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For traditional 401k loans, when you repay the money back into the account with interest, technically you're getting double-taxed on the interest and there's no way to win. For Roth 401k loans though, you're not getting taxed on the eventual withdrawal, so couldn't this be a way of contributing more than the cap, or are the interest payments considered part of the contribution? Assuming no origination fee, etc.
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Apr 6, 2015 22:09
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Bisty Q. posted:Yes, but it's a stupid idea, as you will lose out on returns that are rightly owed to Future You. I'm mainly talking about a withdrawal and not a loan. If there are no penalties/taxes for making a withdrawal from my Roth 401k, wouldn't it make more sense to put money into that instead of a savings account since the return will be higher?
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Apr 6, 2015 23:14
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durk onion posted:I'm mainly talking about a withdrawal and not a loan. If there are no penalties/taxes for making a withdrawal from my Roth 401k, wouldn't it make more sense to put money into that instead of a savings account since the return will be higher? Unless your 401k goes down and whoops there goes your down payment.
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Apr 7, 2015 00:29
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durk onion posted:I'm mainly talking about a withdrawal and not a loan. If there are no penalties/taxes for making a withdrawal from my Roth 401k, wouldn't it make more sense to put money into that instead of a savings account since the return will be higher? Why does your Roth 401k have a higher expected return than a savings account? Because you probably chose higher risk investments for the account. Are these investments appropriate for short-term needs (i.e. near-term down payment for a house)? No, they are not.
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Apr 7, 2015 00:41
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I'm very much lazy when it comes to investing. I have substantial savings I feel like I need to put to work and hopefully you can offer me some simple fund allocation I can use to start. I have the IRA and 401k covered and 6-9 months living expenses. Im 28 yo and no debt or major expenses on the horizon. I would say I'm a medium to conservative investor risk wise and will be going with Vanguard funds. I basically just want to earn more money than my savings account without completely locking it up in case I ever wish to invest in something down the road. Whats a simple allocation you would recommend for vanguard funds for me?
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Apr 7, 2015 00:46
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HE4T posted:Whats a simple allocation you would recommend for vanguard funds for me?
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Apr 7, 2015 00:49
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LifeStrategy __________. Choose your risk profile based on their offerings. They have a flavor for every kind of investor.
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Apr 7, 2015 00:49
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durk onion posted:I'm mainly talking about a withdrawal and not a loan. If there are no penalties/taxes for making a withdrawal from my Roth 401k, wouldn't it make more sense to put money into that instead of a savings account since the return will be higher? If the increased risk does not matter to you, investing it into something higher-ROI will be more profitable on average. It doesn't matter if you invest it for 5 minutes or for 50 years. If you want to make a down-payment by X date and losing 50% of these savings would remove that option/negatively affect your life in an obvious manner, don't put the money in stocks. If you want to maximize your equity, invest it, even if you plan on taking it out in a week.
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Apr 7, 2015 00:53
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HE4T posted:I'm very much lazy when it comes to investing. I have substantial savings I feel like I need to put to work and hopefully you can offer me some simple fund allocation I can use to start. Another option to consider in Betterment since it allows you to tweak your bond allocation. Vanguard life strategy funds are another good all in one option, basically has bond allocations in 20%(Aggressive risk), 40%(Moderate risk) and income (80% bonds).
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Apr 7, 2015 00:58
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80k posted:Why does your Roth 401k have a higher expected return than a savings account? Because you probably chose higher risk investments for the account. Are these investments appropriate for short-term needs (i.e. near-term down payment for a house)? No, they are not. How would you recommend saving for a down payment on a house? I make good money and have no debt, but the median home price in my area is $560k (California  ) so that will require a pretty hefty down payment. I'm not in a hurry to buy, maybe 5ish years? I would like my money to be fairly liquid in case this stupid housing bubble bursts.
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Apr 7, 2015 01:37
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durk onion posted:How would you recommend saving for a down payment on a house? I make good money and have no debt, but the median home price in my area is $560k (California I used a regular savings account when I had about the same time horizon  Interest rates were better then, but it's still a reasonable option. I was also funding 401k and Roth IRA in addition to that though. Retirement savings and house savings are Different Things.
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Apr 7, 2015 02:21
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durk onion posted:How would you recommend saving for a down payment on a house? I make good money and have no debt, but the median home price in my area is $560k (California Using cash is definitely safe, but remember that home prices are volatile too. So as long as your investments are volatile in the same direction and to the same degree that home prices are, you aren't actually taking that much more risk. For example, when home prices are rising, the stock market usually is too, and vice versa. Some parts of the stock market, such as REITS, should be more correlated with home prices because they own lots of real estate. The stock market is much more volatile though so 100% stocks would be a very bad idea. Long term bonds would also be a very bad idea because an increase in inflation would both reduce the value of your bonds increase the prices of houses. But short term bonds have a lot less inflation risk. Similar to the stock market, there should be some correlation between home prices and the health of the credit market, so you could use high quality short term corporate bonds instead of treasury bonds. TIPS might be another option to look at. You would probably want the vast majority of the portfolio in fixed income rather than stocks or REITS, but that depends on how long you have. And as the date gets closer, you would want to reduce risk. There is actually an ETF that tries to follow housing prices, but I'm not sure how well it works. I don't have actual data on these correlations, so do your own research, but IMO you can get a better return than 100% cash and still not be very risky. FWIW I saved for my down payment with ~80% short term corporates and ~20% stocks. warderenator fucked around with this message at 02:44 on Apr 7, 2015 |
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Apr 7, 2015 02:40
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When planning asset allocation across multiple accounts, is there increased risk making one account all stocks or all bonds? I'm balancing between a 403b , 401a, and Roth IRA. I'm considering a total us stock index for one account, a bond index for another, and some sort of REIT /International stock split for the third. Doing so would roughly meet my target allocations based on size of each account and expected growth of each.
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Apr 10, 2015 01:00
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Crazy news out of New York City: http://www.nytimes.com/2015/04/09/nyregion/wall-street-fees-wipe-out-2-5-billion-in-new-york-city-pension-gains.html My first thought was "Wow, $2.5B in fees for a $160B profile...that's a >1.5% ER!" But then I realized that that's over the course of a decade, so the annual expense ratio must have been much lower...right? I realize it's not as simple as 1.5%/10 years=0.15%/year, but does anyone have a rough sense of what the annual rate might have been? I realize it's hard to pin down, but are we talking <1% or >1%? I'm real bad with the math on year over year stuff.  In any event, it sure seems like the real story should be the fact that the trustees approved an investment plan that returned 1.5% over an entire decade. That's pretty terrible, regardless of the fees you're paying.
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Apr 10, 2015 01:01
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pig slut lisa posted:Crazy news out of New York City: http://www.nytimes.com/2015/04/09/nyregion/wall-street-fees-wipe-out-2-5-billion-in-new-york-city-pension-gains.html The assets didn't actually grow, so you don't have to worry about compounding year over year. The fees were charged on 80% of the assets and amounted to about $2B (the other $500M came from the other 20% of the portfolio), so the numbers you got seem correct to me. These types of funds usually require very strict investment strategies, really risk averse. I don't know what that means exactly, so 1.5%/10 years might not be terrible. This could also be a result of the last 7 (?) years of really low interest rates.
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Apr 10, 2015 01:42
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It says the return was $2b "over expectations" anyway. Who knows what the expectation was.
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Apr 10, 2015 01:58
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sweet_jones posted:When planning asset allocation across multiple accounts, is there increased risk making one account all stocks or all bonds? No change in risk doing that. There are tax considerations though. You're likely to get more growth out of stocks, so putting stocks in the Roth rather than bonds will mean more of that growth can come out tax free in retirement.
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Apr 10, 2015 02:20
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pig slut lisa posted:Crazy news out of New York City: http://www.nytimes.com/2015/04/09/nyregion/wall-street-fees-wipe-out-2-5-billion-in-new-york-city-pension-gains.html This guy thought the overall fees weren't that bad, but I dunno: http://www.bloombergview.com/articles/2015-04-09/new-york-discovers-wall-street-charges-fees
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Apr 10, 2015 02:24
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sweet_jones posted:When planning asset allocation across multiple accounts, is there increased risk making one account all stocks or all bonds? Where you put the money won't change your overall risk level. The downside of doing it that way is that if one asset class outperforms and another underperforms you won't be able to rebalance them back to your desired percentages. But you could just deal with that later if it happens.
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Apr 10, 2015 02:31
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warderenator posted:This guy thought the overall fees weren't that bad, but I dunno: Thanks. Good article. 
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Apr 10, 2015 03:19
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warderenator posted:This guy thought the overall fees weren't that bad, but I dunno: The expense ratio and other extra costs become even bigger with larger assets under management. 1.5% ER for something like a multi-billion dollar pension plan means piles of money skimmed off each year, not to mention the active funds underperform the market over long investment windows. Wall Street also likes using sneaky tricks like charging fund load and other extra costs to skim off even more money from the pension fund. At least places like Calpers are finally seeing the light by dumping expensive hedge fund investments and switching over to low cost index investing. etalian fucked around with this message at 07:04 on Apr 10, 2015 |
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Apr 10, 2015 06:58
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etalian posted:The expense ratio and other extra costs become even bigger with larger assets under management. The 1.5% was for all 10 years not each year, but they could still get a better deal. Some index funds with high minimum investments have like 0.02% ER.
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Apr 10, 2015 07:11
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Is VTIAX a reasonable addition to a long-term portfolio containing VBIAX, VIGAX, and VWELX that I'd like to get a bit of international stock exposure for? Thanks in advance.
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Apr 10, 2015 19:08
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VTIAX is an excellent, A++ choice for an international core holding. How did you end up with those 3 funds? It seems like you could simplify by just holding VTSAX and VBTLX instead of those 3 and have more direct control over your stock/bond ratios than juggling a 60/40 fund (VBIAX) and a 65/35 fund (VWELX)
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Apr 10, 2015 20:48
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warderenator posted:The 1.5% was for all 10 years not each year, but they could still get a better deal. Some index funds with high minimum investments have like 0.02% ER. Yeah if anything big assets under management should get you really low rates similar to the federal TSP program. Instead sounds like lots of pension funds got hoodwinked by Wall Street. This actively managed fund will get you better returns over time.
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Apr 10, 2015 23:10
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GoGoGadgetChris posted:VTIAX is an excellent, A++ choice for an international core holding. There are many roads to Mecca. If those particular funds help him stay the course and sleep comfortably then that's far more important than minimizing funds.
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Apr 11, 2015 00:45
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I'd consider a Total World fund and broad bond etf to be a effective even simpler version of the 3 fund portfolio concept. Also having only two investments makes rebalancing easier.
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Apr 11, 2015 02:38
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Does anyone know of a good online bank to use for one and two year CDs? My local bank has a poo poo rate so I'm looking primarily at online banks at the moment. I'm considering GE Capital Bank at the moment because they seem to have okay reviews where it concerns CDs but I was just curious if anyone had a better suggestion.
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Apr 14, 2015 20:17
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JibbaJabberwocky posted:Does anyone know of a good online bank to use for one and two year CDs? My local bank has a poo poo rate so I'm looking primarily at online banks at the moment. I'm considering GE Capital Bank at the moment because they seem to have okay reviews where it concerns CDs but I was just curious if anyone had a better suggestion. i have my emergency savings in Discover Bank right now; they seem fine and have decent rates (which isn't saying much at the moment). ge capital's rates seem slightly better. you should ask yourself if the 0.15% difference is worth locking up your savings in a CD instead of just putting it in a savings account, though.
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Apr 14, 2015 20:23
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Mr. Glass posted:i have my emergency savings in Discover Bank right now; they seem fine and have decent rates (which isn't saying much at the moment). ge capital's rates seem slightly better. My husband and I have a Barclay's savings account which gives us 1.05% and would definitely be a good option if not for the fact that they only let you deposit $1,000 a month. I know for sure I wont need any of this money until around this time next year so I am not concerned about the funds being inaccessible. I'd rather they make a little more money as I do not wish to use them in advance.
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Apr 14, 2015 20:46
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Say for example you are in retirement and you've decided to start withdrawing from your accounts. You have a traditional 401k and a taxable account. Your spending is larger than the distributions from your bonds, hence you also have to either sell equities or bonds in order to maintain your desired spending levels. Would it make a difference as to whether your bonds were held in the 401k or the taxable account given that you're spending more than they are distributing?
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Apr 14, 2015 22:38
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For corporate bonds, in either account the yields end up taxed as income. If you sell the bonds, that ends up taxed as income for the withdrawal from the 401k, while its capital gains in the taxable account. Municipal bond yields are tax free in the taxable account, but end up taxed as income coming from the 401k.
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Apr 14, 2015 23:32
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I love SmartyPig's interface but their interest rate keeps dropping and it's now only 0.75%. Are there savings accounts I can transfer to that have a similar separate goal interface? I like being able to have one account but logically separate it (e.g. Emergency Fund, Car Maintenance, etc.)
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Apr 15, 2015 00:24
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JibbaJabberwocky posted:Does anyone know of a good online bank to use for one and two year CDs? My local bank has a poo poo rate so I'm looking primarily at online banks at the moment. I'm considering GE Capital Bank at the moment because they seem to have okay reviews where it concerns CDs but I was just curious if anyone had a better suggestion. Is GE Capital going to be around in a year?
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Apr 15, 2015 01:15
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So glad I dropped them when I did. Their interface and password system were both poo poo.
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Apr 15, 2015 01:58
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Zool posted:For corporate bonds, in either account the yields end up taxed as income. If you sell the bonds, that ends up taxed as income for the withdrawal from the 401k, while its capital gains in the taxable account. Kinda sounds like it makes more sense to keep corporate bonds in a taxable account - if you're drawing down on them faster than the yields come in.
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Apr 15, 2015 12:29
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ETB posted:So glad I dropped them when I did. Their interface and password system were both poo poo. Well okay then. Any suggestions for online banks with a similar rate that aren't poo poo?
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Apr 15, 2015 12:40
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SweetSassyMolassy posted:Kinda sounds like it makes more sense to keep corporate bonds in a taxable account - if you're drawing down on them faster than the yields come in. Keep in mind in the 401k that tax is deferred until you withdraw. When you are still earning money those yields can be put back to work. And in retirement you may be in a lower tax bracket, decreasing the importance of income tax.
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Apr 15, 2015 13:11
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I have around $15k in my brokerage fund after getting out from under a financial advisor. I've already maxed IRAs for 2014 and 2015 for both my wife and I. I'm already maxed on my 401k and using some other windfall cash to put even more money at the 401k above and beyond the company match. I'd like to put that extra $15k into something that will have a decent balance between risk and maintaining the principal so that if I need to buy a new car in the next two or three years (or more, hopefully) that would help with the cost. I'd rather keep with ETFs and as such VFICX looks fairly solid. My concern as a newbie - given the likelihood of interest rates going up within the next year or sooner, and VFICX's focus on bonds approaching maturity, would that put a hurt on the 2/3-year performance? Should I be looking at different factors in my research?
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Apr 15, 2015 14:28
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In the last five years, VFICX has had two 6% drops almost overnight. The first one took two years to recover and the second one hasn't recovered yet. If your time horizon is 2-3 years and your withdrawal is determined by when your car breaks down, you have zero ability to avoid that kind of thing. Are you comfortable with taking on that kind of risk to boost your expected (not actual) return by a couple of percent? VFICX is a regular mutual fund, not an ETF, by the way.
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Apr 15, 2015 14:57
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