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Ralith posted:This is confused. The commonly-cited 7% figure for average US equity returns is already adjusted for inflation. The nominal figure is 10%. SWR is well below the average real rate of return to compensate for sequence of returns risk.
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Jul 29, 2018 07:14
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Ersatz posted:The trouble is that I'm in my life already, and I really don't have the time or inclination to a deep dive into discovering exactly why I'm being far too conservative about ensuring that I don't run out of money after I've ended a career that I wouldn't be able to get back into. As you might have gathered from the above posts, I'm a strong believer in preparing for the worst, and then more often than not being pleasantly surprised. But thanks for the heads up.
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Jul 29, 2018 07:34
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Ralith posted:If you're planning on ending a career that you can't get back into, all the more reason you should make a point to fully understand the basis on which you do so. Acting on bad information can have effects other than making you "far too conservative." Edit: for people who are interested in learning how, exactly, I was getting the details wrong, the following "internet hearsay" is on point: https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/ https://www.madfientist.com/safe-withdrawal-rate/ Ersatz fucked around with this message at 17:07 on Jul 29, 2018 |
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Jul 29, 2018 07:39
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Ersatz posted:Yeah, taking full advantage of the 401k is absolutely the way to go, seeing as how the alternative is to watch a third of that money (roughly) evaporate into taxes every year. One of the many things that Fientist gets right is the idea of leveraging every tax advantage you can get while still earning, and solving the issue of accessing the funds at a later date. The roth conversion ladder is one promising way to do that. I don't really get the Roth conversion ladder. I mean you're limited to putting in 5500 a year. I mean, I get it, but I don't see how it's good for more than a year or two for most people. I've put in the max for at about 10 years, and even with vanguard funds, I have like 75k in it. Even if I continue to put in the max till an early retirement age of like 50, I doubt I would have more than 200k. Sites like rootofgood examples show taking out 30k a year for 10 years for a ladder. That is obviously impossible.
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Aug 3, 2018 08:38
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TLG James posted:I don't really get the Roth conversion ladder. I mean you're limited to putting in 5500 a year. I mean, I get it, but I don't see how it's good for more than a year or two for most people. The examples are based on maxing out both trad IRA and 401k contributions, then moving the 401k contributions (and whatever match you get) to an IRA.
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Aug 3, 2018 10:10
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You can convert as much as you want from traditional to Roth it’s just taxed. So while you can’t ever put more then $5500 in, if you have money in a 401k you can transfer that to an IRA and then do the conversion. Since 401ks are typically larger that’s where the giant balances come from. The Roth conversion ladder is a specific method for taking 401k money and getting it out with lower penalties.
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Aug 3, 2018 10:15
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This is probably in the long term investment thread already, but Fidelity just hugely lowered their expense ratios on a bunch of index funds (forgive the press release style source): https://www.businesswire.com/news/home/20180801005635/en/Fidelity-Rewrites-Rules-Investing-Deliver-Unparalleled-Simplicity
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Aug 3, 2018 16:01
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Grumpwagon posted:This is probably in the long term investment thread already, but Fidelity just hugely lowered their expense ratios on a bunch of index funds (forgive the press release style source): Zero expense ratios and no fees. I wonder how long that will last.
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Aug 3, 2018 18:40
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0 fees on 2 funds (US total market and international). Much lower on a bunch of others.
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Aug 3, 2018 18:55
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freeasinbeer posted:You can convert as much as you want from traditional to Roth it’s just taxed. https://www.madfientist.com/how-to-access-retirement-funds-early/
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Aug 3, 2018 20:08
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My perspective on roth laddering is that it's immoral. If you have enough income to consider FI you should pay taxes on your contributions, whether it be on deposit or withdrawal. I can only assume the Roth/Trad intent was meant to give you a little flexibility on when it's taxed, but it must have been meant to tax you at some point. I have never ever seen a FI'er even consider this possiblity, they only look at whether it's legal.
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Aug 3, 2018 21:27
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It's immoral to give money to first worlders (read: the us government) when you could instead avoid taxes and give it to third worlders (read: its victims).
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Aug 3, 2018 21:38
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the littlest prince posted:My perspective on roth laddering is that it's immoral. If you have enough income to consider FI you should pay taxes on your contributions, whether it be on deposit or withdrawal. I can only assume the Roth/Trad intent was meant to give you a little flexibility on when it's taxed, but it must have been meant to tax you at some point. Not to mention the rather significant portion of my taxes that go toward illegal and unnecessary warfare, abusing migrants, and so on. When your government routinely does evil poo poo, it's not hard to justify limiting the taxes you pay as much as you legally can. As for the morality of financial "independence" generally, it's worth considering the perspective that capital is dead labor that feeds, vampire-like, on the living. The trick, in my view, is to put the personal freedom that money can buy you to good use. You might, for example, produce art with real value, spend significant time volunteering to help people in need, etc.... It's certainly not difficult to imagine better (and more moral) uses for money than blowing it on consumer crap, and whatever crazy poo poo the government of the moment feels like doing. Ersatz fucked around with this message at 22:36 on Aug 3, 2018 |
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Aug 3, 2018 21:44
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the littlest prince posted:My perspective on roth laddering is that it's immoral. If you have enough income to consider FI you should pay taxes on your contributions, whether it be on deposit or withdrawal. I can only assume the Roth/Trad intent was meant to give you a little flexibility on when it's taxed, but it must have been meant to tax you at some point. ...It's legal because it's taxed. It is taxed.
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Aug 3, 2018 22:06
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the littlest prince posted:My perspective on roth laddering is that it's immoral. If you have enough income to consider FI you should pay taxes on your contributions, whether it be on deposit or withdrawal. I can only assume the Roth/Trad intent was meant to give you a little flexibility on when it's taxed, but it must have been meant to tax you at some point. I get where you're coming from. I've noticed that a not insignificant slice of the FIRE crowd are borderline libertarian 'tax is theft' upper management/IT shitheads in the top 5% salary band who unironically say 'bootstraps' and either don't know or don't care about the the terrible things poorly regulated capitalism has caused since they're net beneficiaries. The conversion thing is pretty tragedy-of-the-commons but I don't see it changing anytime soon because that's where the moneyed interests are. And yes I get that not all FI types are like this but it rakes a pretty uncommon set of circumstances to successfully make it, especially in america. When someone gets trampled to death in a horrific zoo accident nobody says 'not all elephants killed him' because that would sound stupid as hell.
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Aug 3, 2018 22:49
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Alhireth-Hotep posted:...It's legal because it's taxed. It is taxed. Isn't the entire point of laddering to avoid paying taxes on it?
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Aug 3, 2018 23:17
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You still pay taxes on the conversion, but you avoid early withdrawal penalties from the traditional IRA and in early retirement you have likely a low AGI so the marginal tax rate on the conversion should be low.
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Aug 3, 2018 23:24
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the littlest prince posted:Isn't the entire point of laddering to avoid paying taxes on it? The entire point is to access the money before age 60 without paying the additional 10% penalty, or to take advantage of low income years to pay a lower average rate, or to simply spread out the conversions over time to hedge against future changes in the tax code. In the past, Roth IRA and 401k accounts didn't exist so calling it "immoral" to try to use a new type of account exactly as intended is incredibly ignorant.
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Aug 3, 2018 23:26
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Well gently caress, my bad.Droo posted:The entire point is to access the money before age 60 without paying the additional 10% penalty, or to take advantage of low income years to pay a lower average rate, or to simply spread out the conversions over time to hedge against future changes in the tax code. I apologize to everyone except you, gently caress you. (USER WAS PUT ON PROBATION FOR THIS POST)
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Aug 3, 2018 23:27
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Did you seriously show up and declare something immoral without fully understanding it? I don't even read Droo's comment as specifically hostile, what you did was ignorant. One step forward for acknowledging it, two steps back for getting defensive about getting called out on it. Roth Laddering doesn't even make the top 10 when you consider that you could end up doing it at a higher tax bracket than you end up in during retirement, or that it's not exactly a given that you'll even have the opportunity to convert during something like a sabbatical, or that it's kind of difficult to end up in the absolute perfect position for reducing your tax burden. I'd hazard that it's primarily used for reducing the size of RMDs and allowing for early withdrawal without the penalty, with the tradeoff being that you have to wait 5 years so it's not exactly a spur-of-the-moment decision. Get the gently caress out of here with "Ah my bad," charging in here with your unrequested moral opinion on poo poo. Take a second to ask questions or do your research if you're going to go Tiny Brontosaurus up in this bitch. Hoodwinker fucked around with this message at 23:46 on Aug 3, 2018 |
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Aug 3, 2018 23:43
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the littlest prince posted:I apologize to everyone except you, gently caress you. Ignorant manchild lashes out when presented with new knowledge, full news coverage at 11 Edit: now he's messaging me to continue yelling at me Droo fucked around with this message at 00:34 on Aug 4, 2018 |
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Aug 3, 2018 23:45
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Most large companies that index funds invest in have some seriously horrific practices and investing in them is probably worse anyway. Not that there's a good alternative, but tax avoidance seems like a weird thing to focus on when you're indirectly able to retire early on the exploitation of global labor forces.
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Aug 3, 2018 23:51
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 Anyway I hope I get to take advantage of 0% fee funds w/ fidelity. although I currently invest in like 0.02%-0.07% net ERs through them so I assume I'm doing fine, but don't actually know if I'm paying out the rear end in additional hidden fees or anything because I (perhaps wrongly?) assumed that net ER would actually include all that Blinky2099 fucked around with this message at 23:55 on Aug 3, 2018 |
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Aug 3, 2018 23:53
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Ersatz posted:Yep yep. The following Fientist post provides a nicely detailed explanation of how that might work in practice: Thanks, that explains it easier and in picture form, more than any other site I've seen.
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Aug 5, 2018 15:23
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Well that was certainly an exciting derail. Don't forget, gang, that all taxation is theft.
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Aug 6, 2018 12:58
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EAT FASTER!!!!!! posted:Well that was certainly an exciting derail. Fortunately, all theft is taxation too!
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Aug 6, 2018 13:33
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Dang, BFC is sneakily the most angry subforum after DnD Makes sense though, since money is the key to getting under anyone's skin. Anybody else ever work as a bank teller? Customers were always at the cusp of meltdown at all times, I swear.
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Aug 6, 2018 17:15
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Call me crazy, but calling somebody out for garbage behavior because they cast a wide moral judgment over something they didn't understand is pretty well within the bounds of acceptable responses. I don't think it has anything to do with money and anger.
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Aug 6, 2018 17:24
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No, the guy saying "gently caress you" and sending angry private messages. He seems mad. You're all good.
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Aug 6, 2018 17:27
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Jeez, I didn't see that edit up there. What a tweest!
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Aug 6, 2018 17:32
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I was trying explain why I got pissed while avoiding a derail. This was 3 days ago, move on.
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Aug 6, 2018 22:25
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I thought we had, but here you are.
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Aug 6, 2018 22:35
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I'm wrestling with a financial decision at the moment and I thought it might be beneficial to get some opinions and resources from the thread. Basically, I've been maximizing contributions to tax-advantaged accounts for years while, at the same time, paying down debts (primarily student loans). Very soon, the only outstanding debt that I'll have will be the mortgage on my home. With that in mind, I'm trying to decide on whether it would be better idea to pay off the mortgage early, or to instead put my extra cash into the markets through taxable accounts. The latter normally seems like the better idea (assume a 3.5% interest rate on the mortgage vs. 7% average historical returns). That said, it would be reasonable to think that we're nearing the end of the cycle and that markets are due for a large correction, soon. Given that, is it best to be conservative and to work on paying down the mortgage until after a major correction occurs, or is it better to invest the extra cash in taxable accounts, knowing that any investor is inevitably going to take hits along the way to retirement, but that it's all going to smooth out in the long run? My concern, I suppose, relates to sequence of returns risk. FIRE date is likely 5-10 years away, depending on how fat I want it to be, for what that's worth. Ersatz fucked around with this message at 19:09 on Oct 12, 2018 |
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Oct 12, 2018 19:02
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I'm generally conservative about these things and am in favor of paying down your home, but it kind of depends on how much money you owe on it. Key note: I am in favor of this regardless of what the market is doing On the other hand, it sounds a lot like you are trying to time the market! Why are you trying to time the market?
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Oct 12, 2018 19:16
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KYOON GRIFFEY JR posted:I'm generally conservative about these things and am in favor of paying down your home, but it kind of depends on how much money you owe on it. Key note: I am in favor of this regardless of what the market is doing
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Oct 12, 2018 19:19
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Just do both 50/50 and feel good about life. Pay a little extra, invest into total market index funds, sleep well no matter what.
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Oct 12, 2018 19:42
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You could also run a couple scenarios where in one you dump into the stock market and in the other you pay off the mortgage. Your living expenses are lower in the second example because your payments are less to service any remaining mortgage. Then see where the market would have to be in 5-10 years for you to still be able to retire. Based on if you're willing to work a couple more years, etc. you could estimate chance of retirement vs. expected $$/month, or whatever really matters to you.
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Oct 12, 2018 20:30
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Yeah being in a happy place of deciding between paying off mortgage vs extra taxable investments is just risk management, and it's *really* just your personal ability to withstand downturns vs the desired feeling of joy of paying off the house and never being in debt to anyone ever again. Can you guess which direction we went? 
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Oct 12, 2018 20:32
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I feel like from a game theory standpoint that more choices sooner (opening up cashflow by paying off the mortgage) has more strategic value than even more potential choices later on (investing the money).
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Oct 12, 2018 21:25
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Don't FIRE people need to have high growth to achieve their financial goals on a shorter timeline? Take the 7% over the 3.5% for sure. We might be at the end of an up cycle. Might be at the middle. Might be at the beginning. Totally irrelevant.
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Oct 12, 2018 21:29
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