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Alereon posted:If Vanguard lost, wouldn't the practical effect of this be higher expense ratios, with that money returning to you as dividends? As since that money isn't really being spent it ends up as profits to Vanguard, which are paid out to shareholders (the funds themselves)? Yeah but the taxman gets his cut!
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Aug 4, 2014 00:46
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Does it ever make sense to avoid investing in your 401k entirely (assuming no/low match) and just invest the money on your own? I'm not even sure I'll be alive at 59.5, so I'm not liking the idea of a withdrawal penalty.
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Aug 4, 2014 05:44
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Ron Don Volante posted:Does it ever make sense to avoid investing in your 401k entirely (assuming no/low match) and just invest the money on your own? I'm not even sure I'll be alive at 59.5, so I'm not liking the idea of a withdrawal penalty. Probably not, but how old are you? When you say you're not sure you'll be alive before then, are you anticipating working up until your early death, or are you trying to get to early retirement/financial independence by age 35 or something?
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Aug 4, 2014 06:04
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A friend ask me if I thought this change to their retirement plan was good or bad. I told I didn't think it was very good, but that I would ask some goons who would know. They specifically went with a Money Purchase Pension Plan. 414h plans In this special type of money-purchase pension plan, designed solely for public governmental employees, both the employer and employee make contributions, which grow on a tax-deferred basis until retirement. These plans typically have a "pick-up" provision that permits employers to put employee contributions into their accounts on a pretax basis in the same manner as a 401k or other traditional plan. Vesting is always immediate and employees who leave to work for another employer may roll this plan into their new employer's plan, as long as it accepts rollovers. Why would a government want to offer a Pick-Up plan in addition to CalPERS and its 457 Plan? First and most obvious, any government entity that has opted out of Social Security may feel the need to permit its employees to save for their retirement at a level equal to those who are in the Social Security system. Second, any government that for one reason or another either has not elected CalPERS or has chosen not to adopt a 457 Plan. Third, any government that has one or more classes of employees that have a desire for deferrals in addition to those generally offered. Because a government plan may pick and choose who shall participate in a Pick-Up plan without the restrictions of the discrimination rules otherwise applicable to qualified plans, the government may offer individualized plans for special categories or groups of individuals. For example, a government may have certain individuals who seek a vehicle to defer large sums late in their careers to provide sufficient retirement benefits. The pick-up plan fulfills a need to provide substantial benefits to selected individuals up to the IRC 415 dollar limit (currently $42,000 per year). · Money Purchase Pension Plan . This is a type of plan to which there are generally no elective employee contributions. Many governmental entities maintain this type of plan. However, using the "pick-up" rules in Code section 414(h)(2), "units of government" (which generally follow a similar, but not identical definition to the "governmental plan" definition in Code section 414(d)) may treat certain mandatory employee contributions as employer contributions, thus allowing "units of government" to have mandatory employee contributions made to their money purchase pension plans.
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Aug 4, 2014 12:48
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Ron Don Volante posted:Does it ever make sense to avoid investing in your 401k entirely (assuming no/low match) and just invest the money on your own? I'm not even sure I'll be alive at 59.5, so I'm not liking the idea of a withdrawal penalty. It sounds like a Roth IRA may be more appealing for you, since you can withdraw your basis without penalty. The rest of it, however...
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Aug 4, 2014 15:27
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SpelledBackwards posted:5. DON'T TRY AND TIME THE MARKET. Length of time in the market is more valuable in the long run (i.e., 20-40 year time horizons that retirement entails) than trying to buy in at lows. As explained the OP, but also in a nice article just recently posted in the thread, sitting out of the market because you're trying to predict a high or catch a low will just cost you money in the long run. That assumes that you have the long-game in mind and do not panic sell on downturns, and hold your investments. As you get closer to retirement, you will be rebalancing your portfolio to gradually reduce the impact to you in the case of a huge stock market downturn (as in, your investments will be geared more toward assets which are resistant to the same downturn). That's why you don't just keep everything 100% in stocks, despite them being the performance leaders over the last 100+ years. From a while ago, but this is how i feel about investing in any stock-market exposed investment today. To give some perspective on debts: $3500 @ ~11% $24000 @ ~3.5 My employer offers 401k through Fidelity, but there are no matching funds available to me until the middle of next year due to time with the company. I have very few expenses, but here's a short rundown: Rent - $200/mo Food (incl restaurants and liquor) - $450/mo Entertainment - $100/mo Shopping - $150/mo Minimum payment on loans - $275/mo Those are all monthly averages (over the past 5 months) and not just pulled out of my rear end. There are additional (non-reoccurring) expenses not itemized here in the realm of ~$300/mo. Income: ~$2300/mo after taxes, insurance, and a 4% Roth 401k contribution. My net monthly money to play around with is $825 by these calculations, and I'm putting 100% of that into my high APR debt (which, accordingly, will be paid off in around 4 months). Which is all fine and dandy, and advice I'd expect to hear from you guys. Here's the harder -- and far more subjective -- part: Man, the stock market is going to crash in a substantial way within the next three years, guaranteed. The current valuation of the market, as a whole, is way out of line. We're sitting at an enormous peak! I don't have any money in the system as it stands, and the investments that are targeted towards me -- oh yeah, I'm 26 -- are focused on aggressive growth aka the same stocks that will lose 10-30% of their value in an overarching market correction. My finances are easy now: pay high % debt. In four months when all I have left is ~3.5% Student Loans, it gets murky. I'd like to be able to save in a Roth IRA using a stable, recession-proof vehicle (VANG TOT BD MKT INST being my current choice) and then flip those funds into a more aggressive growth vehicle once this poo poo is closer to bottoming out (which could be ~6 years from now). Why is being a Nostradamus, in this sense, a bad idea? I think anyone could look at historical trends and see we're due for a double dip. What's the point of investing into growth (I'm not against investing in principle!) when it's all gonna fall?
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Aug 4, 2014 15:59
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No seriously. This is the long term investment thread. Here we think about how to minimize the deleterious effects of market behavior, whose timing is unpredictable even by experts. No one is going to enable your wild ideas about what the market is going to do three years from now or what is "recession proof".
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Aug 4, 2014 16:11
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Since this is your first post in this thread, I would suggest you read a couple of the books from the OP if you haven't. They'll tell you all about why your market timing idea is a horrible idea and why no investment that will keep ahead of inflation is recession proof. Return and risk are inseparable.
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Aug 4, 2014 16:17
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Okay, and where can I talk about potential sky-fallings with discussion on assets that are less prone to losing value during bear markets as an overall strategy for investing into a bull market in the future? It still seems like a long-term strategy (and long term investing), but if this isn't the thread for discussing investing based both on objective and subjective measures, then where is?
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Aug 4, 2014 16:20
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DNK posted:
There are many problems with your post, but here is one of them: You think Vanguard Total Bond Market is somehow "recession-proof" and it's "guaranteed" that there's going to be a big stock market crash in the next 3 years. Meanwhile, other Nostradamuses (Nostradami?) will go on long rants about how "everyone knows" that bonds are due for a huge correction. Clearly not everyone "knows" the same things that you know about what stocks and bonds are definitely going to do in the next three years.
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Aug 4, 2014 16:24
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Ah! But I am very receptive to your head-slapping. I'm more or less looking to get assaulted for my lovely beliefs about financials as I know just enough to be dangerous to myself. Why are bonds due for a (relatively greater) correction than an aggressive growth stock-based fund? I figure one of those will tank harder than the other, but I'm not betting on a winner -- I'm betting on the one who will lose less. e: perhaps my use of "recession-proof" was very poorly worded. I don't care about not losing money. I merely would like to place my assets in a safer vehicle because of my feelings. DNK fucked around with this message at 16:30 on Aug 4, 2014 |
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Aug 4, 2014 16:28
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The problem is thinking something is "due." If you could actually predict the stock market reliably enough to stay ahead of the S&P 500 over a couple of decades, you'd be better than every mutual fund manager there's ever been. Share prices take into account both risk and return, so when a lot of people start thinking something is "due" to drop, the share price drops. You can't predict when that's going to happen any better than throwing darts at a wall.
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Aug 4, 2014 16:30
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Hm. Isn't there any speculation on how the stock market has expanded ~30% this year while overall world GDP is sitting at like ~4%? Or looking at historical market "fits"? I'm not completely a nutter; I merely have a very cynical view of how the overall market is currently valued (a personal opinion, granted) and would like to invest based on that, for the time being.
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Aug 4, 2014 16:35
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DNK posted:Ah! But I am very receptive to your head-slapping. I'm more or less looking to get assaulted for my lovely beliefs about financials as I know just enough to be dangerous to myself. Sorry, my point was that none of those things is predictable. I just wanted to correct what seemed to be an assumption on your part that nobody was predicting doom and gloom for bonds; in fact, many people are. Luckily they are all wrong to think that they can predict asset price movements in any way. Keep in mind, if you say that you can predict price movements that allow you to get a better risk/reward than everybody else, you are saying that you know better than everybody else in the financial markets. If there was a way to get a better risk-reward than just owning stocks and bonds, people would be doing it. You clearly realize that you are not the world's biggest financial genius, you just have to take that to the next step and realize that it implies a buy-and-hold strategy.
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Aug 4, 2014 16:35
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Echo 3 posted:Keep in mind, if you say that you can predict price movements that allow you to get a better risk/reward than everybody else, you are saying that you know better than everybody else in the financial markets. If there was a way to get a better risk-reward than just owning stocks and bonds, people would be doing it. You clearly realize that you are not the world's biggest financial genius, you just have to take that to the next step and realize that it implies a buy-and-hold strategy. I don't have to be smarter than everyone in order to be smarter than somebody. This is a game where I'd say: "I've climbed this peak long enough, time to move to assets that will devalue less" during a bull season and vice versa during a bear season. I think that's the general idea of buy-low/sell-high. For me, right now, I'm entering with effectively zero dollars in the system. I'm "buying-high" as it were, as the stock market is at objectively all-time highs right now. It is a certainty that it will be lower in the future (how much lower is the debatable part). I do want in on the game, but it feels rear end-backwards at the moment, y'know?
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Aug 4, 2014 16:52
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There's of course no guarantee that the market is "due" for a crash, but let's just say for the sake of argument that you had a crystal ball and somehow knew it was going to happen. If you try to time it, you could end up buying when you think the crash is done, but really it was just a dead cat bounce, and the crash just keeps getting worse so you've still lost out, and additionally you missed any gains the market made leading up to the crash. On the other hand, you might be more conservative and wait until the market is truly demonstrating long-term growth again before buying, in which case you ended up missing the big post-crash bounce and potential gains there. So unless you have every bit of information, even if you were certain about one aspect, it's not enough to really time things right. If you wanted to sit down and crunch the numbers to any of the above scenarios, I suspect that dollar-cost averaging over time would actually beat the performance of even getting the timing mostly right, because one little mistake could kill all your gains so easily. By dollar-cost averaging instead, you're assure that you buy the peaks as well as the dips, and take advantage of the one thing that is closer to certain than anything else: that the market will go up over time.
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Aug 4, 2014 16:56
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DNK posted:objectively all-time highs right now There was an all-time high in 1959, and the market stayed above it until 1974. There was an all-time high in 1992, and the market had almost tripled by 2000. If something like that happens again now and you're out of the market because of this 3-year idea you have, you'll miss a hell of a lot of upside. A combination of stock and bond funds is probably safer than just a bond fund. Bond funds are not "safe".
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Aug 4, 2014 17:13
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DNK, this article was posted a few pages ago, but I think it does a good job demonstrating what some of us are saying: http://awealthofcommonsense.com/worlds-worst-market-timer/ Don't be so afraid to 'buy high'
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Aug 4, 2014 17:16
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DNK posted:I'm "buying-high" as it were, as the stock market is at objectively all-time highs right now. It is a certainty that it will be lower in the future (how much lower is the debatable part). A growing market will frequently be at all-time highs, otherwise how does it grow? Looking at the history of the S&P 500 (especially on a log scale), look at how many buying opportunities you'd have missed if you operated under the assumption that "all-time highs" are not good times to buy in: 
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Aug 4, 2014 17:17
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The hypothetical I'm wrestling with is that I'm positive that I'll be able to invest into a weaker market in the future. I'm sure there will be a valley lower than today's mountain. And that is the Farseer-ish claim with which you are all in agreement is wrong in principle. Duly, it is a lovely long-term investment strategy to not invest. Got it. What are the (overarching; I'm sure the details are horrifying) penalties and fees associated with moving assets within a IRA/401k into different vehicles? There's a question with which I have a burning desire to know the answer to.
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Aug 4, 2014 17:22
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So pick a price that you are willing to invest at. For example, you'll buy the S&P at 1700. Outcome 1, maybe 80-90% likely, is that you'll get it Outcome 2, maybe 10-20% likely, is that the S&P will never in your life get that low again. Then what, do you never buy a stock in your entire life? Edit: Outcome 3, two years from now the bull market is still raging and you can't take waiting anymore. You buy the S&P much higher than it is today.
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Aug 4, 2014 17:26
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Worth keeping in mind is that in 3 years even if you knew there was going to be a market drop of 20%, you'd be missing out on dividends in the meantime. This is another reason that as long as you have diversified holdings (i.e. it's very unlikely that all asset classes will take a poo poo at the same time) and can re-balance after a crash, it's extremely hard to beat a buy and hold strategy even if you mostly got the timing correct.
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Aug 4, 2014 17:35
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What's a good way to figure out how much I should continue putting into my SEP-IRA? I'm 28 years old and I have $120,000 in my retirement account already. It's taken a significant amount of discipline and sacrifice to get to that point this early in my life and frankly I'm not too keen on dumping 20% of my gross income into my retirement account for much longer, I'm more interested in financial independence and early retirement at this point. Is there a ballpark amount that you can have saved by the time you're 30 that will essentially make you (reasonably) "set" for your long-term/traditional retirement savings? My wife also has about $25,000 in her 401k, $30,000 in a roth IRA, and she has a pension that will allegedly be there when she retires. I think we're on the right track to have enough to retire by the time we're 70, am I incorrect in this assumption? tl;dr I'm sick of playing the safer long game and I'd like to now work towards short-term financial independence, do I have enough saved already or do I still need to dump some more into the retirement accounts first?
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Aug 4, 2014 17:40
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DNK, you shouldn't try to be like Nostradamus, more like Socrates.DNK posted:What are the (overarching; I'm sure the details are horrifying) penalties and fees associated with moving assets within a IRA/401k into different vehicles? There's a question with which I have a burning desire to know the answer to. To answer your question, fees for transferring from one mutual fund to another should be small or zero as long as you are using your IRA provider's mutual funds (for example, Vanguard mutual funds within a Vanguard account)
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Aug 4, 2014 17:44
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big data bitches posted:What's a good way to figure out how much I should continue putting into my SEP-IRA? How much are you spending in a year? Do you expect to keep the same lifestyle in the future? Let's say you're spending $30k a year as a couple. You need roughly $750k in today's dollars to reasonably retire. Stock market real (inflation-adjusted) returns can be conservatively set at 5% (historically they're ~7% real). You have $175k currently, which will hit the $750k you need in roughly 30 years, giving you a retirement age of 58 with these assumptions. So if you're spending relatively little and fine continuing to spend that forever, you're all set for retirement already. That said, you're leaving a lot on the table by ignoring retirement accounts. There are multiple ways to get that money back out while preserving the tax advantages and not paying a penalty - going all taxable investments isn't a great idea.
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Aug 4, 2014 17:50
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baquerd posted:How much are you spending in a year? Do you expect to keep the same lifestyle in the future? We try to live below our means, drive lovely 10+ year old cars we own outright, and have a 240k mortgage and no other debts. We want to have kids, and that's going to be expensive, so I'd like to have our retirements covered by the time the first kid pops out in two years. baquerd posted:There are multiple ways to get that money back out while preserving the tax advantages and not paying a penalty I'm listening 
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Aug 4, 2014 17:59
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DNK posted:The hypothetical I'm wrestling with is that I'm positive that I'll be able to invest into a weaker market in the future. I'm sure there will be a valley lower than today's mountain. Why are you positive? Even if you dip into tea leaves (technical analysis) it seems like we're sitting squarely on a trend-line that goes back to the 70s (or earlier) with P/E that might be in the highish end of normal, but still within practical norms. You can't predict the market. In 2000 maybe, but right now the market is pretty normative.
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Aug 4, 2014 18:06
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DNK posted:
Here are two charts showing why you should invest in stocks for the long term (>10 years) even if you think the market is overvalued currently. Also, if you really do think that there is going to be correction you should do a monthly contribution and then forget about it. It seems that there are four possible outcomes: (1) There is no correction and you are investing like normal - meh. (2) There is a short term correction and a following return to previous trend that includes your supposed ~30% overvaluation. Again, you are investing like normal only this time with a few months of cheap buy in - also meh. (3) There is a long term correction (i.e. the market drops and assumes a new trend upward). If you continue to invest over your lifetime, the overvalued purchases part of your portfolio would be only a small portion - again, meh. (4) Total economic collapse. Who cares what your retirement fund looks like?
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Aug 4, 2014 18:19
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on timing the market
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So, I'm kind of confused about how I should be investing money. I work for a public University, so I don't have access to a 401(k). Also, 5% of my pre-tax salary goes into a pension fund (which my employer "matches"). I surely won't stay at this job forever, so when I leave I can either leave the money behind and collect the pension when I retire (which would be a couple hundred bucks a month I think) or take the money I put in and move it into an IRA or other retirement account (and loose the fake "match" from the employer). I'd like to save more than that, and I have access to both a 457 and 403(b), and I can invest those in Vanguard funds. However my employer doesn't match them at all. Can anyone help me out with deciding if I should invest through my employer or just go all out on my own and put money into an IRA/Roth IRA through Vanguard?
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Aug 4, 2014 18:52
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FISHMANPET posted:stuff From the OP: quote:1) Contribute to 401(k) up to employer match You can replace 401k with 457 and 403b. Since there is no match for anything you put into these, you should max out an IRA. Then, if you can pay more into your 457 or 403b, do so up until you hit that 17,500 max. Then it's time for hookers or taxable accounts.
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Aug 4, 2014 18:54
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Also, the 403b and 457b limits are separate, meaning you can contribute $17,500 to each. If both offer similar funds, I would contribute the 457b first since it's almost exactly the same as the 403b except that you can withdraw money without early withdrawal penalties. Great if you want to retire before 60. Some employers offer roth 403b and roth 457b, so you may want to consider those as well.
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Aug 4, 2014 19:11
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big data bitches posted:We try to live below our means, drive lovely 10+ year old cars we own outright, and have a 240k mortgage and no other debts. We want to have kids, and that's going to be expensive, so I'd like to have our retirements covered by the time the first kid pops out in two years. So do you know how much you're spending a year? That's the rock bottom foundation of knowing how much you need to retire. Regarding pulling money back out of retirement accounts, penalty free: 1. ROTH IRA contributions can always be withdrawn tax and penalty free. 2. After 5 years, money rolled over into a ROTH IRA can be withdrawn tax and penalty free (you pay taxes but no penalty at the time of the rollover). 3. SEPP (Substantially Equal Periodic Payments)
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Aug 4, 2014 19:12
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Nail Rat posted:You can replace 401k with 457 and 403b. Since there is no match for anything you put into these, you should max out an IRA. Then, if you can pay more into your 457 or 403b, do so up until you hit that 17,500 max. Then it's time for hookers or taxable accounts. 457b actually has its own separate limit, so you can actually go full-baller status and do 35k total. e: beaten
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Aug 4, 2014 19:14
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I'm planning on putting in 10% of my salary (pretax or post tax I guess depends on if I do IRA or Roth IRA) which would put me a bit over $5500 limit, but only by a couple hundred dollars, so maybe it's not worth opening another account for now. Also, if I'm interested in the mechanics of automatically contributing money into a Vanguard fund as an IRA, Vanguard would be able to answer those questions, right? Mostly I'm wondering how I would contribute to a traditional IRA via direct deposit, which is actually post-tax money. Would it just be an adjustment on my taxes resulting in a larger refund? Also, I'm looking to potentially use this to save money for a down payment on a house. Looks like with a traditional IRA I can pull $10k but with a Roth I can pull out as many contributions as I want. I guess it all comes down to deciding if I plan on retiring in a lower tax bracket than I'm in now, or the same tax bracket.
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Aug 4, 2014 19:27
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DNK posted:The hypothetical I'm wrestling with is that I'm positive that I'll be able to invest into a weaker market in the future. I'm sure there will be a valley lower than today's mountain.
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Aug 4, 2014 19:44
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moana posted:It's weird you're so "sure" and "positive" given that you agree that your knowledge is lovely. Stop trying to time the loving market. I'm slowing comprehending this point, thank you.
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Aug 4, 2014 19:48
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Eyes Only posted:457b actually has its own separate limit, so you can actually go full-baller status and do 35k total. Pension plan + 5500 IRA + 35k retirement plans =  Of course, the jobs that offer those plans generally don't make that realistic (unless you have a spouse with a very high paying job so you can invest more than 50% of your income), but that would own pretty hard. quote:I guess it all comes down to deciding if I plan on retiring in a lower tax bracket than I'm in now, or the same tax bracket. The other thing to keep in mind here is, even if you "plan" to spend less money in retirement, the tax brackets may be higher in the future. They're much lower right now than they have been historically.
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Aug 4, 2014 19:50
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I think if I moved into a cardboard box and stopped eating for a year I could max out all of that.
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Aug 4, 2014 19:52
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FISHMANPET posted:I think if I moved into a cardboard box and stopped eating for a year I could max out all of that. You've lit the tuyop signal.
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Aug 4, 2014 19:52
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Nail Rat posted:You've lit the tuyop signal. He hasn't mentioned rhabdo or lifting yet.
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Aug 4, 2014 20:22
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