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[PflargBlarg]

Why do you want them to roll it back mate?

It's an absurd expense that they threw in there as a crazy idea to try and get the middle class to vote for them in the upcoming election. Of course, most Canadians aren't maxing out their TFSA anyway so it really only benefits people that are already doing well.

We don't need a TFSA that high and it's going to cost the government a crazy amount in the future.

It was a ridiculous political play.

 

[Mr.Mike]

It's an absurd expense that they threw in there as a crazy idea to try and get the middle class to vote for them in the upcoming election. Of course, most Canadians aren't maxing out their TFSA anyway so it really only benefits people that are already doing well.

We don't need a TFSA that high and it's going to cost the government a crazy amount in the future.

It was a ridiculous political play.

The position that it's going to be super expensive and that very few people are even going to use it is maybe a little bit inconsistent.

I would imagine that for some amount of people the TFSA limit sets a "goal", and their goal is to max out their TFSA. If the limit is at 10k they'll shoot for that, and if it's at 5k then they'll only do that. If the higher limits can encourage people to save and invest more than that's a good thing.

Also, it's not like people are going to be hoarding money in a TFSA for the sole purpose of denying tax revenue to the government. It'll come out eventually and be spent, stimulating the economy and paying sales tax.

 

[numble]

Also, it's not like people are going to be hoarding money in a TFSA for the sole purpose of denying tax revenue to the government. It'll come out eventually and be spent, stimulating the economy and paying sales tax.

That's like saying getting rid of the income tax won't be denying tax revenue to the government because the money will come out eventually and be spent, stimulating the economy and paying sales tax. Also, people can take the money out and put it in the U.S., Hong Kong, or wherever.

 

[Mr.Mike]

That's like saying getting rid of the income tax won't be denying tax revenue to the government because the money will come out eventually and be spent, stimulating the economy and paying sales tax. Also, people can take the money out and put it in Hong Kong, or wherever.

It is actually a popular opinion among economists that taxation should focus more on consumption taxes than income taxes.

 

[Makai]

It is actually a popular opinion among economists that taxation should focus more on consumption taxes than income taxes.

Uh, what? I haven't heard of many economists that favor regressive taxation.

 

[numble]

It is actually a popular opinion among economists that taxation should focus more on consumption taxes than income taxes.

Not really. You might have opinions on corporate income tax confused with individual income taxes. Most argue that consumption taxes have regressive effects, corporate income tax should be lowered because corporations are fungible and can move, but individual income taxes can be relied on because people are less likely to move. You see a large movement amongst OECD countries to lower corporate income taxes, but individual income taxes have stayed steady or even risen.

 

[Mr.Mike]

Uh, what? I haven't heard of many economists that favor regressive taxation.

Sales taxes aren't regressive, especially when paired with a sales tax credit for the young and low income that covers the amount of sales tax people would pay on necessities.

Rich people spend a lot more money than poor people, mostly on luxuries.

Anyway, this is getting pretty far off-topic.

 

[numble]

Sales taxes aren't regressive, especially when paired with a sales tax credit for the young and low income that covers the amount of sales tax people would pay on necessities.

Rich people spend a lot more money than poor people, mostly on luxuries.

So your point is that you favor an increase in your sales taxes to fund the $10,000 TFSA exemption amount, because that's the only way that doesn't deny the government tax revenue? You would also force people to spend their TFSA gains on sales taxable items?

 

[Mr.Mike]

So your point is that you favor an increase in your sales taxes to fund the $10,000 TFSA exemption amount, because that's the only way that doesn't deny the government tax revenue? You would also force people to spend their TFSA gains on sales taxable items?

My point is that the increased TFSA contribution room isn't that big of a deal, and that in the long run it won't be this super expensive thing people are making it out to be. For one, it isn't going to be utilized that much, and it's not like all of the money is never going to be taxed again.

It's also worth mentioning that the TFSA contribution room isn't tied to inflation anymore.

 

[GhaleonEB]

So, I have a retirement related question that is different from usual. I got a call from my wife's father, who is turning 70.5 this year. That's triggering mandatory withdrawals from his IRA. He's kind of in the opposite situation as the rest of us: he doesn't need the money at this point. Their SS and pension are enough to live on, so he was asking me what the best thing was to do with the money, to reinvest it.

Other than just rolling it into mutual funds, we also talked about him making a contribution to my kids' 529. But outside of those we weren't sure what his investment options were while in retirement. I'm going to search around, but I thought I'd ask in here in case anyone knows.

 

[Piecake]

So, I have a retirement related question that is different from usual. I got a call from my wife's father, who is turning 70.5 this year. That's triggering mandatory withdrawals from his IRA. He's kind of in the opposite situation as the rest of us: he doesn't need the money at this point. Their SS and pension are enough to live on, so he was asking me what the best thing was to do with the money, to reinvest it.

Other than just rolling it into mutual funds, we also talked about him making a contribution to my kids' 529. But outside of those we weren't sure what his investment options were while in retirement. I'm going to search around, but I thought I'd ask in here in case anyone knows.

Living Trust? Instead of him getting the money, the money will need to be withdrawn by the people he mentions as his beneficiaries. I am pretty sure that the beneficiaries will have to begin annually withdrawing from the IRA Trust when he is 70.5 though. The main benefit is that the money in the trust stays tax advantaged.

I would definitely research this further if interested because I could easily be wrong. I havent looked much into this at all

 

[venne]

So, I have a retirement related question that is different from usual. I got a call from my wife's father, who is turning 70.5 this year. That's triggering mandatory withdrawals from his IRA. He's kind of in the opposite situation as the rest of us: he doesn't need the money at this point. Their SS and pension are enough to live on, so he was asking me what the best thing was to do with the money, to reinvest it.

Other than just rolling it into mutual funds, we also talked about him making a contribution to my kids' 529. But outside of those we weren't sure what his investment options were while in retirement. I'm going to search around, but I thought I'd ask in here in case anyone knows.

From what I understand, he could put $6,500 a year into a Roth IRA assuming he falls within the income limits. If the money isn't needed, you might as well allow the opportunity it to appreciate tax free.

http://www.irs.gov/Retirement-Plans...yee/Retirement-Topics-IRA-Contribution-Limits

Just a thought. I'm by no means an expert.

 

[MikeDip]

It's an absurd expense that they threw in there as a crazy idea to try and get the middle class to vote for them in the upcoming election. Of course, most Canadians aren't maxing out their TFSA anyway so it really only benefits people that are already doing well.

We don't need a TFSA that high and it's going to cost the government a crazy amount in the future.

It was a ridiculous political play.

They better not take it away, I like the jump

 

[Piecake]

So, I have a retirement related question that is different from usual. I got a call from my wife's father, who is turning 70.5 this year. That's triggering mandatory withdrawals from his IRA. He's kind of in the opposite situation as the rest of us: he doesn't need the money at this point. Their SS and pension are enough to live on, so he was asking me what the best thing was to do with the money, to reinvest it.

Other than just rolling it into mutual funds, we also talked about him making a contribution to my kids' 529. But outside of those we weren't sure what his investment options were while in retirement. I'm going to search around, but I thought I'd ask in here in case anyone knows.

http://www.nolo.com/legal-encyclopedia/naming-non-spouse-beneficiary-retirement-accounts.html

Hmm, having him name a beneficiary probably seems like the easiest option actually. A living trust doesnt actually seem to make much sense (could be missing something) in your scenario. Though I am not totally sure if your father-in-law can do this while living...

 

[GhaleonEB]

From what I understand, he could put $6,500 a year into a Roth IRA assuming he falls within the income limits. If the money isn't needed, you might as well allow the opportunity it to appreciate tax free.

http://www.irs.gov/Retirement-Plans...yee/Retirement-Topics-IRA-Contribution-Limits

Just a thought. I'm by no means an expert.

Thanks for this. He didn't think he could make Roth IRA contributions; that should give him a place to put some of it at least.

 

[Crazymoogle]

• The RRSP / TFSA debate is interesting. I can understand why you would want to go TFSA if your earnings are low, thanks to Wormdundee et al. But it seems pretty clear to always max RRSP first otherwise, because you can leverage the refund against the RRSP next year (or TFSA, if you magically hit the limit, though I can't imagine how that's possible)
  
• What do you guys do about the slush fund / emergency reserve / magically huge amount of money often recommended to be set aside? 3 month bonds? Savings account?
  
• Is there a general rule of thumb for recommended contributions per year? Or a basic calculator for that that Canadian gaffers use?
  
• Is there an easy way to figure out fees on funds? Some mandated line maybe? I have a few RRSP funds (a bank one, and another for % job matching) but finding out how much of those contributions go into fees is about as easy as doing taxes on paper (ie: not)
  
• For those advocating this manual index investing, what's a good "minimum" cash amount to get in? Enough to play the index for a bit with minimal risk to get comfortable with the system? (Assume zero time for micromanaging.)

 

[PflargBlarg]

• The RRSP / TFSA debate is interesting. I can understand why you would want to go TFSA if your earnings are low, thanks to Wormdundee et al. But it seems pretty clear to always max RRSP first otherwise, because you can leverage the refund against the RRSP next year (or TFSA, if you magically hit the limit, though I can't imagine how that's possible)
  
• What do you guys do about the slush fund / emergency reserve / magically huge amount of money often recommended to be set aside? 3 month bonds? Savings account?
  
• Is there a general rule of thumb for recommended contributions per year? Or a basic calculator for that that Canadian gaffers use?
  
• Is there an easy way to figure out fees on funds? Some mandated line maybe? I have a few RRSP funds (a bank one, and another for % job matching) but finding out how much of those contributions go into fees is about as easy as doing taxes on paper (ie: not)
  
• For those advocating this manual index investing, what's a good "minimum" cash amount to get in? Enough to play the index for a bit with minimal risk to get comfortable with the system? (Assume zero time for micromanaging.)

Yeah, the RRSP vs TFSA debate is really dependent on your financial position and goals. I've actually changed my position on this for myself, and will be doing RRSP first now. This works for me because I'm planning on retiring early so I want to draw down on my RRSP to bridge the gap between retiring and when government benefits kick in. Hopefully by that point there wouldn't be much left in the RRSP, thus making my income close to nil (TFSA withdrawals don't count as income), meaning I would get full benefits.

Honestly, I would probably change my advice at this point to max out RRSP first as long as you're not in the very lowest tax bracket. My views have changed as I've read the forum threads over at the Mr. Money Mustache forum.

I don't really set anything aside actually. I keep enough to handle monthly cash flow in my bank accounts and everything else is invested. If emergencies happen I use my personal line of credit to cover it (investment returns are higher than line of credit interest rate).

Recommended contributions per year? Always max out both RRSP and TFSA. If you still have more left, put it in taxable investments. Mr. Money Mustache recommends at least a 50% savings rate if at all possible.

Every fund should have a MER or Management Fee line in the description somewhere.

You'd probably want 2000 or so if you're talking about ETF index investing? You can go as low as you want if you're using Questrade since they don't charge transaction fees for ETFs.

 

[vehn]

Guys what are the best bonds that someone 55+ could invest in? I'm looking at my Dads stuff, who currently has a 1.09% average expense ratio.

Is the Vanguard Total Bond market Index Fund and Vanguard Total International Stock Index Fund pretty good to put all of his "bond" funds in? I'll probably tell him the stock index fund equivalents of those for whatever he wants to put in stocks, but I'm not sure what the best bond funds are to use.

 

[PflargBlarg]

Oh god yes, get out of the 1.09% right now.

I don't know too much about US bond fund choices, but out of those 2 you should definitely do the first one if you're aiming to put it all into one. I don't see too much benefit in going international for bonds, having just US government and corporate bonds will serve him just fine.

 

[h_a_t]

Been skimming through this thread as it's time for me to PROPERLY invest towards my future.

Assuming you have no debt (currently renting), no kids, and no immediate (within the next 2 years) goals regarding purchases such as a new car or home, does the path look something like the following?

-Contribute to 401K up to what employer matches.
-Contribute as much as possible to Roth IRA, in my case $5,500.
-Contribute roughly 20% - 25% of savings after bills have been paid towards 401K or Roth 401K
At this point in my life I won't be reaching that 18,000 annual cap.

Not sure as to whether it'll be towards 401K or Roth 401K and currently messing with projected calculations, history, etc.


I'll be opening a Vanguard account soon with $5,500, and it seems going with Total Stock Market Fund is a good initial step into the world of investing.
However, I do have $10,000 I can work with at this point and wouldn't mind reading a few opinions what others with a bit of experience would do in my case.

 

[Makai]

If you have $10k, you could get the admiral version of the total stock market index, which has a lower expense ratio.

 

[h_a_t]

If you have $10k, you could get the admiral version of the total stock market index, which has a lower expense ratio.

Reading about that right now.
However, as max contributions for an ira are $5,500 the admiral version would be a different type of contribution?

These are probably silly questions so I apologize ahead of time.

 

[Makai]

Reading about that right now.
However, as max contributions for an ira are $5,500 the admiral version would be a different type of contribution?

These are probably silly questions so I apologize ahead of time.

Oh, crap. I forgot it's past April 15. The contribution window is more than a year, but you just missed the deadline for 2014. See, I started retirement investment in February, so I was able to max out my Roth IRA for 2014 and 2015. I started with VTSMX but upgraded to VTSAX when I reached $10k.

 

[Randolph Freelander]

However, I do have $10,000 I can work with at this point and wouldn't mind reading a few opinions what others with a bit of experience would do in my case.

Reading about that right now.
However, as max contributions for an ira are $5,500 the admiral version would be a different type of contribution?

These are probably silly questions so I apologize ahead of time.

You'd qualify for Admiral basically next year, assuming you contributed the $5500 this year and did the same in 2016. Vanguard and Fidelity would automatically move you into it shortly after you qualify, or you can do it yourself when you add next year's contribution.

If you have $10000 right now, and assuming you have $4500 remaining if this is the source of your funding for the IRA, you should plan to have some liquid savings on hand just to cover expenses should something unexpected happen. Rule of thumb is to keep 3-6 months expenses within short reach. So either before or after you contribute to Roth, think about this. If you have still have excess, you can consider making an investment using a standard market account (non-retirement), or just keep those funds around to help with making next year's IRA contribution... or do something I like to do: inflate your 401K contribution to effectively transfer this amount from non-advantaged personal savings to tax-advantaged retirement savings. You only do this when you have excess savings on hand and you have room to spare towards the 401K limit, and you would do it by basically increasing your 401K contribution to a level such that you have to pay yourself out of your own savings just to cover your expenses. This essentially becomes an indirect transfer from your savings account to your 401K, and you cut it off once you have eliminated your excess.

 

[Piecake]

Guys what are the best bonds that someone 55+ could invest in? I'm looking at my Dads stuff, who currently has a 1.09% average expense ratio.

Is the Vanguard Total Bond market Index Fund and Vanguard Total International Stock Index Fund pretty good to put all of his "bond" funds in? I'll probably tell him the stock index fund equivalents of those for whatever he wants to put in stocks, but I'm not sure what the best bond funds are to use.

For bonds, I would recommend Total Bond Fund and TIPS. This is what I plan on doing when I get close to retirement, at least.

I mention TIPS in the OP, so I link to the fund should be there somewhere. The reason for TIPS is that stocks are a good hedge against inflation. Bonds are not a good hedge against inflation. TIPS are inflation protected so as you decrease your stocks (meaning you are more susceptible to inflation) you can simply purchase TIPS (to maintain somewhat that hedge against inflation).

Did you mean Total international bond fund instead of total international stock fund? Personally, I have no plans to be invested in international bonds, but I could see it being a reasonable part of the bond portion of your portfolio.

 

[NetMapel]

Anybody here uses Questrade ? How do I set up an auto monthly buying of specific ETFs at market price ? I already set up a monthly fund transfer from my bank to my Questrade account. It'd be good to have the auto buy set up too. I have a direct investment account with Questrade.

 

[Crazymoogle]

Recommended contributions per year? Always max out both RRSP and TFSA. If you still have more left, put it in taxable investments. Mr. Money Mustache recommends at least a 50% savings rate if at all possible.

50%? *chuckle* Yeah, if I was living alone in Alberta or something. MMM is an interesting website, and I totally appreciate the thrust of what he argues, but I'd argue that level of financial minmaxing is just not possible for many family setups and physical locations.

Every fund should have a MER or Management Fee line in the description somewhere.

So do you take into account just the MER or the fee? Is one built into the other? For example, one fund here is showing MER 2.21% but a fee of 1.8%.

You'd probably want 2000 or so if you're talking about ETF index investing? You can go as low as you want if you're using Questrade since they don't charge transaction fees for ETFs.

Interesting, I'll take a look, thanks.

Actually, one other question...how portable are things like Questrade for non-residents? There's always a certain amount of risk I could be living in another country, and I noticed that caused some problems for mutual funds.

 

[h_a_t]

Oh, crap. I forgot it's past April 15. The contribution window is more than a year, but you just missed the deadline for 2014. See, I started retirement investment in February, so I was able to max out my Roth IRA for 2014 and 2015. I started with VTSMX but upgraded to VTSAX when I reached $10k.

Noted, thanks for the info.

You'd qualify for Admiral basically next year, assuming you contributed the $5500 this year and did the same in 2016. Vanguard and Fidelity would automatically move you into it shortly after you qualify, or you can do it yourself when you add next year's contribution.

If you have $10000 right now, and assuming you have $4500 remaining if this is the source of your funding for the IRA, you should plan to have some liquid savings on hand just to cover expenses should something unexpected happen. Rule of thumb is to keep 3-6 months expenses within short reach. So either before or after you contribute to Roth, think about this. If you have still have excess, you can consider making an investment using a standard market account (non-retirement), or just keep those funds around to help with making next year's IRA contribution... or do something I like to do: inflate your 401K contribution to effectively transfer this amount from non-advantaged personal savings to tax-advantaged retirement savings. You only do this when you have excess savings on hand and you have room to spare towards the 401K limit, and you would do it by basically increasing your 401K contribution to a level such that you have to pay yourself out of your own savings just to cover your expenses. This essentially becomes an indirect transfer from your savings account to your 401K, and you cut it off once you have eliminated your excess.

The $10,000 is after already having an emergency fund of several months.
The more I read the more it looks like I'll contribute the majority of the remaining $4,500 into my 401K, and the remainder into a non-retirement account.
Thanks for the help.

 

[Wellington]

... or do something I like to do: inflate your 401K contribution to effectively transfer this amount from non-advantaged personal savings to tax-advantaged retirement savings. You only do this when you have excess savings on hand and you have room to spare towards the 401K limit, and you would do it by basically increasing your 401K contribution to a level such that you have to pay yourself out of your own savings just to cover your expenses. This essentially becomes an indirect transfer from your savings account to your 401K, and you cut it off once you have eliminated your excess.

I get that it's a tax advantaged gambit, but are you at all worried about locking away your additional moneys into an account in which you will have a lot of trouble getting access to it should you need it?* That would be a deterrent for me to your strategy.

I wanted to mention here that the guys at Listen Money Matters released an episode last week in which they interviewed a guy that calls himself the Mad Fientist (FI for financial independence). They do a pretty deep dive into IRA and 401k strategies for those interested in trying to maximize their tax advantaged accounts. I am definitely going to have to listen again as it gets a little too deep for first gloss without any research on my end. Here is the ep: http://www.listenmoneymatters.com/i...ces-and-mega-backdoors-with-the-mad-fientist/

*Assuming you are taking this money from your emergency fund.

 

[keiichi]

Looking for some advice, I'm currently participating in a Roth IRA (VTIVX) sitting at a little below 10k and have not made contributions for 2015, I have enough of a cushion in my savings to push the account over 10k, after reading some of the other comments here (and confusing myself even more) should I do more research into switching to VTSAX To take advantage of the lower expense ratio?

What would be the drawbacks? Having to manually rebalance?

 

[Randolph Freelander]

I get that it's a tax advantaged gambit, but are you at all worried about locking away your additional moneys into an account in which you will have a lot of trouble getting access to it should you need it?* That would be a deterrent for me to your strategy.
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*Assuming you are taking this money from your emergency fund.

Note that I specifically mentioned that this ploy is only for the excess, not for the amount typically recommended to be on hand for emergencies (in the portion of the paragraph excluded from what you quoted). It was not my intention to imply otherwise.

 

[Wellington]

Note that I specifically mentioned that this ploy is only for the excess, not for the amount typically recommended to be on hand for emergencies (in the portion of the paragraph excluded from what you quoted). It was not my intention to imply otherwise.

You're right, it's in there where I quoted as well.

... or do something I like to do: inflate your 401K contribution to effectively transfer this amount from non-advantaged personal savings to tax-advantaged retirement savings. You only do this when you have excess savings on hand and you have room to spare towards the 401K limit, and you would do it by basically increasing your 401K contribution to a level such that you have to pay yourself out of your own savings just to cover your expenses. This essentially becomes an indirect transfer from your savings account to your 401K, and you cut it off once you have eliminated your excess.

 

[PflargBlarg]

50%? *chuckle* Yeah, if I was living alone in Alberta or something. MMM is an interesting website, and I totally appreciate the thrust of what he argues, but I'd argue that level of financial minmaxing is just not possible for many family setups and physical locations.



So do you take into account just the MER or the fee? Is one built into the other? For example, one fund here is showing MER 2.21% but a fee of 1.8%.



Interesting, I'll take a look, thanks.

Actually, one other question...how portable are things like Questrade for non-residents? There's always a certain amount of risk I could be living in another country, and I noticed that caused some problems for mutual funds.

Yeah, I'm not saying 50% is viable, but it's nice to have goals

And yeah, if it lists both of them, the management fee is a component of the whole MER. It's generally the largest component but they do have other expenses like recordkeeping, taxes, general administration, etc. which make up the rest of the MER.

Managing investments with moving countries is always a tricky business and I don't know much about how it works, so I apologize that I can't help you out on that one.

 

[Mr.Mike]

You have to consider MMM's target audience when he says 50%. He's mentioned in the past the the blog is targeted mainly at young professionals (specifically, he started the blog because he couldn't understand why his engineering colleagues weren't doing what he had done that allowed him to retire early, MMM having been retired for 6 years before he even started the blog). These are people who would be making pretty good money and not have any kids yet. It's a target demographic for whom saving 50% maybe isn't really that out there if they're living somewhere with a low cost of living.

Regardless, I can appreciate the stoicism/not being wasteful thrust of it.

 

[Crazymoogle]

Yeah, I'm not saying 50% is viable, but it's nice to have goals

I'd consider it a win to be even 20%. But anyway, it's an interesting take on life. And it certainly can't hurt to know more about finance and refocusing ones' retirement efforts.

And yeah, if it lists both of them, the management fee is a component of the whole MER. It's generally the largest component but they do have other expenses like recordkeeping, taxes, general administration, etc. which make up the rest of the MER.

Cool. Yeah, the number seemed a bit high but apparently the canadian average last year was 2.56% so I guess not horrible. Comes with limited count matching from my employer which is worth a lot, too.

What's your plan for extended layoffs then? You mentioned the Line of Credit but past six months that's maybe a questionable path, isn't it? Partial cash-out, maybe?

Managing investments with moving countries is always a tricky business and I don't know much about how it works, so I apologize that I can't help you out on that one.

That's alright, just something that comes to mind now and then. Tax Residency status is a huge financial ball and chain and I had to divest some stuff just moving within the country let alone outside.

You have to consider MMM's target audience when he says 50%. He's mentioned in the past the the blog is targeted mainly at young professionals (specifically, he started the blog because he couldn't understand why his engineering colleagues weren't doing what he had done that allowed him to retire early, MMM having been retired for 6 years before he even started the blog). These are people who would be making pretty good money and not have any kids yet. It's a target demographic for whom saving 50% maybe isn't really that out there if they're living somewhere with a low cost of living.

Yeah, that makes sense. But I think that it's also situational (ie: engineering) and location dependent. It's great if you have a high-demand, high-pay job and can live in a low income tax zone, but that's something of a unicorn, especially up north. In Montreal, for instance, taxes + rent (forgetting vehicles entirely) is probably enough to hit 50% alone. In Vancouver you save on taxes but get killed on rent, and so on. Still, I agree that it would have been something I'd love to read 10-15 years ago.

 

[vehn]

For bonds, I would recommend Total Bond Fund and TIPS. This is what I plan on doing when I get close to retirement, at least.

I mention TIPS in the OP, so I link to the fund should be there somewhere. The reason for TIPS is that stocks are a good hedge against inflation. Bonds are not a good hedge against inflation. TIPS are inflation protected so as you decrease your stocks (meaning you are more susceptible to inflation) you can simply purchase TIPS (to maintain somewhat that hedge against inflation).

Did you mean Total international bond fund instead of total international stock fund? Personally, I have no plans to be invested in international bonds, but I could see it being a reasonable part of the bond portion of your portfolio.

got it, thanks!

 

[PflargBlarg]

What's your plan for extended layoffs then? You mentioned the Line of Credit but past six months that's maybe a questionable path, isn't it? Partial cash-out, maybe?

Bit of a gamble yeah, but as you say if I had to I could always sell off some of the investments.

Luckily, extended layoffs are fairly unlikely as I work in the tech sector and I've yet to be without work for more than a month despite being fairly lazy at looking for work.

Out of interest I could describe my situation. I make 55k a year + 1500 in bonus, which is honestly fairly severely underpaid, I think I could finagle 70k when I start looking for a job change in a month or 2. I'm saving roughly 28% of my monthly income while living just outside downtown Vancouver.
Living where I live is kind of ridiculous so my wife and I are hoping to move to somewhere significantly cheaper within the next 2 years. If my salary was still the same at that point I would be saving 40%.
If my salary increased to even just 65k I would be hitting roughly around the 50% mark.

I think it's fair to say that the MMM 'strategy' is highly dependent on income. You establish a baseline spending amount which is hopefully fairly low, and then never increase it, while increasing your income. It's probably pretty difficult to save 50% of your income if you're not making at least 70k (depending of course on where you live).

 

[Crazymoogle]

Luckily, extended layoffs are fairly unlikely as I work in the tech sector and I've yet to be without work for more than a month despite being fairly lazy at looking for work.

Luckily you don't work in the gamedev side then. I lived downtown Vancouver for years, rent was pretty good (and raised 500 since I left, ugh) and of course I virtually zero to pay for transit since everybody works in the core anyway.

I'll say it certainly helps if your wife can work too (not always an option on the east coast), but that can be offset pretty hard by kids depending on your situation (always live near your folks if you can mentally and physically afford it)

Anyway, glad to see someone can survive there on less than six digits!

 

[EmptySpace]

so i just bought my first securities, as per couch potato.


as of today, total of 5k canadian

2k for tdb900 cdn indx
2k for tdb901 us indx
1k for tdb911 intl indx


i plan on putting another 5k. the 3k that i put in last week will be accessible tomorrow, so another 2k.


my plan for the next 5k

1k for xaw ishares all country except canada etf
1k split between sune and scty
1k split between ssys and ddd
1k split between cgnx and mkto
1k for isrg

any suggestions/concerns/recommendations?


btw, i am clueless about investing, just to be clear.


oh and the target is, by the end of the year i would've invested 20k. now, i was planning on doing dollar cost averaging but i'm too excited to just buy buy buy. gah. it was going to be, 5k for those 3 and any succeeding 5k will be put in those initial 3 index funds.

 

[Piecake]

Looking for some advice, I'm currently participating in a Roth IRA (VTIVX) sitting at a little below 10k and have not made contributions for 2015, I have enough of a cushion in my savings to push the account over 10k, after reading some of the other comments here (and confusing myself even more) should I do more research into switching to VTSAX To take advantage of the lower expense ratio?

What would be the drawbacks? Having to manually rebalance?

Yup, all you would need to do is manually rebalance. The common advice is to rebalance one a year. Personally, I find it easier to just rebalance when buying more shares. Might be less than a year, might be more than a year, but that year thing is just a very flexible recommendation.

Ive said this previously, but I really don't like Target Date funds because I honestly don't think they make much sense when you are retired and need to sell the fund for income. I don't know about anyone else, but I personally want complete control over what assets I sell. I mean, if another 2008 crash I sure as shit would much rather sell Total Bond rather than be forced to sell a portion of my target date fund.

 

[PflargBlarg]

oh and the target is, by the end of the year i would've invested 20k. now, i was planning on doing dollar cost averaging but i'm too excited to just buy buy buy. gah. it was going to be, 5k for those 3 and any succeeding 5k will be put in those initial 3 index funds.

I know some people will disagree with me, but I really don't care much about dollar cost averaging. According to Vanguard, lump sum investing outperforms dollar cost averaging 2/3 of the time (http://business.time.com/2012/11/15/is-dollar-cost-averaging-dumb). It does reduce risk at the cost of lower returns, so I would recommend DCA when you're getting closer to retirement sort of like the same thing that is recommended with bonds investing.

Curious what made you decide to go with individual stocks instead of just focusing everything on the e-funds?

It's not necessarily bad, just more risky.

 

[EmptySpace]

I know some people will disagree with me, but I really don't care much about dollar cost averaging. According to Vanguard, lump sum investing outperforms dollar cost averaging 2/3 of the time (http://business.time.com/2012/11/15/is-dollar-cost-averaging-dumb). It does reduce risk at the cost of lower returns, so I would recommend DCA when you're getting closer to retirement sort of like the same thing that is recommended with bonds investing.

Curious what made you decide to go with individual stocks instead of just focusing everything on the e-funds?

It's not necessarily bad, just more risky.

well, i read somewhere that it's good to invest in stocks that you believe in, or you're interested in.


also, i can't really find index funds that are quite specific to future tech.

i also just invested in xaw and xec (ishares etfs). i don't know why through webbroker i can't just put in an amount and it automatically should buy the right quantity. instead, i need to put in the quantity and it'll show me the amount.


and the tan etf solar fund (one of the few available, anyway) had its biggest.holdings in this one chinese company called hanergy that is now under controversy for suspicious financial details and activities.

 

[Icelandic_Jazz]

My employer has a lousy 401k (no matching) so I currently only have a Roth IRA and a non-retirement account through Vanguard. Both are invested solely in index funds. Basically I'll be maxing out my Roth at 5,500 and then putting whatever else I save into the non-retirement for now. Does it make sense to forgo the 401k for now? Should I be putting money elsewhere? I'm also paying down my student loans at a quicker pace then I need to.

In terms of liquid money I have a solid few months in emergency savings but I don't want to put too much into a savings account. It feels weird putting the money in a non-retirement account out of a lack of better options though.

I'm 25 and I'd like to start saving for a house down the line, but that's still a few years away.

 

[Randolph Freelander]

My employer has a lousy 401k (no matching) so I currently only have a Roth IRA and a non-retirement account through Vanguard. Both are invested solely in index funds. Basically I'll be maxing out my Roth at 5,500 and then putting whatever else I save into the non-retirement for now. Does it make sense to forgo the 401k for now? Should I be putting money elsewhere? I'm also paying down my student loans at a quicker pace then I need to.

In terms of liquid money I have a solid few months in emergency savings but I don't want to put too much into a savings account. It feels weird putting the money in a non-retirement account out of a lack of better options though.

I'm 25 and I'd like to start saving for a house down the line, but that's still a few years away.

The 401k should be in your mix. Contributing pre-tax is going to reduce your tax liability, which is going to put more money in your pocket. If your employer offers a Roth 401K option, then you can contribute post-tax and avoid taxes in the future. Either approach is going to be better than a non-retirement account option, provided (a) you don't need the money now and do not foresee a need in the near future and (b) you have a good blend of funds to invest in.

Since you're lacking an employer match, your IRA is correctly prioritized to the top, but I would slot the 401K in the next slot.

 

[Randolph Freelander]

well, i read somewhere that it's good to invest in stocks that you believe in, or you're interested in.


also, i can't really find index funds that are quite specific to future tech.

Are you investing in these companies because you like them, such as some silly people investing in Nintendo because Zelda is a really cool game and Pokemon is the best ever and Miyamoto will live forever, or are you investing in them because you understand them, their businesses, their competitive challenges, etc.? Personally, I'd suggest putting the bulk of your dollars into total market index funds and skip the whole deal about trying to pick winners and losers.

i also just invested in xaw and xec (ishares etfs). i don't know why through webbroker i can't just put in an amount and it automatically should buy the right quantity. instead, i need to put in the quantity and it'll show me the amount.

ETFs are traded like stocks, and you do not buy partial shares of stocks. So, yes, you do the math and figure out how many shares you can afford, or you just buy a nice round number (100, 200, whatever). If you want to put in a specific dollar amount, that's where mutual funds are useful.

and the tan etf solar fund (one of the few available, anyway) had its biggest.holdings in this one chinese company called hanergy that is now under controversy for suspicious financial details and activities.

This is what worries me. I'd hate to see you buy a lot of stock in a company or sector and have those turn out to be duds.

btw, i am clueless about investing, just to be clear.

Be afraid.

 

[Wellington]

Randolph: Have you ever executed something like an IRA conversion ladder? Your comments the other day got the gears turning on my stubbornness for the taxable accounts and why it doesn't make sense.

Edit: IRA Conversion ladder - http://rootofgood.com/roth-ira-conversion-ladder-early-retirement/

The Roth IRA Conversion Ladder
By cleverly maxing out our tax deferred savings options, we owed almost nothing in taxes every year in spite of our combined (very very low) six figure income. It feels like we stumbled into a deep pit of tax liability. The Roth IRA Conversion Ladder is the tool we’ll use to climb up and escape the tax pit.

But first a note on tax deferred accounts in general. You can debate the merits of Roth versus traditional IRAs and 401ks all you want, but know that we saved well over a hundred thousand dollars in taxes by maxing out tax deferred options. Those six figure savings were invested over the years and have grown into even more money today. When we owe federal income taxes again (in a decade or two), we’ll have a huge war chest filled with all those tax savings over the years to pay future tax liabilities as they arise.

The basis of the Roth IRA Conversion Ladder comes from an IRS rule that allows any amounts converted from a traditional IRA to a Roth IRA to be withdrawn penalty free and tax free. The rule comes with some catches. The first is that you have to wait five tax years after the conversion before you can withdraw penalty free. The second catch is that you have to pay taxes at the time of conversion.

Here’s how it works in practice. Let’s say you convert $30,000 from your traditional IRA to a Roth IRA during 2015. You will have $30,000 of ordinary income in 2015 due to the conversion, and might owe tax on that amount depending on your filing status and other income earned during the year. In 2020, you can withdraw the $30,000 (but not any earnings) penalty free and tax free. Convert another $30,000 in 2016, pay the tax (if any), then you have $30,000 to withdraw in 2021. Convert another $30,000 in 2017, pay the tax (if any), then you have $30,000 to withdraw in 2022. Repeat each year and you have just built a Roth IRA Conversion Ladder of your own!

 

[PflargBlarg]

well, i read somewhere that it's good to invest in stocks that you believe in, or you're interested in.


also, i can't really find index funds that are quite specific to future tech.

That's an interesting thing to have read because it goes against the most common advice of NOT investing in something just because you think it's cool, or like their products. Like Randolph said, when you're putting money in a single basket, you've got to be really sure that that basket is going to perform well and it's very difficult to do that.

The whole point of the index fund is that it distributes your risk across all possible sectors so that if something terrible happens, for example, to the oil industry, you're not sunk.

 

[Randolph Freelander]

Randolph: Have you ever executed something like an IRA conversion ladder? Your comments the other day got the gears turning on my stubbornness for the taxable accounts and why it doesn't make sense.

Edit: IRA Conversion ladder - http://rootofgood.com/roth-ira-conversion-ladder-early-retirement/

I'd have to read more on that, but on the surface, it sounds like a bad deal in many circumstances if you're still working. My quick read is I think they're being disingenuous with some of their numbers, as they understate the tax liability by essentially predicating it on you not working while you're executing the conversion. But to be more realistic, say you have $30,000 in completely untaxed funds in your traditional IRA. To convert that to a Roth, you pay taxes on the whole thing. This money is sitting on the top of your income, so you will pay your maximum applicable marginal rate on it. If you're sitting in the 28% bracket, that's an $8400 check you're writing to the IRS, plus whatever you might owe to the state and even some local governments in some cities. If you wait until you retire, and assuming this is your sole source of income in those years, that money will be spread out over all the tax buckets, and you'll have various deductions that would reduce your taxable income (even if you're not itemizing), and then you'll pay 10% on a portion of it, then 15%, then 25%, etc. You're not paying 28, 35, or 39.6 percent on the whole thing.

That said, that article seems to be about people trying to retire early and their IRAs and 401Ks being their main source for being able to do that. For people that want to go that route, have at it (and enjoy overpaying your taxes as you ramp up).

 

[EmptySpace]

That's an interesting thing to have read because it goes against the most common advice of NOT investing in something just because you think it's cool, or like their products. Like Randolph said, when you're putting money in a single basket, you've got to be really sure that that basket is going to perform well and it's very difficult to do that.

The whole point of the index fund is that it distributes your risk across all possible sectors so that if something terrible happens, for example, to the oil industry, you're not sunk.

yeah but i was thinking that a portion of my portfolio be dedicated to a "fund" of some stocks i think would be nice to have. so, say, 2000 canadian bucks invested in this list of stocks but majority of my portfolio would still be index funds.

 

[NetMapel]

Any savvy investors here heard about FrontFndr? I guess this could be one of the investing option for retirement so I wanted to post this here to get some opinion. This seems like it is a kickstarted-style platform for investing in local startups. I would like to follow this platform and see where it goes since it is still very new. Imagine investing in the future Facebook company before it went IPO :O

The article:
http://www.vancitybuzz.com/2015/05/vancouver-platform-launches-innovate-crowdfinancing/