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[chaosblade]

I've opened a Lifetime ISA (UK) with Hargreaves & Lansdown and wanted some advice on investment options considering its hopefully going to be fairly short term - around 3 years (for house not retirement).

At the minute I'm debating whether or not to have some mixed fairly high equity funds for the first year or so and then move into something more balanced year 2 and very low risk year 3. I was looking at the various Vanguard 40/60/80% funds for example and maybe a US/global index fund.

You're looking to use a long term investment strategy for short term savings. It's a safe bet the market will go up quite a bit in 30 years. It's not a safe bet the market will be up at all in 3 years. A savings account with a good interest rate or a CD could be good. You may be able to at least match inflation with what you earn back on it in interest if you are lucky.

If you go with an investment bonds would be a better option than stocks.

 

[BraXzy]

Unless you can afford a 50% drop in that timeframe I'd just keep your savings in cash.

Yeah I suppose I was trying to be too optimistic with the time frame. Thanks for the reality check.

If you go with an investment bonds would be a better option than stocks.

I'll go with a small amount in bonds and the rest cash. I wouldn't be able to go savings account because the LISA with Hargreaves gives 25% back via government.

 

[tokkun]

If you go with an investment bonds would be a better option than stocks.

Meanwhile, this article has been making the rounds:

https://www.bloomberg.com/news/arti...ks-but-look-out-when-bonds-pop-greenspan-says

 

[Mrbob]

I estimate that if you were to have $100,000 in international, you'd save yourself $26 per year if you held VEA and VWO instead of VXUS, before you account for any time or transactional costs of maintaining the 80/20 balance yourself. If your balance is less, then you save less.

If that's worth it to you, then by all means.

Got it. I found out VEA + VWO holds more stocks than just VXUS since VWO includes China Class A shares. So I think I'll just keep it as is for now since I don't think yearly balance will be an issue.

Though I'm going through the process of minimizing my holdings from betterment. They include VTV large, VBR small, and VOE mid value tilts to VTI. I've been charting these stocks lately and it doesn't really seem like an extra value tilts deviate much from VTI in the past 5 years anyway. All 4 etfs are roughly the same in terms of percentage increase. So once the transfer in kind is complete I'm going to sell off VTV, VBR, and VOE and put that money back into VTI. Plus it seems VTI is 20% mid and 10% small anyway. Shrinking to a 4 fund portfolio of VTI, VEA, VWO, and BND.

 

[Chris R]

Hell, I have Vanguard funds, but John Hancock adds 1% fees to them. Vanguard S&P 500 has a fee of 1.05% through my 401k.

Straight up robbery, should be illegal

 

[Mrbob]

Meanwhile, this article has been making the rounds:

https://www.bloomberg.com/news/arti...ks-but-look-out-when-bonds-pop-greenspan-says

My portfolio I'm moving over is 90/10 stocks to bonds. Now after reading this is there a really reason to own bonds right now in my roth ira? I'm 30+ years from retirement and I figure I might as well shoot for tax free growth.

 

[Link]

My portfolio I'm moving over is 90/10 stocks to bonds. Now after reading this is there a really reason to own bonds right now in my roth ira? I'm 30+ years from retirement and I figure I might as well shoot for tax free growth.

I'm around the same spot you are, and right now I have my Roth in 100% stocks. Vanguard VTSAX specifically. I don't see any reason to bother with bonds this far out from retirement.

 

[GhaleonEB]

My portfolio I'm moving over is 90/10 stocks to bonds. Now after reading this is there a really reason to own bonds right now in my roth ira? I'm 30+ years from retirement and I figure I might as well shoot for tax free growth.

My view, shared by a few others here, is there's no point owning bonds that far out from retirement. Bonds serve to lower returns over the long horizon, while mitigating volatility. But if you have the discipline to stay hands-off during volatile market periods, an all stock portfolio is likely to provide better returns over that horizon.

If you do think you might panic at big swings, then keep bonds in the mix. Controlling your own behavior is a valid reason to tailor your investment strategy.

That said, that advice is a bit outside of the mainstream, which does suggest holding 10-20% bonds this far out. I'm personally at 100% stocks and have been through two market crashes, so my portfolio swings like crazy. But over the past decade I've been glad to hold all stocks vs. bonds given the relative returns.

It does raise the issue of, at which point in time you start allocating to bonds. But you're got a while to noodle on it. (I'll actually start the shift sometime in the next 10 years.)

 

[ascii42]

My view, shared by a few others here, is there's no point owning bonds that far out from retirement. Bonds serve to lower returns over the long horizon, while mitigating volatility. But if you have the discipline to stay hands-off during volatile market periods, an all stock portfolio is likely to provide better returns over that horizon.

If you do think you might panic at big swings, then keep bonds in the mix. Controlling your own behavior is a valid reason to tailor your investment strategy.

That said, that advice is a bit outside of the mainstream, which does suggest holding 10-20% bonds this far out. I'm personally at 100% stocks and have been through two market crashes, so my portfolio swings like crazy. But over the past decade I've been glad to hold all stocks vs. bonds given the relative returns.

It does raise the issue of, at which point in time you start allocating to bonds. But you're got a while to noodle on it. (I'll actually start the shift sometime in the next 10 years.)

I'm inclined to agree, and sometimes wonder why I don't do the same. But I've stuck with lifecycle funds, mostly because I don't trust myself to do a good job with rebalancing when it would come time to do that. Particularly if that coincided with major market swings. TSP's expense ratios are low regardless of which fund, anyway.

 

[demosthenes]

My view, shared by a few others here, is there's no point owning bonds that far out from retirement. Bonds serve to lower returns over the long horizon, while mitigating volatility. But if you have the discipline to stay hands-off during volatile market periods, an all stock portfolio is likely to provide better returns over that horizon.

If you do think you might panic at big swings, then keep bonds in the mix. Controlling your own behavior is a valid reason to tailor your investment strategy.

That said, that advice is a bit outside of the mainstream, which does suggest holding 10-20% bonds this far out. I'm personally at 100% stocks and have been through two market crashes, so my portfolio swings like crazy. But over the past decade I've been glad to hold all stocks vs. bonds given the relative returns.

It does raise the issue of, at which point in time you start allocating to bonds. But you're got a while to noodle on it. (I'll actually start the shift sometime in the next 10 years.)

At what point indeed.

I was helping some family friends with their finances for the first time and the man is 1.5 to 2 years from retirement. They had him at 96% equities. My jaw dropped.

 

[tokkun]

My portfolio I'm moving over is 90/10 stocks to bonds. Now after reading this is there a really reason to own bonds right now in my roth ira? I'm 30+ years from retirement and I figure I might as well shoot for tax free growth.

This would be the main reason: http://www.multpl.com/shiller-pe/

Although if you think Greenspan is right about the bond bubble, then solution is to buy TIPS instead.

 

[phanphare]

so for investing annually in a Roth IRA

is it better to just put the money in whenever it becomes available or should I save it and try to invest it when the stock market is down during the year? does that matter much in the long run?

 

[Chris R]

so for investing annually in a Roth IRA

is it better to just put the money in whenever it becomes available or should I save it and try to invest it when the stock market is down during the year? does that matter much in the long run?

Don't try to time the market.

Can that be the thread subtitle when we get to OT2?

 

[Neverwinter27]

What do you guys think of Vanguard's VGHCX health care?

 

[phanphare]

Don't try to time the market.

Can that be the thread subtitle when we get to OT2?

ha, thanks

 

[Mrbob]

Goodbye bonds for now then.

What do you guys think of Vanguard's VGHCX health care?

Ive been in vht for awhile (mutual fund equivalent VHCIX) and have no plans of leaving. Holdings aren't exactly the same but have some overlap, and VHCIX and VGHCX charts are very close. Expense ratio for VHT/VHCIX much lower too.

 

[SecretMoblin]

Fidelity cutting fees (slightly) for 14 funds:

Fidelity 500 Index
Fidelity Total Markets Index
Fidelity Large Cap Growth Index
Fidelity Large Cap Value Index
Fidelity Mid Cap Index
Fidelity Small Cap Index
Fidelity International Index
Fidelity Global ex US Fund
Fidelity Total International Index
Fidelity Emerging Markets
Fidelity US Bond Index
Fidelity Short-Term Treasury Bond Index
Fidelity Intermediate Treasury Bond Index
Fidelity Long-Term Treasury Bond Index

Competition is good!



Also this article has been making the rounds: What Impact Is Passive Investing Having on the Market? Try None

 

[Neverwinter27]

Goodbye bonds for now then.



Ive been in vht for awhile (mutual fund equivalent VHCIX) and have no plans of leaving. Holdings aren't exactly the same but have some overlap, and VHCIX and VGHCX charts are very close. Expense ratio for VHT/VHCIX much lower too.

How much % of that is shared in your overall total portfolio, and are it's dividends what they seem based on your experience?

 

[ferr]

Meanwhile, this article has been making the rounds:

https://www.bloomberg.com/news/arti...ks-but-look-out-when-bonds-pop-greenspan-says

1997 - 2016 annual bond returns (based on bloomberg barclay US aggregate bond index)

9.65
8.69
-0.82
11.63
8.44
10.26
4.1
4.34
2.43
4.33
6.97
5.24
5.93
6.54
7.84
4.21
-2.02
5.97
0.55
2.65

Not much precedence for anything to worry about too much.

 

[hockeypuck]

I like having bonds for two reasons, that may be considered corollaries to "reducing volatility." First, it's a traditional diversification hedge that has the blessing of the Boglehead mindset. People say, buy the entire market. For the common portfolio, that includes bonds, I am led to believe. Second, and this is more mind games than anything else, I'd like to have some "kindling" to quickly snatch up cheap equities during a recession. I completely understand that I would statistically still come out ahead if I had stayed in 100% stocks, but I know my risk tolerance is not has high as I claim I can be. I'm 10% in bonds, and hopefully less than 20 years from having "fuck you" money.

 

[Mrbob]

How much % of that is shared in your overall total portfolio, and are it's dividends what they seem based on your experience?

About 7% right now due to growth, try to set it at 5%. Overweight so I'll trim it back down to 5 eventually. Dividend for health care etfs aren't very good. Health care etf boost is in growth. If you are going to buy and hold health care you have to know it has bigger swings than the larger market. To me health care etfs are the ultimate "buy on the dips", because they can swing down 20% and then swing back up 35%. I've been eyeing at buying more VHT on a decent pullback.

If you want dividends in a little less volatile etf perhaps you can look at a value etf like VTV. But I'm not sure if you really need more than VTI (Which is already 13% health care) + VXUS (Or VEA + VWO) + potentially bonds. Many don't even recommend being in sector ETFs but I've always been a little more aggressive with my investment strategy.

 

[Neverwinter27]

I also have most of my funds in bonds, namely the vanguard total bond index; about 95% of my portfolio is in this fund. The reason being is that I'm expected to use all of it for a large purchase within 2-3 years- I thought that keeping my savings in a bank would be inefficient so I chose VBTLX. Now with this kind of bad news with bonds, where else can I move my investment into? A money market? or should I stay put?

 

[chaosblade]

I also have most of my funds in bonds, namely the vanguard total bond index; about 95% of my portfolio is in this fund. The reason being is that I'm expected to use all of it for a large purchase within 2-3 years- I thought that keeping my savings in a bank would be inefficient so I chose VBTLX. Now with this kind of bad news with bonds, where else can I move my investment into? A money market? or should I stay put?

I wouldn't call that "bad news." It's more like speculation. People have been saying stocks are about to tank for two years now.

 

[SecretMoblin]

I also have most of my funds in bonds, namely the vanguard total bond index; about 95% of my portfolio is in this fund. The reason being is that I'm expected to use all of it for a large purchase within 2-3 years- I thought that keeping my savings in a bank would be inefficient so I chose VBTLX. Now with this kind of bad news with bonds, where else can I move my investment into? A money market? or should I stay put?

If it's just 2-3 years, park it in a CD (right now they're running around 1.5-2%) or an online savings account (~1.15-1.20%).

You can't know for certain how bonds will do over the next few years and it's not worth the risk of the index dipping and erasing any yield (or worse).

 

[Neverwinter27]

If it's just 2-3 years, park it in a CD (right now they're running around 1.5-2%) or an online savings account (~1.15-1.20%).

You can't know for certain how bonds will do over the next few years and it's not worth the risk of the index dipping and erasing any yield (or worse).

Which online savings account, The Synchrony one?

 

[Link]

I also have most of my funds in bonds, namely the vanguard total bond index; about 95% of my portfolio is in this fund. The reason being is that I'm expected to use all of it for a large purchase within 2-3 years- I thought that keeping my savings in a bank would be inefficient so I chose VBTLX. Now with this kind of bad news with bonds, where else can I move my investment into? A money market? or should I stay put?

If you don't mind me asking, what kind of return did you get on that?

 

[psyfi]

start gardening

 

[tokkun]

1997 - 2016 annual bond returns (based on bloomberg barclay US aggregate bond index)

There is an important factor at play in the bond market that isn't shown by looking only at historical returns. Bond returns consist of two things: the bond yield and any appreciation in price. Both of those factors are driven by interest rates. Higher interest rates mean higher yields (otherwise people would put their money in a saving account instead). And when rates are cut that helps bond prices, because existing bonds now have a higher rate than new bonds will.

For 30 years, this created a win-win situation in bonds. I say 30 years, because in 1981 interest rates were at a staggering 15%. This meant that bonds started at a high point, and that for the next few decades the Fed mostly cut interest rates, leading to steady increases in bond prices.

However, following the financial crisis, interest rates were cut to near zero (and in fact have negative real yields in many countries). So not only are yields low now, there is not much more cutting that can be done to improve bond prices. Instead, the only direction for interest rates is up, which should hurt bond prices. This is the essential reason why people have become so negative on bonds in recent years.

It is possible that bond prices could rise if there is higher demand for them, but it's worth remembering that the Fed and its counterparts are holding a lot of bonds on their balance sheets that they bought up during the last crisis that they will eventually want to unload. So there may be a lot of false demand in the market as it is.

I also have most of my funds in bonds, namely the vanguard total bond index; about 95% of my portfolio is in this fund. The reason being is that I'm expected to use all of it for a large purchase within 2-3 years- I thought that keeping my savings in a bank would be inefficient so I chose VBTLX. Now with this kind of bad news with bonds, where else can I move my investment into? A money market? or should I stay put?

I wouldn't freak out too much over a single article. Most financial predictions are wrong. I just posted it because it was an interesting topic for discussion, not because I am convinced it is going to come true.

 

[PflargBlarg]

My view, shared by a few others here, is there's no point owning bonds that far out from retirement. Bonds serve to lower returns over the long horizon, while mitigating volatility. But if you have the discipline to stay hands-off during volatile market periods, an all stock portfolio is likely to provide better returns over that horizon.

If you do think you might panic at big swings, then keep bonds in the mix. Controlling your own behavior is a valid reason to tailor your investment strategy.

That said, that advice is a bit outside of the mainstream, which does suggest holding 10-20% bonds this far out. I'm personally at 100% stocks and have been through two market crashes, so my portfolio swings like crazy. But over the past decade I've been glad to hold all stocks vs. bonds given the relative returns.

It does raise the issue of, at which point in time you start allocating to bonds. But you're got a while to noodle on it. (I'll actually start the shift sometime in the next 10 years.)

I've also read some perspectives that it's actually a good idea to keep heavy on stocks the whole way through your lifetime. I think we've discussed the bond tent concept before? It hasn't been academically tested yet but conceivably it make sense.

 

[tokkun]

I've also read some perspectives that it's actually a good idea to keep heavy on stocks the whole way through your lifetime. I think we've discussed the bond tent concept before? It hasn't been academically tested yet but conceivably it make sense.

People are saying that because real bond yields are too low to be sustainable for people who did retirement planning expecting to be able to get something like a 3% real return on bonds. So they either need to take on more risk or delay retirement. It's less of a good idea, and more of a last resort. You also tend to hear more of this type of thinking any time you are in a long bull market like we are now, where people begin to forget about the downside of stocks.

The problem with stocks of course is that they may drop 30% in the course of a 'normal' recession. If that happens when you are entering retirement and you have 100% stocks, you are screwed, because you have no choice but to sell low. You are much better off having enough money in some lower volatility assets (whether it is bonds or TIPS or cash) that you can draw off during such a shock while you wait for stock prices to recover.

If you are going for a 4% withdrawal rate, then being 60% stocks / 40% bonds (or alternative), you have 10 years worth of low-volatility assets to draw off. That should be enough to weather even lengthy recessions unscathed.

 

[BraXzy]

I can never work out if I'm being diverse enough In my fund choices. I'm trying to keep it simple.. this is my long term ISA so no worry about risk per say yet. Also don't have a whole lot to drop in each month yet but anything is a start right.

Legal & General US Index C - 25%
Legal & General International Index Trust C - 18%
Old Mutual North American Equity R - 14%
Vanguard LifeStrategy 80% Equity - 15%
CF Lindsell Train UK Equity D - 14%
Vanguard Global Emerging Markets - 14%

Anyone have thoughts on my current pick of funds?

 

[ferr]

There is an important factor at play in the bond market that isn't shown by looking only at historical returns. Bond returns consist of two things: the bond yield and any appreciation in price. Both of those factors are driven by interest rates. Higher interest rates mean higher yields (otherwise people would put their money in a saving account instead). And when rates are cut that helps bond prices, because existing bonds now have a higher rate than new bonds will.

For 30 years, this created a win-win situation in bonds. I say 30 years, because in 1981 interest rates were at a staggering 15%. This meant that bonds started at a high point, and that for the next few decades the Fed mostly cut interest rates, leading to steady increases in bond prices.

However, following the financial crisis, interest rates were cut to near zero (and in fact have negative real yields in many countries). So not only are yields low now, there is not much more cutting that can be done to improve bond prices. Instead, the only direction for interest rates is up, which should hurt bond prices. This is the essential reason why people have become so negative on bonds in recent years.

It is possible that bond prices could rise if there is higher demand for them, but it's worth remembering that the Fed and its counterparts are holding a lot of bonds on their balance sheets that they bought up during the last crisis that they will eventually want to unload. So there may be a lot of false demand in the market as it is.



I wouldn't freak out too much over a single article. Most financial predictions are wrong. I just posted it because it was an interesting topic for discussion, not because I am convinced it is going to come true.

I don't think the fed will willingly unload bonds knowing they are going to impact the economy negatively. It wouldn't be in their best interest.

Spoiler

sorry for that pun...

Also, re the other bolded statement about 30 years of reduced interest rates versus today's current rates being an issue.. I don't know about that. Rates will fluctuate, prices will react, people will continue to trade bonds. If Greenspan's bubble happens, bond prices will go down, then they will go back up (so buy on the down).

 

[Ziltoidia 9]

Since I've moved back home I've been able to save some and looking to start investing for future, as I am in a position to start putting money away. I still want to buy a house but I should also look at this too.

My employer offers 457, Roth IRA, and Traditional IRA and will match up to 2% of my salary in a 457. Benefits renew in October so I'm starting to plan what I will do.

The two vendors that are offered are International City/County Management and Nationwide. Which should I go for?

And what should I do with money I have been saving?

Any advise?

 

[GhaleonEB]

Since I've moved back home I've been able to save some and looking to start investing for future, as I am in a position to start putting money away. I still want to buy a house but I should also look at this too.

My employer offers 457, Roth IRA, and Traditional IRA and will match up to 2% of my salary in a 457. Benefits renew in October so I'm starting to plan what I will do.

The two vendors that are offered are International City/County Management and Nationwide. Which should I go for?

And what should I do with money I have been saving?

Any advise?

1) What funds do they offer and what are the expense ratios for them? Are you aware of any other account fees?

2) Does your employer offer a 401k or a IRA? IRA's are usually personal accounts, nothing to do with your employer, but maybe this is a special thing I'm not aware of.

3) Very general advise: Contribute to the 457/401k up to the employee match, and then, depending on the quality of the funds, contribute to your IRA in a low cost, broad market index fund. If you are able to max our your IRA, then put any additional contributions into the 457/401k.

Balancing out how much to put into retirement vs. home down payment will depend in your priorities and situation, but I definitely encourage you to do both, to some degree, so you can get money into retirement sooner. Don't focus on one and neglect retirement completely for any number of years, if you have the means to start saving now.

If you can post the funds that you have available to you, we can advise you on the best ones to choose from.

 

[Ancient Gray]

Investing is so confusing to me. I have no idea if what I'm doing is right.

I do have an IRA set up. Was going to consolidate all of my investments into Fidelity and then probably into an index fund. Truth be told, I have no idea if IRA is an index fund. It's all so weird to me that i just freeze up and do nothing. I'm afraid to sound stupid when I call up.

 

[GhaleonEB]

Investing is so confusing to me. I have no idea if what I'm doing is right.

I do have an IRA set up. Was going to consolidate all of my investments into Fidelity and then probably into an index fund. Truth be told, I have no idea if IRA is an index fund. It's all so weird to me that i just freeze up and do nothing. I'm afraid to sound stupid when I call up.

Read the OP, and we can help. What seems crazy complex becomes much easier and simple to manage once you know the basics.

An index fund is a type of investment, like a stock or a bond. (Specifically, it's a type of mutual fund.)

Fidelity has good index funds (it's where my retirement money is).

An IRA is a type of retirement account, which holds the investments.

 

[kotodama]

What does GAF think about stock funds for retirement?

I just looked at my July statement compared to my March and I've gone from a 50/50 stock/bond split to a 25/75 split. Seriously I've been loading up on the bond fund end with tax-free munis and federal stuff.

If one was able to budget their life style pretty well and account for any quarterly market action, would say bumping up Vanguard 500 be alright for retirement and skimming the dividends on a quarterly biases win or lose, while the bond funds would take care of the basic monthly expenses (food, rent, utilities, etc.)

 

[GhaleonEB]

What does GAF think about stock funds for retirement?

I just looked at my July statement compared to my March and I've gone from a 50/50 stock/bond split to a 25/75 split. Seriously I've been loading up on the bond fund end with tax-free munis and federal stuff.

If one was able to budget their life style pretty well and account for any quarterly market action, would say bumping up Vanguard 500 be alright for retirement and skimming the dividends on a quarterly biases win or lose, while the bond funds would take care of the basic monthly expenses (food, rent, utilities, etc.)

We had a good discussion about this in the last page or so. I'm skeptical of the value of holding any bonds this far out from retirement, and am in 100% stock index funds. I reinvest the dividends so the returns compound. (Last year they were worth more than a couple month's income, which is neat.)

My ideal retirement plan has us just living off dividends and never touching principle, once I get to withdrawing. But I don't think we'll quite get there.

 

[kotodama]

We had a good discussion about this in the last page or so. I'm skeptical of the value of holding any bonds this far out from retirement, and am in 100% stock index funds. I reinvest the dividends so the returns compound. (Last year they were worth more than a couple month's income, which is neat.)

My ideal retirement plan has us just living off dividends and never touching principle, once I get to withdrawing. But I don't think we'll quite get there.

Thanks, I'll have to take a look a couple pages back. Well what if you're 2-4 months out from retirement?

Yup, ideally I'd love to live only on a part of my dividends, just to get that other bit compounding indefinitely.

 

[Ancient Gray]

Read the OP, and we can help. What seems crazy complex becomes much easier and simple to manage once you know the basics.

An index fund is a type of investment, like a stock or a bond. (Specifically, it's a type of mutual fund.)

Fidelity has good index funds (it's where my retirement money is).

An IRA is a type of retirement account, which holds the investments.

I read over it. Want to make sure I get it.

As it stands, it looks like I'm putting away more than $5k a year in my 401k. I just called TIAA and my other 401k place and had them transfer those funds to my rollover IRA with Fidelity. It's not much but I'm fairly certain that's all of my funds at that point in one place. Now basically, what do I do? Do I move my current employer 401k into the IRA account as well and from that invest into index funds because of the tax advantage? Is that making sense? Or is that completely not how that works?

 

[Makai]

How do I calculate how much benefits are worth? Insurance, PTO, holidays - I'm probably forgetting other benefits I take for granted. I've always worked full-time salary but I am considering an hourly W2 contract with no benefits. It's about a 50% wage increase using the 2000x salary conversion. Is this a good deal?

 

[tokkun]

I read over it. Want to make sure I get it.

Best to take it slow. The amount of information can be intimidating at first, but trust me when I say that the actual amount of expertise needed to invest well is remarkably low compared to what you might think from portrayals in the media.

As it stands, it looks like I'm putting away more than $5k a year in my 401k. I just called TIAA and my other 401k place and had them transfer those funds to my rollover IRA with Fidelity. It's not much but I'm fairly certain that's all of my funds at that point in one place. Now basically, what do I do?

Now you use the money to buy an index fund. If you want the dead simplest approach to get started investing, buy Fidelity's FFNOX fund:
https://fundresearch.fidelity.com/mutual-funds/summary/31634R109

My advice for newcomers is usually to start with a single fund like that to get the ball rolling. You can always change it later if you decide you like investing and want to get more complex.

Do I move my current employer 401k into the IRA account as well and from that invest into index funds because of the tax advantage? Is that making sense? Or is that completely not how that works?

Probably not. Although you are free to move money from previous employers' 401ks, the law limits your ability to move money from your current employer's 401K.

The 401K is just another type of account, so what you need to do is buy an index fund in your 401K as well. The complication is that 401Ks usually offer much fewer choices of what funds you can buy. So you will need to find a list of the funds offered by your 401K before we can give you advice about which one you should buy.

 

[Natetan]

What do you guys think of Robert Kiyosaki? He's coming to town this week and I'm going to attend an event of his.

 

[greyshark]

My ideal retirement plan has us just living off dividends and never touching principle, once I get to withdrawing. But I don't think we'll quite get there.

What kind of dividend rate do you expect to get in retirement assuming at that point you'd be heavily invested in lower risk areas like bonds?

 

[tokkun]

How do I calculate how much benefits are worth? Insurance, PTO, holidays - I'm probably forgetting other benefits I take for granted. I've always worked full-time salary but I am considering an hourly W2 contract with no benefits.

By law, employers are now required to report their portion of health care premiums on the W2. It's code DD in box 12. Keep in mind that those numbers are pre-tax, whereas the money you use to buy an after-market plan may or may not be post-tax (in my state it is tax deductible, but that's a state-by-state thing). You may also want to factor in the different selection of plans available on the individual marketplace (and any ACA subsidy you might qualify for). So it's complicated, but the value on your W2 is a ballpark value. For me, it works out to about $8500, but health care costs can vary a lot state-to-state.

How much you value PTO is really down to personal preference. You can always start by valuing it equal to the wages you would have to forego to take an equal amount of vacation as an hourly worker.

Relevant to this thread, the other benefit that may be worth a lot of money is a 401K.

 

[demosthenes]

How do I calculate how much benefits are worth? Insurance, PTO, holidays - I'm probably forgetting other benefits I take for granted. I've always worked full-time salary but I am considering an hourly W2 contract with no benefits. It's about a 50% wage increase using the 2000x salary conversion. Is this a good deal?

Don't forget about taxes. They might not withhold them.

 

[Ziltoidia 9]

1) What funds do they offer and what are the expense ratios for them? Are you aware of any other account fees?

2) Does your employer offer a 401k or a IRA? IRA's are usually personal accounts, nothing to do with your employer, but maybe this is a special thing I'm not aware of.

3) Very general advise: Contribute to the 457/401k up to the employee match, and then, depending on the quality of the funds, contribute to your IRA in a low cost, broad market index fund. If you are able to max our your IRA, then put any additional contributions into the 457/401k.

Balancing out how much to put into retirement vs. home down payment will depend in your priorities and situation, but I definitely encourage you to do both, to some degree, so you can get money into retirement sooner. Don't focus on one and neglect retirement completely for any number of years, if you have the means to start saving now.

If you can post the funds that you have available to you, we can advise you on the best ones to choose from.

OK thank you, I will keep all this in mind when It comes time to feel out my benefits selections.

They offer IRAs and Roth IRAs and 457. I guess they are all 3 separate things and one or the other? I believe the employer contribution is only for 457. And I also believe it is an independent account that they put the funds into.

So do full 2% of salary into 457 (They will match it) and then open a IRA/Roth IRA to add funds into it when able?

 

[GhaleonEB]

What kind of dividend rate do you expect to get in retirement assuming at that point you'd be heavily invested in lower risk areas like bonds?

I haven't calculated it, so I have no idea. I generally don't go into that kind of detail. Others might be able to give you a better answer.

Over the years I've come to realize that the simpler I keep things, the better I am at managing the finances and the less stressful it is. So I have a target $ we're saving toward, on a desired schedule. It has me retiring at the age I want with enough to live comfortably. So long as we're on track I can sort out the details when the time comes.

 

[Randolph Freelander]

What do you guys think of Robert Kiyosaki? He's coming to town this week and I'm going to attend an event of his.

Crackpot

 

[Domino Theory]

I like having bonds for two reasons, that may be considered corollaries to "reducing volatility." First, it's a traditional diversification hedge that has the blessing of the Boglehead mindset. People say, buy the entire market. For the common portfolio, that includes bonds, I am led to believe. Second, and this is more mind games than anything else, I'd like to have some "kindling" to quickly snatch up cheap equities during a recession. I completely understand that I would statistically still come out ahead if I had stayed in 100% stocks, but I know my risk tolerance is not has high as I claim I can be. I'm 10% in bonds, and hopefully less than 20 years from having "fuck you" money.

Speaking of fuck you money, I just want to say this thread, the OP, and The Simple Path to Wealth book have been my greatest teachers and helpers for retirement and general investment information. You're all ballers.