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I'd appreciate some discussion on Roth versus Traditional IRA's. I almost started funding a Roth just because it seemed like, ever since they came around, that's the only option people consider. But I'm not sure if it makes sense in my case, for a few reasons. I went to graduate school and was lucky enough to have a good paying job right out of college. My wife has a job too, so we're solidly in the 25% tax bracket. We have pretty much nothing we can write off (no house, no kids, no education bills), so we had something like $10,000 in taxes, which just seems awfully high to me. Also, how am I supposed to determine my income during retirement? I have no clue what my cost of living will be 2050. So I can't help but wonder if it would make sense to knock our taxable income down $5000 by contributing to a traditional IRA, and then when we do have a house and kids and are in a lower tax bracket, switch to contributing to a Roth.
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Jul 10, 2008 13:41
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If anyone is looking for a great book about all of this, I highly recommend Jim Cramer's Stay Mad. I know, I know, it's Jim Cramer, but it's not like he's recommending individual stocks in the book. It's unflinchingly honest and does a really good job explaining retirement savings and the options you have.
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Jul 12, 2008 16:23
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waloo posted:And am I correct in understanding that the benefit of a Roth IRA for me is that I can invest it and then much later if there are gains I can take those gains without tax? Something like a traditional IRA doesn't however make so much sense for me as using it for deductions is of no benefit to me now. Pretty much. Roth's are generally good for younger people who are in a lower tax bracket than they will be when they retire. Traditional are good for years when you need those deductions now to reduce your taxes (i.e. right now I'm in a dual income no kids situation paying rent, and hence have ridiculous taxes, so I'm contributing to a traditional IRA this year).
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Jan 16, 2009 14:52
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My father in law opened up a Roth IRA for my wife at American Funds, and put some starter money into it. My wife wants to contribute to this account to make her dad happy, but I was trying to tell her that even though I think she has some decent funds, the expense ratios aren't worth it. So how do I prove this to her? My main question is if I add the two funds to, say, Yahoo Finance, and do a comparison, do those gains take into account the expense ratios? What about the front-load fee? If not, is there any way to do that? The specific funds she has are: AGTHX ABALX AMRMX AIVSX Thanks!
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Jan 18, 2010 18:51
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Thanks for all the info. It looks as though if she has to be in a fund, those ones aren't too bad, and maybe not worth getting into a discussion about with my father-in-law. EDIT: Just one more follow up question. If I make a portfolio on Yahoo finance with a deposit of $1000 in a few funds, subtracting any front-loaded fees, it still won't be accurate because of the varying dividends of each fund. Is that correct? Strict 9 fucked around with this message at 17:26 on Jan 19, 2010 |
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Jan 19, 2010 16:02
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dv6speed posted:In addition to your Roth IRA, you'll want a traditional IRA. After you max those out, open a standard brokerage account. Except the contribution limit applies to both. You can't contribute $5000 to a Roth and $5000 to a Traditional, as far as I'm aware.
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Mar 2, 2010 17:02
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I'm pretty sure there's no income limit for a traditional IRA, but you can't deduct contributions. Your growth isn't taxed, but you do have to pay taxes when you make withdrawals. Since you aren't getting the benefit of deducting contributions, it seems like a 401K is a better choice, even without a match, since you're contributing with pre-tax money.
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Jul 7, 2010 14:48
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asmallrabbit posted:If the markets look like they are dipping again how do you handle that with retirement accounts assuming you are going to have them for 30+ years. Should you try and switch to something that is going to weather it better, go to cash and try to buy in when things are low before they start to rise back up or just leave it alone? I assume you can rebalance or change any of your holdings within your accounts as much as you want as long as you dont move the money elsewhere? (Canada) It's the basic decision between buy and hold and market timing. I practice the latter. Part of it is just a personal philosophy - for better or worse, I can't stomach watching my portfolio plummet and do nothing about it (see: the years 1999 - 2009). It's certainly more difficult to time the market than it is to buy a stock or ETF or mutual fund and sell it 40 years later, but there can be a reward to it.
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Jul 17, 2010 01:26
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slap me silly posted:S&P500's annualized return from 1/1/1999 to 12/31/2008 was -1.5% (not adjusted for inflation). Just out of curiosity, what was yours? I was just giving an example there, as I haven't been investing for that long. The portfolio system that I do follow outperformed the S&P by 113% over the past ten years. Of course that wasn't all just market timing, it was stock picking as well, so it'd kind of tough to compare the two. It's not anything really complicated either, just a combination of three indicators, two based on moving averages and one based on new lows.
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Jul 17, 2010 04:23
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Leperflesh posted:As to market timing: I view it as added risk (of underperforming the market) with added potential rewards (potentially outperforming the market), just like all investing. The difference for me is that this is my retirement money. I absolutely can't afford to make a blunder somewhere and piss away half my retirement money. If I want to play on the market and try to beat it and get rich, I need to do that with money I can afford to risk; hence, I have my retirement fund that is sacrosanct, and I have a stock broker account with cash in it that is "play money". (Or I would, if I hadn't just bought a house...) Yes, that's a very good point. While I may be a fan of market timing, in terms of practicing what I preach, maybe only 10% - 20% of my retirement money is in a portfolio of stocks which I choose in conjunction with market timing. I don't know if I would be comfortable with the majority of my retirement in a setup like that, but I also haven't been investing for all that long, so maybe that will change when I get older. Of course the older I get the closer to retirement I get, so probably not!
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Jul 19, 2010 19:04
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fougera posted:What does the thread suggest for a 50 year old who doesn't have much saved away (somewhere in the 60-120K area). I realize that he's going to have to work in some capacity for most of his life but I'm trying to get him pointed in the right direction. My understanding that hes got most of what he has so far in an IRA but what should he do with the income he will be pulling in here on out? Is it better to max out IRA/401k? Should he be looking at funds? If so, is it a matter of just choosing a reputable company and working from there? IRA's are certainly still the way to go. Also, since he is over 50, he can contribute an additional $1000 (totally $6000 per year) as a catch-up contribution. That is, of course, after investing in a 401K up to the maximum that his employer will match. In terms of actual investments, it's tricky because normally at that age you're going to want to be in very conservative investments, since you will need the money soon. On the other hand, since it sounds like they have very little saved, they may need to be more aggressive than normal in order to be sure he has enough to enjoy at least a few years of retirement. I mostly look at younger people saving for retirement so I'm honestly not sure exactly what kind of mix I would recommend for someone in that situation. Brian Fellows posted:Long term investing questions to follow in later posts, but for now I have a general savings question: A credit union is an option, sure, but I've found online-only banks to be an excellent place to have a savings account. I've used several (ING, Emigrant Direct) and am currently at HSBC, which is actually where I keep all my money (besides a thousand or so in a local bank for paper checks). Anywhere you look right now though will have pretty low rates though. I'd also recommend going with a online bank that is well reviewed and provides what you need, not chasing rates. A Man Whore posted:I'm trying to get my financial investment poo poo in order. Although I don't know where to begin with basics. 50% in bonds is extremely conservative for someone in their 20's. Especially considering the other 50% is in "long-term stuff", and I'm not sure exactly what that means but sounds like conservative investments as well. For reference, a lot of the target age retirement funds (which automatically adjust their holdings depending on your age) are 100% invested in stocks for someone in their 20's. I'm not saying that is the best option, but just using that to compare it to your 50% in bonds. I'd consider something more like 80% stocks 20% bonds, but it depends on what exactly you are comfortable with.
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Aug 3, 2010 16:34
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It's a prime example of why I think finding a reliable market timing system and applying that to at least some of your portfolio is a good idea, as discussed a few pages back.
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Aug 12, 2010 18:54
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I took a brief look at Plantly and signed up for it. Nice interface for sure. But I didn't love the reasoning behind their investment choices. They seem really heavily into bonds, even for really long term investments, which could be ok with the right reasons. But all the reasoning seemed to be based on the past 10 years and, even worse, the past 3 years of performance. In fact the whole site seems based on the premise of using past performance to predict future gains, which is pretty much the #1 thing to avoid when investing.
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Aug 26, 2010 15:07
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Cheesemaster200 posted:I am getting very antsy with this upward drive on the indexes. I have 17% gain on my 401(k) overall and I am thinking of moving it into some money market/fixed income funds to keep it until the inevitable blows over some. Unless you have a market timing system that you feel you can rely on, it's really risky to put or take money out of the market just because it feels like the market is due for a correction.
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Oct 19, 2010 15:06
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Nysven posted:In other words, it's always a risky idea. Reliable will never happen with timing the market. I use a three pretty simple indicators for a portion of my retirement portfolio (the "risky" portion) that have worked for the past 40 years or so. Who knows maybe one day it will stop working but for several years now it's been outperforming my target retirement fund accounts.
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Oct 21, 2010 13:45
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Nifty posted:What indicators? Long term: As long as both the S&P 500 Index and the Merrill Lynch 100 Technology Index fluctuate above their respective trend lines, the market is bullish. If both indexes are below their trend lines, the market is bearish Intermediate term: S&P 500, NYSE Composite, Nasdaq Composite, S&P 600 Small Cap and the Merrill Lynch Tech Index. The market is considered to be advancing on an intermediate-term basis if at least three of these five indexes are advancing. And contrarily, the market is deemed to be declining if at least three of these five are declining. Short term: When the number of daily new lows on the NYSE is greater than 40 while the major indexes are rising to new peaks, internally, sellers are in control of most stocks, and the indexes are masking this weakness. However, if new lows expand to greater than 40 after the indexes are five days or longer off their peaks, the market is entering a correction. When new lows are less than 40 day after day, the buyers are firmly in control of most stocks. Several of these are lagging indicators, but that doesn't really hurt my investing style (based on finding growth stocks).
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Oct 22, 2010 15:06
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There's always the option of market timing too, so that you're not invested when the market goes down for 6 or 12 months. A lot of people feel it's impossible to beat the market in this sense, but the company I work for does it. I do have a part of my retirement savings in a target retirement fund to be "safe", but it's consistently underperformed my account based around market timing.
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Dec 6, 2010 14:54
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minato posted:My situation is that I have a significant amount of cash sitting in bank accounts, and it's been simple procrastination and ignorance that's kept me from sticking it somewhere it could actually be growing. Now that I've awakened, my inclination is to stick it all in an index fund since I don't feel confident enough yet to dive headfirst into researching and buying stocks by myself. Sounds like you analyzed this very well. Most people on this forum feel very strongly that putting all your retirement money into a low expense ratio index fund is the way to go. For the most part, I agree, and have the majority of my money in such an account. It's easy, and there's something that feels safe about it. The rest of my money though I do have invested in individual stocks, either through my company's profit sharing plan or in a Roth IRA. I use a stock advisory service, because I certainly don't have the time to thoroughly research stocks myself. For what it's worth, both accounts have outperformed the index funds for the past 10 years and 2 years, respectively. It wasn't very hard to outperform the market in the past ten years of course, considering the fact that (excluding dividends) the market lost all of its gains. But that's part of the point of trying to beat the market - you can (hopefully) do better during times like that.
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Jan 17, 2011 14:22
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