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I can't find the report I was reading in January at work... it also could have been citing whole world index weighting vs actual split. I'll google around tonight and see what I can come up with. Either way, I would generally say home bias is a good idea, and the global correlation right now erases a lot of the difference. Then again, with all the #MAGA #winning we're experiencing right now, you all should probably go 100% stable value funds and short The Market!
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Apr 6, 2018 20:24
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GoGoGadgetChris posted:Changing your allocation based on Era Timing Hah, but I'm actually not suggesting changing balance on that basis, only that while you're thinking about why have a particular foreign/domestic balance, the correlation between foreign and domestic stock performance has increased over recent couple of decades but we don't know (and won't know for decades) whether that trend will continue, stabilize, or reverse. One speculative reason one can suggest for why it might reverse, is if the period of increased globalization and internationalization of large American companies turns out to have been temporary. I am not taking a position on that either way and I am already happy with my domestic/international split. It's just grist for the mill.
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Apr 6, 2018 20:43
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50/50 just helps me sleep better for now. Who knows, maybe in the future Tencent, Nestle, Alibaba, Samsung, Softbank, Toyota, and HSBC will dominate everything. I don't want to miss out just in case!
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Apr 6, 2018 20:45
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Man, withdrawing my excess Roth IRA contribution was a pain in the dick. Had to print up 8 pages of paperwork and physically mail (lol) them to Vanguard. I had also purchased $2,000 in a fund's Investor Shares, which put my balance at $10,000 so I converted to Admiral Shares. I explained over the phone to a CS Rep that this meant I had BOUGHT vtsmx but no longer HAD ANY vtsmx and instead had only vtsax. CS Rep: What? What do you mean? I do not understand at all, sir Let's see how they handle it...
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Apr 6, 2018 20:55
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They may automatically reclassify them as investor shares after they're below the admiral limit for a period of time. You'll probably get a notice about this ahead of it occurring. They may also do nothing and you get admiral shares forever.
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Apr 6, 2018 21:20
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Fuckin' hell I am on a Stupidity Spree today. My taxes I'm filing right now are for 2017, so I'm withdrawing from my excess contribution for 2017. Was right about to drop it in the mailbox, phew.
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Apr 6, 2018 21:34
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Ok, so there was some talk about how to go about withdrawals and asset allocation in retirement. I'd like to run my concept past you folks to see what you have to say. Take the concept with a grain of salt and know that I'm waaaaay way off from that point in time. Asset Allocation: So I hear a lot and a lot of talk about a 4% model of safe withdrawals. What that would mean is that every year of spending = 4% of my starting portfolio. My concept is that I'd like to have 5 years worth of expenses in bonds and cash, and the remainder in stocks. The reason for this 5 year time period is that I've heard that if your investing for less than five years, you should be in bonds or depending on if it's shorter, cash, however if you're investing for longer than 5 years, you can take more risk and be in equities. All of this leads to a portfolio that is only 20% bonds and cash in/at retirement. With I don't know, 2 years of cash and 3 years of bonds? Withdrawal strategy: On an annual basis, if the stock portion of the portfolio shows no gain or is up then sell stocks and replenish cash used that year. If stock portion of the portfolio is down by at least $1, then sell bonds to replenish cash. If after selling bonds the stock portion of the portfolio is up at least $1 on the previous year, sell enough stock to replenish two years' worth of cash/bonds. Continue selling stock at two years' worth of living expenses every year that the market is either even or goes up until desired 20% cash/bonds position is reached. What this does is makes the bonds/cash portion of the portfolio vary between 0% and 20%. This withdrawal method is in a way, trying to help keep from selling equities when markets are down by attributing defined timeframes on the cash/bond section of the portfolio. The hope is that with "5 years of reserves" one could weather some of the worst things the market could throw at us, but also give time to adjust lifestyle if need be. I understand there's no getting around bad markets, and so to say the least, this methodology would be considered optimistic. This method is also a method that has a varied income element to it.
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Apr 6, 2018 23:53
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I always understood the 4% to.be based on your current portfolio at the time of the withdrawal. Otherwise you are going to slowly get poorer while your account grows larger even if growth is just due to inflation. All the calculation tools certainly seem to be set up that way.
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Apr 7, 2018 00:28
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SweetSassyMolassy posted:Overly complex withdraw strategy
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Apr 7, 2018 00:58
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Murgos posted:I always understood the 4% to.be based on your current portfolio at the time of the withdrawal. Otherwise you are going to slowly get poorer while your account grows larger even if growth is just due to inflation.
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Apr 7, 2018 05:31
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Ralith posted:If you refer to the source material (or any half-decent summary of it) you'll find that it's defined as 4% of your starting value, adjusted for inflation. Spending 4% of your present value annually has drastically lower historical odds of success. No, "success" is usually defined as having any money left at the end of your target time period, and spending 4% of your present value annually is guaranteed to succeed in this sense. The issue is that you're not guaranteed to have enough to live on in any given year.
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Apr 7, 2018 06:33
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Alhireth-Hotep posted:The issue is that you're not guaranteed to have enough to live on in any given year.
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Apr 7, 2018 06:56
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The best solution is just to keep working until you fall over
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Apr 7, 2018 06:58
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Alhireth-Hotep posted:No, "success" is usually defined as having any money left at the end of your target time period, and spending 4% of your present value annually is guaranteed to succeed in this sense. The issue is that you're not guaranteed to have enough to live on in any given year. Yeah, but isn’t the difference sort of in the noise? Like 100% success for any given 30 year timeline vs. 99.7%? And that mostly coming down to how the account performed in the first few years of withdrawals. It’s mostly dumb anyway because it’s too rote. Any reasonably intelligent person should be able to recognize when the total value of their account has grown or shrunk significantly and adjust their withdrawals accordingly. If 7 years into withdrawals your principal has doubled then it’s probably safe to rebaseline your withdrawal rate. Or if it’s been a bear market to maybe consider economizing and reducing withdrawals to 3 or 3.5% for a while. e: running Monte-Carlo sims at PV with a 35/65 stock/bond and 1% per quarter withdrawal shows success with significant margin for 10,000 30 year randomized trials using historical data for performance and inflation so, 99.99% or greater success rate. By margin I mean capital reserves on the poorest results Murgos fucked around with this message at 15:23 on Apr 7, 2018 |
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Apr 7, 2018 13:54
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Hoodwinker posted:You withdraw your excess contribution and it's treated as if it never happened, but you also need to calculate and withdraw any gains generate by your $5,500 and withdraw those as well. Your IRA company may do this calculation for you. You will pay taxes at your normal marginal rate for those gains. During an excess contribution withdrawal, your IRA company should do withholding on your behalf and send you a 1099-R for this amount you will use to enter on your taxes. H110Hawk posted:Fidelity does this with a super simple form. It's like 2 pages of mostly boilerplate, you enter your info, account number(s), check some boxes, $5500, and sign. They handled the calculations for me for the earnings/losses. Oh boy. I filled out Vanguard's 9 pages of paperwork, and saw that they were withdrawing exactly $5,500. I called to confirm, "Should you also be withdrawing any gains generated by this $5,500?" and the guy said "  nope, no sir! " and just wasn't having it when I said that didn't sound right.Can't wait for that sweet sweet excise tax.
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Apr 10, 2018 03:19
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This reminds me I need to do my return of excess form for my 401k asap. It's also 2 pages most of which is boilerplate.
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Apr 10, 2018 04:26
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GoGoGadgetChris posted:Oh boy. I filled out Vanguard's 9 pages of paperwork, and saw that they were withdrawing exactly $5,500. If you DID have gains, you're right, you'd need to withdraw. I'm guessing Vanguard sees your contribution as worth something like %5,480 now, so you are getting 100% of contribution and no gains/losses back.
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Apr 10, 2018 04:54
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I could use some advice for my wife's and my long-term investment strategy. Here's where we are today: I am 33 and she's 31. No kids atm but that is something that is in our near future plans. Combined income of about $150k, and no debt outside of our mortgage which is about $500k with 4% interest $50k emergency fund in a savings account yielding 1.4% APY ~$150k invested into stocks via a brokerage account (most of the shares were inherited and are in 3 or 4 blue chip stocks i.e BA and XOM) ~$75k split across four different 401(k) accounts from past jobs $3k each in two traditional IRAs which we opened for tax purposes last year and have not contributed to this year $30k invested into a Vanguard 2040 Target fund via my job's 401(a). That account has a mandatory 5% contribution with an awesome 2:1 employer match, so 15% contribution per month. ~$20k in my wife's 401(k). I'm not sure what it's currently invested into or what funds are available there. Here are my questions: If we can assume that we won't need to dip into the emergency fund any time soon, is there a better place to put it than a savings account? I have been reading up about I-bonds, but apparently you can only buy $10k/year. Is it worth it to start doing that? What should we do with all of the old 401k accounts? Rolling over seems like the best bet, but I don't really understand too much about how that process works. Any guidance for our overall investment strategy would be helpful. I don't think I can contribute more than the 15% per month to my 401(a), so should we focus on maxing out my wife's 401(k), or first focus on maxing out the traditional IRAs? Would converting those over into 2 Roth IRAs make sense? Is there any value in contributing extra to our mortgage, or should we only worry about that after we've maxed our all of our retirement accounts? Mikey Purp fucked around with this message at 21:44 on Apr 10, 2018 |
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Apr 10, 2018 21:38
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Mikey Purp posted:If we can assume that we won't need to dip into the emergency fund any time soon, is there a better place to put it than a savings account? I have been reading up about I-bonds, but apparently you can only buy $10k/year. Is it worth it to start doing that? the point of an emergency fund is that it is fully available to dip into in unforeseen circumstances. given that, trying to predict how you will need to use it is pointless, so IMO a savings account is the correct level of liquidity and low returns is the price you pay for that liquidity. quote:What should we do with all of the old 401k accounts? Rolling over seems like the best bet, but I don't really understand too much about how that process works. you can roll the old 401ks into the IRAs you already have. this is not a taxable event or anything, but in general the investment options you get in an IRA are going to be much better than a 401k. quote:Any guidance for our overall investment strategy would be helpful. I don't think I can contribute more than the 15% per month to my 401(a), so should we focus on maxing out my wife's 401(k), or first focus on maxing out the traditional IRAs? Would converting those over into 2 Roth IRAs make sense? it sounds like you're in pretty good shape overall. i would probably move your ~150k out of individual stocks and into index funds and/or tax-advantaged accounts, although this will likely have tax implications that you may or may not want to deal with. quote:Is there any value in contributing extra to our mortgage, or should we only worry about that after we've maxed our all of our retirement accounts? 4% is kind of a wash, i would err on the side of maxing out all of your retirement accounts first
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Apr 10, 2018 21:59
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Mikey Purp posted:I could use some advice for my wife's and my long-term investment strategy. Here's where we are today: Yes, rollover those 401k's into a single Rollover IRA at your broker. Can you even tell off the top of your head roughly how those are invested, around what fees you're paying, etc? This is easier than you think, get your 401k account information (name on account, brokerage, account number, plan number, it's all on your statement) and call up your current brokerage. Tell them what you want to do and ask for help. Look at the great chart-o-savings. Max out that 2:1 match, if there is room there that is 200% gains just by depositing the money. You have an e-fund, but you also have taxable investments while nothing in an IRA. Fill up your IRAs. Your mortgage is also pretty high relative to your incomes. Here you get into risk:reward stuff. Your $500k mortgage with I assume 25-30 years left on it is over $3k/month PITI? How much more comfortable would your life be with a re-casted $400k mortgage and only $50k (natch: $39,000 after IRAs) in that inherited brokerage account? There is fairly common discussion here about paying down mortgage (4%) vs letting it ride in the market (endless arguments over which % this is, let's pretend 6% because I'm posting and I believe that to be correctester.) What if one of you loses your job? What about childcare? You might also consider moving those "blue chips" into an index fund or another target date fund. Do you intend to retire at 55? Otherwise 2045 or 2050 might be a more appropriate date.
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Apr 10, 2018 22:10
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Thanks for the feedback guys! I have a few follow-up questions. Mr. Glass posted:the point of an emergency fund is that it is fully available to dip into in unforeseen circumstances. given that, trying to predict how you will need to use it is pointless, so IMO a savings account is the correct level of liquidity and low returns is the price you pay for that liquidity. My understanding with I-bonds is that they are still liquid, but you just miss out on some of the interest if you cash them out early. In the end it's a 1% difference, so this is probably not the most pressing decision we need to make regardless. quote:it sounds like you're in pretty good shape overall. i would probably move your ~150k out of individual stocks and into index funds and/or tax-advantaged accounts, although this will likely have tax implications that you may or may not want to deal with. Who would I talk to about helping us understand the tax implications? Is this something that the brokerage firm could do for us? H110Hawk posted:Look at the great chart-o-savings. Max out that 2:1 match, if there is room there that is 200% gains just by depositing the money. You have an e-fund, but you also have taxable investments while nothing in an IRA. Fill up your IRAs. Your mortgage is also pretty high relative to your incomes. Good advice, we will focus on maxing the IRAs. Is there any value in converting them into Roth IRAs? quote:Here you get into risk:reward stuff. Your $500k mortgage with I assume 25-30 years left on it is over $3k/month PITI? How much more comfortable would your life be with a re-casted $400k mortgage and only $50k (natch: $39,000 after IRAs) in that inherited brokerage account? There is fairly common discussion here about paying down mortgage (4%) vs letting it ride in the market (endless arguments over which % this is, let's pretend 6% because I'm posting and I believe that to be correctester.) What if one of you loses your job? What about childcare? I think we are more comfortable with the money in the stock market for those reasons. We live in a pretty HCOL area with a really hot real estate market, so it's not super clear to me if it makes the most sense to put more or less money into the mortgage right now in case it turns out that we bought near the top of the bubble. Between the stocks and the E-fund we feel relatively secure against unexpected job loss. You're correct about the mortgage payment, but we are comfortable with it in our budget and are still able to save more than 20% of our income. We anticipate that we won't need to affect our savings rate much when we have children, as the cost of child care will probably be offset in other places where we will be spending a lot less once we have kids i.e. dining out, bars, entertainment, etc. That being said, we've already started talking about what the budget would look like for kids and I anticipate we'd have some funds set aside for that by the time a baby is born. quote:You might also consider moving those "blue chips" into an index fund or another target date fund. Do you intend to retire at 55? Otherwise 2045 or 2050 might be a more appropriate date. We have talked about the idea of FI/RE, which is why I currently have my target fund set to age 55. That being said, does an earlier target just mean it's a more conservative portfolio? That might be the opposite of what I intended if so.
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Apr 10, 2018 23:03
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Mikey Purp posted:
There are conflicting schools of thought. If retirement is soon (as is the case for early retirees), you'd want a higher allocation to bonds But, early retirees need to achieve as much growth as possible in a much shorter timeline than typical, so you'd want a higher allocation to stocks.
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Apr 10, 2018 23:06
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Mikey Purp posted:If we can assume that we won't need to dip into the emergency fund any time soon, is there a better place to put it than a savings account? I have been reading up about I-bonds, but apparently you can only buy $10k/year. Is it worth it to start doing that? Don’t do bonds. As said, it needs to remain ‘I can get this in 1-2 days’ liquid. 50k seems a lot though. I’d go with 6 months’ post-tax expenses (not income, not excess directed to savings). As a datum point, I have mine resting in my mortgage as excess payments since I have no fees for excess payments or redrawing from it. This offsets the mortgage and reduces my interest, essentially delivering guaranteed returns at my mortgage rate. I know Australia’s mortgages often work slightly differently in most cases to the US though (i.e. we do variable rates by default and thus have no fixed term overpayment/redraw fees), so you may not be able to do this. The only risk here is if my bank skyrockets my repayments when the interest rate increases, above what i can meet with increased repayments. However, I am solvent enough to absorb that for at least a couple of percent, I already pay a chunk above my minimum repayments just to buffer and I’m in touch enough with financial news enough to respond in a timely manner if necessary, so I’m comfortable with that risk. Do note that it exists, though. Conventional wisdom here is to find a high-interest savings bank (generally an online-only arm of another bank) and dump it in there. Again, we get free overnight transfers between banks so YMMV. Basically, don’t lock it down with significant fees and have it able so you can redraw 50% or so (for $50k, I’d say 100% for $10k) within 24 hours. That eliminates term deposits, bonds, shares, etc. etc. With any excess savings, I park them in my savings sub-account of my withdrawal bank (where I have my cards, etc. and where my pay is deposited) until I reach $5-$10k and then move it into whatever vehicle I require (topping up efund, parking for holiday/other big expense, to broker for shares, etc.). e: I missed that you responded but I think the above might still give ideas idk.
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Apr 10, 2018 23:22
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I have an Etrade account with old 401ks that I've rolled over from old jobs. Can I now (with no 'qualifying event') roll them over into Vanguard where I have my Roth IRAs? I'd imagine probably? Rollovers are almost always discussed in the context of job changes, but I've never had to 'prove' that or anything when doing one.
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Apr 10, 2018 23:47
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Mao Zedong Thot posted:I have an Etrade account with old 401ks that I've rolled over from old jobs. Can I now (with no 'qualifying event') roll them over into Vanguard where I have my Roth IRAs? I'd imagine probably? Yes. You can move the money around IRA to IRA whenever you please. If it's your current jobs 401k you've rolled the money into the answer is probably not unless you allow in service rollovers. Mikey Purp posted:Who would I talk to about helping us understand the tax implications? Is this something that the brokerage firm could do for us? Looks like you've thought this through pretty well. Keep your e-fund liquid, like FDIC-insured savings account liquid. Inheritance money: Ask your accountant whenever they recover from tax season. Also you need a trust if you don't have one, see an estate planning attorney. Edit the third: lol the Fidelity ROE form says "By April 1" on it, and that they can't withhold taxes for prior years. What do you want to bet this thing gets rejected again because I stupidly checked to withhold taxes? 
H110Hawk fucked around with this message at 01:07 on Apr 11, 2018 |
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Apr 11, 2018 00:54
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Something I'm not quite clear: do Vanguard funds actually buy stocks with the money I invest? Or am I just buying a "stake" in the fund itself and Vanguard is obligated to pay out in accordance to the index's performance, regardless of whether they actually bought those shares or not? Also, how often does the fund capitalize my gains (I might be using the wrong term here) and reinvest them?
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Apr 11, 2018 19:56
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Ur Getting Fatter posted:Something I'm not quite clear: do Vanguard funds actually buy stocks with the money I invest? Or am I just buying a "stake" in the fund itself and Vanguard is obligated to pay out in accordance to the index's performance, regardless of whether they actually bought those shares or not? The money is being pooled together to then purchase those underlying assets.
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Apr 11, 2018 20:28
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Neon Belly posted:The money is being pooled together to then purchase those underlying assets. Or to leave in cash or a money market fund. In strict (and annually audited) accordance with the fund prospectus, which you should read before investing.
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Apr 11, 2018 20:30
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I'm currently investing at: 55% US Total Market 35% Global market (Excluding US) 10% US Bonds. I'm 33, trying to ideally push for FIRE in 10 years or at least just be in a good spot in the future if I don't go that route. Should I change up my allocations? Im copying the Vanguard 2050 target fund breakdown, but curious i I should be deviating. In terms of investment vehicles, I'm fortunate enough to be able to max out my tax advantaged funds, I typically follow this path: Max 401k Max Roth IRA (this year I will be completely phased out incomewise though.) Max Brokerage. I have an IRA with a sizeable 5 figure amount in it that I could roll into my 401k (so i dont get taxed) which should enable the backdoor roth for me in 2018, but sadly I cant do the "MEGA BACKDOOR ROTH" due to it being discriminatory, at least according to finance and HR at my company. Is there anything I am missing? usually I leave this stuff on autopilot but I like to check in on it every 6 months or so. thanks!
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Apr 12, 2018 20:46
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Sounds like you're in a great position. Any kids? You could have more tax space with a college 529.
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Apr 12, 2018 20:54
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Nah no kids, don't plan to have any and I live in a place where I don't plan to buy so I rent a small apartment. Sounds good then I guess, just feels like I could be doing something better than dumping into the brokerage when you hit the end on the tax advantaged accounts. Thanks!
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Apr 12, 2018 21:15
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Minty Swagger posted:Nah no kids, don't plan to have any and I live in a place where I don't plan to buy so I rent a small apartment. Out of curiosity what do you mean by "Max your brokerage"? And is it just a taxable account at Vanguard or Fidelity or something?
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Apr 12, 2018 21:16
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Ha sorry, poor word choice. "As much as I can" into my brokerage account, which is indeed a taxable account at fidelity. 100% mutual funds, and I just happen to have fidelity over vanguard because my first job was a 401k at fidelity (hence the rolled over IRA) and they compete pretty well with vanguard. Love for both. 
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Apr 12, 2018 21:24
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Minty Swagger posted:they compete pretty well with vanguard. Love for both. Just remember that Fidelity is only the way it is because they had to compete with Vanguard. They used to have truly abysmal expense ratios and sales loads until their customers started flocking to Vanguard. Fidelity would happily charge you a 5% fee to buy their S&P500 Index Fund at 0.85% ER if they could. I'm not saying you should ditch Fidelity, just a warning to anyone that's reading this and trying to decide which company to give their loyalty to.
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Apr 12, 2018 21:27
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True that, I don't use their target retirement funds (for example) because they are ridiculously high compared to vanguards: Vanguard 2050 fund (VFIFX) .15% exp ratio Fidelity 2050 fund (FFFHX) .75% exp ratio, 5 times higher. Fidelity for my purposes since I'm already in their system is good, but if I had to do it all again, I'd for sure start fresh with vanguard.
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Apr 12, 2018 21:37
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If you're healthy and your employer offers it, you could enroll in a qualifying HDHP, treat the HSA contributions like another retirement account and just pay whatever expenses you have out of pocket.
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Apr 12, 2018 23:50
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single-mode fiber posted:If you're healthy and your employer offers it, you could enroll in a qualifying HDHP, treat the HSA contributions like another retirement account and just pay whatever expenses you have out of pocket. Minty Swagger posted:I'm currently investing at: I'd move your brokerage and Roth IRA to Vanguard personally. Fidelity does offer some cheaper funds than Vanguard (look at institutional S&P500), but it's literally only because Vanguard is forcing them to. Vanguard's ownership structure and general mission is in our favor vs the shareholders.
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Apr 13, 2018 03:33
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Minty Swagger posted:True that, I don't use their target retirement funds (for example) because they are ridiculously high compared to vanguards: Fidelity has some cheaper expense ratio funds that do the same thing. Look at the 2050 index fund, FIPFX (https://fundresearch.fidelity.com/mutual-funds/summary/315793869). The target date retirement funds that have the word "index" in them appear to be the same expense ratio as Vanguard.
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Apr 13, 2018 12:22
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Yeah looking at the allocation it seems identical except that Fidelity doesn't have international bonds. Totally cool with that.
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Apr 13, 2018 12:31
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Don't forget Fidelity is so butthurt at Vanguard that they added additional 5bps of fees to Vanguard funds held in Fidelity 401(k)s. I just rolled my Roth out of Fidelity to M1 last month, good riddance
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Apr 13, 2018 15:59
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