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Radbot posted:That dude is amazing. I wonder about that chart though - is it for MMM-style "eternal retirement"? Normally retirement models assume a drawing down of the original principal as one approaches death, but this one talks about being sustainable for 70yrs at a 4% annual withdrawal. That chart has issues. It's basic assumption is that if you (for example) spend 75% of your (annual) income and save 25% of your income then you need 75% of your annual income * 20 in savings so that you can live forever spending exactly as much in the future as you do now by withdrawing 4% annually. It's stupidly over-conservative and/or general.
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Feb 13, 2015 15:35
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I always look at the "4% safe withdrawal rate" more as a benchmark of how much you should have in your account at the point of retirement, and not really what you will be doing when you actually retire. Also, using 300 times your expected monthly expenditures comes up with the same number. When threads on Bogleheads.org ask the question of how much people who are actually retired are drawing off of their retirement accounts, the overwhelming number say "as much as I need", and staying at or under that 4% withdraw rate means their accounts are actual getting bigger over time, even as they draw against them.
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Feb 13, 2015 16:32
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Murgos posted:That chart has issues. It's basic assumption is that if you (for example) spend 75% of your (annual) income and save 25% of your income then you need 75% of your annual income * 20 in savings so that you can live forever spending exactly as much in the future as you do now by withdrawing 4% annually. It sounds like you're angry at the chart/article because you think they're holding themselves out to be a precise prescription for an invite spectrum of wants and needs. Maybe it would help to read two companion pieces on the site, "When the back of the napkin can be worth millions" and "The 4% rule: the easy answer to ' how much do I need for retirement?'". I'd link but I'm on my phone.
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Feb 13, 2015 17:20
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The funniest thing about this chart is that I can hand it to a homeless & unemployed guy and say "Hey, you're retired!"
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Feb 13, 2015 18:22
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So, basic sanity check. I just became eligiible for my employer's 401a plan (public University, so now 401k). I pay in 5.5%, they match 10%, pretty great deal (it used to be 2.5%/13% but oh well). It's administered through Securian, but they over Vanguard plans. In fact their default plan for me was the Vanguard Target 2050 retirement plan (I'm 28, makes sense). So I guess I'm just posting as a sanity check. I'm not really interested in doing a ton of work to try and balance my portfolio (at least not right now) so this seems good, right?
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Feb 13, 2015 18:33
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You're probably good, but just in case, what are the expense ratios they're offering? The nice thing about putting in percentages through your work 401k is that you don't have to have a minimum balance on any one fund, so allocation is easier to manage early on. If the expense ratios of the index funds they offer are way lower than the Target 2050, it may well be worth it to spend fifteen minutes doing the percentage allocation yourself. (seriously, it'll take you no time at all to come up with the same allocation as the Target fund and you can check it here if you're worried)
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Feb 13, 2015 18:45
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So the 2050 Target is currently 62.7% Vanguard Total Stock Market Index Fund Investor Shares, 27% Vanguard Total International Stock Index Fund Investor Shares, 8.2% Vanguard Total Bond Market II Index Fund Investor Shares, and 2.1% Vanguard Total International Bond Index Fund Investor Shares. The Expenses for the fund are 0.22%. I can get the two stock funds at 0.07% and 0.08% each, but I can't get the specific bond funds. There are a few domestic bond funds (Vanguard® Intermediate-Term Inv-Grade Admiral Shares, Vanguard® Long-Term Inv-Grade Admiral Shares, Vanguard® Inflation-Protected Securities Inst. Shares) with expenses of 0.11%-0.16%, but no international bonds that I can see. So from what I can tell it's probably not worth it for me to try and find the mix myself, but I could be convinced otherwise.
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Feb 13, 2015 19:20
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Can someone please confirm: If I open a Roth IRA anytime before tax day, I can immediately deposit $11k as both '14 and '15 max contributions.
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Feb 13, 2015 19:46
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Splinter posted:Can someone please confirm: If I open a Roth IRA anytime before tax day, I can immediately deposit $11k as both '14 and '15 max contributions. Yes. As long as you don't exceed the Roth IRA income maximum. http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2014
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Feb 13, 2015 19:48
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pig slut lisa posted:It sounds like you're angry at the chart/article because you think they're holding themselves out to be a precise prescription for an invite spectrum of wants and needs. U mad bro? Lol, how dare someone criticize the great MMM! The chart is not useful. For anyone. Despite the article claiming that it's going to answer the question "how can I possibly know when I’ll have enough to retire myself, with a completely different lifestyle?”" it actually does nothing of the sort.
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Feb 13, 2015 19:50
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Murgos posted:U mad bro? Lol, how dare someone criticize the great MMM! I guess I don't exist, because I saw that chart and a light bulb went off in my head: if I reduce spending permanently, but don't reduce my income, then not only does my net worth grow faster but it doesn't need to be as high in order for me to achieve FI. The exact numbers aren't important; you're failing to see the forest through the trees. But hey, keep loving that chicken.
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Feb 13, 2015 19:54
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Dessert Rose posted:I guess I don't exist, because I saw that chart and a light bulb went off in my head: if I reduce spending permanently, but don't reduce my income, then not only does my net worth grow faster but it doesn't need to be as high in order for me to achieve FI. Really, you needed someone to hold your hand and tell you that the more you save the faster it grows? That the less you spend the longer your savings will last? Good on yer bro. Here is some non-obvious information that will blow your mind: http://www.onefpa.org/journal/Pages/Portfolio%20Success%20Rates%20Where%20to%20Draw%20the%20Line.aspx Murgos fucked around with this message at 19:58 on Feb 13, 2015 |
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Feb 13, 2015 19:56
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Dessert Rose posted:if I reduce spending permanently, but don't reduce my income, then not only does my net worth grow faster but it doesn't need to be as high in order for me to achieve FI. Yeah, this nails it pretty well. To claim the chart has absolutely no value is pretty 
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Feb 13, 2015 20:04
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Murgos posted:Really, you needed someone to hold your hand and tell you that the more you save the faster it grows? That the less you spend the longer your savings will last? These are obvious statements. What isn't so obvious is how quickly your savings can achieve fusion and become effectively infinite. At least in my mind, the idea of having enough money to "live off the interest" was a pipe dream only attainable through a significant windfall. Then some dude posted a chart that showed the implications of those two obvious statements followed through to a conclusion I, and many others I know, had trouble making. You can keep on belittling me for not working this out from first principles - it's certainly possible to without reading it on someone's blog - but the cool thing about not living in a vacuum is that we can benefit from other minds' thought processes and build on them. It's not like he pretends that it's some big, complicated thing that he's a genius for figuring out - quite the opposite, in fact.
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Feb 13, 2015 20:04
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FISHMANPET posted:So the 2050 Target is currently 62.7% Vanguard Total Stock Market Index Fund Investor Shares, 27% Vanguard Total International Stock Index Fund Investor Shares, 8.2% Vanguard Total Bond Market II Index Fund Investor Shares, and 2.1% Vanguard Total International Bond Index Fund Investor Shares. International bonds are only 2% of your allocation; it's totally worth it imo. Do the two stock funds and the intermediate bond fund for the whole 10% of your bonds, and ignore international bonds for now. If you're super concerned about it, wait a few years and add a bond fund using your IRA to include international, but I wouldn't be too concerned either way.
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Feb 13, 2015 20:09
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moana posted:International bonds are only 2% of your allocation; it's totally worth it imo. Do the two stock funds and the intermediate bond fund for the whole 10% of your bonds, and ignore international bonds for now. If you're super concerned about it, wait a few years and add a bond fund using your IRA to include international, but I wouldn't be too concerned either way. While there isn't a wrong answer here (because the fees are already so low), I'm going to say the opposite. If you (FISHMANPET) stay in the target retirement fund, you'll be paying $100 per hundred thousand dollars invested per year to have Vanguard balance your portfolio for you. Meh.
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Feb 13, 2015 20:16
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I have a 457 plan from when I was an employee of a municipal government. I still work "seasonally" for them, mostly scorekeeping for various sports leagues that the parks and rec department runs. As a seasonal employee I'm not adding any more money, or getting a match from the city into the plan. There's about $1300 in there right now. Since I got my current job and switched to working seasonally with the city, they've switched plans to PARS (public agency retirement services) while the 457 is with FTJ Fundchoice. What should I do with this money? I'm not sure if I can roll this into an IRA, since I'm still considered an employee. JUST MAKING CHILI fucked around with this message at 23:07 on Feb 13, 2015 |
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Feb 13, 2015 21:09
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I recently read the Bogelhead's Guide to Investing and I feel like it left me more confused that when I started. I really just want to be a passive investor with this small windfall that I received recently (around 50k); however all I really got from the book is that I should own my age in bonds. What would be a good allocation for a 25 year old who has already maxed his Roth IRA for 2014 (first year contributed)? Which three funds should I buy and what should be my allocation to each fund percentage wise?
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Feb 13, 2015 22:41
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trigonsareNOThomo posted:I recently read the Bogelhead's Guide to Investing and I feel like it left me more confused that when I started. I really just want to be a passive investor with this small windfall that I received recently (around 50k); however all I really got from the book is that I should own my age in bonds. What would be a good allocation for a 25 year old who has already maxed his Roth IRA for 2014 (first year contributed)? Which three funds should I buy and what should be my allocation to each fund percentage wise? The JLCollins stock series should help you out - http://jlcollinsnh.com/stock-series/ Or alternatively this PDF by the Four Pillars author, which was pretty much written specifically for people like you asking that exact question - http://www.etf.com/docs/IfYouCan.pdf You might notice that the two links I just sent agree with each other that you should hold a lot of the Total US Stock Market, but they disagree on what the remainder of your portfolio should be. I suggest putting it all in Vanguard Target Retirement 2055 while you form a conclusion of your own!
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Feb 13, 2015 22:50
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I work for a small company (~10ish employees) that does not offer any sort of 401k plan. Where is the best place to start researching the pros/cons of a workplace 401k and implementation options, etc. so that I can present them to the company president at some point in the future and hopefully convince him to enroll us in one? Ideally I'd be the one who ultimately chooses our provider/fund options.
khysanth fucked around with this message at 20:47 on Feb 17, 2015 |
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Feb 13, 2015 23:01
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trigonsareNOThomo posted:I recently read the Bogelhead's Guide to Investing and I feel like it left me more confused that when I started. I really just want to be a passive investor with this small windfall that I received recently (around 50k); however all I really got from the book is that I should own my age in bonds. What would be a good allocation for a 25 year old who has already maxed his Roth IRA for 2014 (first year contributed)? Which three funds should I buy and what should be my allocation to each fund percentage wise? You can also just with a life strategy fund, the aggressive growth fund includes 20% bond allocation. Nice thing about Life Strategy funds is they already include exposure to US stock, international stocks plus diversified bond exposure. https://investor.vanguard.com/mutual-funds/lifestrategy/#/ Basically the 3 fund profile concept all in a single fund.
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Feb 13, 2015 23:03
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Chaucer posted:Yes. As long as you don't exceed the Roth IRA income maximum. Awesome. Follow up question: I'm 28, in California and am currently making around 94k. I'm already contributing to my 401k up to my employers match. From what I've read, it sounds like I should open a Roth IRA, probably with Vanguard. Is that my best option? Any other companies to consider? Some friends have been hyping Betterment recently, but I don't really know why or why not I'd choose that over Vanguard or any other company. At this point I'd like to take a set and forget approach, but I could see myself wanting to get more involved in the future.
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Feb 14, 2015 00:01
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Vanguard is the best for passive investing because of the unique ownership structure. However, Fidelity and some others have some reasonably priced index funds. Betterment is a little more expensive but still reasonably priced, and definitely legit if you don't feel like loving around with it for yourself. Example: Once you get $100k in there, Betterment charges you an extra $150 per year for every $100k in your portfolio, or $1500 per year at 1 million. You could get roughly the same thing at Vanguard for no extra cost if you maintained it yourself. slap me silly fucked around with this message at 00:15 on Feb 14, 2015 |
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Feb 14, 2015 00:12
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Betterment's fee is in addition to the fees of the ETFs they invest on your behalf, so I would just go with Vanguard. Betterment does tax loss harvesting once you have $50,000 invested with them which is a nice benefit, but it doesn't help in a tax advantaged account like a Roth or traditional IRA.
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Feb 14, 2015 00:21
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While $150/yr per 100k isn't a lot, it is important to note that that $150 is a compounding loss. Like, year 10 you won't have been charged $1500 for management, it'll be $150*(10 years of interest) + $150*(9 years of interest) + $150*(8 years of interest), etc. With 6% annualized returns that's actually $2,095. Something to think about, I guess. Go Vanguard!
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Feb 14, 2015 00:26
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Yes, definitely. I still consider it a huge improvement over the extra 1-2% that several people I know are paying.
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Feb 14, 2015 00:30
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THF13 posted:Betterment's fee is in addition to the fees of the ETFs they invest on your behalf, so I would just go with Vanguard. Betterment does tax loss harvesting once you have $50,000 invested with them which is a nice benefit, but it doesn't help in a tax advantaged account like a Roth or traditional IRA. Vanguard's also has lots of fire and forget type funds for investors like Life Strategy Funds. I consider the Aggressive Growth Life Strategy Fund to be the best bet for most people since it includes a 20% diversified bond allocation. I'm sort of curious if robo-advisors like Betterment can actually do better than something simpler like a 3 portfolio fund. for example the Vanguard aggressive growth fund has a annualized performance around 8% 
etalian fucked around with this message at 00:47 on Feb 14, 2015 |
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Feb 14, 2015 00:43
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FYI for anyone that did a backdoor Roth last year (I did), this link helped me out tremendously when doing my taxes: http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html I contributed to a Roth for the first few months of the year, sold a bunch of stock, then realized my MAGI would be well into the phase-out limit for Roth contributions. I then backdoored the rest of my $5500. It was pretty easy to enter all of this into TurboTax using the guide above. Thankfully, the amount I had directly contributed to my Roth ended up being like $40 short of my phased-out Roth limit, given my MAGI. Boy am I glad I jacked my 401k contributions up to 50% for November and December! Dodged a bullet there... Henrik Zetterberg fucked around with this message at 02:01 on Feb 14, 2015 |
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Feb 14, 2015 01:30
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Quick question: I'm contributing to my Roth Thrift Savings Plan (401k equivalent) but since I'm military, no match. I know with the TSP I'm limited to the products available to me, but one of the options is an S&P500 index fund, and the net expense ratio for the TSP is ludicrously low, like 0.029%. Even with a Vanguard IRA I'd be paying ~0.19% so as I understand it I'm best off maxing my TSP contribution before messing with an IRA. Am I terribly wrong to be maxing the TSP contributions before going and opening a Roth IRA? Also I was reading on the TSP website that some of their administrative costs are offset by forfeited TSP matching funds from people leaving government service before their accounts vest and I felt kinda evil, somehow...
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Feb 14, 2015 06:34
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TSP gets cheap expense ratios mainly due to how the assets under management is really massive given the size of the US government. To your other question TSP is good since it allows you sock away money pre-tax. Also similar to a straight IRA there are special tax breaks if you meet the low income requirements: http://the-military-guide.com/2012/07/25/the-tsp-matches-contributions-for-military-members/ TSP also has lifecycle funds for people who want to do fire and forget investing. If you want something more custom: 20% in F Fund (Bonds) 30% in I Fund (International Stock) 35% in C Fund (mid/large cap US stocks) 15% in S Fund (Mid/small cap US Stocks) etalian fucked around with this message at 06:52 on Feb 14, 2015 |
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Feb 14, 2015 06:43
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I've been running 60% C, 25% S, 15% I pretty much since I started. Only switched to Roth contributions last year, though. Should I be contributing pre-tax dollars instead of post-tax? I was under the impression that post-tax contributions were better since then I don't pay tax on their earnings when I start making withdrawals. Right now my taxable income is only about 60k/year... I'm above the cap for those tax credits but I'm going to remember that for when I have young impressionable minds to forge as a leader of men, though, I didn't know that policy existed.
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Feb 14, 2015 07:29
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Well most of the Roth advantage is based on the assumption that taxes will go up in the future. With pre-tax you have the chance to put in more money to grow in the present since you don't have to initially pay the various taxes. I try to max out both type of retirement accounts each year.
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Feb 14, 2015 07:47
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It's not like you have to assume tax is going up in the future for Roth to be attractive. Even if taxes go DOWN in the future, it's cool to know that the dollar value in my Roth IRA is 100% real, bottom line money that I'll be drawing whenever I want. Also it doesn't have required minimum distributions, so that money can keep growing as fast as possible until you really need it. poo poo rules.
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Feb 14, 2015 16:21
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The tax free bit is especially important for when you go more bond/REITs and other types of higher yield fixed income in retirement. Without being held in a Roth, you would have to pay ordinary tax rates for the above type of investments.
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Feb 14, 2015 18:45
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etalian posted:The tax free bit is especially important for when you go more bond/REITs and other types of higher yield fixed income in retirement. No. Roth and traditional IRAs and 401(k)s treat investments held in them identically. No matter what you have in a traditional IRA or 401(k) - bond, REIT, stock, wacky exotic futures, whatever - it grows tax-free (so, no tax headwind on capital gains from rebalancing, interest income, dividends, etc) and is taxed as ordinary income on withdrawal. No matter what you have in a Roth IRA or 401(k), it grows tax-free just like in the traditional version, but it's also tax-free on withdrawal.
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Feb 14, 2015 19:09
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The catch is with a Roth IRA there is no minimum withdrawal requirement unlike a IRA. You can also continue contributing the Roth as you long as you have earned income from a job and also not have take out more than your dividend earnings for the year. So a Roth IRA containing higher yield fixed income focus assets like REIT stocks would have much more tax efficiency vs a normal IRA in terms of living off of fixed income type assets.
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Feb 14, 2015 21:49
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etalian posted:Vanguard's also has lots of fire and forget type funds for investors like Life Strategy Funds. After reading what's in this thread and researching more on the Bogelhead's forum, the aggressive LifeStrategy fund seems like a good way to go for me. Two things to clarify though. First, this recommended post (http://jlcollinsnh.com/2012/05/12/stocks-part-vi-portfolio-ideas-to-build-and-keep-your-wealth/) recommends putting ALL of your money into VTSAX. Though he does state "As an aside, there are a few studies that indicate that a 80%/20%, stock/bond mix will actually outperform, very slightly, 100% stocks. It is also slightly less volatile. If you want to go that route and take on the slightly more complicated process, you’ll get no argument from me." Second, on the Bogelhead's wiki (https://www.bogleheads.org/wiki/Vanguard_LifeStrategy_funds) it states that some of the drawbacks of the LifeStrategy fund are the following: "Tax inefficiency Because the LifeStrategy Funds all have a significant allocation to taxable bonds, they are most suitable for investors holding their entire portfolios in tax-advantaged accounts. Investors having both taxable and tax-advantaged accounts are generally better served by splitting their equity and fixed income allocations, concentrating on tax-efficient asset location. Investors are well advised to consider the following tax considerations: Held in a tax-advantaged account, stocks will lose the special benefits they possess in a taxable account. [note 2] In a taxable account the bond dividends will get taxed annually at ordinary income rates; when held in tax advantaged accounts this tax can be deferred. By holding a balanced fund in a taxable account the investor loses the option to harvest losses of individual asset classes." Now, as a 25 year old, and remembering that the Bogelhead's Guide to Investing recommends putting your age into bonds, what do you think is my best course of action here? The LifeStrategy fund obviously has a smaller amount of bond allocation and it seems as if it is more difficult to adjust this allocation? And what do you think about the tax inefficiency of the LifeStrategy fund? I'm a little unclear on what they mean exactly and what the difference is between tax-advantaged and non-tax-advantaged accounts or even how to acquire either one or what exactly that means. I appreciate any clarification on my lengthy post.
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Feb 17, 2015 02:52
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I strongly prefer having some in bonds as well as stocks, because it significantly increases the diversity of your portfolio. For someone your age, 10-30% bonds is where I would personally be looking - it's really impossible to give more specific advice. Tax efficiency is irrelevant if all of your retirement investments are in IRA's or 401k's or 403b's. Those are the "tax-advantaged" accounts. What's your situation there?
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Feb 17, 2015 04:19
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Just so I don't screw things up: I've already filed my 2014 taxes, but would like to make a contribution to max out my Roth IRA for 2014. I'm pretty sure this doesn't affect my tax situation, being post tax and all, but am I forgetting something? Would I have to amend my return if I wanted to make that contribution?
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Feb 17, 2015 05:08
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slap me silly posted:I strongly prefer having some in bonds as well as stocks, because it significantly increases the diversity of your portfolio. For someone your age, 10-30% bonds is where I would personally be looking - it's really impossible to give more specific advice. My only retirement investments so far is tied into a Roth IRA, I hope to get a 401k if I get a different job that offers one. So that means it would be fine to go ahead and just get the Life Strategy fund that etalian is advocating; I don't need be concerned about anything being outlined on the Bogelhead wiki about these accounts?
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Feb 17, 2015 05:13
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