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zharmad posted:I'd agree more with Graham that preservation of capital is a fundamental goal of investing, so the gains may not be as large as staying in market investing, but what I was saying is if anyone is going to go for an annuity, he's in the only situation where it could even make sense. From his post he seems to be wanting an additional option to go with the taxable account, which is what an annuity offers in this case with the advantage of lowering his current tax burden, which is not insignificant if he's limited out of IRA's. Given how much he's investing already $1800/year isn't going to completely break his other investments given he's already investing $12,000/year into his taxable account. Immediate Fixed Annuity posted:For the large segments of American society who enter the retirement period with no, or very limited financial assets, an income annuity offers no solution. On the other end of the wealth distribution, for those having very large financial assets allowing them to self insure a retirement income, income annuities are not usually needed. I'm seeing that the taxes on the earnings are tax-deferred at marginal tax rates. If he's investing into a taxable account, he's only going to be dealing with LTCG rates, which is likely superior unless all of his taxable investments see more dividends than capital gains. I'm really not seeing how an annuity at mid-life is superior to just continuing to invest in taxable. Hoodwinker fucked around with this message at 17:12 on Oct 7, 2019 |
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Oct 7, 2019 17:06
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I tried this in another thread but it didn’t get much traction, so here goes: My son is turning one this month and I’d like to set up something for him where we can deposit grandparents checks and the like where it will earn a decent return, so that when he’s 16 and needs to get his first car or whatever hes got some money saved up. I want to start with $500 in there. What’s my best option for this? I have the GI Bill which he’s getting, so college is covered.
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Oct 7, 2019 17:45
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nwin posted:I tried this in another thread but it didn’t get much traction, so here goes:
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Oct 7, 2019 17:49
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I'm not sure how GI Bills work but one thing to keep in mind with utma/ugma is that they affect the kid's financial aid calculations. Are you sure your GI Bill will completely cover the costs? Because if not then maybe put some into a 529 plan as well since that has tax free growth.
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Oct 7, 2019 18:07
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Thanks everyone for the info and feedback. I talked it over with some family members who brought up the scenario of just buying a big annuity a few years right before I retire, assuming I have enough to do so. At this point I could just continue investing in the four fund portfolio to generate that lump sum, but the tax question did come up. My new job has fee based advisors onsite so I have an appointment set up. I wanted to get a sanity check on what my options were as well as to see if I need to be changing around my investment quantities into the four funds or rebalancing. I'll ask about the annuity but to me, the whole idea of "$1800/year, increasing by $300 every year for at least 30 years gets you an absolute guarantee of $X per month until you die regardless of the market" strikes a chord. Rest assured, it'll get the dispassionate advice it requires.
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Oct 7, 2019 19:57
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MJP posted:Thanks everyone for the info and feedback. I talked it over with some family members who brought up the scenario of just buying a big annuity a few years right before I retire, assuming I have enough to do so. At this point I could just continue investing in the four fund portfolio to generate that lump sum, but the tax question did come up. What is the difference between this and investing in bonds?
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Oct 7, 2019 21:00
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MJP posted:until you die regardless of the market" strikes a chord. Unless the insurer goes out under. It is an insurance product after all. In theory there would be a bail out or reinsurance underneath it, but that is a risk even with all the A's and +'s in their credit rating. You would be trading maximum returns for higher assurance.
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Oct 7, 2019 21:05
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Does anyone here have any advice on dealing with a 409(a) plan at work? Apparently I can't contribute much to my 401(k) anymore, but will be eligible to use a 409(a) plan next year. I've done some research already, and it seems overly complicated.
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Oct 8, 2019 13:31
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Ugh, Ally keeps dropping their rates, it's down to 1.8 now. I guess I need to move money.
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Oct 9, 2019 21:28
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My Rhythmic Crotch posted:Ugh, Ally keeps dropping their rates, it's down to 1.8 now. I guess I need to move money. The fed lowers, the banks lower.
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Oct 9, 2019 21:57
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My Rhythmic Crotch posted:Ugh, Ally keeps dropping their rates, it's down to 1.8 now. I guess I need to move money. I have $20-30K on average in my savings account for emergencies and everything else is in Brokerage in allocated stocks and bonds. So the difference between 1.8% to 2% is $40 more interest in a year. I’m not moving anything for $3.33 more a month.
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Oct 9, 2019 22:03
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also everyone else dropped too, I'm at 1.9% with Marcus
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Oct 9, 2019 22:13
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Citi's Accelerate Savings dropped to 2.05% also, IIRC.
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Oct 9, 2019 22:52
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Yeah, they'll all drop whenever the Federal Reserve changes their benchmark rate. About the best you can hope for with emergency fund money is that it'll mayyyybe keep up with inflation, or at least not lose too much against it. I keep a higher amount in emergency funds than most, I'd bet, because turnaround time for finding a new job in my field can be real slow, and that's just the price you have to pay to keep that money readily available and FDIC-insured.
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Oct 9, 2019 23:03
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totalnewbie posted:What is the difference between this and investing in bonds? Wouldn't investing in bonds be subject to capital gains taxes? My logic here is that I'd be investing post-tax money for retirement, and annuities aren't taxable since tax was already paid, AFAIK.
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Oct 10, 2019 14:01
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MJP posted:Wouldn't investing in bonds be subject to capital gains taxes? My logic here is that I'd be investing post-tax money for retirement, and annuities aren't taxable since tax was already paid, AFAIK. I really strongly recommend you do a lot more reading on the mechanics and value of annuities before chasing after one.
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Oct 10, 2019 14:06
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While everyone's talking about rate drops, is there any idea on what to do with an emergency fund/additional savings past that? We've boosted our emergency fund to where we want it to be, but I figure we should probably start saving for my wife's next car (3 years away or so). Would it make more sense to think about putting part of that money in a CD-ladder?
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Oct 10, 2019 15:10
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Residency Evil posted:While everyone's talking about rate drops, is there any idea on what to do with an emergency fund/additional savings past that? We've boosted our emergency fund to where we want it to be, but I figure we should probably start saving for my wife's next car (3 years away or so). Would it make more sense to think about putting part of that money in a CD-ladder?
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Oct 10, 2019 15:14
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There are no “great” options when rates are low. But for known upcoming expenses or emergency funds, the goal isn’t to get a return but rather to store money safely. Savings accounts and CDs are designed for that.
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Oct 10, 2019 15:35
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When I started my Ally account the savings rate was 1.1% so it's still better now. And I think Chase is like 0.04%.
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Oct 10, 2019 15:50
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Mu Zeta posted:When I started my Ally account the savings rate was 1.1% so it's still better now. And I think Chase is like 0.04%. Yea, even a Chase CD right now is like 1.75%. I have a CIBC US account and it's getting 2.05% right now. Was 2.2% a few months ago. At least it's essentially keeping up with inflation.
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Oct 11, 2019 13:35
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We’ve got $65k in savings right now just in HYSA with ally. I’ve got a car loan at 1.99% APR with 11k left. Since the Savings account is less than my apr, shouldn’t I just pay the loan off? We don’t need this money right now-it’s our emergency savings pretty much, so I will look at doing a CD with a bit of it as well.
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Oct 11, 2019 14:04
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how much of your life does $65k represent for your emergency fund? you can do far better than 1.99% in the market in the long term so if you have spare money that you don't need to cover emergencies you should put it in to tax advantaged retirement or barring that taxable investments
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Oct 11, 2019 14:10
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KYOON GRIFFEY JR posted:how much of your life does $65k represent for your emergency fund? We spend about $6500 a month, so 10 months? I currently max my 401k and can fund my Roth IRA about half (250/month). To make it easy in my mind I’d rather pay the car off and use the $385/month and fully fund my Roth IRA. nwin fucked around with this message at 14:43 on Oct 11, 2019 |
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Oct 11, 2019 14:37
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nwin posted:We’ve got $65k in savings right now just in HYSA with ally. For me, the psychological benefit of being debt-free would push me to pay off the loan using some of that money, even though the interest rate is low. Keeping a large amount of cash on hand is also reasonable if you're concerned that finding a new job in the event of suddenly losing yours might take you a significant amount of time - I have the same approach, although many people who work in fields where turnover is easier feel comfortable with 3-4 months of living expenses onhand.
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Oct 11, 2019 14:47
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nwin posted:We spend about $6500 a month, so 10 months? this approach will get you a lower overall long term rate of return than making up the difference to fully funding your IRA out of your savings over the next four years
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Oct 11, 2019 14:55
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We just took $25k from Ally to put towards the mortgage. Seeing $loans number go down really feels good. We still have a sizeable e-fund and felt it was worth it.
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Oct 11, 2019 14:56
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I like being debt free as well. You need less money per month to survive, you don’t freak out when the market tanks, interest not paid is worth more than equal interest earned after taxes, and psychologically it just feels good to me.
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Oct 11, 2019 15:32
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that has traditionally been my mindset but we have similarly picked up an auto loan ~14k @ 1.9% over 60 mos and i'm pretty OK with it. it's not a lot of money every month and the 14k cash is much better deployed in other ways. if it were at 4% that's a different story.
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Oct 11, 2019 15:39
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nwin posted:We spend about $6500 a month, so 10 months? You should fully fund your Roth IRA from the $65k regardless of what you do with the car loan
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Oct 11, 2019 15:51
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Hoodwinker posted:From my reading, annuities are tax-deferred, meaning you still pay taxes, you just do so on gains once you start taking distributions. And instead of paying the long-term capital gains rate (currently 0-15%), you pay your marginal tax rate (going to be more like 15-22%). Additionally, fees on annuities are across the board generally higher than straight stock/bond fund investing. They seem to be more useful for capital preservation, not accumulation, and don't have as much use if you're under the age of 60. Yeah, I'm going to do more digging - the more I see and hear, the more it seems like it's best to pull an approach of investing in a tax-deferred bond fund or something like that, then buying the annuity when it's closer to retirement time if it seems like a good idea then. Or just keep investing in the tax-deferred bond fund. Or inflation-protected bond funds. Bottom line, I'm 37 and it seems like I probably don't even need to really ask the "do I need an annuity" question until I'm 57.
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Oct 11, 2019 16:25
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So, with everyone and everything saying that another recession is coming in 2020, should I cool off on my 401k contributions for now, put it into my personal savings, and do catch up contributions once we're in the clear? The last few months have been some brutal ups and downs and I honestly don't really know what the gently caress to do...
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Oct 13, 2019 22:12
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Never don't invest. The people claiming they know what's coming do not know what's coming. Sky-is-falling viewpoints are ever-present and should be ignored. Edit: also, you can't make catch up contributions to a 401k. Use the space each year or lose it.
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Oct 13, 2019 22:20
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IT BURNS posted:So, with everyone and everything saying that another recession is coming in 2020, should I cool off on my 401k contributions for now, put it into my personal savings, and do catch up contributions once we're in the clear? The last few months have been some brutal ups and downs and I honestly don't really know what the gently caress to do... Please read the thread title and continue investing as normal. *This is assuming you have a proper emergency fund and are otherwise investing reasonably and appropriately
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Oct 13, 2019 22:57
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Motronic posted:Please read the thread title and continue investing as normal. Yep, the emergency fund is good and MY WIFE and I are debt free (and own our cars) aside from the mortgage. I've never had a problem saving for short term things.
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Oct 13, 2019 23:22
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Kylaer posted:Sky-is-falling viewpoints are ever-present and should be ignored. The time to worry is when nobody is making sky-is-falling viewpoints and everything keeps going up up up.
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Oct 13, 2019 23:23
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IT BURNS posted:Yep, the emergency fund is good and MY WIFE and I are debt free (and own our cars) aside from the mortgage. I've never had a problem saving for short term things. Then you are seriously in good shape. I mean....this is said a lot but it's true: you keep investing in a downturn and you are buying everything on sale. Yes, it's hard to stay the course, and easy to tell someone to. We've all heard the stories of the people who "lost everything" in 2008-09. But overwhelmingly the way that happened was panic selling. Sure, there were people who had to sell to remain solvent, but I'd argue they had the wrong asset allocation. Or just buying huge houses they never should have with to little cash reserves because loan money was drat near free then. From what you posted it doesn't seem like you're in this kind of position, so have (keep, I hope) a strategy and stay the course. I'm assuming you are not like 5 years from retirement.
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Oct 13, 2019 23:38
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Alternatively, if I'm still maxing out tax advantage space, am I better off paying off mortgage @4.6% or throwing money in a brokerage fund? I'm starting to think about doing the former instead.
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Oct 14, 2019 01:16
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The Big Jesus posted:Alternatively, if I'm still maxing out tax advantage space, am I better off paying off mortgage @4.6% or throwing money in a brokerage fund? I'm starting to think about doing the former instead. This is the gray area of planning. The 4-6% range of long-term debt is historically low. The earlier in the loan you are, the more interest payments you save by paying it off early. However, there may be some value in refinancing since rates are even lower now. What’s the time frame for how long you will live in the house? What’s the time frame that you would need the money in a brokerage account? What’s your overall liquidity (emergency fund, other long-term expenses, etc)? Also (perhaps most importantly) what path will help you sleep best at night? The best part of this decision is that there is no “wrong” answer as long as you use the designated money for your goal consistently. You could even split the difference!
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Oct 14, 2019 01:39
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Kylaer posted:Never don't invest. The people claiming they know what's coming do not know what's coming. Sky-is-falling viewpoints are ever-present and should be ignored.
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Oct 14, 2019 01:55
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