Support NeoGAF

[womfalcs3]

An index fund might also have more or less risk depending on what it follows. Something like emerging markets is considered higher risk than US total stock market.

They might consider it high-risk as it's a 100% stock fund. Looking at their other funds, their equity funds are high risk, with currency and bond funds having lower risk profiles. I'm guessing it's based on the degree of volatility; while an index fund is a well diversified stock fund, it bears the market risk of stocks which is higher than other investment vehicles.

Makes sense. Thanks.

 

[Dr. Feel Good]

Ah I see. Yes, if he can convert his employer retirement account to a Roth 401k and still get 6% matching, I see no reason not to make the switch. That's an insanely good retirement deal if he really can do that.

Sorry for confusion... for straight 401K my company matches 6% and do not match a Roth. I have been contributing 6% for the past two years and just recently bumped to 8% but was curious if I should be putting that additional 2% in 401K or a Roth account?

 

[Cyan]

Sorry for confusion... for straight 401K my company matches 6% and do not match a Roth. I have been contributing 6% for the past two years and just recently bumped to 8% but was curious if I should be putting that additional 2% in 401K or a Roth account?

The standard advice is to contribute to your 401k enough to get the full match, then contribute to an IRA or Roth IRA up to the max ($5500), then back to the 401k up to the max ($17,500). Or up to the max you can afford, of course.

The reasoning is that not maxing your company's match is leaving money on the table, but IRAs are more flexible and lower cost, so any extra retirement savings after maxing match should go to an IRA before the 401k.

 

[Piecake]

Makes sense. Thanks.

Is this a Total stock market fund for the Saudi Arabia Index? Just to warn you, that might not be very diversified. The only reason why Americans get away with allocating a hefty portion of their portfolio to the SP 500 or Total US Stock Index is that the american economy is just so freakin huge, global and diverse. Thats not really the case with other countries.

For example, If you were Canadian, I think it would be a bad idea to allocate more than 10-20% of your portfolio to Canadian stocks. That can leave you somewhat dangerously overexposed to the energy and finance sectors. While I don't know anything about the Saudi economy and market besides oil, I am guessing that it is smaller and less diverse than the Canadian market.

 

[vehn]

Is it possible to open up some sort of an account (like an IRA) put money in it for some time (like a week), and then transfer that $ into a Roth IRA so you don't pay tax on gains? I hear that is what some people do to get out of the $5,500 yearly limit.

 

[Piecake]

Is it possible to open up some sort of an account (like an IRA) put money in it for some time (like a week), and then transfer that $ into a Roth IRA so you don't pay tax on gains? I hear that is what some people do to get out of the $5,500 yearly limit.

Are you thinking of a back-door Roth? That is how people who exceed the income limit of a Roth put their investments in a Roth. They do that by first putting their investments in a traditional IRA and then convert that to a Roth IRA. It is technically legal.

Also, You don't pay tax on capital gains in retirement accounts like IRAs. What you might be thinking of is the fact that Roths mean that you won't pay income taxes when you take your money out (it is paid before you invest in it). Traditional IRAs you pay income taxes after you take your money out (you dont pay it beforehand). If you do that back-door Roth, you will pay income taxes.

As for what you are suggesting, that does not seem possible, and if it is, it sounds illegal. Traditional and Roth share the same contribution limit bucket. Meaning that your tradtional and roth contributions can't exceed 5.5k for the year. I don't see how you get around that with fancy investment shifting. The only way you can exceed your IRA contributions for the year is if you roll-over your 401k into your IRA.

 

[Husker86]

Is there any common knowledge on the best way to max your IRA for a year? If possible, is it considered best to put in all $5,500 at once, or is partitioning it out throughout a year, on average, better?

I was assuming all at once would be best but then I thought of "dollar cost averaging". Does cost averaging apply at such "short" terms as one year intervals?

 

[Randolph Freelander]

Is there any common knowledge on the best way to max your IRA for a year? If possible, is it considered best to put in all $5,500 at once, or is partitioning it out throughout a year, on average, better?

I was assuming all at once would be best but then I thought of "dollar cost averaging". Does cost averaging apply at such "short" terms as one year intervals?

Law of averages would say max it out on day one, or otherwise as early as you could reasonably do so. The market isn't a steady march up a straight incline, but you would not be able to reliably time the dips, so you're better off getting in at the beginning of the year and enjoying the full 8-9% average growth (certainly not guaranteed) rather than having some of your funds enjoying the 8-9%, other funds enjoying 7, and still others at 6 and on down.

The earlier you start investing, the better. That's true in terms of your overall career, and it's true for a year. On average.

 

[Piecake]

Is there any common knowledge on the best way to max your IRA for a year? If possible, is it considered best to put in all $5,500 at once, or is partitioning it out throughout a year, on average, better?

I was assuming all at once would be best but then I thought of "dollar cost averaging". Does cost averaging apply at such "short" terms as one year intervals?

For a completely rational investor, lump sum investing will always produce a higher expected return, because it immediately moves your funds from asset classes with lower expected returns to ones with higher expected returns. Note that higher expected returns do not guarantee that your actual returns will be higher. According to an investopedia article, [6] studies indicate that lump sum investing has produced higher returns 66% of the time.

Some investors have the goal, not of maximizing their expected returns, but of minimizing their potential regret. For those investors, dollar cost averaging is superior because it reduces the chances of investing just prior to a market drop. If you instead decide to invest 1/6th of the money each month for 6 months, you will reduce the chance of buying just before a crash. Instead, as the price fluctuates each month, you will buy more shares when the price is low and less when it is high.

http://www.bogleheads.org/wiki/Dollar_cost_averaging#Dollar_cost_averaging_versus_lump_sum

 

[Husker86]

Law of averages would say max it out on day one, or otherwise as early as you could reasonably do so. The market isn't a steady march up a straight incline, but you would not be able to reliably time the dips, so you're better off getting in at the beginning of the year and enjoying the full 8-9% average growth (certainly not guaranteed) rather than having some of your funds enjoying the 8-9%, other funds enjoying 7, and still others at 6 and on down.

The earlier you start investing, the better. That's true in terms of your overall career, and it's true for a year. On average.

http://www.bogleheads.org/wiki/Dollar_cost_averaging#Dollar_cost_averaging_versus_lump_sum

So, reading that description of dollar cost averaging, when talking about a 1 year time span, if I were as emotional as a robot, doing a full lump sum every year would be best? That's how I understood this:

For a completely rational investor, lump sum investing will always produce a higher expected return, because it immediately moves your funds from asset classes with lower expected returns to ones with higher expected returns. Note that higher expected returns do not guarantee that your actual returns will be higher. According to an investopedia article, [6] studies indicate that lump sum investing has produced higher returns 66% of the time.

 

[Lazyslob]

im either hoping to win the lotto or hit up an elderly who is loaded

 

[Randolph Freelander]

So, reading that description of dollar cost averaging, when talking about a 1 year time span, if I were as emotional as a robot, doing a full lump sum every year would be best? That's how I understood this:

Yeah, pretty much. Again, on average.

Here's the S&P over the last 10 years.

Tell me, which years would want to dollar cost average, with the benefit of hindsight? Assume you're investing in even increments over the course of the year, when would spreading it out help you come out ahead?

Certainly, you can point to 2008. No question, you would have loved to have some funds going in at the end of the year. 2009 has a good dip when the market finally bottomed out, but the growth afterwards is so rapid that you would have lost ground overall with funds on the sideline, waiting for the next increment. Maybe 2011 would have been a good candidate.

So over 10 years, you have 2 (2008, and I'm throwing in 2011) as good years to dollar cost average. The other 8 years, you would have been better off maxing it out on day one. That's 80% over a small sample, and the Investopedia article quoted says 66% success rate. Edit: You could certainly look at the graph of each year and come away with different conclusions, these are just mine. In truth, only 2010 and 2011 give me some heartburn about which way to go (2008 is a lock) due to the pronounced midyear/late year dips.

All in, day one.

Says me, but it's your money, not mine. Invest accordingly.

 

[Randolph Freelander]

Since I was bored, and in light of the recent topic of interest, I went back and took the closing prices for the S&P 500 index for the past 30 years, covering 1984-2013. I then took the first trading day of the month and discarded all the rest. I took $5500 as a yearly invested amount (the current IRA cap, completely discarding inflation) and invoked 2 strategies: The "Day 1" strategy that invests the full amount on the first trading day of January, and the "Even" strategy that invests 1/12th of that amount on the first trading day of each month. Doing this, you buy "shares" of the S&P at whatever the closing value happened to be on that day. For example, on January 3, 1984, the closing value was 164.04, so $5500 bought 33.53 "shares" (rounded), while 1/12th of that bought 2.794 (also rounded). Then I summed them up to for the year to see which strategy accumulated more shares.

Year	Day 1	Even	Winner
1984	33.5284	34.3166	Even
1985	33.2588	29.7204	Day 1
1986	26.2417	23.4116	Day 1
1987	22.3169	19.4189	Day 1
1988	21.4894	20.7212	Day 1
1989	19.9775	17.278	Day 1
1990	15.2909	16.3854	Even
1991	16.8479	14.7141	Day 1
1992	13.1812	13.211	Even
1993	12.6326	12.1803	Day 1
1994	11.8168	11.9667	Even
1995	11.9797	10.3772	Day 1
1996	8.8605	8.2608	Day 1
1997	7.4626	6.4301	Day 1
1998	5.6408	5.1471	Day 1
1999	4.4785	4.1957	Day 1
2000	3.7795	3.8275	Even
2001	4.2859	4.6075	Even
2002	4.7633	5.5253	Even
2003	6.0504	5.7879	Day 1
2004	4.9617	4.8672	Day 1
2005	4.5754	4.5587	Day 1
2006	4.3348	4.2103	Day 1
2007	3.8825	3.7289	Day 1
2008	3.8005	4.4898	Even
2009	5.9026	5.9852	Even
2010	4.8544	4.8788	Even
2011	4.3243	4.3314	Even
2012	4.3068	4.0049	Day 1
2013	3.7609	3.3975	Day 1

On this particular approach of buying into the market on the first day, the "Day 1" strategy performed better 19 of 30 years. In the years where this strategy prevailed, it was often not even close. During years that an "Even" strategy would have accumulated more shares, it was usually within a couple of tenths, with notable exceptions being 1984, 1990, 2001, 2002, and 2008. You can also see that my slight heartburn in my prior post over 2010 and 2011 were not without merit, as those years (and also 2009) had the "Even" strategy eek out an advantage.

All told, "Day 1" over 30 years would have accumulated 328.59 (rounded) shares of the S&P, for a total value of $591,752.94 as of December 2, 2013. "Even" would have accumulated 311.94 shares, for a total value of $561,765.65 on December 2, 2013. (This would have been the last "buy-in" date for this strategy, which is why the date is used for both strategies' values. Growth experienced for the remainder of the year would have evenly applied to both scenarios.) (In case you're wondering, the total amount invested was $165,000.)

If you bought in at different rates or on different dates, you might come away with a different result, of course.

 

[Easystride]

If your employer matches, absolutely invest at least that first 6% into your 401k. If you open your own Roth (or even a Traditional) IRA, there will be no matching.

I would invest your 6% into your 401k, then if you want to invest further each year, you could open a Roth IRA for the tax benefits (you will not be taxed on any earnings if you withdraw money from your Roth once you enter retirement).

By the way, a straight 6% matching is incredible. One of the best matches I've ever heard. Most are 2-3% or so.

Is it worth it to invest in a 401(k) without an employer match? My employer offers a shitty Wells Fargo 401(k). I think the lowest expense ration I saw on the paperwork was .6%, and that was a really low risk fund. I don't plan to stay at this job too long. I just needed some experience after graduating from college last year. After I get a year in, I plan to start applying to different jobs.

I have maxed out the last two years for my Roth IRA, and have been putting extra money into taxable ETF accounts for the time being.

 

[RumblingRosco]

-

 

[Cyan]

Being tax advantaged is a benefit in and of itself. And when you leave your job, you should be able to move your 401k into a Rollover IRA.

Certainly if there's no matching, contributing to the 401k should be secondary to an IRA. But if you're contributing to a taxable brokerage account that's intended for retirement, you're better off using the 401k.

 

[Randolph Freelander]

I agree with Hobbes.

 

[Piecake]

I see zero reason to contribute to a 401k if there is no explicit benefit such as matching.

I'd just do what you're currently doing if I were you. Maybe someone else in here can give a second opinion though, but I'm pretty confident 401ks are only useful if they offer some sort of matching benefit. Otherwise it just limits your investing options and offers nothing except perhaps direct deductions from your paycheck which is great for people with a lack of self control.

Well, 401ks means no capital gains tax, so that is definitely useful. 401k contributions are also useful for tax purposes. If you are close to earning a tax credit and need to shave off some income, contributing more to a 401k is definitely worthwhile. It does reduce your tax obligations as well - meaning you pay less in taxes.

I probably wouldn't bother with a 401k that does not match and has high fees. I do not have the math talent to actually calculate if it would be worthwhile or not though. No match and high fees just bug me (very scientific, I know). Plus, if you are investing to pay for a downpayment on a house, having a taxable account is actually useful.

Mmm, forgot about the rollover. If this job is simply a short term thing that would definitely make it useful since in the short term expense ratio fees don't really matter much. Its in the long term that they fuck you over.

 

[Husker86]

All told, "Day 1" over 30 years would have accumulated 328.59 (rounded) shares of the S&P, for a total value of $591,752.94 as of December 2, 2013. "Even" would have accumulated 311.94 shares, for a total value of $561,765.65 on December 2, 2013. (This would have been the last "buy-in" date for this strategy, which is why the date is used for both strategies' values. Growth experienced for the remainder of the year would have evenly applied to both scenarios.) (In case you're wondering, the total amount invested was $165,000.)

If you bought in at different rates or on different dates, you might come away with a different result, of course.

Nice! Thanks for that; makes me feel better. Soon I'll be in a position do contribute to my Roth this way, so this helps a lot.

 

[Easystride]

Thanks for the great advice guys! I will look into the fund options a bit more. I plan to start applying to new positions in July, so hopefully I'll find a company with some match. At least time is still on my side since I'm young.

 

[SyNapSe]

Does anyone invest in high-dividend ETFs in their IRA? I've never paid much attention but I have some money to invest and the market seems kind of stagnant so far this year. Getting some dividends might be nice. I was just thinking of grabbing something that follows the FTSE Dividend High Yield index.

Any reason not to do this and just stuff all the money under existing mattresses like All-Market, S&P 500 & 400, etc?

 

[Giard]

Hello,

I've asked a few questions before here. I'm currently opening an online brokerage account in Canada.

1. I'm looking at Vanguard Canada's ETF funds.
There's US Total Market Fund and US Total Market Fund (CAD-Hedged). I'm not too sure what the latter means, could someone help me out? Which one should I invest in?

2. Maybe there's a connection with the previous question, but my brokerage site allows me to open a US TFSA and US RRSP for 50 bucks a year. Will I save lots of fees by doing so?

If it might help, here is the difference between a TFSA and a RRSP: Comparison

Thanks.

 

[B.K.]

Is there any way for people that don't make a lot of money to save for retirement? I don't make much. If I make $900 in a month, then it's been a very good month. Is there any way to save with putting away maybe $50 or $100 per month? There's no way I can afford $5000 per year that most plans want.

 

[RumblingRosco]

-

 

[Smushroomed]

best vanguard roth ira for a 28 yo?

 

[clav]

.

Read previous post.

For you, look in the 2045 or 2050 range.

Later on, you can exchange the fund for something else or just keep it the same.

 

[Piecake]

Hello,

I've asked a few questions before here. I'm currently opening an online brokerage account in Canada.

1. I'm looking at Vanguard Canada's ETF funds.
There's US Total Market Fund and US Total Market Fund (CAD-Hedged). I'm not too sure what the latter means, could someone help me out? Which one should I invest in?

2. Maybe there's a connection with the previous question, but my brokerage site allows me to open a US TFSA and US RRSP for 50 bucks a year. Will I save lots of fees by doing so?

If it might help, here is the difference between a TFSA and a RRSP: Comparison

Thanks.

http://canadiancouchpotato.com/2011/04/04/currency-hedging-in-international-funds/

I don't know anything about Canadian US currency intricacies, so Ill just leave it as is.

Is there any way for people that don't make a lot of money to save for retirement? I don't make much. If I make $900 in a month, then it's been a very good month. Is there any way to save with putting away maybe $50 or $100 per month? There's no way I can afford $5000 per year that most plans want.

Building on Soka's advice, you do not have to save 5k a year for retirement. While the more you save the better off you will be, saving even a little bit will definitely help thanks to compound interest.

Does anyone invest in high-dividend ETFs in their IRA? I've never paid much attention but I have some money to invest and the market seems kind of stagnant so far this year. Getting some dividends might be nice. I was just thinking of grabbing something that follows the FTSE Dividend High Yield index.

Any reason not to do this and just stuff all the money under existing mattresses like All-Market, S&P 500 & 400, etc?

I don't think investing in a high dividend yield fund makes a lot of sense for your retirement account. A few months of returns in the market really do not matter in the long run and are not a good indication of future returns at all. Moreover, the fees of high-dividend funds are usually higher than All-Market funds, which will cost you money over the long term.

I think greater expense of high-dividend funds make sense if you want those funds to generate income for you. That really doesn't work if those dividends are being reinvested in your retirement fund (and you'd be real stupid to take them out). You are sacrificing expense and diversity for a high dividend. I think that is problematic because you have no way of knowing if that high dividend fund will actually net you greater returns than the total-market.

Its certainly not the end of the world if you do do it though and I am sure it will be a solid fund. I don't think it will be the optimal fund for the reasons above though.

 

[Husker86]

Is there any way for people that don't make a lot of money to save for retirement? I don't make much. If I make $900 in a month, then it's been a very good month. Is there any way to save with putting away maybe $50 or $100 per month? There's no way I can afford $5000 per year that most plans want.

Open a Fidelity account. You can buy ETFs (exchange traded funds) instead of Mutual Funds. ETFs don't have a minimum, since you just buy however many shares you can afford.

ITOT has no trading fee on Fidelity, along with many other iShares ETFs.

$50-$100 a month is certainly better than nothing!

The downside of index funds/ETFs is that you will have leftover cash sitting in your account since you can't buy partial shares. No biggie, just buy another share when you put more cash in. Once you get to $2,500 you can move it to a Fidelity fund (like FUSEX) and then never have to have spare cash sitting in the account.

 

[Smushroomed]

Read previous post.

For you, look in the 2045 or 2050 range.

Later on, you can exchange the fund for something else or just keep it the same.

what is the difference between the two? expected retirement age? me being 59 vs 64 ?

I assume the 2050 would give me more money in the end.

 

[Giard]

http://canadiancouchpotato.com/2011/04/04/currency-hedging-in-international-funds/

I don't know anything about Canadian US currency intricacies, so Ill just leave it as is.

So basically CAD-hedged does not count currency fluctuations, I think. Thanks.

I guess I'll keep it simple and go for CAD-hedged, ignoring the US option for retirement accounts.

What would you recommend for a Canadian investor amongst TFSA and RRSP? My employer matches only a small amount, and I'll only have access to their RRSP in 3 months. I would like to start investing before that though.

 

[SyNapSe]

what is the difference between the two? expected retirement age? me being 59 vs 64 ?

I assume the 2050 would give me more money in the end.

These funds manage aggressiveness so as you approach retirement age they gradually shift your investments from higher reward/risk to lower reward/safer. So yes, the 2050 is going to have a more aggressive curve for longer and theoretically should build a larger portfolio.

In the end, I think the goal should be choosing the fund that ends around the date you want to retire so 59 seems real young for the average person

 

[TheContact]

Need to invest 2k a year starting at 19 into a 401k and should be all set

 

[InVinoVeritas]

This thread has been very helpful as I plan for retirement, probably one of my most read threads on gaf. I have a question that isn't specifically retirement related, but this seemed like the best place to ask.

So my wife and I have 401k's at work that we are contributing to, and we each have roth IRA's that we put money into as well. We've saved about 6 months worth of expenses in a checking account, but I really hate letting that money sit there doing nothing. Is there anywhere we could invest some of that money to that would be relatively stable, but would grow at least a little bit? We have a brokerage account with Schwab, so most options are open. I checked into a regular savings account at the bank and it's not even worth it at a whopping .025% interest rate.

 

[RumblingRosco]

-

 

[clav]

Your best bet is in Certificates of Deposit (commonly known as CDs). You won't get a ton, but they almost always beat a checking/savings account. You invest into them at a certain maturity; you can select to leave your money in there for 3 months, 6 months, 1 year, 5 years, 30 years, and some range in between those numbers; longer terms offer better rates (6 months might be ~0.50% where as 5 years might be 2%). You can find a list of some of the higher paying ones here; use the "Products" drop-down list to select the length of time.

Be advised, most if not all CDs make it so that you're penalized some amount if you withdraw early, although in my experience this penalty will not eat into your principal investment, just reduce what you'd have earned from the interest. Please read the terms closely just to be certain before investing in them, since this is your emergency fund, in an emergency, you don't want to have your hands tied if you end up needing to withdraw some/all of the money. If you used 1-year CDs, you could put your money in gradually at around 8% a month. Put 8% of your emergency funds into a 1-year CD, wait one month then put another 8% into a new 1-year CD, wait one month then put another 8% into a new 1-year CD, etc. This would allow you to have a maturing CD each month, so if you suddenly lose your job, you'll have portions of that money frequently available without risking any fees for early withdrawal of funds. This is a bit complicated and probably unnecessary though, but it's just an idea that I thought may inspire some plan you could tailor to your specific scenario more easily.

Overall though, I think CDs are probably a decent route to take.

CD rates are terrible. He's better off opening an online savings account because the last thing you want to do is lock your emergency savings.

A site that keeps track of bank rates

 

[RumblingRosco]

-

 

[InVinoVeritas]

CD rates are terrible. He's better off opening an online savings account because the last thing you want to do is lock your emergency savings.

A site that keeps track of bank rates

Of course CD rates are terrible compared to where they were even just half a decade ago... but, a 1-year CD and maybe even some shorter ones will beat out even the best savings accounts, unless you're looking at some very high minimum savings accounts. I'm just saying, depending on how he expects to need to use his emergency funds, he could consider looking into CDs with particular attention focused on the terms. It has been a long time since I've bought a CD so I'm admittedly not sure how they act now, but I recall you could cash them out early without penalty when I bought mine from a local bank as long as you either 1) gave back a bit of your interest or 2) let the money sit for a certain amount of time (so, if it was a 1-year CD and it sat there for 3 months you could withdraw it penalty-free).

For simplicity's sake, yeah, a savings account is fine, but if you're really looking to maximize in this scenario I think CDs could beat out a savings.

Cool, I will look into both of these options. So there is nothing that I can use the Schwab account to invest in that would have a similar rate of return with low risk? I would rather not have to manage another account, but will do so if it's the best/only good option. Thanks again for your help.

 

[Fourth Stooge]

Is it worth it to invest in a 401(k) without an employer match? My employer offers a shitty Wells Fargo 401(k). I think the lowest expense ration I saw on the paperwork was .6%, and that was a really low risk fund. I don't plan to stay at this job too long. I just needed some experience after graduating from college last year. After I get a year in, I plan to start applying to different jobs.

I have maxed out the last two years for my Roth IRA, and have been putting extra money into taxable ETF accounts for the time being.

It looks like some people already gave you some advice but I'll try to correct and supplement what they told you. Notice how no one asked you any questions before giving boilerplate responses for how to handle your money? That should tell you something. The best advice I could give is to get a copy of your 401(k) plan's participant fee disclosure. It's called a 404(a)(5) disclosure. See what you're actually paying for your 401(k).

It very well may make sense to use your employer's 401(k) plan. IRA investment fees are usually higher than investment fees for 401(k) plans--contrary to what some people are claiming in this thread. You're not going to negotiate a better fee for your $5,500 per year than your employer is on their full plan unless your employer is an idiot. Any investment fees you would pay in an IRA, you will also pay in a 401(k). The difference is that in a 401(k) you may have access to institutional funds with lower expenses. In addition, the 401(k) investment fees may be further offset by fee rebates credited back to your account or fee waivers. The expense ratio you quoted above is most likely wrong (not saying how I know...but I know). And while you will have fewer investment options in a 401(k), you also don't pay trading fees. Keep in mind what a few $10 trading fees would to to your cost ratio for an IRA like yours. IRAs are not exempt from fees and expenses charged at the fund level. Even if you have a discount brokerage account, you will still pay the investment fees for the funds and you're not getting rebates, waivers or any special deals.

A 401(k) plan MAY charge some or all administration fees to your account. Check your fee disclosure. There's no way for me to tell you what type of fees (beyond the mutual funds' fees), if any, are charged to your account. A lot of plans don't charge any fees to you. If fees are charged to your account, the fees may be pro-rata on your balance or a flat annual or quarterly fee. Your employer may pay all of the fees, none of the fees, or anything in between. The fees may be fully or partially paid by the fund companies (revenue sharing) or plan forfeitures. It's really beyond me how someone on NeoGAF can tell you anything about your plan's fees in comparison to an IRA without even asking what your plan's fees are or what your IRA fees are.

Now why would you want a 401(k) plan assuming fees are comparable? You can put in over $5,500 a year. You would most likely be capped at $17,500 in a 401(k) unless you're in a SIMPLE 401(k) (a hybrid IRA and 401(k)) instead of $5,500 in an IRA. Depending on how fees are charged, it may make sense to pay for only your 401(k) fee rather than an IRA fee and an additional account fee. You can take loans from a 401(k) with all of the principal and interest going to your own account (likely with some fees though). Your employer may even wait until they file their taxes (or longer) to decide whether to give you match money. They don't usually have to tell you what they plan to do--and you can't make retroactive contributions to get the match. You may also have a brokerage account within your 401(k) and buy whatever stock or funds you want (likely with fees though--and most plans don't offer this). You may think you know a lot about investments, but the people who pick the investment options for your 401(k) may not be as dumb as you think.

What am I really getting at with all of this? Understand your 401(k) plan and your IRA. Those are the only facts that matter to you. Just because there are 401(k) plans that have exhorbitant fees, doesn't mean yours is one of them. And yours is the only one that counts.

In case you couldn't guess, I work in finance. I could give a rat's ass what you do with your money, but making investment decisions based on other people's uninformed perceptions of financial industry trends is a shitty way to make decisions.

 

[gutter_trash]

I started saving for my retirement rather late, at age 28.
But I bought a condo at the right time before prices shot up, so the potential profit I could make selling it would help me to move on up property wise

 

[Macmanus]

Of course CD rates are terrible compared to where they were even just half a decade ago... but, a 1-year CD and maybe even some shorter ones will beat out even the best savings accounts

Money market is dead, man. You could just as easily invest in stable munis, gradually dump money into MFs and collect the trails, or pick up some low basis point but conservative ETFs. Cash sweep programs are taking the place of CDs/MM for those that insist on ancient investment products.

Cool, I will look into both of these options. So there is nothing that I can use the Schwab account to invest in that would have a similar rate of return with low risk? I would rather not have to manage another account, but will do so if it's the best/only good option. Thanks again for your help.

If all you want to do is earn a small but steady tick of basis points with your investment, like one would with a savings account of yesteryear, find a solid ETF that holds AAA rated bonds. Fixed Income is the way to go for you, even with low interest rates.

 

[Macmanus]

ignore

 

[HoodWinked]

i have money in my savings account and its just sitting there gaining less than 1% interest. where can i put it with zero or near zero risk?

edit: i mean outside of CDs and Savings accounts. They seem to be around the 1% as well. at what amount are there more options?

 

[RumblingRosco]

-

 

[Learn2read]

Hello,

I've asked a few questions before here. I'm currently opening an online brokerage account in Canada.

1. I'm looking at Vanguard Canada's ETF funds.
There's US Total Market Fund and US Total Market Fund (CAD-Hedged). I'm not too sure what the latter means, could someone help me out? Which one should I invest in?

2. Maybe there's a connection with the previous question, but my brokerage site allows me to open a US TFSA and US RRSP for 50 bucks a year. Will I save lots of fees by doing so?

If it might help, here is the difference between a TFSA and a RRSP: Comparison

Thanks.

Here's a good answer to your first question:

http://canadiancouchpotato.com/2014/03/06/why-currency-hedging-doesnt-work-in-canada/

So basically CAD-hedged does not count currency fluctuations, I think. Thanks.

I guess I'll keep it simple and go for CAD-hedged, ignoring the US option for retirement accounts.

What would you recommend for a Canadian investor amongst TFSA and RRSP? My employer matches only a small amount, and I'll only have access to their RRSP in 3 months. I would like to start investing before that though.

As to your last question, check here:

http://canadiancouchpotato.com/model-portfolios/

(40% fixed income is probably a bit high, assuming you're in your 20s or 30s)

 

[clav]

Cool, I will look into both of these options. So there is nothing that I can use the Schwab account to invest in that would have a similar rate of return with low risk? I would rather not have to manage another account, but will do so if it's the best/only good option. Thanks again for your help.

Another option is inflation bonds through the US Treasury.

If access is important though, stick to savings accounts.

 

[Giard]

Here's a good answer to your first question:

http://canadiancouchpotato.com/2014/03/06/why-currency-hedging-doesnt-work-in-canada/

Thanks a lot. Seems that there is no "correct" viewpoint, but he defends his stance very well. Unhedged funds seem to be the way to go.

As to your last question, check here:

http://canadiancouchpotato.com/model-portfolios/

(40% fixed income is probably a bit high, assuming you're in your 20s or 30s)

Thanks, but I'm not too sure how this will help me out between choosing a RRSP or a TFSA. I'm in my 20s, just got my first "real" job.

 

[Piecake]

Thanks a lot. Seems that there is no "correct" viewpoint, but he defends his stance very well. Unhedged funds seem to be the way to go.


Thanks, but I'm not too sure how this will help me out between choosing a RRSP or a TFSA. I'm in my 20s, just got my first "real" job.

Ive heard that those are similar to the Traditional IRA and Roth IRA. I don't know if there are specific differences between the American and Canadian funds so I will leave that up to you to find and only speak about the american accounts in broad terms

The general consensus is that a roth ira is beneficial to poor people who think they are going to make more money and be taxed more when they eventually take the money out. Traditional IRA is beneficial for people who make a lot of money now and will be taxed less when they take the money out.

I personally prefer the Roth IRA no matter what because it is a hedge against uncertainty. Who the hell knows what the tax rate is going to be in 30-40 years? I'd rather just pay the tax now and not have to take that into my retirement calculations.

Traditional does have another benefit though, in that it can reduce your taxable income which means less taxes for you to pay now and can possibly qualify you for tax credits that you would not otherwise have gotten (no idea if you guys have tax credits in Canada).

 

[Cyan]

It looks like some people already gave you some advice but I'll try to correct and supplement what they told you. Notice how no one asked you any questions before giving boilerplate responses for how to handle your money?

Yes, this is a cardinal sin of finance. And yet I still find myself doing it.

Thanks for bringing a different perspective. You are certainly right that it's best to check your specific plan and see what the actual fees are rather than simply rely on the conventional wisdom.

 

[RumblingRosco]

-

 

[Learn2read]

Thanks, but I'm not too sure how this will help me out between choosing a RRSP or a TFSA. I'm in my 20s, just got my first "real" job.

Is your question whether an RRSP or a TFSA is the best invest vehicle in your particular situation, or are you asking which specific RRSP/ TFSA you should invest in? (if the later there may be a bit of a misunderstanding how they work)