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[Randolph Freelander]

Any particular reason you have such low exposure to international markets?

I could say something to the effect of large cap domestic corporations are global and by that fact I already have significant exposure to international markets, with the ability to reap international gains. But the reality is that I just don't feel good enough about international to go higher than what I am.

Real talk: Domestic gains and international losses drove my international percentage down to 8.3% of my account by the end of last year (even with me shifting and balancing a couple of times), and I had to talk myself into rebalancing it back up to 9 when I shifted my other allocation numbers (but I did it anyway). I'll hold it at 9, but I'm just more comfortable domestically. I haven't always made the best choices with a retirement account, and a few years (and a couple of jobs) ago, I was heavy into international and emerging markets and got blistered and couldn't deal with the erratic swings (mostly due to the emerging market component). Maybe I'm swinging the pendulum back too far the other direction, but it's where I'm comfortable.

You 1%'ers. I can't even hit the IRA limit cap.

Invest in bootstraps in addition to your IRA. You'll thank us later.

 

[Halvie]

You on that forum?

 

[Badgerst3]

Work sending out mid level account that was negotiated en lieu of raises.

Need to re-invest into a 457 or 401. Not retiring anytime soon but would like somewhat early access to the account. Refuse to pay the massive tax hits caused by cashing out early.

I can pick. Thinking a medium aggressive Vanguard type mutual fund. Not clear on major differences between 401 and 457.

Thoughts?

 

[harriet the spy]

GAF, I am somewhat ignorant in this kind of thing, and I am not sure I'll ever have the envy to spend the time to educate myself and invest more actively.

I moved from US to UK and changed jobs (will probably do the reverse at some point, but not immediately). The money I had in a 401k is now in an IRA at Merill Edge (I know, they suck. I might change in the future, but for now it makes my life easier) - but it's uninvested, in cash.

I am looking for something relatively easy, want to only rarely check in on performance, targeted towards some growth (I am in my early 30s) but not insane risk type of investment. Following the OP, I am looking at a mix of mutual funds which behave like index funds - namely, a mix of US Total Stock Market and total international market.

It looks like I am able to invest in VTSMX and VGTSX (the US and international stock index from Vanguard - might not make a lot of sense to invest in vanguard funds from Merill, but I am not sure what are the Merill equivalents).

Looking at putting 60% in VTSMX, 20% in VGTSX, 20% in some bond mix. Before I click go for it, is this an ok idea? Terrible idea? I can change later on, but right now the money is just sitting there doing nothing..

 

[chaosblade]

I'm not sure if Merill will provide the same funds for all companies' 401ks, but mine includes the Russell 1000 and 2000 at 0.03 and 0.05 expense ratio, respectively. Definitely the best options, by a long shot. Have a 85/15 split in those.

And those Vanguard funds are the ones most people here are probably using, or equivalents.

 

[Darren870]

You on that forum?

Yea, though I haven't posted in a while. Just lurk every now and then. Hard to follow advice when you are all over the place :/
I really need to get back on top of my retirement and taxes. 2015 resolution!

 

[acksman]

Looking at re-balancing my 401k. I am thinking moving some of my small cap into large cap ~50%. Also trying to decide if I should leave international alone or adjust that.

Any other recommendations?

 

[iamblades]

Looking at re-balancing my 401k. I am thinking moving some of my small cap into large cap ~50%. Also trying to decide if I should leave international alone or adjust that.

Any other recommendations?

^^ you are grossly overweight in small and mid caps.

Large caps account for over 90% of the total market cap, so an aggressive weighting would be 15% small and mid caps total. what you have going on is quite a bit further than that.

It's really hard to give recommendations for 401(k) users though, as your options will typically be super limited. But in general find the cheapest(in terms of expense ratio and fees) broad based large cap fund you can find and move like 80% of what you have in small and mid caps into that. It'll probably be the transamerica partners stock index(but at .65 those fees are still gross).

The high yield bond allocation you have is not exactly something I'd recommend to most people, but I can't argue with it either as I hold a junk bond index fund as well.

 

[clav]

As promised, I was able to shift our company retirement funds out of the global diversified fund (>1% expense ratio, with a lot of bonds and hedge funds in the mix) to the Vanguard S&P 500 index (.02% expense ratio). January's investment will go there.

Feels good. Feels very good.

It also doomed the US markets for 2015. Sorry, guys.

Damn it Randolph.

 

[Randolph Freelander]

Today is not my fault. I swear.

Actually, it might be. I didn't have a 401K contribution for the last 2 months of the year due to meeting the cap. I had one Friday to start off 2015. The market tanked today.

 

[Sain Drevia]

Hey RetirementGAF, I have some questions for you!

I started a new job back in October and the company doesn't do 401k matching, but does facilitate employees investing into a 401k through Verisight (the company plan provides access to a variety of Vanguard funds). Since they don't match, I decided to just invest on my own through Fidelity. Logically and financially, does this seem reasonable? If the company is not necessarily matching any of my contributions, I figured that there is no real sense in investing using their vehicle unless there is something that I am missing.

My second question is about rolling over my 401k (I think technically it is a 403b, but I am not totally sure what the difference is). Right now, I have about 12.5k wrapped up in a TIAA-CREF 2050 Lifecycle Fund (TLFRX), which has a pretty high expense ratio (0.91% gross/0.71% net).

With that said, now realizing that this fund probably isn't the best place for this money to sit since that I am not longer receiving contributions here, should I reallocate into another TIAA-CREF fund (options below) or roll it over into a Fidelity/Vanguard account (where I plan on opening a new account)?

My biggest concerns about rolling over are any tax implications, and, of course, moving this money to the most optimal vehicle.

If it helps, I am relatively new to all of this (26 years old) and would like to be more proactive/intentional about ensuring that I have a solid financial future later in life (which is something that my father never had at the time of his passing). I currently have not contributed anything to retirement funds beyond what is currently in this TIAA-CREF account.

Thanks in advance for your insights!

 

[giga]

As promised, I was able to shift our company retirement funds out of the global diversified fund (>1% expense ratio, with a lot of bonds and hedge funds in the mix) to the Vanguard S&P 500 index (.02% expense ratio). January's investment will go there.

Feels good. Feels very good.

It also doomed the US markets for 2015. Sorry, guys.

Today is not my fault. I swear.

Actually, it might be. I didn't have a 401K contribution for the last 2 months of the year due to meeting the cap. I had one Friday to start off 2015. The market tanked today.

 

[Husker86]

Questions

The only reason I can think of using your company's 401k/403b, even without the match, is for tax benefits if you are going to be maxing your $5,500 yearly IRA limit.

If you won't be hitting the IRA max, then stick with just an IRA.

I would roll over what you have to a Fidelity Traditional IRA (to keep the tax-deferred status, or a Roth IRA if you want to pay taxes on it now and have tax-free growth) so you can invest in whatever funds/ETFs/Stocks you choose.

 

[Sain Drevia]

The only reason I can think of using your company's 401k/403b, even without the match, is for tax benefits if you are going to be maxing your $5,500 yearly IRA limit.

Thanks for the insight! As far as the tax benefit goes, would it make a significant enough difference to actually proceed down that route?

$5,500 is about 10.5% of my current gross yearly salary, but in theory, I could live with that coming out of my paycheck (no debt, no kids, apartment dweller, a decent chunk of inheritance set aside for a future home down-payment). It would be about $458 per month coming out of my paychecks which is only about $100 more than I was paying on my now paid-off student loans. If my situation were different, I would be more wary, but it seems do-able if the upside to a little bit of penny-pinching is high enough.

 

[Husker86]

Thanks for the insight! As far as the tax benefit goes, would it make a significant enough difference to actually proceed down that route?

$5,500 is about 10.5% of my current gross yearly salary, but in theory, I could live with that coming out of my paycheck (no debt, no kids, apartment dweller, a decent chunk of inheritance set aside for a future home down-payment). It would be about $458 per month coming out of my paychecks which is only about $100 more than I was paying on my now paid-off student loans. If my situation were different, I would be more wary, but it seems do-able if the upside to a little bit of penny-pinching is high enough.

If $5500 or less is what you're going to put in yearly, then just stick with an IRA; no work plan if they aren't matching.

If you get to a point where you put in more than that, then your only choice (for yhe money after $5,500) would be a normal investment account, which has no tax benefits; this is where using your employer's option even if they don't match is a pretty good idea.

 

[Sain Drevia]

Ahh, that makes more sense Husker. Thanks much! I am sure I will have some further questions once it comes to allocating the fund, but I will try to read through more of the thread beforehand to avoid repeats.

 

[charlequin]

I'm currently contributing to my work 401k somewhat above the match. Is there a significant benefit to taking the effort of putting that extra into an IRA (which I don't currently have) instead if I'm not hitting the cap?

 

[Husker86]

I'm currently contributing to my work 401k somewhat above the match. Is there a significant benefit to taking the effort of putting that extra into an IRA (which I don't currently have) instead if I'm not hitting the cap?

Yes. The main reason is you can (generally) pick much better investment options than what you're limited to in your work plan.

Even if you have a good, low-fee, large cap fund in your 401k, if/when you want to diversify to mid/small caps or international, work plans tend to have options in those categories with high fees.

It really all comes down to fees/expense ratios.

 

[GhaleonEB]

I'm currently contributing to my work 401k somewhat above the match. Is there a significant benefit to taking the effort of putting that extra into an IRA (which I don't currently have) instead if I'm not hitting the cap?

The primary benefit of using an IRA over a 401k is greater investment options than you have in a 401k, and thus (usually) lower costs. If your employer does not offer index funds, or only a limited selection of them, then it might make sense to expand your options and/or reduce your costs with an IRA. Contribute to the match limit (free money, woo!), then to the IRA.

The other reason might be if you would benefit from using a Roth rather than a traditional retirement account, and your employer does not offer a Roth 401k. If neither if neither of those apply to you, then it makes sense to stick to the 401k until you hit the cap.

 

[Tyreny]

Out of curiosity, what percentage of gross income do people on these forums contribute to retirement accounts? Include 401k, IRA, Roth. Don't include cash savings outside of a tax advantaged account.

I contribute 6%, which is the company match. I don't max the 401k contribution and don't currently do an outside IRA. I do plan to begin making Roth contributions but that will be earmarked as college funds. I am wondering if the rest of our budget (home, food, day to day etc) needs to be looked at to adjust the retirement contributions upward. I am 30 years old for reference.

 

[GhaleonEB]

Out of curiosity, what percentage of gross income do people on these forums contribute to retirement accounts? Include 401k, IRA, Roth. Don't include cash savings outside of a tax advantaged account.

I contribute 6%, which is the company match. I don't max the 401k contribution and don't currently do an outside IRA. I do plan to begin making Roth contributions but that will be earmarked as college funds. I am wondering if the rest of our budget (home, food, day to day etc) needs to be looked at to adjust the retirement contributions upward. I am 30 years old for reference.

We save aggressively, but are still well below the combined cap of 401k and IRA's. Starting out at 6% is good. I have read guidance that aiming for 15% is a good target goal to reach.

 

[Randolph Freelander]

I don't want to put a percentage, because I don't really want to advertise my income. But I maxed the full 401K and Roth IRA limits last year, and that's my target for this year.

 

[TangoAlphaLima]

I'm currently contributing to my work 401k somewhat above the match. Is there a significant benefit to taking the effort of putting that extra into an IRA (which I don't currently have) instead if I'm not hitting the cap?

There can be a significant difference between pre-tax 401k savings and post-tax Roth IRA savings with no tax on earnings. You obviously need to do some of the calculations on your own, because it depends on your current tax bracket to some extent. But the general rule is, the younger you are, the more beneficial a Roth IRA is, due to no taxation on the compounding interest.

Out of curiosity, what percentage of gross income do people on these forums contribute to retirement accounts? Include 401k, IRA, Roth. Don't include cash savings outside of a tax advantaged account.

I contribute 6%, which is the company match. I don't max the 401k contribution and don't currently do an outside IRA. I do plan to begin making Roth contributions but that will be earmarked as college funds. I am wondering if the rest of our budget (home, food, day to day etc) needs to be looked at to adjust the retirement contributions upward. I am 30 years old for reference.

You lost me here. If you're saving to pay for your kid's college, then you should open a 529 plan. Here's a blog post discussing a 529 versus a Roth, and it shows that the 529 has added benefits the Roth does not.

http://www.nerdwallet.com/blog/investing/2013/roth-ira-vs-529-plan-best-college-savings/

And truthfully, you should really focus on using the Roth IRA limits for your own retirement first, then worry about saving for your kid's college with a 529.

Regarding how much I save specifically for retirement, it's around 10% or so of our gross family income. It will go up a fair margin in a few years when we no longer have to pay for daycare, that's a killer drain on the finances. My wife also has a vested state pension, but I have no idea how to calculate what added value that thing has. I'm pretty much viewing it as the gravy on top of our (hopefully) fully loaded mashed potato retirement savings.

 

[Tyreny]

You lost me here. If you're saving to pay for your kid's college, then you should open a 529 plan. Here's a blog post discussing a 529 versus a Roth, and it shows that the 529 has added benefits the Roth does not.

Appreciate the link. The killer for me on 529's is no tax advantage (in NJ) and to a lesser extent the 10% withdrawal penalty. If I get to a point where I can afford the IRA contribution limit for my own retirement I'll consider it a good problem and perhaps begin using a 529 at that point.

 

[TangoAlphaLima]

Appreciate the link. The killer for me on 529's is no tax advantage (in NJ) and to a lesser extent the 10% withdrawal penalty. If I get to a point where I can afford the IRA contribution limit for my own retirement I'll consider it a good problem and perhaps begin using a 529 at that point.

Yeah, I get that the 10% withdrawal penalty can look pretty daunting, but I'm not too worried about it personally. 529 funds can be used for practically anything education-related, so even if my kids were to get tuition paid through scholarships or what have you, the 529 funds could be used to pay for books, room & board, etc.

Another nice feature is that 529 funds can be moved from one family member to another. So in my case, let's say my oldest daughter gets a complete full-ride to college, but my youngest doesn't. I can transfer that money from my oldest to my youngest without penalty (obviously with the caveat that I would be paying out of pocket to reimburse my oldest for what should have been her money). Or my kids could sit on their 529 funds and transfer them to their own future children. Ultimately there are a myriad of ways to avoid ever paying that 10% withdrawal penalty and taxes.

 

[GhaleonEB]

Yeah, I get that the 10% withdrawal penalty can look pretty daunting, but I'm not too worried about it personally. 529 funds can be used for practically anything education-related, so even if my kids were to get tuition paid through scholarships or what have you, the 529 funds could be used to pay for books, room & board, etc.

Another nice feature is that 529 funds can be moved from one family member to another. So in my case, let's say my oldest daughter gets a complete full-ride to college, but my youngest doesn't. I can transfer that money from my oldest to my youngest without penalty (obviously with the caveat that I would be paying out of pocket to reimburse my oldest for what should have been her money). Or my kids could sit on their 529 funds and transfer them to their own future children. Ultimately there are a myriad of ways to avoid ever paying that 10% withdrawal penalty and taxes.

To add, you could also hedge and put aside some funds outside of the 529 that are earmarked for the kids, in addition to funding the 529. I've looked into options such as a UGMA/UTMA, or just having some funds outside of any kind of specialized account (i.e., just a mutual fund); explore your options. In the case of just a mutual fund, you don't get any tax benefit but you also don't have the risk of the withdrawal penalty if that is something you are really worried about.

 

[PflargBlarg]

Out of curiosity, what percentage of gross income do people on these forums contribute to retirement accounts? Include 401k, IRA, Roth. Don't include cash savings outside of a tax advantaged account.

I contribute 6%, which is the company match. I don't max the 401k contribution and don't currently do an outside IRA. I do plan to begin making Roth contributions but that will be earmarked as college funds. I am wondering if the rest of our budget (home, food, day to day etc) needs to be looked at to adjust the retirement contributions upward. I am 30 years old for reference.

I'm in Canada so it's different kinds of tax advantaged accounts but if all goes to plan this year it should end up being around 17-21%. Don't be discouraged by your numbers though. My fiancée and I are both 26 years old and childfree so we have very low costs and she will also have a government pension when she retires.

I would recommend looking at your financial distribution though to see what you can adjust. I don't know how much 6% of your income is, but it would be good to aim higher.

 

[Anduril]

So, I'm 30 and I need to seriously start investing for later years. I learned of index funds at a seminar a while ago and then found this thread yesterday. Managed to read through the first few and last few pages, got excited about Vanguard and their US and international index funds, found out I don't have enough saved for their minimum investments, decided on ETF to start somewhere, then started clicking through Vanguards page and, of course, found out I'm shit out of luck cause I'm not from US. Woot.

Any similarly useful and low-fee investment companies in Europe? I'm from Slovenia, so it needs to be something open to the whole EU, not just the bigger European countries, otherwise I'm screwed.

Also, the international funds seem to have seriously disappointed this year. Still suggested to invest in US and Int. or has this changed from the beginnings of this thread?

 

[iamblades]

So, I'm 30 and I need to seriously start investing for later years. I learned of index funds at a seminar a while ago and then found this thread yesterday. Managed to read through the first few and last few pages, got excited about Vanguard and their US and international index funds, found out I don't have enough saved for their minimum investments, decided on ETF to start somewhere, then started clicking through Vanguards page and, of course, found out I'm shit out of luck cause I'm not from US. Woot.

Any similarly useful and low-fee investment companies in Europe? I'm from Slovenia, so it needs to be something open to the whole EU, not just the bigger European countries, otherwise I'm screwed.

Also, the international funds seem to have seriously disappointed this year. Still suggested to invest in US and Int. or has this changed from the beginnings of this thread?

If you are going the ETF route, then any brokerage that has access to the US markets can buy those funds for you.

I am pretty sure TD, Fidelity, and Charles Schwab all have European operations as far as the bigger name discount brokerages go. Worst case scenario is you have to do business though a local full service brokerage house, which will probably cost you like triple in transaction costs and may leave you stuck in the same situations of not being able to meet the minimums.

You can't really just take recent returns to mean that it is no longer worth investing internationally. Returns have been better in the US for some time, but it probably won't always be that way. You also have to consider currency risks and other factors I don't even know enough to think about. Research some brokerages that operate locally, and call them up and ask questions about what your options are and their fees. Be prepared to walk away if they try to sell you on anything though.

 

[Piecake]

So, I'm 30 and I need to seriously start investing for later years. I learned of index funds at a seminar a while ago and then found this thread yesterday. Managed to read through the first few and last few pages, got excited about Vanguard and their US and international index funds, found out I don't have enough saved for their minimum investments, decided on ETF to start somewhere, then started clicking through Vanguards page and, of course, found out I'm shit out of luck cause I'm not from US. Woot.

Any similarly useful and low-fee investment companies in Europe? I'm from Slovenia, so it needs to be something open to the whole EU, not just the bigger European countries, otherwise I'm screwed.

Also, the international funds seem to have seriously disappointed this year. Still suggested to invest in US and Int. or has this changed from the beginnings of this thread?

I know next to nothing about the index investing options in Europe, so I really can't help you there.

As for international, I don't think it has changed. Past performance is not a guarantee of future returns. US, International, and the various sectors within those broad categories will go up and down every year. If you chase past returns you will most likely end up buying high and selling low, which is the last thing you want to do. That does not mean that International will beat US this year, but it doesnt mean that it will lose to US like last year as well.

Vanguard did a study about the proper allocation of international and they recommended 20-40% of your stock holdings. So if you are pessimistic, just go with 20% (or less). Really, the most important thing is do what you are comfortable with because sticking with a plan is the most important because that way you won't get suckered into buying high and selling low.

 

[anonymous_abc]

So, I'm 30 and I need to seriously start investing for later years. I learned of index funds at a seminar a while ago and then found this thread yesterday. Managed to read through the first few and last few pages, got excited about Vanguard and their US and international index funds, found out I don't have enough saved for their minimum investments, decided on ETF to start somewhere, then started clicking through Vanguards page and, of course, found out I'm shit out of luck cause I'm not from US. Woot.

Any similarly useful and low-fee investment companies in Europe? I'm from Slovenia, so it needs to be something open to the whole EU, not just the bigger European countries, otherwise I'm screwed.

Also, the international funds seem to have seriously disappointed this year. Still suggested to invest in US and Int. or has this changed from the beginnings of this thread?

go check with your bank about opening up a trading account. If they are expensive shop around locally within your country first. I would advise against using foreign banks till you have some capital. You will just have problems and more to worry about in taxes, fees, etc..
Even your local Slovenian stock exchange should offer you funds and etfs comparable to what the US' people in here are talking about. They will sadly just be more expensive. It's the same in Germany.

Out of curiosity, what percentage of gross income do people on these forums contribute to retirement accounts? Include 401k, IRA, Roth. Don't include cash savings outside of a tax advantaged account.

I contribute 6%, which is the company match. I don't max the 401k contribution and don't currently do an outside IRA. I do plan to begin making Roth contributions but that will be earmarked as college funds. I am wondering if the rest of our budget (home, food, day to day etc) needs to be looked at to adjust the retirement contributions upward. I am 30 years old for reference.

I did the maths the other day, I save and set aside 45% of my net income. Want to up that to 50% this year. This is obviously includes just straight up investment in non tax advantage accounts, as I have no 401k or Roth or anything like that in Germany.

 

[Renzoku]

So I'm finally eligible for my employer's 401k, and got the list of accounts today, with very little other info (they're a terrible employer and I'm looking elsewhere, but the job pays the bills and I'm getting lots of experience).


The match up to 3%, which is all I'm going to invest, but I've got lots of options it seems:

5 International Stock accounts
1 Small-Cap account
2 Mid-Cap accounts
6 Large-Cap accounts
4 "Balanced" accounts
1 Bond account
1 Cash account
and a "Nationwide Fixed Account"

Can anyone offer insight into which kinds of accounts one should focus on, or is it personal choice mostly? I've read that I can read through morningstar.com to look at performance, but that diversification is usually best since it follows the same logic as investing into an index fund, which is sadly missing from their portfolio.

If it matters at all, I'm 25, and if I were to pay down my debt with my current savings I'd probably only have $10,000 in debt left or so, so I feel pretty comfortable with a higher-risk approach. I was thinking 20% in bonds, 80% split across the other types of accounts in 5% increments, unless I find a few accounts I want to weigh heavier.

Those that make any sense at all or am I totally offbase?

Also, had a more general question:

So, which one should I choose? Well, the rule of thumb for most is:
- 401k up to the employer match (401ks usually have higher fees and shittier funds)
- Fully fund Roth or traditional IRA (5,500)
- Fully fund 401k (17,500, i think)

When it says "fully fund 401k" is it talking about your employer's 401k, or a second one that you open yourself?

If an employer 401 usually has higher fees and shittier funds, why should I pour more money into it?

Thanks in advance for any help anyone can offer!

 

[chaosblade]

Check the expense ratios. The general recommended approach is going to be to get close to following the market with small, mid, and large caps with low expense ratios, maybe leaning toward one of the three depending on how you feel.

And 401ks usually have higher fees, that's why it is recommended you only contribute to the match for the free money. Then put money in a IRA/Roth (so you have many more options with low fees), which is limited to $5500. If you hit that, then go back to the 401k, because even if the fees aren't great it is still tax advantaged.

 

[anonymous_abc]

So I'm finally eligible for my employer's 401k, and got the list of accounts today, with very little other info (they're a terrible employer and I'm looking elsewhere, but the job pays the bills and I'm getting lots of experience).


The match up to 3%, which is all I'm going to invest, but I've got lots of options it seems:

5 International Stock accounts
1 Small-Cap account
2 Mid-Cap accounts
6 Large-Cap accounts
4 "Balanced" accounts
1 Bond account
1 Cash account
and a "Nationwide Fixed Account"

Can anyone offer insight into which kinds of accounts one should focus on, or is it personal choice mostly? I've read that I can read through morningstar.com to look at performance, but that diversification is usually best since it follows the same logic as investing into an index fund, which is sadly missing from their portfolio.

If it matters at all, I'm 25, and if I were to pay down my debt with my current savings I'd probably only have $10,000 in debt left or so, so I feel pretty comfortable with a higher-risk approach. I was thinking 20% in bonds, 80% split across the other types of accounts in 5% increments, unless I find a few accounts I want to weigh heavier.

Those that make any sense at all or am I totally offbase?

Also, had a more general question:



When it says "fully fund 401k" is it talking about your employer's 401k, or a second one that you open yourself?

If an employer 401 usually has higher fees and shittier funds, why should I pour more money into it?

Thanks in advance for any help anyone can offer!

imho at 25 you don't need 20% bonds

Spoiler

or any for that matter

.

 

[Renzoku]

Check the expense ratios. The general recommended approach is going to be to get close to following the market with small, mid, and large caps with low expense ratios, maybe leaning toward one of the three depending on how you feel.

And 401ks usually have higher fees, that's why it is recommended you only contribute to the match for the free money. Then put money in a IRA/Roth (so you have many more options with low fees), which is limited to $5500. If you hit that, then go back to the 401k, because even if the fees aren't great it is still tax advantaged.

imho at 25 you don't need 20% bonds

Spoiler

or any for that matter

.

Thank you for the response and answers!

what is considered a low expense ratio? From what I'm seeing, it's about 1 - 1.25%?

Here's the only small cap option, as an example:

http://quotes.morningstar.com/fund/GSSMX/f?t=GSSMX

Here's one of the mid cap options, goldman again:

http://quotes.morningstar.com/fund/GCMAX/f?t=GCMAX

I'm also seeing that I should be checking long-term performance, so I've been looking at the 5/10year graphs.

 

[anonymous_abc]

Thank you for the response and answers!

what is considered a low expense ratio? From what I'm seeing, it's about 1 - 1.25%?

Here's the only small cap option, as an example:

http://quotes.morningstar.com/fund/GSSMX/f?t=GSSMX

Here's one of the mid cap options, goldman again:

http://quotes.morningstar.com/fund/GCMAX/f?t=GCMAX

I'm also seeing that I should be checking long-term performance, so I've been looking at the 5/10year graphs.

When we talk about low expense ratios we usually talk about index funds or ETF's which should be <0.5%.
Managed funds will usually be anything above 1.x%.
If you know anything about maths and compound interest you will know in the long run that makes a huge difference.

Looking at the long term performance is valid to a certain extent, but always remember past performance says almost nothing about the future!


If all the funds your 401k offers are non index funds, you will have to run the maths to see whether the 3% match is worth the added cost through the higher expense ratio.

 

[Renzoku]

When we talk about low expense ratios we usually talk about index funds or ETF's which should be <0.5%.
Managed funds will usually be anything above 1.x%.
If you know anything about maths and compound interest you will know in the long run that makes a huge difference.

Looking at the long term performance is valid to a certain extent, but always remember past performance says almost nothing about the future!


If all the funds your 401k offers are non index funds, you will have to run the maths to see whether the 3% match is worth the added cost through the higher expense ratio.

Yeah, sadly none of them are index funds, otherwise I'd have written a big ol' 100% next to it and called it a day.

 

[Piecake]

Yeah, sadly none of them are index funds, otherwise I'd have written a big ol' 100% next to it and called it a day.

It will likely be worth investing in your 401k if the expense ratios are 1 to 1.25 percent. If all of your funds are managed, I would go with the most diversified and cheapest and pick large caps over mid/small/international.

You could also look at turnover rate and cash reserves. Turnover rate costs you money and the higher that rate is the more transaction fees you are incurring. Since this is a 401k, the tax implications of selling don't matter, but those transaction costs still do hurt. Someone can correct me if I am wrong, but turnover rate is not reflected in the expense ratio.

How much a fund keeps out of the market is also a pretty big deal since any % that is held back in cash is the % that is doing absolutely nothing for you. Why is this done? Well, I think fund managers think they can time the market. I think that is bunk, so I would recommend finding a find with a very low % of cash reserves.

http://money.usnews.com/money/perso...tual-fund-trading-costs-hurt-your-bottom-line

Their results are telling: Investors pay an average of 1.44 percent per year in trading costs. In many cases, that's more than they pay in management and operational fees. Moreover, for certain types of funds, trading can be particularly expensive, according to the study. For instance, the researchers found that investors in small-cap growth funds pay an average of 3.17 percent per year in trading costs. For large-cap value funds, that number is only 0.84 percent.

Although active managers tend to justify their trading costs by maintaining that the returns they earn from their active trading outweigh the costs, the researchers have concluded that, at least for the average fund, that's not the case. Instead, they have found "a strong negative relation between aggregate trading cost and fund return performance." Specifically, the funds in the highest quintile for trading costs (the funds that had the most significant costs) underperformed those in the lowest quintile by an average of 1.78 percentage points per year.

Russel Kinnel, Morningstar's director of mutual fund research, says that because funds don't publicize their trading costs, it's difficult for investors to take them into account when deciding which funds to purchase. "Since trading costs aren't reported, it's fairly hard for them to do it," he says...

...Even though such costs can be hard to quantify, what's clear is that if the researchers are correct, the effects of trading costs are more than theoretical. "[O]ur results suggest that invisible trading costs have a detrimental effect on fund performance that is at least as material as that of the (visible) expense ratio," they note.

The average turnover rate is about 130% I believe, so I would assume that a 130% turnover fund will cost you about 1.44% in fees. This is also another reason why you should prioritize large caps over small because those are apparently cheaper to buy (no idea why this is).

 

[Anduril]

Thanks for the responses, guys. I'll have to ask around as to what options I have here, cause I'm totally new in this investment business. As far as I read around the financial forums in Slovenia, there seem to be very few options of investing in index funds and most are through our regular banks, which add their own "caretaker" annual fees, but all in all it doesn't look so sucky.

It seems I can invest in these three funds quite easily:

Amundi Funds Index Equity North America
Amundi Funds Index Equity Euro
Amundi Funds Index Equity Pacific Ex Japan

Entry fee 4.5%, annual management fee 0.15% and the bank seems to add 0.15% in annual caretaker fees. So if I understand this correctly, if I invest 1000$, I get a one-time fee of 45$ when buying, then 0.3% of invested + returns (assuming 7% returns, 0.3% of 1070$ being 3.21$ for the first year)? And another 45$ if I invest another 1000$ and so on? Or am I totally miscalculating something here?

Thanks for all the help anyhow.

 

[Piecake]

Thanks for the responses, guys. I'll have to ask around as to what options I have here, cause I'm totally new in this investment business. As far as I read around the financial forums in Slovenia, there seem to be very few options of investing in index funds and most are through our regular banks, which add their own "caretaker" annual fees, but all in all it doesn't look so sucky.

It seems I can invest in these three funds quite easily:

Amundi Funds Index Equity North America
Amundi Funds Index Equity Euro
Amundi Funds Index Equity Pacific Ex Japan

Entry fee 4.5%, annual management fee 0.15% and the bank seems to add 0.15% in annual caretaker fees. So if I understand this correctly, if I invest 1000$, I get a one-time fee of 45$ when buying, then 0.3% of invested + returns (assuming 7% returns, 0.3% of 1070$ being 3.21$ for the first year)? And another 45$ if I invest another 1000$ and so on? Or am I totally miscalculating something here?

Thanks for all the help anyhow.

I got a fee of 2.87 for the first year. its 955 times 1.067

http://www.begintoinvest.com/expense-ratio-calculator/

That's a good calculator. Fees really start to become terrible in the long term.

I am not totally sure on subscription fees, but it looks like a front-end load. I am not really sure if you pay those once to get into the fund or every time you buy more of that fund (probably more of that fund). 1,000 looks like the minimum though, so you can invest more money into that fund, you just have to at least invest 1k.

As for the funds, I would probably wait for Fantatier to comment since I am not really sure how that compares to index funds offered in Europe.

 

[anonymous_abc]

Thanks for the responses, guys. I'll have to ask around as to what options I have here, cause I'm totally new in this investment business. As far as I read around the financial forums in Slovenia, there seem to be very few options of investing in index funds and most are through our regular banks, which add their own "caretaker" annual fees, but all in all it doesn't look so sucky.

It seems I can invest in these three funds quite easily:

Amundi Funds Index Equity North America
Amundi Funds Index Equity Euro
Amundi Funds Index Equity Pacific Ex Japan

Entry fee 4.5%, annual management fee 0.15% and the bank seems to add 0.15% in annual caretaker fees. So if I understand this correctly, if I invest 1000$, I get a one-time fee of 45$ when buying, then 0.3% of invested + returns (assuming 7% returns, 0.3% of 1070$ being 3.21$ for the first year)? And another 45$ if I invest another 1000$ and so on? Or am I totally miscalculating something here?

Thanks for all the help anyhow.

I usually try to avoid entry fees like the plague, but if that's what you have to work with. 0.15% sounds really good, even when the bank adds another 0.15%.
And yea your returns will only effect your net investment (minus entry fees) but in principle what you say seems right as in the way the costs work.
I would suggest you go to your bank and speak with a person there about the actual costs involved and report back here.
Overall those three funds look ok to me, you will be exposed to many major large caps in the developed world.

 

[GhaleonEB]

Following up on the traditional vs. Roth discussion over the past couple weeks, I just shifted my future contributions to a traditional 401k vs. the Roth we've contributed to for the past year and a half. I'll just leave the existing Roth funds be, rather than convert them. I increased the contribution according to the tax benefit.

I plan to keep the IRA contributions as a Roth, however. We are maxing those out, and so won't be able to take the deduction we receive from the shift and move that into a retirement account (the logistics of managing the tax return funds and correspondingly increasing the 401k contributions is too much of a mess for me to want to manage). It'll also be a tool to keep the tax rate we pay in retirement low.

It occurs to me that with the funds I'm in now, I'm over-weighted to large caps (about half the retirement funds will be in the Vanguard S&P500 index). I've decided to live with that, as I'm more comfortable being overweighed on large caps than tilting small cap, or even with rebalancing toward them.

Thanks for all the great discussion as the year wrapped, it's really helped inform my annual refinements to our retirement savings strategy.

 

[Y2Kev]

I got sold hard yesterday on Permanent Life Insurance today. MetLife salespeople. I have to say they changed my perception of it from "totally worthless" to "would be good if you max out your 401k, IRA, emergency savings, and are worth 12-15 million dollars in 20-25 years".

So that's something.

 

[vatstep]

I finally enrolled in my employer's defined contribution matching plan to coincide with the new year after waiting far too long to do so; beforehand I was just saving a set dollar amount per check, with no match. Seeing the first deposit to my TIAA-CREF account this week (3% of my pay plus a 9% match) was a welcome sight, but also made me feel like an idiot for holding off for so long. I just wasn't in the right place to contribute that much given my expenses, primarily due to renting in the city. Feels good now, though.

 

[Fuchsdh]

I got sold hard yesterday on Permanent Life Insurance today. MetLife salespeople. I have to say they changed my perception of it from "totally worthless" to "would be good if you max out your 401k, IRA, emergency savings, and are worth 12-15 million dollars in 20-25 years".

So that's something.

What's "permanent" life insurance?

 

[Piecake]

I finally enrolled in my employer's defined contribution matching plan to coincide with the new year after waiting far too long to do so; beforehand I was just saving a set dollar amount per check, with no match. Seeing the first deposit to my TIAA-CREF account this week (3% of my pay plus a 9% match) was a welcome sight, but also made me feel like an idiot for holding off for so long. I just wasn't in the right place to contribute that much given my expenses, primarily due to renting in the city. Feels good now, though.

The important thing is that you are contributing now. I wouldn't beat yourself up for it. I think most people procrastinate on some things that they should do (at least I do), and you certainly shouldnt feel bad if you couldnt afford to save for retirement.

 

[Anduril]

I usually try to avoid entry fees like the plague, but if that's what you have to work with. 0.15% sounds really good, even when the bank adds another 0.15%.
And yea your returns will only effect your net investment (minus entry fees) but in principle what you say seems right as in the way the costs work.
I would suggest you go to your bank and speak with a person there about the actual costs involved and report back here.
Overall those three funds look ok to me, you will be exposed to many major large caps in the developed world.

Went to the bank offering Amundi Funds yesterday and everything seems to be as I understood it. You pay the entry fee every time you invest some new money and then there's the annual management and caretaker fees. I supposedly dont even have to open an actual account at this bank, so hooray for no other fees!

I hope to join you guys in the excited world of investing in the next few weeks. Thanks for all the help, everyone!

 

[anonymous_abc]

Went to the bank offering Amundi Funds yesterday and everything seems to be as I understood it. You pay the entry fee every time you invest some new money and then there's the annual management and caretaker fees. I supposedly dont even have to open an actual account at this bank, so hooray for no other fees!

I hope to join you guys in the excited world of investing in the next few weeks. Thanks for all the help, everyone!

Excellent.

 

[vatstep]

The important thing is that you are contributing now. I wouldn't beat yourself up for it. I think most people procrastinate on some things that they should do (at least I do), and you certainly shouldnt feel bad if you couldnt afford to save for retirement.

Thanks

 

[Y2Kev]

What's "permanent" life insurance?

Whole/variable/universal life.