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I've been doing a lot of spring cleaning and apparently the teenage/early 20s versions of myself and my buddy were very good because we randomly stored sealed PSX games, vintage comics, and sealed booster boxes of the right trading card games. My early 2000s Magic: the Gathering portfolio has outperformed the market by a few hundred percent. >_>
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Apr 25, 2015 09:05
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etalian posted:Main advantage is the 401k allows you to sock away more pre-tax money each year. The main advantage to a 401(k) or government TSP is the employer matching funds they offer. If you have a company 401(k) that matches funds up to a certain percentage or dollar amount then that's basically free money and why it should be Priority #1 for investing. Traditional IRA vs Roth IRA is where the pre- and post-tax difference comes up, So OP's advice is to max company 401(k)/TSP up to the match then go Roth IRA up to the max of $5500, then 401(k) to the cap of $18,000 before depositing in a taxable account. Be careful not to confuse IRAs with 401(k)s, they are not the same thing. You can have a traditional 401(k) thru work, a traditional IRA, a Roth IRA and even a Roth 401(k) depending on what is available to you. WarMECH fucked around with this message at 18:12 on Apr 25, 2015 |
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Apr 25, 2015 13:03
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Trad IRAs and Roth IRAs share the yearly cap of $5500. The total amount you contribute to both can't exceed that.
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Apr 25, 2015 13:08
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And they're not offered through employers, either; they're specifically separate from employer-provided retirement accounts (the "I" in IRA stand for "Individual").
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Apr 25, 2015 13:24
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I'm glad this thread provides so many opportunities to educate the people offering financial advice.
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Apr 25, 2015 17:34
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Updated my post to reflect corrected information. Coffee hadn't kicked in yet.
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Apr 25, 2015 18:15
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Celador posted:The main advantage to a 401(k) or government TSP is the employer matching funds they offer. If you have a company 401(k) that matches funds up to a certain percentage or dollar amount then that's basically free money and why it should be Priority #1 for investing. The only catch is they can have a wide range of vesting periods depending on the company with 3 years being the most common number. For new fresh outs remember the two most common mistakes is not signing up for the 401k for various reasons e.g being scared of the stock market or not at least contributing up to the free money match percentage.
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Apr 26, 2015 01:42
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I've been sitting down recently trying to learn about investing my money properly, I still have a long way to go before I pull the trigger and start but I do have a couple of questions. I live in the UK so I guess some of this will be slightly different. I am 26 years old, I earn about £29,000 a year on which I pay no income tax. I have a student loan of around 10k that is slowly getting paid off, the interest on it is low so I haven't been concerned about getting rid of it ASAP. Up until now my only knowledge of savings has been bank accounts and putting my free money in a cash ISA. As it stands I have a company pension scheme where I contribute 4% and the company puts in 6% on top of that. I have recently realized I could be doing much more with my savings which is how I have arrived at this point. So a couple of questions. Do those of you in the UK have any opinions on which fund supermarkets I should be dealing with? I've had a poke around places like Fidelity and Hargreaves Lansdown but I have no real idea about who is considered to be the best option. The plan as it stands for me is that I would be putting away around 15% of my pay, including the employer scheme, into some kind of tracker fund. Is this generally a good idea? What would the best way to spread my money around as if what i'm understanding is correct, I shouldn't put everything into the one fund. Are tracker funds a good idea in the long term vs sticking the money into something that's trying to beat the index? With my current level of income am I right in believing that I don't have to worry about anything beyond my stocks and shares ISA allowance? I'm not exactly going to be hitting that limit with how much I'm planning on saving.
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Apr 26, 2015 20:56
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Mr Teatime posted:Do those of you in the UK have any opinions on which fund supermarkets I should be dealing with? I've had a poke around places like Fidelity and Hargreaves Lansdown but I have no real idea about who is considered to be the best option. Yes this thread recommends low cost passive/tracker funds since over time they do much better than costly active management funds. So focusing on low expense ratio funds is actually the easiest way to pick good investments. If you are thinking of opening up accounts for outside of work retirement savings than everyone's favorite brokerage Vanguard has opened shop in Europe recently: https://www.vanguard.co.uk/uk/portal/home Pretty much the advice in the OP can be applied to other countries: -Max out company retirement plans at least to get the match benefit/free money amount -Assuming you max out the company benefit, then look into additional country specific retirement options like a stock ISA etalian fucked around with this message at 01:42 on Apr 27, 2015 |
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Apr 27, 2015 01:38
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This is slightly embarrassing, but can someone explain bond funds to me? I know what bonds are and I understand how mutual funds/etfs/index funds work. I think my problem is trying to apply the same framework of those stock funds to bond funds. I'm not sure I understand how a collection of bonds can a) Maintain a constant time to maturity. (What happens to the bonds that were bought 10 years ago, for example?) b) The fact of a) implies that while you're holding a share of the bond fund, you are constantly owning 'newer' bonds. How does that work? Where does the fund get the money to buy these newer bonds? Is it only from the coupons of bonds you owned before? So does that mean the rate of which the fund buys the bonds is exactly the rate of replacement for the old bonds given their yearly 'coupon' return?
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Apr 27, 2015 18:07
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Rurutia posted:This is slightly embarrassing, but can someone explain bond funds to me? I know what bonds are and I understand how mutual funds/etfs/index funds work. I think my problem is trying to apply the same framework of those stock funds to bond funds. I'm not sure I understand how a collection of bonds can When the bonds mature they pay back the original amount of money that was loaned and the fund uses this money to buy newly issued bonds. They keep doing this over and over again a little bit at a time so the average maturity of the fund ends up being about half the maturity of the newly issued bonds they buy. If a fund only wants to own a certain range of maturities they can just buy and sell them on the open market.
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Apr 27, 2015 18:31
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Mr Teatime posted:I've been sitting down recently trying to learn about investing my money properly, I still have a long way to go before I pull the trigger and start but I do have a couple of questions. I live in the UK so I guess some of this will be slightly different. 1) don't pay off your student loan. It's the cheapest loan you'll ever get, and you'll make more by investing in a tracker fund than it'll cost you in interest. 2) How do you pay no income tax? 3) I use HL but I'm aware that it's not the best option (I can't be arsed to change). http://www.moneysavingexpert.com/savings/stocks-shares-isas will tell you where the best places are, based on your profile. 4) My general rule of thumb is that filling my ISA is the most important thing to do in a tax year. If you're not hitting the limit, then that's the only thing you need to worry about. 5) Tracker funds are generally best unless you have particular views on different markets and/or have enough experience to trade individual stocks and shares. There's not much wrong with throwing everything into a FTSE tracker (or maybe 60/40 FTSE100/FTSE350 trackers or something similar) if you're investment time is 5 years plus.
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Apr 27, 2015 18:33
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warderenator posted:When the bonds mature they pay back the original amount of money that was loaned and the fund uses this money to buy newly issued bonds. They keep doing this over and over again a little bit at a time so the average maturity of the fund ends up being about half the maturity of the newly issued bonds they buy. If a fund only wants to own a certain range of maturities they can just buy and sell them on the open market. I see. I think I misunderstood someone when they said that total bond funds had time to maturity of 10-12 years. I thought they meant absolute rather than a weighted average.
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Apr 27, 2015 18:34
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Rurutia posted:I see. I think I misunderstood someone when they said that total bond funds had time to maturity of 10-12 years. I thought they meant absolute rather than a weighted average. Yea the maturity really does not matter as much as the duration (which takes coupons into account to get a better estimate of sensitivity to interest rate risk). CD's are generally better than bond funds if you need the money on a certain date (say, you need the money 3 years from now, then get a 3 yr CD). A bond fund with duration of 3 years will still have a duration of 3 years when you need the money 3 years later which means it is continuously sensitive to interest rate risk at the targeted duration. Bond funds are great for portfolio diversifiers but CD's and savings accounts are better for saving for nearterm goals.
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Apr 27, 2015 19:24
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tentish klown posted:1) don't pay off your student loan. It's the cheapest loan you'll ever get, and you'll make more by investing in a tracker fund than it'll cost you in interest. Thanks for the advice. Just to answer your question I don't pay any income tax because I work at sea and there are some fancy seafarers tax rules where if you meet the requirements you don't pay tax on your income. You either have to claim it back or in my case the company I work for pays me from Guernsey and so nothing is taken through PAYE, I just have to pay an accountant who ensures my records are right with the taxman. On that note there is actually another question I have which I suppose comes under retirement savings. Because of my tax situation I'm also not actually paying any national insurance contributions. I can start making voluntary payments but is that actually the best plan? If I only need 30 years of payments to get a full state pension then wouldn't it be a waste to pay anything before 30 years until retirement? The likelyhood is that I will at some point have a normal job where I wont have a choice but there isn't a good reason to be paying now is there?
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Apr 27, 2015 21:02
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Mr Teatime posted:Thanks for the advice. Just to answer your question I don't pay any income tax because I work at sea and there are some fancy seafarers tax rules where if you meet the requirements you don't pay tax on your income. You either have to claim it back or in my case the company I work for pays me from Guernsey and so nothing is taken through PAYE, I just have to pay an accountant who ensures my records are right with the taxman. What happens if you become disabled and can't work, right when you've paid in for 28 years? I genuinely don't know the answer, but it'd be a really good idea to find out. Because not everyone automatically gets to work until their planned retirement date.
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Apr 27, 2015 21:07
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Rurutia posted:This is slightly embarrassing, but can someone explain bond funds to me? I know what bonds are and I understand how mutual funds/etfs/index funds work. I think my problem is trying to apply the same framework of those stock funds to bond funds. I'm not sure I understand how a collection of bonds can Unlike stocks you are buying a debt note, which promises both to pay interest and also the original amount after a certain term. Since everything from countries to corporations use the bond process to sell their debt off to investors, there's always a new supply of notes flying around. A bond fund just purchases the notes according to the fund strategy, for example a immediate type bond fund would focus on notes with 5-7 year maturity, while broader bond funds including all sort of time ranges.
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Apr 27, 2015 23:09
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Mr Teatime posted:ISA stuff A better place to look for ISA (and SIPP) costs is here: http://langcatfinancial.co.uk/blog/d2c-heatmaps-update/
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Apr 28, 2015 09:31
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Leperflesh posted:What happens if you become disabled and can't work, right when you've paid in for 28 years? I think I need to speak to the citizens advice bureau because nobody seems to be able to give me an answer on this one. Back to questions, I've been looking at Vanguards lifestrategy funds, are there any strong opinions on these? They seem to offer what I am looking for. At my age (26) would it be a good idea to run with the 80% equity or the 60% equity fund? I realize that nobody can predict the future but would I be short changing my future self because I was unnecessarily nervous about the higher risk?
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Apr 28, 2015 18:10
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Mr Teatime posted:I've been looking at Vanguards lifestrategy funds, are there any strong opinions on these? They seem to offer what I am looking for. At my age (26) would it be a good idea to run with the 80% equity or the 60% equity fund? I realize that nobody can predict the future but would I be short changing my future self because I was unnecessarily nervous about the higher risk? if you believe that the stock market will go up over time (which you probably do if you're posting in this thread), 60% stocks is really, really, really conservative imo, especially considering your age. you may want to investigate vanguard's target retirement funds; they're similar but automatically shift from stocks to bonds as you approach your target retirement year. the one i have most of my retirement money in is currently ~90%/~10% stocks/bonds.
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Apr 28, 2015 18:17
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I just setup depositing the maximum allowable by my company, 90%, of every paycheck into a Roth 401k (post-tax.) 1) I'm being 2) I won't be able to hit the annual limit on Roth 401k at the current 90% post-tax rate, so increasing the amount of exemptions would allow me to deposit more into Roth 401k (since less money will be withheld from each paycheck, thus more money will be deposited into my Roth 401k. is this true?) Am I correct to assume that I should be increasing exemptions both to A) not end up receiving a $3,000+ refund check at the end of the year which I would rather invest now, and B) to allow a higher % of my paycheck to go into a Roth 401k? also, it's legal to do this right? (throw a number in exemptions that helps balance out taxes via 2015 withholding calculator etc., rather than actually following the exemptions rules) Blinky2099 fucked around with this message at 19:12 on Apr 28, 2015 |
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Apr 28, 2015 18:42
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e:VVV You're right, that was a brain fart on my part. It's Roth IRA's I was thinking of. Murgos fucked around with this message at 20:26 on Apr 28, 2015 |
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Apr 28, 2015 18:48
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Murgos posted:You can always put money into the Roth 401K for this year after you get the return next year. I think you have until April to make donations to the previous year. Of course you miss out on a few months of interest accumulations. Really? I thought that applied to IRAs but not 401ks.
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Apr 28, 2015 18:57
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I have a question re: IRAs - Before I was working at my current job, I had started a self-directed IRA for myself through ShareBuilder that I'd contribute to every week. I stopped the automatic contributions for some reason, and quite honestly forgot the thing existed for years. My family's currently in kind of a tight spot medically and, well, I need some of the money. I'm just not sure what the deal is tax-wise. I'm sure there's some kind of fee for early withdrawl but from the cursory googling I've done I can only find info for 401k plans, and I figured the helpful and knowledgable people here would be able to point me in the right direction. In order to head off any "how irresponsible of you" and "think about your future" type advice (even though it's probably still warranted): I have a 401k plan through work and a railroad retirement pension, so liquidating this small account shouldn't have a real impact on my retirement - especially since I haven't contributed to it in years and won't be contributing any more to it. Whatever's left over would probably go into my car so I could up my 401k contribution by a bit. Any guidance would be appreciated! EDIT: Hmm, would this be more appropriate in the US tax questions thread? Probably, right? I'm a giant idiot but don't want to double post 
indigi fucked around with this message at 01:09 on Apr 29, 2015 |
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Apr 29, 2015 01:05
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indigi posted:I have a question re: IRAs - Is it a traditional or a Roth? If it's a Roth, you can withdraw your contributions without penalty. If it's a traditional IRA, it's probably the same rules as 401k plans, I think it's a 10% tax penalty, on top of being taxed as regular income.
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Apr 29, 2015 01:22
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Traditional. Well that sucks.
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Apr 29, 2015 01:35
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There is an exception for the early IRA distribution 10% penalty, for unreimbursed medical bills that are more than 7.5% of your adjusted gross income. http://www.irs.gov/taxtopics/tc557.html http://www.irs.gov/pub/irs-pdf/p590b.pdf
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Apr 29, 2015 01:43
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I have about $20k that I'm going to be parting with some time in 2017. Is it even worth parking it in VASIX for such a short term or am I better off leaving it in cash in the event I find any short term opportunities that having a liquid buffer would help with?
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Apr 29, 2015 17:08
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Nephzinho posted:I have about $20k that I'm going to be parting with some time in 2017. Is it even worth parking it in VASIX for such a short term or am I better off leaving it in cash in the event I find any short term opportunities that having a liquid buffer would help with? I would put it in a 1% online savings account like Barclays if I were you.
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Apr 29, 2015 17:10
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Nephzinho posted:I have about $20k that I'm going to be parting with some time in 2017. Is it even worth parking it in VASIX for such a short term or am I better off leaving it in cash in the event I find any short term opportunities that having a liquid buffer would help with? Is it OK if that $20k is only $17k? What about if it's $14k? Sure it could be $23k or $24k but then again maybe it won't.
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Apr 29, 2015 19:26
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Murgos posted:Is it OK if that $20k is only $17k? What about if it's $14k? Sure it could be $23k or $24k but then again maybe it won't. Yes, I have other active accounts to supplement this. It is basically going to act as a foundation and if it loses some value I can make up the difference elsewhere.
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Apr 29, 2015 20:04
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So earlier in this thread it was recommended that I establish my 6-9 month emergency fund in an online high-yield savings like Ally bank. I opened the account with them at 1%, but then got to thinking: My regular credit union frequently, like at least once a year, offers a promotional high-yield fixed rate 12-month CD at anywhere from 3 to 5 percent (I have 4.99% right now), with the only penalty for early withdrawal being "Forfeiture of all dividends on the amount withdrawn for 90 days or from the date of purchase or renewal (whichever is less)." Unless I'm mistaken, wouldn't it make more sense to put my emergency fund in this type of CD to earn a much better yield on that parked cash while still being an FDIC-insured investment? Gray Matter fucked around with this message at 20:54 on Apr 29, 2015 |
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Apr 29, 2015 20:50
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That kind of sounds too good to be true. Is your CU open to the public?
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Apr 29, 2015 21:18
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Gray Matter posted:So earlier in this thread it was recommended that I establish my 6-9 month emergency fund in an online high-yield savings like Ally bank. I opened the account with them at 1%, but then got to thinking: Point me to this credit union please, they pay a far higher rate on CDs than I pay on my mortgage.
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Apr 29, 2015 21:23
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Twerk from Home posted:Point me to this credit union please, they pay a far higher rate on CDs than I pay on my mortgage. e: The max deposit on these is either 5k or 10k as well, so it wouldn't work for the entirety of an emergency fund but at least a chunk of it. They also gave me a $100 dividend for opening an IRA with them of $100 minimum initial deposit. I plan on rolling that over to Vanguard just as soon as I can 
Gray Matter fucked around with this message at 21:55 on Apr 29, 2015 |
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Apr 29, 2015 21:36
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Are preferred stocks a good idea for long term investing(though some of them appear shady)?
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Apr 30, 2015 01:38
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Torpor posted:Are preferred stocks a good idea for long term investing(though some of them appear shady)? This thread generally doesn't consider individual stocks to be a good idea for long term investing. Preferred shares in a company may infer more (or any) voting rights, and may have other advantages (such as better treatment in the event the company is bought out or goes private or has a merger). But their performance is still just as tied to the company as common shares in that company, and individual stocks should probably be a very small part (if any) of a long-term investment strategy. There is a thread for individual stock advice, but we call it the gambling thread for a reason (and so do the people who post in it): http://forums.somethingawful.com/showthread.php?threadid=3259986
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Apr 30, 2015 02:06
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My company matches my 401k contributions by 50%. So if I contribute the maximum of $18k this year, they will contribute $9k. I'm twenty-five and I want to be financially-independent (i.e., no need for a day-job) in five, maybe ten years, so I can safely contribute $0 to this, right? I don't see how money when I'm 50-somthing helps, given I don't want to wait that long to retire. On the other hand, I heard that there's a 10% penalty if I withdraw early, so if I keep $18k in this year's income, then this year's income simply has +$18k. However, if contribute $18k, then it gets matched to $27k, and a 10% penalty is $2.7k, which means I end up with +$24.3k, which is $6.3k more income than I would have had if I had simply contributed $0. Is that really how it works? Why wouldn't I just contribute $18k this year and take out $27k ($24.3k after penalty) next year, then? fruit loop fucked around with this message at 03:15 on Apr 30, 2015 |
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Apr 30, 2015 03:11
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Because you also get taxed on that money as normal income, on top of the 10% penalty. If you hide it in the 401k, you're not taxed on it until you withdraw it. Also not contributing to tax-advantaged retirement accounts is the WORST thing you can do if you're looking for financial independence early. First you're turning down that sweet, sweet 50% match (though I'd check your plan - it's usually 50% UP TO 6% or something like that, not a flat 50%), which is an immediate 50% return on your money. Second, Google Substantially Equal Periodic Payments and Roth Conversion Ladder. There are ways to get at that money before retirement age without taking the 10% hit, AND you get to hide the gains from taxes so it grows super fast in the meantime before you want to draw from it.
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Apr 30, 2015 03:20
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Can you make Roth contributions? If so, max it yesterday.
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Apr 30, 2015 03:27
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