Long Term Investing & Retirement: The second best time is now

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TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Was looking at the reading list in the OP and noticed that several links keep pointing to Random Walk. Was really surprised to see All About Asset Allocation. I used to work for the author at his investment company as a Portfolio Manager. That guy is ALL about proper long term investing and can be highly trusted. Everything he does/says is in the investors real interests and has absolutely ZERO snake oil to sell.

Gonna start skimming this thread since so many people are asking me for my suggestions and well, i'm a trader not an investor!

# ¿ Oct 20, 2008 13:36

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# ¿ Apr 29, 2024 09:45

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

The Noble Nobbler posted:

Can you fix these links to not be the random walk book

Bonus fact: You can find my name in the acknowledgments of the All about asset allocation book

# ¿ Dec 18, 2008 18:18

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Greetings BFF goons! It's been quite some time since I've poked my head in here. I'm looking to get a pulse on the best high-yield savings accounts these days. I am amassing a 'GET THE gently caress OUT OF MY CITY THAT JUST OPENED A GOLDEN CORRAL' fund and am thinking I need a 2-3 year time horizon. I'm furiously putting cash away into this fund but wish to earn more than .4%. I'm hesitant to drop on some CDs as I like liquidity in times of need. Are there any solid G-bond funds I could consider as well?

Appreciate the insight, please let me know if you need more information.

# ¿ Mar 29, 2010 16:10

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Leperflesh posted:

Huh. This discussion of life insurance now has me wondering if I'm doing the best thing for my own situation.

I'm married, no kids. My wife is an artist and she makes comparatively small income: 80% of our income comes from my salary. A year and a half ago we bought a house, which we both signed on the title. I pay our mortgage and most of our living costs. We have debts; most of it is her student loans, which she pays from her own earnings, but she's really only able to do that because I cover most of our living expenses (groceries, utilities, mortgage, insurance, etc.) My job provides our health insurance as well.

Right now I have a life insurance policy offered by my employer. I have set it at the highest amount available, which is (if I remember correctly) six times my gross annual salary. It "looks back" at the previous calendar year to determine what that is, so when I get a raise, it takes a while to fully affect the payout value.

Right now I am paying $10.76 per paycheck (24 checks per year), so that's $258.24 a year. This policy is obviously only available to me as long as I am employed by this employer, so I guess that means it's a term life, but the alternative (buying my own permanant life policy and dropping this one) seems likely to me to be much more expensive?

Of course I also have a 401(k), cash savings, and some other assets. My intention with the life insurance policy is to be sure that, if I die, my wife can pay off all of her debts, all of my debts, buy out our house outright, and have money left over to carry her for a year or two while she undertakes the effort and expense of changing careers into something that would support her at a similar quality of life. At six times my salary, I think that just about covers it, so I'm comfortable with that amount of coverage.

Am I doing this stupidly? My assumption is that if I lose my job or change employers and I can't get a similar deal through my next employer, I'd buy a permanant life policy with a similar payout from elsewhere. But now I'm thinking maybe I'm doing this wrong... although again, $22 a month really doesn't seem like much money to me.

e. Oh I guess this is important: I'm 36, non-smoker, in reasonable but not excellent health, but for various reasons, very little of my genetic medical history is available. I consider myself to be at a modest risk of suddenly dying, but not as low as an average healthy 36-year-old.

More edit: Ok doing some research: My employer requires a minimum level of coverage for both life and AD&D, but provides credits for the cost of both up to the 2x salary level. Everything is through Metlife. So the number I quoted above is subsidized, sort of; I have flex credits applicable to several things including dental, health, vision, life & AD&D, etc., but I'm already well above that level just for the health insurance, so in practical terms, the full cost of the insurance is out of my pocket. The minimum flat coverage is $10k/$50k for AD&D/Life, which would presumably be very cheap (like what, $4 a paycheck or something?).

AD&D is pre-tax, and only applies to me. Life has pre-tax or after-tax, but I went with after-tax because if you do pre-tax, then the payout is taxable.

I also have a small after-tax supplemental life policy on my wife. It's tiny, just enough to pay for funeral expenses and the like, but it's also really cheap: less than $3 a month.

That's all from the summary. I'm gonna read the full plan documents now and see if there's more relevant details.

The reason I dislike group insurance policies like this is that if for some reason you need to leave your company (new/better job, you or your wife is sick and needs to move closer to specialized facility, etc) you will need to be insurable to get a comparable policy. If you develop cancer or something else terrible, you are now chained to your company, assuming your job is secure, and are unable to do what you need to do for your family. I dislike that notion, and for a small premium, I prefer to insure myself on other terms.

# ¿ Jul 29, 2011 22:49

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

80k posted:

Life insurance is not bad. If you need it, term life insurance can be bought online. Do this when you have a reason to buy it and don't confuse it with retirement savings or investing. When you have dependents, go to term4sale.com for unbiased quotes.

Any self-respecting financial advisor would advise that the need for life insurance depends on your life situation. The idea that EVERYONE should buy life insurance before investing in the capital markets can only come from someone who is making a big commission off of selling life insurance. Or the concept of mixing investing and insurance, as is the case when sold some kind of permanent life insurance (whole life or universal). Fees and hidden costs are of course the reason why they are bad. This guy is trying to sell you a high cost product that you do not need and that will earn him a fat commission. what else do you need to know?

Buy term and invest the rest. Best advice you can have in regards to life insurance. Insurance is NOT an investment, it's I-N-S-U-R-A-N-C-E against catastrophic events.

(not replying to you to tell YOU this 80k, but to reiterate)

My example: I have a policy on me, 30 year term, that in the event of my death (i'm currently 30 years old, 1 child, twins on the way) all of our debt, mortgages and all, will be paid for and enough money will be provided for my wife to live comfortably for a few years until she finds a new sugar daddy. Now that I have twins on the way, I am seeking a policy to put on my wife so that in the event of her death, I can afford to pay someone to take care of my many children at least half as well as she does now. I'm thinking 10 year term, as after that time period the value of her ONLY IN REGARDS TO RAISING OUR SMALL CHILDREN will have dropped to virtually zero.

That is what insurance is for, not investing... low-cost index funds in an appropriate asset allocation, regularly rebalanced will get you to the finish line financially, provided you live beneath your means.

rawrr posted:

gently caress, I'm seriously wondering if I should raise the issue with his manager or something. The entire thing doesn't sit right with me. The guy is an "associate advisor" at the wealth management division of a big Canadian bank that supposedly only deals with high net worth clients. Looked into the job description and apparently an associate advisor is a "sales-oriented", entry level position that requires minimal qualifications. I feel as if selling expensive financial products as investment advice to middle class families is their strategy, bolstered by their supposed reputation of dealing with high net worth clients only ("so he must give sound advice, and he's doing me a favor by bending down and talking to me").

The guy literally showed me a chart that showed 9% annual returns, told me 90% of it was based on long term government bonds, so it's "safe". He refused to provide me with further reading, and it's not until I did some digging and found a sample contract that the plan actually guarantees the higher of:
- 2.25%
- 90% earnings from bonds -1.5% fee

You have now been introduced and indoctrinated into the mystique that is financial sales. The best dressed used car salesmen around.

Consider yourself lucky you found out at 24, instead of paying ridiculously high fees for UNDERPERFORMANCE for twenty years! Fun fact, 85% of advisors fail to meet their respective benchmarks on a 5-year horizon, that number jumps into the 90s the further out you go. (my numbers could be slightly off, but they're in the neighborhood)

# ¿ Jul 29, 2011 22:50

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

ashgromnies posted:

I'm not really sure how this works...

My current employer has a 401k that I've been contributing 10% of my income to for the past 4 years, so I have a sizable chunk of change in it right now.

I just received an offer at another company that I'm planning on accepting, however they don't offer a 401k.

What do I do with my current 401k? I can't keep contributing to it, can I? Can I transfer the money out into some other investment structure that I can continue pumping money into?

Assuming you are 100% vested, you will take it with you and likely roll it over into an IRA at another custodian. Otherwise, you'll take your vested portion. It's your money. There is little benefit to keep the 401k after your company stops contributing to it. You will have limited fund choices and potentially other fees and restrictions.

# ¿ Jul 29, 2011 22:51

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

ashgromnies posted:

I am 100% vested at this point.

How would I roll it into an IRA and how do I pick an IRA custodian? Is there a thread with resources on that?

It will be very clear to you once you leave. The 401k administrator will send you information. It's very stress free and you should be focusing your energy on your new job at this point. You're good to go holmes.

I prefer Schwab, or some other low-cost brokerages. I'll let some of the others pitch in their recommendations.

edit: Just caught the part about the new job not having a 401k. If you plan on contributing a significant amount over the IRA contribution limit ($5,000), you may want to keep the 401k. I BELIEVE you can continue to contribute to it with the maximums there (which is significantly higher, like 20% or 15k of income).

TraderStav fucked around with this message at 23:16 on Jul 29, 2011

# ¿ Jul 29, 2011 23:13

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

KennyG posted:

You're in it.

Not to disparage what TraderStav said but the conventional wisdom here is Vanguard. It's a bit of a different company in that it's entirely geared toward long term, index/value/low cost investing. It is not a great place to get your Wall Street on , It's not for Jim Cramer but if you like your investments boring and productive it's the place to be.

Not disparaging me in the least bit. Vanguard is absolutely one of the best options. I invest in lots of Vanguard funds in my Schwab account.

Only have the Schwab so I can add in other ETFs that fit my AA that Vanguard doesn't have a product for.

# ¿ Jul 30, 2011 04:45

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

syphon posted:

Bleh, I opened a Roth about a month ago. I know its a long term investment and I shouldn't be checking it every day, but that poo poo's gone down almost 10% since I opened it. I think I picked the worlds worst ETF's to invest in.

Markets have been sliding since then, as a long-term investment, you shouldn't be overly concerned with the returns in a single month. Every one of my equity ETFs are taking it in the pooper right now, but I'm looking to rebalance out of bonds into more equities.

# ¿ Aug 4, 2011 13:02

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

bam thwok posted:

Unless the expenses of the funds available in the 401k are greater than the 6% match he's getting by contributing to them, I don't think that's very good advice.

I would imagine he's discussing what to do with the funds over the match amount.

# ¿ Aug 4, 2011 15:46

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

ynotony posted:

My employer does not match, so I guess I'm on my own.

I'd rather not go into too much detail but yes, I have about 2 years in an "emergency fund" which really does not need to grow anymore. Given my personal goals, 2 years is what I've decided is comfortable for me (may want to take that time off from a paycheck to pursue some things, for instance).

Given my take home and my budget, $3k is a very safe estimation for the amount of "I really don't need to touch for anything" money. Not even for the occasional one-time expenses like gifts, travel, moving/furnishing, car repairs, etc. In my head, that $3k/mo could potentially be used on a new car in a few years ($15k) if I wanted one. A downpayment for a house if I wanted one. Or some mystery thing I don't even know about. And that is the trouble. I don't know what I will want/need in a few years, which is why my savings number is a moving target.

As you are in a very positive financial situation, I highly recommend you read The Millionaire Next Door and further extend it. You are in a prime position for financial greatness, which equates to a great lifestyle of your choosing.

# ¿ Aug 4, 2011 21:36

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Eggplant Wizard posted:

In the next month or so, I'll be getting a little over $11,000 shortly from a savings account held for me till I turned 25.

Accounts currently:

$2600 in BoA Checking (I like to keep a buffer)

$500 in BoA Savings for immediate emergencies, gets like $25/month automatically.

$3500 in ING Savings, my sad little emergency fund. I put c. $200/month in this September-June (I don't get paid July/August).

$9000 in Vanguard Brokerage account, of which $7000 in VTI and $1000 each in VCIT & VGIT.

$7500 in Vanguard Roth IRA 2050 Target Retirement Fund (VFIFX).

I pay off my credit cards every month and my only debt is $17,500 student loans, deferred for another 2-3 years while I'm in school.

So my question is. Of $11k, I'm going to put $2500 in the Roth. I'll probably put another $2000 in the ING Savings just to bulk it back up. What about the other $6500? I'm open to dumping more of it into the ING Savings. If I want to put more in my brokerage account, what would be good funds? Right now I notice I only have US funds and I think it might be good to get some international exposure? I'm pretty hands-off and so I prefer to go with ETFs and mutual funds rather than individual stocks. Any thoughts?

I'm of the position that your best position right now would be to get as debt-free as possible. You already have habits that are in that direction, but have $17.5k in student loans that will take some time to pay off and take a good chunk out of your cash flow later. I'd suggest dropping as much as possible on the student loan, so that you can make that debt go away before you leave college and start acquiring more debt. The best situation would be that you leave college and start paying for things in cash (car, house, etc), but that's unlikely so you want to bring your monthly fixed cost down to a bare minimum.

Also, focus less on the location of your investments, but more on the size of them. At this age and account size, your performance is the smallest factor in the growth of the portfolio.

# ¿ Aug 5, 2011 16:39

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Eggplant Wizard posted:

Oh, I should have said. I'm in grad school, not college. I live on my own & pay rent and all those good things. As a TA I make about $25k a year. If I start repaying my loan now, I'll have to keep doing it, and while I have the cash, I'm not sure it'd be that good of an idea to spend my entire cushion. I'm planning on dumping a bunch of cash into the loan as soon as I graduate though. That is sortakinda what the brokerage account is destined for ultimately.

I do not have a car because I don't have the extra every month to make me feel comfortable paying insurance instead of savings. I don't really need one at the moment and walking/biking keeps me skinny!

In that case, don't do anything with it. Put it aside for a year or two (2% or 6% on that amount of money is quite insignificant) until your immediate term outlook is more stabilized. Then, if you don't NEED it then, pay down the debt. In any event, you will have it there if you need it in the short-term, and you'll have it later if you don't!

# ¿ Aug 5, 2011 18:53

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Niwrad posted:

One suggestion, max out the Roth. Your contributions (not earnings) to the Roth IRA can be taken out at anytime penalty free. So if an emergency does strike, you have easy access to the cash. Since the Roth is an annual "use it or lose it" deal, you'd be missing out on a $2500 contribution this year. Also, the earlier you build that up, the more tax free earnings you'll make over the next 40 years.

ING is sort of a waste with an interest rate of 1%. And anything you plan to do in the brokerage account can likely be done in the Roth.

The only downside I see is if you planned to make a large purchase in the near future and needed to use returns on your investment right away. But if it's just paying off school loans when you get out, don't bother unless the interest rates are high. You'll likely earn more in your Roth than you would paying interest on your school loan. So make a few tax free percentage points off their money. You may even be able to deduct your student loan interest.

And if something does come up where you need a large cash quickly, you can just pull the principle out of your Roth with no harm at all.

Totally forgot about the Roth this way. Do this! But don't daytrade or by risky stuff. You're goal is to not miss contribution years, not performance.

# ¿ Aug 6, 2011 14:17

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

KennyG posted:

Most retail investors do a great job of buying high and selling low for just this reason. Why? They see headlines that say "Stock market hot!" & "Up 75% in 2 years!" so they think, "Buy! Buy! Buy!" But what's coming around the bend is a downward correction. The market dips, depending on the situation, somewhere between 10 (what's happened so far) and ~40% (what happened in 2008). These people ride this roller coaster to the bottom, and sell. They have now cashed out the bottom, will miss the ride to the top and bitch and moan about how the stock market lost them a bunch of money. Just be patient, invest for the LONG TERM, and don't check your portfolio daily if you are the type that can make those knee jerk reactions.

My father-in-law liquidated his retirement portfolio in the middle of March 2009. :ughh:

No inheritance coming our way.

TraderStav fucked around with this message at 17:36 on Aug 7, 2011

# ¿ Aug 7, 2011 17:30

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Radd McCool posted:

Jesus christ, that's when I started my investopedia paper trading account. It's up 90%.

Did he explain why? One man in my family did the same thing, except two months earlier, and also citing concern that Obama might find a way to take it all on top of 'I got tired of seeing my retirement disappear.'

Yup, he couldn't take it anymore. He refused to hire a professional, even his son-in-law who is in the business. Look up stubborn rear end in the dictionary....

# ¿ Aug 8, 2011 00:52

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

I have a very unique question that may require someone who works for a custodian to answer. I have a client who is a conservator for her grandmother who has dementia. This woman has $615,000 in assets and the court is requiring that she (the conservator on behalf of the grandmother) either put up a $2k/yr surety bond, or deposit the money in a bank/investment account. The latter definitely is the preferred choice, but the court is requiring that the custodian sign a letter (that the court will provide) stating that they will not release any of the assets in the account without a court order. I've already touched base with Schwab, and after escalation they said that is not something that they do.

Does anyone have any experience with this sort of thing? Is there a name for this type of account (aside from the ambiguous Restricted Account)? Just looking for some direction.

Thanks!

# ¿ Aug 25, 2011 18:25

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Secret Sweater posted:

Where is the money held currently? What type of account is it in? What exactly are the circumstances surrounding the case? No custodian is going to hold funds from someone because they have dementia. Why are they in court currently?

Having a court order dictating when funds can move is fairly normal (see QDROs/divorce decrees) but I wouldn't really be able to say without knowing why they're in court and where the funds are currently held

The funds are currently held at a treasury bond custodian that the grandmother set up years before becoming incapacitated. Custodians routinely hold funds for the benefit of those who have guardians or conservators, this is not unusual. What is, is the requirement for this specific document that the court is requiring. I've got in touch with Scottrade and TradePMR, it is seeming like they will honor the courts request so my question may be moot, but I appreciate you taking the time to address my question.

They are in probate court, it's simply a situation where someone is stepping in to care for someone who cannot care for them self.

# ¿ Aug 26, 2011 13:06

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Dr. Gaius Baltar posted:

There's this nifty-looking site I found called Index Funds Advisors, and they have a portfolio called Index Portfolio 80, which, although appearing at first to be similar to the Vanguard Retirement Date 2050 fund (it is about 60% US Stocks, 30% Intl Stocks, 10% Bonds), it has actually significantly outperformed the Vanguard 2050 fund.

Most of the assets in that Index Portfolio 80 have cheap Vanguard index fund ETF cousins. Would it be folly to attempt to piece together a Vanguard ETF replica of that portfolio?

Absolutely not, you can customize your allocation and rebalance periodically to obtain that premium instead of waiting for the fund to do it. Managing a portfolio of index funds is not a difficult task in the least bit.

# ¿ Aug 26, 2011 13:12

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Thanks for the feedback. We plan to invest the account, so a credit union wouldn't work. But I feel good that I can find a custodian for this and having the right terminology helps.

# ¿ Aug 26, 2011 17:52

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

80k posted:

Book recommendation time... for somewhat more advanced reading, Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen is a phenomenal book. I'm not quite finished with it (it is long) but it could be the best book on investing I have read. In fact, I can't think of a more important book. Far too many people make rash assumptions on risk and expected performance, without being familiar with the academic literature.

Most of the recommended books on this forum for longterm investing are fairly dogmatic in the belief of efficient markets and low cost investing. This book gives a far more complete and balanced overview of the investment world, covers far more asset classes and strategies, is less US-biased, and is very up-to-date with the latest academic literature. It is also heavy reading (but no heavier than it needs to be) but well worth the effort.

Yay! Kindle version

Boo! $42...

Is it one of the books that has lots of diagrams and exhibits so a hard cover may be better?

# ¿ Aug 26, 2011 19:22

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Unless you have more than $75k, your savings rate has a larger impact on your portfolio value than asset selection. After that point, compound returns take over and you should be much more concerned with what your allocation is. I recommend making a 75/25 portfolio and focus on creating a nice stream of savings into your account. That is where you will get your most value.

# ¿ Sep 22, 2011 14:00

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

gvibes posted:

I am sure the Japanese were saying the same things twenty years ago.

His point is not that it couldn't happen, but that it's foolish to think that you can predict it one way or another. The more prudent path to take is to pick an appropriate allocation, rebalance at least annually, and stay the course. Overall, the economy has been flat, but sectors have seen growth that you would be able to capitalize on through rebalancing.

# ¿ Sep 22, 2011 14:45

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

gvibes posted:

I didn't take that as his point, but agree with you on the prudent path.

You're right, my fundamental reading skills were off this morning. I disagree with him also!

# ¿ Sep 22, 2011 16:34

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

downout posted:

I would think that depends on how much liquidity you need over a period of time. But perhaps others have a more detailed explanation or understanding.

6 months of cash in the bank, rest into your investment portfolio is a good start. Provided you don't have any other liquidity needs. Shouldn't your financial advisor be suggesting something? Is he compensated by commission or fees only?

# ¿ Sep 23, 2011 20:28

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

silvergoose posted:

1.5%? Maybe?

Ten year bond is below 1.70%, we're all doomed.

# ¿ Sep 24, 2011 01:29

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

T-1000 posted:

Haha, fair point.
I'd say so. I can vouch for The Four Pillars Of Investing and A Random Walk Down Wall St. Amazing books.

Having worked for, and being a friend of Rick Ferri, I highly recommend all of his books. He absolutely knows his stuff and always has the investor in mind when he writes.

# ¿ Sep 24, 2011 14:44

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

KennyG posted:

It may not belong here but if they do lock you in to universities inside a given state, Iowa is a much better choice.

Wait wait wait... I live in Michigan and chose the Nevada plan for my son. This means that my son will have to go to a certain set of schools? I suppose I thought these were less restrictive, please add some clarity for me!

Thanks!

# ¿ Oct 19, 2011 21:12

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

flowinprose posted:

As far as I know, unless it's some type of pre-paid tuition plan, it is not locked into any particular set of schools.

The only advantage to investing in a particular state is typically if your own state provides some type of tax advantage for enrolling in their plan. For example, in Arkansas, any amount I contribute to Arkansas' 529 plans can be deducted from my state income tax. Also, Arkansas residents are exempted from the ~$20/year service fee.

You can live in Michigan, invest in a 529 plan in Nevada, and use it to pay for school in Ohio. Or any other combination of states.

Just read the plan information for the one you invested in, it should explain all this.

Thanks, I did when I set this up years ago, but this comment threw me for a loop thinking that I missed something critical as he was comparing the NV Vanguard vs IA Vanguard...

# ¿ Oct 19, 2011 21:32

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

KennyG posted:

I have no children so I know zip about 529s. I was only reacting to the post above mine that certain plans (not necessarily 529s) are restricted to instate schools. In such a case U of Iowa is far better than UNLV unless you want to get your gamble on during parents weekend. Besides there's always the riverboats.

Well poo poo, I took that up to about a ten unnecessarily.

# ¿ Oct 20, 2011 03:26

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Nosre posted:

Count me among, well, not the chicken littles but as someone who feels a heavy downturn is coming. I plan to keep investing, but there have been a LOT of indications of a crash soon such as BofA's FDIC move. With that in mind, wouldn't "buy low and sell high" would mean sell now, and re-buy after the crash? Not "keep calm carry on."

This presumes that a crash will indeed occur. In the past ten years, I have seen at least a dozen instances where it 'was plainly obvious' that a huge crash was coming, only to have the markets rally to new highs in the following months. Do not let fear get the best of you, create a plan, and stick to it.

If it were indeed guaranteed to happen, it would have already. The markets are deadly efficient in that regard.

# ¿ Oct 21, 2011 13:04

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

RivensBitch posted:

I didn't say they were incompetent or malevolent. I just said the account has lost $200, which is absolutely undeniable.

Look, I appreciate what you're saying and I understand. But I don't consider this an investment as I never really had a chance to invest. I got pre-empted before I even started. Even if/when I start making more money next year, I'll be lucky if I'm in a position to start contributing again until 2013 or 2014. So right now, for the next 2 years, I'm stuck with $1000 in a 401k. I don't consider that a serious investment, and I don't see the economy turning around until more like 2015 or 2016.

What I do see is my savings account is empty, and it's very hard to put anything in there right now. In my mind the utility of having $750 on hand for rainy days far outweighs any potential gains that this $1000 by itself might possibly make in the next 2 years, even with the $250 it will cost me to pull it out. If my car needs any serious work in the next year and I don't have any money on hand, I'll have to get another credit card and now I'm not just losing $250 on $1000 (or $200 on $1200), now I'm paying 30% interest on $600-$700 (or more) of car repairs.

So please, lecture me on how I should be less risk averse. I don't think you understand the risks I'm dealing with and trying to protect myself against.

I have some serious deductions coming this year. It's October and just looking at the numbers, I can see my tax liability is going to be very small. Worst case scenario I'll pay the feds and state 15%, but I'm thinking it will be even less just looking at my expense reports.

What I need to know is, can the 401k provider actually keep me from getting my money? Right now they're saying they wont do it, period.

You have yet to tell us what you're invested in. A 401k is just a container, it doesn't make or lose money. List the funds you have, and have access to. You may have a good option in there.

# ¿ Oct 21, 2011 22:19

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

HiddenReplaced posted:

My employer does not match any 401k contributions for what they deem "highly compensated" employees, and because of my income I can't contribute to a Roth.

So, a few questions:

Should I bother contributing to the 401k at all?

If I leave the position for greener pastures (preferably ones where the employer will contribute to my 401k) will it be a headache to transfer it over?

If I can't use Roth and I won't get any deductions for traditional, what should I invest in?

I'm in my mid 20s.

In the order of financial funding operations, you should fund your traditional IRA to the max first, then turn to your 401k. Even though they are not matching, it will still grow tax-deferred and has a high contribution limit of 17,000. The IRA earnings and income will not be taxed until you start receiving withdrawals, so despite the lack of a deduction, there is value.

After you fund both of those, you should begin funding the taxable portion of your investment portfolio.

# ¿ Oct 25, 2011 14:04

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Tai-Pan posted:

It may have been mentioned, but is there a good "how much should I save" calculator that adjusts for inflation?

All of them seem to target a dollar amount without any adjustment for inflation. They suggest we could retire on a about a million five in today's dollars, which is absurdly low for a target date 35+ years out.

Aren't all of these calculators completely screwing people?

Retiring on 1.5 million in today's dollars, 35 years from now is actually quite a lot of money. If your annual expenses are 75k a year (in today's dollars, and likely a bit high as you would probably own your home), that is a 5% withdrawal rate. With 0% investment return, that will last you 20 years. Conservative investments would likely yield about 3-4%, which would make that balance last even longer.

# ¿ Oct 26, 2011 00:58

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

tuckfard posted:

I'm a couple of months into my first teaching job @46k. Right now my budget is looking at about $800 savings a month (after a $600 payment on my much too large loan for my 7 year bachelors degree).

6.4% of my salary is automatically contributed into TRS, which is matched by the state. How much should I be looking into putting in a Roth, and how should I go about getting this started? Or should I be more aggressively going after my ~50k in loans?

At your income level, it's an ideal time to maximize your Roth IRA, especially with how much free cash flow that you have. You are in a relatively low marginal tax bracket (25%, assuming you're single) and now would be the perfect time to pad that account. At $800 a month, you will have it funded in six months each year. After that, I would absolutely apply the remaining $4,600 on to the student loan. Even if your investment returns are not amazing, the tax haven alone for the Roth IRA is a very powerful tool for retirement.

# ¿ Oct 26, 2011 02:45

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

tuckfard posted:

I'll be single until sometime next summer. She makes about the same i do. We live together right now which is why I'm able to save a good amount.

So the next step is getting a Roth started. Do I need to have a large first deposit or anything saved up or can I start this up later this week when I get my next check? Sorry for all of the silly basic questions, I'm pretty clueless on this stuff.

Charles Schwab has a $1,000 account minimum on their Roth IRAs without any service fees. Really a great custodian and doesn't nickel and dime you. You will have access to virtually any security (although you should stick to low-cost index funds!) and enjoy their great customer service. You can set up auto-draft to have contributions automatically come out of your checking account.

There are a lot of other good custodians, but I find that Schwab is the best/easiest to get into.

# ¿ Oct 26, 2011 03:34

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Tai-Pan posted:

Am I missing something? How is 75k in today's dollars a useful number? In 35 years, that probably won't even cover my property taxes. Assuming a steady inflation rate, wouldn't you need about $195,000 to maintain the buying power of 75k?

Just what plester said, what this is accomplishing is allowing you to compare apples to oranges. By taking inflation out of the picture (by stating both values in the same base year, 2011 dollars) you are able to better understand what that number means. When I said you would be able to have the purchasing power of today's 75k, that really means the future value of 75k.

The reason things are expressed in current dollars is because you can understand them. For instance, you may be paying $12k a year for your mortgage now, $2000 a year in fuel, $4000 in dining, etc. and expect to have 75% of that spend in retirement. This allows you to produce a number ex-inflation that you need to target. When you build your financial plan, you will strip out inflation expectations of your portfolio return (if you expect 3% inflation, and have an expected return of 8% on your portfolio, you would forecast your growth out 5% instead) and be able to wrap your arms around the numbers better.

You could also use future dollars and include inflation assumptions into your portfolio, but typically that is not done because it is assumed that a diversified portfolio will outpace inflation by the market premium and negate that effect.

tl;dr: If that $1.5M number is bothering you, open up Excel and put in a cell

code:

=FV(.03,35,0,1500000)

This will give you the value in 2046 dollars of $1.5M today at an assumed 3% inflation rate. ($4.2m)

# ¿ Oct 26, 2011 13:36

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Tai-Pan posted:

Okay, so that seems like a really bad idea, doesn't it? I just asked two otherwise intelligent analysts exactly this question and one assumed the 1.5 million was the "final" target and the other didn't understand why the value didn't account for inflation. That means that in a best case scenario 50% of people using these calculators will assume they need to have 1.5 million in the bank upon retirement.

I see your point, but your statistics are very very flawed with a sample size of 2. I will go ahead and agree with you that perhaps these calculators need to be more clear with what they are offering for their conclusions, but overall, the practice and methodology is not flawed.

Frankly though, I don't believe that there are too many people making rash and final financial decisions such as this based on a cursory use of a lightweight tool they barely understood to begin with.

# ¿ Oct 26, 2011 16:13

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Tai-Pan posted:

That is certainly a pleasantly delusional concept. Wasn't there a study saying something like 60% of Americans did not even have access to $1,000 in an emergency?

Regardless, I have been using excel for 10 years daily now and I never knew about the FV function. Very cool. I love Excel.

I don't believe it's delusional at all. I'm a financial planner and it has been my experience that the majority of people may occasionally kick the tires at calculators like these and want to do something about their finances, but rarely do. They'll do one half-assed on their lunch break, get a number, then move right on to ESPN.com. Very little thought is actually carried on to execution for many people. I'd contend that the vast majority of people filling out those calculators get a "That's interesting" feeling and that's it.

# ¿ Oct 26, 2011 16:34

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# ¿ Apr 29, 2024 09:45

TraderStav: May 19, 2006; It feels like I was standing my entire life and I just sat down

Insane Totoro posted:

My wife is currently working as a long-term substitute teacher and has access to a 403b with employer match. There is no guarantee that she will be able to stay with this job, but she expects to be able to stay in public education for the rest of her life. Should she begin contributions to this account? Or should we just get a Roth IRA? We are currently both 26 years old.

Basically, can I do both the 403b and the Roth, and then if she can't get a permanent position, roll the 403b into the existing Roth?

If it's HIGHLY probable (I'm talking, like CERTAIN) that she will not be there long enough to vest, then I'd recommend funding the Roth until you hit the maximum, then fund the 403b. However, the match is very important as Chin Strap noted, so you need to consider that.

# ¿ Oct 26, 2011 17:17

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Long Term Investing & Retirement: The second best time is now

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