1000, so that isn't a problem. I guess I should start with that - just choose based on my target retirement date, correct?

Madbullogna posted:

Because what you said is very, very true.....Nothing in life is a sure thing. All you can do is stack the cards in your favor.

ntan1 posted:

Check after around 8PM - Mutual funds tend to only update prices a few hours after the market closes.

SlightlyMadman posted:

A total layman such as myself would expect them to match up exactly, right? It does seem to track close over time just fine, off by 1% or less no matter how far out you go. It occurs to me that the difference is probably from when the expenses come out then?

Spartan 500 Prospectus posted:

Correlation to Index. The performance of the fund and its index may vary somewhat due to factors such as fees and expenses of the fund, imperfect correlation between the fund's securities and those in its index, timing differences associated with additions to and deletions from its index, and changes in the shares outstanding of the component securities. The fund may not be fully invested at times, either as a result of cash flows into the fund or as a result of reserves of cash held by the fund to meet redemptions. The use of sampling techniques or futures or other derivative positions may affect the fund's ability to achieve close correlation with its index.

nessin posted:

Does anyone have a recommendation for a good all-in-one portfolio tool? I'm trying to find something simple that also lets me define investment percentages and evaluate what I need to do to rebalance them, but it doesn't seem like any of the free tools do that and I'd prefer to avoid having one place tracking prices, history, and news, and then a separate spreadsheet just to put in percentages and manually enter in totals for a quick output for rebalancing.

Folly posted:

I am fully vested in a pension from my former employer.

{snip}

I believe that I can roll it into a traditional IRA without a penalty. Assuming that's true, is there any reason not to? I mean, for diversification purposes, this is probably the only way I'll be able to get an asset like this. I guess it is mostly a corporate bond in terms of asset class?

Huttan posted:

I strongly recommend that you never take the lump sum payout from a pension. You will only get ahead if you are a better investor than people with full time jobs investing in Wall Street. And if you really are that good you need to be working on Wall Street taking all their money.

Folly posted:

Actually, I'm glad you're here. Can you tell me the name of a good book that offers a counterpoint to what I've been reading? Something that posits some combination of 1) market timing is a verifiable skill, 2) the current mutual fund hiring systems adequately recruit people with this skill into fund management positions, 3) the use of this skill is profitable enough to overcome the fund fees.

nessin posted:

Does anyone have a recommendation for a good all-in-one portfolio tool? I'm trying to find something simple that also lets me define investment percentages and evaluate what I need to do to rebalance them, but it doesn't seem like any of the free tools do that and I'd prefer to avoid having one place tracking prices, history, and news, and then a separate spreadsheet just to put in percentages and manually enter in totals for a quick output for rebalancing.

Guy Axlerod posted:

I see HSA chat in here once in a while. I'll be on a HDHP next year, who should I open an HSA with?

baquerd posted:

On the other hand, a typical pension strategy is to drop the money in hedge funds and other high fee vehicles. When you take that into account, investing the lump sum yourself makes sense.

GoGoGadgetChris posted:

Are you sure you have any say in the matter? My hdhp offered through work has an HSA through Chase. I didnt get to choose what bank my hsa was at, and I didnt think thst was typically up to the participant.

Guy Axlerod posted:

This is an individual health plan purchased on the ACA market. I see Chase and Bank of America appear to offer individual HSAs. My employer is not involved.

Huttan posted:

Nope. It still doesn't. The pension plan is on the hook to pay you $X per month. If they burn lots of it on hookers, blow and hedge funds, they still owe you $X/month. If they go tits up, then PBGC is on the hook for for the first $4600/month. For defined benefit plans, the investment risk is all on the side of the company. When you take the payout, the risk becomes all yours, plus they never pay out the full value of what your benefits are.

baquerd posted:

I recently helped my dad evaluate his pension, lump sum versus lifetime payouts. The present value of the payments equaled the lump sum if he lived to be 98, assuming 3% inflation. So, if he can beat 3% returns himself, the lump sum was going to be the winner. Maybe some pensions are worth taking, but you don't need to be some investment superstar to beat the periodic payments.

Cranbe posted:

But if you're collecting your pension, you're at the period in your life (i.e. retirement) when you would want to limit your portfolio to especially conservative investments--i.e. investments that won't have very good returns. Also, as has been mentioned, the company that owes you the pension has (nearly) all the risk if they don't get the returns. You're still owed your money, regardless of whether they're losing or making money on the investments.

Edit: Also, you can plan extremely well based on a pension of $x/month. You can't necessarily plan what money your investments will generate (assuming you don't want to draw down more than z%/year of your total portfolio's value).

nessin posted:

How painful is it to move a Roth to another account? In looking over what I'd like to do the majority of it is with Vanguard, and the parts I'm not doing with Vanguard can easily be switched to Vanguard funds or done in a single trade or two a year. In light of that it seems like it'd make sense to move my Roth to Vanguard, but I'm a bit unclear as to what it entails from doing a quick google search.

ntan1 posted:

There are very few books that offer a direct counterpoint to the argument that "active mutual funds are usually a bad idea". The issue is that there's too much empirical evidence that shows that active mutual funds tend to fail, and anybody seriously thinking about investing in active funds needs to take that into account. For example, 2/3rds of active funds fail per year, and there only a handful of active funds that have beat the index after a period of 20 years.