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[Liberty4all]

How healthy are you, what are your ages right now, based on the prior 2 and age of relatives - how old do you think you'll live, what age do you think you want to cease working all together, how much do you have in retirement outsie of the above, how much do you think you'll need a year once you're retired - will you travel a lot? Do you have expensive hobbies?

These need to be answered to give advice.

I'm sorta healthy but I'm sure being a smoker doesn't help.

I'm 40, wife is 34. I'll hit 85 factor at age 62 with 23 years service. Pension is indexed 60% to inflation. Hers is 85% indexed.

Savings are not good but we plan to ramp that up. Once retired we are thinking about doing half the year in Mexico or the Phillipines, the over half in Canada. We will both get OAS and CPP -- aprox 1500 a month each on top of our company pensions at age 65. Unfortunately though her pensions both company and government will stagger in 9 years after mine due to our age difference. So initially we will be living on what I get (assuming she retires when I do)

Honestly not sure how much we will need. I'm thinking 60 - 70k adjusted for inflation. We don't have too expensive hobbies although I expect we will want to travel (cruises). Living in Mexico or Phillipines might scratch that itch though.

Edit: no kids yet but want one or two

 

[oktarb]

What would be a good method for find individual stocks that are currently tracking at a low rate? I currently buy individual stocks on Scott Trade just while I get my feet wet and honestly I get mode bio feedback this way as opposed to a 401K.

I of course know that if something is a low doesn't mean its going to go back up. Just curious if there's terminology or a site that specializes in stocks that are currently tending low.

 

[Walter White Walker]

What would be a good method for find individual stocks that are currently tracking at a low rate? I currently buy individual stocks on Scott Trade just while I get my feet wet and honestly I get mode bio feedback this way as opposed to a 401K.

I of course know that if something is a low doesn't mean its going to go back up. Just curious if there's terminology or a site that specializes in stocks that are currently tending low.

This thread is more for long term investing for retirement in index funds rather than individual stocks or trying to time things. The other stocks thread is probably a better one for getting your question answered:

http://www.neogaf.com/forum/showthread.php?t=176332&page=299

 

[TMC]

Hey guys,

I am already invested in VTSMX and VGTSX for my Roth IRA, but I am now able to contribute to a 401k with my employer. They offer a 35% match up to 6% of my salary. I currently contribute about 30% of my salary to my Roth IRA and taxable account. I now plan on contributing 6% of my salary to the 401k and then 24% to my Roth IRA/Taxable account. Is this the best way to go?

Here are the funds I can select from. Any recommendations? Should I just go with the 2055 target fund? I am currently 28.

http://i.imgur.com/asPnMko.png

Thanks guys!

 

[tokkun]

Hey guys,

I am already invested in VTSMX and VGTSX for my Roth IRA, but I am now able to contribute to a 401k with my employer. They offer a 35% match up to 6% of my salary. I currently contribute about 30% of my salary to my Roth IRA and taxable account. I now plan on contributing 6% of my salary to the 401k and then 24% to my Roth IRA/Taxable account. Is this the best way to go?

If the money is intended for retirement, you should put it back in the 401K after maxing out your IRA rather than putting it in a taxable account.

Here are the funds I can select from. Any recommendations? Should I just go with the 2055 target fund? I am currently 28.

http://i.imgur.com/asPnMko.png

Thanks guys!

The target date funds in your plan are kind of pricey. Personally I would do something like a 70:30 split between the S&P 500 fund and the BlackRock International.

 

[TMC]

If the money is intended for retirement, you should put it back in the 401K after maxing out your IRA rather than putting it in a taxable account.



The target date funds in your plan are kind of pricey. Personally I would do something like a 70:30 split between the S&P 500 fund and the BlackRock International.

Thank you for your advice! I will look into those. I agree with you completely after thinking it over. Putting more into my 401k rather than putting the excess into a taxable account is a better decision.

I had a lot in savings when I started investing for retirement. I couldn't put it all in my Roth IRA so I thought it would be better to put what was left (about 20k) into a taxable account. I am unsure if I want to use this for retirement or to just earn a better rate than my savings account. I can only contribute to a 401k through payroll deductions, correct? What do you think is the best way to deal with the money that is currently in my taxable account?

 

[Randolph Freelander]

Thank you for your advice! I will look into those. I agree with you completely after thinking it over. Putting more into my 401k rather than putting the excess into a taxable account is a better decision.

I had a lot in savings when I started investing for retirement. I couldn't put it all in my Roth IRA so I thought it would be better to put what was left (about 20k) into a taxable account. I am unsure if I want to use this for retirement or to just earn a better rate than my savings account. I can only contribute to a 401k through payroll deductions, correct? What do you think is the best way to deal with the money that is currently in my taxable account?

The easiest option is to just switch your strategy going forward to favor your 401K but otherwise leave the funds in your taxable account alone. This leaves you with some future flexibility, as well, since those funds are not locked away until retirement.

The more complex option is to supercharge your 401K contributions to where you're literally not leaving much for yourself to live on, sell a portion of your holdings in your taxable account, and then live off that. It's an indirect transfer from your non-advantaged holdings to an advantaged account, but it comes with the caveat that your taxable account may have gains that you need to pay taxes on. But if you have some room before you hit the 401K personal contribution limit, this is a way to get there, at the expense of taxes on already-accrued gains and, of course, reduced flexibility.

Off that topic, if I may say so, even the index funds in your plan options are far more expensive than we'd like to see. You have no real control over that, but if you work for a small company, you could be an agent of change to at least get a conversation started about finding better options for the company 401K plan. If you work for a larger company, then shame on them, for real. I would still favor the 401K over a taxable account, but I wouldn't favor thinking I'm a lifer working for that company. This is part of your compensation and benefits package, and this part of the package is less than ideal.

 

[TMC]

The easiest option is to just switch your strategy going forward to favor your 401K but otherwise leave the funds in your taxable account alone. This leaves you with some future flexibility, as well, since those funds are not locked away until retirement.

The more complex option is to supercharge your 401K contributions to where you're literally not leaving much for yourself to live on, sell a portion of your holdings in your taxable account, and then live off that. It's an indirect transfer from your non-advantaged holdings to an advantaged account, but it comes with the caveat that your taxable account may have gains that you need to pay taxes on. But if you have some room before you hit the 401K personal contribution limit, this is a way to get there, at the expense of taxes on already-accrued gains and, of course, reduced flexibility.

Off that topic, if I may say so, even the index funds in your plan options are far more expensive than we'd like to see. You have no real control over that, but if you work for a small company, you could be an agent of change to at least get a conversation started about finding better options for the company 401K plan. If you work for a larger company, then shame on them, for real. I would still favor the 401K over a taxable account, but I wouldn't favor thinking I'm a lifer working for that company. This is part of your compensation and benefits package, and this part of the package is less than ideal.

Thank you very much for your input! I think I will leave the taxable account alone for now. The second option you mention does sound nice as well and I will consider it in the future.

I do work for a fairly large company so it is disappointing to see how high the fees are. I am considering leaving in the near future so I was wondering if it is even worth starting my 401K here.

 

[tokkun]

I can only contribute to a 401k through payroll deductions, correct?

Yes.

What do you think is the best way to deal with the money that is currently in my taxable account?

There aren't a lot of better options. If you are eligible to contribute to an HSA, you could do that, but it's only ~3K per year max. If you are planning on paying for college for someone and live in a high-tax state, you can put some money in a 529.

Just make sure you are using low cost index funds in your taxable account. You have access to better funds than you do with your 401k.

 

[tokkun]

I do work for a fairly large company so it is disappointing to see how high the fees are. I am considering leaving in the near future so I was wondering if it is even worth starting my 401K here.

Yes it is. When you leave your company you can roll the money in your 401k over to your IRA and get access to better funds.

 

[TMC]

Yes.



There aren't a lot of better options. If you are eligible to contribute to an HSA, you could do that, but it's only ~3K per year max. If you are planning on paying for college for someone and live in a high-tax state, you can put some money in a 529.

Just make sure you are using low cost index funds in your taxable account. You have access to better funds than you do with your 401k.

Yeah, I will stick to leaving the taxable account alone for now. I do have low cost index funds in my taxable account (VTIAX and VTSAX).

Yes it is. When you leave your company you can roll the money in your 401k over to your IRA and get access to better funds.

Thanks! I wasn't sure how much of a pain it was to roll it over and whether it was worth it if I leave within the next couple months. Any amount you rollover will count towards the $5,500 max contribution limit, right?

 

[tokkun]

Thanks! I wasn't sure how much of a pain it was to roll it over and whether it was worth it if I leave within the next couple months. Any amount you rollover will count towards the $5,500 max contribution limit, right?

No, there is no limit on rollovers and they do not count as contributions.

 

[PflargBlarg]

Yeah for real. Having almost every option be near an expense ratio of 1%+ is pretty ridiculous.

 

[TMC]

No, there is no limit on rollovers and they do not count as contributions.

Awesome! Thank you for confirming.

Yeah for real. Having almost every option be near an expense ratio of 1%+ is pretty ridiculous.

I know. Really wish they had better options. At least I don't plan on being here for much longer.

 

[Mr.Mike]

For Canadians, I thought this was interesting. https://www.reddit.com/r/PersonalFinanceCanada/comments/50hdyr/questrade_fraud_protection/

Apparently Questrade doesn't have a guarantee that they will reimburse people for unauthorized transactions. It is a discount brokerage, but maybe paying some commissions for a brokerage account from one of the big banks isn't that bad of a deal. You really shouldn't be doing much trading anyway, although if i had to pay commission to buy ETF's I'd definitely have to stop my practice of buying $100 worth of ETF's every other week.

 

[Piecake]

Finance GAF how do you define net worth with Defined Benefit Pensions Plans? Asking as wife and I both have DBPP's.

Not sure what we should be saving on top.

Both plans are traditional ... 85 factor, 5 year best salaries. Mine is 1.4% on YMPE (in Canada about $54500) and 2% on everything made over that. Likely will retire with 90 - 100k 5 best years. 23 years in plan.

Wife will have 8 years in plan 72k 5 best years, same as above.


I read somewhere it takes 18k saved to make 100 monthly income. This was a rough calculation to help DBPP folks figure out the value of their pensions. I'm still having trouble though envisioning what I need to save on top.

I'm sorta healthy but I'm sure being a smoker doesn't help.

I'm 40, wife is 34. I'll hit 85 factor at age 62 with 23 years service. Pension is indexed 60% to inflation. Hers is 85% indexed.

Savings are not good but we plan to ramp that up. Once retired we are thinking about doing half the year in Mexico or the Phillipines, the over half in Canada. We will both get OAS and CPP -- aprox 1500 a month each on top of our company pensions at age 65. Unfortunately though her pensions both company and government will stagger in 9 years after mine due to our age difference. So initially we will be living on what I get (assuming she retires when I do)

Honestly not sure how much we will need. I'm thinking 60 - 70k adjusted for inflation. We don't have too expensive hobbies although I expect we will want to travel (cruises). Living in Mexico or Phillipines might scratch that itch though.

Edit: no kids yet but want one or two

Bumping this to see if anyone can help you. I haven't really looked at pensions

 

[PflargBlarg]

For Canadians, I thought this was interesting. https://www.reddit.com/r/PersonalFinanceCanada/comments/50hdyr/questrade_fraud_protection/

Apparently Questrade doesn't have a guarantee that they will reimburse people for unauthorized transactions. It is a discount brokerage, but maybe paying some commissions for a brokerage account from one of the big banks isn't that bad of a deal. You really shouldn't be doing much trading anyway, although if i had to pay commission to buy ETF's I'd definitely have to stop my practice of buying $100 worth of ETF's every other week.

Yes, the commissions are definitely why I buy in chunks of $3000-$5000 at a time.

 

[anonymous_abc]

So I now have the information what is avaliable in my companies 401k. The selection is not super varied.

Name/Inception Date			Asset Class			Category	Gross Expense Ratio**
ABF LG CAP VAL INST (AADEX)07/17/1987	Stock Investments		Large Cap	0.59%
FA NEW INSIGHTS Z (FZANX)07/31/2003	Stock Investments		Large Cap	0.53%
FID 500 INDEX INST (FXSIX)02/17/1988	Stock Investments		Large Cap	0.04%
FRANKLIN GROWTH ADV (FCGAX)04/01/1948	Stock Investments		Large Cap	0.63%
ABF MID CAP VAL INST (AACIX)11/30/2005	Stock Investments		Mid-Cap		0.86%
FID MID CAP IDX INS (FSTPX)09/08/2011	Stock Investments		Mid-Cap		0.06%
WF DISCOVERY R6 (WFDRX)04/11/2005	Stock Investments		Mid-Cap		0.76%
FID SM CAP IDX INS (FSSSX)09/08/2011	Stock Investments		Small Cap	0.06%
INVS SM CAP VAL Y (VSMIX)06/21/1999	Stock Investments		Small Cap	0.87%
TRP NEW HORIZONS (PRNHX)06/03/1960	Stock Investments		Small Cap	0.79%
FID INTL INDEX INS (FSPNX)11/05/1997	Stock Investments		International	0.06%
FKLN INTL SMCPGR ADV (FKSCX)10/15/2002	Stock Investments		International	1.12%
OPP DEVELOPING MKT Y (ODVYX)11/18/1996	Stock Investments		International	1.06%
TEMPLETON FOREIGN AD (TFFAX)10/05/1982	Stock Investments		International	0.93%
TRP RETIRE BAL (TRRIX)09/30/2002	Blended Fund Investments*	N/A		0.56%
TRP RETIREMENT 2005 (TRRFX)02/27/2004	Blended Fund Investments*	N/A		0.58%
TRP RETIREMENT 2010 (TRRAX)09/30/2002	Blended Fund Investments*	N/A		0.58%
TRP RETIREMENT 2015 (TRRGX)02/27/2004	Blended Fund Investments*	N/A		0.62%
TRP RETIREMENT 2020 (TRRBX)09/30/2002	Blended Fund Investments*	N/A		0.66%
TRP RETIREMENT 2025 (TRRHX)02/27/2004	Blended Fund Investments*	N/A		0.69%
TRP RETIREMENT 2030 (TRRCX)09/30/2002	Blended Fund Investments*	N/A		0.72%
TRP RETIREMENT 2035 (TRRJX)02/27/2004	Blended Fund Investments*	N/A		0.74%
TRP RETIREMENT 2040 (TRRDX)09/30/2002	Blended Fund Investments*	N/A		0.75%
TRP RETIREMENT 2045 (TRRKX)05/31/2005	Blended Fund Investments*	N/A		0.75%
TRP RETIREMENT 2050 (TRRMX)12/29/2006	Blended Fund Investments*	N/A		0.75%
TRP RETIREMENT 2055 (TRRNX)12/29/2006	Blended Fund Investments*	N/A		0.75%
MIP CL 109/07/19897 			Bond Investments		Stable Value	0.78%
FID STRATEGIC INCOME (FSICX)05/01/1998	Bond Investments		Income		0.71%
FID US BOND IDX IS (FXSTX)03/08/1990	Bond Investments		Income		0.04%
PIM REAL RETURN INST (PRRIX)01/29/1997	Bond Investments		Income		0.58%
FID RET GOVT MM (FGMXX)12/16/19887    	Short Term Investments		N/A	0.42%

Looking at the expense ratios I would have whitled it down to the 5 ETF

Name	Category	TER	Allocation	Relative TER
FXSIX	US-Large Cap	0.04%	40%		0.014%
FSTPX	US-Mid-Cap	0.06%	20%		0.012%
FSSSX	US-Small Cap	0.06%	10%		0.006%
FSPNX	International	0.06%	20%		0.012%
FXSTX	US-Bonds	0.04%	10%		0.004%
				100%		0.048%

Any thoughts?

 

[chaosblade]

So I now have the information what is avaliable in my companies 401k. The selection is not super varied.

Looking at the expense ratios I would have whitled it down to the 5 ETF

Any thoughts?

That's weighted heavily toward mid and small caps. If you want to follow closer to the market and keep 10/20 in bonds and international, I believe it should be closer to something like 55 large, 9 mid, 6 small. You can do what you like of course, but I imagine most will recommend something fairly close to the market with a slight tilt to your preference (more large cap is a bit less risk/less reward, and vice versa with mid and small caps).

 

[anonymous_abc]

That's weighted heavily toward mid and small caps. If you want to follow closer to the market and keep 10/20 in bonds and international, I believe it should be closer to something like 55 large, 9 mid, 6 small. You can do what you like of course, but I imagine most will recommend something fairly close to the market with a slight tilt to your preference (more large cap is a bit less risk/less reward, and vice versa with mid and small caps).

That sounds reasonable, To be quite honest I just quickly pulled the 4|2|1 out of thin air.

Maybe I'd like this. This should better mirror VT, regrettably there is no reasonable EM available. I'll give it some thought.

Name	Category	TER	Allocation	Relative TER
FXSIX	US-Large Cap	0.04%	50%		0.014%
FSTPX	US-Mid-Cap	0.06%	5%		0.012%
FSSSX	US-Small Cap	0.06%	5%		0.006%
FSPNX	International	0.06%	30%		0.012%
FXSTX	US-Bonds	0.04%	10%		0.004%
				100%		0.048%

 

[Randolph Freelander]

That sounds reasonable, To be quite honest I just quickly pulled the 4|2|1 out of thin air.

Maybe I'd like this. This should better mirror VT, regrettably there is no reasonable EM available. I'll give it some thought.

Name	Category	TER	Allocation	Relative TER
FXSIX	US-Large Cap	0.04%	50%		0.014%
FSTPX	US-Mid-Cap	0.06%	5%		0.012%
FSSSX	US-Small Cap	0.06%	5%		0.006%
FSPNX	International	0.06%	30%		0.012%
FXSTX	US-Bonds	0.04%	10%		0.004%
				100%		0.048%

I think this swings back too far the other way. We like Vanguard around here, and though I use Fidelity and their strategy is roughly the same, I like to quote Vanguard's blend for domestic stock, which is roughly 73/18/9 across large/mid/small, or roughly 8 parts large, 2 parts mid, and 1 part small.

If your domestic split is 60, then that would be 44/11/5, and 70 would be 51/13/6. Each split rounds down on small cap, so I might go the other way and round up and then take a point away from large just a personal weighting preference.

 

[womfalcs3]

I started watching videos of Warren Buffett and Mark Cuban on YouTube. I mostly like Warren's principles... except I do not have the time to read through company reports 6 hours a day and I don't have the money to buy farm land or a large stake in a company. I do agree with him about gold/silver/commdities.

Mark says he puts all of his money now in savings (this is what he recommends). He doesn't invest it in equity and bonds unless he really wants to. The issue with that is he's talking about generating income from interest. In my country (Islamic), we don't have savings accounts that accrue interest. So our cash, if left as cash, loses about 4% of its value every year... almost 20% loss in 5 years (!!). It doesn't make sense to leave it as cash.

The local stock market is very bearish with the low oil price. So my only options are to invest in other countries or Islamic bonds (unlike conventional bonds, they don't make money off interest). Okay... so I lose some money due to exchange rates when I invest in other countries, but I did so anyway (in real estate), and it's performing okay. But I have most of my money in the Islamic bonds, which generate tiny returns but they're very low risk. I think it's basically performing as a savings account would elsewhere.

I realize that many posts here say how the younger you are, the more equity you should hold.

 

[Liberty4all]

Bumping this to see if anyone can help you. I haven't really looked at pensions

Thanks!

I was told a rough formula is that for every $100 in monthly cash flow one needs to have invested $18000 dollars.

I figure my pension will be worth on just dollars put in about $450,000 at retirement. But the commuted value probaly much higher since that $450,000 is only looking at contributions, not what it has actually grown. I have no idea though how to figure out what that value 'after growth' is.

 

[milanbaros]

Thanks!

I was told a rough formula is that for every $100 in monthly cash flow one needs to have invested $18000 dollars.

I figure my pension will be worth on just dollars put in about $450,000 at retirement. But the commuted value probaly much higher since that $450,000 is only looking at contributions, not what it has actually grown. I have no idea though how to figure out what that value 'after growth' is.

Honestly, I think that is on the high side. A more conservative approach is that for every $100 you need $30k (4% withdrawal rate), and from that $100 you need to pay for expenses (0.4%pa would be $10 pm).

Another way to put that (assuming 4% withdrawal and 0.4% expense ratios), is that $1,000 of retirement savings as at date of retirement will equal $3 per month of net income.

Now, assuming real returns of say 4.0% on your retirement investments (e.g. 6.4% nominal, 2.0% inflation and 0.4% expense ratio) then for that $1,000 at retirement you need to invest the following:

Retirement - 10 years = $665
Retirement - 20 years = $442
Retirement - 30 years = $294

In other words, for every $100 you save 30 years from retirement you can expect a real net income of $1 per month in retirement.

 

[UncleSporky]

Years ago I toyed with the stock market a little...bought into Nintendo at one of the absolute worst times before they took a dive. Just sold it since it's on a spike now and broke even. So right now I've got $1000 in my account at Tradeking (which was once Zecco, which initially attracted me with the idea of zero commission costs, but then slowly changed their tune and eventually got bought out I believe).

At this point I haven't paid attention to much of anything in terms of investments or stocks for ages, forgot anything I thought I knew about it, I'm essentially a newbie.

If i just want to get started right now what's the best first step?

I'm leaning towards sticking with Tradeking for now and investing in VBINX. Seems like it's what OP recommends, 60 in one, 40 in the other, but all under one symbol instead of needing two.

Or should I get out of Tradeking and open an account with someone else? Should I go with several different index funds?

I apologize, I really know very little about all this at this point but I'd like to get started, reinvest what I just got out, maybe begin adding to that.

 

[chaosblade]

Years ago I toyed with the stock market a little...bought into Nintendo at one of the absolute worst times before they took a dive. Just sold it since it's on a spike now and broke even. So right now I've got $1000 in my account at Tradeking (which was once Zecco, which initially attracted me with the idea of zero commission costs, but then slowly changed their tune and eventually got bought out I believe).

At this point I haven't paid attention to much of anything in terms of investments or stocks for ages, forgot anything I thought I knew about it, I'm essentially a newbie.

If i just want to get started right now what's the best first step?

I'm leaning towards sticking with Tradeking for now and investing in VBINX. Seems like it's what OP recommends, 60 in one, 40 in the other, but all under one symbol instead of needing two.

Or should I get out of Tradeking and open an account with someone else? Should I go with several different index funds?

I apologize, I really know very little about all this at this point but I'd like to get started, reinvest what I just got out, maybe begin adding to that.

I use VBINX outside retirement, but I wouldn't use it for retirement. You would be better off either getting two funds for greater control or using a target date fund that will gradually get more conservative as you approach retirement. VBINX is too conservative when you are young and too risky when you are old.

 

[UncleSporky]

I use VBINX outside retirement, but I wouldn't use it for retirement. You would be better off either getting two funds for greater control or using a target date fund that will gradually get more conservative as you approach retirement. VBINX is too conservative when you are young and too risky when you are old.

Hmm.

I could also just withdraw the money and open a Roth IRA like I need to do anyway, and reinvest in that with a more diverse split like I've seen recommended at a few different places.

Is a maxed out Roth IRA typically enough for a comfortable retirement? I got the impression from the OP that it might be something you do in addition to regular investing.

 

[Stronty]

I talked to a financial planner at a credit union a few weeks ago, he mentioned that American National Insurance had a tax free annuity that paid a decent return. Anyone here familiar with the best investments available from insurance companies? I am looking for somewhere to place regular savings, the non existent interest rates paid on savings these days is criminal.

 

[Randolph Freelander]

Is a maxed out Roth IRA typically enough for a comfortable retirement? I got the impression from the OP that it might be something you do in addition to regular investing.

Not likely to be close to what you need, depending on how long you invest.

If you're 35 years out from retirement and started to invest the max in a Roth*, I estimate that you would accumulate approximately 1.22 million in assets (average rate of return of 8%). Holding inflation to 2%, that equates to almost 610K in today's dollars. Using a standard 4% drawdown rate for retirement, this would net you just over $24K to live (again, in today's dollars). If you're 40 years out, it's a little better, in that you'll be at $28K in today's dollars.

If you have access to an employer plan such as 401K, you'll want to participate, and otherwise continue to invest over and beyond what you can do in just an IRA.


(*For the purposes of this exercise, I allowed the Roth contribution to grow by 2% every year to keep up with inflation. In reality, the IRS only adjusts the contribution limit upwards in increments of $500 based on accumulated inflation changes.)

 

[SolKane]

Question about a Roth IRA account. I opened one of these recently with Fidelity and moved my max contribution ($5500) in the account. I haven't actually invested any of it yet, the account is just idle. I decided I like Vanguard's offerings better and was thinking of opening a Roth IRA there. Can I move that money from Fidelity to Vanguard or am I pretty much screwed at this point?

 

[Randolph Freelander]

Question about a Roth IRA account. I opened one of these recently with Fidelity and moved my max contribution ($5500) in the account. I haven't actually invested any of it yet, the account is just idle. I decided I like Vanguard's offerings better and was thinking of opening a Roth IRA there. Can I move that money from Fidelity to Vanguard or am I pretty much screwed at this point?

You can move it, but Fidelity will charge you a fee to close the account (as would Vanguard if you moved the opposite direction, I presume).

That said, which fund did you like at Vanguard? If it's a target date fund, it makes sense, as Vanguard's target date funds execute a passive strategy with lower expenses, whereas Fidelity's use an active strategy and incur higher expenses. If you like something like a total stock market fund, Fidelity's fund is highly competitive.

 

[GhaleonEB]

Looks like it's $50 flat fee to close an IRA account at Fidelity.

https://www.fidelity.com/bin-public...uments/Brokerage_Commissions_Fee_Schedule.pdf

Close Account $50 per account for Fidelity IRAs

Top right of page 4.

 

[iamblades]

I started watching videos of Warren Buffett and Mark Cuban on YouTube. I mostly like Warren's principles... except I do not have the time to read through company reports 6 hours a day and I don't have the money to buy farm land or a large stake in a company. I do agree with him about gold/silver/commdities.

Mark says he puts all of his money now in savings (this is what he recommends). He doesn't invest it in equity and bonds unless he really wants to. The issue with that is he's talking about generating income from interest. In my country (Islamic), we don't have savings accounts that accrue interest. So our cash, if left as cash, loses about 4% of its value every year... almost 20% loss in 5 years (!!). It doesn't make sense to leave it as cash.

The local stock market is very bearish with the low oil price. So my only options are to invest in other countries or Islamic bonds (unlike conventional bonds, they don't make money off interest). Okay... so I lose some money due to exchange rates when I invest in other countries, but I did so anyway (in real estate), and it's performing okay. But I have most of my money in the Islamic bonds, which generate tiny returns but they're very low risk. I think it's basically performing as a savings account would elsewhere.

I realize that many posts here say how the younger you are, the more equity you should hold.

Then you should follow Buffett's other advice, which is to buy index funds and hold for the long term. Actually most people should do this even if they do have 6 hours a day to read P & L statements and do research, because most people aren't Warren Buffett.

This is what most of the thread is about.

Cuban's statement is a bit different, as his money is all tied up in businesses that generate revenue, and he would probably rather reinvest those funds into what he is already doing than try to invest in new things. I don't think he was generally suggesting savings accounts as an investment, because that's some pretty terrible advice.

I'd imagine it's the same thing with Buffett as well though, I'm sure he doesn't take his salary(if he even gets one) and worry about investing it, because why waste time trying to make decisions on investing millions when he has 10s of billions in Berkshire Hathaway stock, and his time is much better spent looking for ways to invest Berkshire's money.

 

[milanbaros]

Then you should follow Buffett's other advice, which is to buy index funds and hold for the long term. Actually most people should do this even if they do have 6 hours a day to read P & L statements and do research, because most people aren't Warren Buffett.

This is what most of the thread is about.

Cuban's statement is a bit different, as his money is all tied up in businesses that generate revenue, and he would probably rather reinvest those funds into what he is already doing than try to invest in new things. I don't think he was generally suggesting savings accounts as an investment, because that's some pretty terrible advice.

I'd imagine it's the same thing with Buffett as well though, I'm sure he doesn't take his salary(if he even gets one) and worry about investing it, because why waste time trying to make decisions on investing millions when he has 10s of billions in Berkshire Hathaway stock, and his time is much better spent looking for ways to invest Berkshire's money.

You're right, but he is the largest holder of Berkshire Hathaway stock. He does spend hours working to increase his wealth. That is probably for reputation, fun, charity or ego though, as he hasn't needed to work for decades.

The way I view it, when you buy say an s&p 500 tracker, you have 500 boards going to work to make me money, and all I do is watch it come in.

 

[anonymous_abc]

I would like to run my strategy by the experts.

1. Max out 401k (18k us, 6k employer) - front loaded as much as possible with 75% per paycheck
2. Max out HSA (5150 us; 1500 employer) - front loaded
3. Max out traditional IRA (11k us) - to slowly convert once we RE
4. Mega Backdoor Roth as much as possible at the given time
5. ???
6. Profit

 

[tokkun]

I would like to run my strategy by the experts.

1. Max out 401k (18k us, 6k employer) - front loaded as much as possible with 75% per paycheck
2. Max out HSA (5150 us; 1500 employer) - front loaded
3. Max out traditional IRA (11k us) - to slowly convert once we RE
4. Mega Backdoor Roth as much as possible at the given time
5. ???
6. Profit

How close are you to hitting the income limits for taking a tax deduction on the IRA contribution?

https://www.irs.gov/retirement-plan...-you-are-covered-by-a-retirement-plan-at-work

 

[anonymous_abc]

How close are you to hitting the income limits for taking a tax deduction on the IRA contribution?

https://www.irs.gov/retirement-plan...-you-are-covered-by-a-retirement-plan-at-work

this year easily below. As I'm only working 4 months in the us.
Next year ... well .... likely above.

Not sure what the implications are though.

 

[Original Famous Ray]

Never thought about front loading my 401k. I do max out my Roth IRA every January but I put $340 per week towards my 401k (I get close to the max). I could put more each week but I need to find out through my payroll department if contributions automatically stop when the max is reached. Any reason not to front load a 401k?

I still need to do the taxable thing but I need to read up on the best way to do that and the tax implications. I'm more of a set it and forget it guy and want things to be as easy as possible. I get health insurance through my employer so HSA's aren't something I can do in addition to my 401k and Roth.

 

[SyNapSe]

I still need to do the taxable thing but I need to read up on the best way to do that and the tax implications. I get health insurance through my employer so HSA's aren't something I can do in addition to my 401k and Roth.

You can get a HSA if your employer offers a high deductible health plan.

 

[Original Famous Ray]

You can get a HSA if your employer offers a high deductible health plan.

I probably should have been more specific. I get insurance through my employer via my union. HSA's aren't offered since I'm covered 100% through my Union/Employer.

 

[Wellington]

Never thought about front loading my 401k. I do max out my Roth IRA every January but I put $340 per week towards my 401k (I get close to the max). I could put more each week but I need to find out through my payroll department if contributions automatically stop when the max is reached. Any reason not to front load a 401k?

Yea I do it and from the math I did a few months back from my last COL raise today is actually the day I put in my calendar to reduce the percentage so that I don't hit the limit too early and lose the employer match. The extra money will just go into my taxable account until I reset it to start next year.

I still need to do the taxable thing but I need to read up on the best way to do that and the tax implications. I'm more of a set it and forget it guy and want things to be as easy as possible. I get health insurance through my employer so HSA's aren't something I can do in addition to my 401k and Roth.

www.vanguard.com

 

[tokkun]

this year easily below. As I'm only working 4 months in the us.
Next year ... well .... likely above.

Not sure what the implications are though.

What does your Traditional IRA balance look like now?

If it is already pretty big, then nevermind. If it is low, there are some potential arguments for keeping it low for someone in your situation. It is a bit technical, so let me know if you want me to elaborate.

Never thought about front loading my 401k. I do max out my Roth IRA every January but I put $340 per week towards my 401k (I get close to the max). I could put more each week but I need to find out through my payroll department if contributions automatically stop when the max is reached. Any reason not to front load a 401k?

I've done a 100% frontload for the last 2 years. The disadvantages are just the obvious ones:
- Less liquidity in the early part of the year.
- You don't have the opportunity to change your mind if your financial situation changes part-way through the year.

Aside from that, there is the typical risk/reward tradeoff between lump sum investing and dollar-cost averaging.

I guess you may want to check with your employer that they don't have any restrictions related to their matching funds, but that has never been a problem for me. My 401k provider (Vanguard) is also good about automatically stopping contributions when I hit the limit. I would imagine most are (since that is their job and it seems kind of ridiculous to rely on the employee to do it), but it doesn't hurt to confirm that.

 

[anonymous_abc]

What does your Traditional IRA balance look like now?

If it is already pretty big, then nevermind. If it is low, there are some potential arguments for keeping it low for someone in your situation. It is a bit technical, so let me know if you want me to elaborate.

Yes please.
All my US accounts are currently at zero.


With my 401k the employer matches no matter when or how much I contribute, they don't mind me front loading and payroll/fidelity automatically will stop taking my money once I reach my max.

 

[tokkun]

Yes please.
All my US accounts are currently at zero.

The argument for keeping your pre-tax IRA balance at zero if you are a high earner & saver is related to the IRA pro rata withdrawal rule. You can read more about it here if you are interested.

In brief: if you have both pre-tax (Traditional) and after-tax (Roth or non-deductible Traditional) IRAs, and you want to take any distribution from them, then you have to take money from each type of account proportional to its balance. If you have both pre-tax and after-tax IRA money you cannot choose to withdraw / convert from only one type.This becomes a problem if you want to do the original (non-Mega) backdoor Roth IRA. This involves making an after-tax (non-deductible Traditional) contribution, then converting it to a different after-tax (Roth) account. If you have pre-tax money in an IRA, you can't only convert the after-tax money, due to the pro-rata rule. You will have to convert some of the pre-tax money, which you then have to pay tax on. For example, if you have $55K in pre-tax money and $5.5k in non-deductible after-tax contributions, you would pay tax on 90% of your conversion. Thus, if you have enough pre-tax money in your IRA, it essentially renders the non-Mega backdoor Roth IRA strategy useless.

tldr; If you keep your pre-tax IRA balance at zero, you can use the backdoor Roth IRA without any additional taxes. So if you think you might use it, you might want to avoid making Traditional IRA contributions.

One caveat here: If the Democrats and Republicans ever manage to come together for bipartisan tax reform, I expect both backdoor Roth IRA loopholes to be among the first things on the chopping block. So if you thought it would be 5 or 10 years before you passed the income limits, I might advise you to just go ahead with the Traditional contributions. However if it is only one year, I suggest skipping the Traditional contribution to keep your pre-tax IRA balance at zero. You can do a Roth IRA contribution instead.

Hope that makes sense.

 

[ZackieChan]

What does your Traditional IRA balance look like now?

If it is already pretty big, then nevermind. If it is low, there are some potential arguments for keeping it low for someone in your situation. It is a bit technical, so let me know if you want me to elaborate.



I've done a 100% frontload for the last 2 years. The disadvantages are just the obvious ones:
- Less liquidity in the early part of the year.
- You don't have the opportunity to change your mind if your financial situation changes part-way through the year.

Aside from that, there is the typical risk/reward tradeoff between lump sum investing and dollar-cost averaging.

I guess you may want to check with your employer that they don't have any restrictions related to their matching funds, but that has never been a problem for me. My 401k provider (Vanguard) is also good about automatically stopping contributions when I hit the limit. I would imagine most are (since that is their job and it seems kind of ridiculous to rely on the employee to do it), but it doesn't hurt to confirm that.

I would imagine if you have a 6 month emergency fund, you should be covered, yes?

 

[anonymous_abc]

The argument for keeping your pre-tax IRA balance at zero if you are a high earner & saver is related to the IRA pro rata withdrawal rule. You can read more about it here if you are interested.

In brief: if you have both pre-tax (Traditional) and after-tax (Roth or non-deductible Traditional) IRAs, and you want to take any distribution from them, then you have to take money from each type of account proportional to its balance. If you have both pre-tax and after-tax IRA money you cannot choose to withdraw / convert from only one type.This becomes a problem if you want to do the original (non-Mega) backdoor Roth IRA. This involves making an after-tax (non-deductible Traditional) contribution, then converting it to a different after-tax (Roth) account. If you have pre-tax money in an IRA, you can't only convert the after-tax money, due to the pro-rata rule. You will have to convert some of the pre-tax money, which you then have to pay tax on. For example, if you have $55K in pre-tax money and $5.5k in non-deductible after-tax contributions, you would pay tax on 90% of your conversion. Thus, if you have enough pre-tax money in your IRA, it essentially renders the non-Mega backdoor Roth IRA strategy useless.

tldr; If you keep your pre-tax IRA balance at zero, you can use the backdoor Roth IRA without any additional taxes. So if you think you might use it, you might want to avoid making Traditional IRA contributions.

One caveat here: If the Democrats and Republicans ever manage to come together for bipartisan tax reform, I expect both backdoor Roth IRA loopholes to be among the first things on the chopping block. So if you thought it would be 5 or 10 years before you passed the income limits, I might advise you to just go ahead with the Traditional contributions. However if it is only one year, I suggest skipping the Traditional contribution to keep your pre-tax IRA balance at zero. You can do a Roth IRA contribution instead.

Hope that makes sense.

I think I understand....
I will pass the income limits next year, especially if my wife starts working as soon as her employment authorization documents gets issued in a couple of months time.

So would you then suggest I just skip the tIRA completely?

1. Max out 401k (18k us, 6k employer) - front loaded as much as possible with 75% per paycheck
2. Max out HSA (5150 us; 1500 employer) - front loaded
3. Max out Roth IRA (11k us)
4. Mega Backdoor Roth as much as possible at the given time
5. ???
6. Profit

Or should I consider not using the Roth at all as I am in a high tax bracket right now.

1. Max out 401k (18k us, 6k employer) - front loaded as much as possible with 75% per paycheck
2. Max out HSA (5150 us; 1500 employer) - front loaded
3. Max out traditional IRA (11k us)
4. Mega Backdoor Roth as much as possible at the given time
5. Invest all the rest in a regular investment account?
6. ???
7. Profit

[edit]
I've just learnt from fidelity that my employer doesn't allow in-service withdrawals before the age of 59. That's Mega Back Door Roth out of the door. :'(

 

[Wellington]

I like the Mad Fientist, he released a really good podcast episode that is worth a listen. It's a panel from Camp Mustache of a number of popular bloggers/FI'ers. Thought it was a good listen on my commute to/from work - http://www.madfientist.com/camp-mustache-q-and-a/

 

[Pocks]

Assuming the SCTY and TSLA merger goes through, what is the exact conversion metric? According to Tesla's presentation on August 1st, the ratio is of 0.110, but it also mentions a share price of $25.37 based on an average trading price at the end of July.

With that in mind, do I get $25.37 worth of TSLA for each share of SCTY—or do I get 0.110 shares of TSLA for each share of SCTY?

 

[tokkun]

I think I understand....
I will pass the income limits next year, especially if my wife starts working as soon as her employment authorization documents gets issued in a couple of months time.

So would you then suggest I just skip the tIRA completely?

1. Max out 401k (18k us, 6k employer) - front loaded as much as possible with 75% per paycheck
2. Max out HSA (5150 us; 1500 employer) - front loaded
3. Max out Roth IRA (11k us)
4. Mega Backdoor Roth as much as possible at the given time
5. ???
6. Profit

Or should I consider not using the Roth at all as I am in a high tax bracket right now.

1. Max out 401k (18k us, 6k employer) - front loaded as much as possible with 75% per paycheck
2. Max out HSA (5150 us; 1500 employer) - front loaded
3. Max out traditional IRA (11k us)
4. Mega Backdoor Roth as much as possible at the given time
5. Invest all the rest in a regular investment account?
6. ???
7. Profit

[edit]
I've just learnt from fidelity that my employer doesn't allow in-service withdrawals before the age of 59. That's Mega Back Door Roth out of the door. :'(

It's your call, but I was in a similar situation and chose option 1. If you don't need full liquidity, Roth is still a lot better than a taxable account.

 

[chaosblade]

Assuming the SCTY and TSLA merger goes through, what is the exact conversion metric? According to Tesla's presentation on August 1st, the ratio is of 0.110, but it also mentions a share price of $25.37 based on an average trading price at the end of July.

With that in mind, do I get $25.37 worth of TSLA for each share of SCTY—or do I get 0.110 shares of TSLA for each share of SCTY?

You're probably looking for this thread, individual stock trading is outside the scope of this thread .