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Yes bond funds are great and balance is good, especially when the chart includes the benefit of a massive government bailout. All those bond holders enjoyed those welfare checks from 2007-2010 or so, be sure you mark that section on the chart. Just keep your fingers crossed that we never have another crisis or that the fed will bail out all the banks again, because we have reformed nothing and it's just a matter of time.
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Aug 12, 2019 14:32
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Pryor on Fire posted:Just keep your fingers crossed that we never have another crisis or that the fed will bail out all the banks again Both are guaranteed to happen. You could have the most leftist govt this country has ever seen and they would still provide a bailout.
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Aug 12, 2019 15:10
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I just stick with the advice of actual professionals. 4 pillars has done me well.
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Aug 12, 2019 19:07
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Jeeze, rolling over my partner's 403(b) from Nationwide (who I have always hated) and they charge $190 just to move out. What a rip. Is that normal for a provider to charge you to leave?
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Aug 13, 2019 14:56
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El Mero Mero posted:Jeeze, rolling over my partner's 403(b) from Nationwide (who I have always hated) and they charge $190 just to move out. What a rip. Is that normal for a provider to charge you to leave? Yeah it is, for HSAs too.
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Aug 13, 2019 15:14
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Normal yes, but still BS. 190 is a lot though.
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Aug 13, 2019 15:15
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El Mero Mero posted:Jeeze, rolling over my partner's 403(b) from Nationwide (who I have always hated) and they charge $190 just to move out. What a rip. Is that normal for a provider to charge you to leave? I would expect some fee, but $190 seems high. I just paid TD Ameritrade $75 to transfer funds to another brokerage.
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Aug 13, 2019 15:50
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Hello, I'm putting in near the $19,000 401k yearly limit. I see most websites say it is the yearly pre-tax maximum, but I wasn't sure when the start of the year is. I put in $730 every 2 weeks automatically from my paycheck with an additional 8% employer matched. Is it from Jan 1st - Dec 31st, or tax day - tax day, or a rolling window of 12 months? I don't have a "year" I can select like with my Roth IRA on Vanguard.
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Aug 13, 2019 16:14
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McGrady posted:Hello, I'm putting in near the $19,000 401k yearly limit. I see most websites say it is the yearly pre-tax maximum, but I wasn't sure when the start of the year is. I put in $730 every 2 weeks automatically from my paycheck with an additional 8% employer matched. Is it from Jan 1st - Dec 31st, or tax day - tax day, or a rolling window of 12 months? I don't have a "year" I can select like with my Roth IRA on Vanguard. Jan 1 to Dec 31. The $19k is only your deferral from salary, the employer match is operating in the overall $56k limit from "all sources." Also if you can afford to I would bump it up to the full $19k. You're leaving a small amount of money on the table. If you cannot afford the extra 1% per paycheck then that's fine, but don't worry about going over. H110Hawk fucked around with this message at 16:22 on Aug 13, 2019 |
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Aug 13, 2019 16:17
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H110Hawk posted:Jan 1 to Dec 31. The $19k is only your deferral from salary, the employer match is operating in the overall $56k limit from "all sources." 730 a paycheck gives me 18980 at the end of the year, it is the closest I can get without going over. When I go over, wouldn't that cause tax form headache? I haven't gone over before so I wasn't sure how complex it would be.
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Aug 13, 2019 17:01
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Check if your employer will even let you go over. Odds are that last paycheck they will only let you hit $19k exactly.
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Aug 13, 2019 17:04
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Your 401k provider should automatically stop you from going over. I know firsthand that Fidelity will.
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Aug 13, 2019 17:06
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Depends on the employer. Mine dumps anything above the limit in an after tax portion of the account.
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Aug 13, 2019 17:18
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Dustoph posted:Check if your employer will even let you go over. Odds are that last paycheck they will only let you hit $19k exactly. That's how it works for the federal government as well. I don't know if that screws over matching if you go over though.
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Aug 13, 2019 17:24
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Beer4TheBeerGod posted:That's how it works for the federal government as well. I don't know if that screws over matching if you go over though. I think you get screwed out of some matching if you hit 19k too early; you’ll get your 5% for each paycheck that meets the matching threshold then you won’t get anything beyond 1% for the remaining pay periods once you hit 19k.
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Aug 13, 2019 17:31
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Velius posted:I think you get screwed out of some matching if you hit 19k too early; you’ll get your 5% for each paycheck that meets the matching threshold then you won’t get anything beyond 1% for the remaining pay periods once you hit 19k. Yeah I need to double check and make sure that doesn't happen.
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Aug 13, 2019 17:44
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Velius posted:I think you get screwed out of some matching if you hit 19k too early; you’ll get your 5% for each paycheck that meets the matching threshold then you won’t get anything beyond 1% for the remaining pay periods once you hit 19k. It depends on the employer. You have to ask. Mine does the match once a year in February so it doesn't matter when you put the money in during the previous year. Some do a true up if you contribute early. Side note just hit 19k with this paycheck. Always interesting to see the drastic change in pay that will be coming.
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Aug 13, 2019 17:50
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spwrozek posted:It depends on the employer. You have to ask. Mine does the match once a year in February so it doesn't matter when you put the money in during the previous year. Some do a true up if you contribute early.  it was funny doing 100% espp then 80% (maximum allowed) 401k and simply not/barely getting any net pay.I really wish congress would make some model plans everyone had to adopt, I'll wait for everyone to stop laughing. Basically create a truth in lending style 1-pager which spelled out the features of the plan with simple yes/no and straight numbers. If you can't fit it in 1 page your plan is too complicated, and using model plans would make compliance automatic.
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Aug 13, 2019 18:07
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McGrady posted:730 a paycheck gives me 18980 at the end of the year, it is the closest I can get without going over. When I go over, wouldn't that cause tax form headache? I haven't gone over before so I wasn't sure how complex it would be. Is 20 bucks a year really here or there? I wouldn't worry about not getting that last 20 bucks too much.. or maybe I misunderstood your reasoning?
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Aug 13, 2019 18:09
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H110Hawk posted:
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Aug 13, 2019 18:19
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totalnewbie posted:Is 20 bucks a year really here or there? I wouldn't worry about not getting that last 20 bucks too much.. or maybe I misunderstood your reasoning? It was suggested I max it out, and I was essentially saying why I wasn't since it is within $20 of the yearly max anyway, and for me it probably isn't worth the headache at tax time. I am worried the plan administrator wouldn't cut me off in time and I'd go over the limit and then I'd have to figure out how to handle it. My place only matches at contribution time up to 8% of your paycheck so I need to make sure I put in at least the matching amount every payroll. (It actually way more complex than that -- up to 4% is matched on your paycheck 100% vested every other week, +4% yearly match on a vested schedule as a lump at the end of the year, and up to 1/2 of your bonus you can take into your 401k on a vested schedule).
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Aug 13, 2019 18:41
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H110Hawk posted:
yes please let mitch loving mcconnel design a retirement plan for me
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Aug 13, 2019 18:49
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McGrady posted:It was suggested I max it out, and I was essentially saying why I wasn't since it is within $20 of the yearly max anyway, and for me it probably isn't worth the headache at tax time. I am worried the plan administrator wouldn't cut me off in time and I'd go over the limit and then I'd have to figure out how to handle it. That's a really nice match though, provided you plan on staying there through at least some of the vesting.
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Aug 13, 2019 18:53
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ranbo das posted:It doesn't include dividend reinvestment, which is where bonds get most of their return. Sorry, just catching up, but: starting the chart at exactly the year 2000 is sliiightly misleading, given that was a moment of stock market crash; and, long-term US treasuries isn't the same as the typical bond fund we're suggesting people buy in their retirement accounts. Even so, I think this chart shows that it's certainly possible to find good returns with bonds, at least if you carefully select the right 20 year period. The general idea I see from various sources that bonds are universally bad and nobody should buy them is just not based on evidence. Disclaimer: I'm 44 years old and I'm holding about 30% of my retirement portfolio in Vanguard bond index funds. That's more than most goons in this thread tend to hold. But I'm on track for my retirement goals and prefer the lower volatility over chasing another 2 or 3% return rate or whatever.
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Aug 13, 2019 18:58
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McGrady posted:730 a paycheck gives me 18980 at the end of the year, it is the closest I can get without going over. When I go over, wouldn't that cause tax form headache? I haven't gone over before so I wasn't sure how complex it would be. Maybe. So there are a few options:
These are all defined by the plan, but it's highly likely that 3b is going to be your outcome. For me personally, my plan gives me the option of what to do in case of excess contributions. My choices are either option 2 or option 3b, and I chose 3b. edit: This is all assuming your match is on a per-paycheck basis, which is all I've ever seen done. This is typically done so they don't have to screw around if someone leaves part-way through the year (either making a partial match for the year, or clawing back some match that wasn't earned). Looks like some other people get a lump match, so that would slightly change your options. DaveSauce fucked around with this message at 19:14 on Aug 13, 2019 |
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Aug 13, 2019 19:09
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Good to know. I'll check with the admin and see how it works. I plan on sticking around for a while and get as much as I can from retirement. The benefits are good, as is the compensation, and the work/life balance is great compared to other jobs I've had. I have learned so much from this thread! I just wish I had more money to invest when I got out of college, but that was during the recession and I was just getting started. McGrady fucked around with this message at 21:18 on Aug 13, 2019 |
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Aug 13, 2019 21:03
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Bonds-talk, so I just read a thing that just 'clicked' in my head (maybe this was already obvious to you guys, I dunno). As someone here said, the conventional wisdom was 'adjust your portfolio to skew more heavily towards bonds as you near retirement'. But this logic is more tailored towards 'I saved a bunch for retirement, I want to get the most out of it I can before my savings run out'. It's not the same goal as wanting our investments to sustain forever. Instead, your stock-vs.-hedge (bonds, treasuries, cash, whatever) ratio should be 'what's roughly the proportion of time that bonds will outperform stocks'? When stocks are doing great, withdraw from that. When stocks are taking a dump and underperforming bonds, withdraw from bonds. (In addition to the normal rebalancing you do, of course.) Is this a reasonable line of logic to take? Please help me poke holes in it.
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Aug 13, 2019 23:09
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To me that seems like timing the market. "just take your money out of stocks and put it into bonds before the stock market crashes" doesn't seem like a sound strategy to me edit: oh wait you mean withdrawal like take your salary from the asset class that's doing well thereby giving the poor asset class time to recover before you withdrawal from it again I haven't looked into financial independence stuff so I'll leave that answer to someone more well versed.
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Aug 13, 2019 23:14
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facepalmolive posted:'what's roughly the proportion of time that bonds will outperform stocks' I guess if you can predict what this will be then sure. But you're still trying to predict the future. What if it takes longer than expected for stocks to recover?
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Aug 13, 2019 23:30
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You're right, can't predict, so really the best you could do is to use long-term historical averages as an estimate.  Of course, with the huge bold blinking caveat of Past Performance Is Not Indicative Of Future Results, etc.I don't know how to answer 'what if it takes longer than expected for stocks to recover?'. How would you answer that question in the general retirement investment case, anyway? tangy yet delightful posted:edit: Yes, that's exactly what I meant. Just withdraw from what is currently doing well at the moment.
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Aug 14, 2019 00:49
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the answer is that most of us are young enough that we have 20-40 year time horizons to invest and grow our retirement savings, so it's reasonable to bet on "over that period of time the market will go up" and invest accordingly. However, if you retire at age 65, you may get 40 years of retirement but you also may only get 10 or fewer, and actuarial tables will probably predict that you'll most likely get like 20 years. And that's year 1, every year past that the actual number of years you'll live goes down. So: any strategy that relies on the market doing a specific thing could gently caress you over really big. Like, a crash that takes 10 years to recover could mean you spend the entire rest of your life with less money than you planned on. For that reason, retirees are well advised to have a portfolio that consists of a substantial portion in cash or cash-equivalents. You also have a large portion in bonds, because their volatility is much lower (even a "bond market crash" is likely to preserve most of its value, assuming you're diversified in your bonds). And then you may have a slice of your pie in stocks, but probably considerably less than half of the total. There are a ton of other factors though. Do you own your own home? What are your medical needs? Are you taking advantage of relatively good health to travel a lot in your late 60s, on the assumption that by the time you're in your 70s you won't be able to? Are you trying to leave a large inheritance or hoping to spend your last dime five minutes before you die? And, do you have a large retirement fund or a small one? If you have not really enough money, you may need to be 100% certain of preserving it all, and park it all at whatever the "risk free rate" is - perhaps just cash and t-bills. How much social security are you collecting, do you have fixed living costs? You may actually be a candidate to buy an annuity, or get a reverse mortgage, or maybe your grandkids need to live in the house you own while you live in a nursing home and their rent pays yours. Who knows? The reality is that while you're young or middle aged, you plan to have enough money to retire on: but you revise that plan as you get older and approach retirement, and you can start to take into account more and more the specifics and peculiarities of your situation. If you develop macular degeneration at age 55 and know you'll be nearly blind by the time you retire, or if you have diabetes, or if you get a big windfall on that house you bought and have a half million more than you were planning for, etc. etc. etc. those all affect your planning. And then once you're actually in retirement, you have even more info and can manage your retirement fund with a focus on what your priorities are (preserving value, investing for returns, going hog wild before the cancer gets you, or whatever). Taking all of that into account... yeah maybe it'll make sense in certain years to sell your high performers. That's just basically rebalancing, the same thing you do now - effectively if you're maintaining 50% in bonds, 30% stocks, and 20% cash, but stocks are doing great while bonds aren't, then you'll have to shift some stocks to bonds when you rebalance. As a retiree, you'll do that, plus withdraw what you need to live on, and if they happen to line up to "sell some bonds and use that money for this year's cash allowance" then fine, and if they don't, then that's also fine. Leperflesh fucked around with this message at 01:06 on Aug 14, 2019 |
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Aug 14, 2019 01:03
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If you have any reason to want to own bonds of any kind, you would probably be best off just buying long-dated USTs directly, or something like TLT/VGLT that deals exclusively in them. I wouldn't feel particularly protected holding a bunch of crap like LQD full of underlyings just waiting to eat a downgrade.
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Aug 14, 2019 01:09
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Thanks; that's a great answer. Honestly medical expenses as I get older terrify me. I've been fortunate to be healthy all my young life, that I don't even have the faintest clue of how much to set aside for health expenses as my body starts to fall apart.
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Aug 14, 2019 01:14
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single-mode fiber posted:If you have any reason to want to own bonds of any kind, you would probably be best off just buying long-dated USTs directly, or something like TLT/VGLT that deals exclusively in them. I wouldn't feel particularly protected holding a bunch of crap like LQD full of underlyings just waiting to eat a downgrade. or buy a total bond market index fund such as VBTLX, which is what this thread consistently recommends if you're buying bonds in a taxable account for some reason, look into tax-free bonds though, for example in California, CA muni bonds are untaxed. So for example, VCITX is both federal and california income tax exempt.
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Aug 14, 2019 01:27
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Muni bonds almost never make sense unless you're in or near the top marginal tax bracket. The tax savings are factored into their price already, driving yield down.
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Aug 14, 2019 02:38
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Just to add to that, capital gains from munis are still taxed. It's just the interest income which is exempt. This matters more than ever these days because a significant percent of total returns from munis this year have been through capital gains with yields falling rapidly.
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Aug 14, 2019 03:05
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facepalmolive posted:When stocks are doing great, withdraw from that. When stocks are taking a dump and underperforming bonds, withdraw from bonds. (In addition to the normal rebalancing you do, of course.) tangy yet delightful posted:To me that seems like timing the market.
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Aug 14, 2019 05:35
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SlapActionJackson posted:Muni bonds almost never make sense unless you're in or near the top marginal tax bracket. The tax savings are factored into their price already, driving yield down. Any way you could add to this? Currently we just have a 4 fund portfolio including some vanguard total bond, but I've always heard municipal bond yields can be pretty good.
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Aug 14, 2019 10:54
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If you're a doctor then yeah in your tax bracket it's probably good, if you need more bonds in a taxable account.
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Aug 14, 2019 12:47
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Residency Evil posted:Any way you could add to this? Currently we just have a 4 fund portfolio including some vanguard total bond, but I've always heard municipal bond yields can be pretty good. Basically, the market is efficient. Buyers of bonds in taxable accounts care about the net after-tax yield of the bond, so they are incentivized to bid up the price (and down the yield) of munis as long as the muni yield still beats taxable yield minus tax owed. Since the tax owed is a function of your marginal tax rate, the people willing to pay the most for the munis are those in the highest tax brackets. That cohort will generally bid up muni prices until the effective yield is close to the taxable bond for them. If Joe middle class then buys one of these bonds, he gets sub-par return because the yield on the muni is suppressed and the tax savings isn't nearly as valuable to him on account of his lower marginal rate. Joe should just buy a taxable bond and enjoy his lower tax rate. To put some numbers behind it, my broker is currently offering 1yr AAA munis @ 1.033% and 1yr T-bill @ 1.798%. The muni gives only 57% of the nominal yield of the taxable. But if your marginal tax rate is more than 43% (not hard for a high earner in CA, for example) then the muni wins after tax. If your tax rate is lower, you want the T-bill.
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Aug 14, 2019 15:03
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