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How to Invest for Retirement
- Thread starter Piecake
- Start date
Good news for me! I'm starting a new job with a much better salary. Sad news for me! There's no 401k matching. I assume it's still worth it for the tax savings to contribute if I'm already beyond the year's limit for my Roth IRA?
I suppose it also depends on the fund options which I'm not sure of yet. Anyone have experience with Ubiquity?
I suppose it also depends on the fund options which I'm not sure of yet. Anyone have experience with Ubiquity?
It is a pretty safe bet that it will be still worth your while. The expense ratios and fees have to be pretty high for it not to be worth it. And congrats! sort of!
ThoseDeafMutes
Member
After periods of uncertainty and sudden expenditures that I had to plan for, I've now got a multi year contract and can accumulate money. I'm in Australia. I don't have specific plans for retirement dates and so on.
I'm leaning towards putting money in a fund with Vanguard. But I don't really what is advisable in terms of the super / other investment split and what I should be looking into here. Any simple, general guidelines or things to look at? I'm not ultra risk adverse because I'm still young, but I'm not bold enough to want to play stocks directly or anything like that.
I'm leaning towards putting money in a fund with Vanguard. But I don't really what is advisable in terms of the super / other investment split and what I should be looking into here. Any simple, general guidelines or things to look at? I'm not ultra risk adverse because I'm still young, but I'm not bold enough to want to play stocks directly or anything like that.
Checking out Canadian Couch Potato might be a good idea. I'm thinking the Canadian and Australian economies are very similar (resource heavy and all, certainly you couldn't mostly just invest in domestic equity like Americans can) and the investing advice for Canadians probably translates very well to Australia.
http://canadiancouchpotato.com/couch-potato-faq/
This is a topic I'm interested in as I've been eyeing similar services like Wealthfront for a bit. I do my 401k, IRA but I have quite a lot of money sitting in a stupid savings account generating nothing.
I don't want to really "trade" and have to actively keep up with the stocks I purchased, trends, etc. I could just buy ETF Index funds via someone like Vanguard I suppose. Does anybody understand the tax loss harvesting really well?
Each year when it came to tax time I'd have losses that I could use to offset my salary thus causing me to get an increased tax return that I can then reinvest? Is it that simple?
Would I also have short term capital gains, etc.? I don't want to make my taxes a real pain to gain a tiny amount.
what do you mean by super /other investment split? Do you mean asset allocation? Personally, I am in favor of 100% stocks, meaning investing in the most diversified and lowest cost 100% stock index fund you can find. I know others advocate including some bonds in there, so if you are not comfortable with stocks, then just find a highly diversified and super cheap bond index fund.
Since you are young 80-90% stocks and 10-20% bonds is probably a good bet, but if you are not comfortable with that then adding more bonds is fine. The worst thing that you can do is do something you are uncomfortable with then panic during a market downturn and sell everything.
I honestly have no idea what sort of options you have in Australia, but I would caution against home bias. The reason why Americans can get away with it is that America's economy is just so fucking huge and diversified and international that it doesnt really matter. Nations like Australia and Canada? Not so much.
I honestly haven't done any tax loss harvesting and havent researched much on it so I am not quite sure when it would be 'worthwhile', but I do have index funds in a taxable account if that makes you feel better. I personally think that is the best investment, period, so that is what I go with in my non-retirement accounts as well.
PflargBlarg
Member
The brief overview of tax loss harvesting, and it may vary slightly from country to country, is as follows.
If you're invested in some fund that's dropped from 50000 to 45000 you can sell that investment to realize the 5000 dollars in capital loss. When you do your taxes you can use that $5000 capital loss to offset a $5000 capital gain somewhere else. Thus saving you the taxes on that capital gain.
Obviously you've now sold that investment so you've just got cash sitting around which isn't good. You now need to rebuy so that the money is working again. The trick is that the fund that you sold and the fund that you're rebuying need to be "substantially different" in order for it to count otherwise the government will see it as exploiting a loophole. The definition of "substantially different" varies among countries so I can't give a definitive answer there.
Personally, I'm passive enough that I would never bother with tax loss harvesting, I just don't even want to think about my investments that much. I'm happy throwing money in there and rebalancing when needed and that's all I'll do.
And while I was writing this I was reading an article which made a very good point that tax loss harvesting is really just a deferral scheme if you think about it.
http://www.canadianbusiness.com/blogs-and-comment/the-questionable-benefits-of-tax-loss-harvesting/
I really wouldn't bother doing it.
Darren870
Member
Advice in this thread is heavy on US and Canada. We are a bit unique in Australia since we get 9.5%+ of our salary put into our super by law.
I'd say some recommendations would be to combine all your supers into one account, if you haven't already. Pick the account with the lowest fees and best growth. I have ANZ do my super as they were the cheapest with best growth.
After that then Vanguard is a good option, or you could put more into your super. It's up to you though. Depends on your goals, but obviously you can't withdraw that money till retirement date. So putting into Vanguard ETFs might be a better option.
You can add about $180k a year into your super, so it might make sense to add a bit more for tax purposes. But the super investments are so generalized that you don't get many good investment options with them.
Hope that helps a bit.
I just got a new job and am trying to figure out what to do with my 403b from my previous job.
If I want to be able to do a backdoor Roth in the future, from what I understand, if I have any traditional IRA accounts I will have to take the balance of those in account when calculating taxes owed when performing the backdoor Roth transaction. The 403b I currently have is the only tax-deferred account I have (my other retirement account is a Roth IRA, no trad IRA acocunt(s) currently).
Should I roll my 403b to my Roth and pay the taxes, or should I just roll it into a new traditional IRA account and deal with the tax implications of potential future backdoor Roth transactions?
I am not ineligible for contributing to a Roth right now. Obviously I hope my career progresses quickly (this new job is a career change and gives me much better future prospects than the job I previously had), but technically my future Roth ineligibility is still firmly in the "what if" stage.
If I want to be able to do a backdoor Roth in the future, from what I understand, if I have any traditional IRA accounts I will have to take the balance of those in account when calculating taxes owed when performing the backdoor Roth transaction. The 403b I currently have is the only tax-deferred account I have (my other retirement account is a Roth IRA, no trad IRA acocunt(s) currently).
Should I roll my 403b to my Roth and pay the taxes, or should I just roll it into a new traditional IRA account and deal with the tax implications of potential future backdoor Roth transactions?
I am not ineligible for contributing to a Roth right now. Obviously I hope my career progresses quickly (this new job is a career change and gives me much better future prospects than the job I previously had), but technically my future Roth ineligibility is still firmly in the "what if" stage.
Personally, I would just roll it over into a traditional ira. You'll keep your balance of Roth and Trad and won't have to worry about any sort of complicated tax implications. If it becomes beneficial to you to do a backdoor roth in the future then you can always simply do it then.
Honestly, probably my biggest reason is that it just sounds like a pain in the ass. Do you really want to do that when you are trying to get used to a new job? Especially when the pluses and minuses of a trad vs roth ira are really kind of up in the air? And the differences likely quite minimal in the long run anyways? Perhaps that is just me being lazy, but meh, not worth it.
That's interesting, any links?
Tricky question. It is premised on you being in a higher tax bracket later, in which case it would be better to do the rollover now since you will be taxed less.
On the other hand, if the backdoor Roth were to disappear, would you prefer having that money in a traditional or Roth account? If you would prefer for it to stay in the traditional, then you need to speculate on how long you think the backdoor Roth exemption will continue to exist. Obama's budget proposes ending both the backdoor and mega-backdoor Roth conversions, but with the politics around tax revenues who knows if that change has a snowball's chance in hell of getting through?
How do I determine the amount of money that I've gained from an investment?
For example, say you invest $10,000 and one year later, your account is at $14,000. Is there a term for, or a way to determine the $4,000 number? I have two accounts both with mutual funds and retirement funds that I have been contributing to for a while. I'd like to see how they're doing. I'm with both T. Rowe Price and Vanguard. TRP shows me a "Personal Rate of Return" on the website, broken down by years and since inception, but I'd like to know the dollar amounts.
For example, say you invest $10,000 and one year later, your account is at $14,000. Is there a term for, or a way to determine the $4,000 number? I have two accounts both with mutual funds and retirement funds that I have been contributing to for a while. I'd like to see how they're doing. I'm with both T. Rowe Price and Vanguard. TRP shows me a "Personal Rate of Return" on the website, broken down by years and since inception, but I'd like to know the dollar amounts.
On Vanguard:
My Accounts > Balances and Holdings > Balances over time > Investment returns
Thanks. I'm looking at my TRP account and I think the "Unrealized Gain/Loss" is what I was looking for. It sounds like it would be realized if I take money out of those accounts.
Yep
FrenchMovieTheme
Member
really need to get my roth IRA setup. i have my 401k which i do up to employer matching (6%) and have a lot of money in savings that isn't really doing anything much for me. have to read up on this thread later but my 401k is with vanguard. how difficult is it to setup a roth ira account?
If you're going with Vanguard's mutual funds it takes maybe 5 minutes to do the initial setup. The most complicated bit is verifying your bank account if you use that to fund the account.
Thanks for the replies. Maybe I'll just leave it in my soon-to-be previous employer's retirement account (luckily the Vanguard Total Stock Market fund is one of the options, where almost all of my money in that account is). Honestly, moving it to a traditional IRA wouldn't change much for me since the funds would be going to a similar investment. So I guess I can just take the in between route and not roll it over so the backdoor Roth is still an easy option in the future (if it's still allowed).
I really just wanted to consolidate some retirement funds under my Fidelity account, which really doesn't matter all that much.
chaosblade
Unconfirmed Member
Finished funding my Roth for the year, and it should put me over $10k for total stock market. Saw mention before that Vanguard will automatically switch the fund to admiral shares once you have been over 10k for a little while so I'll leave it and let that happen.
Should be able to fully fund next year's right at the start too with the money from selling company stock. Hopefully that will put me in position to put the money aside over the course of the year then fully fund at the beginning of every year.
Should be able to fully fund next year's right at the start too with the money from selling company stock. Hopefully that will put me in position to put the money aside over the course of the year then fully fund at the beginning of every year.
Randolph Freelander
Member
It feels good to top stuff off, doesn't it? My 401K hits the limit this week. Similar to you, my focus will then turn to setting aside the funds for next year's Roth on day 1.
Wellington
BAAAALLLINNN'
Lions WR with $3.6 million contract lives on $60,000 a year
$60k a year is a lot to be a modest lifestyle, but hey more power to him. 4% rule puts him at $1.5 mil after taxes to be able to go 30 years.
$60k a year is a lot to be a modest lifestyle, but hey more power to him. 4% rule puts him at $1.5 mil after taxes to be able to go 30 years.
anonymous_abc
Member
This solves all our problems, just earn three and a half million and we can retire you guys. It's that easy.
This solves all our problems, just earn three and a half million and we can retire you guys. It's that easy.
Right principle even if it's a different order of magnitude!
FrenchMovieTheme
Member
what's the difference between a mutual fund and index fund (or are they the samething)? and which should i be looking for on vanguard? i see a few (500 index admiral, retirement fund 20XX, etc)
An index fund is a type of mutual fund. Mutual funds can be actively managed (the fund manager buys and sells a lot in order to try to increase performance for those who own the fund), or passively managed (the fund manager sets some basic parameters like "this fund should match the S&P 500 in its holdings" and then lets it ride). Index funds are passively managed mutual funds, and as such typically have lower costs associated with them. When you take costs into account, most actively-managed mutual funds lose out in performance to index funds.
What Cyan said is correct. I'll add that the alternative to using mutual funds at Vanguard is to use ETFs (exchange traded funds). ETFs are bought and sold like stocks are. There are ETF versions of the index funds as well.
ETFs are a little harder to understand at first, but some people like that they don't have minimum investment amounts like many of the mutual funds do.
ETF's also don't restrict when/how soon you can resell them (not that you should be buying and selling frequently) and might have lower management fees, depending on where you are and how much you have to invest. (I think anywhere outside of the US ETF's will almost certainly have lower fees than mutual funds, but in the US you have Vanguard Admiral class mutual funds for if you have at least $10,000 to invest).
chaosblade
Unconfirmed Member
I considered going the ETF route for my non-retirement savings fund (went with the Vanguard Balanced Index) but I wanted automatic investment and that's not available for ETFs.
For Vanguard funds, the difference in expense ratio between ETFs and investor share mutual funds seems negligible. If you are putting in enough for it to make a difference it won't take you long to get admiral shares. For passive/hands-off investing I didn't really see any advantages for ETFs other than not having the minimum starting investment.
For Vanguard funds, the difference in expense ratio between ETFs and investor share mutual funds seems negligible. If you are putting in enough for it to make a difference it won't take you long to get admiral shares. For passive/hands-off investing I didn't really see any advantages for ETFs other than not having the minimum starting investment.
Wellington
BAAAALLLINNN'
What if You Only Invested at Market Peaks?
My buddy was telling me how has been buying and selling and shorting and all kinds of crap due to the recent market volatility. I am staying the course with my retirement account and my Betterment experiment. It's been a wonky last 3-4 months for sure but I am ok buying at a slight discount.
My buddy was telling me how has been buying and selling and shorting and all kinds of crap due to the recent market volatility. I am staying the course with my retirement account and my Betterment experiment. It's been a wonky last 3-4 months for sure but I am ok buying at a slight discount.
TheRagnCajun
Member
They don't make any sense for a DIY investor. ETFs are they way to go. The issue is, if you have an advisor/portfolio manager. They have to get compensated somehow. So if you're looking for a bundled security like an ETF or mutual fund to be part of the portfolio, you can let them take a slice out of your ETF return or take the comission out of the mutual fund. Or alternatively buy class F which works out about the same. A mutual fund can compare favourably to ETF in an advisor relationship, so long as that's not the entire portfolio.
Do remember to account for dividends if you haven't. That's an important part of the whole thing.
You should probably get used to it. P/E ratios are very high compared to the historical mean, there is a sense that the Fed has to eventually raise the interest rate barring some major catastrophe, and stalling in China may drag down much of the world market. We have a bear market or a big correction coming sooner or later.
Read the story Wellington posted and remember that retirement investing is a matter of 10-year averages, not YTD returns.
PflargBlarg
Member
Yeah, I've pretty much had no movement on my VXC and VCN holdings this whole year.
I'll be pretty excited if a big correction comes in, cheap shares for me!
I'll be pretty excited if a big correction comes in, cheap shares for me!
anonymous_abc
Member
Yea I'm looking to buy low when the market crashes. We're in it for the long haul.
Wellington
BAAAALLLINNN'
No sense even worrying about it. Decades down the line you will be well ahead of the curve. None of the ups and downs make a difference unless you act irrationally and start pulling money out (or if it's time to cash out).
I recently went to the Dominican Republic with my near retirement age parents, most of our family is over there and I mentioned that maybe they should retire there rather than here in the Bronx NY. My reasons were the familial connection (only our nuclear family is here) and of course that the dollars they would get from pensions and their separate IRAs would go much further there than here.... They actually are taking my advice and plan to retire down there in about 5 years.
Geographic arbitrage has always been in the back of my mind. Consider that $1 here is $45 pesos there, and everything (except gas) is dirt cheap as is. I could probably retire right now and move to like Costa Rica and be good for decades.
Original Famous Ray
Member
^^
Heh..sorta similar to my dad who just retired. He's about to move to his hometown in Puerto Rico rather than stay in the Bronx. General stuff (clothing, food..etc) are similarly priced in PR but the cost of living is much lower. As that mayoral candidate dude said years ago about NYC..the rent is too damn high! Even in many parts of the Bronx! Plus my old man will be near lots of family so its all good.
I'm so ready to create a taxable account at Vanguard with Total Stock (VTSAX) and International (VGTSX). Not sure if I should put a small amount of Total Bonds (VBMFX) as I'm no longer a spring chicken (I'll turn 39 in October). I already have my Roth IRA funded and I'm putting in $200 a week into my 401k so I'm good there. I'm only concerned with the whole tax thing. I want this money to grow and I have no intention of touching it unless necessary. Obviously I can't touch my Roth and 401k until I'm close to 60 without penalty so I think a taxable account would be the way to go.
I actually asked about this months ago here and someone recommended I put more into my 401k (only put in 50 a week back then). So I boosted it to 200 which is working out well and not really biting into my ludicrous savings much.
Heh..sorta similar to my dad who just retired. He's about to move to his hometown in Puerto Rico rather than stay in the Bronx. General stuff (clothing, food..etc) are similarly priced in PR but the cost of living is much lower. As that mayoral candidate dude said years ago about NYC..the rent is too damn high! Even in many parts of the Bronx! Plus my old man will be near lots of family so its all good.
I'm so ready to create a taxable account at Vanguard with Total Stock (VTSAX) and International (VGTSX). Not sure if I should put a small amount of Total Bonds (VBMFX) as I'm no longer a spring chicken (I'll turn 39 in October). I already have my Roth IRA funded and I'm putting in $200 a week into my 401k so I'm good there. I'm only concerned with the whole tax thing. I want this money to grow and I have no intention of touching it unless necessary. Obviously I can't touch my Roth and 401k until I'm close to 60 without penalty so I think a taxable account would be the way to go.
I actually asked about this months ago here and someone recommended I put more into my 401k (only put in 50 a week back then). So I boosted it to 200 which is working out well and not really biting into my ludicrous savings much.
Wellington
BAAAALLLINNN'
Can you elaborate on the bolded. Not entirely sure what you mean.
Original Famous Ray
Member
Apologies for the lack of clarity. Nothing like writing something before the morning caffeine sinks in.
I just want to put half my savings in a place where it can grow rather than leave it in my checking account where its earning zilch. I put $200 a week towards my 401k (so thats a bit over 10k a year + $520 per year from my employer) and I always contribute the $5500 towards my Roth IRA. My 401k is on Vanguard's LifeStrategy Growth Fund (VASGX) and my Roth IRA is Target Retirement 2040 (VFORX). So thats a decent amount I'm putting away towards my retirement I think.
I'm still not 100% clear on the tax implications of a taxable account.
Sorry if thats still unclear. My financial situation may be very different come January where I will have more money in my pocket (new job but same employer) so I have a lot on my mind.
TheRagnCajun
Member
What do you consider a taxable account? Do you mean an unregistered account? As opposed to a 401k or ROTH? That means you the money you deposit won't be deducted from your taxable income like with a 401k. The gains are also taxable every year, depending on if they are dividends, interest or capaital.
But what if you take into account the Minimum Required Distributions? Using this calculator , if I have 2,000,000 when I'm 70, and assuming a 7% growth rate, I would have to take out the below each year and get taxed on it.
So from age 84 - 106 (not shown), I'd be in the 33% tax bracket. Now the amount wouldn't be so high if I had less money, or if I made 3% instead of a 7%, but knowing some money could potentially be taxed higher is something to consider.
Randolph Freelander
Member
Tax brackets adjust with inflation. For example, the 33% bracket for single income filers began at $186,350 in 2014 [1], and $189,301 in 2015 [2].
If you're looking at retiring in 2045, for example, and if we hold inflation at 2%, you might expect the 33% bracket to begin at $342,892. But remember, that rate only applies to dollars above that threshold. You'll still progress through the lower brackets, which would make your average tax rate lower than your top marginal rate.
Darren870
Member
I could retire now and living in SE Asia comfortably if I wanted to. However, there are a lot of issues when trying of relocate geographically when retiring. With our generation we would probably have a bit of a culture shock as well.
There are quite a bit of tax implications and you may get double taxed if there is no tax treaty between the two. Or you can just skimp the government and not pay. Guess you have a choice.
I think about it too, especially living abroad as it is, but also don't get too caught up in it. Who knows whats going to happen in 30+ years, the boarders might even be more closed then they are now.
Apologies for the lack of clarity. Nothing like writing something before the morning caffeine sinks in.
I just want to put half my savings in a place where it can grow rather than leave it in my checking account where its earning zilch. I put $200 a week towards my 401k (so thats a bit over 10k a year + $520 per year from my employer) and I always contribute the $5500 towards my Roth IRA. My 401k is on Vanguard's LifeStrategy Growth Fund (VASGX) and my Roth IRA is Target Retirement 2040 (VFORX). So thats a decent amount I'm putting away towards my retirement I think.
I'm still not 100% clear on the tax implications of a taxable account.
Sorry if thats still unclear. My financial situation may be very different come January where I will have more money in my pocket (new job but same employer) so I have a lot on my mind.
Assuming you are in the US, you will only have to pay 15% tax on your holdings upon sale. This is assuming you hold it for longer then a year. You are better off putting money into a taxable investment then just letting it sit in a checking account.
While this thread is focused on retirement, I believe in mixing your portfolio between a few different options. That can include but not limited to, retirement accounts, taxable shares accounts, real estate, etc etc.
No reason to lock all your money up till you are in your 60's. You can of course withdraw the money you put into your Roth IRA, so you should max that out, but you can't do that with your 401k without getting hit hard with tax.
chaosblade
Unconfirmed Member
You have to pay taxes on dividends too, but that shouldn't amount to a whole lot unless you have a ton of money invested.
Darren870
Member
Yea, but its ~15% assuming they are qualified dividends. Which most would likely be.
Otherwise, yea its your tax bracket.
Zantetsuken
Member
Too poor to invest unfortunately. But I have definitely subscribed to this thread and will read front to back.