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I agree, and this is where people like Mr. Money Mustache and the really die-hard frugalists/early retirement/FI people lose me. Sure, I'd like to retire at 40, but not at the expense of enjoying my 20s and 30s. I'm still very much an advocate of saving and contributing to retirement plans as much as you can as early as you can, but not to the point of disallowing yourself all the experiences, activities, and fun of your youth and life today. Restrict yourself some, yes, but not entirely. There's no guarantee you're going to make it to retirement, and even if you do there is a significant chance that your physical or mental condition will have degraded, perhaps substantially. In regard to travel, it's a hell of a lot easier (and cheaper) to go travel and experience the world while you're young, healthy, fit, and willing to walk miles a day with a pack on your back and put up with crowded hostels and busses and don't need any special accommodations.
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Apr 2, 2014 17:55
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Are there any problems associated with my wife and I both having Roth IRA accounts, so long as our combined income is less than the threshold? I'm having a hard time finding resources on this.
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Apr 2, 2014 18:33
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ZentraediElite posted:Are there any problems associated with my wife and I both having Roth IRA accounts, so long as our combined income is less than the threshold?
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Apr 2, 2014 18:43
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moana posted:No problem. You can each contribute up to $5500 for 2014, in fact this is one way you can even get around the restriction that you have to have "earned income" just in case either you or your wife don't work: http://www.rothira.com/blog/open-an-ira-for-your-non-working-spouse Interesting. From what I interpret here... http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2014 As long as our combined household income is less than $181,000, we can each have an IRA and contribute $5500 to it. Just wanting to make sure I understand this correctly. Edit: Also, how does that non-working spouse thing really work? I thought you couldn't put in more than you had on a W2?
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Apr 2, 2014 18:45
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Nail Rat posted:Since you started out by replying to me, I'll say that I'm not living as a pauper or anything, and I'm not maxing my retirement accounts, though I'm happy with where they're heading. It was more of a prompt for me to recall and express some thoughts I've had recently about the philosophy of retirement planning, and how one should arrange one's life in general. I do think that 5% is not wildly optimistic; I read somewhere recently that the historical rate of return over the last century for securities investing has been about 10% (before inflation). Several people have posted that they think the future return will be worse, and I agree there's a chance that's true... but I think there's also a chance the future return will be better. I don't really agree with the various rationales for predicting specific future rates of return. I certainly don't fault you for basing your planning on a 3% post-inflation return, though, so please don't take that as a criticism.
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Apr 2, 2014 19:06
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ZentraediElite posted:Interesting. From what I interpret here... http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2014 You file jointly, so if one spouse has no income it doesn't really show up that way on your tax return. By the way, if you file separately it doesn't matter what either person's income is, you can't contribute ANYTHING to an IRA.
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Apr 2, 2014 19:25
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ZentraediElite posted:Interesting. From what I interpret here... http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2014
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Apr 3, 2014 00:02
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Does anyone have any experience using Vanguard to invest trust assets in? I'm the executor of an estate and it has about $200k cash I'd rather not have sitting around in accounts. Since this isn't a retirement account I'm assuming I'm going to be playing under a different set of rules. I mention Vanguard since I have my retirement portfolio with them and have been pretty happy so far. Thanks! I'm shooting for a small time horizon (1-5 years), with minimal risk tolerance. I am researching a mix of things like REITs and bond funds, but I keep feeling like my retirement investment experience keeps clouding my opinions. Edit: Looked a few pages back into Wealthfront/Betterment, which seems pretty helpful. Bastard Tetris fucked around with this message at 07:52 on Apr 4, 2014 |
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Apr 4, 2014 06:20
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Sorry if this is longer than it needs to be, but it's part technical, part philosophical. I've been throwing around an idea that's mostly retirement related, but seems kind of a novel thing that most people like me never really do. I'm thinking about eventually starting a family bank. Not an actual bank, but rather a family trust combined with an LLC. The idea behind this is rooted in the financial practice I've had all my life of "don't spend money you don't have"'. I won't bore you with the details of my portfolio, but I'm 29 with zero debt and far more retirement savings than average people twice my age. If I end up banking a military pension that pays out at 60, I can probably survive off of that (house paid off/healthcare heavily subsidized). I'll be flush with a bunch of retirement cash I don't need. Conventional wisdom says leave it to your kids, right? But if I don't kick the bucket for another 30 years after, that doesn't help anyone pay for college, buy a house, or start a business. Not to mention, I plan on acquiring a bit of property along the way...rental houses, side businesses, things like that. The best part is, if I don't feel like running the business or the kids don't want to take it over, I just liquidate and put hth money into the trust. Anyway, my plan is to organize the businesses and real property under an LLC, and then organize a portion of the retirement assets under a family trust, with myself as the trustee, and the family members as the beneficiary. This is something that rich people do, but, gently caress it, why can't i do it too? In this case, the kids borrow from the trust at zero interest, and contribute back to it in kind. If I die early, then my life insurance pays into the trust. They have the capital to pay for education, pay for a house, pay for weddings, all that poo poo, without ever going into real debt. If they start a business, the trustee reviews the business plan, and the LLC either loans the money, or takes a partial or whole equity stake. I realize this will take some pretty heavy indoctrination on my part, but I'm for the challenge. This is an idea that I've been kicking around for a while. One of my primary goals in life is to have a family and eliminate financial insecurity forever. That way they (and their kids, and their kids' kids, etc) can major in some bullshit humanities or social science degree and not actually need to work any more than they want to because the interest on the trust is compounding so much that they will never need a loan. It's like being old money, except you're still solidly middle class. Just wanted to see what others thought of this insane idea.
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Apr 4, 2014 06:22
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First, estate planning is not a crazy idea. It's a normal and good thing to do for anyone who plans on dying with assets. With that said, you might be putting the horse before the cart. Do you have a family yet? There's no rule that says you can't give your kids any money until you die. If you live solely off your military pension when you retire, and have separate accounts with lots of money, there's no reason you couldn't withdraw money to pay for your children's expenses, if that's what you wanted to do. I'm not totally familiar with business organization, but it strikes me as a really bad idea to have a bunch of businesses organized under one umbrella LLC, especially if the businesses are being operated by different people. If one business accidentally sets people on fire, couldn't the lawyers come after all of the assets owned by the businesses under the umbrella LLC?
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Apr 4, 2014 12:39
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Can you legally "loan" money to a family member at zero percent interest? I think the IRS considers this to be illegal because normally there would be interest paid that would require taxation. At the very least, I think they calculate a theoretical interest rate based on prevailing rates and consider that to be "forgiven" interest and the loaner has to pay the tax on the forgiven interest as well as it counting against gift tax exclusions. Anyway, that might be a stitch in your plan. Not sure if it would work the same within a trust, but I would guess the IRS will find a way to get its money.
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Apr 4, 2014 15:07
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Uranium 235 posted:First, estate planning is not a crazy idea. It's a normal and good thing to do for anyone who plans on dying with assets. With that said, you might be putting the horse before the cart. Do you have a family yet? I am putting the cart before the horse here, but only because I'm making a few major life changes soon and I would prefer to lead turn a lot of this poo poo and cash in on "dat compound interest" rather than leaving it as an afterthought when I'm 60 and getting raped by taxes every time I transfer assets. Also, it helps to know what is community property and what isn't. Good point about the LLC stuff, I'm 100% going to be in contact with a lawyer and accountant before I ever get into that stuff. This is all rather conceptual at this point.
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Apr 4, 2014 15:34
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Rekinom posted:Sorry if this is longer than it needs to be, but it's part technical, part philosophical. How much money are we talking here? I'm in a very similar situation as you (same age, frugal lifestyle, low expenses, military pension coming to me at 60, low six figures portfolio). That said, I save my extra cash to get me from an early retirement to age 60 when my pension kicks in. I can't imagine setting up some sort of trust outweighs the tax benefits of maxing out 401ks and such. Unless of course I'm way off the mark and you have a seven figure portfolio.
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Apr 4, 2014 19:15
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flowinprose posted:Can you legally "loan" money to a family member at zero percent interest? Here's some info about that. The short answer is that you can loan small amounts, no problem, but if it's a big pile of money, the IRS gets mad that you're not charging (and paying taxes on) some minimal interest rate. I don't think having your money be a business gets you out of that. Here's some info about gifting money. One important thing is that you can give your kids money well above the $14k limit if it goes directly to a school for tuition, without paying gift tax. So you can give your kids as much as you want, to pay their tuition (or medical expenses), tax and interest free. The $14k limit is just for whether you have to file a form, it's not actually the point where you owe tax. The point you owe tax is when you hit the lifetime accumulated gift exclusion, currently $5.25M. So you can give your family up to five and a quarter million dollars, before there are actual tax consequences. Leperflesh fucked around with this message at 19:28 on Apr 4, 2014 |
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Apr 4, 2014 19:24
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Would anyone care to critique my asset allocation. I'm 37 hope to retire somewhere between 65-70 (earlier the better obviously). Around 250K in retirement assets now. I have 9-12 months expenses in an emergency fund. I'm willing to assume moderate to high risk (40-50% drop in a year would suck but I can deal). My target allocation would be: 85% Stocks, 10% Bonds, 5% Cash Bond Portion: 80% Domestic, 20% International Stock Portion: 70% Domestic, 30% International Domestic Stock Portion: 25% Large Blend, 25% Small Blend, 25% Large Value, 25% Small Value Which works out to: 5% Cash (Money market) 8% Domestic Bonds (VBTLX Vanguard Total Bond Market Index Fund Admiral Shares) 2% International Bonds (VTABX Vanguard Total International Bond Index Fund Admiral Shares) 25.5% International Stocks (VTIAX Vanguard Total International Stock Index Fund Admiral Shares) 14.8% Domestic Large Blend (VTSAX Vanguard Total Stock Market Index Fund Admiral Shares) 14.8% Domestic Small Blend (VSGAX Vanguard Small-Cap Growth Index Fund Admiral) 14.8% Domestic Large Value (VIVAX Vanguard Value Index Fund Investor Shares) 14.8% Domestic Small Value (VSIAX Vanguard Small-Cap Value Index Fund Admiral) No REIT because I own a home that will be payed for in 14 years.
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Apr 4, 2014 19:28
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I'm 39 and I'm 40% bonds. Your 10% bonds is fairly aggressive for your age, although the 5% cash mitigates that. I also think your allocation to small caps is very aggressive at 25% of your total portfolio. What's your reasoning for not just buying the total domestic market using Vanguard index funds?
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Apr 4, 2014 19:51
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ManDingo posted:Would anyone care to critique my asset allocation  Regarding the 85/10/5 split. I was about 95% equities when the last crash hit, my entire retirement account dropped by nearly half, and I barely noticed much less cared. There was no component of "It sucked and I had to deal", and my retirement contributions continued to be mostly in equities throughout. What about you, what was your situation in 2008 and how did you feel about it? Are you sure you're going to stick to this allocation when the next bust comes? I am also about your age and a homeowner, and I am about 25% bonds right now, so your allocation does seem a bit aggressive to me too.
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Apr 4, 2014 19:59
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Leperflesh posted:I'm 39 and I'm 40% bonds. Your 10% bonds is fairly aggressive for your age, although the 5% cash mitigates that. I also think your allocation to small caps is very aggressive at 25% of your total portfolio. What's your reasoning for not just buying the total domestic market using Vanguard index funds? I guess I felt I'm a little behind at this point so I need to assume a bit more risk and hopefully lean more towards bonds in the future. And I'm actually 15% Small Cap, I was just splitting my domestic equities (60% total) among the four main asset classes (25% of 60% = 15%). I was trying to mimic the Coffeehouse portfolio. I got the impression from the four pillars that putting all your domestic portion in total stock market doesn't give you adequate exposure to small cap. Coffeehouse portfolio I got from here but I'm pretty sure it's mentioned in four pillars: http://www.bogleheads.org/wiki/Lazy_portfolios
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Apr 4, 2014 19:59
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Oh okay, I should have read more carefully. 15% small cap seems OK to me.
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Apr 4, 2014 20:03
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Yeah, the differences between the portfolios on that page are exactly the kind of thing where I don't know of good justifications for one versus another. Except the "permanent portfolio", because gently caress gold with a zinc-plated dildo. I use essentially the three-fund portfolio.ManDingo posted:I guess I felt I'm a little behind at this point Of course that is kind of irrelevant because it's all a matter of your current and intended future lifestyle.
slap me silly fucked around with this message at 20:09 on Apr 4, 2014 |
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Apr 4, 2014 20:06
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My assumptions were pretty conservative in my opinion. The hardest part for me was determining what I would need after retirement. I assumed I could draw down my retirement savings at 4% and cover 80% of my pre-retirement salary. This was assuming my salary grows at 3% a year and my investments return 5.5%. This is probably going to be way more than I need considering the house will be paid for but I'd like to do a fair amount of traveling and be able to have a good amount of leeway, maybe a summer home someplace warm. As far as how I weathered the crash I had an adviser at that point that did my allocation (for a 1% annual fee). My finances were of no concern to me I just assumed they knew what they were doing. Which I guess they did, but at a cost I'm no longer willing to bear. In lieu of the comments I might scale my risk back just a bit and target 75% equities, 20% bonds, 5% cash. With the intent of getting to the 'my age in bonds' rule of thumb by the time I'm 45.
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Apr 4, 2014 20:31
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ManDingo posted:'my age in bonds'
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Apr 4, 2014 20:35
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ManDingo posted:I assumed I could draw down my retirement savings at 4% and cover 80% of my pre-retirement salary. This was assuming my salary grows at 3% a year and my investments return 5.5%. lol doublepost
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Apr 4, 2014 20:39
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ManDingo posted:Would anyone care to critique my asset allocation. I'm 37 hope to retire somewhere between 65-70 (earlier the better obviously). Around 250K in retirement assets now. I have 9-12 months expenses in an emergency fund. I'm willing to assume moderate to high risk (40-50% drop in a year would suck but I can deal). My target allocation would be: This all seems very reasonable to me. I have a couple comments for your consideration. Bonds At first glance, international bonds seem to be a great method to diversify your fixed income portfolio. However, they tend to be highly correlated to domestic bonds (and thus lack the diversification benefit that international stocks do). It kind of makes sense if you think about US treasury interest rates influencing the global bond economy. In fact, due to currency exchanges you will effectively buying something incredibly similar in risk/correlation to a US Bond but with a higher fee (exchange rates). There is a lot of great discussion of this over at Bogleheads.org http://www.bogleheads.org/wiki/Developed_market_bonds 25/25/25/25 Equity Split This is perfectly reasonable, just realize that you are not over weighting small cap value (and small in general). Here is a good thread about that strategy http://www.bogleheads.org/forum/viewtopic.php?t=38374 There is historically a reward premium for carrying SCV /(see Famma/French efficient frontier stuff), but some believe that won't extend into the future because it is so popular. http://www.bogleheads.org/forum/viewtopic.php?t=22002 REIT I do the exact same thing as you. Own my own home so I consider that my exposure to real estate. Personally, I haven't made up my mind about SCV yet. If there is a yield premium it might take DECADES to show up. Can you hold onto an underperforming asset for that long waiting for a yield bump that may or may not happen? The important thing is whatever you choose you stick to that asset allocation for life. Your portfolio is great as is. Velochis fucked around with this message at 00:56 on Apr 5, 2014 |
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Apr 5, 2014 00:21
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I really have my work cut out for me  I will be buying "4 pillars of investing" and doing some reading but right now I have 0 long term plan and I really need to shape up. Luckily I have 0 debt and all but it's time for me to start. Can someone please tell me the advantages of Vanguard? It seems like a solid recommendation here in the forums. Are there any alternatives? I'm based in Hong Kong, so I don't have to deal with Capital Gains tax and taxation is generally really low. However, there are cost of living problems and other problems. Right now, I'm subscribed to the Mandatory Provident Fund where I make a contribution and the employer matches it. However the returns have always been lovely ever since I started and the management fees are eating things up. Would my financial situation in the long term really improve if I opt for a different mutual fund? I really just want financial discipline and having some long term goals for retirement. I mentioned in the other threads, but I have reached my salary ceiling of around 60k and my girlfriend just got a teaching job for 70k. We are getting older and costs are rising. We are basically living on borrowed time and wealth. For me personally, I am not setting some lofty long term goals, but I would like to budget 1000 US for a retirement account monthly (can be done). What to do with that chunk of change is definitely another matter but I suppose I need a 6 month cash buffer and then build long term.
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Apr 5, 2014 03:06
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I saw this on Mother Jones today (it is a few days old or somesuch): http://www.motherjones.com/kevin-drum/2014/04/sp-500-sets-yet-another-fake-record-year It looks like the inflation adjusted growth in the S&P 500 since 1998 has been totally wiped out by the two recessions that occurred. Maybe it is some graph illusion due to how it was plotted, but it doesn't make me particularly optimistic about high future growth rates.
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Apr 5, 2014 04:09
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It's the lowest 15-year return since 1970! Of course, regression to the mean suggests.... However I agree with the general theme of the article that short-term returns info is useless.
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Apr 5, 2014 04:14
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caberham posted:Can someone please tell me the advantages of Vanguard? It seems like a solid recommendation here in the forums. Are there any alternatives? quote:Would my financial situation in the long term really improve if I opt for a different mutual fund? General advice from the OP: 1) Contribute to 401(k) up to employer match 2) Max out Roth IRA ($5,500 this year) 3) Max out 401(k) ($17,500 limit this year) 4) If you were able to finish Step 3, you will end up rich in all likelihood. Start a taxable savings account, or go out and blow some money at a strip club or something. Are you a US citizen in Hong Kong or...?
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Apr 5, 2014 04:48
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A common caveat is that if you have an HSA, contributing to it to the max is often considered to be 2a in that list of steps. That can be a little debatable because I don't think you can ever roll it over to an IRA, so you're limited a bit in fund choices. However, the money is never taxable if you use it for qualified medical expenses, and functions like a traditional IRA otherwise after retirement age(so you can withdraw and just pay normal tax at that time).
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Apr 5, 2014 14:33
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MickeyFinn posted:I saw this on Mother Jones today (it is a few days old or somesuch): As a follow up to this. I had some time and investigated the data:  The Real GDP is already adjusted for inflation (albeit, likely in a different way), but it looks like the problem with my previous statement is that it focused only on the S&P 500. GDP is growing, trying to the capture the whole market appears to ring true.
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Apr 5, 2014 15:27
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moana posted:Tons of alternatives, but Vanguard is owned by the shareholders so there's no incentive for them to gently caress you over. It was also the first creator of index funds for the poors, basically they do everything good and there's not a lot of reason to look elsewhere unless you like day trading or are forced to by your workplace. Thanks for clarifying! quote:Depends on the fund. Even with lovely fees, usually it makes sense to contribute enough to your employer's match, b/c it's an immediate return of what, 50, 100% right away? I just have no confidence in the local government savings plan. I will probably start my own budget first and then decide on what to do with the chunk of savings I have. quote:Are you a US citizen in Hong Kong or...? I'm not American, I'm just a Canadian based in Hong Kong. So I don't have to deal with the global taxation 
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Apr 5, 2014 16:01
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caberham posted:Thanks for clarifying! Vanguard likely won't let you open an account. They are one of the hardest institutions to deal with if you are a non-US person without a US address. Consider Schwab or a discount brokerage. The Vanguard and 4 Pillars principal can be applied to using ETF's at a discount brokerage.
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Apr 5, 2014 16:04
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moana posted:Tons of alternatives, but Vanguard is owned by the shareholders so there's no incentive for them to gently caress you over. It was also the first creator of index funds for the poors, basically they do everything good and there's not a lot of reason to look elsewhere unless you like day trading or are forced to by your workplace. Yeah the biggest selling point on Vanguard funds is they offer expense rations similar to what you would see in a company run retirement plan aka institutional class low expense ratio shares. The expense ratio is so important since for large amounts of money and also a fairly long time period it becomes a big deal. For example $100,000 with a 1% expense ratio means $10,000 not invested over a 10 year period. For a vanguard 0.15% fund you would only pay $1800 over the same period. Also because Vanguard has done so well with its business concept the funds tend to have better liquidity, more fund performance history and tracker error than some competing newer options. etalian fucked around with this message at 19:30 on Apr 5, 2014 |
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Apr 5, 2014 19:25
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So I'm looking at lazy portfolios, quick question about funds... https://www.dropbox.com/s/t6r9o1dyontzab9/vanguard.png Does that mean I have to put in $100 every month to each fund? Or just if I want to contribute it has to be $100?
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Apr 8, 2014 15:04
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$100 per fund.
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Apr 8, 2014 15:12
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I believe you could ACH the money into your money market fund and manually apply it to other funds. But for auto-deposit right into the funds, $100/mo min per fund.
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Apr 8, 2014 16:13
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Is that your 401(k) charging you a $20 commission per transaction on that fund? Holy hell.
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Apr 8, 2014 16:49
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No that's sharebuilder (I use them for stocks) but I'll buy the funds through Vanguard instead
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Apr 8, 2014 17:09
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Hi guys, I'm based in the UK but hopefully the general advice is transferable - I'm 32 with simple retirement goals of getting the basics moving and working some additional 3-5 year savings goals towards a house. This is the first year I've been debt free so I'm starting to look beyond the standard company pension and into investments. My current situation has an employer pension running at 10.5% of my salary (6.5% them, 4% personal contribution, which is the max they allow) - this is then managed through a set of respectable funds by Fidelity, so I'm pretty happy with it. I believe this is similar to your 401(k). Next I've got a 6% CD-equivalent through my bank, but you're capped at investing 3k and you can only have one per year. It's a nice bonus for an annual big purchase with no effort. I keep a further cash cushion in a low interest rate online savings account for emergencies. From there it moves onto a UK Cash ISA, which I believe it very similar to a US IRA - this is a cap of 5.5k p.a and receives a tax-sheltered 1.5% on a monthly basis. I max this each year via monthly contributions. This year I've had enough to open the other half of our tax-sheltered system and put 5.5k into a shares ISA, however I'm not feeling educated enough right now to know how to distribute it (bought 4 pillars, reading). I have an additional few thousand available that I could shuffle into Fixed rate bonds, but that's barely going to get me 1.5% at current rates, and I currently have it in a .75% if-no-withdrawals savings account for extra emergencies. So, am I doing anything dumb here? And what is a likely good approach to working with the 5.5k in the shares ISA (I have low cost access to a lot of funds via HSBC's shares platform). Thanks in advance for any consideration you give to this
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Apr 8, 2014 17:17
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Bumming Your Scene posted:No that's sharebuilder (I use them for stocks) but I'll buy the funds through Vanguard instead
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Apr 8, 2014 19:16
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