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I just started contributing to my 401k this January. At age 30. Dumb as poo poo, I know. Really wish I'd gotten my financial poo poo together and learned to budget and save eight years ago. But I am contributing 11% right now, and have a 4-year general financial plan. Part of that plan includes using part of my year-end bonus this year to start a Roth IRA(based on my projections, I'd be maxing out both the 401k and Roth IRA by age 33). At that point in time, I'll only be able to contribute enough in a lump sum to start up one Vanguard fund. My current plan is drop 3k into VGTSX(my 401k is in various domestic funds) for tax year 2013, then throughout 2014 I'll be contributing 8% to that(nearly maxing the contribution; this will be about 4800 for the year) and dropping my 401k back to about 8% as well(employer match ends at 4%). Then if I get a bonus in 2014, I'll open up a bond fund in the Roth IRA for tax year 2015, and going forward contribute to the two funds in a way that will keep them at the percentages I want between international stocks and bonds. I'll add more funds in the future as my balance and knowledge grow. Does this sound like a good plan with the IRA? Having a 5.5k limit per year and a 3k minimum fund balance for Vanguard(who, based on a few weeks of research, are the company I want to go with) kind of makes getting one off the ground seem tricky  . I definitely can't have 3-4 funds off the bat to diversify holdings.
Nail Rat fucked around with this message at 19:41 on Sep 18, 2013 |
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Sep 18, 2013 19:34
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I should clarify: I was more interested in the VGTSX as my primary (initial) stock fund and supplementing that with one of their bond funds, which all also seem to be around 3k. The target index funds seem to be more familiar in nature/composition to the balanced funds I already have in my 401k. Or is that just a bad idea in general, and I should either start with a few target index funds or start with VGTSX and then add a couple of target index funds during 2014 instead of contributing more eggs to one basket? edit: nevermind, question already answered. Nail Rat fucked around with this message at 21:28 on Sep 18, 2013 |
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Sep 18, 2013 21:21
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I also mistakenly assumed Vanguard had an overall minimum to start a count of 3k. That part I feel especially dumb about. Well hot drat, I can start an account this weekend with a target fund and begin contributing to it right away.
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Sep 18, 2013 21:54
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Nail Rat posted:I also mistakenly assumed Vanguard had an overall minimum to start a count of 3k. That part I feel especially dumb about. Went ahead and signed up for one with VFIFX. Glad I can split the way my money is taxed now. Nail Rat fucked around with this message at 14:43 on Sep 19, 2013 |
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Sep 19, 2013 14:30
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That seems like a strange decision. Is there an advantage for a company to do that for its own tax purposes? If the motivation is to reset the compensation of new hires to a lower level, couldn't they just stop offering the match and grandfather in existing contributors? Another option, if your company's 401k provider allows it, might be to contribute some of the money to your 401k as Roth contributions. It shares the 17,500 annual limit with traditional 401k, but if you're maxed, you might be able to get some more benefit out of doing that if you're trying to fit the advantage of that extra match money in. Nail Rat fucked around with this message at 16:30 on Sep 19, 2013 |
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Sep 19, 2013 16:26
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I've seen a couple references to putting a lot in an HSA - is there a particular reason for that? I know you want to have money available to cover out-of-pocket medical expenses, but assuming you don't somehow end up with hundreds of thousands in medical bills that are solely your responsibility(i.e. in my situation my insurance still covers a lot of what I would otherwise pay, and I'm pretty much fully covered after the 3k deductible), isn't ending up with a half-million-plus in the HSA a little overkill? Can you eventually withdraw HSA contributions for non-medical purposes without incurring a penalty? Or is this advice mostly to hedge against a medical disaster or potential loss of insurance?
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Sep 26, 2013 13:58
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asur posted:The penalty is waived either at 65 or if you are disabled at the time of the withdrawal. Yeah, came here to edit my post that I had decided to actually use google and answer the question. Looks like HSA contributions to the max(if applicable) are an important step not in the OP. Starting in January, when I can change my HSA contribution, I can(and will) max 401k match, IRA, and HSA.
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Sep 26, 2013 14:29
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Harry posted:1) It's basically impossible to get that much in your HSA. It's $3,000 a year. Won't that depend on whether and how you invest? Mine only requires you keep $500 cash in the account, you can invest anything beyond that. I'd only been paying into it what I needed to stay ahead of my out-of-pocket medical costs($80 a month had been more than adequate so far), but given that, I'll probably keep enough cash to cover an annual out-of-pocket max (deductible is $1500, out-of-pocket max is $3k) and invest everything else. If I need to pull anything out of investments because I go through that money, I'll have time to do it before I get to a new year. Nail Rat fucked around with this message at 18:06 on Sep 26, 2013 |
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Sep 26, 2013 17:54
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Guinness posted:Also you should be able to contribute to your HSA at any time, doesn't have to be a paycheck deduction. No need to wait until January if you already have the HDHP/HSA accounts. You also get a nice tax deduction by doing so. Last year I saved like $800-some in taxes by maxing my HSA. Well the funds I'd be allocating to it are by and large coming from my traditional 401k(I'm contributing a ton to my 401k right now, in Jan that's going to go down and get ramped back up again through raises and dialing back principle curtailment on the mortgage in the future) - so no tax difference. I *could* reduce my 401k contribution down right now and then make manual contributions to the HSA and get money back in February, but 
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Sep 26, 2013 18:42
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It would kind of defeat the whole purpose of a Roth account - which comes after taxes and is free of future tax liability(after certain conditions namely age).
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Dec 10, 2013 17:19
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Dazzo posted:Does anyone have any thoughts about doing future contributions to a portfolio in a way to sort of rebalance it? So theoretically say my ideal portfolio was 60% domestic and 40% international and at the end of the year the actual portfolio was 70% and 30%. Would it be better to just continue to do contributions at a 60/40 split and then rebalance or does it make sense to contribute a bit more heavily to international in order to get it back to a 60/40? Some fund companies actually offer the automation of this as a feature. I'm sure someone here who knows more will have better insight, but it seems to intuitively make sense as long as you do it fairly often: you keep the split you want, buying the underperformers and preventing the overperformers from getting out of hand, and you don't eat the transaction fees associated with selling your high-performing assets.
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Dec 18, 2013 17:05
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My personal vote would be to pay down the car. After you move out, you won't want to be paying a $300 car payment on a salary that pays you $2500 a month, which will probably be somewhat lower after you begin paying into your 401k.
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Dec 19, 2013 14:53
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Not a Children posted:Just to be clear, the $2500 figure is after the car payment, and is a moderately conservative estimate of what I can currently afford to invest every month. My actual take-home salary is around $3300 for a 4-week period. Fair enough, but I do think you're going to want that payment gone. How long are you going to be staying with your parents? If it's for just a few more months, you'll want that emergency fund to be a lot closer to where it is right now than 4-5k. If it's for five more years, obviously you can invest a lot more. Nail Rat fucked around with this message at 18:01 on Dec 19, 2013 |
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Dec 19, 2013 17:57
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Jose Cuervo posted:I was recently hired at UVa as a post-doc (research associate) and I am now confronted with selecting a tax deferred savings plan. I have to make the following choices: how much to contribute to a 403(b) plan, how much to contribute to a Roth 403(b), and whether to use Fidelity or TIAA-CREF for the contributions. On a basic level, a 403(b) is like a 401(k) in that it has a separate contribution limit bucket from an IRA. It has the same 17,500 limit(unless you're pretty old) as a 401(k) does. So the advantage is that you can put more in if you've already maxed your Roth IRA. Whether to do traditional or Roth will depend on what your current AGI is and what you plan to spend in retirement.
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Dec 19, 2013 20:54
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So I'm pretty happy with changing the way I viewed saving for retirement in 2013...went from having literally zero dollars invested in retirement accounts at age 29 to having 11k in my 401k and 2kish in my Roth IRA. However, when I started the 401k at the beginning of the year I basically just threw poo poo together, not knowing what I was doing. I still don't know what I'm doing, but I know a little more, and would like to rebalance. Just wanted to get some input on the plan. Current funds: 50% American Funds Balanced Fund Class R3 0.95% ER 25% Delaware Select Growth Fund Class A 1.27% 25% RS Partners Fund Class A 1.45% Basically, I've done well on the 401k just due to the market doing well, but looking at the expense ratios I've realized I'm probably leaving a lot of money on the table by paying those. These are the options I have: American Funds Money Market Fund - Class R3 American Funds Intermediate Bond Fund of America - Class R3 PIMCO Total Return Fund - Class A Templeton Global Bond Fund - Class A JPMorgan SmartRetirement Income Fund - Class R2 JPMorgan SmartRetirement Various Target Funds - Class R2 American Funds American Balanced Fund - Class R3 American Funds The Income Fund of America - Class R3 American Funds American Mutual Fund - Class R3 Vanguard 500 Index Fund - Signal Class American Funds AMCAP Fund - Class R3 American Funds The Growth Fund of America - Class R3 Delaware Select Growth Fund - Class A American Century Mid Cap Value Fund - Class R Vanguard Mid-Cap Index Fund - Signal Class BlackRock U.S. Opportunities Portfolio - Investor A Class RS Partners Fund - Class A MFS New Discovery Fund - Class R2 American Funds EuroPacific Growth Fund - Class R3 American Funds Capital World Growth and Income Fund - Class R3 American Funds SMALLCAP World Fund - Class R3 Not that great, sans a few Vanguard options that have extremely low expense ratios. The target funds being class R3 are really unattractive compared to say my Vanguard target IRA. I was thinking of: 50% Vanguard 500 Index Fund 0.05% ER 30% Vanguard Mid-Cap 0.10% ER 20% Templeton Global Bonds Fund 0.91% ER (about halfway through The Four Pillars, for context...so I'm currently thinking 20% in bonds) Some arithmetic tells me my average expense ratio under this allocation drops from 1.155% to 0.2825%...nearly an extra 1% in returns sounds a lot nicer. 1) Is this good for someone my age, or would there be a better option? 2) Should I just leave my current assets where they are or transfer them to the new allocation? ADP's website isn't really clear on what sort of fees they'll take out of the balance due to the transfer. Nail Rat fucked around with this message at 21:56 on Dec 27, 2013 |
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Dec 27, 2013 21:02
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Disclaimer: I'm still clueless about investing. That said, I would only do something like you listed where you're balancing asset allocation across the two accounts in aggregate if you do in fact switch the 401k to a Roth IRA. It would seem to defeat the purpose of tax diversification ( one part Roth one part traditional) if all your international stock is tax free and all your bonds/US stock are ultimately taxable. Also employer 401k matches are always traditional, not Roth, so that's an annoying little thing if you go all Roth. But hey if the vast majority of your income is tax-free in retirement and you have only a tiny bit that you're withdrawing that's taxable, you'll probably get almost all of that back from the standard deduction  If you contributed the max to a Roth IRA and $280/month Roth 401k until age 64, assuming just 3% inflation-adjusted returns that's 700k in purchasing power at age 64, which I think sounds pretty good considering it's tax-free. And that's pretending you won't up the 401k contribution or increase Roth contributions when the limit goes to 6k or 6500, which you probably will.
Nail Rat fucked around with this message at 16:46 on Dec 30, 2013 |
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Dec 30, 2013 14:23
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Nail Rat posted:
I ended up going with this instead: 63% Vanguard 500 Index Fund 27% American Funds EuroPacific Growth Fund 10% Templeton Global Bond Fund It seemed the best of my limited options to get US stock exposure(pretty happy with that part) and international and bond exposure(not that happy with that part). I may or may not down the road a few months switch to say 40% Vanguard 500 Index and 23% Vanguard Mid-Cap Index for some more aggressive exposure within US stocks, but meh. This is a better allocation than the random poo poo I had before...and my weighted expense ratio still went down by 0.72% 
Nail Rat fucked around with this message at 19:59 on Dec 30, 2013 |
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Dec 30, 2013 19:54
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What's the recommended period of time to wait before rebalancing a portfolio? In Four pillars Bernstein alternately uses "each year" and "two years."
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Jan 1, 2014 16:17
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crazyphil posted:I'd say whenever it makes sense to. For example, I've been 100% in the Vanguard Target Retirement Fund (2050) for the last two tax years. I decided I want more control over my portfolio though, so this morning I rebalanced. By rebalancing I mean balancing back to the intended percentages. It seems unlikely your portfolio would ever stay at the "intended" asset distribution for more than a few weeks owing to different assets performing differently.
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Jan 1, 2014 20:19
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It might seem like path of least resistance now to give in to an unreasonable request like that, but if you guys can't stand to file taxes together, I think things like buying a home or financing kids later will be a real issue.
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Jan 2, 2014 20:17
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GoGoGadgetChris posted:On a personal note, I think even Bernstein over complicates retirement investing. His diversification timeline for the first several years of investing will involve REITs, precious metal funds, and some other stuff that seems a bit overkill. Yeah I'm almost done with pillar two and I'm just not doing all the poo poo he says would be "ideal." For one I just don't have those options in my 401k(and why not take advantage of a tax-sheltered account until I'm making enough money that I'm maxing both of them?) and for two who has the money when they're starting out to do that and meet minimum fund requirements? I guess I'd qualify as lazy by his definition of it. 
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Jan 2, 2014 23:12
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You can have as many IRAs as you like as long as you only contribute 5500 combined(you could do 3000 traditional and 2500 Roth for example). I'm assuming that if you open up the traditional with Vanguard as well under the same login, they'll keep track of them together in the little section telling you how much you can contribute when making a contribution. Why would you set up a traditional now to roll into your existing Roth later - are you at the upper end of a tax bracket for this year?
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Jan 3, 2014 14:58
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Vehementi posted:The correctness of the passive strategy relies on the assertion that it is impossible to perform research and choose good fund managers and/or funds. Since 50-90% fail, actively managed investing is doomed if research does not help - but I don't choose at random, so if research can help, then active funds may be viable. Can someone point me to the research that shows that I cannot research fund managers / funds to make good decisions? Have you finished pillar 1, 2, and 3 or are you still early in pillar 1? Read the sections on EMH and how many investors expect that they'll outperform the market. A paraphrase from early in pillar 3: "If the nation's biggest pension funds, each managing tens of billions of dollars, can't find effective money managers who pick the right funds(guys who, as Bernstein points out, are being paid tens of millions for their services to these funds), what makes you think you will be able to?" Nail Rat fucked around with this message at 21:54 on Jan 3, 2014 |
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Jan 3, 2014 21:47
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GoGoGadgetChris posted:The main take away from the chapter is that there are no talented stock pickers. There are, however, people who are naturally bad at it and can be relied on to underperform the market on a consistent basis. That's a slight overgeneralization as he does say there are some talented stock pickers, but there are basically two who outperform(ed) the market consistently by a wide enough margin that it's worth the salary and expenses spent looking for the deal. It takes an awful lot of time and money to find out, as he points out, that a $40 stock is worth $50 only to have others jump on the train midway through you buying it all and kill your returns.
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Jan 3, 2014 21:58
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On the other side, I find your argument to be one of wishful thinking. You admit you can't do it full time, and all but two people in history who do it full time do not significantly outperform the market on a long timeline(more than a decade). Therefore your very best case scenario is to aim for a market-level return as it will be better than a market-level return or slightly-above-market-level return minus the high expenses involved in an active fund. Unless you literally luck out which can happen if you take all your life savings on one trip to Vegas too. Basically what you're doing is saying, I want to win the lottery, and calling us conflicting because we say you won't but some of us say well you might but probably not. Nail Rat fucked around with this message at 22:28 on Jan 3, 2014 |
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Jan 3, 2014 22:25
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You say you're in a financial situation where you can't afford to do more than 4% in the 401k and perhaps 5% in an IRA on top of it. That comes out to 233 per month in the 401k and 189 in the IRA. Why is that? If you don't have kids and aren't supporting a non-working partner(in which case ignore the rest of this), you can probably find a way to tighten up your budget and contribute close to, if not the full 458 a month to the IRA contribution. Every dollar you save right now(with 3-plus decades left) in that Roth IRA will easily be worth three to four dollars in inflation-adjusted non-taxable money when you're retiring. Put another way, if you put 5500 in this year to a target retirement fund(the contribution limit), and didn't touch it, and you got 6% returns(pretty conservative) you'd end up with about 42,000. Even if you assumed 100% total inflation between now and then(kind of high) that's almost a 400% return in buying power. Finding a way to fit that 5500 into your budget each year will mean you'll retire comfortably instead of working until the day you die. Nail Rat fucked around with this message at 22:01 on Jan 7, 2014 |
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Jan 7, 2014 21:57
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A Proper Uppercut posted:Does it make sense to have both an IRA and a 401k? Yes. You need to save a lot more for a comfortable retirement than most people think. I highly suggest reading The Four Pillars of Investing which is recommended in the OP. It lays out in terms easy to understand for the layperson what financial companies obfuscate behind a lot of jargon and misleading figures.
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Jan 8, 2014 17:12
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Drewski posted:I haven't picked this book up yet, but is there a reason you're linking to an older edition? I know some books the newer editions are worse... But for a book that everyone touts as essential reading, I just want to make sure before I buy it. edit: It looks like the same book with a 14 page postscript. But if I haven't bought any edition I suppose the newer one is probably the better choice. It is literally the exact same edition with a "2010 Postscript" that is like 12 pages that comes after the bibliography. It's basically 12 pages of him saying "look how everything I said is still valid over the past decade." I have the newer edition because I didn't realize this, but I think you can just save yourself ten bucks and get the old one. Use that ten bucks for a used copy of one of the many other books he recommends as further reading
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Jan 8, 2014 20:30
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RaoulDuke12 posted:So this is going to be a retarded question, but all of the books you guys have recommended answer every question you might have except the actual technical procedure for buying stocks on a website (like etrade for example). If you'd like to open a Vanguard IRA, go to this URL and click start an IRA today. They make it very easy. It's probably the simplest place to start out. Unless you were asking about day trading stuff. https://investor.vanguard.com/home/ However I will add that with mutual funds including index finds, traditional ones are open ended. You buy shares at the price of the current value of the index but the number of shares are not fixed, so yes as you say buying shares is just adding to the pool. ETFs however are traded on the exchange. Nail Rat fucked around with this message at 14:06 on Jan 13, 2014 |
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Jan 13, 2014 13:59
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I know a lot of people here are less bullish on bonds than Bernstein is in Four Pillars, but anything above 90% stock seems a bit much to me.
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Jan 15, 2014 19:47
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surrender posted:I'm leaning towards less bonds since it looks like the state pension fund is 18% bonds, but I'm amenable to changing my asset mix. Ah that makes more sense then. quote:Edit: Nail Rat, just saw your post. 10% it is! 10% is what I often see thrown around in this thread for people in their 20s/30s, but yeah taking into account your pension, you should probably see if you can figure out exactly how that's split, exactly how much you're going to put into the 403b and then try to plan your 403b and pension as one portfolio. You have some great choices in the 403b(at least compared to the poo poo I have in my 401k where Vanguard S&P 500 is the only really low cost index fund not in a mixed asset class  ). You probably can get away with 5% if you have 18% bonds in the pension fund; if you're paying 6% into your 401k and you have a total of 13.5% going into your pension with match, you'd still end up with like 13% bonds across both.
Nail Rat fucked around with this message at 20:05 on Jan 15, 2014 |
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Jan 15, 2014 20:01
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Rollovers aren't contributions, so you can roll the whole 403b into an IRA and still contribute 5500.
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Jan 18, 2014 18:45
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ntan1 posted:Roll it over into a traditional IRA (which does not cause an increase in taxes) with Vanguard and put it into the Target Fund there for a .18% expense ratio. You can roll it into a Roth IRA if you would like, but that is not necessary. If you do roll over to a Roth IRA as opposed to a traditional IRA, you will have to pay taxes on the money you are rolling over. The other reason why I like Roth for my IRA despite being in the 25% bracket after about 30k of various deductions is that you know you don't have to pay any taxes on it later. With my traditional 401k, who knows what the crazy tax codes will be in 40 years. It's nice to have a segment of retirement income that's a known commodity.
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Jan 18, 2014 23:12
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baquerd posted:It sounds like you're not able to evaluate the different offerings yourself. Start up your Roth IRA with Vanguard and use their target date funds. Do this and read the Four Pillars. After that you'll be able to easily understand Vanguard's offerings and probably have a better idea for your 401k. I picked random crap when I started my 401k, after The Four Pillars I started to understand how poo poo its offerings were but also how I could make a better effort to mix assets with what it does have, until I can finally roll it over into an IRA someday.
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Jan 23, 2014 15:01
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Since there's no matching on the 457 I'd say worry about that only if you're maxing an IRA of your own.
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Jan 23, 2014 20:38
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I think you need to be saving/investing a lot more money before you can entertain the notion of retiring before 60 unless you live extremely frugally(in which case I would expect you should be able to save a much higher percentage of income so I doubt this is the case). You will probably need around 2.5 million dollars at age 60 to be able to take currently-recommended "safe" withdrawals of 2.5% and have 40k in today's purchasing power per year. Of course this becomes about 1.8 million or 1.4 million if you're willing to withdraw 4% or 5% per year, but with lower returns expected in the future this increases the chance significantly of running out of money before you die. Nail Rat fucked around with this message at 16:36 on Jan 24, 2014 |
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Jan 24, 2014 16:30
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Given all that, I'd say if you can max a Roth(460 a month) and find a way to contribute 2-300 a month to a taxable account(saving a little more than you were setting out to do) would give you a comfortable retirement after 60 and possibly give you a few hundred k in the taxable account by 50-55 to go live cheap in paradise until 59.5.
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Jan 24, 2014 17:03
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On the one hand it's depressing, on the other hand it's good to put some concrete numbers on something a lot of people treat as an abstract concept. It's also worth keeping in mind that that 2.5% "safe" withdrawal is designed so you have a very high chance of still having money for many decades past when you will probably die. Meaning, you can have less than that and still have plenty enough to last you your lifetime, but unless you know when you're going to die, you're better off having more than you think you need. If you retire at 60 and are alive at age 88 and run out of money, there's probably not much demand for you in the workforce.
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Jan 24, 2014 18:50
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baquerd posted:For all 50 year periods in US history from 1871 onwards, a 2.5% withdrawal rate would be safe. So would a 3.4% withdrawal rate. A 4% withdrawal rate would be safe in 83.9% of these cases. This is great historically but as has been noted several times in this thread future stock returns may not be as high as they were in the 20th century. From Forbes: quote:The 4% target is certainly a good starting point. But this simple, one-size-fits-all plan may be off the mark for many retirees these days. Nail Rat fucked around with this message at 20:09 on Jan 24, 2014 |
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Jan 24, 2014 20:07
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Acceptableloss posted:So I've got a chunk of my retirement savings that I've been wanting to move from stocks to bonds for a while, but have not done so due to the beating bonds have been taking over the last couple years? Now that the Fed is finally tapering, would this be a decent time to finally pull that trigger? By the time people are starting to buy an asset class, it's a bad time to buy that asset class. Stop thinking in the short term.
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Jan 27, 2014 18:24
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