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Long Term Investing & Retirement: poo poo's Expensive Now Whoops sniped, the above title suggestion came from PODS charging ~$3700 to move from Chicago to Calgary. Space Fish fucked around with this message at 06:31 on Nov 26, 2023 |
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Nov 26, 2023 06:29
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pmchem posted:if someone wants to write a thoughtful "should you rent or should you buy?" OP, by all means, please make a new thread so that this discussion can be focused over there I thought it was a good discussion?  I can see how it's getting a little long, I can drop it and move onto something else.
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Nov 26, 2023 07:06
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I like the idea that people can negotiate their rent to stay the same or decrease. Last time I moved apartments purely due to cost, they listed my old unit at less they were charging me prior to the rent increase that caused me to find the time, energy and money to move. I'm sure that's true in some states or countries in some situations, but, it sounds like a fantasy to me. RVT fucked around with this message at 10:56 on Nov 26, 2023 |
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Nov 26, 2023 10:54
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TITTIEKISSER69 posted:I moved from Chicago to Calgary about 2 months ago. PODS charged me ~$3700 total. To be fair, for this move specifically they were trying to warn you against moving to Calgary.
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Nov 26, 2023 14:32
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Gucci Loafers posted:I thought it was a good discussion? the discussion was fine, I'm not saying to stop the discussion. but this discussion does routinely pop up in other threads as well. it seems there is significant, recurring interest on it, and there's no single thread that currently focuses on pros and cons or how to decide on renting vs. buying. I'm trying to encourage people to start a new thread because I think a thread on this topic would have traction.
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Nov 26, 2023 15:00
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Residency Evil posted:“$20 and some beer” stops being enough to cover moving costs as you get older. Yeah, that description is of how you move yourself between studios in your twenties, not how you move your life around decades later. ("Just sell all your stuff and buy new stuff" ???) My fiancée has rheumatoid arthritis, we both need a lot of space to not murder each other, and we live with three pets. Finding a new place that works for us and moving into it costs way, way more in time and money than two weeks and a pizza.
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Nov 26, 2023 16:07
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Don't forget that depending on where you are moving to you might have to cough up several months of rent as a deposit on top of moving costs.
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Nov 27, 2023 07:28
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raminasi posted:Yeah, that description is of how you move yourself between studios in your twenties, not how you move your life around decades later. ("Just sell all your stuff and buy new stuff" ???) My fiancée has rheumatoid arthritis, we both need a lot of space to not murder each other, and we live with three pets. Finding a new place that works for us and moving into it costs way, way more in time and money than two weeks and a pizza. The cost of beers and pizza is not worth the cost of my friendships and having to see an orthopedic specialist. I finally started paying for movers in my early 30s and it was the best decision I ever made. Conversely I had a friend in his late 30s say "hey, listen I'm moving and was wondering if you wanted to help" and that's when he learned my aunt nana needed me to paint her fence all day that weekend.
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Nov 27, 2023 20:06
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You come to me, on the day my cat is to be shampooed, and ask me a favor?
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Nov 27, 2023 21:19
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GoGoGadgetChris posted:You come to me, on the day my cat is to be shampooed, and ask me a favor? That's every day you ask, lol  I've got a question about pre-tax traditional 401k vs Roth 401k contributions. From my understanding since Roth 401k is post-tax I can have a higher principal contribution (10-20%) based on taxation and it seems like a no-brainer. My job is relatively stable at its current income but I don't expect to increase more than 10% in total compensation over the next 10 years +/- sporadic cost-of-living increases. I have so far since joining been able to contribute the maximum retirement amount and don't expect that to change. I've got another 30+ years until retirement, and think that Roth 401k would be useful to sock that additional capital over the next few decades. I'm solidly in my tax bracket and the $19,500 won't move me into any additional bracket, and I'm in a state with a high income tax but don't expect to move out of state for a number of reasons, even in retirement. Is there anything else I'm missing? It seems for my use case it's a solid argument for Roth 401k instead of traditional contributions.
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Nov 27, 2023 22:21
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Generally speaking you'll want to make Traditional IRA contributions if you believe your current tax rate is higher than it would be in retirement. But that requires you knowing the future. A Roth IRA also gives you additional flexibility as you can pull the principal out whenever if you need it, without penalty (but you can't do that with the earnings, with exception).
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Nov 27, 2023 22:31
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adnam posted:That's every day you ask, lol Are you already doing a megabackdoor roth? Usually, switching entirely from Traditional to Roth only becomes worth it after you are maxing out what you can do with the megabackdoor, unless your employer doesn't support Roth conversations post-tax contributions (or has an internal pro-rata rule). It may be worth doing a fraction of it though, but that depends on expected savings at retirement. Edit: Also, if you are maxing out to at least the 402g limit and want to do more, since you mention 30+ years to retirement, I would recommend at least considering retiring early. Look into Roth IRA retirement rules, the 55 rule for workplace accounts, and SEEP withdrawals and consider how much money you would want in retirement. Even for a conservative 3.25% "immortal" retirement rule, you likely can get (in 2023 dollars) upper 5 figures or lower 6 figures annually in retirement in less than 30 years. MegaZeroX fucked around with this message at 22:49 on Nov 27, 2023 |
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Nov 27, 2023 22:33
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You are correct that the effective contribution limit for Roth is higher since post-tax money is “denser” so if your goal is to get as much as possible into the 401k then yes, your strategy is optimal. The arguments against are: 1. It is fairly uncommon to be making enough to max a 401k now but have your income be higher in retirement. 2. Future income tax rates are not predictable so it is generally considered wise to maintain a mix of pretax and Roth to hedge against increases (or decreases in the event of some sort of national sales tax shenanigan) in tax rates. 3. In retirement you will have 25+ years where you need at least some pretax income to fill up the first few 0% and 10% etc brackets - so 100% Roth is never optimal unless you’re really sure that a progressive income tax won’t exist in the future. If you have any other tax-advantaged saving space available (Roth IRA, HSA, Mega Backdoor Roth 401k) I would advise making use of those before trying to make the regular 401k limit work harder.
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Nov 27, 2023 22:49
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adnam posted:That's every day you ask, lol I think I just wrote a bunch about this. Let me find that post... CubicalSucrose posted:Trad vs Roth comes down to:
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Nov 27, 2023 22:50
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adnam posted:I'm solidly in my tax bracket and the $19,500 won't move me into any additional bracket, I'm seeing a small red flag here for terminology and understanding. Suppose you were just barely into the tax bracket, what would you expect to happen tax-wise if you contributed to a traditional 401k instead and your total AGI fell back into the next lower bracket instead of the current bracket?
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Nov 27, 2023 23:13
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My wife doesn't have any sort of IRA and wants to. Since our income pushes us out of contributing directly to a Roth IRA, she would be creating a traditional IRA and contributing the max to it for 2023. Is this a situation where it makes sense to do a backdoor Roth IRA conversion, or should she just leave it as the traditional IRA to not add any potential tax headaches? Additionally if the backdoor makes sense, do you continue doing the backdoor conversion each year?
Tweak fucked around with this message at 00:00 on Nov 28, 2023 |
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Nov 27, 2023 23:55
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She would be making a post-tax contribution to a traditional IRA, and then doing the (backdoor) Roth conversion immediately after making each contribution (there may be a day or two required holding period - you do the conversion as soon after that as you can). This avoids any additional tax issue, because you will owe tax on the earnings made in the account between when you contribute and when you roll it over. You keep doing the contributions and then rollovers forever. This is a good reason to do a single lump sum contribution annually, instead of like monthly contributions or something. Just to avoid the hassle of doing lots of rollovers. https://investor.vanguard.com/investor-resources-education/article/how-to-set-up-backdoor-ira e,. I highlighted "post tax" because even though you're initially putting money into that traditional IRA, you do not get to reduce your taxable income by that amount like you normally do with trad IRA contributions: because you are over the limit for that benefit. You also have to file Form 8606 each year. This is all very much worth doing. You get all the benefits of a roth IRA - tax-free withdrawals when you retire - even though you are over the contribution limit. It's stupid as hell, the government should just remove the roth IRA contribution limits, but the IRS has been 100% clear that backdoor roth is legal. Leperflesh fucked around with this message at 00:38 on Nov 28, 2023 |
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Nov 28, 2023 00:34
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jokes posted:Generally speaking you'll want to make Traditional IRA contributions if you believe your current tax rate is higher than it would be in retirement. But that requires you knowing the future. Most likely my current tax rate is at its highest, and much lower in retirement. MegaZeroX posted:Are you already doing a megabackdoor roth? Usually, switching entirely from Traditional to Roth only becomes worth it after you are maxing out what you can do with the megabackdoor, unless your employer doesn't support Roth conversations post-tax contributions (or has an internal pro-rata rule). It may be worth doing a fraction of it though, but that depends on expected savings at retirement. Currently none of the above, but a wrinkle I forgot to mention (big wrinkle) is that next year I become eligible for my employer's Keogh plan. I intend to contribute 100% to that plan. Currently I'm just trying to add after-tax contributions and convert to Roth 401k per my 401k plan to make up the additional tax-advantaged space of $44,000 I can't use this year. Retiring early in my field is unlikely as I like what I do and it's fairly interesting. Eyes Only posted:You are correct that the effective contribution limit for Roth is higher since post-tax money is “denser” so if your goal is to get as much as possible into the 401k then yes, your strategy is optimal. You underestimate my daily butter and saturated fat intake to consider me having another 25+ years post-retirement. Having said that can you explain #3? Based on my calculators I should fill up 0-10% bracket on my dividend/pension alone CubicalSucrose posted:I think I just wrote a bunch about this. Let me find that post... Thank you for the information. From my understanding and talking with other partners at this company who are retiring this is 100% true, but given most people are really squirrely about discussing finances and my own parents have their own financial issues, while this might be rearranging deck chairs on the Titanic, it helps my anxiety to run certain large financial decision by the folks in this thread. SpelledBackwards posted:I'm seeing a small red flag here for terminology and understanding. Suppose you were just barely into the tax bracket, what would you expect to happen tax-wise if you contributed to a traditional 401k instead and your total AGI fell back into the next lower bracket instead of the current bracket? From my understanding a traditional 401k should reduce my total AGI by the amount contributed. My understanding is that if the upper limit for bracket is x, all income until x is taxed at nominal amount %, and then any additional income above x is then taxed at the higher bracket. Whereas with Roth 401k since this is post-tax my AGI is not affected. Let me know if any of this is wrong.
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Nov 28, 2023 00:57
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adnam posted:Currently none of the above, but a wrinkle I forgot to mention (big wrinkle) is that next year I become eligible for my employer's Keogh plan. I intend to contribute 100% to that plan. Currently I'm just trying to add after-tax contributions and convert to Roth 401k per my 401k plan to make up the additional tax-advantaged space of $44,000 I can't use this year. I'm confused. Are you saying your employer doesn't support the mechanisms required for a megabackdoor Roth, hence why you have $44,000 you can't use, and hence want to switch to the Keogh plan? Since if that isn't the case note the contribution limits are the same for a Keogh plan and a 401k, they both are the 415c limit of $66,000 in 2023. If you can't do a megabackdoor roth, are considering how much to do roth conversions on, and care about a fixed retirement year rather than a retirement amount, then its complicated. I'd use a calculator like this and figure it out, given the amount of money you have invested and are going to invest each year, how much you will eventually have in 30 years. The worst 30 year annual growth average in the history of the stock market, adjusting for factors like inflation and losses from market volatility, is 2.9%. The average is 6.7%. And it has never been above 13%. So try those numbers as APR to get estimates. For most people, you want to have the amount you put into traditional equal to your current income times 1/your withdrawal rate in retirement. The rest should be in Roth accounts. So how much you want to split depends on this. Also, note if you have enough money to have much more money to save after the 415c limit (68k next year), and maxing out an IRA (7k next year), and maxing out an HSA if possible ($4150 next year), then Roth becomes extra good, and you can disregard all of the above, since if 100% of your income is in roth savings, then effectively you get $60k each year of tax free gain withdrawals from taxable accounts if you are single (including the standard deduction in the calculation), or over $100k if you are married.
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Nov 28, 2023 01:39
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MegaZeroX posted:I'm confused. Are you saying your employer doesn't support the mechanisms required for a megabackdoor Roth, hence why you have $44,000 you can't use, and hence want to switch to the Keogh plan? Since if that isn't the case note the contribution limits are the same for a Keogh plan and a 401k, they both are the 415c limit of $66,000 in 2023. I don't have enough money to max out past the 415c limit, but I was dragging my feet and didn't realize the mega backdoor Roth option was available until earlier this year with my employer so trying to put the dredges of my cash reserves into that to max out 2023 contributions. My employer makes us eligible to use the Keogh plan after a certain time frame (2024 for me) and I'd prefer to funnel 2024 and onward contributions through that since I believe it qualifies for a QBI deduction vs a megabackdoor (lol) Roth contribution.
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Nov 28, 2023 01:53
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adnam posted:The cost of beers and pizza is not worth the cost of my friendships and having to see an orthopedic specialist. I finally started paying for movers in my early 30s and it was the best decision I ever made. Conversely I had a friend in his late 30s say "hey, listen I'm moving and was wondering if you wanted to help" and that's when he learned my aunt nana needed me to paint her fence all day that weekend. past 30 if anyone asked me to help move I would just offer them $50 cash to help pay for movers. My Back is worth more than that.
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Nov 28, 2023 01:55
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Leperflesh posted:snip thanks for this, I kept getting tripped up on some of the specifics
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Nov 28, 2023 02:04
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adnam posted:From my understanding a traditional 401k should reduce my total AGI by the amount contributed. My understanding is that if the upper limit for bracket is x, all income until x is taxed at nominal amount %, and then any additional income above x is then taxed at the higher bracket. Whereas with Roth 401k since this is post-tax my AGI is not affected. Let me know if any of this is wrong. Right, only the dollars within a bracket are taxed at that rate. It was a little weird for you to mention where in the bracket you were, since the AGI reduction only has that marginal utility on tax reduction at the percentage for that bracket, and then less for the next bracket down. Seems like you got that ok, and you get the biggest benefit at higher brackets, but a break is still a break. For what it's worth, I used to maximize the traditional 401k, backdoor Roth IRA, and HSA contributions, plus a bunch into mega backdoor Roth before I sold my paid off house and bought another one and took on another mortgage. So I don't contribute to the mega backdoor Roth much anymore because my monthly expenses are way higher again, but I also do trad. 401k plus Roth IRA so I i have a lower AGI (from the 401k & HSA contributions), but also a mix of both trad and Roth contributions for future tax hedging (401k and Roth IRA contributions). It may not be a bad way for you to go, either.
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Nov 28, 2023 02:12
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401(k) question. Signing up for a 401(k) for the first time in a few years (finally, uthor's job!). I always picked a mix of index funds with the smallest "expenses", but looking at this plan, those expenses are in the 0.05-0.07% range and the "Target Date Funds" have "expenses" listed as 0.08%. Anything wrong with picking one of those and just not worrying about it? (sorry if my terminology is wrong!) EDIT: and then I read the OP after posting. panic posted:I have all these different funds to choose from, where do I start? Uthor fucked around with this message at 03:26 on Nov 28, 2023 |
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Nov 28, 2023 03:22
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Uthor posted:401(k) question. Probably not!
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Nov 28, 2023 03:24
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CubicalSucrose posted:Probably not! Thanks! (read the OP after posting, quoted the meaningful part)
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Nov 28, 2023 03:28
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Uthor posted:401(k) question. You're lucky, my company's 401k target date funds are at 1.03% with no match. Even my IRA doesn't have an ER that low.
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Nov 28, 2023 03:38
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adnam posted:You underestimate my daily butter and saturated fat intake to consider me having another 25+ years post-retirement. Having said that can you explain #3? Based on my calculators I should fill up 0-10% bracket on my dividend/pension alone (2023 figures for a single filer but you get the idea) Every year you are alive, your first $13,850 of income is tax free. The next $15,700 after that is taxed at 10%. The next $44,150 after that is taxed at 12%. Above that are buckets for 22%, 24%, 32%, 35%, etc. My point is to ensure that you don’t leave those lower buckets empty later on in life. If at age 69 you pay all your expenses from a Roth account, your income will be zero and that tax free 0% bucket will be wasted for that year - it is use it or lose it. Better to save 35% on taxes now and pay 0% on it as an old fart. If you have a pension or enough dividend income to fill up these lower buckets anyway then this is a moot point, do whatever go hog wild.
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Nov 28, 2023 03:41
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Jabarto posted:You're lucky, my company's 401k target date funds are at 1.03% with no match. Even my IRA doesn't have an ER that low. Then you need to move your IRA to vanguard or Fidelity. For reference my IRA with vanguard is all in the 2060 target at 0.08% ER
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Nov 28, 2023 03:42
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Eyes Only posted:(2023 figures for a single filer but you get the idea) Every year you are alive, your first $13,850 of income is tax free. The next $15,700 after that is taxed at 10%. The next $44,150 after that is taxed at 12%. Above that are buckets for 22%, 24%, 32%, 35%, etc.
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Nov 28, 2023 04:03
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spwrozek posted:Then you need to move your IRA to vanguard or Fidelity. I worded that poorly, I was shocked to see a 401k with such low fees. 401k's tend to be lovely in general and getting 0.08 on one is amazing. I have a target date fund at Fidelity that's at 0.2%
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Nov 28, 2023 05:09
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Eyes Only posted:(2023 figures for a single filer but you get the idea) Every year you are alive, your first $13,850 of income is tax free. The next $15,700 after that is taxed at 10%. The next $44,150 after that is taxed at 12%. Above that are buckets for 22%, 24%, 32%, 35%, etc. That makes total sense, thank you. I wish this was as simple as "you idiot do this instead of this" but as always the truth somewhere along the ymmv and it depends considerations.
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Nov 28, 2023 06:28
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Jabarto posted:I worded that poorly, I was shocked to see a 401k with such low fees. 401k's tend to be lovely in general and getting 0.08 on one is amazing. I have a target date fund at Fidelity that's at 0.2% Which fund is that? Fidelity charges us a 0.65% fee for their "Fidelity Freedom" funds, which seems high to me but not obscenely high.
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Nov 28, 2023 08:44
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Small White Dragon posted:Which fund is that? Fidelity charges us a 0.65% fee for their "Fidelity Freedom" funds, which seems high to me but not obscenely high. Fidelity is sneaky. They also have "Fidelity Freedom Index" target date funds which are the same asset allocations as the "Fidelity Freedom" ones but composed of their low cost passive index funds instead of the expensive active equivalents. That doesn't help you if your 401k only offers the non-index versions but if you're buying it in a Fidelity IRA/HSA/other tax-advantaged retirement account, make sure to get the index version.
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Nov 28, 2023 11:30
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My 401k has index and non-index versions of all the basic funds, but only non-index versions of the target date ones which is a bit annoying. Feels like taking advantage of people who just trust the system. In other news, I finally rolled over my old 401k away from Fidelity to consolidate and the guy who helped me was literally the most pleasant phone rep I’ve ever talked to. I was kind of sad I was leaving.
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Nov 28, 2023 13:55
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smackfu posted:My 401k has index and non-index versions of all the basic funds, but only non-index versions of the target date ones which is a bit annoying. Feels like taking advantage of people who just trust the system. Same here, Fidelity 401k, all the target date funds are 0.65% , they have 2 each of small cap, large cap, international and bond, regular is 0.65%, index is 0.04%. A lot of people likely select the wrong funds and end up paying the 0.65% because they just don’t know.
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Nov 28, 2023 14:00
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Yeah, look at this thing: Fidelity® Large Cap Stock Fund https://fundresearch.fidelity.com/mutual-funds/summary/315912402 0.76% exp ratio Underperformed the S&P 500. Or this one I just found. Fidelity® Mega Cap Stock Fund https://fundresearch.fidelity.com/mutual-funds/summary/31617F403 0.63% exp ratio Underperformed the S&P 500 and the Russell 200. Honestly think the performance difference is because they aren’t holding as much AAPL as the index funds but that’s just based on eyeballing.
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Nov 28, 2023 14:09
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My frustration with any target date fund (and any other fund really) is that the S&P 500 index funds have outperformed everything for such a long time that even though I'm in my early 50s I have a hard time putting my money elsewhere. (Yes, I do have an index bond funds, but I hate it)
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Nov 28, 2023 15:16
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smackfu posted:My 401k has index and non-index versions of all the basic funds, but only non-index versions of the target date ones which is a bit annoying. Feels like taking advantage of people who just trust the system. Fidelity phone support has always been phenomenal in my experience.
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Nov 28, 2023 15:24
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daslog posted:My frustration with any target date fund (and any other fund really) is that the S&P 500 index funds have outperformed everything for such a long time that even though I'm in my early 50s I have a hard time putting my money elsewhere. (Yes, I do have an index bond funds, but I hate it) We haven't had a sustained bear market (or sideways market) in over a decade, and bond yields were negligible for most of that time until very recently. Of course an all stock allocation would outperform, especially one that is tilted towards US large cap growth like SP500, which has driven returns in recent years. The result of this is that valuations are pretty stretched in those categories. While it is of course not possible to exactly predict future market returns, it certainly seems like the outperformance of US, large cap, and growth cant last forever. This is what we see in Vanguard's latest investment outlook (10-year annualized nominal return):  Here we see International outperforming US, small cap outperforming large cap, and value outperforming growth. Even cash (!) is expected to outperform US growth. This model, like all models, will be wrong, but it feels directionally correct. drk fucked around with this message at 17:36 on Nov 28, 2023 |
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Nov 28, 2023 17:30
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