It's not a problem at this point. I have a lot of money, but due to inheritance and such. This is so I can be in control of my own money and actually feel like the account represents funds I've earned and grown on my own.
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How to Invest for Retirement
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Learn2read
Member
All VB ETF buys are free to buy. Their "100 Free ETFs" are free to buy AND sell
Learn2read
Member
My experience has only been on VB, bu if you place an open market order close to your available funds (say you have $52.10 and want to buy two $26 stocks) it may reject this as the actual sale price could exceed your funds. (e.g. that market order got place and the price was actually $26.06)
You can avoid this by always placing limit orders. If you were to place 2 limit orders of $26.05, it should go through.
Do you know which ETFs are free to trade at Sharebuilder?
Yes, that was mainly for others in this thread who may get discouraged by the thought of not being able to meet the account minimums.
I don't think they have any free to trade ETFs at sharebuilder (though they do have like 400 NTF Mutual funds), but not having an account there I do not know for sure. They have some alternative pricing methods though, like being able to buy an entire portfolio of stocks for one transaction fee instead of paying a separate fee for each stock (which may be useful for some), and they allow setup of automatic recurring investments based on dollar amount not by the share.
http://blogs.barrons.com/focusonfunds/2014/07/16/retirement-investing-are-you-doing-it-all-wrong/
Interesting. Can't say I am really surprised since stocks will get you a better return, but I think the whole point of going into bonds is so that the market doesnt fuck you over when you need to sell for income.
I definitely do not think that I am going to follow that strategy. I'll likely have a 3/0/70 maybe 40/60 stock/bond split, but I would be warry of a pretty big market nosedive if I couldnt cover like 5 years of income with my bonds.
7 Habits of Highly Successful Retirement Savers
good tips. 2 is a very good one. That is pretty much my plan. I am going to drive my 2000 Corolla until it explodes (hopefully not with me in it).
Interesting. Can't say I am really surprised since stocks will get you a better return, but I think the whole point of going into bonds is so that the market doesnt fuck you over when you need to sell for income.
I definitely do not think that I am going to follow that strategy. I'll likely have a 3/0/70 maybe 40/60 stock/bond split, but I would be warry of a pretty big market nosedive if I couldnt cover like 5 years of income with my bonds.
7 Habits of Highly Successful Retirement Savers
good tips. 2 is a very good one. That is pretty much my plan. I am going to drive my 2000 Corolla until it explodes (hopefully not with me in it).
I also find number 2 to be one of the the important ones. Im still driving my car from high school 10 years later. I hear all these stories at work of people struggling and many are paying 300-600 dollars a month per car in the household for loans. It takes a huge chunk of your disposable income.
IMO the ideal plan should be never to sell for income, as I've said before. Selling off your portfolio off to make income puts your retirement on a 15-20 year clock, where you better be dead before you run out of money. I do not see this as a reasonable plan for retirement. I would much rather cut back my spending now and in early retirement, save more, and retire with the idea that I want my income to continue to grow throughout retirement.
I view heavy bond allocations the same way I view annuity funds as discussed above, if someone has a marginally decent amount saved for retirement and a couple bad years in the market can wipe them out, then bonds are there. Ideally though, you should have enough invested at retirement that it makes you more risk tolerant.
Obviously this isn't going to fit all people in every situation, but I certainly believe it should be the end goal when people start planning their retirement.
Is number 3 right? I have been paying my debt down as first priority, still have about $18,000 which I will pay off in one year at the rate I'm going. Anything else I put in my Roth IRA. I have read that paying down student debt is better because it's a guaranteed "return" on interest versus the prospect of raises in your investments.
I'm trying to decide if I should invest in municipal bond funds. I would pick a fund that is exempt from both federal and state taxes. I'm young, so it isn't like I need the safety, but I could always use some additional bond exposure and I don't want to pay any additional taxes on anything.
This would be in a taxable vanguard account. I do not have room in my Roth IRA but do have some in my 401k...but I don't think I have any good options left there.
This would be in a taxable vanguard account. I do not have room in my Roth IRA but do have some in my 401k...but I don't think I have any good options left there.
RumblingRosco
Member
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I read about munis, so I can share a little bit of info.
Just beware of the alternative minimum tax and taxation of social security benefits. If the muni bond fund invests in private bonds, you will be subjected to those stipulations.
From a quick glance, most Vanguard muni funds aren't subjected to AMT, but remember these are active managed funds, so that can change on a year to year basis. Also, if you choose to invest in munis, do not automatically reinvest the dividends because that will make selling the bond later very complicated. I would invest its dividends in a tax-deferred account (or preferably Roth IRA).
Which state do you live?
NJ, and I was thinking of this fund:
https://personal.vanguard.com/us/funds/snapshot?FundId=0014&FundIntExt=INT
What do you think? I recently reduced my future bond allocation in my 401k because I decided I wanted to own some of my company's stock (and I wasn't willing to reduce my equity exposure overall). So I reduced from 20% bonds to about 15% bonds.
I don't believe in owning bonds in taxable accounts but I doooooo like the idea of tax free bonds in taxable accounts.
I'm not sure what to do. Does it make sense to buy some munis or does it make more sense at my age and risk appetite to just plow the 3k minimum into an existing index fund?
Historical returns have been very acceptable to me (not, you know, that they are indicative of anything) but I don't know if they are tax adjusted.
Can you explain? I don't understand.
When do you plan on retiring?
In taxable, you are required to report your capital gains/losses on your tax forms when you sell. If you automatically invest the bond fund's dividends, you will create a tax lot (i.e. new purchase date) for that fund. Since a muni bond fund gives you 12 dividends a year (dividend at the end of each month), you will have 12 tax lots in one tax year.
In one potential scenario, if you were to sell part of the fund, you may encounter a wash sale once you hit a dividend date since you repurchased the fund within 30 days of the sale.
I suppose if you were to go into a muni bond with a purchase and then sell the entire fund later mindset, you won't encounter that although your fund would be divided short and long term gains/losses.
If you just bought the bond fund once and transferred its dividends to somewhere else, then you wouldn't have to worry about this scenario. You get to choose when to rebuy.
I would say 40 years from now will take me to typical retirement age. I would love to retire in 35 if possible.
I don't want to disclose my exact salary but suffice it so say I am ineligible to use a Roth IRA unless I backdoor into it...so unfortunately I'm in one of the higher tax brackets. Tax issues are one reason why I would like to consider the munis. I'm getting to the point now where I have not insignificant investment income that I have to pay taxes on at the end of the year and I actually don't have the income sitting around to pay tax on reinvested money I never actually see.
I'm confused a little. Why would I be creating new taxable events if these bonds are tax exempt?
I wouldn't be buying any individual bonds, just a fund with the dividends reinvested into the fund. That would create a taxable event?
Remember it's a bond fund.
Funds are still subjected to capital gains/losses. If you buy at $12 and sell at $13, you have a capital gain of $1/share.
By reinvesting your dividends, you are creating new price points that you are rebuying the fund's shares. The fund will do this 12 times an year.
There might be admiral shares for that NJ fund if you have that much money lying around.
If you're going to do that, OK. If I were to buy a muni bond fund, I would defer its dividends to stock funds.
The choice is yours. That strat works, too.
Again, just beware of AMT in taxable investing.
I think that would be ideal, but that requires a lot of money invested to get to the point where you can simply live off the income generated by your investments.
I don't think I will ever make enough money to actually save enough to do that, and I don't want to miss out on trips or other experiences because I need to save money for retirement.
Randolph Freelander
Member
The higher the interest on the loans, the higher priority. But if you have an auto loan at 0-3% and a student loan at 4%, and the market is historically returning 8, then keep your money in the market.
This is, of course, easier said than done, because nobody likes the idea of paying interest, and not having payments also means having more disposable money. But from a pure mathematical perspective, it makes much more sense to pay the minimum on your low interest debt and invest the rest. Credit cards and high interest debt? Yeah, pay those off as fast as possible.
I haven't done a full write-up on my asset allocations since I made some posts on boggleheads about a year ago, but I have low six figures saved-- about 25% in liquid high-yield savings accounts, 55% in a Roth 401K, another 15% in a Roth IRA, and then the rest in a taxable vanguard account.
I am probably something like 87% equity and 13% fixed income. Maybe a little more in equity. Age 25.
I haven't calculated my tax rate but I probably should...
I'm looking for non-retirement savings, non-tax incremental investment yield. I don't need income. That's why I'm wondering if I should just not worry about the tax hit because it's not significant or look at munis. I'm not a high net worth individual and I would not qualify as an "accredited investor" under SEC rules if that helps.
Because of my job, I cannot hold individual securities without pre-clearance so I will not be doing that.
Yeah, I would of course go for something low duration, but I looked at the returns of the fund I linked above and, yeah, all standard disclosures, it didn't seem that bad. Certainly not 10 year treasury.
That said, I think I'm just bored with my play-around portfolio since I am being locked out of individual securities and "narrow ETFs" and I want to do something different and see how it performs.
edit: I'm actually not positive if it is inclusive of debt securities. I think so. I've never thought about buying them individually.
That said, I think I'm just bored with my play-around portfolio since I am being locked out of individual securities and "narrow ETFs" and I want to do something different and see how it performs.
edit: I'm actually not positive if it is inclusive of debt securities. I think so. I've never thought about buying them individually.
RustyNails
Member
ruh roh, my wife's roth 401k is showing 0. I was aware that they were switching to a different bank, but was not expecting that. Gonna be making a few calls on monday.
I think you are overestimating the increased amount needed to be able to retire without selling off assets, especially if you go with a standard conservative 4% draw down.
If you just rebalance from growth stocks to dividend paying stocks, you are basically already at fairly reliable 4% dividends, while still having the opportunity for further asset appreciation.
It's not like you need an order of magnitude more investment capital to live off dividends or something. It's a relatively minor increase in capital that doesn't require much sacrifice in lifestyle at all, assuming the sacrifices are made early enough to allow compounding to amplify them.
Worth noting also that bond rates are currently so shitty that even a less than 4% drawdown leaves you vulnerable to running out of money too soon. Really if bond rates don't make a massive turnaround, pretty much everyone is going to have to remain allocated into stocks well into retirement.
RumblingRosco
Member
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There is if the allocation is bond heavy and is not outperforming the annual drawdown rate, or even coming close. Which was what the discussion was about, whether people close to retirement or already retired should maintain larger stock allocations.
If the plan is to remain invested in appreciating assets and selling them off for income over time, then I agree completely, there is no functional difference between dividends and appreciation.
Sure, asset allocation between bonds and stocks is going to drastically affect your expected return.
What I disagreed with was saying "the ideal plan should be never to sell for income" and pushing dividend stocks over growth stocks because then you don't have to sell anything. Bond vs stock allocation is important, dividend vs growth is not.
I don't think having 6% bond exposure (really, 40% of 6.6%) is bad.
You don't think I should be concerned about taxes with REITs? I'm kind of worried about large dividends.
My situation is weird. I have what I would consider relatively high income but very little just laying around. I invest almost everything. I'd hate to draw down on my savings account to pay taxes at the end of the next tax year, which I almost had to do this year (which genuinely shocked me). I claim 0 withholdings btw.
5.5% bonds is not a significant allocation. Most would consider 5.5/94.5 bonds/stocks an aggressive allocation.
Especially considering that 60% of that are junk bonds.
That's super aggressive, which is not bad for a 25 year old, just that there is no real reason to go even more aggressive.
Easystride
Member
Does anyone have a 401(k) through Wells Fargo? I just opened one at the beginning of June, and I just saw I had a "fund expense" on 7/08 and again on 7/14. Are they just from the expense ratio of the funds? They don't provide much detail on the website.
Randolph Freelander
Member
Is Wells your employer or just who your employer uses?
Easystride
Member
It's who my employer uses. I invest in WFIOX and a small percent of PTTAX. They don't have very many fund options. I was going to call, but they have no live reps on Saturday.
Randolph Freelander
Member
OK. I work for Wells, but those funds are actually not in my stable of options. But from what I've seen online, the WFIOX has an expense ratio I think around 0.25%-0.35%, and the PTTAX is around 0.85%. Given that PTTAX is a bond fund, that expense ratio is probably eating away a significant portion of your earnings.
I don't know how your portal might be set up, but you should be able to see fee disclosure information under a Plan Resources page, or something similar. (For me, "Plan Resources" is under "Plan Information" from the dashboard.) From there, you should have fee disclosure comparisons. You should also have somewhere within the portal investment literature that shows each option's fact sheet and prospectus. (For me, it's Actions & Investments > Research Investments > Investment Literature.)
Easystride
Member
Thanks for the information! Do they deduct fees for the expense ratios at random intervals? I didn't have any fees in June, and then I had fees for 2 weeks in a row at the beginning of July. I suppose I will get rid of PTTAX. WFIOX was the only fund with a reasonable expense ratio in my company's options.
Randolph Freelander
Member
Well, I haven't actually ever seen a "fund expense" line item in my balance history, but Wells Fargo waives the administrative fees on our plan, covers part of the fees on managed funds (none of which I'm in), and has numerous low expense options (I'm in funds with fee & expense ratios all below 0.1%). My guess is that your two instances in July are separate fees for each fund (you could verify that assumption via the "balance history" screen, assuming you have it and it has the same features as mine), and it could be that the fee is assessed at some interval (quarterly, semi-annually, etc.).
I should note I'm actually a bit jealous of the transparency of seeing a line item for the expense, by the way.
You should check out this book, The Power of Habit. It doesnt tell you how to invest, but it does tell you how to form new habits, how to change bad habits and the science behind all of it. I really liked it. Want to save more money? Well, go form that habit.
I think your first step would be to track all of your spending and create a budget. That way you can see how much you spend and what you spend it on. You can then see what you can cut, etc so you can save money.
After you know how much you can put towards your retirement, you might want to automate it. Vanguard and I am assuming others have an option that takes a certain amount of money from your bank account each month and invests it in your chosen funds. That way you do not have to think about investing, or spend the money before you can invest it because it is done automatically.
As for a financial adviser, if you want one, I would find one that is fee-only. That way you know that are not making a commission on the thing they are trying to sell you and are presumably giving you good advice that is in your best interests.
http://www.nytimes.com/2014/07/23/o...p-span-region&WT.nav=c-column-top-span-region
Interesting article on 401k reforms. This paragraph was rather infuriating to read.
Interesting article on 401k reforms. This paragraph was rather infuriating to read.
Randolph Freelander
Member
That has exactly 0% chance of ever happening.
I can dream, can't I? It really is quite stupid to have our retirement system vastly favor the wealthy though.
RumblingRosco
Member
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super-famicom
Member
If I wanted to open a traditional or Roth IRA, is Vanguard recommended?
Excuse me, but as a rich person and therefore a non-leech on the government teat, I clearly deserve more from the government in order to help fund my retirement.
As if it weren't enough that poors don't get taxed as highly as the rich aka job creators, now these lucky duckies want to skim even more off the top so they don't have to eat dog food when they'reretired semi-retired a Walmart greeter? Pshaw, I say. Pshaw!
As if it weren't enough that poors don't get taxed as highly as the rich aka job creators, now these lucky duckies want to skim even more off the top so they don't have to eat dog food when they're
RumblingRosco
Member
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super-famicom
Member
Thanks! I'll look into these.
Randolph Freelander
Member
Any tax deduction favors the wealthy, that's a byproduct of our progressive tax system. But I'd say the contribution limits are so low that the benefits aren't all that significant to a wealthy person, to be honest. When you're talking IRA contribution caps (for 2014) at $5500 and 401K personal caps at $17500 (+5500 for catch-ups after age 50), you're not really talking a whole lot of money in the grand scheme of things for someone who is wealthy. Particularly the IRA limit, as it's a joke, and already off limits (pre-tax) to even modest income earners anyway.
To put it in context, someone age 45 in a 39.6% bracket is avoiding exactly $6930 in federal taxes if they're contributing pretax to a 401K up to the IRS limit. The minimum amount someone is paying in taxes at that bracket is $116,000 (2013), and they'll additionally pay 39.6% at anything over $400K. Meanwhile, that $6930 tax benefit is hard capped. So at its highest, it's 6% of the tax bill, and drops as income grows.
For someone earning 80K, the tax bill would be $15,935 (2013). If they max their 401K, the tax bill drops to $11,560, a drop of $4375 (not far off from someone earning $400K!), but also a 27.5% savings off the original amount. That's not a bad deal.
Yes, I want those with lower incomes to save more. I want to abolish the actual regressive "retirement plan" (called the public lottery). I favor 401K plans that are opt-out, not opt-in. But I'm not going to shed any populism tears over tax benefits benefiting those who pay the most in taxes, particularly when the benefits are capped due to low contribution limits, as that's a byproduct of our progressive tax system.
But this....
The Article said:
That's so never happening.