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cowofwar posted:During bull markets favoring one sector it's always tempting to load your portfolio in that direction. Who are you talking to? I don't see anyone talking about sector allocations here.
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Nov 19, 2013 01:01
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ZentraediElite posted:Any tips for a 401k rollover? My company just switched owners and now we had to sign up and enroll in new plans. I have 5 years worth of contributions (some Roth, mostly pre-tax) in the account. One caveat is that within the account, we were able to invest in stock purchases of the company. Oh, and I'm 27. Roth is as good for 401ks as it is for IRAs. The only reason it's not discussed as much is that it's relatively uncommon to even be a choice as your employer has to choose to make it an option for you. Unless you're expecting to have lower taxes in the future, go all Roth. Keep in mind though that if you convert your existing pre-tax portion to Roth in the rollover you'll have to pay income tax on it. If you can make Roth 401k contributions and you can pick Fidelity's Spartan index funds, it may even make more sense to max your 401k first before contributing to an IRA.
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Nov 19, 2013 02:29
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baquerd posted:Who are you talking to? I don't see anyone talking about sector allocations here. Probably referring to Ignoranceisbliss88's comment. The issue is that the most dangerous influence on poor decision-making is yourself. Hence, it is usually dangerous to load a portfolio in a specific direction.
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Nov 19, 2013 03:01
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ntan1 posted:Probably referring to Ignoranceisbliss88's comment. The issue is that the most dangerous influence on poor decision-making is yourself. Hence, it is usually dangerous to load a portfolio in a specific direction. I agree that can happen, and chasing white whale investments or frantically rebalancing on any little piece of news tends to produce poor results. But not looking at the markets and thinking "what's the worst, and best that could happen here?" is just as bad in the opposite direction. There is no practical scenario in the next few years where US (govt, corp, muni) bond funds will return anywhere near their historical mean. They can lose relatively big or gain relatively little, a losing proposition. Bonds just aren't a great place to be entering right now for long term investors. In a few years, when rates rebound a bit the situation will have changed and they will perhaps again be a good place to mitigate risk without impacting return. For my money, if you're in US bonds you don't need to sell them off, but rebalance into them if they start heading down and don't put more into them right now. It's not about market timing, it's about the financial realities of interest rate risk.
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Nov 19, 2013 05:20
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ntan1 posted:Probably referring to Ignoranceisbliss88's comment. The issue is that the most dangerous influence on poor decision-making is yourself. Hence, it is usually dangerous to load a portfolio in a specific direction. I don't get what the bolded is supposed to mean? Typically when one makes a bad decision its because of themselves...... I think its important to look at prices when buying. I'm not advocating going all out away from the U.S. market (I have a huge chunk already invested there that I intend to hold on to for a long long time). I'm saying that when you see other markets that aren't doing well right now and are underpriced its often a good bet to overweight them in your new contributions (you should be doing this anyway as outperformers throw your portfolio out of balance). You can't tell me that buying a tech ETF in 2000 would be the most intelligent move considering how out of whack P/E was at that time. You hold a good diverse mix of equities and make sure you don't get too heavily loaded in any one direction, but when you see a pretty blatant opportunity you push a little more in that direction. Once you lock in at a pretty historically low price you then ride it into oblivion for decades. (I'm not talking about selling out of positions).
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Nov 19, 2013 05:52
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Does anyone here have any experience with the Roth TSP option? If so, couple of questions: 1) Is it just like a 401(k) except you pay taxes now? A la If I make 80k, want to contribute 10k, I still pay taxes on all 80k, as opposed to a traditional TSP setup where if I contributed 10k, I would only pay taxes on 70k? 2) Has anyone had any complaints using the TSP system? Is there any reason not to dive head first into the new Roth TSP option? As far as I can tell, it looks like a Roth IRA on steroids. 3) Are the state centric funds worth having more then a general bond index fund in a taxable account? IE is https://personal.vanguard.com/us/funds/snapshot?FundId=0075&FundIntExt=INT better to have then say, https://personal.vanguard.com/us/funds/snapshot?FundId=0084&FundIntExt=INT if we are a California resident? I do not pay California taxes, so the only way the Cali fund could benefit me is if it affected my Federal taxes paid. Thanks all, love lurking in this thread. xaarman fucked around with this message at 07:13 on Nov 19, 2013 |
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Nov 19, 2013 07:04
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xaarman posted:1) Is it just like a 401(k) except you pay taxes now? quote:2) Has anyone had any complaints using the TSP system? Is there any reason not to dive head first into the new Roth TSP option? As far as I can tell, it looks like a Roth IRA on steroids. TSP tends to be one of the best possible retirement plans out of all. The fed government tends to be better than most private companies quote:3) Are the state centric funds worth having more then a general bond index fund in a taxable account? Bond indexes are significantly more stable than state funds. In general, unless you explicitly know what you are doing with Munis and owning short term bonds outright, an index fund would be better. Also, don't bother unless you are really making 150k+ per year.
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Nov 19, 2013 07:29
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cowofwar posted:During bull markets favoring one sector it's always tempting to load your portfolio in that direction. is talking to this guy, as evidenced by being the post directly above it. On the Internet when people don't use a quote it often means they're directly inline responding. Ignoranceisbliss88 posted:This is generally what I was getting at when asking my first question. I think people cling a little to tightly to the 20% bond/30% domestic large cap/20% small cap etc. etc. It's obviously a valuable proven formula, but a few key tactical decisions with the larger strategic truths kept in mind can be more lucrative. If you're entering the market now it might be wise to shift away from bonds and certain U.S. industries towards Europe and emerging markets and then rebalance when valuations change. (I'm not advocating going all in Europe/EE, but a little heavier allocation in that direction may be wise). Exachery. Sure you can make a better return, but you wear more risk. You cannot get around this. If you're young and we're talking 50k, then that's very different to being mid 40s and 500k, when you throw around ideas of portfolio mix. Tony Montana fucked around with this message at 11:33 on Nov 19, 2013 |
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Nov 19, 2013 11:29
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slap me silly posted:Yes, you are trying to time the market. Choose an allocation (you are young, so 80-90% stocks and 10-20% bonds, maybe?). Buy that. Forget about bull and bear crap forever. Thanks, this is what I thought, just good to hear how wrong I was. Another question...if I've already hit my cap on my ROTH, and I don't have a 401k to contribute to, should I just open an taxable account on Vanguard and put my extra money in tax-efficient funds?
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Nov 19, 2013 16:44
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Low-Pass Filter posted:Thanks, this is what I thought, just good to hear how wrong I was. Possibly, unless you want to save for a house or need the money short term. See if you qualify for a SEP IRA
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Nov 19, 2013 18:33
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Low-Pass Filter posted:Thanks, this is what I thought, just good to hear how wrong I was. Yes and don't forget to allocate the investments between the roth and the taxabale. In general bonds in the Roth (Qtrly interest is taxable) and tax-efficient equities in the taxable account (Tax advantage of the lower rate on long term capital gains).
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Nov 19, 2013 21:21
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Checked the original post and did a quick search but couldn't find a specific answer. As far as % of income savings for retirement is it o.k. to include pension contributions as part of this number or should this be kept separate?
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Nov 19, 2013 22:34
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Untagged posted:Checked the original post and did a quick search but couldn't find a specific answer. As far as % of income savings for retirement is it o.k. to include pension contributions as part of this number or should this be kept separate? Should be OK, assuming you factor the pension into your total retirement calculation.
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Nov 20, 2013 00:38
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My wife just got a new 401k plan. It's literally the worst plan I have ever seen. Lowest expense ratio: 1.76% for Vanguard Small Cap Index, or Vanguard Mid Cap Index is 1.84%. Obviously, it needs to be 18 times more expensive than the option directly from Vanguard! Highest expense ratio: 2.56% For Neuberger Berman Genesis. They do offer a stable value option without expenses, which offers a *guaranteed* 0.01% return. The expense ratios are poo poo, of course, but I think I've heard of worse, so let's throw in a 5% back-end load for everything in the first three years. That would be a truly awful 401k, sure, but why stop there? Obviously they need a 0.5% administration fee for managing the 401k plan, a 0.1% trustee fee for trusteeing stuff, a 1.25% fee for getting these awesome investments under contract, and a floating "expenses" charge that depends on actual expenses. Hahaha, you think they're done? That's only a guaranteed minimum drag of 3.52-4.32%, you can make that up in the stock market... theoretically. Don't mind the guaranteed negative 1.75% returns if you go with the stable value. Add $6.50 a month for a recordkeeping fee because their hate burns deep in their gut, and a $100 fee for any payouts or rollovers to punish you for any disloyalty. This plan is only slightly better than investing in defaulted bonds, but still there's the employer match, right? About that, the match is done annually and is entirely discretionary, so who knows? You need at least 1000 hours worked in a year to qualify for this potentially real and not imaginary match, so the first match won't be done until 2015. That doesn't matter though, because the vesting schedule is 0% for three years, so maybe in 2017 you might see some of those rock solid guaranteed returns. It says something about the power of the 401k that we're still going to invest for the tax savings. We'll roll that poo poo over and eat the $100 fee while hating every minute, but eat it we shall.
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Nov 20, 2013 03:37
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baquerd posted:My wife just got a new 401k plan. It's literally the worst plan I have ever seen. Why not contribute to an IRA first? That 401k sounds pathetic even with the  match.
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Nov 20, 2013 04:19
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balancedbias posted:Why not contribute to an IRA first? That 401k sounds pathetic even with the We're maxing out both 401k's, both Roth IRAs, and saving 30k/year in taxable accounts, with a plan for early retirement. Deferring the taxes until then is worth it. Not sure if we'll still max hers out because I hate the idea of paying such ridiculous fees, but it makes fiscal sense and we're ineligible for traditional IRAs and almost ineligible for Roth contributions.
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Nov 20, 2013 04:34
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baquerd posted:My wife just got a new 401k plan. It's literally the worst plan I have ever seen. That's straight-up robbery by your wife's employer. I've never really looked into it, but I have heard of lawyers that specialize in going after companies for excessive 401k fees. If your wife ever moves on to greener pastures beyond the reach of retribution, you'd be doing the world a favor in bringing this company to their attention.
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Nov 20, 2013 07:47
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baquerd posted:My wife just got a new 401k plan. It's literally the worst plan I have ever seen. Is she able to lay all this out to someone in HR or management to try and improve the situation? I just don't get why a company would do this to themselves, after all Mgmt is presumably in the same 401k plan. J4Gently fucked around with this message at 17:57 on Nov 20, 2013 |
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Nov 20, 2013 17:42
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Looks like International Paper was sucsecfully sued for excessive 401k fees in the plan. And for reference http://blogs.wsj.com/totalreturn/2013/10/01/401k-fees-how-much-is-too-much/ quote:How much is too much? Total expenses for larger 401(k) plans should be “well under 1%,” preferably 0.5% to 0.75%, says Mike Alfred, chief executive of BrightScope, a financial-information firm in San Diego that rates 401(k) plans. If you’re paying between 1% and 2% of your account’s value, you may want to investigate why expenses are that high, especially if you’re in a larger 401(k) plan. And if the costs total more than 2%, contribute only enough to get the full match from your employer and not a dollar more. quote:A new rule issued last year by the U.S. Department of Labor does require greater disclosures of fees by 401(k) service providers. But it also helps place "the burden of monitoring the fee information contained in these lengthy disclosures squarely back on employers and participants," according to Little.
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Nov 20, 2013 17:56
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J4Gently posted:That is a (edit: not a literal crime but a real injustice) crime , is it a Small Co or a Big Co ? Very small company, 2 years out from fresh startup. They're not managing the 401k themselves, but going through a one-stop shop for all their benefits. They may honestly not know they're getting hosed hard on the 401k, or they just had to go with the highest cost option because they didn't want to subsidize it. I'll look at contacting the DOL about possible ERISA violations, and go from there. Other than the 401k, the benefits are actually pretty decent, and there's no employee contribution.
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Nov 20, 2013 18:27
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baquerd posted:Very small company, 2 years out from fresh startup. They're not managing the 401k themselves, but going through a one-stop shop for all their benefits. They may honestly not know they're getting hosed hard on the 401k, or they just had to go with the highest cost option because they didn't want to subsidize it. With a startup they may have no idea that they are being taken advantage of. Before summoning up an ERISA shtstorm perhaps give the employer the benefit of the doubt. Do a little research on this "one stop shop", see if there are other complaints about them. Then you could research general fees for having vanguard or fidelity directly manage the 401k. Do that homework then set a time to talk to the right person in management and lay out how the plan is way out of whack with industry norms. Our all in fee right now is X industry avg is .25X and in broad strokes talking with Vanguard and Fidelity for firms of our size the fees they would charge are around .3X. Over 30 yrs that would amount to $XXX,XXX going to the service provider instead of the employee retirement.
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Nov 20, 2013 18:57
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For a tax-advantaged account with an expense load of 2% or 2.5% you need to maintain nominal returns of 8% or 10% for it to even be worth it instead of putting the money into a taxable low fee account. And that's generously assuming that all interest in the taxable account would be taxed as income, not capital gains. I dont see much point in participating in that plan at all unless you expect a reasonable employer match or you are not planning on staying with the company very long. Especially if you are planning early retirement and will need considerable after-tax accounts anyway.
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Nov 20, 2013 18:59
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J4Gently posted:Do that homework then set a time to talk to the right person in management and lay out how the plan is way out of whack with industry norms. Our all in fee right now is X industry avg is .25X and in broad strokes talking with Vanguard and Fidelity for firms of our size the fees they would charge are around .3X. I can't really take direct action with her employer, and she's not willing to do so (she hates dealing with both finance and authority). Don't want to make this E/N, so let's leave that there. Eyes Only posted:For a tax-advantaged account with an expense load of 2% or 2.5% you need to maintain nominal returns of 8% or 10% for it to even be worth it instead of putting the money into a taxable low fee account. And that's generously assuming that all interest in the taxable account would be taxed as income, not capital gains. It's more complicated than that. We need to put some money in it to keep MAGI low enough to continue fully Roth contributions, we're in the 28% tax bracket, and anticipate being in the 15% tax bracket on retirement. I need to model out a timeline to see exactly when to do it since there's the $100 rollover fees, but the idea is to do in-service rollovers to a traditional IRA. She's also looking for another job, so if she leaves before the first in-service rollover it's problem solved.
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Nov 20, 2013 19:26
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baquerd posted:I need to model out a timeline to see exactly when to do it since there's the $100 rollover fees, but the idea is to do in-service rollovers to a traditional IRA. She's also looking for another job, so if she leaves before the first in-service rollover it's problem solved. Are you sure the plan allows this? My understanding is that most plans do not allow in-service rollovers for employees younger than retirement age. In any case the law doesn't allow pretax employee contributions to have in-service rollovers. At best you could only roll-over their matchings and any earnings you have (which doesn't look like you'll have very much with that plan!) Also, you still have the option of back-door Roth contributions even if your MAGI is too high. Unless that loophole was closed without me hearing about it. flowinprose fucked around with this message at 19:57 on Nov 20, 2013 |
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Nov 20, 2013 19:54
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flowinprose posted:Are you sure the plan allows this? My understanding is that most plans do not allow in-service rollovers for employees younger than retirement age. In any case the law doesn't allow pretax employee contributions to have in-service rollovers. At best you could only roll-over their matchings and any earnings you have (which doesn't look like you'll have very much with that plan!) It does allow it, or rather I can't find any prohibitions against it, albeit with the $100 fee attached. It looks like you're right though and we couldn't roll over the most important part until she leaves, thanks for alerting me to that. Ugh. edit: flowinprose posted:Also, you still have the option of back-door Roth contributions even if your MAGI is too high. Unless that loophole was closed without me hearing about it. This works, but we both have traditional IRAs from when we were younger so it's not as awesome as it could be. I recently read about a cool strategy where you roll over your traditional IRA into your 401k, then do the backdoor Roth, but in her case obviously that won't fly with the terrible 401k. baquerd fucked around with this message at 05:36 on Nov 21, 2013 |
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Nov 20, 2013 20:25
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I'm 26 years old and over the past 3 years of working a corporate drone job have saved up about $20,000. It's only recently dawned on me how dumb it is to have it festering in a checking account, but all this is very new to me. I definitely want to put some (2k for now, maybe) into a Roth IRA and a bit more into mutual funds, but what would be the best way for me to do this? Just set up an E-trade/Ameritrade/Scottrade/whatever account and pull the trigger? I'm sure this has been covered a dozen times already, but this is really overwhelming.
MeatwadIsGod fucked around with this message at 03:37 on Nov 23, 2013 |
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Nov 23, 2013 03:34
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Vanguard. Put it in to the target retirement fund for your year and don't touch until you read up. *EDIT*: What I mean is that you should solely be investing with an account form Vanguard at vanguard.com, and skipping all of the other brokers. ntan1 fucked around with this message at 09:35 on Nov 23, 2013 |
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Nov 23, 2013 04:08
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MeatwadIsGod posted:I'm 26 years old and over the past 3 years of working a corporate drone job have saved up about $20,000. It's only recently dawned on me how dumb it is to have it festering in a checking account, but all this is very new to me. I definitely want to put some (2k for now, maybe) into a Roth IRA and a bit more into mutual funds, but what would be the best way for me to do this? Just set up an E-trade/Ameritrade/Scottrade/whatever account and pull the trigger? I'm sure this has been covered a dozen times already, but this is really overwhelming. I would put 5500 into a Vanguard target retirement fund in a Roth IRA this tax year (dollar averaged into monthly contributions of 1100 until April 15, the last day for 2013 contributions) and keep the rest as cash as an emergency fund. Then contribute 458.33 dollars per month to your IRA thereafter, keeping at least sixth months to a years expenses in cash for emergencies.
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Nov 23, 2013 05:11
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I know YNAB is popular here, so I thought I'd pass along that they now have one of their email courses about investing. I can't speak for the quality of the content yet, but outward signs look good.
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Nov 23, 2013 06:13
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MeatwadIsGod posted:I'm 26 years old and over the past 3 years of working a corporate drone job have saved up about $20,000. It's only recently dawned on me how dumb it is to have it festering in a checking account, but all this is very new to me. I definitely want to put some (2k for now, maybe) into a Roth IRA and a bit more into mutual funds, but what would be the best way for me to do this? Just set up an E-trade/Ameritrade/Scottrade/whatever account and pull the trigger? I'm sure this has been covered a dozen times already, but this is really overwhelming.
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Nov 23, 2013 16:35
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I'm here to see if my custom whole life policy is the best place to be putting money on the advice of user slap me silly. Apologies if I use incorrect terminology here but I'm not versed in this and part of me posting this is for me to understand it better. I'm single, no kids, 26, and am about to jump from stable employment to grad school/poo poo pay. I have a $250k custom whole life policy starting August 2012 that I pay $160/mo for. It's a $100k policy with a $150k rider. I think the actual payment is somewhere around $50/mo for the policy, and another $50/mo for funding the rider. I'm overfunding it by the maximum amount of $60/mo. Any more and it will turn into an MEC. The guaranteed minimum puts me even at ~14 years into the policy. It was explained to me that this is a good way to start a stable base, like a 401k, but I will be able to borrow from it tax free if I really need to. I also have a 401k at my current job, but I will probably be losing that come January and will be rolling it into an IRA or something along those lines. Any ideas on that would be great too. Thanks!
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Nov 25, 2013 17:13
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Whole life is a scam. Never get it, you don't need life insurance really with single/no kids, and put your money into emergency fund, then real retirement accounts. Get out get out get out.
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Nov 25, 2013 17:24
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I have another dumb question. After maxing my Roth, I opened a taxable account with Vanguard with the money currently standing by in a money market account, and I am considering the LifeStrategy Growth fund since I currently don't know enough about portfolio design to pick my own funds. My question is, if I buy into the LifeStrategy fund now, and in a few months I build my own diversified portfolio, when I go to sell the LifeStrategy shares, I will have to pay capital gains tax right? Even if I'm using the "Exchange" tool on Vanguard to immediately purchase another fund? This was all much easier in tax-sheltered accounts!
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Nov 25, 2013 18:15
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Hey guys, quick question for you. I've decided to fund my Roths again this year through Capital one 360, formerly ING, 5k for me and 5k for my wife. Unfortunately I made this decision in November, and although I have the cash sitting around (savings account), I haven't been buying in on a monthly basis. I will make the decision going forward to fund Roth IRAs throughout the year instead of once a year, to make sure I don't get killed on the price of whatever I buy, due to the cost averaging effect. It looks like its going to be an S&P index fund at the moment. My question is - how bad is it to buy once a year, or should I be spending the 7$/whatever trade fee on a monthly basis to buy stock? Whats the happy medium you guys recommend?
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Nov 25, 2013 18:27
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Need some advice on retirement for independent contractors. My wife has a roth IRA which she opened while she was with her previous employer. Her previous employer was supposed to offer her a 401k but never actually did it (badly run small business, went under a few months ago) so we're behind where we should be for her retirement savings. She is contributing up to the max for the IRA at the moment. She is now an independent contractor and we haven't dealt with that before. Currently we're planning to keep contributing to the Roth, however that isn't enough to cover what we'd like to save for retirement. She expects to make 70-80k+ next year depending on how much she works and how many clients she picks up (considering branching out and starting her own business instead of working for others as a contractor). Doing some research came up with SEP-IRA Simple IRA Individual 401k We would want to put ~20-25% of her income next year into retirement. According to Vanguards site she could contribute up to ~30k to the individual 401k and about 13-14k into the SEP/simple IRA. Based on this it seems the individual 401k is the best choice for her if we wanted to contribute more than ~19k next year (roth + SEP/Simple IRA if she can contribute to both?) Can she still contribute to her existing Roth IRA while she's doing this? If she picks up full time employment with employer 401k can she roll the individual 401k into that in future?
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Nov 25, 2013 18:54
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Cost averaging for retirement accounts has no discernable benefit. The reduction in risk from averaging has diminishing returns the longer your money is in the market, but the "cost" of averaging will always be 5-6 (non-compounded) months of interest regardless of time in market. You reduce risk by about 10% if you only hold for a year, 4% for two years, 2.5% for three, etc. At 10 years the difference in risk becomes so small it is imperceptible. An extra 6 months of interest isn't a huge deal, so cost averaging is fine if thats what your budget allows for. But if you can afford to do so you should lump-sum immediately unless you plan to withdraw all the principal in the next 2-3 years. I can go over the math behind this in more detail after work if anyone is interested.
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Nov 25, 2013 19:07
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Low-Pass Filter posted:I have another dumb question. After maxing my Roth, I opened a taxable account with Vanguard with the money currently standing by in a money market account, and I am considering the LifeStrategy Growth fund since I currently don't know enough about portfolio design to pick my own funds. If it's in a taxable account yes but capital gains tax will be a percentage of your gains. Would you rather get returns of zero dollars or returns of (100-your marginal tax rate)% of more than zero dollars?
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Nov 25, 2013 19:11
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dhrusis posted:Hey guys, quick question for you. Not sure I'm understanding you correctly. CapOne is dinging you for $7 every time you put money in your IRA? There's no reason to put up with that at all, roll it over to Vanguard. You need to diversify, too. Pick up Four Pillars from the OP and read it, it's pretty short and accessible. If you do roll over to Vanguard, a Target Retirement date/LifeStrategy fund will tide you over while you figure out how to construct your portfolio on your own. Don't buy individual stocks.
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Nov 25, 2013 19:11
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GanjamonII posted:Need some advice on retirement for independent contractors. To my knowledge, she can contribute as an individual to the Roth IRA ($5500) and then also to the SEP IRA as her own employer (about 25% of her net income, IIRC). However, you can't contribute to both the Roth and the SEP as an individual. In other words, she can contribute the $5500 max to either the Roth or the SEP, but not both--on top of that, she can contribute her "employer" portion to her SEP, regardless of which account the $5500 "individual" contribution went to. Starting tax year 2014, that's how I'm doing it as an independent contractor, by the way. $5500 to my Roth IRA then contribute my maximum "employer" amount to the SEP. Just in case I want to retire early, I'll have more options than if everything is in a traditional or SEP IRA. Not sure how a 401k would fit into that. Edit: Make sure she understands how the SEP works. If she ever gets any employees, she'll have to contribute an equal percentage for them too. (Look up the specifics for yourself.) Cranbe fucked around with this message at 19:26 on Nov 25, 2013 |
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Nov 25, 2013 19:24
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GanjamonII posted:Based on this it seems the individual 401k is the best choice for her if we wanted to contribute more than ~19k next year (roth + SEP/Simple IRA if she can contribute to both?) And yes, the Roth is separate and she can still contribute up to the max for it.
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Nov 25, 2013 19:24
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