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[ty_hot]

Since January I and my gf were expecting to start investing... We both get nearly the same wages, so we planned on spending one and saving the other salary. First month of the year we had a salary of unexpected expenses, second month we decided to get new phones which also costed most of our salary and now in March we are finally going to have 70% of the salary saved. We are not investing it as its better to have some extra money available, but next month we should finally start as I will be getting an extra money on top of my scholarship (I get 3 months worth of money in advance).

She also got an apartment in Eastern Europe (inheritance) that I say it is better to sell and she prefers to rent. She says house prices are hiking so it's better to wait... Idk where to confirm that information... If she would sell that apartment then we would be off to a good start investing. In case she sells we would probably start sending half of that to Brazil (we will live there in 2019) and the other half invest here in Europe.

 

[Joe]

Does it make sense at all to start a traditional IRA right now over a Roth IRA for long-term investing (30 years) if I'm in a lower tax bracket now than I will be at retirement age?

My thinking is that I could use the tax deductions in the short-term and then I would start a Roth IRA a year or two down the road.

 

[hockeypuck]

Does it make sense at all to start a traditional IRA right now over a Roth IRA for long-term investing (30 years) if I'm in a lower tax bracket now than I will be at retirement age?

My thinking is that I could use the tax deductions in the short-term and then I would start a Roth IRA a year or two down the road.

If you're in a low tax bracket then I would argue to put as much money into Roths as you can. Be it Roth IRA or Roth 401K. You would hope to be in a higher tax bracket by the time you retire (you do want pay raises and a healthy nest egg, right?), so why do you want to pay a higher marginal tax rate later?

 

[PantherLotus]

Nobody here got experience inheriting apartments in Eastern Europe and knowing when to time the market??

 

[GhaleonEB]

Nobody here got experience inheriting apartments in Eastern Europe and knowing when to time the market??

When in doubt, sell and invest in index funds.

 

[Pterion]

When would any of you look into private investment/wealth management firms? Or you wouldn't bother even if you made more than 7 figures a year?

 

[LucidMomentum]

Nobody here got experience inheriting apartments in Eastern Europe and knowing when to time the market??

I mean, give me some Eastern Europe apartments to inherit and I'll get right on that.



Anyways, I've been kind of lazy with my retirement stuff. Started working my first salaried position about 2.5 years ago, the standard Employee Savings plan and all that.

Maxed out my out of paycheck deductions so I get the maximum matched by my employer and have it in Vanguard. I have Vanguard manage it and I've got about $45k in there now.

Anything I should be doing to improve my returns / give me a bit of an edge?

 

[demosthenes]

When would any of you look into private investment/wealth management firms? Or you wouldn't bother even if you made more than 7 figures a year?

Knowing what I know I wouldn't ever use one. I think if I even won a Powerball the most I would use is an accounting firm (the one I would quit if I won powerball lol) to help me with my tax returns. Someone is always going to try and tell you they can make you more money. I could potentially see it if you were getting involved in some really complex investments but then I'd personally avoid anything like that.

 

[hockeypuck]

When would any of you look into private investment/wealth management firms? Or you wouldn't bother even if you made more than 7 figures a year?

I would look into them if I'm thinking about using Donor-Advised Funds, setting up estates and trusts for heirs, basically stuff that will ultimately lower the tax burden. If I'm completely fine with my index funds portfolio, then there's no need for an advisor.

 

[Joe]

If you're in a low tax bracket then I would argue to put as much money into Roths as you can. Be it Roth IRA or Roth 401K. You would hope to be in a higher tax bracket by the time you retire (you do want pay raises and a healthy nest egg, right?), so why do you want to pay a higher marginal tax rate later?

My rationale is I would start saving for retirement while also receiving tax deductions now.

 

[ClosingADoor]

When would any of you look into private investment/wealth management firms? Or you wouldn't bother even if you made more than 7 figures a year?

Get experts for tax advise and how the set up your money. Don't give it to them to invest, because they will charge high fees and won't outperform the market.

 

[Chris R]

I mean, give me some Eastern Europe apartments to inherit and I'll get right on that.



Anyways, I've been kind of lazy with my retirement stuff. Started working my first salaried position about 2.5 years ago, the standard Employee Savings plan and all that.

Maxed out my out of paycheck deductions so I get the maximum matched by my employer and have it in Vanguard. I have Vanguard manage it and I've got about $45k in there now.

Anything I should be doing to improve my returns / give me a bit of an edge?

Which funds are you in right now? That would be the only real thing to look at. With over 10k you should be in Admiral funds somehow to take advantage of the lower expense ratios.

 

[SyNapSe]

My rationale is I would start saving for retirement while also receiving tax deductions now.

Do you have a work sponsored retirement plan? If you do, you'd want to make sure your AGI qualifies to take the deduction

 

[LucidMomentum]

Which funds are you in right now? That would be the only real thing to look at. With over 10k you should be in Admiral funds somehow to take advantage of the lower expense ratios.

Hid the number and name of my Employer's stock fund for obvious reasons.

 

[Walter White Walker]

When would any of you look into private investment/wealth management firms? Or you wouldn't bother even if you made more than 7 figures a year?

Have you ever heard the joke financial advisers tell? "I made money, the firm made money. Well, two out of three ain’t bad." Never give them your investment money.

 

[tokkun]

...

Hid the number and name of my Employer's stock fund for obvious reasons.

The only problem I see here is that it is needlessly complicated. You would get a very similar overall allocation if everything was in the 2055 fund (employer stock excluded).

My advice is to consolidate your index funds into just the 2055 fund and stop thinking about how to get a short term edge in the market. Making changes to try to get an edge is more likely to result in less money - or so the research says.

 

[Daante]

This year i have a goal of a saving rate of at least 60% post taxes on my salary.
I will most likely be able to up it to 62-65% when my yearly salary review has been, and hopefully i can end the year on a 65% saving rate totally.

Its not rocket science but having a spreadsheet and tracking everything, combined with solid planning on stuff that you want to buy/spend helps alot. Its crazy what good planning can do, really. I mean this year i will likely travel the most iv ever done during a year. That would be impossible to achieve with my current saving rate if the planning not had been solid.

My goal is to retire 2030.

 

[demosthenes]

This year i have a goal of a saving rate of at least 60% post taxes on my salary.
I will most likely be able to up it to 62-65% when my yearly salary review has been, and hopefully i can end the year on a 65% saving rate totally.

Its not rocket science but having a spreadsheet and tracking everything, combined with solid planning on stuff that you want to buy/spend helps alot. Its crazy what good planning can do, really. I mean this year i will likely travel the most iv ever done during a year. That would be impossible to achieve with my current saving rate if the planning not had been solid.

My goal is to retire 2030.

Wow, I can't imagine saving 65%.

 

[The Lamp]

What do I do with my 401k if I am moving and hope to retire in Europe?

 

[ZackieChan]

This year i have a goal of a saving rate of at least 60% post taxes on my salary.
I will most likely be able to up it to 62-65% when my yearly salary review has been, and hopefully i can end the year on a 65% saving rate totally.

Its not rocket science but having a spreadsheet and tracking everything, combined with solid planning on stuff that you want to buy/spend helps alot. Its crazy what good planning can do, really. I mean this year i will likely travel the most iv ever done during a year. That would be impossible to achieve with my current saving rate if the planning not had been solid.

My goal is to retire 2030.

I have a goal around the same time, but my savings rate is going to be more like 25-30%. Good luck bro! Keep us updated.

 

[anonymous_abc]

What do I do with my 401k if I am moving and hope to retire in Europe?

Let it be till you are 59.5 years old.

This year i have a goal of a saving rate of at least 60% post taxes on my salary.
I will most likely be able to up it to 62-65% when my yearly salary review has been, and hopefully i can end the year on a 65% saving rate totally.

Its not rocket science but having a spreadsheet and tracking everything, combined with solid planning on stuff that you want to buy/spend helps alot. Its crazy what good planning can do, really. I mean this year i will likely travel the most iv ever done during a year. That would be impossible to achieve with my current saving rate if the planning not had been solid.

My goal is to retire 2030.

We're at a net savings rate of ~50%. Living very comfortably not really trying to squeeze out every penny.
10 years is our time frame.

 

[LucidMomentum]

The only problem I see here is that it is needlessly complicated. You would get a very similar overall allocation if everything was in the 2055 fund (employer stock excluded).

My advice is to consolidate your index funds into just the 2055 fund and stop thinking about how to get a short term edge in the market. Making changes to try to get an edge is more likely to result in less money - or so the research says.

Good to know. I actually haven't done any of the above work, I let Vanguard do quarterly adjustments on it for me or however that management option works.

Should I just tell them I'll do it myself and then dump what's not company stock into the 2055?

 

[br0ken_shad0w]

This year i have a goal of a saving rate of at least 60% post taxes on my salary.
I will most likely be able to up it to 62-65% when my yearly salary review has been, and hopefully i can end the year on a 65% saving rate totally.

Its not rocket science but having a spreadsheet and tracking everything, combined with solid planning on stuff that you want to buy/spend helps alot. Its crazy what good planning can do, really. I mean this year i will likely travel the most iv ever done during a year. That would be impossible to achieve with my current saving rate if the planning not had been solid.

My goal is to retire 2030.

God I wish I was you. I could probably pull it off if I wasn't shopping for my very first house.

 

[tokkun]

Good to know. I actually haven't done any of the above work, I let Vanguard do quarterly adjustments on it for me or however that management option works.

Should I just tell them I'll do it myself and then dump what's not company stock into the 2055?

Yeah, I would put it all in 2055 instead of all those different funds.

Do you pay for the management service? I can come up with two reasons why they might give you such an unnecessarily complicated set of funds:

1. It's done by a computer that doesn't care about simplicity.
2. It's done by a human who is using smoke and mirrors to make it seem like they are doing something really advanced with your money.

 

[LucidMomentum]

Yeah, I would put it all in 2055 instead of all those different funds.

Do you pay for the management service? I can come up with two reasons why they might give you such an unnecessarily complicated set of funds:

1. It's done by a computer that doesn't care about simplicity.
2. It's done by a human who is using smoke and mirrors to make it seem like they are doing something really advanced with your money.

Yeah it's an "option" they give you to have Vanguard periodically check your accounts and "manage" them. Not sure if it's an AI or Human though.

So eh, if 2055 is just as stable / good at getting me returns, I'll save that little bit off the top.

 

[Walter White Walker]

Yeah it's an "option" they give you to have Vanguard periodically check your accounts and "manage" them. Not sure if it's an AI or Human though.

So eh, if 2055 is just as stable / good at getting me returns, I'll save that little bit off the top.

Yeah, I don't know what's up with them sticking you in all those funds. A target date fund is meant to have all of your funds in it as that's sort of the whole point.

 

[demosthenes]

Man I just went over my nubmers again, I don't know how you guys are putting 50%+ towards retirement.

 

[ZackieChan]

Man I just went over my nubmers again, I don't know how you guys are putting 50%+ towards retirement.

I get paid in the US, but live like a nomad in various inexpensive countries. Expenses are quite low, but my income is rising.

 

[demosthenes]

I get paid in the US, but live like a nomad in various inexpensive countries. Expenses are quite low, but my income is rising.

Ah that would certainly help.

The way I see it right now I'm at:

Taxes/Insurance: 31%
House/car/food/utilities: 30%
Retirement: 17% (401k/IRA)
Various other costs including a sinking fund for future house costs: 12%
Extra: 10%

 

[GoldenEye 007]

I just started a new job and I recently made my selection for retirement. It's a state level/university position, so retirement is mandatory. I have to contribute 10% and the school will contribute 13% of my salary per month. So despite my high student loans, I'll be contributing towards retirement regardless. I had options in an Alternative Retirement Plan(a 401a) or the state retirement plan. I live in TX, but the new position is in OH. However, I work from home, so my residence will stay in TX.

I have been job hopping a bit, but I hope to stay settled in this role for awhile. It represented a salary level more in line with what I feel I should be at in my career (a 31% jump from my previous employer). With my previous employer, I went into the state pension system, but I have only a year and a half into it. I'll likely keep that there in case I end up back at a state position, I guess. Or I can take my contributions out and put it towards credit for the new employer.

For the new employer, I've opted to go into the state system again, rather than the alternative investment plan. However, I went for a hybrid option. Where part of the plan is a state pension and the other part is a member directed defined contribution plan. I figured that would be a good mix as I'm unsure if I'll commit 30-40 years here - while allowing me to pay into a pension. The state contribution goes into the pension and my contribution goes into the defined contribution.

More to the point, I am 28 going on 29, and I figure I'm a solid 40 years away from retirement. So I guess I can take on more risk. Of the funds I am contributing, I have 10% going to bonds (.04% expense ratio), 40% to a large cap index (.05% expense ratio), 20% to a small cap index (.08% expense ratio), 15% to an international index (.1% expense ratio), and 15% to a general US stock fund (.03% expense ratio) - which seems to skew large cap.

Is that a good mix to establish for long term? I do also plan on starting a 403b plan through the employer - I think Vanguard is an option there. Not sure if I'll immediately be able to do a 401k or Roth IRA, though. And even with a possible 403b, it'll be very small contributions per month for the first couple of years I'm sure - like $50 a month or something.

Edit: Oh, and this employer does not participate in Social Security. So for the time being, my contributions will stop, affecting benefits later on. Assuming it still even exists. And it looks like these funds use Russel 2000 as the benchmark for performance.

 

[GhaleonEB]

That's a good mix, with the only one I'd really question being the total stock market index, which overlaps with the large and small cap. But it's also a way to get midcap exposure. Personally, if it's really a total market index, I'd just go all into that and drop the other two. (The market overall skews large cap.) You've got great fund expenses and selection.

 

[Daante]

Man I just went over my nubmers again, I don't know how you guys are putting 50%+ towards retirement.

Im in my mid 30:s age wise, and have worked many years on building a "rich life" without the need to spend a lot of money. I made a shit load of mistakes career and salary wise during my +10 year career, and there are probably alot of people who make more money than i do on a yearly basis.

Yet there are also probably alot of people who never will be able to have the saving rate i can have, beacuse they are still trapped in the cunsumtion-Matrix-and-i-let-other-people-run-my-life-and-economy.

I know the above sounds a bit fluffy and out there, but start by really digging deep and face your spending habits, and how people you usually hangs out with looks at money. There is a lot of good info on sites such as mrmoneymustache etc.

 

[ClosingADoor]

Man I just went over my nubmers again, I don't know how you guys are putting 50%+ towards retirement.

Low living costs and no car / transport costs due to working from home goes a long way.

 

[anonymous_abc]

Ah that would certainly help.

The way I see it right now I'm at:

Taxes/Insurance: 31%
House/car/food/utilities: 30%
Retirement: 17% (401k/IRA)
Various other costs including a sinking fund for future house costs: 12%
Extra: 10%

we typically use net numbers. so that would increase your percentages.

 

[demosthenes]

we typically use net numbers. so that would increase your percentages.

Ohhh, that makes a little more sense then. I just assume net of the taxes/insurance #'s?

 

[GhaleonEB]

Ohhh, that makes a little more sense then. I just assume net of the taxes/insurance #'s?

FWIW, when I do all my savings rate calculations, I do it off my take-home (after taxes, healthcare deductions, etc.), vs. gross salary. I want to know how much of my income available to save, I'm saving. Looking at the full picture with taxes is also useful, but less so for that analysis, IMO.

 

[Joe]

Does it make sense at all to wait for a potential bear market, or some sort of extended downturn, sometime this year before opening a Roth IRA and investing in etfs? Or don't even worry about that at all and just buy in ASAP?

 

[ClosingADoor]

Does it make sense at all to wait for a potential bear market, or some sort of extended downturn, sometime this year before opening a Roth IRA and investing in etfs? Or don't even worry about that at all and just buy in ASAP?

Don't try to time the market. It might go up, it might go down. Nobody knows.

 

[LucidMomentum]

Yeah, I don't know what's up with them sticking you in all those funds. A target date fund is meant to have all of your funds in it as that's sort of the whole point.

Good to know. It seems like it's more a smoke and mirrors thing to make me feel more comfortable.

It's around $2-300 year until I hit above 100K which could take a couple more years.

At which point those dollars could be compounding interest and doing more work for me.

Spent a half hour trying to figure out how to enenroll since it won't let me move stuff over to 2055 by myself so I sent them an email about unenrolling from the service.

Thanks for the advice, y'all.

 

[Joe]

Don't try to time the market. It might go up, it might go down. Nobody knows.

Thanks for the advice!

 

[ZackieChan]

Thanks for the advice!

Dollar cost averaging, bro

Ah that would certainly help.

The way I see it right now I'm at:

Taxes/Insurance: 31%
House/car/food/utilities: 30%
Retirement: 17% (401k/IRA)
Various other costs including a sinking fund for future house costs: 12%
Extra: 10%

I ain't saving for a house, so there's that. Plus my expenses are hella cheap.

And running my own 401(k) reduces my taxable income by a lot. But I'm an edge case, for sure. Sounds like you're doing pretty well, man.

 

[Piecake]

Dollar cost averaging, bro

Historically, you are better off simply doing lump sum investing than doing dollar cost averaging.

http://www.businessinsider.com/lump-sum-vs-dollar-cost-averaging-2014-12

An AllianceBernstein blog post from July explained this argument, and the group reiterated its point in a year-end review Wednesday. It compared historical returns from three investment strategies: putting a sum of money into the market all at once, dollar-cost averaging and splitting that money into equal monthly investments, and just holding cash. While dollar-cost averaging fared better on average than waiting on the sidelines, the clear winner is the front-loaded, lump-sum investment.

AllianceBernstein's Seth Masters points out that immediate investing works better than dollar-cost averaging "because stock markets tend to rise over time, so investing immediately wins on average." Dollar-cost averaging means that you still have some of your money on the sidelines, so you can miss out on some big gains.

Obviously, lump sum investing won't be the best method all the time, but it seems to be the best method most of the time.

 

[radioactivez0r]

I have an IRA that I rolled over from a 401k with a previous employer. It's with T Rowe Price (Target 2045 fund) currently. I've just let it sit there since the rollover, not contributing. I also currently have a 403b account under Fidelity with my current employer, which I do contribute to, but it's kind of crap as my company has a pension system that they tend to prioritize.

Anyway, I use Betterment as my emergency fund (10% per check goes to it) and they recently emailed me about moving my T. Rowe IRA to their IRA. Has anyone done this (use a more automated system for an account)? Does it have any real benefits? There is a larger conversation about my goals here but I'm just curious about this specific question at the moment.

 

[ascii42]

I've never really tried to calculate my savings rate, because I've never been certain what to consider the defined benefit portion of FERS.

 

[anonymous_abc]

I've never really tried to calculate my savings rate, because I've never been certain what to consider the defined benefit portion of FERS.

For savings rate I only go by what lands on my account on payday post tax and all.

 

[ZackieChan]

Historically, you are better off simply doing lump sum investing than doing dollar cost averaging.

http://www.businessinsider.com/lump-sum-vs-dollar-cost-averaging-2014-12





Obviously, lump sum investing won't be the best method all the time, but it seems to be the best method most of the time.

Interesting. What if I did it quarterly? The money just adds up in YNAB in my retirement categories. Or is annual the way to go?

Or should I just wait until I'm 70 to put it in? 😏

 

[tokkun]

Interesting. What if I did it quarterly? The money just adds up in YNAB in my retirement categories. Or is annual the way to go?

Or should I just wait until I'm 70 to put it in? 😏

Seems like there might be some misconception here. The sole reason lump sum investing outperforms DCA in those studies is because the money goes into investments earlier. It is not related to the number of contributions. Although there is a practical advantage to doing fewer contributions: it tends to make doing your taxes easier.

So if you are asking "should I accumulate cash over the course of a year and invest it all at once", the answer is no. The optimal strategy is to invest the money as fast as possible. Of course, you should balance optimization with the effort required on your part. Quarterly is about what I do with my after-tax investments.

 

[PflargBlarg]

Seems like there might be some misconception here. The sole reason lump sum investing outperforms DCA in those studies is because the money goes into investments earlier. It is not related to the number of contributions. Although there is a practical advantage to doing fewer contributions: it tends to make doing your taxes easier.

So if you are asking "should I accumulate cash over the course of a year and invest it all at once", the answer is no. The optimal strategy is to invest the money as fast as possible. Of course, you should balance optimization with the effort required on your part. Quarterly is about what I do with my after-tax investments.

Yeah, I do a buy roughly every time I have $5000 available as I have to pay a $10 commission on every trade. So that ends up being every 2-3 months.

 

[ZackieChan]

Seems like there might be some misconception here. The sole reason lump sum investing outperforms DCA in those studies is because the money goes into investments earlier. It is not related to the number of contributions. Although there is a practical advantage to doing fewer contributions: it tends to make doing your taxes easier.

So if you are asking "should I accumulate cash over the course of a year and invest it all at once", the answer is no. The optimal strategy is to invest the money as fast as possible. Of course, you should balance optimization with the effort required on your part. Quarterly is about what I do with my after-tax investments.

I think quarterly would be optimal, as it would line up with my quarterly estimated tax payments and I can invest accordingly to reduce the tax burden (theoretically). I just got a tax guy so I'll discuss with him.

 

[Moppet13]

Yeah, I do a buy roughly every time I have $5000 available as I have to pay a $10 commission on every trade. So that ends up being every 2-3 months.

$10 commission is pretty high, Fidelity just lowered theirs to 4.99 and TD Ameritrade lowered theirs to around $6.

Edit: Not that it's the biggest deal in the world