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- adam parker, morgan stanley's chief u.s. equity strategist
I personally enjoy focusing on none of that
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How to Invest for Retirement
- Thread starter Piecake
- Start date
I personally enjoy focusing on none of that
anonymous_abc
Member
dito, all part of the noise.
I don't either for my retirement. But in my job I have to read a ton of analyses everyday about market sentiment and not enough about fundamentals. It's a scourge.
Are you a stock picker or a stock analyst of some sort? I have a hard time imaging that many of those people are passive index investors considering that the nature of the job requires them to believe that they can pick stocks.
Kinda curious how how that all works out in your mind.
No I don't pick stocks. I mostly look at hard macroeconomic indicators at work. But I also follow market actions and expectations, which is where I'm coming from here. Passive investing is popular, but definitely doesn't account for large parts of market flows.
Hi guys! I have some vested stock from my company and it pays pretty decent dividends. Its in the amount of 105 per share and I have about 55 shares. I was considering selling and moving it all to vanguard to fully fund my Roth for this year. My question is should I do that or just leave it? There is also an incentive to keep the stock by giving you a 3.5% extra percent every year during bonus time. I appreciate the feedback!
chaosblade
Unconfirmed Member
I doubt anyone in this thread will recommend holding company stock. If you get a match or incentive it might still be worth it to buy it depending on trading fees, but you don't want to hold it long term.
Is there some sort of minimum amount of shares you need to get that 3.5% bonus? What percentage of your portfolio does your company stock take up? I mean, is it like 5% of your total investment portfolio or 25%? About how much is your average yearly bonus?
No minimum; just a maximum of up to your monthly salary which I am definitely nowhere near in attaining. This is kind of part of their bonus package where they award half as cash and half as stocks vesting 20% every year. Average yearly bonus is about 10K.
Certainly not as a general rule; it's almost always better to diversify. As Piecake was asking, the particulars really matter. It can make sense under the right situation.
I hold a fixed # of shares, but use them like I would a bond, because the dividend is very high. It's our "income" portion of the portfolio (currently helping to pay the house down quickly). We get shares at a discount and pay zero fees in the account. Otherwise, nope.
Ah, RSU's (restricted stock units). We get them as well, though they vest over 4 years vs. 5. Personally I treat them like incremental income and sell immediately upon vesting.
I'm still not clear how holding stock benefits you. Does that increase your bonus? Get you more stock? Etc.
The only benefit really is that I get more shares the following year so my bonus is ever so slightly increased. One day if i have enough stock it can be potentially equal up to a month salary but at this moment its only equal to about less than 10% of my salary. Current dividend is 78 cents per share.
My concern though is that maybe the dividends i am missing out could be potentially be higher than the one i am earning from my company because I am holding out for the potential promise of up to a month salary.
I wouldn't be too focused on dividends.
http://www.investopedia.com/articles/stocks/07/dividend_implications.asp
Now, this doesnt take into account market psychology, but I am pretty sure that stocks with dividends and stocks without pay the investor the same overtime when you look at a lot of data. Someone can correct me if I am wrong.
As for keeping company stock, I dislike holding individual stocks and dislike holding company stock even more. I think picking stocks is a gamble and investing in company stocks is a gamble and a terribly not diversified gamble at that.
The only situation where I would invest in company stocks is if it was a small part of my overall investment portfolio and the incentive for investing in the company stock made it obviously worth it. I can't really tell if it is obviously worth it based on the information that you gave us, nor do I know if it is a small part of your overall investment portfolio
LordGorchnik
Member
Anyone here use Fidelity? I just opened my 401K with them and I am looking for the fund assets similar to what the OP listed for his Vanguard ones and my company only offers 33 choices and I am not sure which ones are similar.
It looks like this is a list of all the ones they offer here (click on the Index tab)
https://www.fidelity.com/mutual-fun...79&gclid=CPGjh6iCmcwCFQhOMgodOWMHbA&gclsrc=ds
Sadly I only have around 10K to start investing in but start early and now better than later right?
It looks like this is a list of all the ones they offer here (click on the Index tab)
https://www.fidelity.com/mutual-fun...79&gclid=CPGjh6iCmcwCFQhOMgodOWMHbA&gclsrc=ds
Sadly I only have around 10K to start investing in but start early and now better than later right?
ViewtifulJC
Banned
yeah how about you give me some of your money. I promise I'll back with interest in 40 years or whatever
You should probably run some numbers to decide whether it's advantageous or not. Look up the dividend yield of the stock; the market (and thus market index funds) yield about 2%. Unless the yield is really high, the dividend alone probably won't move the needle much in favor of the stock.
That leaves you with the incremental income from the bonus. One strategy could be to accumulate shares and then feed the incremental income you get from holding them into retirement, thus increasing the overall amount you can se aside. The downsides are the taxes you'll pay on the stock dividends, and if/when you sell shares and if/when they go up, you'll pay taxes on the gains. And your investment portfolio as a whole will be far less diversified. Those are big downsides in the context of retirement investing where tax deferment/sheltering and diversification are key elements.
Without knowing the derails, which you should crunch on, personally I would not accumulate shares and opt to sell them upon receipt and funnel them into an index fund, held in an IRA. But that would partly depend on the size of the bonus, how much you're already saving for retirement, etc.
I'm with Fidelity. Here is their index fund listing: https://www.fidelity.com/mutual-funds/fidelity-funds/why-index-funds
Total Market Index Fund = total US stock fund
Global ex U.S. Index Fund = international index
$10k is a good start!
TangoAlphaLima
Member
This is an interesting article that suggests dividend-producing large cap funds can outperform an S&P 500 Index Fund.
http://www.marketwatch.com/story/heres-another-reason-to-dump-your-index-fund-2015-01-09
What really confused me about the particular fund referenced in the article is the expense ratio of 0.78%. The stocks in the fund are well defined by past performance, and they're equally weighted, so why is the expense ratio akin to one that you'd find in an actively-managed fund? I guess it doesn't really matter if the performance is there, but it still seemed odd to me.
LordGorchnik
Member
Thanks boss, unfortunately neither of those plans are offered through my employers 401K. Is it possible to take the 10K I have instead and invest it in a separate account using those two?
Looking for some advice on whether or not to touch my IRA right now. I've been going back to school and about to enter the last 15 months where I will not be able to work much and the cost have gone up significantly. Since it's a 2nd degree program there is little finical aid available outside loans. The cost of school isn't the problem as much as rent in So Cal.
What I'm trying to figure out is if it is better to take unsubsidized federal loans or take money out of my rollover IRA. The loans are at just under 5% but interest will start accruing right away. With the IRA I will have to pay income tax but my income this year will be very low. I'm leaning towards using the IRA but not sure if there is something I'm not looking at right. Is there a way to figure out if the amount lost up front to income tax is less then accrued interest over say 8-10 years?
What I'm trying to figure out is if it is better to take unsubsidized federal loans or take money out of my rollover IRA. The loans are at just under 5% but interest will start accruing right away. With the IRA I will have to pay income tax but my income this year will be very low. I'm leaning towards using the IRA but not sure if there is something I'm not looking at right. Is there a way to figure out if the amount lost up front to income tax is less then accrued interest over say 8-10 years?
Randolph Freelander
Member
Dividends are the sole reasons you invest. You think you're investing for gains in stock price, but you aren't. Those are mere abstractions over the only important thing: the share of the profits you expect -- the dividends. The higher you expect dividends to be into the far flung future, the more you're willing to pay for the stock (and the more someone else is willing to pay to buy it from you). Even companies that aren't paying dividends presently are ultimately priced with that expectation in mind. (If you own a piece of a company that is never going to share profits with you, what exactly do you own? Nothing, that's what.)
That said, I say dump the company stock as soon as you're eligible unless you just like to gamble, all things held equal. We don't get stock options at my current place of employment, it all goes into the 401K (the match and discretionary profit sharing). While it goes into a company stock fund in the account, we can move it immediately, and that is exactly what I do.
Thanks thats what I thought. These are the RSUs that have vested and I think I would like to move them out of my company stock as what everyone said. Thanks for all the advice!
As soon as trade window opens I will move them out
. Like you Randolph in addition to RSUs, i also have those 401K profit sharing + match and those I also need to move out of my company's stock.Yes, for contributions outside of your employer 401k, open an IRA. Now you just need to decide between Roth and traditional.
https://www.fidelity.com/retirement-ira/ira-checklist
You can link your Fidelity NetBenefits account to it, and have a single login / combined view for all retirement accounts.
I feel like you are discussing this in terms of theoretical abstractions. I certainly was not. I know that when I start selling my funds the vast majority of my earnings will come from the increase in stock price.
I honestly don't care how it increases in stock price. I care about the safest and best way to grow my money. If you are chasing dividends, meaning buying stocks now with high dividends and buying funds with high dividends even though they have higher expense ratios, then that certainly does not sound like the best and safest way to grow and increase money, which is what I was warning the poster against.
Randolph Freelander
Member
No, I'm not going to say go into a managed funds for any reason, and I'm not going to encourage anyone to hold onto a particular dividend paying stock. I'm on that highly diversified, low cost index fund strategy, same as you and most everyone in here. In other words, I get where you were going, just disagreeing about the mode of transportation (belittling dividends, and focusing on the stock price going down at the ex-dividend date, while not accounting for the fact that the stock price would have been pushed up in anticipation of that date).
The fact is that dividends are vitally important, but the other fact is they're also in the things we like to recommend -- index funds. You own parts of those funds, those funds own stocks, those stocks pay dividends. If you're in an S&P 500 index fund, you will outperform the actual index, because the index doesn't include and reflect the dividend yield. The average dividend yield of S&P stocks is around 2% (which is inclusive of stocks not presently paying dividends), so when the stock index gains 9% in a given year, your actual holdings will gain 11%. That's dividends at work.
tl;dr: Don't knock dividends for any reason ever, or I will hunt you down. Though if you want to make dividends part of your strategy, join us in the index funds.
I wasn't trying to belittle dividends. I have no problems with dividends. I was trying to belittle hunting for dividends because when you hunt for dividends you usually find yourself in single stocks with high dividends or more expensive funds that will likely reduce your overall earnings in the long run. I got the impression that the poster was doing that, so I wanted to warn against that if true.
And I definitely know that our investment style is basically the same (100% stock index funds, woo!), so I wasn't trying to imply that you were in a managed funds hunting for dividends or anything like that.
LordGorchnik
Member
Most glorious. This is all new to me. I only have around 28K saved up for retirement so far and feel like I am way behind. Trying to learn as much as I can. Been hitting the books, Google, Reddit, and other finance websites hard these past few days.
Dividends are boring. fite me
RumblingRosco
Member
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Among the graphs I keep, is one showing the total annual dividends since I graduated college and really began investing. That graph is getting pretty exciting, I tell you.
Well, okay. Remember folks, this was by request.
(You should put money in anyways.)
Randolph Freelander
Member
The system works without dividends. The companies just need to take the cash they would have distributed as the dividend and use it to initiate a stock buyback. This raises the price of the shares without an expectation of any future dividend. When the number of outstanding shares gets too low, you do a split and the cycle repeats.
This approach transfers money to the shareholders without having to get taxed as ordinary income, which is why dividends kind of suck for taxable accounts.
Darren870
Member
Thanks thats what I thought. These are the RSUs that have vested and I think I would like to move them out of my company stock as what everyone said. Thanks for all the advice!
As soon as trade window opens I will move them out
Please don't forget capital gains tax!
I believe with RSU's you have to pay tax when you acquire them (as they are free money) but you may also be subject to capital gains tax.
If you hold a stock for less then a year you are taxed at your tax rate, compared to 15% if you hold them for over a year.
Least something to think about, might want to look into how RSU's work with capital gains and any other tax implications.
Probably a 1 or 2 year CD.
thoseAREmySHOES
Member
Probably your best bet for a safe ~1.3% return, looking at the 1 year. You can check out higher interest rate online savings accounts, like Ally Bank or Barclays. They come out to about 1% APY and you'll be able to access it without penalty like a CD. So, without knowing your full situation, I'd say explore those options.
Randolph Freelander
Member
Either way, it's profit being returned to shareholders (what you're paying for when you buy a stock), and I generally include that as a dividend for general discussion, though technically it does take a different avenue. Though as a correction, (qualified) dividends are taxed not as ordinary income, but at rates in line with capital gains. It would seem you're going to pay a capital gain either way, basically, though a dividend is more ironclad than the expectation of a gain in stock price at the conclusion of the buyback program (though that is certainly the expectation), so it's really a matter of when you pay it.
I don't have a strong opinion against stock buybacks, though it does seem that they take more heat in the general press than you might expect (some of which is entirely misplaced), and they haven't always been widely practiced and who knows if someday the government might tighten rules.
nhlducks35
Member
Open a bank account with Ally and get 1% interest for free
Not entirely related to the thread, but you guys know stuff.
Is it fraud to transfer money from a joint account you have with a family member that is dying if they have outstanding debts?
I assume this is some sort of fraud, avoiding debt or whatever, but I am not sure.
Is it fraud to transfer money from a joint account you have with a family member that is dying if they have outstanding debts?
I assume this is some sort of fraud, avoiding debt or whatever, but I am not sure.
I can't imagine so.
You have every legal right to take out money out of a joint account whenever you want. Now, the dying relatives creditors might track that down and claim that as asset that needs to be handed over.
No legal expertise at all, but that is how I imagine things might shake out.
That was basically the crux of my question, whether or not creditors can come after money you took out of a joint account prior to death.
Good call on the tax! Ill only sell the shares i have that is over a year. Thanks again for the heads up!
Definitely look into how they are handled a time of vesting. As he said, there are actually two taxes to keep in mind - the initial income at time of receipt, and any gains (or losses) incurred when you sell the shares. Where I work, they are treated as incremental income and taxed at the same rate as pay, at vesting. So if my tax rate is 25% and 100 shares vest, I get 75. Selling at the time of receipt (vesting price) incurs no further taxes, so I sell right away. YMMV
No one has any insight on the math for this?
I bonds are one of the best places to get something back on cash but for your situation it might not be worth it. You can only buy $10k a year with cash and another $5k with your tax return. Really worth looking into for emergency funds though. Current rate is 1.64% and adjust every 6 months for inflation. http://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm
Randolph Freelander
Member
If the loans are 5%, consider taking them. Historical market returns are higher than that (10%), so the spread is going to work in your favor. You could park your IRA into either FSTVX or VTSAX (total market funds with Fidelity and Vanguard, respectively). The only thing is that the interest you would owe is guaranteed to accrue, whereas market returns over the short term are not. But that's the risk you take, but I'd personally take it.
Edit: Eh, you also said you would owe income tax on the IRA. I'm assuming it's a traditional IRA using deferred income? If so, take the loans.
It is a traditional IRA as it was rolled over from a 401k and I never paid taxes on it. I would have to pay income tax on what I withdraw, probably under 30K income for 2016, but there wouldn't be a penalty. I'm close to having enough cash to pay for it all but don't want to cut it to close. The loans/IRA are just to leave a safety net.
I'm in 3 Fidelity Spartan Advantage funds right now, FSGDX, FSVTX(majority), and FSITX. FSGDX, the international fund, has sucked. All into FSVTX would have been the better move right now but who knows about tomorrow.
Hey guys, I could do with some advice (based in the UK).
Recently lost my job, and 90% of the money I have left is going to pay off debts for the foreseeable future.
I'm a hardware technician by trade, but since I've moved to a cheaper area, I've found that there's no jobs here at all for people with my skills. I know it's not alot but I can afford to invest probably around £50 a month, and I'd really like to start thinking about my future for once. Also, 40 years old...feels bad man
What's the best way to invest my money ?
Recently lost my job, and 90% of the money I have left is going to pay off debts for the foreseeable future.
I'm a hardware technician by trade, but since I've moved to a cheaper area, I've found that there's no jobs here at all for people with my skills. I know it's not alot but I can afford to invest probably around £50 a month, and I'd really like to start thinking about my future for once. Also, 40 years old...feels bad man
What's the best way to invest my money ?
anonymous_abc
Member
Hey guys, I could do with some advice (based in the UK).
Recently lost my job, and 90% of the money I have left is going to pay off debts for the foreseeable future.
I'm a hardware technician by trade, but since I've moved to a cheaper area, I've found that there's no jobs here at all for people with my skills. I know it's not alot but I can afford to invest probably around £50 a month, and I'd really like to start thinking about my future for once. Also, 40 years old...feels bad man
What's the best way to invest my money ?
50 quid is enough to get started!
Find a very low cost index fund for the MSCI world and just buy into that every month.
I don't know the specifics of what the creditors may be allowed to do, but one thing at least to consider is that you can only give so much money as a tax-free gift. This prevents people from doing the same thing to avoid inheritance taxes.
My view is that it is better to sell RSUs right away rather than waiting the year. The capital gains tax only applies to the amount the shares have increased in value since they vested, so unless your stock skyrocketed within the last year, it's usually not such a big difference. The benefit of asset diversification outweighs it, IMO.
Fair point about qualified dividends. It is still worse from a tax perspective since you have to pay the capital gains tax immediately rather than deferring it until you sell the stock, though.
I think the reason stock buybacks are viewed negatively is because they are perceived as something companies do when they are struggling whereas giving a large dividend is viewed as a measure of success, even though they are both just ways of transferring cash to the shareholder.
Thanks for everone's suggestion. I would like to sell my company stock when the trade window opens but just a question about taxes. I've never sold stocks before but I know that I was charged income tax already when my RSUs vested. In terms of capital gains tax, how would they charge for that? Would they sell my current shares at market close price then take out the taxes for capital gains? How would they know which one is eligible for long term capital gains tax rate vs which one is income tax rate. Ill give them a call later but just want to be prepared if I need some more follow up questions.
Randolph Freelander
Member
I caution first that I'm speaking in general terms, because I've never cashed in company stock option of any flavor.
But generally, that's not going to be withheld upfront. When you file your taxes, you'll fill out an additional form (or your tax preparation software will do it) covering your stock sales. You'll just need to provide the relevant info regarding the stock purchase and sale, and this will impact your total tax liability. Tax preparation software makes this simple. If you were going through a standard broker (which I don't think is the case for you here), software could often just import the information it needs and you would then review it for accuracy.
If the capital gain is substantial and might impact you to such an extent that you would owe taxes at the deadline instead of getting a refund, and the amount you owe would be significant, you might want to look at info regarding avoiding tax underpayment penalties.