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Dangerous Mind posted:Makes sense. Another thing I’ve been wondering is what are your thoughts on me opening a Roth IRA for my mom? She lives with me and pays me $700/mo rent that I’ve been putting towards the mortgage and buying her groceries. She makes $1000/mo at 54yo and has no retirement savings. My strategy would be to instead of collecting rent then I’d set up automatic monthly contributions to her Roth IRA to max it out. And if I act now then I can max out her 2022 contribution with what I had saved myself already. Why not do this with a traditional IRA?
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Oct 13, 2022 01:27
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downout posted:Why not do this with a traditional IRA? At $12k/yr she's basically paying no taxes already. Roth means she won't pay taxes when she cashes it out either, whereas traditional could incur taxes when she also has social security income.
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Oct 13, 2022 01:50
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Bremen posted:I understand how interest rates going up make old bonds worth less, but how can a bond ETF be down 20% for a year without mass bankruptcies? It's not like interest rates are up 20%. pmchem's links are great, but for a simple example with figures roughly approximating what has happened the last 12mo for a typical aggregate bond fund: At a 1% yield, an asset that pays you $1000 in 7 years is valued at 1000/1.01^7 = $933 At a 4% yield that same asset is worth 1000/1.04^7 = $760. That's an 18% drop in value, which is about what BND is down. Leperflesh posted:Like, some folks I guess were hoping bonds would be anticorrelated with stocks, which they aren't And they never really have been. I've seen a lot of people (and this was really popular in the 2010s) look at the correlation between stocks/bonds over short time periods, usually daily, and assume that those correlations, which were frequently negative, extrapolate out to longer timespans. In time series analysis, this is sensible (although many forget that -30% daily correlation doesn't imply -30% annual, the longer your time period the closer to 0% it should get) only if you assume the daily correlation is fundamentally unchanging. In reality, it floats around over time so much that you can't really use it for annual+ time periods at all. Generally speaking in modern finance almost all profitable investments are positively correlated, and the few that aren't will have their prices bid up to the point where their expected return (relative to their risk) is low enough that it isn't a useful diversifier anymore. This even happens for uncorrelated assets - in my own field of reinsurance tons of pension funds and whatnot are willing to buy catastrophe bonds at prices much lower than regular bonds of similar risk simply because they have low correlation with peer investments. On an annual basis, the correlation between stock and bond returns is actually closer to +30% over modern history. At -30% you could actually have a higher expected return on a stock+bond fund than you could for just stocks alone, which is preposterous.
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Oct 13, 2022 01:59
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Discendo Vox posted:It's a non-designated plan and for various unpleasant reasons I know someone else was getting Vanguard SIMPLE distributions at some point, at least- it may be that a different contract applies, but if so I didn't get it and I'm concerned the site's sent me to the wrong account process. I look forward to finding out which it is! Just following up on this, Vanguard doesn't have an online process for getting SIMPLE distribution/contribution set up! My employer's going to have to log into the portal they already have for other employees getting contributions to Vanguard and add me to the plan, which will result in my getting the application from Vanguard. SIMPLE's a mess- and it looks like my participating in it may lock me out of or limit other retirement account options?
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Oct 13, 2022 02:01
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Eyes Only posted:pmchem's links are great, but for a simple example with figures roughly approximating what has happened the last 12mo for a typical aggregate bond fund:
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Oct 13, 2022 02:33
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pmchem posted:yeah There are inflation protected bond ETFs too, and I got some of them. They're down nearly as much as the other bonds, though at least the pain is mitigated by high single digit annual yields.
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Oct 13, 2022 02:53
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Dangerous Mind posted:Makes sense. Another thing I’ve been wondering is what are your thoughts on me opening a Roth IRA for my mom? She lives with me and pays me $700/mo rent that I’ve been putting towards the mortgage and buying her groceries. She makes $1000/mo at 54yo and has no retirement savings. My strategy would be to instead of collecting rent then I’d set up automatic monthly contributions to her Roth IRA to max it out. And if I act now then I can max out her 2022 contribution with what I had saved myself already. Senor P. fucked around with this message at 04:13 on Oct 13, 2022 |
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Oct 13, 2022 04:09
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Bremen posted:There are inflation protected bond ETFs too, and I got some of them. They're down nearly as much as the other bonds, though at least the pain is mitigated by high single digit annual yields. yes, this was something that really struck me about this year. it's very logical, but it never would have occurred to me that high inflation under modern monetary theory is going to mean a rapidly rising interest rate, which can result in real losses even for inflation protected bonds though i try to remind myself that even though this year hurts, once rates stabilize (or dare i even hope, go down) both tips and regular bond funds will make back their losses through the higher yield once the rate increases end, if you can hold a bond fund till or past it's average duration you end up even or ahead of where you would be if rates never rose (at least in nominal terms). it's when you have to sell a before the average duration to meet a short term liability that is the real killer
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Oct 13, 2022 04:28
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Discendo Vox posted:. SIMPLE's a mess- and it looks like my participating in it may lock me out of or limit other retirement account options? Well, I'm just a lay person trying to understand for myself, but I think it locks your employer out of offering other retirement plans while they have it going
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Oct 13, 2022 05:39
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Eyes Only posted:pmchem's links are great, but for a simple example with figures roughly approximating what has happened the last 12mo for a typical aggregate bond fund: yeah, good example. if anyone wants to read more about pricing and invert the math with yield to maturity in hand, find the price equation @ middle of this page to use as guide: https://www.investopedia.com/terms/b/bond-yield.asp Bremen posted:There are inflation protected bond ETFs too, and I got some of them. They're down nearly as much as the other bonds, though at least the pain is mitigated by high single digit annual yields. yeah, I'm guessing you perhaps owned a long duration TIPS ETF. SCHP and TIP are down similar to the S&P over that 410d period. VTIP is up (short duration). that's what vanguard uses in its TDFs as a TIPS fund.
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Oct 13, 2022 12:17
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High CPI print this morning. I think the next 6 months of Series I bonds will be yielding about 6.47%? Obviously not 9.62% or whatever it is now but still a bit of an  savings rate for e-funds and the like.
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Oct 13, 2022 14:30
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GhostofJohnMuir posted:yes, this was something that really struck me about this year. it's very logical, but it never would have occurred to me that high inflation under modern monetary theory is going to mean a rapidly rising interest rate, which can result in real losses even for inflation protected bonds Are we really operating under modern monetary theory? Because if we were we'd be controlling inflation primarily with taxes and we're not doing that even a little bit.
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Oct 13, 2022 14:41
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Bremen posted:There are inflation protected bond ETFs too, and I got some of them. They're down nearly as much as the other bonds, though at least the pain is mitigated by high single digit annual yields. It is also mitigated by the rising real yields. If you bought bonds (or bond funds) with a duration that is equal to or lower than the time you are planning use the money then the dropping principal is offset by the higher income that is coming. In fact, you are happy about it. This Vanguard post explains in more detail but basically you will recover the lost principle with higher coupon payments and then beyond that, you will be getting higher yields! https://investor.vanguard.com/investor-resources-education/news/the-dynamics-of-bond-duration-and-rising-rates If you were buying bonds as ballast, especially if it was because you thought the price bonds would rise when the price of stocks fell, then you are very sad. If you bought 30 years bonds to spend in 15 years you are also very sad. It's about understanding total returns vs just watching the stock/capital prices.
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Oct 13, 2022 14:51
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fourwood posted:High CPI print this morning. I think the next 6 months of Series I bonds will be yielding about 6.47%? Obviously not 9.62% or whatever it is now but still a bit of an 6.47% is still double what you can get on the open market for short term cash or bonds so it remains an amazing deal.
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Oct 13, 2022 19:37
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My mom called me out of the blue asking me for my SSN as a beneficiary for some IRA at some company I've never heard of. I asked her what the management fee was and she never got back to me
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Oct 13, 2022 20:57
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fourwood posted:High CPI print this morning. I think the next 6 months of Series I bonds will be yielding about 6.47%? Obviously not 9.62% or whatever it is now but still a bit of an We have until end of October to get the 9.62% for 6 months right ?
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Oct 14, 2022 04:01
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Yes but if you don't already have a Treasury Direct account then make one ASAP. Sometimes it will make you mail in paperwork if it can't verify you.
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Oct 14, 2022 04:39
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I changed banks and they want me to send in paperwork to use my new bank, which for how much money I wanted to put in bonds is borderline not worth the effort
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Oct 14, 2022 05:00
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They announced the treasury direct site is being updated soon to allow you to change banks without paperwork. Sucks that it's not out yet.
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Oct 14, 2022 05:09
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Duckman2008 posted:We have until end of October to get the 9.62% for 6 months right ? But IIRC it can take a few days to process, so it’s maybe prudent to make sure any buy orders are in a few days ahead to make sure the issue date is in October and not November. (This might just be an issue with weekends, not sure.)
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Oct 14, 2022 13:51
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Hadlock posted:My mom called me out of the blue asking me for my SSN as a beneficiary for some IRA at some company I've never heard of. I asked her what the management fee was and she never got back to me Your mom doesn’t know your social? 
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Oct 14, 2022 14:43
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DNK posted:Your mom doesn’t know your social? I'm not convinced my mom knows my social.
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Oct 14, 2022 14:47
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fourwood posted:As said, yep, bonds purchased this month will still get 9.62% for 6 months before changing to ~6.47%. Plus if you buy by October 31 you still get interest paid to you for all of October. I know the I-bond rate is tied to CPI, but not the specifics. Where are you getting the ~6.47% from? Just doing calculations off the latest numbers? E: oh found an article about it that includes how the treasury calculates it. https://www.usinflationcalculator.com/inflation/i-bond-rate-likely-6-47-beginning-nov-1/100023214/ surc fucked around with this message at 16:13 on Oct 14, 2022 |
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Oct 14, 2022 16:10
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DNK posted:Your mom doesn’t know your social? I am hopeful none of my family knows my social.
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Oct 14, 2022 16:39
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For those who are interested in adding more inflation protected assets, the 5 year TIPS auction is expected to have a real yield around 1.8%. That compares pretty favorably with I Bonds (real yield: 0%), though there are other pros and cons to TIPS vs I Bonds. These are marketable assets, so can be held in a brokerage account and have no cap on purchases. Some info here: https://tipswatch.com/2022/10/16/get-ready-this-weeks-5-year-tips-auction-is-a-unicorn/
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Oct 16, 2022 21:01
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drk posted:For those who are interested in adding more inflation protected assets, the 5 year TIPS auction is expected to have a real yield around 1.8%. That compares pretty favorably with I Bonds (real yield: 0%), though there are other pros and cons to TIPS vs I Bonds. These are marketable assets, so can be held in a brokerage account and have no cap on purchases. What’s the catch ? Can’t be worhdrawn for 5 years ?
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Oct 16, 2022 21:37
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As far as I know the downsides to TIPS are: -During times of deflation, the principal amount is adjusted downward, unlike I Bonds that can never decrease in value. TIPS held to maturity are always paid out at at least par though (so, if 5 years ends up with net deflation, you still get back your original principle + whatever interest payments you've received along the way). -As tradable securities, there is no minimum holding period but you are subject to interest rate risk - if yields move higher, prices move lower. If bought at auction and held to maturity, market pricing is not relevant. -If inflation ends up lower than the implied rate, nominal bonds will return more. 5 year treasuries are at 4.25%, which imples a 5 year inflation rate of 4.25-1.8=2.45%. If inflation is above that, TIPS are better, below that normal Treasuries are better. edit: more @ bogleheads wiki: https://www.bogleheads.org/wiki/I_Bonds_vs_TIPS drk fucked around with this message at 00:54 on Oct 17, 2022 |
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Oct 16, 2022 22:43
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Mannnnnnn the stock market having taken a dump compared to a couple years ago really makes me want to take advantage of the cheaper stocks and put more into my taxable retirement fund. But I’m building up a down payment on a house and I need that money in the next 3-5 years so weh. Also don’t time market etc.
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Oct 17, 2022 18:16
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I finished buying the yearly limit for I Bonds on Treasury Direct, but I first had to cancel out my remaining scheduled purchases. It was a huge pain in the rear end figuring out where the scheduled purchases were, I really hope they do update their site to make it more usable.
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Oct 17, 2022 18:32
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Pollyanna posted:Mannnnnnn the stock market having taken a dump compared to a couple years ago really makes me want to take advantage of the cheaper stocks and put more into my taxable retirement fund. But I’m building up a down payment on a house and I need that money in the next 3-5 years so weh. Also don’t time market etc. Don’t psyche yourself out, it’s currently a saver’s market!
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Oct 17, 2022 19:07
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DNK posted:Your mom doesn’t know your social? My family better not know my social anymore. I'm trying this new thing of just consistently investing a certain amount every month instead of just saving up and timing the market. Seems like I am never good at staying on top of that and speculating causes a lot of anxiety and stress for me. That's not bad, right?
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Oct 17, 2022 19:38
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CmdrRiker posted:I'm trying this new thing of just consistently investing a certain amount every month instead of just saving up and timing the market. Seems like I am never good at staying on top of that and speculating causes a lot of anxiety and stress for me. That's not bad, right? This is a good strat. Take the emotion and tea leaf reading out of it and just stick to your plan. It's even better if you can automate the investments so it's hands-off.
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Oct 17, 2022 19:41
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Yeah, I automated it for once a month to vtsax and vfiax. Keeping it relatively higher risk for now with the bear market. It is very discouraging to see unrealized losses on everything though. WELP.
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Oct 17, 2022 19:47
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CmdrRiker posted:Yeah, I automated it for once a month to vtsax and vfiax. Keeping it relatively higher risk for now with the bear market. It is very discouraging to see unrealized losses on everything though. WELP. The trick is to not realize that you have unrealized losses. Zen and the art of complex hedging instruments. The latest freakonomics was about investing advice from economists vs popular finance. I think thread regulars would enjoy.
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Oct 17, 2022 20:11
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pseudanonymous posted:The latest freakonomics was about investing advice from economists vs popular finance. I think thread regulars would enjoy. https://pca.st/episode/bdc26a7f-ab7a-4e98-8770-2955c0676800
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Oct 17, 2022 20:17
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CmdrRiker posted:Yeah, I automated it for once a month to vtsax and vfiax. Keeping it relatively higher risk for now with the bear market. It is very discouraging to see unrealized losses on everything though. WELP. Stop looking
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Oct 17, 2022 21:14
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Dangerous Mind posted:I turn 29 next month. You are going to be just fine.
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Oct 17, 2022 22:26
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pseudanonymous posted:The latest freakonomics was about investing advice from economists vs popular finance. I think thread regulars would enjoy. Listened to this to/from work today. Take home: economists seem bad at personal finance.
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Oct 18, 2022 00:36
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Residency Evil posted:Listened to this to/from work today. Take home: economists seem bad at personal finance. I don't understand why that is a revolutionary take. Is it? Economists study how the combustion engine performs and personal finance advisors study how to effectively keep gas tank filled.
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Oct 18, 2022 01:45
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CmdrRiker posted:I don't understand why that is a revolutionary take. Is it? Economists study how the combustion engine performs and personal finance advisors study how to effectively keep gas tank filled. Nah. The Yale economist they interviewed was just annoying.
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Oct 18, 2022 02:10
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