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That should be more than enough for a reasonable retirement unless you want to retire way before 65, like 45. Numbers?
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Feb 26, 2016 04:01
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Illusive gently caress Man posted:retirement calculators bum me out. I don't want to work all the way to 65 or whatever, but because I haven't really started investing until 28/29, I have less time for growth. I can shovel the maximum legal amount into 401k/IRA for the foreseeable future but it's not enough. $23.5k ($18k 401k $5.5k IRA)/yr for 36 years at a 4% real return is a PV of $1,896,502.79, or roughly a safe withdrawal rate of $75k/yr. If you can't make that work, you should bootstrap harder for your yacht and first class airfare. $75k withrawal in retirement is not the same at $75k salary, not even close. No FICA, roth withdrawals are tax free, you presumably have paid off house, no work commuting expenses or childcare expenses... it's an entirely different ball game for a 65 year old retiree.
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Feb 26, 2016 04:50
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Illusive gently caress Man posted:retirement calculators bum me out. I don't want to work all the way to 65 or whatever, but because I haven't really started investing until 28/29, I have less time for growth. I can shovel the maximum legal amount into 401k/IRA for the foreseeable future but it's not enough. You get to use taxable investments in retirement too, they just aren't tax advantaged. And yeah, as antiga says even just maxing the 410k/IRA combo should put you at the retirement point a good bit before 65, depending on what your anticipated expenses are.
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Feb 26, 2016 04:50
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baquerd posted:$23.5k ($18k 401k $5.5k IRA)/yr for 36 years at a 4% real return is a PV of $1,896,502.79, or roughly a safe withdrawal rate of $75k/yr. If you can't make that work, you should bootstrap harder for your yacht and first class airfare. Wait, is that accurate? maybe I've been using the calculators wrong. When I put in retirement age of 50 into the thing I was using, it was just like a graph showing "you will starve to death before 55". I'm aiming to shovel away the whole 54k/year into 401k and roll the after tax portion into a Roth IRA. If I keep this up, what will I have by 50?
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Feb 26, 2016 05:06
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Retiring fifteen years sooner than "normal" isn't the same ballpark. Fifteen years' difference is a lot of time. You'll either have to up your savings rate or cut your expenses in order to retire by 50 if you haven't saved anything before your thirties.
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Feb 26, 2016 05:44
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Illusive gently caress Man posted:I'm aiming to shovel away the whole 54k/year into 401k and roll the after tax portion into a Roth IRA. If I keep this up, what will I have by 50? What does this mean 
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Feb 26, 2016 06:02
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Illusive gently caress Man posted:Wait, is that accurate? maybe I've been using the calculators wrong. When I put in retirement age of 50 into the thing I was using, it was just like a graph showing "you will starve to death before 55". I'm aiming to shovel away the whole 54k/year into 401k and roll the after tax portion into a Roth IRA. If I keep this up, what will I have by 50? It's really simple compound interest, google for a calculator. If you agree that 4% real returns are valid, then you can do the math and get a $1.8 million dollar stash at $54k a year invested and 21 years investing (29-50). Similar results to the previously calculated retiring at 65 with saving $23k a year, but with an added 15 year withdrawal period. If you do only withdraw at the 4% rate though, you could reasonably expect the difference in withdrawal periods to not matter a lot. Nothing is certain, and you could theoretically fall short, but check out firecalc.org for a great site to run all the historical scenarios for you. If you're doing in-service Roth rollovers of after-tax contributions, your $75k withdrawal rate though becomes equivlant to $120k salary or so, and without other normal expenses like rent/mortgage/car/children, you're living a life like someone going paycheck to paycheck on $150k a year. What are the specific numbers you are looking at that makes you worried?
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Feb 26, 2016 06:25
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pig slut lisa posted:What does this mean
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Feb 26, 2016 06:28
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moana posted:If he's self-employed, the max to contribute into a 401k is $53,000 from both employer and employee side. However, that presumes that you're making enough to be able to hit that amount ($175k/year, I believe). So dude, stop spending all of your money and start living like a normal person and just save a bunch more if you want to retire early. Many regular 401k's allow for after-tax contributions up to that $53k limit which can be rolled over into Roth IRAs. Rolling over that after-tax into a Roth while currently employed, or an "in-service" rollover is the holy grail of tax loopholes. https://www.bogleheads.org/forum/viewtopic.php?t=137366
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Feb 26, 2016 06:30
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Ah, thank you. That's a crazy high number 
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Feb 26, 2016 06:41
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I've just been looking into the mega backdoor stuff myself now that I'm in a position to do so, and it seem that I might not even need to do a rollover part. My plan offers "In-Plan Roth Conversion of Pre-Tax and Aftertax Dollars." Only restrictions seem to be that you can only do 1 conversion or in service withdrawal per year, and we can only do a maximum of 30% contribution to 401k. So tell me if Ive got this right: Step 1) Contribute at 30% until I hit 18k to Pre-tax 401k and leave it there. Step 2) Once Pre-tax maxes out, switch to Aftertax for the rest of the year, maybe down to 25% so my take home doesn't take a huge hit. Around 4k by the end of the year at current pay. Step 3) Every December, do the in-plan conversion on the Aftertax money. I've already paid tax on the base amount and I wound only need to pay taxes on whatever it earned over the last ~1-4 months. Xenoborg fucked around with this message at 07:13 on Feb 26, 2016 |
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Feb 26, 2016 07:11
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Should be noted that $75,000 purchasing power in today's dollars in retirement is a lot, especially if your plan includes having paid off housing by that point and doesn't include any SS you might be eligible for.
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Feb 26, 2016 14:35
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baquerd posted:It's really simple compound interest, google for a calculator. If you agree that 4% real returns are valid, then you can do the math and get a $1.8 million dollar stash at $54k a year invested and 21 years investing (29-50). Similar results to the previously calculated retiring at 65 with saving $23k a year, but with an added 15 year withdrawal period. If you do only withdraw at the 4% rate though, you could reasonably expect the difference in withdrawal periods to not matter a lot. Nothing is certain, and you could theoretically fall short, but check out firecalc.org for a great site to run all the historical scenarios for you. Okay I think I was doing some math very wrong before. I'm a lot less worried now. Kinda too far in the future to worry about this part right now, but the way I understand it is: Before age 65, I can withdraw the contributions from a roth IRA tax free with no penalties. Is that right? or do you have to withdraw growth first (and pay the taxes / penalty) or something? Illusive Fuck Man fucked around with this message at 15:10 on Feb 26, 2016 |
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Feb 26, 2016 15:08
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http://www.rothira.com/roth-ira-withdrawal-rules After reaching age 59.5 there are zero penalties for withdrawing the money, up to the entire balance, as long as the account has been open for at least 5 years. Under 59.5 you can only withdraw up to your contribution amount penalty free. A 10% penalty is assessed on any earnings beyond your contribution amount that you withdraw (except for special cases like first time home purchase or college expenses). You never pay taxes on your Roth withdrawals, that's kind of the point to them.
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Feb 26, 2016 15:38
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moana posted:If he's self-employed, the max to contribute into a 401k is $53,000 from both employer and employee side. However, that presumes that you're making enough to be able to hit that amount ($175k/year, I believe). So dude, stop spending all of your money and start living like a normal person and just save a bunch more if you want to retire early. I'm pretty sure there's a limit of the lesser of 25% of compensation or $53k so you need to be grossing $212k to put in the whole $53k. But I could be remembering that wrong. e: https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions
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Feb 26, 2016 15:44
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Celador posted:You never pay taxes on your Roth withdrawals, that's kind of the point to them.
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Feb 26, 2016 16:57
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Finally was offered a 401(k). The vest window is 6 years (lol), but the fund options are pretty good I think. If I could get some opinions on where to put my money (if anyone has had any of these funds and recommends them). I'm starting from 0 at 28 (other than my Roth) so I was going to do 6%. They'll match half of that, but my timeline for leaving this job I'd get 20%. Or is 10% a better idea and contribute to my IRA as I can? I'm not super risk adverse. Also just moved $6K into Vanguard's 2055 Target. I make $63K. http://imgur.com/xeJZNKx http://imgur.com/C7YeW4q cheese eats mouse fucked around with this message at 17:23 on Feb 26, 2016 |
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Feb 26, 2016 17:17
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cheese eats mouse posted:Finally was offered a 401(k). The vest window is 6 years (lol), but the fund options are pretty good I think. Those are some really lovely expense ratios, but GRMIX is probably where you want most of your money with maybe some in FGBPX depending on your risk tolerance. The expense ratios are so bad though I would try to diversify in mid/small/international using your IRA if you can.
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Feb 26, 2016 19:09
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Dum Cumpster posted:I'm pretty sure there's a limit of the lesser of 25% of compensation or $53k so you need to be grossing $212k to put in the whole $53k. But I could be remembering that wrong.
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Feb 26, 2016 19:56
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Just to make the SEP IRA contribution even dumber, the actual amount you can contribute is (percent / (1+percent)), so 25% = 0.25/1.25 = 265000, plus there is a 1/2 self employment tax adjustment, so you need to make more like $275k to max out the $53k SEP contribution.
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Feb 26, 2016 20:01
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Haha this is why I wasn't sure about my post. I hope I didn't gently caress up my contribution!
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Feb 26, 2016 20:05
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mrmcd posted:Those are some really lovely expense ratios, but GRMIX is probably where you want most of your money with maybe some in FGBPX depending on your risk tolerance. drat. This shows how much I know.  Probably 90/10 or 85/15.
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Feb 26, 2016 20:27
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cheese eats mouse posted:drat. This shows how much I know. GRMIX is a S&P 500 index fund, meaning you are basically buying equity in the largest companies in the US in a way that tracks the S&P 500. It has the lowest expense ratio of anything on that menu, but at 17 bps it's still over 3x more expensive than the same product from Vanguard at 5 bps (VOO). Even SPY is only 9 bps. An S&P 500 index fund is roughly a proxy for investing in the "whole American economy." A lot of people like to add some small and mid cap index funds as well, but I don't see anything there that looks like it has an acceptable expense ratio. If you don't care about trying to precisely calibrate your small/mid cap exposure then the Vanguard target retirement funds are a perfectly acceptable place to put your IRA funds. As for bonds FGBPX is basically a high grade corporate bond fund that will give very little return for relative price stability. It's about as close to "safe" as you'll get without putting your into cash or Treasuries. I would still contribute to get as much free matching money as you can. Once you leave your job though roll it over into an IRA with Vanguard or something.
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Feb 26, 2016 20:50
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Celador posted:Are you contributing to a 401k or TSP account through your employer? If so, the amount you contribute will reduce your modified adjusted gross income, and could drop it below the maximum rate to contribute to a Roth IRA. Just on the rough numbers you provided in this post, you would need to contribute at least If right on the border like that, could they contribute 3k to a traditional IRA and then 2.5k to a Roth IRA?
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Feb 26, 2016 21:42
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The traditional IRA limit is even lower, unless you're talking about a taxable contribution in which case I don't know why you wouldn't just do the whole contribution through the backdoor.
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Feb 27, 2016 00:56
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cheese eats mouse posted:drat. This shows how much I know. Actually your expense ratios really are fairly decent in the 401k landscape. Not in all funds, but overall you could do far, far, worse. 17bps in S&P500 when you could be doing 5bps fairly easily in an IRA may seem nasty, but here's the thing: Being a 401k provider has overhead and someone has to pay. In your case, it is extremely likely that your company is footing a good part of the bill as opposed to passing all expenses on to you (often in the form of expense ratios and other fees).
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Feb 27, 2016 04:57
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Dessert Rose posted:The traditional IRA limit is even lower, unless you're talking about a taxable contribution in which case I don't know why you wouldn't just do the whole contribution through the backdoor. Back door is best door.
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Feb 27, 2016 06:55
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Dessert Rose posted:The traditional IRA limit is even lower, unless you're talking about a taxable contribution in which case I don't know why you wouldn't just do the whole contribution through the backdoor. Henrik Zetterberg posted:Back door is best door. 
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Feb 27, 2016 10:10
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Trying to figure out a good allocation (and a good set of funds to go with those allocations). Here's what I'm thinking: Low-risk bonds (VFICX): 20% Mid/high-risk (municipal/junk) bonds (VWAHX, VWEHX) : 10% U.S. stocks (mostly VTSMX and VUVLX, a little VGHCX): 50% International stocks (VWIGX): 10% Emerging market stocks (VEIEX): 10% I'm 24, I have my Roth IRA (Target Date 2055) fully funded for the year and six month of expenses set aside in savings, so this is my first step toward investing with a 10-15 year time horizon in mind instead of a "tomorrow to 2 years from now" or "retiring 40 years from now" time horizon. Given that I've got good savings, a great (and seemingly stable) job and a solid start on my retirement savings, I'm not too risk-averse with this investing. On a 1-10 scale with 1 meaning zero risk and 10 meaning penny stocks, I'd say I'm about 6.5 with these investments. I would appreciate any advice I can get on this, thank you.
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Feb 27, 2016 20:11
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Leperflesh posted:He has $95k in his 401(k) and zero in his IRA, which he is maybe thinking about opening and starting to fund soon. So, I suggested diversification options among his current funds as a temporary measure so he can be diversified for the (at least) two years it'll take to get his IRA up to 10%+ of his portfolio, where he could get (say) all of his bond exposure there.
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Feb 27, 2016 21:22
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surf rock posted:Trying to figure out a good allocation (and a good set of funds to go with those allocations). Here's what I'm thinking: 30% bonds for a 24 year old is way too conservative IMHO, especially with a 6 month emergency fund. You're not going to need to withdraw from your investments to cover expenses with that much in cash. I'm 25 and I'm doing 100% stocks in index funds + a smallish emergency fund.
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Feb 27, 2016 22:05
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Ludwig van Halen posted:30% bonds for a 24 year old is way too conservative IMHO, especially with a 6 month emergency fund. You're not going to need to withdraw from your investments to cover expenses with that much in cash. Another thing to consider is the lower expense ratio VTSAX vs VTSMX. I decided to go less diversified more total stock market with a lower expense ratio due to the 10k minimum.
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Feb 28, 2016 00:30
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surf rock posted:Trying to figure out a good allocation (and a good set of funds to go with those allocations). Here's what I'm thinking: I'd disagree with the above poster who said it's too conservative overall. If you like the overall stock/bond split, more power to you. Without the reasoning behind your various tilts, it's hard to say if they're appropriate or not. These are my thoughts: VFICX 20% - A fine choice for a bond fund VWAHX, VWEHX 10%- Why junk munis? Considering the disfunction of state governments these days, I'd steer clear unless I had a good reason. At least you have a valuation argument to get into junk corporates right now. I'd consider just putting it all into VFICX to keep it simple, or a broad (non-junk) muni fund if this is all taxable money. VTSMX/VUVLX/VGHCX 50% - Value tilt to US equity is fine. Health care smells like a performance-chasing pick, why do you want it? VWIGX 10% Why not VFWIX (total international instead of international growth)? Did you just copy the wrong fund symbol? How does tilting growth here square with your value tilt in your US equity? Looking at top-10 holdings, there's a lot of overlap with big emerging market stocks (plus Amazon for some reason?). VEIEX 10% Sure I'd say you could simplify it (esp. the bond holdings) without much effect on the portfolio as a whole. I think there's a contradiction between tilting US value and tilting international growth in there that you should sort out.
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Feb 28, 2016 03:10
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Ludwig van Halen posted:30% bonds for a 24 year old is way too conservative IMHO, especially with a 6 month emergency fund. You're not going to need to withdraw from your investments to cover expenses with that much in cash. They were asking for a 10-15 year timeline. That's roughly the equivalent of being 55 years old. I think 30-35% bonds is spot on for that timeframe.
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Feb 28, 2016 04:14
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e: double post
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Feb 28, 2016 04:15
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CannonFodder posted:Ahh. I'm not near the limit so I didn't know which of traditional or Roth was lower. There are two types of traditional IRAs. Deductible (pre-tax) and non-deductible (after-tax). You deduct pre-tax IRA contributions from your taxable income but the income limit for doing that is very low. There is no income limit on making traditional non-deductible IRA contributions, but the cap is shared between all three types. When people do backdoors they are talking about making non-deductible traditional IRA contributions then converting the money into their Roth IRAs. There are also three types of 401(k)s, which are the same as the IRAs, but they don't share the limits quite the same way. Traditional pre-tax 401(k)s and Roth 401(k)s share the same 19k limit for employee contributions, but after-tax 401(k)s have no specific limit of their own, only the requirement that the total of all contributions, employee or employer, be no more than 53k. So when you just say "Roth," as you did in some earlier posts, it can lead to a bit of confusion.
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Feb 28, 2016 09:29
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Is there anything special I have to do to have my extra 2016 Roth contribution count towards 2015?
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Feb 28, 2016 22:29
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Hollis Brown posted:Another thing to consider is the lower expense ratio VTSAX vs VTSMX. I decided to go less diversified more total stock market with a lower expense ratio due to the 10k minimum. Definitely, I'm going to switch to that fund next year once I have the funds to meet that minimum without screwing up my diversification. Deep 13 posted:I'd disagree with the above poster who said it's too conservative overall. If you like the overall stock/bond split, more power to you. Without the reasoning behind your various tilts, it's hard to say if they're appropriate or not. These are my thoughts: I think that junk munis are undervalued and not all that risky as a market. Even in 2008, VWAHX dipped less than 5%. I like that it has a little more volatility than VFICX but much less than a stock fund. You're right about the healthcare fund, I didn't actually have a good reason for that besides seeing some kind of sector fund in a lot of lazy portfolios and not trusting REITs. On the international funds, I'm having a hard time with VFWIX because its performance has been terrible since its inception. Part of that is the '08 crash, sure, but it hasn't done much since then beyond recouping what was lost. On the plus side, its expense ratio is way lower than VWIGX. Should I be thinking about this differently?
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Feb 28, 2016 22:42
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surf rock posted:On the international funds, I'm having a hard time with VFWIX because its performance has been terrible since its inception. Part of that is the '08 crash, sure, but it hasn't done much since then beyond recouping what was lost. On the plus side, its expense ratio is way lower than VWIGX. Should I be thinking about this differently? Yes, you should probably be thinking about it differently. Past performance does not guarantee future results. When it comes to long term passive index investing (the overall strategy typically espoused by this forum), the most important things you should be looking at when it comes to funds are exposure (what segments of the economy and types of securities are in the fund), risk (high risk = high expected return, high volatility), and cost (net expense ratios). The only time you should look at the past returns is if you are comparing the fund against an index to see how closely they stick together. Past performance doesn't matter, because you are using index funds, and all index funds should be pretty much the same. All (good) index funds being essentially the same, you should just pick the one with the lowest ER for each class of asset you want in your portfolio. Put another way, you should first say "I want to have exposure to international companies not traded in the US", and then say "whats the cheapest way to buy that index?" You seem to be mostly there with how you're building your portfolio, you just need to learn to ignore most of the information in the fund prospectus. If you haven't checked it out, Bogleheads might be worth a visit: https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit I Like Jell-O fucked around with this message at 06:12 on Feb 29, 2016 |
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Feb 29, 2016 06:06
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I Like Jell-O posted:Yes, you should probably be thinking about it differently. Past performance does not guarantee future results. When it comes to long term passive index investing (the overall strategy typically espoused by this forum), the most important things you should be looking at when it comes to funds are exposure (what segments of the economy and types of securities are in the fund), risk (high risk = high expected return, high volatility), and cost (net expense ratios). The only time you should look at the past returns is if you are comparing the fund against an index to see how closely they stick together. Past performance doesn't matter, because you are using index funds, and all index funds should be pretty much the same. All (good) index funds being essentially the same, you should just pick the one with the lowest ER for each class of asset you want in your portfolio. Put another way, you should first say "I want to have exposure to international companies not traded in the US", and then say "whats the cheapest way to buy that index?" Thank you, this makes sense. Put in the various purchase orders, kind of anticipating a call from my bank tomorrow morning asking if I actually did just move all that money at once. Stress!
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Feb 29, 2016 06:21
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