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To add to what Gimbal said, you can always call Vanguard. They are very helpful on the phone and can step you through the process. Also, they won't let your wife and your retirement money go under the same login I believe, so you should have to do everything twice. I'm not sure if that's true, but that's what one rep told me after I got married and tried to merge everything.
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Aug 7, 2008 16:25
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Can anyone offer any advice on specific stocks to add to my non-retirement portfolio, which I am building up with the plan of living off dividend income at some point in the next 4-10 years? I am currently holding:
The main things I'm missing, I think, are:
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Jul 21, 2010 20:01
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Leperflesh posted:Are you trying to be diversified? It seems like you're heavily into industrial, energy, and consumer products, but you're lacking anything in a wide swath of sectors (tech, financial, healthcare, services, utilities, etc.) I already own junk bonds. I additionally listed a total bond market fund on my buy list. I already own a utility stock (NEE). I also listed financial companies on my buy list. I am not particularly interested in healthcare, and the tech sector would be fine if there was a good looking company that wasn't overpriced and generated some amount of cashflow. CD's are not attractive in general, and especially now. They also would belong in a retirement account for tax efficiency, as would the large majority of any bonds I would ever hold.
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Jul 21, 2010 22:22
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flowinprose posted:Are CD's really less tax efficient than dividend stocks in the face of the current situation with qualified dividends disappearing (barring congressional action) at the end of this year? Possibly they go away, possibly they are renewed at 20% instead of 15%. Either way, CD rates are poo poo right now and for the foreseeable future, with no protection from inflation. flowinprose posted:Junk bonds are equally tax inefficient if you don't own those in a retirement account. Yes, that's what I just said. I'm glad we agree. flowinprose posted:I will try to save you some effort by pointing out that in this thread you're not likely to find much advice on picking individual stocks. That is because in the long term (which is what this thread is about), picking individual stocks will increase your risk astronomically with very little (if any) evidence that your return will increase accordingly. Picking individual stocks can be much cheaper and accomplish the same thing as buying a large cap US fund. For example, I could buy equal weights of the published top 25 holdings of the Vanguard Dividend Appreciation Index http://portfolios.morningstar.com/fund/holdings?t=VDAIX®ion=USA&culture=en-US for $200 and leave them alone for 10 years. This will save me between $30,000 and $60,000 over an example 10 year period with a $1-$2 million account in fund management fees with no particular expectation of a difference (good or bad) in gross performance. In addition to the savings in fees, I will have slightly more control of short and long term "pass through" capital gains timing by avoiding mutual funds. I am not trying to "beat the market", I am trying to buy quality stocks for the rest of my life without pissing away thousands of dollars in management fees to people who, quite frankly, are just as likely to have no clue what they are doing as any average person. As you can see, I am more than happy to pay a mutual fund management fee for things that are much more difficult to emulate, like an emerging market small cap fund. I do enjoy that you think the only way to own a diverse stock portfolio for "the long term" is through a mutual fund.
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Jul 22, 2010 02:11
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alreadybeen posted:Is giving up dollar cost averaging a big enough disadvantage to purposefully wait on contribution of an IRA? I figured the longer your money is in the account, the more time it has to grow so get as much in as soon as possible. Over a period of 50 years contributing will average out so lump sum yearly contributions would be OK. Thoughts? Since the stock market should go up more often than not in any given year, your ideal IRA contribution strategy over a long period of time should be to contribute the maximum amount allowed on the first day of the year. If stocks go up 8% a year on average, an even contribution amount would earn about 4% in the first year, and a lump sum on January 1st should earn 8%. All other years being equal except the first, if done every year it should make a nice average portfolio value difference of +4% or so of the total value of your IRA when you retire, assuming you contribute on Jan 1st every time. So if you manage to accumulate $1,000,000, now you would end up with about $1,040,000. In the end, it probably wouldn't really matter for you when compared to your overall portfolio though, since the 5k you put into your IRA on Jan 1st had to come from somewhere else that is now not invested.
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Oct 31, 2010 19:16
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Running 1000 simulations over 30 years with similar random weekly returns as you have (I was too lazy to match the numbers exactly). Random returns are the same for both strategies (i.e. there are the same 1000 random returns generated for each test). Test is run over 30 years. Average Jan 1st: $395,726 (min $67,326 max $2,672,298) Average Even: $386,253 (min $68,655 max $2,563,325) As you can see, on average the lump sum allocation is $9,473 higher, which is 2.4% of the Jan 1st average ending equity. You also notice that the worst-case outcome is lower in the lump sum allocation by $1,329, which is what you were referring to with the wider bell curve. I'm not really sure why you focused on that (instead of return) since it seems fairly obvious that this would happen, but I wanted to point it out in case you think we don't understand what you are saying. Droo fucked around with this message at 02:55 on Nov 1, 2010 |
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Nov 1, 2010 02:17
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flowinprose posted:Lets say you estimate that you will need at least $200,000 in retirement savings in order to retire 30 years from now Since the average return is shifted higher, the success rate (using $200k) also increases. Average Jan 1st: 370772.424 (min 94121 max 1845635) (85.7% success rate) Average Even: 361904.04 (min 94624 max 1759760) (85.2% success rate)
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Nov 1, 2010 21:00
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KennyG posted:It's not just the 10% penalty. It's 10% plus the general income tax burden. Lets say you happen to get 100,000 in there by the time you're 35. If you wanted to withdraw it (even if you could, more on that in a minute) you'd show 100k in income. Let's say, best case scenario, you quit your old job December 31 and then took the distribution Jan 1. As a single person income tax will hit you for 28% of ~90k or ~$25k and then $10k on top. That means you will keep about 65k of your 100k.
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Oct 6, 2011 18:17
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Using the Vanguard Total Bond Index and mixing it with the S&P 500 Total Return Index from August 1990 to Feb 2012 and rebalancing percentages monthly:code:
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Mar 4, 2012 01:51
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SlightlyMadman posted:All told, I'll now be contributing about 20% of my base pre-tax salary. Is that about right? 20% of salary contributed for 37 years to end up retiring at 50%? That seems about right if you only get less than 2% real return, assuming you have nothing saved right now. 2% is a very low number to assume for any 50+% equity portfolio. If you got a 4% real return on investments and assume a 4% safe withdrawal rate, then saving 20% a year pre-tax should give you about 65%. If you actually wait until 70 to retire, then I would say you could have more like a 5% withdrawal rate since you would already be so old and unlikely to live out the 30+ year "safe withdrawal" scenario. Historically, 4% real return is a low number to use for equities also. On top of that you will have some kind of social security income which would add another 20-40% of pre-retirement income.
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Jun 15, 2012 15:38
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1. The fees on that principal fund are probably too high. Roll it over to a Vanguard account. The account type will be "Rollover IRA" and will not incur any taxes. Vanguard will basically take care of this all for you and tell you exactly what you need to do if you call them. 2. Invest the vanguard money in whatever combination of the "total stock market" and "total bond index" makes you comfortable. 3. You don't have enough money saved. Double your 401k contribution rate. 4. Whenever you leave a job, roll over the 401k as soon as possible into your vanguard account. Financially you would be better off funding a separate Roth IRA account that you also open at Vanguard, but since this isn't a car I assume you won't think about it for more than 20 minutes a year and just increasing your 401k rate is simpler.
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Jul 31, 2012 15:33
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Someone tried to employ this strategy (or a similar one) on the Boglehead forum and he happened to start in 2007. You can go find the thread there and read through it still - he provided net worth updates during the crash. I think it eventually got so bad he was margin called out of everything and he was forced to realize a ~200k loss, and didn't get any of the upside he should have in 2009 because he didn't have the capital to stay invested.
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Aug 20, 2012 14:52
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sapmagic posted:It seems a bit crazy/risky to me to lock up that 50% of your money for that long. Your money isn't locked away in some inaccessible cavern of doom, it's just in a tax advantaged account. Most of them have goofy ways to get access to it without paying the 10% penalty - you can borrow from a 401k, you can take money from an IRA as long as you do it in a "substantially equal periodic payments" for at least 5 years, you can take the principal out of a Roth IRA. Even if you can't do one of those things you can still take it out and pay the penalty if you need it. How much of a tax difference you end up realizing in tax deferred money will be a very complicated thing to calculate, but in general you have the potential to save quite a bit by using as much tax deferred space as possible because you have complete control over when you have to pay the taxes, and you can (generally) choose to only withdraw money from taxable vehicles when your income is low enough to only pay 0-15% federal tax on the money.
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Nov 9, 2012 17:19
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* Get rid of the Bright Horizon fund. This is just overlap of all your other stuff. * I would get rid of the mid cap index and just use the S&P 500 along with the Russell to simplify * Get rid of the company stock as soon as possible * Add a total bond fund of some sort. What do you have available? So if I were you I would end up with: * S&P 500: 20% * Russell 2000: 20% * Intl Developed: 20% * MSCI Emerging Market: 20% * Bonds: 20% Make sure to re-balance the portfolio at least quarterly. Over your lifetime, reduce the 4 stock investments equally and increase the bond investment. Personally I would never go higher than 60% bonds though. 30 years old: 20/20/20/20/20 40 years old: 17/17/17/17/32 50 years old: 14/14/14/14/44 60 years old: 10/10/10/10/60
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Mar 19, 2013 14:17
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Pilsner posted:In order to diversify my otherwise rather "dull" portfolio, I bought some raw gold and silver the other day. Risky? Perhaps, but it's diversification and I'm in it for the long haul, 30-50 years maybe. Warren Buffett posted:Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it With that being said I own some random gold and silver too.. but I certainly have no expectation of it increasing in value (notice I didn't say "returning".. since gold doesn't return anything it just sits there) anywhere near what a stock investment would over multiple decades. Over the very long term I expect gold, silver, houses, gems, etc to basically keep pace with inflation and be volatile along the way.
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Mar 20, 2013 13:29
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Why don't you adjust to a lower-income lifestyle now so you can save more and retire earlier if you want?
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May 16, 2013 21:50
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flowinprose posted:
Using the laws as they stand today you can easily roll the 401k over to an IRA and then take "substantially equal periodic payments" of whatever amount you want for 5+ years in order to pull money out penalty free during early retirement, so your comparison that docks the 401k $6k in penalties is not really applicable to a planned early retirement situation.
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May 31, 2013 04:32
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You need at a minimum 25 times YEARLY expenses, and a lot of people would argue that that number is optimistically low. If you spend $4k a month, you need $48k*25 or $1.2 million. Remember to include taxes on the investment income when you consider this - they are much lower than earned income taxes and can be managed pretty well, but that makes your $1.2mm target even higher. Using those numbers invested in a balanced portfolio, then yes inflation adjustments are accounted for, so your spending will be able to increase a bit each year. You should invest no less than 50% (if you can stand the risk at this amount) in the total stocks and no more than 75%. Invest the rest in a total bond fund. Rebalance the two funds at least yearly and not more than quarterly. Do not try and time these investments or rebalances. If the money is in a tax haven (e.g. 401k or IRA), or in any mutual funds, go ahead and automatically reinvest the dividends. If the money is in a regular taxable brokerage account with ETFs, have the dividends and gains go into a cash account so that you can manually use them to add to positions. Technically, using ETFs this way will give you the most flexibility in the future to minimize your tax burden in retirement. The fact that you have no savings and are talking about saving 50+% of your income seems like quite a shift. If you post more details about your age and incomes and kid status and house status I can offer more specific advice.
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Jun 2, 2013 21:14
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Alright, at that income you are not paying a 25% federal tax rate. The 2013 cutoff for a couple is AGI of 73k, and you automatically get to deduct close to $20k in standard deductions and exemptions. For your investments then, I think your priorities are: 1. Health Savings Account if you have high deductible insurance and are eligible for one. 2. Roth IRA for both you and your wife 3. Employer 401k (or 403b or whatever) for both you and your wife up to employer match. If you have self-employment (tax form 1099) income, then look into a SEP IRA or a Solo 401k (I think a solo 401k lets you put more in until you have income over 100k or so). 4. If you were in the 25% tax bracket I think it would be a pretty easy no-brainer to fund your 401k up to the federal limit of $17,500 each. However, since you are in the 15% bracket I think you could easily decide to fund a taxable brokerage account as your next step instead. If you don't have a 401k, or if the investment choices in the 401k are relatively high-fee or have purchase feeds (called "loads") then I would probably fund a taxable brokerage account next. If you have an excellent 401k option I would max that out instead. If you live in a state with a high state tax percent, and you would be able to deduct the 401k contribution from the state tax, that would probably make the 401k the better choice. 5. The only thing left is a taxable brokerage account. I use Fidelity for a brokerage account but I really just buy Vanguard ETF's anyway. Fidelity has a very nice checking account setup that can pretty much replace a bank account, and Vanguard doesn't really do that well, which is why I like Fidelity better even though I end up paying ~$100 a year in trade fees. I think Schwab is similar to Fidelity but I haven't used them. You should create a target asset allocation. It can be as simple as 70%Stocks/30%Bonds, but it should probably be split up into a few more categories for tax efficiency. My personal asset allocation just as an example of a pretty simple but still more split up one: 15% High Grade Bonds 15% Junk Bonds 15% US Large Cap Stocks 15% US Small Cap Stocks 10% International Large Cap 15% International Small Cap (inludes emerging markets) 15% Real Estate Investment Trusts Foreign stocks should all go into a taxable brokerage account so you can take advantage of the foreign tax credit. There is some weird tax thing where you can't get a foreign tax credit unless the fund is entirely foreign, so I don't buy stock funds that are mixed foreign/domestic. Bonds and REITs should go into a tax sheltered account since the tax rates on dividends are higher (I put REITs in a roth and bonds in a 401k, since the REITs should grow more in theory over my lifetime than the bonds). The specific funds I use just in case anyone is curious: VBR - Vanguard US Small Cap ETF VEU - Vanguard International Large Cap ETF VSS - Vanguard International Small Cap ETF VYM - Vanguard US Large Cap (technically a dividend income fund) VBMFX - Vanguard total bond market (I think BND is the etf version of this) VWEHX - Vanguard high yield corporate index fund VGSIX - Vanguard REIT index (I think VNQI is the etf not sure though)
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Jun 2, 2013 22:26
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enraged_camel posted:Should those be prioritized over Roth/401k if goal is early retirement, then? As it stands right now you can take penalty free distributions from an IRA as long as you take about the same amount each year until you are eligible to retire, or 5 years, whichever is longer. E.G. from 50 to 65 you can take whatever amount you want as long as you do it for all 15 years without paying the extra penalty. I think you can get penalty free withdrawals from a 401k if you are still employed past 55, without even bothering with the periodic payments. So basically if you want to retire "early" at 50+, I wouldn't do anything different at all since you will be able to get your money. I would probably prioritize tax-deferred vehicles, since in general the government wants money NOW NOW NOW and they are more likely to leave options open to take early withdrawals from a taxable retirement account compared to a roth, since it lets them get money. If you want to retire before 50 you probably should do some more careful planning on where the money to fund those years will come from. Technically the same process would work, but it's hard to stash that much in a retirement account. With that being said - an average couple with good jobs with profit sharing/matching can save around 50k tax deferred. If you do that for 25 years and live a modest lifestyle you wouldn't really have a problem funding retirement.
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Jul 14, 2013 13:24
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No Wave posted:I'm in a weird position where I'm better off getting paid 80k as a consultant than I am getting paid 80k + healthcare working as an employee. Like, the tax benefits on getting to 401k most of my 80k are more lucrative to me than the 4k a year I pay for health insurance. Obviously this could change if I had more dependents. You can apparently put 32k away in a solo 401k at that income, which is $14500 more than as an employee. Your tax rate at that level is 25% (and possibly 15% on some of it), so you theoretically DEFER $3625 in tax which is much less than $4000, which is not a deferred thing in the first place. You also pay an "extra" $5604 in self employment tax like the poster above me stated. You also give up any employer matching on the 80k that would be available (estimate: $0-$2400). You also don't get unemployment if you are let go. So.... Benefits: $3625 in federal income taxes deferred, to be paid later Costs: $5604 in self employment tax $0-$2400+ in lost 401k employer contributions $0-$4000 in unpaid health care costs No unemployment benefits I am curious if we are all missing something because this doesn't even really seem like a close call if you actually have the option.
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Aug 9, 2013 21:52
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This entire conversation about volatility is irrelevant because no one on earth builds a portfolio with the singular goal of minimizing standard deviation - the natural outcome of that would be a 100% cash portfolio at all times. As someone said earlier, mathematical standard deviation is not what any rational investor should consider to be the one and only "risk". It completely ignores the risks of not meeting your retirement goals, currency valuations over time, inflation eating away your real purchasing power, etc. Even if you decide to try and minimize standard deviation while making a projected 8% a year, you will still end up with wonky portfolios because unless you know the future returns of the universe of assets you are picking from, all you have to use in your formula are past returns, which obviously A. don't predict future returns and B. will still end up with you owning like 80% emerging markets and 20% US treasuries or something goofy.
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Sep 10, 2013 16:19
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I can imagine it having a big impact to not track individual cost basis for your shares. You could probably make it a lot simpler by not automatically reinvesting dividends or capital gains in your taxable accounts - that would cut down on the mess a lot. Personally I use ETFs in a taxable account, don't reinvest automatically and only buy shares in round numbers. Then when I go to sell, it asks if I want to choose specific shares and I always say yes to manage the capital gains that are realized. If you don't do something like that to keep it relatively simple, I imagine it could turn into a giant mess over a lifetime.
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Mar 7, 2014 19:43
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Yeah that's what they do. It's kind of annoying but not really a big deal I guess. You can have them cancel all the options on the account (checks, transfers, etc) if you're worried about something goofy happening to it over the next year or two.
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Jul 10, 2014 18:38
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Hog Obituary posted:Ok, so just read Four Pillars? What people are trying to say is that life is full of bullshit you don't want to do, and in this particular instance it would probably cost you hundres of times more over your lifetime than a lot of the other poo poo you don't want to do either. So yeah, suck it up and spend 10 hours of your life researching some basic stuff, and end up with a Vanguard account and a total portfolio allocation you are happy with, and then spend 2 hours a year rebalancing everything. Your rate for the time you spend will be at least $1000/hour over your life.
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Jul 22, 2014 17:17
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So pick a price that you are willing to invest at. For example, you'll buy the S&P at 1700. Outcome 1, maybe 80-90% likely, is that you'll get it Outcome 2, maybe 10-20% likely, is that the S&P will never in your life get that low again. Then what, do you never buy a stock in your entire life? Edit: Outcome 3, two years from now the bull market is still raging and you can't take waiting anymore. You buy the S&P much higher than it is today.
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Aug 4, 2014 17:26
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Rurutia posted:Do we do portfolio analysis for tax efficiency etc here? I half thought about throwing it up on Bogle but I don't post there much. My order of preference for tax efficiency: Taxable Accounts: 1. International stocks and Tax Exempt Bonds 2. Domestic Stocks 3. High Quality Bonds 4. Junk Bonds Traditional IRAs and 401k/403b/whatever: 1. High Quality Bonds 2. Junk Bonds 3. REITs 4. Domestic Stocks 5. International Stocks Roth Accounts: 1. REITs 2. Junk Bonds 3. High Quality Bonds 4. Domestic Stocks 5. International Stocks
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Aug 6, 2014 17:33
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No, you can just open one and transfer money in yourself. Be a little careful because the contribution limits are kind of stupid - it end up being somewhere around 18% of contract income as a limit even though they make it look like 25%. There are calculators online.
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Aug 6, 2014 20:02
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Leperflesh posted:SlightlyMadman are you sure your inheritance is taxable, for you? Normally there's like a $5M exemption before inheritances become taxable. I'll try to answer this like as much of a dick as possible so I fit in with the guy above me. It's my understanding that, if you inherit money from a retirement account/pension, it might be taxable to you and it might be taxable to the estate. If the beneficiaries were set up correctly, and you are listed as a beneficiary, it is taxable to you and you have a few options (outlined by the IRS) of exactly how you can pay the tax on it (immediately, evenly over 5 years, evenly over your life i think). If the person who died didn't list you as a beneficiary FOR THAT SPECIFIC ACCOUNT (retirement account beneficiary designations trump wills) and somehow you are inheriting the money anyway, then most likely they screwed up and the estate will have to liquidate the account and pay the tax immediately. I'm not 100% positive, but that's my understanding. If you have a big retirement account I suggest you check the beneficiaries, and make sure the person inheriting it is smart enough to make a smart tax decision.
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Aug 23, 2014 19:52
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I just read your initial question for the first time, and it appears you don't understand the tax ramifications of inheriting money as it affects your roth IRA contribution this year. I am not sure why you are throwing a temper tantrum and trying to separate out the two issues. Maybe you should call up Robert Boggle and ask him since you apparently don't want anyone's help here.
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Aug 23, 2014 20:15
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trigonsareNOThomo posted:I received about 88,000 dollars from a step-relative who I had no idea would will me this money. My question to you guys is how I should proceed. I have a pretty low paying job all things considered, but I want to start putting this money into a retirement account. I guess my basic questions are how I should get started. Should I open up a lazy portfolio and Roth IRA? If so, who is currently the best to go with, Vanguard, Fidelity, Schwab? I think I only have a Schwab in my town out of these options, but these accounts can be opened through the internet, correct? Any advice is appreciated. You want to maximize a contribution to a roth IRA. You also want to maximize a contribution to a roth 401k if you have that option through your work. If you can do a roth 401k, change your withholding to the highest amount you possibly can and use the 88k to supplement your paycheck. If I were you I would also open a non-retirement brokerage account and a "MySmart Cash Account" (or whatever they call it now) with Fidelity, and get rid of your regular bank entirely. You can direct deposit to the fidelity account, get checks, use any ATM for free (they refund the ATM fee also) and transfer money between the brokerage and the cash account freely. With the brokerage account, you have access to all mutual funds and stocks so that when you are ready to invest it is all set up for you already. If you regularly use a credit card, I would also apply for the Fidelity American Express Investment Rewards 2% cash back card and have the cash back automatically set to go into either your brokerage or cash account, depending on your preference. The only reason to NOT get rid of your current bank account is if you ever need to deposit cash, or if you need to get more than $500 in cash out at one time ever. So to summarize what I would do in your shoes: * Call fidelity, tell them you want 3 accounts opened: RothIRA, Brokerage, and MySmart cash account * Put the annual limit ($5500?) into the Roth IRA (leave it in a money market fund for now) * Put enough money into the MySmart cash account to open it, I forget what the minimum is * Transfer the rest to the brokerage account, leave in money market for now * Once you get checks/debit cards from the MySmart account, change your direct deposit from your job to that account * Close your crappy bank account and never look back * Apply for Fidelity credit card if you want a good rewards card * Read books in the OP and then post your investment plan before you actually do anything
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Aug 29, 2014 23:33
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Knyteguy posted:I have a couple quick questions that I've been wondering about for awhile: There are basically 3 ways you will pay taxes on a non-tax-advantaged investment account that holds mutual funds. 1. Dividends. These are distributed to you automatically by the fund, but they are basically out of the funds control and really are distributed by the individual stocks in the fund. You can't control when you get these. You will pay 15% for most dividends you receive, and for some (foreign companies or very shortly held companies) you will pay your marginal tax rate. 2. Pass through capital gains. This is completely out of your control, and is caused when the fund is forced to realize capital gains based on rebalancing they do periodically. It's usually a relatively small amount of money, and should be very insignificant in a passive index fund. Some of these will be short term gains and some will be long term gains, and you pay the rate for whatever they are. 3. When YOU sell your shares, you will realize capital gains. This is fully in your control and you will ideally defer as long as possible on paying any taxes. If you have held for more than a year, you will pay long term gains rates (generally 15%). If it's less than a year, you will pay your nominal tax rate. If you have a loss, you can deduct it against your income (up to a limit each year). Search for "tax loss harvesting" to learn more. If you own mutual funds in an IRA/401k, you can set the dividends and capital gains to automatically reinvest without worrying about it, since your exact basis and timing don't matter, because you never have to pay any of the above taxes. In a taxable account, I would absolutely never allow dividends or capital gains to be automatically reinvested. It screws up your cost basis, average holding times, etc, and generally makes a mess of the tax accounting when you eventually have to sell. Usually dividends are not adjusted based on the share price of the company. The company generally plans a dividend payment far in advance and share price is irrelevant to their budget.
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Sep 2, 2014 20:03
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slap me silly posted:Don't really know what you're looking for, I guess. Droo had a couple good suggestions for getting the money into retirement accounts, now maybe you're not sure you actually want to do that? Provider is a matter of preference but Vanguard is a good default choice. Thanks for confirming that at least one person on this forum can see my posts
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Sep 5, 2014 20:35
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DrSunshine posted:Well, what I'd really like is to minimize, as much as possible, the part of my life that I spend actually working, so I can spend most of my prime years doing the creative things that I like to do most -- drawing, writing, and learning. In short, I'd like to save and invest very aggressively so that I can retire early. I'm a bit at a loss as to where to put my money so I can do that, since the retirement accounts are for people intending to retire in their 50s and 60s, and there's all those penalties for taking them out early. If you retire at 40 you will still need money from 60+, and in my opinion if you save enough money to actually retire at 40 you will have a lot of investments that you can't cram into a tax-advantaged account. You can also take out a series of equal payments (basically about 4% a year) from an IRA without paying a penalty, so even if you have low expenses, and end up with $1m in your 401k by age 40, you can quit your job, roll the 401k to an IRA and then take about 40 grand a year from it penalty-free.
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Sep 15, 2014 02:10
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Ropes4u posted:The 1.5% i give up going to only the index fund is another month of retirement. A fee difference of 1.5%, given the same performance, using actual S&P 500 returns, investing $15,000 annually from 1981 through 2010: 0% expense ratio ending balance: $2.022 million 1.5% expense ratio ending balance: $1.498 million Quite the lavish lifestyle you are going to have in retirement if $524,000 is one month.
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Sep 17, 2014 04:06
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If you retire at 40, your life expectancy is still like 80 so half your life would be in the penalty free withdrawal part... plus you talked about having kids, and presumably a wife, so even if you walk in front of a bus at 60 what about them? Am I missing something? Why would you not be willing to leave any money in a 401k?
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Sep 18, 2014 22:41
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Bellagio Sampler posted:I'm considering weighting heavily on stocks (75/25) up to and through retirement, but I suppose I might find myself to be less aggressive when I'm older. My risk tolerance goes down as the money I lose in a crappy stock market becomes harder to replace. In a 20% correction, it's easy for a 29 year old to not worry about losing $18,000 of their 100k, 90% stock portfolio because it is relatively easy to replace. It's much harder to a 53 year old to watch $360,000 of a $2 million portfolio poof away in a crappy month.
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Nov 5, 2014 22:31
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etalian posted:With the fine note some states don't allow HSA pre-tax evasion like the people's republic of california. They need your HSA tax money to fund the full-time committee in charge of deciding how many people are allowed to use, and the completely random fine, for every individual 100 feet of carpool lane throughout the state. And to put up more road signs. MORE SIGNS.
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Dec 3, 2014 01:24
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Omne posted:Does anyone here do dividend investing? I'm not talking necessarily about DRIPs, but is there a fund that invests solely in dividend-paying companies and allows you to reinvest the dividends, or take the distribution? As far as I know, a DRIP automatically re-invests the dividends. I'm trying to see the feasibility of living on dividend income in retirement (in addition to 401k and Roth IRA, of course) Dividends are an incredibly common thing, and almost any mutual fund or ETF you own already pays them I'm sure. Some funds like the one linked above only invest in dividend paying companies, but broad-market funds and indexes still pay dividends. Dividends aren't really relevant on their own for any particular reason but tax planning. I think most experts would agree that no one can accurately predict the total return of a stock based on whether it has a dividend or not, so it really is just a tax thing. In general, dividends in retirement accounts are automatically re-invested by default and dividends in standard accounts are not. This is because your cost basis for each stock in a standard account matters for tax purposes, and it doesn't matter in a retirement account. In retirement, you would want to first live off of any dividends you receive in a taxable account. This is because you have to pay tax on them whether you spend them or not, so you may as well spend them first before you touch other money. Saying that you "want to live off of dividend income in retirement in addition to 401k" is a weird statement, and I am not sure you understand stocks and dividends.
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Dec 17, 2014 22:47
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Eyes Only posted:It will all come down to current marginal rate vs effective tax rate in retirement. People keep saying this but it's not really a practical way to think about it. Income goes into your IRA at your marginal tax rate, and it comes out at your marginal tax rate. Withdrawals from retirement accounts aren't magically treated any differently than other income. Most people near or at retirement age will have some combination of: Pension Social Security Part Time Job Income Royalty or Patent Income Dividend/Capital Gain Distributions from Taxable Account Spouse with a Job/Pension/Etc Rental Property Income If you are retired and have some combination of the above stuff, presumably you would live off of all that stuff first. If you still needed more money or had RMDs, then you add the taxable IRA withdrawals on top of all that stuff you would have anyway. I don't get to just fill up the 0% tax bracket with my IRA distributions because that doesn't make any sense.
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Dec 18, 2014 17:45
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