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[PflargBlarg]

Heh, I don't think my wife will ever be fully onboard with my savings plan, but that's alright.

She's kind of golden handcuffed to her government job which will pay out around a 60k/year pension once she hits 57. She likes her work and she's ok with working that long so I'm fine with that. She's also still investing whatever extra she's got so she'll still be gathering up extra retirement funds over that time.

It's impossible at the moment for me to save much of a higher percentage than I already am due to the minimum quality of housing that the wife wants and the very high prices around here.

But with a quick calculation using StashLine it looks like I'll have 800,000 by 45, she'll have her own somewhat smaller retirement account, and then her pension coming into effect. I'm pretty sure we'll be absurdly well set.

 

[Darren870]

My missus just started working for herself so now she is being extra tight with money. She always has been, and while I am pretty good she is ridiculous. We really only spend money on experience type activities, eg travel. We even cut back on eating out heaps, though I do like to treat her to a really nice meal every now and then!

I'm still on track to have over 2 Mil by 65. Well above it. Assuming 7% growth.
Right now work pays ~11k AUD per year into my retirement account, so that's all I contribute into retirement since I am an American and don't want to throw even more money into accounts I wont be able till touch until I retire.

All the other extra money just goes into the mortgage. We have a ~440k mortgage on a house we bought in Jan. We should be able to pay it off in about 8 years at the going rate. Luckily the money doesn't get tied into the mortgage, just offsets the interest (4.24%) so we can still use the money for however we please.

Otherwise, we plan on moving to another country in 2-3 years. Thinking maybe somewhere in South or Central America. Then maybe the US after that for a while. Who knows, could go back to Europe or maybe try Asia. See what happens.

This thread has always been a great help and reading it always helps me get refocused on what I need to do and what I want out of life. Thanks everyone for the great advice so far!

 

[demosthenes]

Heh, I don't think my wife will ever be fully onboard with my savings plan, but that's alright.

She's kind of golden handcuffed to her government job which will pay out around a 60k/year pension once she hits 57. She likes her work and she's ok with working that long so I'm fine with that. She's also still investing whatever extra she's got so she'll still be gathering up extra retirement funds over that time.

It's impossible at the moment for me to save much of a higher percentage than I already am due to the minimum quality of housing that the wife wants and the very high prices around here.

But with a quick calculation using StashLine it looks like I'll have 800,000 by 45, she'll have her own somewhat smaller retirement account, and then her pension coming into effect. I'm pretty sure we'll be absurdly well set.

First I've heard about stashlite and it's iOS only, guess I can't play with it

 

[Husker86]

First I've heard about stashlite and it's iOS only, guess I can't play with it

I've been thinking about making something like this for my next Android project...hmmm.

 

[demosthenes]

I've been thinking about making something like this for my next Android project...hmmm.

I do all of my stuff in excel but for the less numbers/excel savy I would love something to suggest to friends.

 

[nhlducks35]

I'm 21 and currently have a paid internship at a large company. Interns don't get any benefits, so I can't do a 401K yet. Can I open a Merrill Edge Roth IRA and start putting in my money that I earned?

Edit: Actually I'll open a Vanguard account.

 

[Piecake]

I'm 21 and currently have a paid internship at a large company. Interns don't get any benefits, so I can't do a 401K yet. Can I open a Merrill Edge Roth IRA and start putting in my money that I earned?

Edit: Actually I'll open a Vanguard account.

Yep, as long as that money counts towards earned income, then you can use that money to open an IRA account.

 

[huxley00]

New to this thread, finally getting my retirement in order. For the past year, I've been putting the full 17.5k into my 401k. After talking to a friend and reading over this thread a bit, it seems like that is a bad idea, mainly because my 401k investment options aren't that great. I read the OP and believe I understand what people recommend

1. Invest to your 401k match (5%) in my case.
2. Open a Roth IRA, put the max in per year (5500)
3. Start an index fund and invest any further cash into these index funds.

My work has a ESP plan, our stock is fairly stable at around 10 dollars a share, has been for about the last 5 years or so. I get stock at a 15% discount. At this point, I put 10% into this program, is this a good idea, bad idea or completely dependent? It does seem somewhat risky being that a large sum of my investments would be in one company...but, that is a very large discount on shares, advice?

Does that about sum it up correctly?

I have about 50k in my 401k and about 20k in a Roth IRA from a previous employer. I just bought a house last year which took almost all of my savings (40k) and haven't been able to invest much this year as there have been various house expenses as my home was quite old and needed a few updates. I'm 33 years old.

My salary breakdown is something like this

84k annual
6k bonus

My girlfriend and I just broke up and I am managing the household myself now, as well as the cost of my puppy. Any advice would be appreciated, thanks!

 

[Ether_Snake]

Can anyone tell me why bonds have been tanking?

Also, I hold a REIT (VNQ) etf and it has tanked a lot too. I'm down around 7% on it and wondering what this drop has been related to. I'm guessing the fed rising interest rates soon?

 

[Randolph Freelander]

New to this thread, finally getting my retirement in order. For the past year, I've been putting the full 17.5k into my 401k. After talking to a friend and reading over this thread a bit, it seems like that is a bad idea, mainly because my 401k investment options aren't that great. I read the OP and believe I understand what people recommend

1. Invest to your 401k match (5%) in my case.
2. Open a Roth IRA, put the max in per year (5500)
3. Start an index fund and invest any further cash into these index funds.

My work has a ESP plan, our stock is fairly stable at around 10 dollars a share, has been for about the last 5 years or so. I get stock at a 15% discount. At this point, I put 10% into this program, is this a good idea, bad idea or completely dependent? It does seem somewhat risky being that a large sum of my investments would be in one company...but, that is a very large discount on shares, advice?

Does that about sum it up correctly?

I have about 50k in my 401k and about 20k in a Roth IRA from a previous employer. I just bought a house last year which took almost all of my savings (40k) and haven't been able to invest much this year as there have been various house expenses as my home was quite old and needed a few updates. I'm 33 years old.

My salary breakdown is something like this

84k annual
6k bonus

My girlfriend and I just broke up and I am managing the household myself now, as well as the cost of my puppy. Any advice would be appreciated, thanks!

Assuming your fund options aren't completely atrocious, you want to favor the 401K over independent outside investing. If you're contributing pre-tax, it's going to reduce your liability in the current year. If you have a Roth 401K option, you'll pay taxes now but avoid taxes on gains. Either approach is preferable to investing in a non-advantaged account, which would have you paying taxes both now and later (your earnings are taxed now prior to investing and your gains are taxed upon selling). Based on your salary, you might favor the pre-tax 401K over the Roth, but that's up to you. In any event, and again assuming your fund options aren't completely terrible, slot the remainder of the 401K into position 3 in your priority list.

As for your employee stock plan, I'm assuming there's a minimum amount of time you have to hold the stock? This exposes you to risk. Your 15% discount doesn't mean anything if the stock goes down 20% or, worse, if the company goes bankrupt. You also say it has been stable around $10 for 5 years. At your age, stability isn't what you're looking for, you're looking for growth. Assuming a dividend yield of around 2%, we'd also like to see stock price gains of around 6-8% annually (this gets your total growth to around 8-10%). Taking price gains of 7%, a $10 stock in 2010 would be a $14 stock in 2015. To drive it further home, the S&P 500 is up 94% in the five years since July 16, 2010. $10 invested in the index would be $19.40 today. I don't mean to tell you that your stock is a bad buy, but again, I don't like having too much in one company and your discount must be weighed against other factors (how long you have to hold it, prospect for growth, opportunity cost of that discount + growth over other options, etc.). That said, if you can buy it today for 15% off and sell it tomorrow, that's a fantastic deal (but I don't suspect that you can).

 

[huxley00]

Assuming your fund options aren't completely atrocious, you want to favor the 401K over independent outside investing. If you're contributing pre-tax, it's going to reduce your liability in the current year. If you have a Roth 401K option, you'll pay taxes now but avoid taxes on gains. Either approach is preferable to investing in a non-advantaged account, which would have you paying taxes both now and later (your earnings are taxed now prior to investing and your gains are taxed upon selling). Based on your salary, you might favor the pre-tax 401K over the Roth, but that's up to you. In any event, and again assuming your fund options aren't completely terrible, slot the remainder of the 401K into position 3 in your priority list.

As for your employee stock plan, I'm assuming there's a minimum amount of time you have to hold the stock? This exposes you to risk. Your 15% discount doesn't mean anything if the stock goes down 20% or, worse, if the company goes bankrupt. You also say it has been stable around $10 for 5 years. At your age, stability isn't what you're looking for, you're looking for growth. Assuming a dividend yield of around 2%, we'd also like to see stock price gains of around 6-8% annually (this gets your total growth to around 8-10%). Taking price gains of 7%, a $10 stock in 2010 would be a $14 stock in 2015. To drive it further home, the S&P 500 is up 94% in the five years since July 16, 2010. $10 invested in the index would be $19.40 today. I don't mean to tell you that your stock is a bad buy, but again, I don't like having too much in one company and your discount must be weighed against other factors (how long you have to hold it, prospect for growth, opportunity cost of that discount + growth over other options, etc.). That said, if you can buy it today for 15% off and sell it tomorrow, that's a fantastic deal (but I don't suspect that you can).

The opinion on the employee stock plan is something I hadn't considered at all, thanks for that insight. I just assumed that the 15% saved on the front end would overtake any gains on the back end...which isn't true at all, not sure how I even came to that conclusion.

We have a new CEO in house, I may stick with the ESP for the next year or two to see if things start moving up or not. If they remain relatively the same, I'll put out of it and reinvest elsewhere. You can sell options immediately, there is only a hold period during the 3 weeks near the end of each quarter.

I only have the option for a traditional 401k at my job, I'll look at putting more money into that instead of outside investing. Essentially, max out 401k, max out Roth IRA should be my two main focuses right now?

 

[Randolph Freelander]

I only have the option for a traditional 401k at my job, I'll look at putting more money into that instead of outside investing. Essentially, max out 401k, max out Roth IRA should be my two main focuses right now?

Yes, fill those up and try to replenish your cash savings along the way, since your original post mentioned depleting that to fix up your house (I know the feeling from a different angle, I bought a house last year). If there's excess after the fact, you can use it for independent investing.

 

[PflargBlarg]

Yeah, I think you'll find most people advising against holding single stocks for any long term amount of time. It's just too risky to hold any significant amount of retirement savings in one company.

 

[Piecake]

Can anyone tell me why bonds have been tanking?

Also, I hold a REIT (VNQ) etf and it has tanked a lot too. I'm down around 7% on it and wondering what this drop has been related to. I'm guessing the fed rising interest rates soon?

Animal spirits

It seems rather unlikely that it is interests rates because the Fed has been planning on doing that for a while. I don't think they've said anything recently that indicates that they are going to do it really soon. Though I really havent been paying all that much attention.

 

[tokkun]

Can anyone tell me why bonds have been tanking?

Also, I hold a REIT (VNQ) etf and it has tanked a lot too. I'm down around 7% on it and wondering what this drop has been related to. I'm guessing the fed rising interest rates soon?

People were speculating that the fed might hold off on raising interest rates this year if the situation worsened in Europe. Now it looks like things are going back to the status quo.

 

[Mr.Mike]

Can anyone tell me why bonds have been tanking?

Also, I hold a REIT (VNQ) etf and it has tanked a lot too. I'm down around 7% on it and wondering what this drop has been related to. I'm guessing the fed rising interest rates soon?

Bonds move with interest rates no? And also then of course, the expectation/speculation of interest rate changes. http://canadiancouchpotato.com/2015/05/18/how-changing-interest-rates-affect-fixed-income/

CCP talked about this a while ago. It's also why I hold short term bonds (VSB) instead of VAB. (If is was holding a larger proportion of bonds I would probably revisit this idea, but right now I'm just doing 10% bonds).

 

[Darren870]

The opinion on the employee stock plan is something I hadn't considered at all, thanks for that insight. I just assumed that the 15% saved on the front end would overtake any gains on the back end...which isn't true at all, not sure how I even came to that conclusion.

We have a new CEO in house, I may stick with the ESP for the next year or two to see if things start moving up or not. If they remain relatively the same, I'll put out of it and reinvest elsewhere. You can sell options immediately, there is only a hold period during the 3 weeks near the end of each quarter.

I only have the option for a traditional 401k at my job, I'll look at putting more money into that instead of outside investing. Essentially, max out 401k, max out Roth IRA should be my two main focuses right now?

ESPP and Stock Options are different though. You literally are making 15% with little to no risk. As soon as the buy get put in (3-6months) at the discounted price you can sell that day. You just made 15% for putting money away for a short period of time. You will never get a savings account that good. I always do ESPP if I work for a company that offers it. Each company is a little different but we used to get 15% discount on whatever the lowest price was during that 3 month period. That price would also lock in for two more cycles. There were times I was making over 100% return on my investment. You obviously just have to pay short term capital gains tax on the money. There is no reason to hold the stock after that. Unless you think the stock will go up.

As for the 401k. Yes, 401k to company match then Roth IRA. I know this is a retirement topic, but after that I would put the money in index funds, not more into my 401k. I mean, that money is locked away now for 27 more years of your life unless you mean the very specific circumstances to withdraw. Do you really want to have that much money locked away for that long? I personally believe in a mix and match between the two, but I don't see the reason to contribute any more then the company match into your 401k then maxing out the IRA. For you that's almost $14k a year into retirement. Thats like 1.5mil by the time your 60 with 7% growth. Also assuming you never get a raise etc etc...

Idk, I'd rather have some spending money on the side for other things, or pay down my mortgage. Its not all about saving for retirement

 

[C.Dark.DN]

How does 401k work when you switch jobs?

 

[Cyan]

How does 401k work when you switch jobs?

You've got a few options:
-leave it in the old plan (don't do this unless the old plan is amazing)
-roll it into your new employer's 401k plan
-put it into a rollover IRA (likely the best option unless your new plan is amazing)
-cash it out (and get hit with income taxes)

 

[Ether_Snake]

People were speculating that the fed might hold off on raising interest rates this year if the situation worsened in Europe. Now it looks like things are going back to the status quo.

We'll see I guess. It's still been falling even when it was clear rates would go up. I would assume bonds would stop going down if we are closer than ever to higher rates.

 

[Randolph Freelander]

You've got a few options:
-leave it in the old plan (don't do this unless the old plan is amazing)
-roll it into your new employer's 401k plan
-put it into a rollover IRA (likely the best option unless your new plan is amazing)
-cash it out (and get hit with income taxes)

And a 10% penalty on top of it. Don't do this unless you're bad off (or bad with money).

 

[Apt101]

You've got a few options:
-leave it in the old plan (don't do this unless the old plan is amazing)
-roll it into your new employer's 401k plan
-put it into a rollover IRA (likely the best option unless your new plan is amazing)
-cash it out (and get hit with income taxes)

And if you rollover, make sure you followup on all the paper work and make sure both investment companies do what they're supposed to do. A clerical error fucked up a rollover of mine about eight years ago. I lost a good $10k because of it. I've heard of people getting shafted far worse, like losing $20k.

 

[tokkun]

We'll see I guess. It's still been falling even when it was clear rates would go up. I would assume bonds would stop going down if we are closer than ever to higher rates.

Interest rates going up is bad for bond prices.

Today's bonds have returns that are based on the current interest rates. If interest rates go up, then new bonds will have to offer better returns than today's bonds do. Let's say that I'm trying to sell you a bond that returns 1%, but someone else is offering to sell you a newer bond that returns 2%. Of course you are going to be willing to pay less for mine.

For a while now, some people have been arguing that bond prices have nowhere to go but down, given that interest rates can only go up.

 

[Ether_Snake]

Interest rates going up is bad for bond prices.

Today's bonds have returns that are based on the current interest rates. If interest rates go up, then new bonds will have to offer better returns than today's bonds do. Let's say that I'm trying to sell you a bond that returns 1%, but someone else is offering to sell you a newer bond that returns 2%. Of course you are going to be willing to pay less for mine.

For a while now, some people have been arguing that bond prices have nowhere to go but down, given that interest rates can only go up.

But an ETF like BLV wouldn't go up with interest rates?

 

[tokkun]

But an ETF like BLV wouldn't go up with interest rates?

No, it should typically go down as interest rates go up. BLV is a long-term bond fund, so it's more susceptible to interest rate changes because the individual bonds in the fund have more time until maturity (i.e. more time until they can be converted into bonds based on the higher interest rates).

What were you planning on doing with that investment? If you were going to hold it, then don't worry about it. You will still get the same dividends as before, and over time the bonds in the fund will be converted to the newer interest rates and the price will rebound. If you were planning on selling the investment and reinvesting the proceeds or using them as income, then you are going to lose out.

 

[Ether_Snake]

No, it should typically go down as interest rates go up. BLV is a long-term bond fund, so it's more susceptible to interest rate changes because the individual bonds in the fund have more time until maturity (i.e. more time until they can be converted into bonds based on the higher interest rates).

What were you planning on doing with that investment? If you were going to hold it, then don't worry about it. You will still get the same dividends as before, and over time the bonds in the fund will be converted to the newer interest rates and the price will rebound. If you were planning on selling the investment and reinvesting the proceeds or using them as income, then you are going to lose out.

I'm holding it pretty much indefinitely. The dividend alone is good.

What about REITs? I have VNQ. Have they been going down simply because recovery is slowing down or expect to?

 

[GhaleonEB]

The opinion on the employee stock plan is something I hadn't considered at all, thanks for that insight. I just assumed that the 15% saved on the front end would overtake any gains on the back end...which isn't true at all, not sure how I even came to that conclusion.

We have a new CEO in house, I may stick with the ESP for the next year or two to see if things start moving up or not. If they remain relatively the same, I'll put out of it and reinvest elsewhere. You can sell options immediately, there is only a hold period during the 3 weeks near the end of each quarter.

I only have the option for a traditional 401k at my job, I'll look at putting more money into that instead of outside investing. Essentially, max out 401k, max out Roth IRA should be my two main focuses right now?

It depends entirely on how your SPP is structured. My employer also offers one, and also with a 15% discount. I contribute the maximum to it (5%) for a period of six months. At the end of that six month window, the stock purchase is made at the lower the stock price on the first day of that window, or the last day. So if the stock goes down, I get a 15% discount. And if it goes up, I get 15% plus whatever it's gained in that window. (The idea is reward employees for stock growth.) So I get a guaranteed minimum 15% return for a six month investment; I can sell the same day as the purchase (which they call a quicksale), so there is no market risk.

I'd be a fool not to max it out. So it all depends on how your SPP is run. If you can sell right away, I'd max it out and use the proceed and profits to fund your IRA, which is the strategy I've been using for a few years.

So look into the details. If there is no holding period for the stock, it's much better to take the guaranteed return - and then sell it and put it into diversified investments such as index funds.

 

[NYCmetsfan]

How soon should I start putting away for a 401k?

The employer doesn't match (there's a pension if I stay for 5 years). I figure I should just start saving in a bank account until I can invest in something significant? I mean it's not like its being spent I'm still saving

 

[tokkun]

I'm holding it pretty much indefinitely. The dividend alone is good.

What about REITs? I have VNQ. Have they been going down simply because recovery is slowing down or expect to?

I can't say I understand REITs very well. It's a much more complicated market with less of a direct tie to interest rates. I think it's fair to assume there will be some negative correlation with interest rates based on the basic principle that asset allocation is a zero-sum game. Higher interest rates make safe investments like treasury bonds, CDs, and money markets more attractive, and some people will pull money into them from other asset classes. That said, REITs have been punished a lot more than equities in response to recent rumors of interest rate hikes for some reason.

How soon should I start putting away for a 401k?

The employer doesn't match (there's a pension if I stay for 5 years). I figure I should just start saving in a bank account until I can invest in something significant? I mean it's not like its being spent I'm still saving

If you actually intend that the money will go to retirement, then you are much better off putting it in a 401k and/or an IRA. You will end up with more money in the end because you will pay less in taxes.

As for when, it depends on your personal situation. Do you have an emergency fund? Are you planning on saving up to buy a house in the near future? Just remember that due to the magic of compound interest, you get a lot more out by investing earlier.

 

[huxley00]

It depends entirely on how your SPP is structured. My employer also offers one, and also with a 15% discount. I contribute the maximum to it (5%) for a period of six months. At the end of that six month window, the stock purchase is made at the lower the stock price on the first day of that window, or the last day. So if the stock goes down, I get a 15% discount. And if it goes up, I get 15% plus whatever it's gained in that window. (The idea is reward employees for stock growth.) So I get a guaranteed minimum 15% return for a six month investment; I can sell the same day as the purchase (which they call a quicksale), so there is no market risk.

I'd be a fool not to max it out. So it all depends on how your SPP is run. If you can sell right away, I'd max it out and use the proceed and profits to fund your IRA, which is the strategy I've been using for a few years.

So look into the details. If there is no holding period for the stock, it's much better to take the guaranteed return - and then sell it and put it into diversified investments such as index funds.

Great, thanks for the tip! That is exactly how my ESPP is run, I'll plan on just selling it right away and re-investing into my Roth IRA. My company seems relatively stable stock-wise, seems to make more sense to re-invest the funds, thanks for the tips!!!

 

[hitsugi]

Question:

Wife and I are saving for a home.. planning to have at least $25k to put down, which could take 1-2 years. Is there a purpose of doing anything else with this money besides throwing it into a normal savings account?

In terms of retirement savings, I'm putting 7.75% (mandatory) in a pension fund, and contributing 4% (matched) in a 401k (2040 Target Date Fund). She is doing the same. Outside of that, we try to keep around $10k in an emergency fund.. and that's it.

We usually have around $1500-2000/mo after regular living expenses, but we do our share of traveling.

 

[TangoAlphaLima]

Wife and I are saving for a home.. planning to have at least $25k to put down, which could take 1-2 years. Is there a purpose of doing anything else with this money besides throwing it into a normal savings account?

You could invest that money in a mutual fund, but it wouldn't be wise, given that you plan to use it so soon and it could potentially lose value. Just throw it in a money market fund. Vanguard Prime Money Market would be a good choice, or your bank may offer a reasonable, easier alternative. A money market fund is not 100% safe, but it's as close as you can get. There was a threat that Vanguard's would "break the buck" back during the recession, but it never happened.

 

[GhaleonEB]

Yeah. For a planned major purchase 1-2 years out, I would not put the money in a mutual fund. If you were saving for say, 3-5 years, I would consider doing so, at least with a portion of the savings.

 

[Piecake]

Question:

Wife and I are saving for a home.. planning to have at least $25k to put down, which could take 1-2 years. Is there a purpose of doing anything else with this money besides throwing it into a normal savings account?

Well, you could put it into a 1 or 2 year CD. Not quite sure how you would manage that given that you will be saving up to buy a house and it doesnt sound like you have a significant lump sum already. Even then, you'll only get like 1% interest, so is that hassle even worth it for that short of period?

It is an option, but I would probably just go with a savings account.

 

[greatestjediever]

Anybody else have experience using HSAs? I know it had been mentioned in the thread earlier so I decided to try and max out my HSA through my current employer, but didn't figure out the details before signing up.

I had originally thought that the HSA would be managed through Fidelity, which manages our 401k and IRAs, which would allow me to invest it in the type of indexes I currently am set up for. But it turns out it is done through my health insurance company, Cigna, which uses JP Morgan Chase to run the HSA. It seems like I don't get the choice in how to invest the HSA, and it is invested in a JP Morgan Chase mutual fund, of which I have no idea what the fees they have or what the returns look like.

Should I cut off my HSA funding and use throw that money into something else?

 

[Piecake]

Anybody else have experience using HSAs? I know it had been mentioned in the thread earlier so I decided to try and max out my HSA through my current employer, but didn't figure out the details before signing up.

I had originally thought that the HSA would be managed through Fidelity, which manages our 401k and IRAs, which would allow me to invest it in the type of indexes I currently am set up for. But it turns out it is done through my health insurance company, Cigna, which uses JP Morgan Chase to run the HSA. It seems like I don't get the choice in how to invest the HSA, and it is invested in a JP Morgan Chase mutual fund, of which I have no idea what the fees they have or what the returns look like.

Should I cut off my HSA funding and use throw that money into something else?

I wouldnt. I would imagine that you would be quite thankful to have that money if you had any health issues this year. If you don't like it, then change to another plan next year. I have no idea if you can get your money out at that point, but 3k randomly sitting in a HSK isnt going to screw you over if you cant.

I was interested in HSAs and did some research on it. One thing that point me off, and like you realized, is that none of the major players seem to be involved in HSAs, and, as a result, everything has higher fees. They kinda seem like a pain in the butt to get working.

 

[Darren870]

To me any type of insurance that allows you to "invest" money just rings alarm bells. Life insurance, health insurance and any other type of insurance that allows this.

Insurance is suppose to protect you and/or you family in the event something unforeseeable was to happen. Not to be used as an investment vehicle. I really hope we don't keep going down this route, just feels like a disaster waiting to happen.

 

[Piecake]

To me any type of insurance that allows you to "invest" money just rings alarm bells. Life insurance, health insurance and any other type of insurance that allows this.

Insurance is suppose to protect you and/or you family in the event something unforeseeable was to happen. Not to be used as an investment vehicle. I really hope we don't keep going down this route, just feels like a disaster waiting to happen.

An HSA is basically a traditional IRA that you can use for medical expenses tax free. You have some weak insurance and then a pool of tax free money that you can invest in index funds or whatever (well, you gotta fill the pool). If the investment options are good and the fees are low, I think it would be a benefit for a lot of people in here providing that they are in good health.

Of course, I sure as shit do not think we should make that the main form of insurance. That would be disastrous. I think humanity has proven time and time again that we are absolutely terrible at planning. On the whole, 401ks and IRAs has been an absolute failure. Extending that to health insurance? Yikes...

 

[tokkun]

Anybody else have experience using HSAs? I know it had been mentioned in the thread earlier so I decided to try and max out my HSA through my current employer, but didn't figure out the details before signing up.

I had originally thought that the HSA would be managed through Fidelity, which manages our 401k and IRAs, which would allow me to invest it in the type of indexes I currently am set up for. But it turns out it is done through my health insurance company, Cigna, which uses JP Morgan Chase to run the HSA. It seems like I don't get the choice in how to invest the HSA, and it is invested in a JP Morgan Chase mutual fund, of which I have no idea what the fees they have or what the returns look like.

Should I cut off my HSA funding and use throw that money into something else?

For the majority of people, the tax advantages of the HSA will outweigh whatever additional efficiency you would get from index funds.

 

[GhaleonEB]

I wouldnt. I would imagine that you would be quite thankful to have that money if you had any health issues this year. If you don't like it, then change to another plan next year. I have no idea if you can get your money out at that point, but 3k randomly sitting in a HSK isnt going to screw you over if you cant.

I was interested in HSAs and did some research on it. One thing that point me off, and like you realized, is that none of the major players seem to be involved in HSAs, and, as a result, everything has higher fees. They kinda seem like a pain in the butt to get working.

I have one through my employer, but they eat most of the fees for us, so it's just a few dollars a year. The money is in a low interest money market account. It works well with the CDHP we're on, but I think that sort of thing is best used on its own merits rather than as some kind of savings vehicle; the moderate savings on taxes is a bonus, not a great reason to use one, IMO.

 

[Azar]

I've been reading through this thread yesterday and today and it's been full of some great advice. Luckily I've been more or less following it, but the big thing I didn't know was the difference between a managed mutual fund and an index fund. I've had most of my Fidelity account money in mutual funds and they've done pretty well for me, but I think I'm going to prioritize adding money to indexes going forward to minimize the expenses. It's only ~20K right now and I still have about 8K or so in student loans to pay off (5-6%) but I plan to start growing it quickly, instead of just leaving a large chunk of money sitting in my bank account, which is what I've been doing.

I also have a 401K at work and am putting in 6% salary for a 3% match. I don't know anything about what the 401K is investing in. It sounds like I should find that out, and potentially be putting more money into the 401K if it's good investing?

I think the thing I'm least clear on is the benefit of opening my own IRA in addition to the 401K and my independent mutual/index investments in my Fidelity portfolio. The advantage is primarily investing more of my income in a way that's not going to be taxed now, right?

 

[Husker86]

I think the thing I'm least clear on is the benefit of opening my own IRA in addition to the 401K and my independent mutual/index investments in my Fidelity portfolio. The advantage is primarily investing more of my income in a way that's not going to be taxed now, right?

Yes, this should be a priority. You can either invest your already taxed money and not pay any tax on the gains (Roth IRA), or invest money and be able to deduct that amount when you file your taxes, but have to pay taxes on withdrawals come retirement (Traditional IRA).

Whichever way you go, absolutely open one of those because if you're just investing (for retirement) in a standard brokerage account, you are missing out on tax benefits.

Mutual funds usually have higher expenses than index funds, but if you're with Fidelity and investing in FUSEX/FUSVX then the comparable index fund isn't going to save you much, if anything. It all depends on the specific fund and it's most comparable index fund.

Look at iShares for index funds, Fidelity offers many of those commission-free.

 

[Randolph Freelander]

Mutual funds usually have higher expenses than index funds, but if you're with Fidelity and investing in FUSEX/FUSVX then the comparable index fund isn't going to save you much, if anything. It all depends on the specific fund and it's most comparable index fund.

Look at iShares for index funds, Fidelity offers many of those commission-free.

To clear something up here, mutual funds can be managed or indexed. ETFs can also be managed funds or indexed. Therefore, the expenses of the funds are independent of whether it is a mutual fund or an ETF, it's really just about the type of fund you're in. FUSEX is an index fund.

 

[Husker86]

To clear something up here, mutual funds can be managed or indexed. ETFs can also be managed funds or indexed. Therefore, the expenses of the funds are independent of whether it is a mutual fund or an ETF, it's really just about the type of fund you're in. FUSEX is an index fund.

Ahh, gotcha.

 

[iamblades]

To clear something up here, mutual funds can be managed or indexed. ETFs can also be managed funds or indexed. Therefore, the expenses of the funds are independent of whether it is a mutual fund or an ETF, it's really just about the type of fund you're in. FUSEX is an index fund.

Also worth noting that the primary driver of expenses(at least for funds of comparable investment strategy, ie indexes that track the same index) is volume, and 9/10 times it is better to go with the higher volume option if you have both a mutual fund and an ETF available to you.

There are also some structural advantages that closed end funds and ETFs have over traditional (open end) mutual funds(ie not being forced to sell off assets when a large number of shares are redeemed), but that's not usually a huge factor for large volume funds.

Volume tends to be on the side of the ETFs in most cases, as most mutual funds have a fairly restrictive ownership requirements, while anyone can buy an ETF, but this may not always be the case, also one particular ETF may dominate the market for that index.

 

[Makonero]

I just recently got re-employed and my new employer does not have a 401k. I acutally have money in two separate 401ks already that I never transferred after I left those jobs. Should I do anything with those?

I've also been looking at alternate ways of saving money for the long run and I've been reading about Wealthfront.com and Betterment.com. Are they efficient ways for me to save money? Are they safe? I can't go two steps on the internet without seeing "They're terrible for varous complex reasons!" or "They're perfectly great for new investors with little money!"

So yeah, I'm conflicted. Anything is better than my savings account, right? And I am no financial guru so I'd rather leave managing my funds personally to someone else.

 

[Bebpo]

Is the info in the OP still the latest and most useful advice?

 

[Randolph Freelander]

Is the info in the OP still the latest and most useful advice?

We've all moved on to gold and whole life insurance.

Ignore the first sentence of this reply.

 

[Randolph Freelander]

I just recently got re-employed and my new employer does not have a 401k. I acutally have money in two separate 401ks already that I never transferred after I left those jobs. Should I do anything with those?

I've also been looking at alternate ways of saving money for the long run and I've been reading about Wealthfront.com and Betterment.com. Are they efficient ways for me to save money? Are they safe? I can't go two steps on the internet without seeing "They're terrible for varous complex reasons!" or "They're perfectly great for new investors with little money!"

So yeah, I'm conflicted. Anything is better than my savings account, right? And I am no financial guru so I'd rather leave managing my funds personally to someone else.

If you're satisfied with your fund selections in your 401K plans, you can leave them where they are, but you might consider instead rolling them over into an IRA that you can manage and that will give you far more options with funds. I know that you said you're no guru and I respect that, but if you just opened a Vanguard IRA and put your funds in a Vanguard Target 20XX fund, where XX is the year closest to when you expect to retire, you could "set it and forget it" but have your funds in one place, and you'd have options should you ever want to alter your strategy in any way.

As for your savings, since you don't have a current 401K option, you'll want to first look at investing in an IRA (either Roth or traditional) up to yearly IRS limits. The limit for the current year is $5500, so you'll have this figure as a goal. If you go beyond that, you can do additional independent investing, even if it's just buying into the same type of fund you might have in your IRA. I don't have any experience with services like Betterment (I personally don't want any part of their fees), so I can't offer you any advice there, but you can search this thread as that service has certainly been discussed.

 

[Piecake]

Is the info in the OP still the latest and most useful advice?

I still stand by it. I linked some posts who have some different opinions than me in the OP, though the majority of them also agree with passive index investing, we just disagree on stuff like bonds and target retirement funds, etc