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cowofwar posted:I think the user definitely has to have a shopping problem to make it worthwhile. $0.50 of round-ups a day is only $185 a year which is really not worth the time, effort or fees. Useful for a kid's college fund perhaps but not retirement. Although a $2k college fund would be useless as well so maybe it's better off as a beer fund or something. It just really doesn't work. I'm a habitual small change keeper. I dump my pockets into a drawer at work or bowl at home at the end of the day. I easily end up with ~$400 a year that way, usually cash it out twice a year. I've stopped taking pennies though, just not worth it. e: Added quote for context.
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May 12, 2015 16:14
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cowofwar posted:I think the user definitely has to have a shopping problem to make it worthwhile. $0.50 of round-ups a day is only $185 a year which is really not worth the time, effort or fees. Useful for a kid's college fund perhaps but not retirement. Although a $2k college fund would be useless as well so maybe it's better off as a beer fund or something. It just really doesn't work. Seems like the kind of thing that would have worked a lot better 20-40 years ago before inflation made spare change basically worthless. I know my grandparents used to save all their spare change and invest it and it actually had some power back when they were doing it, but now the same amount after a year would be something you could comfortably trim out of a single paycheck and not even feel it.
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May 12, 2015 17:45
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What is the best way to give myself a reasonably safe estimate on how long it will take me to retire assuming x amount of savings per year? Age: 24 Goal: retire as early as possible Savings (by end of this year): $11,000 roth ira $16,200 roth 401k $15,000 life strategy fund = $42,000 total long-term savings I'd like to see what happens to a realistic retirement date if I save $5,000/yr vs $10k vs $15k etc. From my math, depositing $15k a year would still only get me to $42k + (35*$15k) = $567,000 not including interest by 60. And if I want to retire at say, 60, my quick calculations say I should have at least 1.5-2mm (post-interest) by then. I assume that retiring at say, 45, requires some really ridiculously huge savings per year, yeah? (another 15 years at $40-$50k paid to me per year, so another $750,000 in savings, while losing out on 15 years of income+interest.) Blinky2099 fucked around with this message at 20:31 on May 12, 2015 |
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May 12, 2015 20:26
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My advice is use a financial calculator (like an online clone of an HP-12C) and make the assumption that you'll get 4% real returns (7 minus 3 for inflation). If you don't know how an HP12C works, you type a number and then hit n, i, PV, PMT, or FV to tell it what the number is. In this case, we'll do the following: - Input 26 and then "n" (You're telling the calculator you will be saving for 26 years, until you're 50 years old) - Input 4 and then "i" (You're telling the calculator to expect 4% real growth per year) - Input 42,000 and then "PV" (You're telling the calculator that your present value is $42,000) - Input either 5,000, 10,000, or 15,000 and then "PMT" (You're telling the calculator how much more you're saving every year) - Press the "FV" Button. The resulting number is the Future Value of your money. Multiply it by 4% to see how much you could (theoretically) withdraw per year without it ever running out. The results are: $5,000/year - $338,000 when you're 50, and you can withdraw $13,520/year (Alpo Status) $10,000/year - $559,561 when you're 50, and you can withdraw $22,382/year (Alpo with the occasional stray dog) $15,000/year - $781,120 when you're 50, and you can withdraw $31,245 (People-food 3 times a day and you may even have kids/grandkids squabble over your estate!) Note that you can also use the HP12C to figure out any of those figures. You can "Solve for FV" to see how much money you'll have when you'll retire, you can "Solve for PMT" to see how much you'll need to save per year to end up with $1,000,000 (don't enter anything for PMT, enter 1,000,000 in FV, and then push "PMT"), or even "Solve for N" to see how many years it will take you to save a million bucks at 15,000/year (Don't enter anything for N, put 1,000,000 in FV, and then push "N"). EDIT - If you want to have a million today-bucks and retire at 45, you need to save $34,274/year based on your current $42,000.
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May 12, 2015 20:37
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This site (https://www.portfoliovisualizer.com/) is your friend then. You can backtest your portfolio to get an idea of the performance you would expect and then run Monte Carlo simulations to see expected outcomes based on contributions over time and then withdrawals in retirement. Here is an example of $42,000 invested into Vanguard Lifestrategy Moderate Growth Fund (VSMGX) in 1995 and adding $5,000 a year for the last 20 years The good news is you would have earned an CAGR of 12.38% (IRR of 7%) and now have $448,000. The Bad news is that will only last you an average of 12 years at a 60,000 withdrawl rate. Looks like your going to be going back to work in your 50's! Good Luck! e: Here is 7% return (Std Dev of 12%) for 30 years starting at 42000 and adding 15k a year. A respectable median end balance of 2.4 million. Which with 30 years of inflation isn't going to be near what it is today but will probably still give you a comfy retirement if you strictly limit yourself to a <4% withdrawal rate. Murgos fucked around with this message at 20:47 on May 12, 2015 |
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May 12, 2015 20:38
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The people who retire early reduce their yearly expenses so they don't need to have as much income in retirement. This helps in two ways: 1) less spending during working years allows you to save more and 2) if you continue less spending in your retirement years, you can live off the interest of a smaller investment portfolio meaning you can retire earlier.
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May 12, 2015 20:42
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Great , thanks for the tools and advice. I'll keep messing around with numbers and gain some motivation to save more and spend less. But yeah, sounds like early to mid 50s is the best I'll ever get to. Thanks guys. edit: with all the numbers you guys ran I pretty much have all of the info I need. Much appreciated! Blinky2099 fucked around with this message at 20:52 on May 12, 2015 |
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May 12, 2015 20:48
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If you're interested, we sperg about the minutiae over here.
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May 12, 2015 20:52
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GoGoGadgetChris posted:My advice is use a financial calculator (like an online clone of an HP-12C) and make the assumption that you'll get 4% real returns (7 minus 3 for inflation). If you don't know how an HP12C works, you type a number and then hit n, i, PV, PMT, or FV to tell it what the number is. In this case, we'll do the following: Jesus Chrust, WTF. He's not sitting for a finance exam. Use excel or the Google equivalent. There are a bevy of financial functions. And you don't have to redo them every time you're changing assumptions or numbers.
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May 12, 2015 23:46
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Bloody Queef posted:Jesus Chrust, WTF. He's not sitting for a finance exam. Use excel or the Google equivalent. There are a bevy of financial functions. And you don't have to redo them every time you're changing assumptions or numbers. It appeared to me from his post was that he didn't have a good idea of how compound interest worked. I thought some manual number crunching would be helpful for him.
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May 12, 2015 23:56
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Saint Fu posted:The people who retire early reduce their yearly expenses so they don't need to have as much income in retirement. This helps in two ways: 1) less spending during working years allows you to save more and 2) if you continue less spending in your retirement years, you can live off the interest of a smaller investment portfolio meaning you can retire earlier. Unless the hobbies or travel they never had time for while working start to expand and consume more money.
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May 13, 2015 07:57
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tesilential posted:Just do an S&P fund at Vanguard. I used the 2055 target retirement fund and lost out on half the markets' gains the past few years. I know some people have pooh-poohed this idea but it's actually not all that faulty. Just not for the stated reasons. Bogle and Buffet have both made comments to the effect that this is really all you need. The idea being that to get the market reward you should take on the market risk, and no more than the market risk. This link shows an allocation of 100% Total Stock Market would have outperformed a classic three fund or even a 'safe' 60/40 over the last 40 years. The concern however is draw downs at the wrong time, if you are young and know that you will still be able to hold out for 10+ more years then the full market risk may be a reasonable amount of risk for you. However, this link shows what can happen over even as large a period as 10 years when you take on the full market risk. Note that the safe 60/40 portfolio outperformed the market by more than 2x over the decade. So, correspondingly many people choose to accept lower reward as a penalty for more protection due to the uncertainty of the future. The point to be aware of is that, sure, being 100% S&P 500 is going to boom when the market is booming but you also get the full effect of the downside too. And to be absolutely clear about it, there will always eventually be a downturn.
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May 13, 2015 18:54
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Murgos posted:This link shows an allocation of 100% Total Stock Market would have outperformed a classic three fund or even a 'safe' 60/40 over the last 40 years. Adjusted for inflation it's not a big advantage over things like the 3 fund portfolio, not to mention the pure stock allocation would have much higher losses in bear markets.
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May 13, 2015 23:02
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etalian posted:Adjusted for inflation it's not a big advantage over things like the 3 fund portfolio, not to mention the pure stock allocation would have much higher losses in bear markets. What do you mean...? Inflation is constant regardless of the portfolio.
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May 14, 2015 06:25
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Hello thread, I'm brand new to all this so please be gentle. I've begun meeting with a financial advisor a friend of mine referred me to. I'm a US citizen, but since I live abroad a lot of stuff in this thread isn't readily available to me. Anyhow, the guy has talked me through how we'd set up a brokerage account, set up some plans for various monthly deposit amounts and example portfolios to get to my target amounts. All this is well and good and I think I have the barest beginning of a grasp on how all this works, but there is one thing I'm having trouble with. For a 0.3% annual fee the company will do portfolio management, but I've no idea if that is a good idea or not. Is this something that people often go in for? I'm (obviously) an utter noob, and I seriously doubt I'm going to have the time or energy to rectify that anytime soon. Does anyone have an off the cuff recommendation?
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May 14, 2015 06:37
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Stringent posted:All this is well and good and I think I have the barest beginning of a grasp on how all this works, but there is one thing I'm having trouble with. For a 0.3% annual fee the company will do portfolio management, but I've no idea if that is a good idea or not. Is this something that people often go in for? I'm (obviously) an utter noob, and I seriously doubt I'm going to have the time or energy to rectify that anytime soon. If you don't want to manage your own portfolio, which will involve considerable hours of study (but nothing crazy, we're talking a couple weeks of 20 hrs/wk study max for a basic but solid grounding), then 0.3% is actually quite nice. The danger is that in exchange for your 0.3%, the adviser will gently caress you over, under, and through in a number of unexpected ways (for example, involving you in loaded 2% ER funds which pay a
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May 14, 2015 07:31
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etalian posted:Adjusted for inflation it's not a big advantage over things like the 3 fund portfolio, not to mention the pure stock allocation would have much higher losses in bear markets. Inflation is the same regardless of the portfolio and the time period addressed covers 3 of the largest bear markets in history. An allocation to total stock during that particular period performs extremely well (or any long enough period). The point is that if you have a long enough investing horizon to ride out the inevitable draw downs and recovery periods just saying "gently caress it, keep it as simple as possible" is not actually a poor choice even if current theory says you're almost certainly better off with an allocation to bonds and international as well as your core stock index holding. The entire rest of my post dealt with how chasing the last nth of performance was actually a poor choice and I actually strongly emphasized the benefits of diversification. But it's always nice to see that someone read at least as portion of what I wrote. Murgos fucked around with this message at 13:59 on May 14, 2015 |
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May 14, 2015 13:21
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Probably a stupid question but is it better to open a new Ira or increase my 401k. We want to invest more than the current 16% per month we are currently investing. Our situation is that we are a married couple 50 & 38, single income with about 600k in our savings / 401k. We have a mortgage and no other debt. I keep saying I should open a brokerage account but I am happy with my 401k choices (vanguard target funds) and if I open an account outside of the 401k it would likely be in another vanguard target or world fund.
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May 14, 2015 14:09
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Stringent posted:Anyhow, the guy has talked me through how we'd set up a brokerage account, set up some plans for various monthly deposit amounts and example portfolios to get to my target amounts. As was said above, it's hard to tell if an FA is screwing you without having at least a basic understanding already. 0.3% is, on the surface, quite reasonable but there are lots of ways for the unscrupulous to part the unknowing from their money. Many, many people use a financial advisor and each pretty much has to be evaluated on their own merits. FAs can often supplement their income with fees and kickbacks generated by buying certain funds with higher ER's or that charge a front end (or even back end) load or by constantly 'adjusting' you portfolio through frequent buying and selling of assets. quote:Anyhow, the guy has talked me through how we'd set up a brokerage account, set up some plans for various monthly deposit amounts and example portfolios to get to my target amounts. If you could share one of the example portfolios we could probably give it a quick sniff test, if it includes the actual fund names and share classes. The brokerage fee schedule might help too.
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May 14, 2015 14:12
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Ropes4u posted:Probably a stupid question but is it better to open a new Ira or increase my 401k. We want to invest more than the current 16% per month we are currently investing. You might want to consider opening a Roth IRA to diversify your tax burden but you'd have to evaluate your current tax bracket relative to your expected tax bracket in retirement to know if it'd be a good idea in your case.
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May 14, 2015 15:22
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Saint Fu posted:If you're happy with your 401k choices and haven't maxed it yet, there's no reason to open an IRA just for the sake of opening an IRA. If your 401k is maxed every year and you want to save more, then by all means. Thank you for the help I will max 401k and then go debate between a Roth and traditional.
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May 14, 2015 18:16
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Ropes4u posted:Thank you for the help I will max 401k and then go debate between a Roth and traditional. If your 401(k)'s fund availability is limited and you are already maxing any matching in your 401(k), you should probably do IRA first, and then once you have maxxed your annual IRA contribution limit, at that point you go back to the 401(k) to increase your savings there. The reason is because with an IRA you can invest in literally anything, so you can select very low-cost high quality funds. In your 401(k), you are limited to whatever your plan has to offer. If you post your 401(k) options, along with their expense ratio information, we can help you evaluate the investment choices there.
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May 14, 2015 19:58
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Sounds like their 401k has Vanguard target date funds, which is what this thread commonly recommends as a solid IRA fund choice.
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May 14, 2015 20:31
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One thing to note is that a 401k's expense ratios might be different that what you can get through Vanguard in an IRA or brokerage account even if the fund is the same. Could be higher or lower depending on how the 401k provider negotiated.
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May 14, 2015 20:32
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At any given time your 401k plan administrator could change and your Vanguard funds could be replaced with terrible alternatives. This does not have any risk of happening with an IRA. Post-match 401k, it really is a MUCH better idea to max out an IRA before finishing the 401k.
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May 14, 2015 20:36
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GoGoGadgetChris posted:At any given time your 401k plan administrator could change and your Vanguard funds could be replaced with terrible alternatives. This does not have any risk of happening with an IRA. The only counter point I can think of is that a traditional IRA messes up your ability to do a backdoor Roth down the road. This comes up frequently but just though I'd mention it.
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May 14, 2015 20:40
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Murgos posted:As was said above, it's hard to tell if an FA is screwing you without having at least a basic understanding already. 0.3% is, on the surface, quite reasonable but there are lots of ways for the unscrupulous to part the unknowing from their money. Many, many people use a financial advisor and each pretty much has to be evaluated on their own merits. FAs can often supplement their income with fees and kickbacks generated by buying certain funds with higher ER's or that charge a front end (or even back end) load or by constantly 'adjusting' you portfolio through frequent buying and selling of assets. Oh yeah, thanks! So the brokerage is through Generali. The balanced portfolio that was outlined for me looked like this:
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May 15, 2015 12:29
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Stringent posted:Oh yeah, thanks! Before I tell you to run away screaming do you know what the share class of these are? For example for the JPM America Equity it should be something like "JPM America Fund Class A" or "Institutional" or "R5". Or there could be a ticker symbol like, "JUEAX". At worst some of these are horribad total rip-offs and at best some of them are just kinda not good. That CF Miton Special Situations fund, uh, whoa, bad. Hell, their slogan is "Genuinely Active Investing". Their best share class, the 'B' share has a load of 1% and an ER of 0.79% while others (A, C, F and N) range between and ER of 1.04% to 1.79 with an initial load 5%. That's without even getting into that they've only returned 2.3% over the last five years of a raging bull market. e: You also gotta like the 8% allocation to water ("The sub-fund favours companies operating in water supply, processing services, water technology and environmental services"). Personally, I can't imagine a situation where I'd want a significant portion of my holdings to be in one specific sector. Even so though, like, why water? e2: It's not immediately apparent but this portfolio is heavily (~20%) invested in Japan. Murgos fucked around with this message at 14:09 on May 15, 2015 |
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May 15, 2015 13:05
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Stringent posted:Oh yeah, thanks! 8% in water?  what the gently caress, did a bond villain build your portfolio?
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May 15, 2015 13:45
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ohgodwhat posted:8% in water?
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May 15, 2015 14:00
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Murgos posted:Before I tell you to run away screaming do you know what the share class of these are? Got bored so went looking for the info to see how bad the train wreck is. Found the data here.
Uh, yeah, run away screaming. Maybe vomit a little. This is basically a text book bad portfolio. The 5% loads will cripple you to start with and the ~2% ERs will doom you to eating dog food in retirement. Heaven forbid you want to sell one of these as many of them have redemption fees. Also, some of them are [very] small funds, so good luck buying or selling them at any where near a reasonable price or when you want to. Most of these funds are denominated in GBP are you in the UK? If so, go here: https://www.vanguard.co.uk and work with them. e: If you're really stuck can you open just a straight up brokerage account somewhere? Something that just give you access to stock markets like e-trade (preferably with low flat fees)? If so, you can just buy some low fee, broad market ETF's and be much better off. Murgos fucked around with this message at 16:18 on May 15, 2015 |
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May 15, 2015 16:12
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Wow, glad I asked, looks like I've got some studying to do. Where would I look to get these kind of appraisals? Is this kind of thing in the stuff linked in the OP and I just missed it?
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May 15, 2015 16:42
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Those are all expensive funds, but i wouldn't just assume that he would pay both the sales load and a wrap fee. It's certainly possible, but oftentimes if you are charged a wrap fee you don't pay sales loads. Obviously this doesn't change the assessment of the funds as they all have high expense ratios, but I just wanted to point out that it isn't necessarily true he would have to pay a bunch of sales loads. mike- fucked around with this message at 16:51 on May 15, 2015 |
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May 15, 2015 16:47
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Hey guys, my wife works for the government and is trying to set up her Roth 401(k), via SavingsPlus, which has the following plans. https://www.savingsplusnow.com/401k457/choices/OpExpenses.html https://cache.hacontent.com/ybr/R516/16446_ybr_ybrfndt/downloads/InvestmentPerf.pdf Is she better off using the target date funds or mimicking those funds through allocations to the various indices, with the lower ERs? If the second route, how much "managing" will she need to do?
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May 15, 2015 17:00
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Ok, so why is this a run away screaming kind of deal? Obviously I'm a babe in the woods here, what would be the outcome of putting my money here?
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May 15, 2015 17:02
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your profits go into their yachts rather than back into your own pockets, basically. The fees are so high you won't get the compounding you should and with the same amount of money in, it might take you twice or even three times as long to get to a number that you'd get with a lower cost vanguard fund.
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May 15, 2015 17:13
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Stringent posted:Ok, so why is this a run away screaming kind of deal? Obviously I'm a babe in the woods here, what would be the outcome of putting my money here? The outcome would be that you lose a ton of money to fees over your lifetime, and statistically there is less than a 10% chance that the crappy JP morgan funds outperform index funds over a long period of time EXCLUDING fees. code:Droo fucked around with this message at 17:17 on May 15, 2015 |
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May 15, 2015 17:13
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Ok, so I'm a US citizen living in Japan. The financial advisor in question is British, based in Japan (http://argentumwealth.com/). So, two questions. First, what chance is there that the recommendations the advisor made were a result of incompetence rather than actual self-serving malice? Second, aside from running away screaming from this financial advisor, my next move should be to set up a brokerage account and start investing in some Vanguard funds that the links in the OP will make clear after a few weeks reading?
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May 15, 2015 17:28
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Stringent posted:First, what chance is there that the recommendations the advisor made were a result of incompetence rather than actual self-serving malice? Financial advisers are generally salespeople, not investment professionals. There is a chance that he personally is just doing what he was taught and he actually believes it, and there is a chance that he is aware it is a horrible investment plan and is doing it purely out of malice. Either way, the corporate structure that taught and incentivized him to sell these kinds of investments is 100% self serving malice, so the specific motivations of the person you met with is kind of irrelevant. Either way, you have not, and never will, receive good advice from this person. I am not sure if the fact that you live in Japan has any impact on your eligibility at all, but if I were you I would call Vanguard and just talk to them about whether you are eligible to open an account or not. Then you can read "The Four Pillars of Investing" before you buy any mutual funds. Finally, make a plan and get it vetted by either this forum or the Bogleheads forum, and then do it.
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May 15, 2015 17:37
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You could try asking, see if he or his firm receives any benefits for offering those funds, I wonder if they're required to tell you.
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May 15, 2015 17:39
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