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They probably had a much different composition in 2008, and had you rebalanced to 50/50 then the overall amount might be higher.
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May 5, 2014 21:50
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GoGoGadgetChris posted:Truly criminal. "Investing is HARD and SCARY so pay us money to do it right." thanks god for low fee ETFs and also the simplicity of passive index investment.
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May 6, 2014 02:46
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After a long bout with unemployment, my wife recently got hired part time with Lowes. One of the benefits they offer is a 401(k) - they contribute as follows:quote:1% of compensation 1% Should we just go ahead and just do the 6% since that's the max they match, or should we contribute as much as we can? Money is kind of tight right now, so I don't want to go crazy, but I also don't want to pass up free money. They also do an employee stock purchase plan at a 15% discount on the closing price of the stock at the end of the offering period, but am I better just going for a Vanguard fund?
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May 6, 2014 14:32
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Since you have presumably been getting by without your wife's income lately, I'd personally try to save as much of it as you can (assuming you don't have large credit card balances). Try thinking about saving 50% and putting 50% into your checking account. While it seems like a lot to be saving, that's still 50% more in your checking than you had before she got hired. You definitely want to save at least 6% to get the full match. Depending on the terms of the stock purchase plan (how long is the holding period?) you should take advantage of it if you can afford it. If the stock price is steady for the duration of the holding period, that's a 15% return. Tough to beat that.
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May 6, 2014 14:56
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Well, we've been getting by, but with her parents' assistance (though I've been trying to keep that to a minimum.) I just paid off our credit card with the tax refund, so the only large balances we have are the mortgage and the car payment. Of course, we live in the northeast though, so the cost of even day-to-day items is through the roof... With a 401(k), can you increase your contribution at any time, or do you have to wait until a certain time period? As for the stocks, the holding periods are 6 months - June 1 and December 1, so I'm guessing this is not optimal since the money will be just sitting there for 6 months doing nothing?
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May 6, 2014 15:08
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The match is free money so whatever you do get that 6%. After that start a Roth IRA if you can since you have no consumer debt. You just need to save up 1k to do that with Vanguard, then at least $100 at a time as you can to contribute to it.
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May 6, 2014 15:13
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If you have a automatic investment set up with Vanguard, it can be less than $100.
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May 6, 2014 15:16
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berzerkmonkey posted:As for the stocks, the holding periods are 6 months - June 1 and December 1, so I'm guessing this is not optimal since the money will be just sitting there for 6 months doing nothing? Isn't that like a 15% immediate gain if you hold for 6 months? Seems like a no brainer to me depending on how liquid the shares are.
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May 6, 2014 15:19
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LorneReams posted:Isn't that like a 15% immediate gain if you hold for 6 months? Seems like a no brainer to me depending on how liquid the shares are.
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May 6, 2014 15:51
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berzerkmonkey posted:With a 401(k), can you increase your contribution at any time, or do you have to wait until a certain time period?
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May 6, 2014 16:06
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SiGmA_X posted:Yes. It's a good deal, cash it out and throw it into retirement every 6mo. Since the 15% will probably be on the basis, wouldn't it be better to transfer the stock and THEN liquidate after it's in the IRA?
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May 6, 2014 16:15
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SiGmA_X posted:Yes. It's a good deal, cash it out and throw it into retirement every 6mo. Would I immediately cash out? I'm also responsible for a broker transaction fee through eTrade - I'm thinking at the low contribution we are going to be able to make isn't going to offset the fees that are going to be charged. Or am I wrong, and the fees are relatively low?
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May 6, 2014 16:39
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berzerkmonkey posted:Would I immediately cash out? I'm also responsible for a broker transaction fee through eTrade - I'm thinking at the low contribution we are going to be able to make isn't going to offset the fees that are going to be charged. Or am I wrong, and the fees are relatively low? Etrade should only charge you 10$ correct...that means you need a total contribution of ~$75 in a 6 month period to break even. That's $5.77 per biweekly paycheck. You could make this even better by dropping to one transaction a year instead of every 6 months.
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May 6, 2014 16:46
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That will be good to keep in mind - I just realized that she won't even be eligible until 1 full year of employment anyway, so it's a moot point for the time being. I will get on board with the 401(k) though. Regarding the stock, would it be better to just go ahead and save that percentage of her paycheck for the year, then use that to fund the initial stock purchase? Or should I just take that extra and put it into the 401(k)? Or should I think about something else?
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May 6, 2014 17:20
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I'm pretty certain I'm asking a dumb question here, but if this is the scenario: -In 1.5 years I want to start saving for a house -I won't be buying the house for about ten years after I start saving -I will have a 6 month emergency fund set aside by then(6k) and be investing at least 20k per year in retirement accounts -I will likely be putting 12k a year into the taxable account for a decade(so after capital gains, if I get a 7% return I might end up with 147k instead of 122k or so in a bank). Would it be sensible to open a taxable Vanguard account and use the target retirement 2025 fund for all the holdings? Nail Rat fucked around with this message at 19:30 on May 6, 2014 |
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May 6, 2014 19:16
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If this will be a taxable account, you should consider Vanguard funds that minimize the tax burden. The target retirement funds are best for tax-sheltered accounts like IRAs.
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May 6, 2014 19:38
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Leperflesh posted:If this will be a taxable account, you should consider Vanguard funds that minimize the tax burden. The target retirement funds are best for tax-sheltered accounts like IRAs. poo poo, that's a good point. Already forgot half the stuff I read in Four Pillars. But it looks like their tax-managed funds are only available as Admiral funds, so I'd have to save up 10k to start off with Tax-Managed Balanced Fund. Which isn't the worst thing, just nice to be aware of I guess. Nail Rat fucked around with this message at 20:12 on May 6, 2014 |
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May 6, 2014 20:00
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LorneReams posted:Since the 15% will probably be on the basis, wouldn't it be better to transfer the stock and THEN liquidate after it's in the IRA? He can do that as long as the stock is purchased in an IRA. If the stock is purchased in a brokerage account he would have to sell it first because IRA contributions can only be made in cash.
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May 6, 2014 22:14
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Nail Rat posted:poo poo, that's a good point. Already forgot half the stuff I read in Four Pillars. But it looks like their tax-managed funds are only available as Admiral funds, so I'd have to save up 10k to start off with Tax-Managed Balanced Fund. Which isn't the worst thing, just nice to be aware of I guess. One a side note the Wealthfront white paper is pretty interesting if you want to look at tax efficiency: https://www.wealthfront.com/whitepapers/investment-methodology  For US investments it makes sense to buy a muni bond ETF since the dividends are exempt from federal taxes and in most cases state taxes as well. etalian fucked around with this message at 01:10 on May 8, 2014 |
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May 7, 2014 01:35
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etalian posted:One a side note the Wealthfront white paper is pretty interesting if you want to look at tax efficiency: This depends on what tax bracket you are in and what state you are in, right? The tax break on munis vs. corporates will not necessarily be worth it for everyone.
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May 7, 2014 04:09
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Echo 3 posted:This depends on what tax bracket you are in and what state you are in, right? The tax break on munis vs. corporates will not necessarily be worth it for everyone. True but they have other good advantages such as lower volatility plus a better default rate vs options such as US corporate bonds. I suppose there's a method to the madness for why Wealthfront uses muni bonds for taxable accounts while using emerging junk/corporate bonds for their tax free Roth IRA/401k accounts. In my case MUB works out to a 4% yield with the tax advantage which is compared to the 4-5 percent rate you could get with riskier intermediate term bonds. etalian fucked around with this message at 01:20 on May 8, 2014 |
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May 8, 2014 01:16
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OK, so I maxed out the contribution 401(k) for my wife, so the next step is the Roth IRA. I will get a pension from my current job, though it isn't a 401(k) - it's an actual pension, but I do contribute toward it. Are there any potential issues with having that and a Roth? I know there are contribution limits if you have a 401(k), but I don't know if these same rules apply to pensions as well. I read the Motley Fool article referenced in the OP, and it didn't seem like I would have a problem, but I just want to confirm that before I start something. EDIT: Looks like as long as I don't exceed my AGI, I'm good? berzerkmonkey fucked around with this message at 14:00 on May 9, 2014 |
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May 9, 2014 13:57
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berzerkmonkey posted:OK, so I maxed out the contribution 401(k) for my wife, so the next step is the Roth IRA. I will get a pension from my current job, though it isn't a 401(k) - it's an actual pension, but I do contribute toward it. The interaction between having an employer retirement plan and limits on IRA contributions only happens for the ability to deduct Traditional IRA contributions; the Roth IRA income limit is independent of that. So yes, as long as your AGI doesn't exceed $181,000, you're good. If you are concerned about exceeding the AGI limit, you can always contribute to a Traditional IRA and then immediately roll it over to a Roth, provided that you don't already have Traditional IRA contributions elsewhere.
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May 9, 2014 14:50
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Yeah, I don't think I'll ever get close to that number, so I should be good.
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May 9, 2014 15:35
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I am currently maxing out my 401k and Roth IRA through my job. I also have significant part time income through a sole proprietor LLC business. Can I put additional savings in tax advantaged accounts through a SEP IRA or individual 401k on top of the 401k I have through work?
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May 11, 2014 20:43
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i81icu812 posted:I am currently maxing out my 401k and Roth IRA through my job. Technically the Roth IRA is independent of your job, but I get what you mean. The 17.5k limit for 401k contributions only applies to the employee's contributions. The total combined limit for 401k employee contribution + 401k employer contribution + SEP IRA contributions is 51k. There is an additional sub-limit on SEP IRA contributions, which is 25% of the income from your business. As an example, if you max out your 401k and your employer contributes an extra 6k, you will have used 23,500 of the overall 51,000 limit. If you made an extra 24,000 on the side from your blog you can sock away another 6,000 in the SEP IRA. That brings you up to 29,500 which is still well under the overall limit. Sadly the remaining space is unusable unless you increase the income from your side business substantially. I don't believe your Roth IRA contributions matter for any of these limits. Alternatively, if your employer offers a Roth 401k option you should consider it due to the larger effective limit it offers. Other routes to look into are accelerating any debt payments you have or looking into other tax advantaged vehicles like annuities (though this might not be better than taxable accounts). I would just take a nice vacation at this point though. I am not a tax professional and you should definitely check this advice against a real life professional before setting up an SEP IRA. I am only moderately sure of the information above so if you get dinged by the IRS I will take no responsibility and will probably laugh at you.
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May 12, 2014 00:09
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Awesome. Thanks.
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May 12, 2014 01:38
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I believe the $17.5k cap includes both SEP and 401k contributions as an employee, though, doesn't it? The reason I decided to go with a solo 401k (through Vanguard, really easy) instead of a SEP or SIMPLE was because of some cap or restriction or something on the other options - sorry, don't remember the exact details. However, a solo 401k allows you to contribute as both employer and employee, so you can put more money in.
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May 12, 2014 16:26
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moana posted:I believe the $17.5k cap includes both SEP and 401k contributions as an employee, though, doesn't it? The reason I decided to go with a solo 401k (through Vanguard, really easy) instead of a SEP or SIMPLE was because of some cap or restriction or something on the other options - sorry, don't remember the exact details. However, a solo 401k allows you to contribute as both employer and employee, so you can put more money in. As an employee sure, but the 25% business income you can add in addition is acting like an employer match, even if you are the only employee.
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May 12, 2014 17:17
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Vilgan posted:As an employee sure, but the 25% business income you can add in addition is acting like an employer match, even if you are the only employee. The benefit of a solo 401k over a SEP is then just that you can do penalty-free loans from a solo 401k which you can't do with a SEP. Right? Also if you do end up working for yourself full-time you can still contribute the 401k cap as an employee to a solo 401k which you can't do with a SEP.
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May 12, 2014 20:00
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So ideal situation, I max out a ROTH IRA, max work ROTH 401k, and fund solo 401k up to $52,000 - 17,500 - employer matching contribution. Where funding for the solo 401k is limited to 25% of side business profit, funded as employer contribution. i81icu812 fucked around with this message at 06:10 on May 13, 2014 |
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May 12, 2014 22:38
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Is it 25% or 20? I'm not sure. Anyway, yes. Also consider bugging your company to offer an HSA so you can tuck away another $3k or so in there.
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May 13, 2014 00:03
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i81icu812 posted:So ideal situation, I max out a work ROTH IRA, max ROTH 401k, and fund solo 401k up to $52,000 - 17,500 - employer matching contribution. Everybody keeps talking about "work" Roth IRAs as if they're a thing that exists.
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May 13, 2014 01:35
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SpelledBackwards posted:Everybody keeps talking about "work" Roth IRAs as if they're a thing that exists.
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May 13, 2014 02:41
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Dammit, yes work ROTH 401k. Word order got mixed up.
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May 13, 2014 06:10
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So, MY WIFE and I are debt free - no student loans, car payments, or unsecured debt. Our combined income is 100k, and we have 11k in savings (we had 25k until we recently decided to use a big chunk to pay off a loan). What are some good short-term investment options? We are possibly facing a move/relocation in the next year. Should we focus on rebuilding our savings? We were also considering maxing out our 410k.
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May 13, 2014 13:28
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moana posted:Is it 25% or 20? I'm not sure. Anyway, yes. Also consider bugging your company to offer an HSA so you can tuck away another $3k or so in there. You must have a high deductible health plan to use an HSA. Not everyone can do it. Edit: I mention this because it is a (rare) case where you have to sacrifice something, potentially a better health plan, to be eligible to make these contributions. It is not nearly as straightforward as savings in a 401k or IRA where you only sacrifice immediate access to the money. MickeyFinn fucked around with this message at 15:17 on May 13, 2014 |
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May 13, 2014 15:14
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IT BURNS posted:So, MY WIFE and I are debt free - no student loans, car payments, or unsecured debt. Our combined income is 100k, and we have 11k in savings (we had 25k until we recently decided to use a big chunk to pay off a loan). What are some good short-term investment options? We are possibly facing a move/relocation in the next year. Should we focus on rebuilding our savings? We were also considering maxing out our 410k. Emergency fund (6+ months) > 401k (up to match) Given tour upcoming move, I would just save up for those expenses, and then you can decide on how you want to invest.
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May 13, 2014 16:05
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MickeyFinn posted:You must have a high deductible health plan to use an HSA. Not everyone can do it.
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May 13, 2014 19:25
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IT BURNS posted:So, MY WIFE and I are debt free - no student loans, car payments, or unsecured debt. Our combined income is 100k, and we have 11k in savings (we had 25k until we recently decided to use a big chunk to pay off a loan). What are some good short-term investment options? We are possibly facing a move/relocation in the next year. Should we focus on rebuilding our savings? We were also considering maxing out our 410k. MickeyFinn posted:You must have a high deductible health plan to use an HSA. Not everyone can do it. SiGmA_X fucked around with this message at 22:02 on May 13, 2014 |
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May 13, 2014 21:57
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