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[witchedwiz]

Question... Are these kind of funds available for europe private investor?
Atm in Italy index funds are scarce, and what's worse they have high commission for private sector..
Advice us gaf?

 

[Y2Kev]

I'm finally thinking of switching from my Roth 401k to a traditional 401k on January 1. I am not maxing out the Roth (I save a good chunk of my income but not entirely in retirement yet as I am planning for other asset purchases-- grad school, house, etc), so the argument about being able to "save more" doesn't really apply. I'm finding it harder and harder to believe my tax rate could be higher in retirement than it is now, but I don't think saving in a traditional 401k would reduce my income to a lower tax bracket.

I can never make up my mind on this. I like the certainty of having paid the tax already but I'm trying to imagine what I will be withdrawing in regular income in 40 years and it is just really hard to imagine it is what I am making today. I dunno. Seems like I'm in the bracket where it could go either way.

I've posted about this before but even though I feel like I have a lot of information (thanks to Rudolph and co) I can never make a decision. The key input is always "what do you expect your tax rate to be in retirement" and I can never say.

 

[GhaleonEB]

I'm finally thinking of switching from my Roth 401k to a traditional 401k on January 1. I am not maxing out the Roth (I save a good chunk of my income but not entirely in retirement yet as I am planning for other asset purchases-- grad school, house, etc), so the argument about being able to "save more" doesn't really apply. I'm finding it harder and harder to believe my tax rate could be higher in retirement than it is now, but I don't think saving in a traditional 401k would reduce my income to a lower tax bracket.

I can never make up my mind on this. I like the certainty of having paid the tax already but I'm trying to imagine what I will be withdrawing in regular income in 40 years and it is just really hard to imagine it is what I am making today. I dunno. Seems like I'm in the bracket where it could go either way.

I've posted about this before but even though I feel like I have a lot of information (thanks to Rudolph and co) I can never make a decision. The key input is always "what do you expect your tax rate to be in retirement" and I can never say.

I've been in the same dilemma this year. I've decided to split the difference: switch our Roth 401k to a traditional in January and increase the contributions by the amount of the tax benefit as we're well below maxing out. But continue to put into the Roth IRA's. When combined with the company retirement plan, that puts future contributions at about 35% Roth, 65% traditional.

I'm telling myself that will be a good thing because I can leverage the Roth withdrawals to limit the extent to which the traditional 401k funds are taxed, should taxes be higher than I expect. (Mix traditional and Roth withdrawals to keep the taxable income on the former low.)

I don't know if that's a good strategy or if I'm just telling myself that it is to make this "why not do both" approach sound wiser than it is. It's basically a hedge because I can't make up my mind.

 

[teiresias]

Ever since they introduced the Roth TSP (401k essentially) for us federal employees I've had the same debate. Simply due to the path of least resistance I've just kept contributing solely to my regular TSP, though I do have a Roth IRA as well. I'm maxing out both this year (I've always maxed the IRA, but have always just missed maxing the TSP).

I also can't believe I'll be in the same or higher tax situation upon retirement, so I'm not sure using the Roth TSP is worth it.

 

[Randolph Freelander]

It's OK to be in the same or higher tax situation, though. Remember, your Roth contributions now require that you pay the highest marginal rate on those dollars now. The comparison isn't income now to income later, or top marginal rate now to top marginal rate later, it's top marginal rate now to average tax rate later.

If you're able to max out a 401K and a Roth (or come close), you're likely sitting in the 28% or above bracket as your top marginal rate (for single filers). Your average tax rate is going to be lower than this, as you're paying progressively lower rates on your earliest dollars. Calculate your average tax rate from your most recent year (federal tax liability / federal taxable income), and use that number as a basis point as you try to predict the future. Let's say that your calculation is 20%. If it is, your average tax rate would have to grow by 40% (20 + 8) to undermine the savings you're receving by avoiding 28% now. (Essentially, tax rates would have to go up a lot, or your income would have to go up a lot, or some mixture of the two.)

The more money you have available for investments now might change the equations a little bit (if, for example, you were able to max out your 401K, Roth, and still have some left over for regular investing), but I think most people aren't in that boat. If you're struggling to max out a 401K right now by itself, or can't get a Roth IRA going in addition to the 401K without sacrificing one or the other, then I think you'd be well served to think about your top marginal rate (now) versus your average tax rate (now and future) and invest accordingly.

 

[AstroNut325]

Any thoughts on self-directed investments for 401Ks? My wife landed a job after hunting for a full year. Their fund selections for the 401K are terrible. Nothing is approaching the performance of index funds. We have the option of choosing other funds as "self-directed investment" but they want to hammer you with a fee of close to $30 per transaction for funds that aren't part of their standard 401K package.

 

[Randolph Freelander]

Any thoughts on self-directed investments for 401Ks? My wife landed a job after hunting for a full year. Their fund selections for the 401K are terrible. Nothing is approaching the performance of index funds. We have the option of choosing other funds as "self-directed investment" but they want to hammer you with a fee of close to $30 per transaction for funds that aren't part of their standard 401K package.

Apparently, this isn't entirely uncommon. The fee is likely to cover their own brokerage fees (with significant padding), but my question is would that fee apply to all contributions, or to just movements between funds. If it's all contributions, your wife will probably want to initially direct the weekly/biweekly contributions into one of the better available funds offered by the plan, and then move those dollars over to the self-directed investment part later, probably twice per year, maybe 3 or 4 times depending on just how bad the regular offerings' fees and expenses are.

After that, it's just a matter of knowing what's available. From a cursory search of the topic on the internet, it seems some plans are still restrictive even in self-directed selections, though if you can select from a wide range of good mutual funds, you're probably in good shape. Obviously, select the fund or funds you're comfortable with, as moving the dollars around will indeed by quite pricey.

 

[IceCold]

What's the penalty for removing money early from your 401K?

 

[AstroNut325]

Apparently, this isn't entirely uncommon. The fee is likely to cover their own brokerage fees (with significant padding), but my question is would that fee apply to all contributions, or to just movements between funds. If it's all contributions, your wife will probably want to initially direct the weekly/biweekly contributions into one of the better available funds offered by the plan, and then move those dollars over to the self-directed investment part later, probably twice per year, maybe 3 or 4 times depending on just how bad the regular offerings' fees and expenses are.

After that, it's just a matter of knowing what's available. From a cursory search of the topic on the internet, it seems some plans are still restrictive even in self-directed selections, though if you can select from a wide range of good mutual funds, you're probably in good shape. Obviously, select the fund or funds you're comfortable with, as moving the dollars around will indeed by quite pricey.

The fee is applicable to all contributions. And there is a monthly fee and an annual fee. They really don't want people to step outside of what is offered without taking a significant hit. I have to see if I can move the funds to a desirable MF later.

 

[Y2Kev]

It's OK to be in the same or higher tax situation, though. Remember, your Roth contributions now require that you pay the highest marginal rate on those dollars now. The comparison isn't income now to income later, or top marginal rate now to top marginal rate later, it's top marginal rate now to average tax rate later.

If you're able to max out a 401K and a Roth (or come close), you're likely sitting in the 28% or above bracket as your top marginal rate (for single filers). Your average tax rate is going to be lower than this, as you're paying progressively lower rates on your earliest dollars. Calculate your average tax rate from your most recent year (federal tax liability / federal taxable income), and use that number as a basis point as you try to predict the future. Let's say that your calculation is 20%. If it is, your average tax rate would have to grow by 40% (20 + 8) to undermine the savings you're receving by avoiding 28% now. (Essentially, tax rates would have to go up a lot, or your income would have to go up a lot, or some mixture of the two.)

The more money you have available for investments now might change the equations a little bit (if, for example, you were able to max out your 401K, Roth, and still have some left over for regular investing), but I think most people aren't in that boat. If you're struggling to max out a 401K right now by itself, or can't get a Roth IRA going in addition to the 401K without sacrificing one or the other, then I think you'd be well served to think about your top marginal rate (now) versus your average tax rate (now and future) and invest accordingly.

This makes sense to me, I guess, but if you were to save 100k now (let's say) and pull 100k a year later, wouldn't your average tax rates be the same? Maybe I'm missing something, but this seems to make the Traditional 401K considerably more attractive if you assume you'll be withdrawing less on an annual basis than you saved during the accumulation phase. Maybe that's a standard assumption to make.

 

[Randolph Freelander]

This makes sense to me, I guess, but if you were to save 100k now (let's say) and pull 100k a year later, wouldn't your average tax rates be the same? Maybe I'm missing something, but this seems to make the Traditional 401K considerably more attractive if you assume you'll be withdrawing less on an annual basis than you saved during the accumulation phase. Maybe that's a standard assumption to make.

It's reasonable to believe the tax rates now will be the same as they are in the future, and the brackets themselves will be adjusted for inflation. After all, the expectation that marginal rates will increase is also the expectation that Congress will have the political will (real talk: the audacity) to raise taxes on the middle class. I don't particularly have that expectation.

And while, sure, the traditional 401K is the obvious choice if you know you'll withdraw less in retirement (inflation adjusted) than now, it can still be the choice if that's not the case. It's the top marginal rate now that's the consideration (and the next-top, for those that contribute enough), versus the expected average rate of the future. You could make more money in the future, which would act to pull up your average tax rate (more dollars in higher brackets), but still remain below the top marginal rate of today.

For example, if your adjusted gross income was $100K today, then your federal tax amount (after standard deduction) is $19,440 (I'm using figures from this tax calculator for this), which is 19.44% of your income. At $120,000, your taxes rise to $25,040, or 20.87% of your income. At $150,000, the tax bill is $33,440, or 22.29% of your income. If you're avoiding a top marginal rate of 25 or 28% (or higher) now by contributing to a traditional plan, then you pay 22.29% taxes in the future, you're winning.

 

[Randolph Freelander]

What's the penalty for removing money early from your 401K?

Unless you qualify for special disbursements or have reached the age of 59.5, you'll pay a 10% tax penalty in addition to regular taxes that will be due. This is not a good idea unless you absolutely need the money (yet somehow still don't qualify for a hardship withdrawal).

The fee is applicable to all contributions. And there is a monthly fee and an annual fee. They really don't want people to step outside of what is offered without taking a significant hit. I have to see if I can move the funds to a desirable MF later.

At some point, the math will let the self-directed investments win, you just need to figure out where that point is. If the typical fund the plan offers has fees and expenses of 1%, then that's $100 per year on $10K, $200 on 20K, $1000 on 100K, and up it goes. Compare that to the fees you would incur for going self-directed and once you hit that break even point, which is likely very low on the investment meter, then you change to that approach, and let new contributions accumulate until they reach the tipping point again.

 

[~Kinggi~]

Hopefully America begins moving in this direction because the data on how many people save for retirement and the amount they actually saved is pathetic. People suck at saving, investing and long-term planning and this is going to term into one huge fucking disaster pretty soon if we don't get ahead of this problem, like now.

I know some people will bitch and moan about being able to do better on their own, but I don't this is such a simple comparison. The economy is going to take a huge hit and someone is going to have to help all those retirees who can't afford retirement. That costs money, which might eat away and cost Mr awesome more than what he could have earned on his own.

People don't have money to save. Rising costs along with wages even in skilled jobs not rising along with them means no savings for you. Forget having a family. The only real way to save for most people these days is get rid of a lot of the stuff they used to be able to afford, get a person to live with and provide double incomes, and don't have kids. There are a lot in the 40-50 yr age group I know that are totally fucked. Basically homeless if they ever stop working. Retirement will not exist basically in the next 10-20 years except for rich folk, who will also be affected if they decide to stick around and not jump ship.

 

[KooPaL]

Guys, i am looking for some advice. Currently investing in my company's 401k and right now I have 100% allocation in an S&P index fund. Should i diversify with other options listed below or jusy keep that allocation and that is sufficient diversification? I am contributing about 17K annually and we are above the 25% bracket and whatever we have left we put in a Roth IRA.

The index funds are:
S&P 500 Midcap Index Fund
Russell 2000 Index Fund
Intl Developed Cntry Eqty Index Fund
MSCI Emerging Markets fund

Thanks in advance.

 

[Randolph Freelander]

Guys, i am looking for some advice. Currently investing in my company's 401k and right now I have 100% allocation in an S&P index fund. Should i diversify with other options listed below or jusy keep that allocation and that is sufficient diversification? I am contributing about 17K annually and we are above the 25% bracket and whatever we have left we put in a Roth IRA.

The index funds are:
S&P 500 Midcap Index Fund
Russell 2000 Index Fund
Intl Developed Cntry Eqty Index Fund
MSCI Emerging Markets fund

Thanks in advance.

The S&P 500 index provides sufficient diversification for large caps, but if you're wanting to mimic a total market approach, you'll want to add in the midcap and the Russell. Vanguard's (I believe) total market fund is allocated 8:2:1 between large, mid, and small caps, which would be roughly 73%, 18%, and 9% of your fund balances, so if you wanted to follow that model, that's how you might allocate between your S&P 500, S&P Midcap, and Russell 2000, adjusted to your particular risk tolerance. (Generally, large caps will be less volatile and small caps more, but it's really just higher risk/potentially higher reward.) Add in bonds and other "less risky" instruments to whatever degree suits you (personally, I'm all stock, but I'm young-ish), and allocate some towards international if you want, and I think you'll be fine.

For what it's worth, I'm at 9% international, and I'd have more confidence in the developed country equity index than emerging markets, but that's just me and I'm not you.

 

[KooPaL]

The S&P 500 index provides sufficient diversification for large caps, but if you're wanting to mimic a total market approach, you'll want to add in the midcap and the Russell. Vanguard's (I believe) total market fund is allocated 8:2:1 between large, mid, and small caps, which would be roughly 73%, 18%, and 9% of your fund balances, so if you wanted to follow that model, that's how you might allocate between your S&P 500, S&P Midcap, and Russell 2000, adjusted to your particular risk tolerance. (Generally, large caps will be less volatile and small caps more, but it's really higher risk/potentially higher reward.) Add in bonds and other "less risky" instruments to whatever degree suits you (personally, I'm all stock, but I'm young-ish), and allocate some towards international if you want, and I think you'll be fine.

For what it's worth, I'm at 9% international, and I'd have more confidence in the developed country equity index than emerging markets, but that's just me and I'm not you.

Awesome! Exactly what I was looking for thank you so much!

 

[Y2Kev]

It's reasonable to believe the tax rates now will be the same as they are in the future, and the brackets themselves will be adjusted for inflation. After all, the expectation that marginal rates will increase is also the expectation that Congress will have the political will (real talk: the audacity) to raise taxes on the middle class. I don't particularly have that expectation.

I once went to a seminar held by Dave Kautter who said it was his expectation that for both individual and corporate income tax reform would "broaden the base" and lower the rates. He kept saying that was the only place where there would be political will to do anything. It just never sat well with me. I can't imagine there's a ton more room to allow corporations to screw with their effective tax rates than there already is, and I just don't know how to interpret "broaden the base" beyond a) fuck with poor people or b) fuck with super rich people. In either scenario, I am not sure A particularly helps me or that B would help me.

I do have a Roth IRA so I have limited tax diversity but the limits on Roth IRA contributions just seems so stupid.

 

[Randolph Freelander]

I once went to a seminar held by Dave Kautter who said it was his expectation that for both individual and corporate income tax reform would "broaden the base" and lower the rates. He kept saying that was the only place where there would be political will to do anything. It just never sat well with me. I can't imagine there's a ton more room to allow corporations to screw with their effective tax rates than there already is, and I just don't know how to interpret "broaden the base" beyond a) mess with poor people or b) mess with super rich people. In either scenario, I am not sure A particularly helps me or that B would help me.

I do have a Roth IRA so I have limited tax diversity but the limits on Roth IRA contributions just seems so stupid.

Usually, it seems to be people on the right advocating tax reform, which probably means a net gain for the wealthy, and a net loss for the poor or middle class (especially if done in a "revenue neutral" manner). If they really want to broaden the tax base, the "easiest" way to do that is to create jobs. To whatever degree tax policy achieves that, great. I'd be wary of reform that says it reduces rates but also gets rid of many deductions, particularly if those deductions are commonly used by those in the middle class (think: mortgage interest deduction). You might end up with a lower marginal rate but a higher actual tax bill. Even deduction phase-outs sound dubious, since (as we know with IRA limits), the phase outs can occur quite swiftly.

 

[npm0925]

My employer is fully matching my 401k, and I have about $35k - $40k disposable income that I would like to put towards retirement. What should be my next step? Open an IRA & contribute to it annually and then invest in an index fund(s)?

 

[Piecake]

Question... Are these kind of funds available for europe private investor?
Atm in Italy index funds are scarce, and what's worse they have high commission for private sector..
Advice us gaf?

Well, I know they are offered in England. Beyond that, I have no idea. I tried googling it, but that failed miserably since all it brought up was Europe/Itay index funds.

If you are struggling to find information online as well, I would ask here

https://www.bogleheads.org/forum/index.php

While I am certain that it is also American-focused, I think it is a much larger community so a few might be able to help you out.

 

[Cyan]

Interesting. Thanks for the great post. One thing though is that the the article specifically mentions small cap value indexes, not small caps in general. I don't get the reasons behind it, but apparently that is an even more effective and 'sound' tilt. I'd imagine that those numbers would be even better than the ones you posted.

Thinking about it some more, I probably will never do it. I am not saying I think the strategy is BS, it is just that one of the reasons why I like index investing so much is that I don't have to do anything. Also, if I did tilt, and it went bad for me over a period of time I am not sure how I would handle that. Another benefit of index investing for me is that it stress free for me. If I started tilting or employed a bunch of other crazy things I'd get upset and stressed for 'guessing' wrong.

It is kind of weird to think stress-free investing is worth more to me than a possible increased return, since I know even a .5% increase is a huge deal, but I can only conceptualize that as a gamble. I think that is a warning to me that things won't go well for me if I do this and it hits one of its periodic snags.

Huh. I'm actually a little bit surprised. The argument for tilting to small caps is essentially the same as the argument for allocating more towards stocks and less towards bonds: higher E(R) in exchange for higher risk. Just curious, but is there any particular reason you view small caps as so risky that you don't want to do it? Not that I'm going to encourage you to take on additional risk that you don't want to take.

 

[Piecake]

Huh. I'm actually a little bit surprised. The argument for tilting to small caps is essentially the same as the argument for allocating more towards stocks and less towards bonds: higher E(R) in exchange for higher risk. Just curious, but is there any particular reason you view small caps as so risky that you don't want to do it? Not that I'm going to encourage you to take on additional risk that you don't want to take.

I think they are a bit different, but I am not going to lie, I agree that a lot of my reasoning is rather irrational and emotional. To me, simply following the market feels safe because it eliminates choice and errors on my part, and the market will always go up eventually. If the market drops for a period of time, well, its the market's fault, not mine.

If I tilt, and it goes badly for me I am going to blame myself because I made a poor 'bet'. I am not going to do it because I don't fully believe that it will work better than simply following the market and I don't fully trust myself that I will follow the strategy when the strategy hits a snag.

Thanks to how much time I have to invest, I don't look at my 100% stock allocation as a bet. Basically, I know stocks will do better than bonds over the long run. I am not totally sure a tilt strategy will beat a follow market strategy. I think that is the reason I feel totally comfortable investing all of it into index funds and following the market, but do not feel comfortable with a tilt. Now, when I get closer to retirement that is likely to change, and I am sure I will invest more in bonds.

 

[Randolph Freelander]

My employer is fully matching my 401k, and I have about $35k - $40k disposable income that I would like to put towards retirement. What should be my next step? Open an IRA & contribute to it annually and then invest in an index fund(s)?

Is this a continual (barring job changes, of course) availability of funds or more of a one time thing? If this money is available to you on an ongoing basis, then yes, max out your 401K and a Roth IRA, and make a point of doing so every year. Any excess can be invested as you see fit in index-based ETFs or mutual funds, or in any particular stock or bond or other investment you prefer.

Pay note to recent discussion on whether you'd want to go traditional versus Roth (if available) on your 401K.

 

[Halvie]

Any HY fund suggestions that can be bought through a Vanguard brokerage account and has an initial investment of under 100k? Selling most of my VWALX shares. Was planning on splitting between PIMIX and one other bond fund.

 

[Cyan]

If I tilt, and it goes badly for me I am going to blame myself because I made a poor 'bet'. I am not going to do it because I don't fully believe that it will work better than simply following the market and I don't fully trust myself that I will follow the strategy when the strategy hits a snag.

Right on. This is totally valid reasoning. Always good to take your own likely future responses/actions into account. Thanks for the response!

 

[npm0925]

Is this a continual (barring job changes, of course) availability of funds or more of a one time thing? If this money is available to you on an ongoing basis, then yes, max out your 401K and a Roth IRA, and make a point of doing so every year. Any excess can be invested as you see fit in index-based ETFs or mutual funds, or in any particular stock or bond or other investment you prefer.

Pay note to recent discussion on whether you'd want to go traditional versus Roth (if available) on your 401K.

This money is what I've accumulated in a savings account over the past few years. I'd have maybe $5k - $7k available yearly. I'd probably opt for the Roth IRA, so I should do $5500 yearly in that and put whatever remains into my 401k?

I understand the tax situation for the IRAs, but suppose I buy $30k in index funds and leave them untouched for 30 years. When will I be taxed on those?

 

[giga]

Anyone tried https://www.acorns.com ?

I registered and it's asking me to scan my employee ID for verification. I'm not comfortable with that and not sure why they would need that when my brokerage account (Vanguard) doesn't need that.

 

[egruntz]

As for income tax, they work a bit differently. If you invest your money in a 401k and traditional IRA you will not pay income taxes now, and your taxable income for the year will be lowered by how much you invest. So if you invest 15k into your 401k, your taxable income will lower by 15k. You will pay income tax on it when you start selling and taking money out. This benefits people who have a high income tax now, but will have a lower income tax when they retire

Can someone please help me understand this? So I could work in California for my working life, with high income tax, then retire in Washington, with no income tax at all, and get nothing taken out of my 401K?

 

[Randolph Freelander]

This money is what I've accumulated in a savings account over the past few years. I'd have maybe $5k - $7k available yearly. I'd probably opt for the Roth IRA, so I should do $5500 yearly in that and put whatever remains into my 401k?

Invest at least enough yearly in your 401K to secure your full employer match. If that's $1500 or all $7000, get every last dime your employer offers. Any excess can go into a Roth IRA, particularly if your top marginal tax rate is fairly low.

As for your accumulated savings, I assume that's several months worth of expenses? And are you planning any large purchases? If you have more than a few months of expenses, and if you're not planning a large purchase in the near-term, have you already opened a Roth IRA and contributed for this year? If not, consider opening one. As long as it's open by December 31 (tomorrow!), you have until April 15 of next year to fully fund it. But given your savings, you could go from 0 to $11,000 in a Roth just this week ($5500 for 2014 and $5500 for 2015) and put that money to work for you if those funds aren't targeted for something else.

I understand the tax situation for the IRAs, but suppose I buy $30k in index funds and leave them untouched for 30 years. When will I be taxed on those?

If held for longer than a year (obviously, in this case), gains would be taxed at the capital gains rate (barring a change in policy, and who knows what those rates might be at that time). You would want to fund a Roth first, assuming you're OK with not being able to touch that money until you're 59.5. If you're investing with the thought that you might want to access the money sooner, and the type of need you have wouldn't qualify for an unpenalized withdrawal, then you could invest outside the Roth knowing that you'll pay some sort of tax on any gains upon selling.

 

[Randolph Freelander]

Can someone please help me understand this? So I could work in California for my working life, with high income tax, then retire in Washington, with no income tax at all, and get nothing taken out of my 401K?

The state tax might not be applicable, but you will still pay federal income taxes on withdrawals from a traditional 401K.

 

[npm0925]

Invest at least enough yearly in your 401K to secure your full employer match. If that's $1500 or all $7000, get every last dime your employer offers. Any excess can go into a Roth IRA, particularly if your top marginal tax rate is fairly low.

As for your accumulated savings, I assume that's several months worth of expenses? And are you planning any large purchases? If you have more than a few months of expenses, and if you're not planning a large purchase in the near-term, have you already opened a Roth IRA and contributed for this year? If not, consider opening one. As long as it's open by December 31 (tomorrow!), you have until April 15 of next year to fully fund it. But given your savings, you could go from 0 to $11,000 in a Roth just this week ($5500 for 2014 and $5500 for 2015) and put that money to work for you if those funds aren't targeted for something else.



If held for longer than a year (obviously, in this case), gains would be taxed at the capital gains rate. You would want to fund a Roth first, assuming you're OK with not being able to touch that money until you're 59.5. If you're investing with the thought that you might want to access the money sooner, and the type of need you have wouldn't qualify for an unpenalized withdrawal, then you could invest outside the Roth knowing that you'll pay some sort of tax on any gains upon selling.

I am getting all that I can out of my 401k -- max employer matching and am putting in about $4k yearly myself. I'm not planning any large purchases but would like to keep a little in reserve (maybe $10k to $15k) for vacations, emergencies, or whatnot. I just opened a Roth IRA with Vanguard and contributed the max $5500; do I have to do anything with these funds or will it automatically go into the Vanguard Prime Money Market Fund? Thanks for all the help so far!

 

[RumblingRosco]

-

 

[Randolph Freelander]

I am getting all that I can out of my 401k -- max employer matching and am putting in about $4k yearly myself. I'm not planning any large purchases but would like to keep a little in reserve (maybe $10k to $15k) for vacations, emergencies, or whatnot. I just opened a Roth IRA with Vanguard and contributed the max $5500; do I have to do anything with these funds or will it automatically go into the Vanguard Prime Money Market Fund? Thanks for all the help so far!

I don't use Vanguard, so someone else can answer that specifically, but you'll want to direct your funds to something a bit more meaty than the money market fund (VMMXX) unless you just want to be ridiculously conservative (and lose value, in real terms once adjusted for inflation). You'll probably want to look at the total market fund (VTSMX), S&P 500 Index (VFINX), and things such as that.

Just check your account for your funds to hit and be available to use and then make your investment choices.

 

[anonymous_abc]

Question... Are these kind of funds available for europe private investor?
Atm in Italy index funds are scarce, and what's worse they have high commission for private sector..
Advice us gaf?

It will wildly depend on where you are. Here in Germany we have a decent selection of ETFs that we can buy with a low TER (0.5%). I have no idea about the situation in Italy. You will however want to stay in your home market, especially with a small portfolio or you will have to deal with all sorts of taxation problems.
I would be surprised if you cannot get a few decent global ETFs in Italy at reasonable TER (1%). Try to find something that follows the MSCI World as that is probably one of the largest indexes availiable.

 

[Darkatomz]

I got a question concerning Fidelity.

So I opened a Roth IRA with them (finally...) yesterday to get into the 2014 year and dropped $5,500 into the account. After some thought and understanding, I narrowed down my index fund choices to the Total Market Index (FSTMX), International Index Fund (FSIIX), and the Bond Index Fund (FBIDX) to cover the Dow Jones, small/mid/large caps, international, and bond areas. (I would have chosen the 500+Extended (FUSEX+FSEMX), but I ran into an issue outlined below).

The problem is, I can't seem to allocate specific amounts to each fund to split up the $5,500 that I would want. All of these funds seem to have a minimum of $2,500.

For me, I would ideally do 90/10 (stocks/bonds), where within the stocks, I would have 80/20 (US/international), where within the US, I would have 75/25 (market/small+mid caps). But, due to the minimum contribution to a single fund of $2500, the best I can do as it seems is a $3,000/$2,500 split if I were to only choose 2 options.

Is there a workaround to this, or am I missing something?

 

[Piecake]

It will wildly depend on where you are. Here in Germany we have a decent selection of ETFs that we can buy with a low TER (0.5%). I have no idea about the situation in Italy. You will however want to stay in your home market, especially with a small portfolio or you will have to deal with all sorts of taxation problems.
I would be surprised if you cannot get a few decent global ETFs in Italy at reasonable TER (1%). Try to find something that follows the MSCI World as that is probably one of the largest indexes availiable.

Jesus, you guys should pray for Vanguard and Fidelity to come to Europe. You can invest in Total US or the SP 500 with expense ratios as low as .05% in America and I would balk at investing in a fund that has an expense ratio more than .25%

I got a question concerning Fidelity.

So I opened a Roth IRA with them (finally...) yesterday to get into the 2014 year and dropped $5,500 into the account. After some thought and understanding, I narrowed down my index fund choices to the Total Market Index (FSTMX), International Index Fund (FSIIX), and the Bond Index Fund (FBIDX) to cover the Dow Jones, small/mid/large caps, international, and bond areas. (I would have chosen the 500+Extended (FUSEX+FSEMX), but I ran into an issue outlined below).

The problem is, I can't seem to allocate specific amounts to each fund to split up the $5,500 that I would want. All of these funds seem to have a minimum of $2,500.

For me, I would ideally do 90/10 (stocks/bonds), where within this, I would have 70/30 (US/international), where within THIS, I would have 80/20 (market/small+mid caps). But, due to the minimum contribution to a single fund of $2500, the best I can do as it seems is a $3,000/$2,500 split if I were to only choose 2 options.

Is there a workaround to this, or am I missing something?

You can invest in their ETF equivalents. Another option is to simply achieve your desired ratio with your total portfolio (which you should be doing) so invest in total us in Roth IRA, Total world in your 401k Total bond in both or something. If that isnt an option and you really want to invest in funds, investing just in Total US for one year isnt the end of the world.

 

[Laekon]

I got a question concerning Fidelity.

So I opened a Roth IRA with them (finally...) yesterday to get into the 2014 year and dropped $5,500 into the account. After some thought and understanding, I narrowed down my index fund choices to the Total Market Index (FSTMX), International Index Fund (FSIIX), and the Bond Index Fund (FBIDX) to cover the Dow Jones, small/mid/large caps, international, and bond areas. (I would have chosen the 500+Extended (FUSEX+FSEMX), but I ran into an issue outlined below).

The problem is, I can't seem to allocate specific amounts to each fund to split up the $5,500 that I would want. All of these funds seem to have a minimum of $2,500.

For me, I would ideally do 90/10 (stocks/bonds), where within the stocks, I would have 70/30 (US/international), where within the US, I would have 80/20 (market/small+mid caps). But, due to the minimum contribution to a single fund of $2500, the best I can do as it seems is a $3,000/$2,500 split if I were to only choose 2 options.

Is there a workaround to this, or am I missing something?

Just go with one for now. Total U.S. is probably the best bet but it's still a bet. In a few years when you have more invested you can try to hit the formula.

 

[giga]

I got a question concerning Fidelity.

So I opened a Roth IRA with them (finally...) yesterday to get into the 2014 year and dropped $5,500 into the account. After some thought and understanding, I narrowed down my index fund choices to the Total Market Index (FSTMX), International Index Fund (FSIIX), and the Bond Index Fund (FBIDX) to cover the Dow Jones, small/mid/large caps, international, and bond areas. (I would have chosen the 500+Extended (FUSEX+FSEMX), but I ran into an issue outlined below).

The problem is, I can't seem to allocate specific amounts to each fund to split up the $5,500 that I would want. All of these funds seem to have a minimum of $2,500.

For me, I would ideally do 90/10 (stocks/bonds), where within the stocks, I would have 70/30 (US/international), where within the US, I would have 80/20 (market/small+mid caps). But, due to the minimum contribution to a single fund of $2500, the best I can do as it seems is a $3,000/$2,500 split if I were to only choose 2 options.

Is there a workaround to this, or am I missing something?

I assume you're also in your mid to late 20s? I ran into the same issue when I first opened my Roth (with Vanguard). I just said fuck it and put all 5500 into the total stock market index (U.S.), as I'll have time down the road to rebalance it to a more appropriate risk level. I would suggest you do the same.

 

[chaosblade]

When I opened my account (Vanguard though) I did a $3000/$2500 split for Total US and International. Putting most of contributions into Total US Market to get it balanced out. Still nothing in bonds, but I'm 26 and not really worried about it right now.

 

[Randolph Freelander]

The market has closed, the year is over. This is how some various indices finished on the year, with large caps leading the way and mid and small caps lagging behind.

S&P 500 +11.83%
Dow +8.16%
Nasdaq +13.95%

S&P Midcap +8.67%
Russell 2000 +3.75%

And of personal interest to me, since it's in my 401K blend

Nasdaq 100 +18.53%

 

[UraMallas]

This hasn't updated with 12/31 but it wasn't a bad year.

 

[giga]

Jealous of that 15%.

My 401k allocation is pretty aggressive, so I got hit by international stocks.

10% bonds: 5.97% return
80% US stocks: 13.75% return
10% int'l stocks: -4% return

 

[Y2Kev]

Just in my Roth 401k and no outside retirement/non-retirement investments.

Fucking International Stocks.

And the 1% of my paycheck I put into my company stock fund just for lulz.

 

[GhaleonEB]

I can't figure out how to view annual returns for my portfolio with Fidelity's new layout. I can find the daily portfolio performance, or the performance of the fund, but not the annual performance of the portfolio. Arg.

 

[x-Lundz-x]

What do you guys/gals think of investing in silver or gold? My sister and mother are big into buying silver bars and keeping them in a safe. The idea is obviously keep buying low and hope down the road it increases in value.

Obviously you would not want this to be your only form of retirement but I'm thinking about sinking a few thousand a year into buying some bars.

 

[vehn]

I have a question about the Vanguard Total International Stock Index Fund Investor Shares (VGTSX) stock listed in the OP (that I have around 40% of my money in).

Its YTD performance is listed at -3.93% on Morningstar, while the Vanguard Total Stock Mkt (VTSMX) has +13.54% this year. Should I just keep my money in there for diversity sake and wait for it to come back up next year? Makes me wish I put all of it in the Total Stock mkt fund this year. . .

 

[chaosblade]

I have a question about the Vanguard Total International Stock Index Fund Investor Shares (VGTSX) stock listed in the OP (that I have around 40% of my money in).

Its YTD performance is listed at -3.93% on Morningstar, while the Vanguard Total Stock Mkt (VTSMX) has +13.54% this year. Should I just keep my money in there for diversity sake and wait for it to come back up next year? Makes me wish I put all of it in the Total Stock mkt fund this year. . .

40% International is high. That's about what I'm at, but it's mostly because I don't have enough money built up to set up my investments how I'd like to yet, and it's why the majority of my contributions are going to US Market.

It's not a good idea to be reactionary and move most of your money out of International just because it had a bad year. That would basically be selling low and buying high. It will probably bounce back at some point in the nearish future (within a couple years), and having that diversity is good.

Rebalancing isn't a bad thing, but you want to have a solid reason to do it. Like maintaining a certain balance in your portfolio.

 

[Piecake]

What do you guys/gals think of investing in silver or gold? My sister and mother are big into buying silver bars and keeping them in a safe. The idea is obviously keep buying low and hope down the road it increases in value.

Obviously you would not want this to be your only form of retirement but I'm thinking about sinking a few thousand a year into buying some bars.

I am not in favor of buying precious metals. I think it is far too dependent on psychology. Unlike stocks whose businesses gain value, how does gold and silver gain value? They don't. It all depends on what people are willing to pay for them. I wouldn't trust that as a long term investment. If you really want to invest in silver or gold, I would invest in a precious metals fund over physical bars. Physical bars are iliquid assets, which means that they are difficult to turn into cash when you need it.

I will admit that I am no expert, but I will never invest in gold or silver. Plus, a lot of physical gold and silver sellers are just businesses out to scam you, so you gotta be wary about that as well.

I have a question about the Vanguard Total International Stock Index Fund Investor Shares (VGTSX) stock listed in the OP (that I have around 40% of my money in).

Its YTD performance is listed at -3.93% on Morningstar, while the Vanguard Total Stock Mkt (VTSMX) has +13.54% this year. Should I just keep my money in there for diversity sake and wait for it to come back up next year? Makes me wish I put all of it in the Total Stock mkt fund this year. . .

It really doesnt matter in the long run. Stick with your plan. Stocks will go up and down in the short term. If you chase past returns you will end up losing big because what that usually results in is buying high and selling low. That is the opposite of what you want to do. Right now, internationals are sucking, but next year they could be great. Moreover, you are buying international stocks at a possible 'cheaper' price (I have no idea what international stocks are selling at, but I am pretty sure that US stocks are at 18.5 times earnings, which is 'supposed' to be rather expensive).

If it makes you feel any better I am at 40% international as well and have no plans of changing anything.

 

[iamblades]

Gotta love year end dividends though, made $1500 by just waking up today.

 

[Randolph Freelander]

Today is also the quarterly employer match day at my POE, so that's nice. I'll, of course, move those funds swiftly out of company stock and into the S&P on Friday.