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ntan1 posted:This statement is probably not actually true yes sorry, you two above got what I meant. Of course we all hope the opposite is true and that past performance is repeated and we all become fabulously wealthy by shoveling cash into index funds.
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Oct 13, 2013 21:17
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I think you meant something very slightly different.
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Hey guys, Sorry for asking so many scattered questions. I have a 401k through my job and I am contributing the maximum company match, 4%. I opened an IRA with Vanguard and I am planning on contributing the maximum to that account. I was considering opening a taxable account with Vanguard as I thought that my stock options in my 401k sucked. But taxes are the same as a large expense ratio (=theft), so I looked at my stock options again in more detail. There are only 4 index funds in my 401k. They track the Russell 2500, Russell 1000, MSCI ACWI ex-US, and Barclay's aggregate bond index. Given these options, should I be comfortable maxing out my 401k? Thanks.
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Oct 13, 2013 22:41
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What are the expense funds of the associated index funds in your account? In general, you should be maxing out your 401k after your Roth IRA unless you need to save up to purchase a house.
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Oct 13, 2013 22:57
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ntan1 posted:What are the expense funds of the associated index funds in your account? In general, you should be maxing out your 401k after your Roth IRA unless you need to save up to purchase a house. Did you mean 'expense ratios' or 'expense funds'? If expense ratio, then MSCI: 0.07% 1000: 0.02% 2500: 0.03% Bond: 0.05%. In other words, dirt cheap. There are target funds with an ER of ~0.5% and a couple more expensive options. I am not planning on buying a house within the next 10 years. An issue with these options is that they are not the most diverse. However, I would cover the US, international, and some bonds.
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Oct 13, 2013 23:17
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Sorry, ratio. My mistake. No S&P 500 Index Fund? You can mostly capture everything from the Russell 1000 + 2500, but the Russell 2500 goes hand in hand specifically with the S&P 500 Index. MSCI represents the International Market, and your bond fund pretty much represents your base bond index. Find your asset allocation, and you're pretty much set. In other words, your 401k is actually currently OK. ntan1 fucked around with this message at 23:42 on Oct 13, 2013 |
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Oct 13, 2013 23:34
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ntan1 posted:Sorry, ratio. My mistake. Sweet, thanks. I'm glad I looked at the fine print of the funds.
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Oct 13, 2013 23:43
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I clarified the post - make sure to read the edit on the Russell Indexes. These might mean a little more complexness, but it still isn't that bad.
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Oct 13, 2013 23:47
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ntan1 posted:I clarified the post - make sure to read the edit on the Russell Indexes. These might mean a little more complexness, but it still isn't that bad. Yeah, no 500 index fund in my 401k, but I have the 500 index fund in my IRA and I'll diversify it (my IRA) as it grows. Edit: And I also noticed that the Russell 2500 and 1000 line up well with the SP500, so I am not too worried about them. I was just hoping I could choose between value/growth stocks in my 401k. But I won't complain as I have it better than a lot of other people. theHUNGERian fucked around with this message at 00:27 on Oct 14, 2013 |
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Oct 14, 2013 00:14
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I opened a Roth IRA woth etrade over the weekend, and now I'm having some second thoughts about going with etrade. The account hasn't been funded yet. If I want to switch, do I need to transfer the account or can I just leave it alone and make a new account elsewhere? Also, I'm self employed and I won't be making monthly contributions. I'll be able to max out my Roth IRA, but I'll probably make 2-5 contributions over the year. In that case, should I worry so much about fees I would incur with Etrade? I've read that Vanguard requires a minimum monthly contribution to waive fees. Perhaps I should be looking for another broker with lower fees?
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Oct 14, 2013 15:09
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Sperg Victorious posted:I opened a Roth IRA woth etrade over the weekend, and now I'm having some second thoughts about going with etrade. The account hasn't been funded yet. If I want to switch, do I need to transfer the account or can I just leave it alone and make a new account elsewhere? No funds, nothing to transfer. The only thing I can think of is that you may need to call them to officially 'close' it, so they don't try to charge service fees to the unused/unfunded account. Sperg Victorious posted:Also, I'm self employed and I won't be making monthly contributions. I'll be able to max out my Roth IRA, but I'll probably make 2-5 contributions over the year. In that case, should I worry so much about fees I would incur with Etrade? I've read that Vanguard requires a minimum monthly contribution to waive fees. If you select e-delivery of your statements, the quarterly fee is waived. As someone who just went through opening an account with them, (which included a rollover as well), I give them a thumbs up. It seems that folks are happy with them as far as purchasing ETFs as well, but I'm not in a position to comment on them as I haven't ventured to that side yet.
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Oct 14, 2013 15:38
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theHUNGERian posted:I may not have phrased my question correctly. I wasn't only talking about value stocks. I was talking about him recommending 'x index fund' because 'x index funds' have done well over the course of time (last 50 years). Yet, he also claims that 'last years winners will most likely be next years losers' and that nobody should every by a stock or mutual fund based on its performance from the previous years. This seemed like a contradiction to me. An active fund manager tries to beat the index each year, aiming to deliver positive and massive returns both when the market is doing well and when it is not. Active managers are actually exceedingly bad at this, and while some do it occasionally -maybe even repeatedly for a spell- most of it is due to luck (or if it is genuine talent, most of the benefits are eaten away by higher expenses). There's no way to tell in advance which funds will and won't perform well, so past performance of a particular fund can't help you make that call. If you just invest in index funds, then your performance is going to be the same as the market as a whole. Some years it will be up, others it will be down. Index funds have done well in the past, but that's because staving off the breakdown of society is predicated on long-term appreciation of the markets overall, so if we believe in our future then it makes sense to invest in them broadly. But we understand that this means some years we will be in the red, even if we cannot tell which years those will be in advance. That's why it's not a contradiction. You can't know which active fund managers will do well based on prior performance, but you can mostly expect that the market as a whole is going to appreciate in fits and starts over time. bam thwok fucked around with this message at 17:55 on Oct 14, 2013 |
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Oct 14, 2013 16:25
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bam thwok posted:An active fund manager tries to beat the index each year, aiming to deliver positive and massive returns both when the market is doing well and when it is not. Active managers are actually exceedingly bad at this, and while some do it occasionally -maybe even repeatedly for a spell- most of it is due to luck (or if it is genuine talent, most of the benefits are eaten away by higher expenses). There's no way to tell in advance which funds will and won't perform well, so past performance of a particular fund can't help you make that call. I know it's hip to bash active management on SA, especially with its tendency towards more "liberal" economic policies and a general disdain for "1%ers," but lets not get too excited. Active management does have it's uses and there are a small number of funds that consistently beat the market. There are also entire sectors/classes where active management outperform indexes (markets/certain bond types). Finally, large institutions/endowments have unique issues and goals that passive investment can't always handle. If you talk to fee-based institutional investment consultants you'll find Hedge Funds/PE etc. strategies in their investment plans. Before everyone jumps down my throat, I do have the majority of my portfolio invested in low expense ratio ETFs/indexes and advocate that the vast majority of individual long-term investors do the same. I just want to keep everyone grounded here.
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Oct 14, 2013 23:00
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I have a lot invested in a biotech mutual fund that is actively managed and with a .8% ER (hgnnnnnn), but its given me huge returns way way way above the index. As the poster above noted though, a VAST majority of my other holdings are index funds with fees under .1%. That one managed fund has been good to me but I also was lucky when I got in. There are some diamonds in the rough; is it worth trying to dig through the crap to find the magic one? Maybe not, but sometimes you can get lucky if you put some research in before you just pull the trigger on something you "think might be good.
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Oct 14, 2013 23:46
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Ignoranceisbliss88 posted:I know it's hip to bash active management on SA, especially with its tendency towards more "liberal" economic policies and a general disdain for "1%ers," but lets not get too excited. Active management does have it's uses and there are a small number of funds that consistently beat the market. There are also entire sectors/classes where active management outperform indexes (markets/certain bond types). Finally, large institutions/endowments have unique issues and goals that passive investment can't always handle. If you talk to fee-based institutional investment consultants you'll find Hedge Funds/PE etc. strategies in their investment plans. I'm not sure where your get the feeling people tend towards liberal economic policy and disdain for 1%ers in this thread. I would not be surprised if there are a good number of free market, invisible hand loving, Hyek for president 1%ers in this very thread thread. The issue is in general you pay more to get less with stock funds, and the conflict between investors and managers is fairly substantial. Some segments of the investment world do not have low cost index options and active management makes sense there.
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Oct 14, 2013 23:48
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J4Gently posted:I'm not sure where your get the feeling people tend towards liberal economic policy and disdain for 1%ers in this thread. I agree with everything you say. I'm just trying to point out that active management is a very necessary component of the financial world. When people attempt to discredit it entirely they're not giving an accurate picture.
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Oct 14, 2013 23:55
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Ignoranceisbliss88 posted:I agree with everything you say. I'm just trying to point out that active management is a very necessary component of the financial world. When people attempt to discredit it entirely they're not giving an accurate picture. I think what you're running into is that this is the long-term investing thread. The vast, vast majority of actively managed funds fail to beat the market over a 20 year period after taxes and fees. You can pick the right number on a roulette wheel too, but that doesn't turn it into a good bet at the time you made it. I'm only 4 books in at this point, but what I've read says that actively managed funds seem to be limited in cost-effectiveness to small stock/specific industry funds where the value of research can be maximized. Furthermore, a truly successful actively managed fund will eventually balloon with assets and become too large to continue using the strategies that made it grow. This makes actively managed funds a relatively short term (< 5 years?) endeavor. Again, this is the long-term thread.
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Oct 15, 2013 00:46
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Ignoranceisbliss88 posted:I agree with everything you say. I'm just trying to point out that active management is a very necessary component of the financial world. When people attempt to discredit it entirely they're not giving an accurate picture. I think there's a big distinction between active management when talking about mutual funds versus finance. Unfortunately, when speaking about active management from a mutual fund perspective, I think it's much harder to defend.
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Oct 15, 2013 03:20
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bam thwok posted:... So is an index fund immune to asset bloat? Or is it only x times less prone to asset bloat (where x is roughly the ratio of 'fund in index funds' by 'funds in actively managed fund')? At any rate, your argument makes sense, and I think I get it.
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Oct 15, 2013 03:48
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Ignoranceisbliss88 posted:I agree with everything you say. I'm just trying to point out that active management is a very necessary component of the financial world. When people attempt to discredit it entirely they're not giving an accurate picture. This thread is for people investing for the long term, not institutional finance  . For Joe Blow looking to save for retirement or his kids college, actively managed funds should be avoided.
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Oct 15, 2013 06:47
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So I'm basically Lemon-ing right now and I'm hoping some finance goons can point me in the right direction. I have a fairly stable career as a technical writer grossing about $50-60k/year depending on overtime and things are going really well with my employer. They've basically been tossing 6-8% raises and cash bonuses at me since I started. I'm not expecting things to continue like that forever, but for now I'm in a very good position. After paying off the majority of my debts, starting to keep a budget, and working an rear end-load of over time I've come into a lot of money over the last couple years - more than I know what to do with. By the end of this year I'll be sitting on almost $30k in cash with another $5-6K in my 401K. My employer is considering matching 401K contributions in the future, but for now they only contribute through profit sharing once a year. My car is paid off and my only debt is a $6500 student loan bill that I can obviously pay in full at any time. I'm 27 years old and will probably be wanting to put a down payment on a house some time in the next 5-8 years. My tentative plan right now is this: 1) Pay off my last student loan in full 2) Open a Roth IRA and max it for this year, setup a direct deposit from my paycheck for the future 3) Keep a few grand in my checking account 4) Put the rest in a mutual fund or something else that's relatively safe 5) Contribute to my 401K depending on how much extra income I end up with I'm probably at a point where I need to go and speak with an actual financial adviser, but I really don't know where to start. I've heard Vanguard is great and all that jazz, but beyond that I'm pretty clueless. Are there any good resources I can use to help find people in my area? Halp please.
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Oct 15, 2013 21:21
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BigAlienHoopajoo posted:So I'm basically Lemon-ing right now and I'm hoping some finance goons can point me in the right direction. I have a fairly stable career as a technical writer grossing about $50-60k/year depending on overtime and things are going really well with my employer. They've basically been tossing 6-8% raises and cash bonuses at me since I started. I'm not expecting things to continue like that forever, but for now I'm in a very good position. 2. Medium term savings for house down-payments, car purchases, vacations. 3. Long term retirement savings. If you have low expenses you'll want tax-advantaged and after-tax accounts. Pick a savings vehicle for each. So maybe a HISA for the emergency fund (liquid), a GIC ladder system or equivalent (IRA) for the medium term savings and an investment account for the long term savings. Figure out your monthly allocation as part of your budget. Contribute automatically each month right when you get paid and don't touch the money once it leaves your chequing account.
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Oct 15, 2013 21:43
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cowofwar posted:1. Short term emergency fund. I'd recommend flipping 2 and 3. It's fine to have lower baseline for long term savings before you decide to invest on a house, car, or vacation, but it's wise to focus on retirement as soon as possible. For now, a savings account (or even checking account) suffices for an emergency fund in the US due to interest rates. In an emergency fund, your priority is immediate accessibility to the cash reserves. Otherwise, as recommended in the OP, focus on your 401k until employer match, followed by a Roth IRA, followed by maxing out your 401k. As a forewarning, be careful when you seek a financial adviser. Some financial advisers are good, but many will in some way try to extract fees or money from you. A financial adviser is not necessary if you spend 2-4 hours and do the research yourself. If you do seek a financial adviser, make sure that they can sign a document stating that they have a fiduciary guarantee, meaning a guarantee that they are always doing the best specifically for your interests. The best way to learn how to invest is to read the The Four Pillars of Investing by Bernstein, as listed in the OP. theHUNGERian posted:So is an index fund immune to asset bloat? Or is it only x times less prone to asset bloat (where x is roughly the ratio of 'fund in index funds' by 'funds in actively managed fund')? At any rate, your argument makes sense, and I think I get it. Index funds tend to be more resistant to asset bloat than active funds, as they capture specific, usually large, sections of the market by investing in assets specifically according to weight. For example, if Stock A is worth 5% of the market sector, Stock B were worth 10% of the market sector, and stock C were worth 15% of the market sector, then an index fund for that market sector would put 5%, 10%, and 15% of assets into Stock A, B, and C accordingly. An Index fund like Vanguard's Total Stock Market fund seeks to simulate all US stocks according to their weights, so said index fund is pretty much completely resistant to asset bloat from a domestic stock perspective. Index funds that capture smaller portions of the market are more risky and could be slightly affected by asset bloat, however. ntan1 fucked around with this message at 05:12 on Oct 16, 2013 |
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Oct 16, 2013 04:59
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ntan1 posted:Index funds tend to be more resistant to asset bloat than active funds, as they capture specific, usually large, sections of the market by investing in assets specifically according to weight. For example, if Stock A is worth 5% of the market sector, Stock B were worth 10% of the market sector, and stock C were worth 15% of the market sector, then an index fund for that market sector would put 5%, 10%, and 15% of assets into Stock A, B, and C accordingly. An Index fund like Vanguard's Total Stock Market fund seeks to simulate all US stocks according to their weights, so said index fund is pretty much completely resistant to asset bloat from a domestic stock perspective. Index funds that capture smaller portions of the market are more risky and could be slightly affected by asset bloat, however. Thanks, now I understand.
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Oct 16, 2013 05:54
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cowofwar posted:1. Short term emergency fund. Also, what are people doing with their medium term savings these days? I hear lots of advice about short-term emergency savings and long-term retirements savings, but little about the "house fund" type of things.
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Oct 17, 2013 00:13
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Small White Dragon posted:Is GIC just a Canadian thing?
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Oct 17, 2013 01:14
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Small White Dragon posted:Is GIC just a Canadian thing? Depends on how soon you're looking to buy. In the next 1-2 years? You probably want something very stable and secure. Online savings account (0.7-1.0% APY typically) is about the best you'll get among very-conservative instruments. These days CD rates are about the same, or only very mariginally better, than a savings account so it does not make sense to forfeit the liquidity to earn a couple extra cents per year. In the next 3-5+ years? Depending on your risk tolerance, low-expense index mutual funds or ETFs are IMO a reasonably safe option, especially if your timeframe to buy is pretty open-ended. Bonds are also another option that are a more conservative play. Me personally I also have a "house fund" but with an open-ended time frame for buying (likely 2+ years away... but maybe not?), so it's really just more a general medium-term portfolio. I also invest in individual stocks some, but I wouldn't recommend it if you don't put in some real time studying up on fundamental analysis and value investing. I'm also young, single, and have a high financial risk tolerance. Guinness fucked around with this message at 01:24 on Oct 17, 2013 |
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Oct 17, 2013 01:22
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I need help as I'm wasting some major opportunity here and I'm very wishy washy when it comes to my future goals (also pretty conservative). I need to do something as I have cash sitting in a savings account now doing nothing. At the same time though I'm not ready to commit all that to being locked up long term as I could potentially use some for investing in maybe a small business of some type should the opportunity present. I have no real need for a house and would prefer to just not be tied down to any location or area. Basically the summary of it... Age-26 Income-120k Savings ~200k No Debt Rent- 1500/mo with bills 401k maxxed Roth-maxxed
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Oct 17, 2013 19:09
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Your situation is a bit different from most others here because your salary is high. We'll need to talk about your 401k/Roth and allocation into it separately from the rest of your savings account. Some starting questions: Specifically for your Savings (stuff that isn't in retirement accounts), how long in the future do you expect to spend it? What are your goals in terms of capital preservation? How tolerant are you to risk? Are you set with the investment mix in your 401k and Roth?
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Oct 17, 2013 19:44
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So...you're in a situation where you can tolerate a lot of risk, but you're not taking much risk? Small businesses cost more than money, they take a lot of time. Did you have something in mind? If not, the biggest risk you can take would be an extremely early retirement.
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Oct 17, 2013 19:50
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ntan1 posted:Your situation is a bit different from most others here because your salary is high. We'll need to talk about your 401k/Roth and allocation into it separately from the rest of your savings account. My 401K (Fidelity) is allocated as follows. Its a Pretty wide mix any suggestions I'm all ears. 21.18% MID CAP EQ IDX STR 20.88% LARGE CAP EQ STR 17.90% SMALL CAP EQ STR 12.69% NON-US EQ IDX STR 10.17% STABLE VALUE STR 9.44% BOND INDEX STR 7.73% 2050 RETIREMENT PORT The ROTH is managed by chase. Would I be better off Just transfering this to a Vanguard ROTH? As for the savings I don't really have any plans which is part of the problem of why I'm just sitting on it. Ive considered parking half into longterm retirement funds but the other half I would really like to have access to and would like to use much less conservatively.
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Oct 17, 2013 20:13
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HE4T posted:My 401K (Fidelity) is allocated as follows. Its a Pretty wide mix any suggestions I'm all ears. Can you list out the index funds that are available to you and their expense ratio/maintenance fees? I'm guessing that some, but not all, of the funds that you put money to already have high expense ratios. HE4T posted:The ROTH is managed by chase. Would I be better off Just transfering this to a Vanguard ROTH? Yes, Chase probably is taking a large commission from having it managed by them. Vanguard Roth, all into the Target Retirement 20XX fund is a legitimate, lazy strategy. HE4T posted:As for the savings I don't really have any plans which is part of the problem of why I'm just sitting on it. Ive considered parking half into longterm retirement funds but the other half I would really like to have access to and would like to use much less conservatively. The big thing I'm trying to get at is an asset allocation for the savings, ie. whether or not you will need to take that money out in the next 5-10 years, and if so, how long. Basically, if you intend to use the money to buy a house, then you'd need to be more conservative with the money. If you expect to not need the money, then it would make sense to put a majority (90% or so) of the money into stocks. Out of curiosity, how expensive is the real estate market in your area? People with incomes like this in their 20s tend to live in expensive real estate markets, which may affect long term planning and retirement decisions.
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Oct 17, 2013 21:46
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ntan1 posted:Can you list out the index funds that are available to you and their expense ratio/maintenance fees? I'm guessing that some, but not all, of the funds that you put money to already have high expense ratios. Large Cap EQ- None S&P 500- .13% Mid Cap EQ INX- .15 Small Cap EQ- .94 Non Us EQ INX- .04 Non US EQ STR - .60 Stable Value STR- .53 Intermediate BD STR- .07 INFL Sensitive STR- None Bond Index- .15 Retirement Funds- None ntan1 posted:The big thing I'm trying to get at is an asset allocation for the savings, ie. whether or not you will need to take that money out in the next 5-10 years, and if so, how long. Basically, if you intend to use the money to buy a house, then you'd need to be more conservative with the money. If you expect to not need the money, then it would make sense to put a majority (90% or so) of the money into stocks. I don't anticipate anything major in the next 10 years at least for my current savings. I guess at this point stock would be the best option but how should I allocate them? I'm definatly a passive investor and don't want anything to do with short term trading or get rich quick BS. ntan1 posted:Out of curiosity, how expensive is the real estate market in your area? People with incomes like this in their 20s tend to live in expensive real estate markets, which may affect long term planning and retirement decisions. I live in Houston, its not that bad compared to East/West coast. You can get a very nice house for 200k. I don't have any plans to Use this money to buy a house in the foreseeable future unless its some type of investment/rental property.
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Oct 17, 2013 23:06
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HE4T posted:Large Cap EQ- None Is there a particular reason that the Retirement Funds don't have an expense ratio? Are there no other fees associated with those retirement funds? I'm looking at this because the lack of expense ratios is really attractive. I assume there's a Retirement fund year in there with an allocation of 90% into stocks and 10% into bonds? HE4T posted:I don't anticipate anything major in the next 10 years at least for my current savings. I guess at this point stock would be the best option but how should I allocate them? I'm definatly a passive investor and don't want anything to do with short term trading or get rich quick BS. Before we begin, I'd recommend reading the 4 Pillars of Investing by Bernstein, as listed in the OP. It basically lists the principles of long term investment, and is pretty much a very important read for understanding wealth preservation. Here is the allocation that would basically be the standard target retirement fund for year 2050: 90% stock, 10% bonds. Of the stocks, about 70% into the US market, 30% international. Consider opening a Vanguard Taxable account and putting the money into index funds. As this is taxable, note that you will have to deal with capital gains when you sell off the funds. You have enough that you qualify for Admiral shares, which will save you a tiny bit more as well. http://www.bogleheads.org/wiki/Three-fund_portfolio However, since you still have not purchased a house, you might consider putting 5%-10% into an REIT (Real Estate) index. That being said, there are some more complications that arise because you are making a high amount of income: taxes. The article below explains this in depth, but the big takeaways are that you should put the bond portion of your money into your 401k/IRAs in order to avoid taxes, and focus on stocks in your taxable accounts. http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement quote:I live in Houston, its not that bad compared to East/West coast. You can get a very nice house for 200k. I don't have any plans to Use this money to buy a house in the foreseeable future unless its some type of investment/rental property. Congratulations then. You're financially wealthy given where you live. Consider leaving the option of retiring early open.
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Oct 17, 2013 23:26
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ntan1 posted:Is there a particular reason that the Retirement Funds don't have an expense ratio? Are there no other fees associated with those retirement funds? I'm looking at this because the lack of expense ratios is really attractive.
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Oct 18, 2013 04:39
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This is kind of a long one and could just as easily have gone into the budgeting thread, but I feel right now the key missing piece of our budget is long term investing. Aside from a little 401k action we basically don't have any so that is by far the largest focus for me. Background 2013 has been a crazy year. Courthouse marriage, filing for residential status via spousal sponsorship (wife is from canada, we expedited the legal side of the marriage to stay well ahead of her 3yr work visa which was expiring. as a side note don't neglect or gently caress around with the immigration process, it is slower and more expensive than you think), 1st home purchase & mortgage, and finally our large wedding ceremony kicked off last saturday which concludes the last of a crazy queue of costly, high pressure, "not sure how this will go" projects for the year. To cap it off her company promoted her with a sizable pay raise and the startup I'm working at is back to cash positive after a long growth phase, is doing its Series A and word from the CTO is I'm getting yet another promotion and substantial raise before the end of Q4. So, things are happy and looking good. Jobs are quite secure and already bringing in plenty, plus the wife and I are each positioned to see a nice ramp in the coming years. All the weird aberrant costs of lawyer fees, wedding expenses, mortgage downpayment and giving a million bucks to Home Depot post-move-in, all that is settling down to where we can actually model out our finances instead of the seat of the pants budgeting we've done the last year or so. Being that we're relatively young (28/33) and while we're not hopeless cases about being disciplined with disposable income we're not exactly stoic either, so I'd rather get the longer term investing stuff baked into our finances right away so that we don't damage our long term finances too badly with little temptations adding up. So, here's what we've got and I'd love some advice: Income salary only: ~110k w/ conservative est. bonuses: +10-15k Assets/savings: Equity: Only with my employer, don't want to count these, still vesting and such and rather keep it as a potential back pocket windfall instead of making assumptions and planning on it Nest Egg: 12k? Haven't taken a recent count but should be at least that much 401k: Mine: only like 5 or 6k, stagnant from a previous job that I really should do something with. hers: 'round 15k with her employer, she puts in 5% they match 4% for a total of 9% of salary going in. Debt: 161k on a brand new 30yr @ 3.25% mortgage. ~4k left on my car loan, KBB has it around 7-8k, wife owns hers and has plenty of good years left in it CC: I run up & pay off a credit card monthly just to nab the small % kickback. We have a few "just in case" CCs that go unused, so basically none. Monthly numbers: After taxes, bills, debts, food, gas, etc we at minimum clear a good deal north of 3k left over each month between us. For us that's an incredible amount, even without going into us budgeting our lives better (he says with a starbucks beverage at his desk) because i know we can make some huge strides there but that's for the other thread. I overpay my car payment, the interest is embarrassingly high so I put about 600+ down when the minimum is like 310. We would just pay it off completely but don't want our nest egg to take too large a hit because for the last while we've had to anticipate large unexpected expenses coming out of the wedding/immigration/house/etc so we have been fearful of getting caught with our pants down. we do not overpay our mortgage, though I completely understand why it's such a good idea. The principal+interest portion each month is like 700-something so we could certainly train our guns on that. My thoughts: As I see it, we have about 3k/mo to play with, how much of that we play with I'm not sure of. And how much of that to divert to investing vs. how much to put towards running down debt I'm also unsure of. My initial thoughts are: 1) Outside of the car loan, we don't need to chase down debt too aggressively. Certainly we should put a pin in the car loan and start overpaying the mortgage but perhaps not go bananas with it. 2) My understanding of IRAs is once your income grows to a certain point the better a Roth becomes compared to a traditional because the taxes you won't pay when drawing from the account in later years will be larger than the taxes you wouldn't pay when depositing the money with a traditional. If that's the case we're probably at least on track for that being the better choice in the long run, at least I think/hope. And I am not certain how marriage complicates this. Had a hard time finding stuff that talked directly about how to plan this as a married couple. 3) My wife's 401k is pretty good, I imagine we should leave that as-is. My employer doesn't offer one, that could change one day but for now I know I need to do something with the leftover 401k I had from years before. I've talked with a rep for the account managing firm and was told I could move it into a new 401k or use it to seed a new IRA. I am still unclear exactly of my options or what would be the best choice. 4) Before year end we should probably use our nest egg (and optionally my 401k) to seed an IRA because starting next year we'll likely be able to cap it going forward. Questions: Aside from a generic "what would you do in this spot?" here's a few specific Qs if any of you prefer to cherry-pick: 1) I've read motley fool, lurked here, and dabbled around other places but still feel like I don't have a solid understanding of how marriage tends to change things. Would anyone know of some good materials for that, or have experiences that could help us navigate this? Do couples tend to do everything jointly, separately, mixed or is it a giant "it depends"? 2) Do I have my understanding of a Roth vs traditional basically right in that if our income is where it is now and in all likelihood will grow that we'll be better off with that, or is there a lot more to consider? I guess the big one is if, say, we have kids and get knocked down to one income, which is certainly on the table. 3) What the gently caress should I do with my stagnant 401k? Let's assume for now that I won't have an employer-offered one (I assume if that changed one day I could just start it up fresh) 4) I've only been looking primarily at retirement accounts, but am I being stupid in not getting into shorter term index/etc funds and general stocks? Sometimes the above plan feels like it has too little risk and that we might be too conservative in filling out all the low risk stuff to capacity before looking elsewhere. Thanks a bunch in advance and apologies for being a master at walls of rambling text Bhaal fucked around with this message at 22:33 on Oct 18, 2013 |
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Oct 18, 2013 22:27
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1) There's like a 99% chance you're going to be filing jointly. I'm sure someone can explain the benefits of doing it separately, but I don't think there's many. 2) With your salary you don't really have a choice of which one to chose. You're past the phase out for 2013 which means you won't be getting the IRA deduction, which means you should do the Roth unless you hate making the correct choice. 3) Roll over into an IRA (this doesn't count as your yearly funding). Go to any brokerage website and they will walk you through it. 4) You'd be safer with the less risky options at the moment based on your questions. You might as well pay your car down. With $3000 extra a month, it's going to take quite a huge event to draw down your nest egg by a decent amount that's hard to recover from.
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Oct 19, 2013 02:06
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Harry posted:... poo poo. I never realized that IRA vs. Roth IRA also depends on income. So if I were to make >$100k, single, and I had a 401k with my employer, should I be having a Roth IRA? If so, is there any way I can convert my traditional IRA (Vanguard) to a Roth IRA (I opened my IRA just a few weeks ago)?
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Oct 19, 2013 03:38
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Actually, since he doesn't have a 401k it looks like he can actually get the deduction. Then it might be a question of taxes. theHUNGERian posted:poo poo. I never realized that IRA vs. Roth IRA also depends on income. Depends what $100k> means. If you're under the phase out, then yes. If you're over, you have to contribute to the IRA then convert to the Roth. As for your situation, you might want to see if you can just take the money out as if it never happened.
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Oct 19, 2013 04:20
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Harry posted:Depends what $100k> means. If you're under the phase out, then yes. If you're over, you have to contribute to the IRA then convert to the Roth. As for your situation, you might want to see if you can just take the money out as if it never happened. For 2013, the phaseout (what a stupid word) limit is 59k to 69k. So if I make >$100k I am over that limit, my contributions are not tax deductible, and I will be taxed upon withdrawing my money. In other words I'll be taxed twice, right? I'll try to solve this over the phone with somebody at Vanguard as I did not see an easy way of doing this on their web page.
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Oct 19, 2013 04:57
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theHUNGERian posted:For 2013, the phaseout (what a stupid word) limit is 59k to 69k. So if I make >$100k I am over that limit, my contributions are not tax deductible, and I will be taxed upon withdrawing my money. In other words I'll be taxed twice, right? That's for deducting Traditional contributions, but the phaseout for singles being able to make Roth contributions is from $112k to $127k. If you're not that far over $100k then you can contribute post-tax dollars and then not be taxed when you take your distributions. Those limits are based on MAGI, too, so if you're just over the limit then you can subtract your pre-tax 401k contributions to qualify to make Roth IRA contributions, ironically enough.
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Oct 19, 2013 05:42
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