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Pissingintowind posted:I would like to end up with 4 separate funds or ETFs in my Vanguard Roth IRA. They are: Anyone? I'm looking to make a purchase as early as today!
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Nov 5, 2010 15:08
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Pissingintowind posted:Anyone? I'm looking to make a purchase as early as today! 1. Which domestic fund is better choice, Total Market, or S&P500? I'm leaning towards S&P500. Personal choice. I hold the Total Market so I get exposure to all the companies the S&P 500 excludes. 2. Should I be using funds or ETFs? I'm leaning towards ETFs. Although buying and selling Vanguard ETFs is now commission free, you incur a $20 annual fee until you have $50,000 in assets. If you want to hold individual funds (as opposed to a Total Retirement fund, which includes Bonds as well), ETFs are your only way to do this until your account balance grows, so you have to decide if paying this fee is worth it. 3. What distribution ratio should I be doing for Domestic/Europe/Pacific/Emerging Markets? I'm leaning towards 40/30/20/10. Personal choice, but with your target distribution you should consider Vanguard Total World Stock Index Fund Investor Shares (VTWSX). It has those asset categories split into 44/27/14/16 and would let you manage a single fund without needing a large IRA balance. Alternatively, if you had a high enough balance you could hold 60% Vanguard Total International Stock Index Fund (VGTSX) you would have 15% Emerging, 29% Europe, 15% Pacific and get your Domestic from VTSMX until you meet Admiral fund requirements. I don't think this is different enough from VTWSX to make it worth it, though, unless VGTSX gets an Admiral version before VTWSX.
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Nov 5, 2010 17:28
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var1ety posted:Alternatively, if you had a high enough balance you could hold 60% Vanguard Total International Stock Index Fund (VGTSX) you would have 15% Emerging, 29% Europe, 15% Pacific and get your Domestic from VTSMX until you meet Admiral fund requirements. I don't think this is different enough from VTWSX to make it worth it, though, unless VGTSX gets an Admiral version before VTWSX. VGTSX will get an admiral version before VTWSX. 1st quarter 2011. Doubt VTWSX will get one anytime soon.
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Nov 5, 2010 17:47
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var1ety posted:1. Which domestic fund is better choice, Total Market, or S&P500? I'm leaning towards S&P500. Thanks for the reply. For the record, I have ~$10,700 to play with now, and another $5,000 incoming for 2011 when that starts. 1. $20 doesn't seem like that big a deal when you take a look at the tiny expense ratios... Am I off base here? 2. VTWSX seems like it has a pretty high expense ratio when compared with the individual ETFs/funds. If only they had Admiral Shares for this... I'm still leaning towards ETFs until VTWSX gets Admiral Shares. Pissingintowind fucked around with this message at 18:49 on Nov 5, 2010 |
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Nov 5, 2010 18:43
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My Vanguard 2050 retirement fund went up nearly 3% this week... If only I had more money in it.
|Ziggy| fucked around with this message at 18:56 on Nov 5, 2010 |
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Nov 5, 2010 18:47
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For what it's worth, you can get Vanguard Admiral index funds with 10k instead of 50-100k invested now. Also, with 10k the annual fee is waived. https://personal.vanguard.com/us/content/Funds/FundsAdmiralSharesOverviewJSP.jsp
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Nov 6, 2010 04:56
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Here's one for you guys, I am definitely making the foreign exclusion tax break this year (first $92k is not taxed if you are out of the country for >330 out of a rolling 365 days) so I'm thinking about throwing all of my paycheck into the after tax option of my 401(K) for the remainder of the year. Right now I've got 15% going toward pre-tax. Any reason not to do this?
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Nov 6, 2010 06:28
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If I contribute money to a Roth 401(k), then later roll that money into a Roth IRA, can I withdraw all the money out of my Roth IRA, thus getting around the requirement that you can never withdraw money from a 401(k) until retirement age?
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Nov 6, 2010 17:56
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spf3million posted:Here's one for you guys, I am definitely making the foreign exclusion tax break this year (first $92k is not taxed if you are out of the country for >330 out of a rolling 365 days) so I'm thinking about throwing all of my paycheck into the after tax option of my 401(K) for the remainder of the year. Right now I've got 15% going toward pre-tax. Any reason not to do this? What is the remainder taxed at? Is everything after 92 taxed at the top bracket rate or does it start from the bottom?
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Nov 7, 2010 04:48
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From the bottom.
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Nov 7, 2010 04:50
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Putting after tax money in a 401k is not a horrible thing to do but it doesn't have many advantages over other options. Personally if I'm paying with after tax money I'd first go with a Roth IRA (if your AGI falls within limits). After that, the tax advantages of the "after tax" 401k contributions aren't that great when compared to long term capital gains rates for normal investments. So if there's anything you'd rather have in your portfolio other than the 401k choices you're given, go with normal taxable investments instead.
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Nov 7, 2010 05:19
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nelson posted:Putting after tax money in a 401k is not a horrible thing to do but it doesn't have many advantages over other options. Personally if I'm paying with after tax money I'd first go with a Roth IRA (if your AGI falls within limits). yea nothing wrong with taxable accounts. And this is especially true if you are going to choose tax efficient investments anyway (like stock index funds). or if your 401k choices are worse than your taxable choices (almost a sure thing). Plus no early withdrawal penalties.
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Nov 7, 2010 08:09
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80k posted:yea nothing wrong with taxable accounts. And this is especially true if you are going to choose tax efficient investments anyway (like stock index funds). or if your 401k choices are worse than your taxable choices (almost a sure thing). Plus no early withdrawal penalties. Seriously. The best MER I can get with my company's match is like 1.5% -- for a bond index. Bleugh. I invested the maximum they'll match and invested the rest elsewhere.
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Nov 7, 2010 11:09
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Cool good advice. So it sounds like I should contribute to the match max as after tax then put the rest elsewhere.
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Nov 7, 2010 13:44
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Need some advice regarding budgeting, 401k's and IRAs.
So with that in mind, I have a few questions. My employer allows me to keep my 401k open after employment termination, but that doesn't seem to make much sense. They also allow rollover into a third-party IRA after my employment terminates. This is the obvious choice, right? Do rollover's count as payments, or can I continue contributing on top of the rollover? Second, since it will be nine months until I have the appropriate funds to start an IRA at Vanguard, should I stop saving money in my savings account for it and instead increase my contributions to the 401k, treating it as a temporary IRA? Does Vanguard accept rolled-over 401k's without a pre-existing account? Thirdly, each month I'm saving something like 30% of my post-tax income, not counting 401k. Is this appropriate? I live in Boston, so rent and the like eats a significant chunk of my income. Edit: I'm 23, if it matters.
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Nov 8, 2010 14:23
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polyfractal posted:Need some advice regarding budgeting, 401k's and IRAs. Rollovers do not count as contributions. If you convert to a Roth from a traditional account you'll have to pay taxes (since a Roth is an after-tax account) but it's still worth because you're currently in a lower tax bracket. You can contact vanguard directly for more information. https://personal.vanguard.com/us/whatweoffer/rollover/howrolloverswork?Link=facet nelson fucked around with this message at 15:57 on Nov 8, 2010 |
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Nov 8, 2010 15:49
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I'm in the middle of reading The Intelligent Investor, where Graham continuously emphasises the importance of choosing companies that pay dividends, and have done so for the past 10-20 years, when looking for long-term reliable and low-risk companies to invest in. This was written in the 70s, does it still hold true? I figure it doesn't hurt to pick companies that pay dividends, such as the big dogs in the dow, because an extra 2-4% on top each year is nothing to sneeze at, if the stock price at least follows the general market. Plus it makes it more fun, like a little christmas bonus when the dividend ticks into your account.
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Nov 8, 2010 17:09
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Pilsner posted:I'm in the middle of reading The Intelligent Investor, where Graham continuously emphasises the importance of choosing companies that pay dividends, and have done so for the past 10-20 years, when looking for long-term reliable and low-risk companies to invest in. This was written in the 70s, does it still hold true? I figure it doesn't hurt to pick companies that pay dividends, such as the big dogs in the dow, because an extra 2-4% on top each year is nothing to sneeze at, if the stock price at least follows the general market. Plus it makes it more fun, like a little christmas bonus when the dividend ticks into your account. Let me preface all of this by saying that if Ben Graham were alive today, he would very likely recommend that anyone who isn't a professional investor should be invested in a diverse portfolio of low-cost index funds. With that said, here are few things to keep in mind while reading the Intelligent Investor: 1) It was written before index funds existed, and Graham himself died before index funds became as prevalent and low-cost as they are today. 2) It was written, and Graham died, before the internet and even computer technology as we know it today existed. This means Graham could not have known how relatively easy it is today for a non-professional investor to obtain company reports, past stock price information, etc. It also means Graham had no idea about how sophisticated that professional investors are today in terms of computerized monitoring and data collection on stocks. So on the one hand it might seem like an individual investor has gained much greater access and ease to the markets and market data/news, in fact individual investors today are likely at a much greater disadvantage to professionals compared to what they were 30-40 years ago. 3) Capital gains taxes are something that changed around alot during Graham's lifetime, and from what I remember of reading the Intelligent Investor, he almost completely avoids the subject. I'm not sure at all what the tax rate was on dividends during Graham's lifetime. Jason Zweig might've made some comments about this in his revision if you're reading that version. The point I'm getting at here is that tax treatment of dividends vs capital gains can greatly impact how you choose to invest, and this is something that isn't really addressed very well (if at all) in the Intelligent Investor. For instance, Warren Buffett will tell you now that he would rather have a company reinvest in itself the money it would otherwise have distributed as a dividend, so that he as an investor can decide when he wants to be taxed. To really answer your question, whether a company has a dividend or not is a pretty moot point. The real question is what is underlying whether or not the company has a dividend. For example, you would hate to invest in a company that had wads of cash laying around all the time that wasn't doing anything with it. On the other hand, if a company is reinvesting their cash flow instead of paying a dividend and are benefitting from that reinvestment, then it's probably better for you as an investor, because instead of being taxed on the dividends every 3 months you get to pick and choose when you sell the stock and decide when to pay taxes on your investment.
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Nov 8, 2010 21:53
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Pilsner posted:I'm in the middle of reading The Intelligent Investor, where Graham continuously emphasises the importance of choosing companies that pay dividends, and have done so for the past 10-20 years, when looking for long-term reliable and low-risk companies to invest in. This was written in the 70s, does it still hold true? I figure it doesn't hurt to pick companies that pay dividends, such as the big dogs in the dow, because an extra 2-4% on top each year is nothing to sneeze at, if the stock price at least follows the general market. Plus it makes it more fun, like a little christmas bonus when the dividend ticks into your account. What Graham wrote in the 70's should still hold true today. But that doesn't mean you have to agree with it. Dividends shouldn't matter, and are a tax inefficient way to provide investor value... Buffett being the largest shareholder of BH certainly doesn't like dividends for that reason, and neither should other taxable investors, provided you trust the management. Therein lies the problem. Graham was not of the belief that management should be trusted to invest free cash flow. Michael Jensen of Harvard Business school showed that free cash flows allow firms' managers to finance low-returning projects that might not be funded by the equity or bond markets.... i.e. the market is a more efficient investor for this cash. FWIW, despite sympathizing with Jensen and Graham... after taxes and additional costs of dividend-strategies (compared to the cap-weighted index funds which by far is the lowest cost investment vehicle), I take the "dividends don't matter" approach.
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Nov 8, 2010 22:04
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80k posted:...after taxes and additional costs of dividend-strategies... Do American investors not receive preferential taxation on dividends? In Canada, you pay less tax on dividends, so it's often recommended that you pursue them in your unsheltered portfolio. http://blog.canadian-dream-free-at-45.com/2010/06/08/a-look-at-the-canadian-dividend-tax-system/
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Nov 9, 2010 07:23
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polyfractal posted:Need some advice regarding budgeting, 401k's and IRAs. 1) Rollovers do not count as contributions. 2) Can't really speak for vanguard specifically, but almost every single broker dealer account application I've seen has check boxes for rollovers. Granted that's a little bit different from going directly to a fund company, but I don't see why they'd refuse your money as long as you meet the pre-requisites. 3) 30% of your income at 23 is extremely good from what I've seen. Side note, if you're short on meeting a fund company's minimum requirements, there are BDs that have omnibus type accounts. Basically you and everyone else investing in say VGEEXLOL get pooled together into one huge account with your investment representing a small percentage of the pool. When you decide to move your money out, your holdings are liquidated and then moved out. This type of account does carry advisory fees which can be steep depending on your relationship with your financial advisor, albeit better than letting the cash stagnate. I'd only do that if you're hellbent on a specific fund and it has high minimum requirements. I work in the financial industry at a broker dealer. Specifically one that caters to non-profit, government and educational plans (403b etc) but has plenty of non-qualified business as well. If anyone has any general questions and such, I'd be happy to help, I just can't give out recommendations or say that XXX person is an awesome representative to invest with. edit: For more content, I shall share stories. I recently took a call from a client with a $200k+ retirement account. She immediately prefaced her call with obama this and obama that before cutting to the chase and wanted to take a distribution on her entire account. I tried to talk her out of it, but she was hellbent on taking a $45,000 tax hit in order to withdraw her funds. After explaining that obama was selling away all of our land including our rivers and fresh water (couldn't find anything on google for this) to foreigners, she decided to take Glen Beck's advice and spend her entire fortune less taxes on gold. I guess so she'd be able to buy things after Obama sells our entire country to socialist nazis or something. 
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Nov 9, 2010 09:17
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polyfractal posted:Need some advice regarding budgeting, 401k's and IRAs. I did exactly this about 7 years ago. Vanguard's cool with that. Note that your rollover is pre-tax money while a Roth is post-tax. This year brought a whole bunch of new conversion rules allowing you to move rollover IRA funds into a Roth which can be advantageous if you're 20+ years from retirement. You'll have to pay taxes because of conversion, but you can split that bill up over 2 years free of charge thanks to the new rules. I also did exactly this a few months ago. Try this calculator I guess. Edit: Here's Vanguard's page on the subject. Merrill Grinch fucked around with this message at 14:23 on Nov 9, 2010 |
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Nov 9, 2010 14:19
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Chernori posted:Do American investors not receive preferential taxation on dividends? In Canada, you pay less tax on dividends, so it's often recommended that you pursue them in your unsheltered portfolio. yes we receive preferential taxation on dividends. Though remains to be seen what will happen after 2011. However, it doesn't matter what the dividend tax rate is... having no dividends is better in a taxable account, since capital gains taxes are deferred until you sell. A dividend focused strategy will be a tax drag if it is in a taxable account. Dividend focused ETF's and funds also suffer from higher costs as well as higher turnover (which affects capital gains distributions which are another tax drag), when compared with capitalization weighted index funds.
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Nov 9, 2010 18:34
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Secret Sweater posted:Side note, if you're short on meeting a fund company's minimum requirements, there are BDs that have omnibus type accounts. Basically you and everyone else investing in say VGEEXLOL get pooled together into one huge account with your investment representing a small percentage of the pool. When you decide to move your money out, your holdings are liquidated and then moved out. This type of account does carry advisory fees which can be steep depending on your relationship with your financial advisor, albeit better than letting the cash stagnate. I'd only do that if you're hellbent on a specific fund and it has high minimum requirements. No one should be this hellbent to get into ANY fund, considering the wide availability of low cost ETF's which have zero minimum investment (other than share price). edit: I, of course, admit my bias against chasing hot funds or managers, especially when costs are high which is even more pronounced in special arrangements like the above. Vanguard ETF's are accessible from any discount brokerage so minimums are no longer problem for any small investor who wants to have a diversified portfolio. 80k fucked around with this message at 18:43 on Nov 9, 2010 |
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Nov 9, 2010 18:39
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Merrill Grinch posted:I did exactly this about 7 years ago. Vanguard's cool with that. Thanks everyone for the advice on IRA/401k stuff. It seems I should start dumping more money into my 401k and using it as a temporary IRA, since the money is just collecting dust in my bank account otherwise. I'll look into the details about paying the conversion tax-loss on IRA->Roth. Good to know I can pay the loss in taxes with "outside" money over time, that should help substantially.
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Nov 10, 2010 14:26
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I'm looking at a Roth vs Traditional 401k. From what I've been reading it looks like the caps on both are $16,500. If I'm interpreting this correctly, since a Roth is after tax you have a higher effective retirement cap by going with it. Assuming you're at a 25% tax bracket, you could effectively put an additional $4,125 in your retirement account. Am I understanding this correctly or am I overlooking something completely?
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Nov 12, 2010 19:21
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Aredna posted:I'm looking at a Roth vs Traditional 401k. From what I've been reading it looks like the caps on both are $16,500. correct.
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Nov 12, 2010 19:54
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Props if you're in the 25% tax bracket and putting enough away to max out a Roth 401k (and presumably a Roth IRA as well).
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Nov 12, 2010 20:41
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alreadybeen posted:Props if you're in the 25% tax bracket and putting enough away to max out a Roth 401k (and presumably a Roth IRA as well). I've been running numbers today to see if I can or not. I think I can pull it off if I start watching my money like I should, but it will definitely be an adjustment to not eating out as much (which I should stop doing anyways). Fortunately I can change my 401k contribution by the week so if I am stretching myself too far I can cut back quickly and easily.
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Nov 12, 2010 22:54
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Let's talk about Roth 401k accounts. My work is offering them next year, but the more I read about them, the more it seems like they're a bad idea for most situations. Here is a concise article that talks about reasons not to use one (and cases where you would want to): http://thefinancebuff.com/2008/03/case-against-roth-401k.html It talks about a few points -
The article was written in 2008. One thing that I believe has changed since then is that there is now a conversion path from a Roth 401k to a Roth IRA. To those people who are funding a Roth 401k, what made you decide it made financial sense for you?
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Nov 12, 2010 23:22
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var1ety posted:You need a lot of retirement income to get to the tax bracket where the Roth 401k makes sense High hopes I guess. I think the only real plus is you can pull out contributions penalty free before retirement age. Edit: Disclaimer: I only have a Roth IRA not a Roth 401k. However I could have put the money I contributed to the Roth into to the Traditional 401k instead (since I'm not yet contributing the limit). nelson fucked around with this message at 13:40 on Nov 13, 2010 |
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Nov 13, 2010 04:14
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var1ety posted:Let's talk about Roth 401k accounts. My work is offering them next year, but the more I read about them, the more it seems like they're a bad idea for most situations. I've been maxing out a Roth 401(k) for the last 3 years, the first 3 years of my career. I make around ~75k and my reasons for funding it are as follows: -I plan on fully funding my Roth 401(k) every year until age 32 or so. I will then cut down on my contributions for the remainder of my life (compounding interest FTW). This strategy is aggressive, and leaves me with little savings. I wanted the ability to withdraw my contributions without penalty if need be. I also feel that maximizing my 401k allows me to "save more" than $16,500 vs. a traditional IRA because I'm saving after tax income. -I don't own or lease a car, which allows me to save more. -I live in a relatively low income tax state. I plan to live in California later in life and ideally in retirement. I can only imagine what taxes in Cali will be like 20 years from now. That said, I actually was researching this topic this week, and read the article you linked to. It's interesting and brings up great points I had not thought of. After reading, I don't believe that the Roth 401k makes sense for most people.
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Nov 13, 2010 05:43
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Fully funded Roth401k and Roth IRA two years running now. Reasons for doing so: 1) I plan on having a wealthy retirement. I want to do a lot of traveling and retire on the early side so I plan on having a large amount saved to enable this. 2) You can effectively contribute more because they are already after tax dollars.
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Nov 13, 2010 15:21
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A friend that works at Edward Jones suggested this for a Roth. Any opinions on the funds and percentages? CWGIX 20% CAIBX 15% AGTHX 15% AMECX 15% ANWPX 15% SMCWX 20%
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Nov 15, 2010 22:14
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substitute posted:A friend that works at Edward Jones suggested this for a Roth. Any opinions on the funds and percentages? The expenses are also higher than I'd like to see, but maybe not terrible for actively managed funds.
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Nov 15, 2010 22:29
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substitute posted:A friend that works at Edward Jones suggested this for a Roth. Any opinions on the funds and percentages? Sure. It's lovely for many reasons: - Loads - Poorly allocated with redundant overlap: a tactic EJ reps use to increase number of funds in client accounts and reduce chance that the client ever meets the American Funds breakpoints that qualify for lower commissions on future purchases. - Difficult to determine and achieve desired asset allocation since you are mixing balanced funds and world allocation funds, rather than splitting up into clearly defined asset classes. - Edward Jones is a terrible place to invest with. - Your friend is not held to fiduciary standards. He is not a professional. If you are going to pay an advisor, you should have higher standards.
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Nov 15, 2010 22:42
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I'm 25, and self-employed, but feeling really stable in my career. I've maxxed out a Vanguard Roth for the last 5 years, then I've continued to throw 30-40% of my income into a plain savings account making something average like 1%. All the while I've got a 15 year mortgage racking up 4.875% against me. I've got almost enough savings to pay the loan out cash (but I won't because I value a cash buffer). Is there anything smarter to do with my money than to set my mortgage on course for a 5-year payoff? I feel like I'm losing 3.875% for no reason.
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Nov 15, 2010 23:00
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eddiewalker posted:All the while I've got a 15 year mortgage racking up 4.875% against me. I've got almost enough savings to pay the loan out cash (but I won't because I value a cash buffer). Is there anything smarter to do with my money than to set my mortgage on course for a 5-year payoff? I feel like I'm losing 3.875% for no reason.
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Nov 16, 2010 05:14
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gvibes posted:Your "friend" is not a friend. He clearly wants to gently caress you over. Those funds are all loaded. 80k posted:Sure. It's lovely for many reasons: Thanks -- yeah I know about the upfront loads. He's new to EJ and seems to be following a script, basically. I think the funds are decently rated but the costs suck, and the allocation/percentages seem a bit excessive for such little money ($5000 max contribution).
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Nov 16, 2010 18:17
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substitute posted:Thanks -- yeah I know about the upfront loads. He's new to EJ and seems to be following a script, basically. I think the funds are decently rated but the costs suck, and the allocation/percentages seem a bit excessive for such little money ($5000 max contribution). EJ's business is rampant with conflicts of interest that are at the detriment of the clients. One of the reasons they were sued a few years ago was due to non-disclosure of revenue sharing payments, which added up to between 30% and 60% of their total net income per year. Your "friend" is also likely earning points towards trips to Caribbean resorts for steering you to preferred fund families. Consider these are the types of arrangements EJ brokers have and ask yourself whether he really has your best interests in mind. You will be much better served with a DIY approach. And if you must hire a professional in the future, you can do a lot better than EJ.
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Nov 16, 2010 19:24
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