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Vilgan posted:Yeah, this is the case in a lot of companies. Pretty much every company of any size will have a 401k committee that is supposed to act in the interests of the employees and keep fees low, have good fund options, etc. The issue in many places is that the committee ends up being made up of HR people who don't really know very much and get information on what to do from any number of bad sources. This is made worse because VERY few employees ever reach out with comments, questions, etc. In my company of 3k+ highly paid professionals, I asked some questions about our 401k and I was apparently the first in over a year to reach out like that. I'm on the 401k committee at my company and we would LOVE to hear more input from employees about what they want. We get almost zero input or comments from employees. The more input we get from employees, the more pressure we can put on Fidelity to give us what we want. We try to do our best to improve the plan every year, but when we get no feedback at all we kind of have to assume, legally, that no comments means 'stay the course'. After reviewing our most recent plan numbers, it's shocking to me how many people obviously don't think or care about their 401k: - Almost 50% of employees didn't log in to their Fidelity account even once in 2014. - The majority of employees (all highly paid professionals, most over six figures) only contribute 5%. - Almost 20% of the total plan assets are sitting in a cash-equivalent money market fund. - Many, many people are sitting in underperforming, actively-managed funds with expense ratios in the 1.0 - 1.3% range, despite having access to several Spartan funds with ERs under 0.2%. So yeah, if you have an interest please speak up. Showing that you care at all puts you ahead of 90% of people. We want to hear from you, and your input gives us ammunition.
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Jan 4, 2015 18:47
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Based on this, I'm thinking of asking my HR to add a self directed brokerage account if they won't add Vanguard funds. It seems there's a fee of $100/year though, which diminishes its usefulness, at least in my case, quite a bit.
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Jan 4, 2015 19:19
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moodyhank31 posted:I would like some advice for my parents. I've been reading (and benefiting from) this forum a substantial amount so I talked to my Dad about his financial situation and told him I'd give him some advice if he gave me the concrete numbers to what I'm already mostly familiar with. The first thing I would do is figure out your dad's social security benefit. It looks like the post office used to not exactly pay into social security, which resulted in weird discounts to the benefit for postal employees. http://articles.chicagotribune.com/2004-02-01/business/0402010388_1_quesada-moore-significant-qualifier-windfall-elimination-provision. It looks like he might be OK but it's really impossible to tell without knowing exactly what the post office does with his withholding. You can register online and see all of your past earnings/withholding and estimated benefits on the ssa.gov website. Then I would have them make a budget and figure out what their annual living expenses are now, and figure out how to adjust those expenses based on what they want to do in retirement (i.e. travel or just sit around and watch tv all day). See how the budget looks compared to the pension and social security benefits (remember to figure out about how much tax you will pay on the benefits also - should be relatively small but depends on what state you live in ). Definitely get rid of the life insurance on your 16 year old brother (wtf?). I don't know enough about whole life to know if it's worth keeping once they are in their 50's or not, but at least look into getting rid of that also and replacing with term life insurance. They may decide that they don't need life insurance at all - I imagine the pension will still pay out, social security will still pay out in retirement, etc. I would get rid of the 10k in the stock purchase plan - is this money in a tax deferred account? If it is, you can roll it to an IRA at a custodian of your choice. If it's not, then you have to consider the impact of capital gains tax on the stock purchases and decide if it's worth moving it or not. I would do a full assessment of what they are invested in in the retirement accounts, and make sure they own somewhere around 30-50% stocks and 50-70 bonds. I would also make sure they are in low fee index funds and aren't getting ripped off high fee active funds, goofy annuity funds, etc. I would probably pay off the promo credit card debt personally, but there is technically no reason to do so if it's at 0%. Especially if having a $0 balance makes them more likely to start spending it up again (how did they get to 8k in the first place?). What state do they live in?
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Jan 4, 2015 19:27
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They live in Chicagoland. Thanks for the advice. I'll look into some of those things. I don't know the tax implications and ill get their fund breakdowns as well. I helped him look up his SS benefit recently and it was 2500/month if he retired at 66.
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Jan 4, 2015 19:40
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moodyhank31 posted:I would like some advice for my parents. I've been reading (and benefiting from) this forum a substantial amount so I talked to my Dad about his financial situation and told him I'd give him some advice if he gave me the concrete numbers to what I'm already mostly familiar with. Assuming the USPS doesn't hit catastrophe and nuke his pension, they'd have to actively gently caress up to not be set for retirement. SS will kick in another ~$20k a year, which brings us up to $45k a year without tapping into the 401ks. Using the 4% rule, they could stop contributing now and still be able to draw another $17k a year, which gets us up to $62,000. Mortgage should be almost gone by then, so that's pretty good. Fund allocation probably should be 50-55% bonds,. Make sure that they won't sell all of their stocks during the next market correction, since chances are pretty good that one will occur sometime in the next 10 years. You never want to be fully out of the market though. Even in retirement 30-40% equity is good to protect against inflation. Realistically, though, they should be putting in as much as they can afford to, within reason of course. It's always good to have more money than you need, but they've got enough already that there's no need to get extreme. If he can max, go hog wild. But with your little brother still in high school, they should be thinking about college. I wouldn't count on much assistance is he goes to a state school, and a non-Ivy private still might charge quite a bit, if they're planning on footing the bill for him. 401k contributions get added back to their AGI for the purposes of calculating aid eligibility too, so that won't help things. My parents made a similar income to yours, and I didn't get poo poo. At the very least, they'd want to put a few grand in so that their AGI is below ~$99,000. With the standard deductions, that'll put them in the 15% bracket for married couples, which means 0% tax on the dividends (and capital gains if they sell some) from your mom's stocks. That mortgage interest is so low that I wouldn't focus too much on paying it off early, same with the car. Pay down the CC before the 0% apr expires obviously. moodyhank31 posted:They live in Chicagoland. Thanks for the advice. I'll look into some of those things. I don't know the tax implications and ill get their fund breakdowns as well. If they're putting any money at all in their 401ks, they're income are low enough to not pay any tax on those stocks. Assuming neither one gets a massive raise, it's probably fine where it is. They might want to roll it over into a Roth IRA anyway. ChipNDip fucked around with this message at 19:43 on Jan 4, 2015 |
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Jan 4, 2015 19:40
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ohgodwhat posted:Based on this, I'm thinking of asking my HR to add a self directed brokerage account if they won't add Vanguard funds. It seems there's a fee of $100/year though, which diminishes its usefulness, at least in my case, quite a bit. The Self-directed option is mainly handy if you have a fairly large balance so you have enough yearly dividend income to cover the yearly fee and also don't need to do many trades to move over to the better Vanguard funds. Assuming you stick to ETFs, self-directed account trades are fairly cheap at only $8-$9 flat rate commission for each trade. moodyhank31 posted:They live in Chicagoland. Thanks for the advice. I'll look into some of those things. I don't know the tax implications and ill get their fund breakdowns as well. I believe if you push out retiring to 68 you get a slightly highly monthly benefit.
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Jan 4, 2015 20:36
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etalian posted:I believe if you push out retiring to 68 you get a slightly highly monthly benefit. Your benefit increases every year you delay claiming, up until age 70
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Jan 4, 2015 22:31
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On a side note one the great things about TSP is all the funds have really low expense ratios, even for target retirement and international stock funds.
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Jan 4, 2015 23:39
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Dead Pressed posted:I always kind of rolled my eyes when people mentioned reaching out to your hr group about benefits, but after some changes in my 401k plan (Jp Morgan retirement sold to some brand I have never heard of This also happened to my 401k, and no one I work with was given any sort of heads up about it. We just started getting calls and emails from Great Western or whatever the gently caress it is now, with oddly specific details of our 401k plans. It's fine, but it was handled atrociously.
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Jan 4, 2015 23:52
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On a side note this is pretty cool site for displaying overall basic states such as CAPE/Price to Book for different countries: http://www.starcapital.de/research/stockmarketvaluation
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Jan 4, 2015 23:57
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I have a really stupid question but I'm psyching myself out a bit. I've got my IRA invested 100% in VFFVX - Vanguard Target Retirement 2055 Which is supposedly made up of the following four funds: 1 Vanguard Total Stock Market Index Fund Investor Shares 63.2% 2 Vanguard Total International Stock Index Fund Investor Shares 26.8% 3 Vanguard Total Bond Market II Index Fund Investor Shares† 8.1% 4 Vanguard Total International Bond Index Fund 1.9% Instead of dumping everything into VFFVX should I instead purchase the individual admiral class versions of the four funds and take advantage of even lower expense ratios? Is there any reason to not do this?
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Jan 5, 2015 00:58
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fruition posted:I have a really stupid question but I'm psyching myself out a bit. The only reason not to do this is if you are so hands off that you don't feel like rebalancing the proportions later on. The Target Retirement fund will do this automatically as you age (and the fund nears its target date), shifting more of the portfolio towards bonds. If you are okay with rebalancing it yourself (you could just look at what the current portfolio of the 2055 fund was at the time), then it would save you a teeny bit in expenses to switch to the admiral funds if you qualify for them. At most you would only want to do this probably once per year, but you could probably let it go a few years at a time without touching it if you wanted or forgot 
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Jan 5, 2015 01:01
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fruition posted:Instead of dumping everything into VFFVX should I instead purchase the individual admiral class versions of the four funds and take advantage of even lower expense ratios? Is there any reason to not do this? The whole point of target retirement funds is lazy investing, since things like asset changing over time->lower risk and also rebalancing get done by Vanguard. I consider Vanguard target funds to be the best option since the they only have a 0.18 ER. I don't consider a 0.08 improvement to be worth it if you want to do simple lazy retirement investing. Most ER big improvements is going from the lovely 1.0-1.2% found in some 401k funds down to more reasonable 0.05-0.2% ER found in low cost ETFs and mutual funds. Also even low cost Vanguard international ETFs charge around 0.15%, so it's not a big saving trying to build your own portfolio to save costs. I would also add some REIT exposure, (VNQ and VNQI) in addition to using target retirement fund as a core investment. etalian fucked around with this message at 01:07 on Jan 5, 2015 |
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Jan 5, 2015 01:04
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flowinprose posted:The only reason not to do this is if you are so hands off that you don't feel like rebalancing the proportions later on. The Target Retirement fund will do this automatically as you age (and the fund nears its target date), shifting more of the portfolio towards bonds. Yeah, just this. Convenience is legitimately worth money and it's reasonably priced in this case, so don't feel bad if you just want to leave it where it's at and go do fun things instead of loving around with mutual funds.
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Jan 5, 2015 04:15
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Thank you both, this is very helpful.
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Jan 5, 2015 04:19
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slap me silly posted:Yeah, just this. Convenience is legitimately worth money and it's reasonably priced in this case, so don't feel bad if you just want to leave it where it's at and go do fun things instead of loving around with mutual funds. While I do agree that convenience is worth a money it should be pointed out that even a small percentage like 0.08 is a non-trivial sum of money since portfolios contain significant sums of money. It's $80 a year for a $100k portfolio for example and while this is not onerous, you should consider if you want to pay that to save an hour of a year. If you don't want to spend the time or think you'll forget it can definitely be worth however.
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Jan 5, 2015 04:42
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fruition posted:Thank you both, this is very helpful. The fund also pays a small dividend of 1.8%, so you would only be giving up a small amount each year. I think such as small ER is really not significant compared to bigger things such as maxing out the IRA contribution or having fire-forget investing since Vanguard automatically rebalances the mutual fund over time to reduce risk. It also solves the problem of compulsive decision making in which people do wild investments just because they can.
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Jan 5, 2015 05:09
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asur posted:While I do agree that convenience is worth a money it should be pointed out that even a small percentage like 0.08 is a non-trivial sum of money since portfolios contain significant sums of money. It's $80 a year for a $100k portfolio for example and while this is not onerous, you should consider if you want to pay that to save an hour of a year. If you don't want to spend the time or think you'll forget it can definitely be worth however. For taxation purposes, don't the Target Retirement funds and similar funds-of-funds have more turnover in a year than getting the same funds and only rebalancing once/twice per year? Off course that wouldn't matter at all if you're using tax advantaged accounts, but I imagine it's less optimal to use TR funds with taxable accounts.
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Jan 5, 2015 05:17
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SpelledBackwards posted:For taxation purposes, don't the Target Retirement funds and similar funds-of-funds have more turnover in a year than getting the same funds and only rebalancing once/twice per year? Off course that wouldn't matter at all if you're using tax advantaged accounts, but I imagine it's less optimal to use TR funds with taxable accounts. It's still a mutual fund type classification not ETF, even though the main use is in non-taxable accounts means it's not a issue. Mutual funds in general have slightly less tax efficiency than ETFs due to the overall structure which means turnover or even big selloffs in the mutual fund can ripple back to individual investors via short term capital gain distributions.
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Jan 5, 2015 05:39
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The Wall Street Journal reports that Vanguard saw an inflow of $216 billion in 2014, a record for any mutual fund firm. The word continues to get out there. It appears that actively managed U.S. equity funds had net withdrawals of $12.7 billion too. e: the word, not the weird. pig slut lisa fucked around with this message at 17:14 on Jan 5, 2015 |
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Jan 5, 2015 15:52
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My 401k administrator overlords have finally decided to give us access to a bunch of Spartan funds, so I can ditch my 0.66% target retirement fund! Does this look like a good allocation for a 35-year old? SPTN 500 INDEX INST (FXSIX), Large Cap, 0.05% GER - 50% SPTN EXT MKT IDX ADV (FSEVX), Mid Cap, 0.07% GER - 20% SPTN GLB XUS IDX ADV (FSGDX), International, 0.28% GER - 10% SPTN INFL PR IDX ADV (FSIYX), Income, 0.1% GER - 10% SPTN US BOND IDX ADV (FSITX), Income, 0.17% GER - 10%
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Jan 5, 2015 16:27
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SlightlyMadman posted:My 401k administrator overlords have finally decided to give us access to a bunch of Spartan funds, so I can ditch my 0.66% target retirement fund! Does this look like a good allocation for a 35-year old? I would suggest reading the last page or two of the thread, there has been a lot of allocation chat. I'd go for a 70/30 U.S./intl split period, and then maybe 10-20% bond at your age, and a 60/40 large/mid split, roughly. Add some REIT if you have options to do so.
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Jan 5, 2015 16:41
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SiGmA_X posted:I would suggest reading the last page or two of the thread, there has been a lot of allocation chat. Sorry, I thought we were chatting allocation so I decided to post mine. Is that not what this thread is for anymore? SiGmA_X posted:I'd go for a 70/30 U.S./intl split period, and then maybe 10-20% bond at your age, and a 60/40 large/mid split, roughly. Add some REIT if you have options to do so. Thanks, I guess I am a bit under in international, I just get freaked out a bit by that 0.28% expense ratio. No real estate funds available, and pretty much everything other than what I posted above is ridiculously expensive.
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Jan 5, 2015 16:58
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what are the prevailing philosophies for investing HSA funds? should i keep enough to cover my deductible available in cash? I'm new to high-deductible health plans.
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Jan 5, 2015 17:13
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I love that people freak out at 0.28% nowadays!
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Jan 5, 2015 17:15
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slap me silly posted:I love that people freak out at 0.28% nowadays! It's Vanguard's fault; I look at that fund and it seems comparable to VTIAX in my IRA, which is 0.15%. I guess it's not a big deal, it just strikes me that it's almost twice as expensive as the Vanguard fund. Other funds seem to be a lot closer, like FXSIX and FSEVX compared to VTSAX's 0.05%.
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Jan 5, 2015 17:38
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Back before I knew anything I got into a large cap fund with 5% front load and 2% ER. So that is my personal concept of "stupidly expensive". It underperformed the S&P500 (its benchmark) very very badly in the tech crash, and was wiped from history a few years later - thus also teaching me about survival bias. Nothing like learning the hard way!
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Jan 5, 2015 17:56
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Mr. Glass posted:what are the prevailing philosophies for investing HSA funds? should i keep enough to cover my deductible available in cash? I'm new to high-deductible health plans.
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Jan 5, 2015 18:01
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slap me silly posted:Back before I knew anything I got into a large cap fund with 5% front load and 2% ER. So that is my personal concept of "stupidly expensive". It underperformed the S&P500 (its benchmark) very very badly in the tech crash, and was wiped from history a few years later - thus also teaching me about survival bias. Nothing like learning the hard way! Ha, that's pretty amazing how much things have changed recently then. When I posted last year about my 0.66% target retirement fund, somebody in this thread told me I shouldn't even bother contributing to my 401k if that was the best option I had available.
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Jan 5, 2015 18:01
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That EXT MKT index fund is not really a "Midcap" fund, it's a 500 Index Completion Fund. An 80%/20% ratio of SP500 to the Extended Market is how you emulate a "Total US Stock Market" fund. If you want to overweight small and midcap companies, push it higher than 20%. Also - your US Stocks (the 500 index and the Ext Mkt index) are excellent, best-in-class funds. Why not just go with those two and rely on your IRA for your international and bond exposure?
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Jan 5, 2015 18:04
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GoGoGadgetChris posted:That EXT MKT index fund is not really a "Midcap" fund, it's a 500 Index Completion Fund. An 80%/20% ratio of SP500 to the Extended Market is how you emulate a "Total US Stock Market" fund. If you want to overweight small and midcap companies, push it higher than 20%. Ah, thank you, I was just going by the classifications Fidelity gives me on their fund listing. I'll go with the 80/20 split between the two then, as you say. GoGoGadgetChris posted:Also - your US Stocks (the 500 index and the Ext Mkt index) are excellent, best-in-class funds. Why not just go with those two and rely on your IRA for your international and bond exposure? I could probably do that, it just requires a lot more work to rebalance, since I'm contributing to the Fidelity 401k and Vanguard IRA at different rates (around 3:1), and currently the 401k has about five times as much in it. I guess my question would be: just how bad are those other funds then?
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Jan 5, 2015 18:11
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SlightlyMadman posted:Ah, thank you, I was just going by the classifications Fidelity gives me on their fund listing. I'll go with the 80/20 split between the two then, as you say. SlightlyMadman posted:
The other funds are quite good. I would kill for them, as my 401k only offers Vanguard's 500 Index and Ext Mkt Index, as well as a bevy of AmericanFunds with 5% sales fees and 2% expense ratios. Your options are exceptional!
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Jan 5, 2015 18:23
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Awesome, based on the above feedback then, I'm thinking of revising it to: SPTN 500 INDEX INST (FXSIX) - 45% SPTN EXT MKT IDX ADV (FSEVX) - 15% SPTN GLB XUS IDX ADV (FSGDX) - 20% SPTN INFL PR IDX ADV (FSIYX) - 10% SPTN US BOND IDX ADV (FSITX) - 10%
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Jan 5, 2015 18:27
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Just out of curiosity, how bad would fund expenses have to be before opening a taxable Vanguard account would be preferable? I am loving the growing trend toward despising high fees.
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Jan 5, 2015 19:20
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This is after maxing company match and a roth IRA, yes? Cause those first before the taxable, regardless.
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Jan 5, 2015 19:24
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Bellagio Sampler posted:Just out of curiosity, how bad would fund expenses have to be before opening a taxable Vanguard account would be preferable? I am loving the growing trend toward despising high fees. This is highly dependent on a lot of factors as 401k withdrawals are taxed as normal income, and the contribution is taxed as well, and a taxable account would taxed at the capital gains rate. Doing some quick math with estimating taxes gives me between 1 and 2%. asur fucked around with this message at 21:56 on Jan 5, 2015 |
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Jan 5, 2015 21:38
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asur posted:and the contribution is taxed as well
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Jan 5, 2015 21:40
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Bellagio Sampler posted:Just out of curiosity, how bad would fund expenses have to be before opening a taxable Vanguard account would be preferable? I am loving the growing trend toward despising high fees. Let me try my hand at this question. Let us assume you have a given amount of money to put into a 401k or a taxable account, called P0. (1) You take the money as income, pay income tax on it (g1 = 1 - effective taxes rate on it) and put it in to a taxable account, it grows as P1 = g1P0 ea1*t (2) You put that money in to a 401K with (N=2) or without (N=1) match and the money grows over time as P2 = g2N*P0 ea2*t where g2 = (1 - effective tax rate at retirement). When P1 >= P2, you should choose a taxable account. This happens when a1 - a2 >= ln(g2*N/g1)/t. The tricky part is figuring out how to compare the effective growth rates (a1 and a2). Since the formula contains the difference between the two growth rates, the overall growth rate of the market doesn't matter, so we compare effective expense ratios due to taxes during the life of the the account, actual expense ratios on the account and the taxes from income either at pay day (g1) or in retirement (g2). ER401k - ERtaxes - ERVanguard >= ln(g2*N/g1)/t. Let us assume your tax rate now is 25%*, your tax rate in retirement will be 15%, the ER for Vanguard is 0.2%, and you intend to invest for 30 years. I find that ER401k must be 2.9% higher than ERtaxes to make the taxed account worth it with match. Without match, that difference is only 0.6%. I did this pretty quickly at work, so there are some simplifying assumptions, but the formula and explanations are there for you to play with. * In response to asur's comment, this should read total effective "one time" tax rates on the money in the account. So if you pay 25% income tax now and 15% capital gains tax when you withdraw the money, you would put g1 = (1-0.25)*(1-0.15) = 0.64 here, that will make the lovely 401k fund more appealing that the 25% assumed above. Alternatively, you can calculate the total tax burden over the life of the investment and calculate ERtaxes and use it directly. I don't know anything about taxes on investments and the numbers given above should be taken as merely representative of how to perform the calculation. MickeyFinn fucked around with this message at 00:07 on Jan 6, 2015 |
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Jan 5, 2015 21:46
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Saint Fu posted:It is? 401k withdrawals are taxed at normal income rates, there is no differentiation between contributions, dividends or other factors. @mickeyFinn - I think you're missing that gains are taxed at the capital gains rate for 1).
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Jan 5, 2015 21:54
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asur posted:@mickeyFinn - I think you're missing that gains are taxed at the capital gains rate for 1). That is included in ERtaxes or g1 depending on the time of the taxes. For instance, if you take gains every year and the taxes amount to 1% of the total account value, then ERtaxes=0.01. Alternatively, if you pay for all of the gains at the end when you withdraw them, you might put g1=(1-capital gains rate)*(1-initial tax rate), but I'm sure there is a tax law way of getting out the gains piecemeal or somesuch. I dunno anything about tax law, but the model above can be used with either reoccurring taxes (ERtaxes) or taxes at the beginning or end (g1). I guess I called the taxes at the end "income taxes" when I should have said "total effective tax burden on the money withdrawn". MickeyFinn fucked around with this message at 00:12 on Jan 6, 2015 |
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Jan 5, 2015 23:53
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