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What's the ballpark rate for fee-only advisors? I see a few very disparate hourly rates online, as well as a "percent of funds managed," but never see an amount. Obviously it will vary from firm to firm, I would just like a little more data before I start going into initial consultations.
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Jan 5, 2014 01:13
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Low-Pass Filter posted:What's the ballpark rate for fee-only advisors? I see a few very disparate hourly rates online, as well as a "percent of funds managed," but never see an amount. Obviously it will vary from firm to firm, I would just like a little more data before I start going into initial consultations. It depends on how much money you have. I guess a ballpark could be 1%.
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Jan 5, 2014 02:15
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My girlfriend just started working after graduating law school last October, and I'm trying to help her set up her retirement contributions for 2014 this weekend. So far I've convinced her to max out her contribution each year, and to stay away from the relatively expensive funds that were recommended by a 'family friend', but I had a couple questions I was hoping to run past the thread: 1) Her employer offers the option of either a standard 401(k) or a Roth 401(k), and I'm not sure which one to recommend. For 2014 she'll be near the higher end of the 28% tax bracket, and would otherwise be ineligible to contribute to a Roth IRA. I'm not certain which would be most advantageous, since I don't know how to weigh her future tax rate/income requirements. If it makes a difference, it looks like she does have the ability to contribute both pre-tax and post-tax dollars simultaneously. 2) In terms of asset allocation, I was going to suggest the following split: 50% Spartan 500 Index 13% Spartan Extended Market Index 27% Spartan International Index 10% Vanguard Total Bond Market Index This seems pretty close to the recommended mix I've seen in this thread - have I made any serious errors?
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Jan 5, 2014 04:10
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Definitely the normal 401k.
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Jan 5, 2014 04:28
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Stutes posted:My girlfriend just started working after graduating law school last October, and I'm trying to help her set up her retirement contributions for 2014 this weekend. So far I've convinced her to max out her contribution each year, and to stay away from the relatively expensive funds that were recommended by a 'family friend', but I had a couple questions I was hoping to run past the thread: On pre-tax vs. post-tax 401k: Depends on her age and how much she already has saved, but my gut says to go Roth. Since she's maxing her contributions, she benefits from a higher "effective limit" on contributions, by virtue of the taxes already being taken out externally to the account. That's worth a few percentage points difference in tax rates on its own, so even if she would only pay 25% in the future it's still the smart move, and she wouldn't go all the way down to 15%. Of course, tax brackets in the future won't be what they are now, but still. On IRA ineligibility: There is technically no income limit on being able to contribute to a traditional IRA, only on being able to deduct it. The importance of the distinction is that you can contribute to the traditional IRA despite having no tax benefits, and then the next day immediately roll it over to a Roth, despite income limits. This is called the "backdoor" Roth IRA strategy, if you want to read more about it. The split is good. If you do open a backdoor Roth IRA, I'd suggest picking up some emerging markets ETFs, as the Spartan international index is developed markets only. VWO at Vanguard, or IEMG at Fidelity.
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Jan 5, 2014 06:48
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Kilty Monroe posted:On pre-tax vs. post-tax 401k: Depends on her age and how much she already has saved, but my gut says to go Roth. Since she's maxing her contributions, she benefits from a higher "effective limit" on contributions, by virtue of the taxes already being taken out externally to the account. That's worth a few percentage points difference in tax rates on its own, so even if she would only pay 25% in the future it's still the smart move, and she wouldn't go all the way down to 15%. Of course, tax brackets in the future won't be what they are now, but still. She's about to turn 26 and currently has $0 saved. I'm aware of the backdoor Roth method, but I wasn't really worried about having her do any post-401k investing, since she'll also be trying to get her student loans paid down ahead of schedule over the next 3 years. In terms of emerging markets exposure, it looks her best alternative option would be Janus Aspen Overseas Fund, which is (currently) 36% weighted to emerging markets, but has an expense ratio of .49%, as compared to .2% for the Spartan International. I didn't think the additional expense was worth the incremental exposure, but that's a matter of opinion.
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Jan 5, 2014 07:28
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Stutes posted:She's about to turn 26 and currently has $0 saved. I'm aware of the backdoor Roth method, but I wasn't really worried about having her do any post-401k investing, since she'll also be trying to get her student loans paid down ahead of schedule over the next 3 years. Starting at 26 and able to max out a 401k, I'd say that Roth is a pretty clear winner at this point. If she's more highly compensated later in her career she can switch to pre-tax then. That way she's taking the edge off her taxes when she's at her peak salary and in retirement. I definitely don't advise switching away from the Spartan international index, just supplementing it with some ETFs in an IRA if she did open one. VWO and IEMG both have a .18% ER. Maxing an IRA would be a drop in the bucket compared to her compensation, I can't see it delaying wiping out her student debt by more than a month or two.
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Jan 5, 2014 08:09
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Did you guys miss that she's in the top part of the 28% bracket? It's absurd to be doing the roth 401k.
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Jan 5, 2014 17:19
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Harry posted:Did you guys miss that she's in the top part of the 28% bracket? It's absurd to be doing the roth 401k. Not necessarily - 1) Highly compensated now also means she'll likely be highly compensated later (tax bracket won't be lower later). 2) Given the structural deficit in the US, it is almost a certainty taxes will need to rise in the long term future. 3) If one is able to max out a 401k, a Roth enables one to effectively contribute more dollars because the dollars inside it are post tax. This tax sheltering of additional dollars can be tremendously valuable. This was discussed on here a couple years ago, but the third point alone can mean even if your tax rate is 5-8% (depending on assumptions) lower at retirement you can come out ahead with the Roth. This is especially true is long term cap gains are taxed like regular income in the future which is a real possibility. The second point may be worth another 3-5% increase in taxes tipping further in the Roth's favor.
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Jan 5, 2014 19:53
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I have no idea how accurate this tool is, but it looks like the Roth could be a better choice even if she winds up in a lower tax bracket in future years. For the moment, I used her marginal tax rate of 28%, but for the retirement tax rate used an arbitrary 'effective tax rate' (since any distributions would likely comprise most/all of her income) of 20%. Assuming any unfavorable changes in future tax law (as others have mentioned above), that would only make the benefits of going Roth even greater. Even using the 'reinvest tax savings' option, the Roth plan still comes out slightly ahead. I would imagine that this Roth plan would extend its advantage again, however, if she started to max out an IRA (either traditional or backdoor Roth) in addition to her 401k contributions. 
Stutes fucked around with this message at 20:19 on Jan 5, 2014 |
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Jan 5, 2014 20:17
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I just finished off paying student loans and am starting to look at passive investing options for IRA and 401(k). I have a few questions about IRAs and contribution limits after doing some research. I've read that you have until the following April to contribute to an IRA for a particular year. - Does that still apply for me this year to make 2013 contributions since I won't have actually started the IRA until 2014? - If you max the previous year's contribution limit, you can still make contributions to the current year during that period from January-April, correct? I'm also looking at how the contribution limits for Roth IRAs work with respect to modified AGI. I'm under the limit now but imagine I'll be impacted someday. Let's say I've set up my monthly budget such that I'm contributing an equal portion of my yearly maximum each month. Since I can't predict exactly what I'll earn each year due to raises, bonuses, or whatever, I see myself making accidental excess contributions in the years when my income creeps into the reduction threshold. So in that situation, I would either have to: A. Deal with the complexities of making a correction every year I'm in the reduction threshold B. Sit on my contribution money until after the year is over and I can calculate what my actual maximum is Both of those options sound silly. Is there a better way to deal with that?
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Jan 6, 2014 03:54
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Just make the contribution once a year when you do your taxes. It's not a big deal, just meet the deadline. And yes you can still make a 2013 contribution even if you haven't opened the IRA yet.
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Jan 6, 2014 04:20
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timn posted:I just finished off paying student loans and am starting to look at passive investing options for IRA and 401(k). I have a few questions about IRAs and contribution limits after doing some research. I am in this situation right now and I chose option B. If there is a better solution I am all ears!
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Jan 6, 2014 04:40
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Either one is fine, I'm pretty sure correcting your contribution just amounts to calling the company that you hold your Roth IRA with and saying "Hey I need you to give me back X amount because of contribution limit reasons." End-of-year corrections to come into compliance with income limits aren't something the IRS gets upset about. Just call them right now and ask them what people do in that situation if you want to be extra double sure.
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Jan 6, 2014 05:29
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Shear Modulus posted:Either one is fine, I'm pretty sure correcting your contribution just amounts to calling the company that you hold your Roth IRA with and saying "Hey I need you to give me back X amount because of contribution limit reasons." End-of-year corrections to come into compliance with income limits aren't something the IRS gets upset about. Not this simple. You need you remove the contributions plus the earnings on those contributions only.
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Jan 6, 2014 06:31
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timn posted:I just finished off paying student loans and am starting to look at passive investing options for IRA and 401(k). I have a few questions about IRAs and contribution limits after doing some research. It's still debated whether regular IRA contributions every month is any better than maxing right out of the gate in January, so if you were okay with doing that instead, using the "back door" method of funding a traditional IRA and then rolling it over to a Roth the next day would eliminate any income limit worries.
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Jan 6, 2014 07:02
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Kilty Monroe posted:It's still debated whether regular IRA contributions every month is any better than maxing right out of the gate in January, so if you were okay with doing that instead, using the "back door" method of funding a traditional IRA and then rolling it over to a Roth the next day would eliminate any income limit worries. The longer you are in the market, the less this matters.
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Jan 6, 2014 07:50
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Does the ROTH 401k allow penalty free withdrawl of principal contributions? edit: I just max my ROTH as early as possible. The less I touch my IRA the better.
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Jan 6, 2014 15:22
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Orange_Lazarus posted:Does the ROTH 401k allow penalty free withdrawl of principal contributions? Essentially, no. You cannot withdraw contributions unless you have a triggering event (attaining age 59 1/2, disability, etc), which is no different than traditional 401k contributions.
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Jan 6, 2014 16:54
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Edit: Too much personal info.
Twerk from Home fucked around with this message at 21:10 on Jan 7, 2014 |
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Jan 6, 2014 17:58
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flowinprose posted:Essentially, no. You cannot withdraw contributions unless you have a triggering event (attaining age 59 1/2, disability, etc), which is no different than traditional 401k contributions. My understanding was that withdrawals were similar to a Roth IRA with one (very important) distinction in that there's no priority ordering of contributions > rollovers > earnings, but rather withdrawals are taxed (and penalized without a corresponding life event) based on the percentage of the balance that is earnings vs. contributions. For example, let's say I have a Roth IRA with 10k in contributions and 5k in earnings. If I want to withdraw 5k, I can do so without any taxes or penalty fees, because I withdraw from the contributions before I withdraw from the earnings, and I have a 10k contribution balance. In contrast, let's say I have a Roth 401k with 10k in contributions and 5k in earnings. If I withdraw 5k from the Roth 401k, I will be taxed (and penalized) on 1/3rd of the withdrawal, since the current balance is 2/3rds contributions and 1/3rd earnings. Therefore, I'll be able to withdraw 3.33k without any taxes or penalties, but I'll be taxed and penalized on the remaining 1.66k that corresponds to the earnings percentage. If I have a traditional 401k with the same balances, I would be taxed and penalized on the entire 5k withdrawal. The upshot of all of this is that while a Roth 401k is not nearly as good for a backup emergency fund as a Roth IRA, it's still better than a traditional 401k if you're really hurting and need the money. There's still a penalty and it makes the Roth 401k much less attractive than a Roth IRA, but it's also much less onerous than tapping a traditional 401k, since with a traditional 401k you're paying taxes and the 10% penalty fee on the entire amount, instead of just the portion corresponding to your earnings. NJ Deac fucked around with this message at 19:47 on Jan 6, 2014 |
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Jan 6, 2014 19:45
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NJ Deac posted:The upshot of all of this is that while a Roth 401k is not nearly as good for a backup emergency fund as a Roth IRA, it's still better than a traditional 401k if you're really hurting and need the money. There's still a penalty and it makes the Roth 401k much less attractive than a Roth IRA, but it's also much less onerous than tapping a traditional 401k, since with a traditional 401k you're paying taxes and the 10% penalty fee on the entire amount, instead of just the portion corresponding to your earnings. In theory, though, couldn't you roll your Roth 401k into a Roth IRA? Would that somehow maintain the information on what portion is contributions?
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Jan 6, 2014 20:04
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Hi, I posted earlier in this thread about what to do with a surprise $5,000. I deposited the money into my bank account. So if I open a Roth IRA with Vanguard, can I literally do all of that online? Just pick what I want and give them all my money? What if I don't know when I'm going to retire, just guess? Does it matter? I am still clueless.
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Jan 6, 2014 23:49
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razz posted:Hi, I posted earlier in this thread about what to do with a surprise $5,000. I deposited the money into my bank account. So if I open a Roth IRA with Vanguard, can I literally do all of that online? Just pick what I want and give them all my money? What if I don't know when I'm going to retire, just guess? Does it matter? I am still clueless. Yes, you can do it all online. Until you learn more, stick it all in a target date retirement fund and just guess as to your retirement date. You can move it anytime you want, and maybe you'll even just leave it there - the target date funds are not bad choices!
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Jan 6, 2014 23:56
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First decide if you're going to want to spend it in the next... 10 years. Didn't you ultimate decide to invest it because that's what the benefactor wanted? Consciously decide you aren't touching this money for 10 years and Target Retirement Date the hell out of it! (Vanguard's account creation tool won't even LET you make a mistake, by the way. Don't be nervous)
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Jan 6, 2014 23:58
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baquerd posted:Yes, you can do it all online. Until you learn more, stick it all in a target date retirement fund and just guess as to your retirement date. You can move it anytime you want, and maybe you'll even just leave it there - the target date funds are not bad choices! So I can change the target retirement date, like if we end up retiring earlier than the target? Sorry for all the dumb questions, I'm new to investing. Also, this might be a real dumb question, but can my husband and I both have a Roth IRA? We are only planning on opening one but can it be associated with both our names? GoGoGadgetChris posted:First decide if you're going to want to spend it in the next... 10 years. Didn't you ultimate decide to invest it because that's what the benefactor wanted? Consciously decide you aren't touching this money for 10 years and Target Retirement Date the hell out of it! Yes our grandmother gave us the nebulous advice to "invest" this money and asking folks on here and doing research online led me to believe a Roth IRA would be best. No we do not need the money nor do we plan on needing it anytime soon, and will be contributing more to this account besides the initial $5,000. I want to just put it in and forget about it! razz fucked around with this message at 00:03 on Jan 7, 2014 |
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Jan 7, 2014 00:00
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sorry, double post!
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Jan 7, 2014 00:01
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razz posted:So I can change the target retirement date, like if we end up retiring earlier than the target? Sorry for all the dumb questions, I'm new to investing. You can "change" the target retirement date by investing in a different fund. When you invest in the 2060 target retirement fund for example, this is like a container for your money. The people that manage that container for you will assume that you're going to retire in 2060. If you decide to retire in 2050, you will need to move your money to that container instead. Roth IRAs are individual, there are no joint Individual Retirement Accounts, so you and your husband can each have your own.
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Jan 7, 2014 00:15
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I gotcha, thanks for the help!
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Jan 7, 2014 00:21
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You could each open an IRA with $2500 in it.
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Jan 7, 2014 00:30
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Guy Axlerod posted:You could each open an IRA with $2500 in it. And unlike most Vanguard funds (which have minimum initial deposits of $3,000), the target retirement funds require only $1,000.
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Jan 7, 2014 00:35
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What would be the benefit to each having our own account (besides the fact that we could contribute twice as much?) We probably won't have the kind of disposable income to contribute the full amount to one Roth IRA each year, let alone two. Maybe open one now and if we get in a better financial situation later on, open another one? Let's say we open two and put $2500 in each. Then contribute $1,000 to each account per year. Would there be a benefit to doing that, rather than opening one account with $5,000 and contributing $2,000 to that one account each year?
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Jan 7, 2014 00:45
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razz posted:What would be the benefit to each having our own account (besides the fact that we could contribute twice as much?)
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Jan 7, 2014 01:20
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moana posted:If you split up, it will be a lot less headache. Haha obviously! Well I hope that doesn't happen!  I meant that question more from a financial perspective.
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Jan 7, 2014 01:26
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razz posted:I meant that question more from a financial perspective. There's no benefit to having two separate funds other than that, eventually, your pooled money would reach the level of the minimum investments in other funds if you wanted to manage your investment slightly more with lower-cost funds. But this would be way way in the future and isn't a good reason to change your course now. I would also recommend a $2500/$2500 split. We all think and hope you will never split up, but in the future you might like to have retirement checks issued in your name, and not just have all the payments go to your spouse for them to split with you later. I don't think there is a way to split the fund after the fact, and you will eventually want to have one...why not do it now? [edit: wait I thought of a reason: if one of you was a student, and the other might qualify for the Retirement Savings tax credit, then it might make more sense to put more in the non-student's account]
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Jan 7, 2014 04:19
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NJ Deac posted:The upshot of all of this is that while a Roth 401k is not nearly as good for a backup emergency fund as a Roth IRA, it's still better than a traditional 401k if you're really hurting and need the money. There's still a penalty and it makes the Roth 401k much less attractive than a Roth IRA, but it's also much less onerous than tapping a traditional 401k, since with a traditional 401k you're paying taxes and the 10% penalty fee on the entire amount, instead of just the portion corresponding to your earnings. If you're in the same tax bracket upon taking the withdrawal that you were when you made the contribution, then withdrawing the Roth vs. traditional 401k contributions is effectively the same. In any case, none of that applies if you are still employed at the place you have a 401k, since my understanding is that you cannot withdraw contributions without a triggering event. The law doesn't allow in-service withdrawals of employee contributions. So it should not be treated as an emergency fund, in my opinion.
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Jan 7, 2014 06:16
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kaishek posted:In theory, though, couldn't you roll your Roth 401k into a Roth IRA? Would that somehow maintain the information on what portion is contributions?
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Jan 7, 2014 14:21
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Saint Fu posted:My understanding is that upon leaving your place of employment (I guess this is a triggering event?) you can roll your Roth 401(k) into a Roth IRA without penalty. You could then withdraw all of that rollover amount penalty-free in five years. Am I understanding this right? Yes, that is a triggering event and would allow you to roll-over into an IRA. I'm not certain, however, on how the IRA treats the rollover in terms of withdrawals. There has been some discussion of this here previously, and I'm not sure anyone ever answered the question (at least to my satisfaction). Does the IRA continue to keep track of what amount from the 401k was considered contributions vs. earnings and therefore whether subject to penalty upon early withdrawal? It looks like from the rules regarding Roth IRA distributions, that you would be able to withdraw the full amount penalty and tax free, even before retirement age, but I'm not 100% certain. flowinprose fucked around with this message at 15:06 on Jan 7, 2014 |
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Jan 7, 2014 14:59
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razz posted:What would be the benefit to each having our own account (besides the fact that we could contribute twice as much?) You can't contribute twice as much (unless you file taxes separately maybe?). Married filling jointly had the same contribution limits as individuals.
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Jan 7, 2014 17:00
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Papercut posted:You can't contribute twice as much (unless you file taxes separately maybe?). Married filling jointly had the same contribution limits as individuals. Each IRA account is owned by one person only. Each person can contribute $5,500 per year, married or not, into their own IRA account(s). The only difference for married persons is that the earned income requirement need not come from the individual that owns the account as long as the earned income for the jointly-filing couple is enough for the total contributions between the two accounts. Oh, and also the fact that if you file separately, then neither partner can make any contribution whatsoever. For example, a couple with only one working partner earning $50,000 per year (filing taxes jointly) could contribute $5,500 into each of 2 accounts (one for each spouse). flowinprose fucked around with this message at 18:06 on Jan 7, 2014 |
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Jan 7, 2014 17:17
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