Another notch in the post of 'buy and hold'. All the drops earlier this year, Brexit, etc, and here we are.
-
Hey, guest user. Hope you're enjoying NeoGAF! Have you considered registering for an account? Come join us and add your take to the daily discourse.
How to Invest for Retirement
- Thread starter Piecake
- Start date
Another notch in the post of 'buy and hold'. All the drops earlier this year, Brexit, etc, and here we are.
Make's me want to go all 'Told you so' to everyone who was going all chicken little after brexit.
Wouldn't change anyone's mind unfortunately. Some people have unrealistic perspectives on both the predictability of unpredictable events and the rationality of the market's response to unpredicted events.
It should have been clear to anyone with a grasp of basic math that the stock market's response to the brexit news was an entirely irrational panic move, because you could take the entire nation of Great Britain and all it's GDP off the map, and it would be less than a 5-6% drop in world GDP long term. There was no reason for the markets to drop ~8% or more to the news that maybe trade and financial transactions would become incrementally less efficient.
Well TL
R I just did what I said I shouldn't do because it isn't going to change anyone's mind.
I think the anxiety is less about what will specifically happen to the UK and more about whether we can take this result as a bellwether for other protectionist, anti-globalization movements around the world.
The quick recovery to me speaks to the fact that there are fewer investment options available when bond rates are historically low. Pension funds have little choice but to put money in the stock market if they need a certain return to have a chance of meeting future obligations.
$5,500/year limit still applies. If you've already capped it for 2016, you gotta wait.
Ether_Snake
å®å®å®å®å®å®å®å®å®å®å®å®å®å®å®
Not sure if it means anything, I was looking at Google trends, and consistently the low-point of the year for searches for the term 401k is May-June. This year it suddenly jumped as high as march, which is usually searched for the most after January probably due to income tax season.
I wonder why this year specifically so many searched for it in June when it's usually the lowest point.
I wonder why this year specifically so many searched for it in June when it's usually the lowest point.
Make's me want to go all 'Told you so' to everyone who was going all chicken little after brexit.
Wouldn't change anyone's mind unfortunately. Some people have unrealistic perspectives on both the predictability of unpredictable events and the rationality of the market's response to unpredicted events.
It should have been clear to anyone with a grasp of basic math that the stock market's response to the brexit news was an entirely irrational panic move, because you could take the entire nation of Great Britain and all it's GDP off the map, and it would be less than a 5-6% drop in world GDP long term. There was no reason for the markets to drop ~8% or more to the news that maybe trade and financial transactions would become incrementally less efficient.
Well TL
Whenever there's a big drop like that, I go to the charts to contextualize it. Having been through 2000 and 2008 certainly has helped shape my long term perspective, but it's nice to have a visual to tell the story as well.
This is the S&P for the past month. That's quite the Brexit drop, but it recovered as fast as it dropped:
Over the past six months it is still noticeable, but much less of an event:
Zoom out a year, and it's not even the biggest drop we've had:
Five years out, and it's a barely perceptible blip, indistinguishable from many other market gyrations:
If I were looking at my accounts daily, or worrying about what to do about a market drop, I'd have made dozens of bad decisions over that time horizon. If you are worried about a market drop, take a step back. It's not a big deal when investing over the long term.
chaosblade
Unconfirmed Member
Bought at the bottom of that brexit dip. Feels good.
Randolph Freelander
Member
I believe you have 60 days to put funds back in, allowing you to classify it as a rollover even if it goes to the same account. But I would advise you to just contact your broker and ask.
Thanks Nintendo.
Another ~10% gain from Yen strengthening.
I kid. I actually bought more ( at a lower price ), decides to sell off and barely breaks even during the Jan-Feb crisis. Good thing I put them into Sony which records a 12.4% one day jump in Feb, the highest since 2008. Bad thing is it's not as much as I would have made if I hold.
Pokemon Go inspires such confidence.
Edit: I'm sorry, wrong thread.
This particular line of discussion might be a better fit in this thread: http://www.neogaf.com/forum/showthread.php?t=176332&page=294 Don't want to chase you away or anything, just noting that individual stocks isn't really this thread's forte.
Damn American funds have really cheap total expense ratio.
I mean 0.02% TER for local stock index fund is really cheap.
While our cheapest TER index fund offering has 0.60% TER and if you want fund with tax plan benefit the cheapest offering has 0.77% TER.
Fund with tax benefit:
LTF (Long term mutual fund):Can only invest in local stock market and investors have to keep hold of their fund for at least 7 years.
RMF (Retirement mutual fund):Can invest in multi assets and investors have to keep hold of their fund until you reach 55 years old.
My kids were gifted a bunch of stock from my grandmother that she intended to be used for their college education. Until they come of age, I am in charge of the accounts. Would it make sense to put their money into index funds as opposed to the individual stocks it is in now? My kids are 9, 8 and 3, so it will be invested for 9, 10 and 15 years, respectively.
Is it a substantial amount of money? Would she be upset if you changed it around? If no and yes I would just leave it. If yes and no then totally go into index funds and bonds then go heavy bonds as you get closer to college time.
Oh, I should have probably noted that she passed away which is how I came to be in charge of the accounts. She was in charge of them before.
It's about $8k-$10k in each.
Randolph Freelander
Member
I'd say put them in target 2025 and 2030 funds (2025 for your oldest 2, 2030 for the youngest), since that seems to align with your children's planned matriculation. Vanguard's 2025 fund is still roughly 66% stock and nearly 34% bonds (2030 is 74/26), and those allocations will continue to shift more conservative with each passing year, as should your strategy for those funds since the need for them isn't that far off.
Damn American funds have really cheap total expense ratio.
I mean 0.02% TER for local stock index fund is really cheap.
While our cheapest TER index fund offering has 0.60% TER and if you want fund with tax plan benefit the cheapest offering has 0.77% TER.
Fund with tax benefit:
LTF (Long term mutual fund):Can only invest in local stock market and investors have to keep hold of their fund for at least 7 years.
RMF (Retirement mutual fund):Can invest in multi assets and investors have to keep hold of their fund until you reach 55 years old.
Yea, I think America has the lowest fees in the world. I know Canada and Europe are definitely higher at least.
I am kinda curious why that is. Is it competition, regulation, or something else?
I am pretty sure that Britain has less financial regulation than the US and is other world financial center next to NY, so unless brokerages and index offerings are comparatively underdeveloped I have a hard time understanding why it is competition.
Could someone help me understand the relationship between Traditional/Roth IRAs and investing (stocks, index funds, etc.)? I understand - in general terms - what each thing does individually, but I guess I am having trouble understanding how they work together, or how someone should prioritize them. I guess another way of wording this is, do the tax benefits on the front/back end outweigh (or outperform) investing in the market?
I assume it varies from person to person, but is there an established way of calculating what that point is?
Generally, do most people choose to invest up to the limit with the employer (3% or whatever is offered), then max out the Roth contribution, then max out the traditional 401k, and then invest in something like an index fund?
I assume it varies from person to person, but is there an established way of calculating what that point is?
Generally, do most people choose to invest up to the limit with the employer (3% or whatever is offered), then max out the Roth contribution, then max out the traditional 401k, and then invest in something like an index fund?
IRAs, Roth IRAs, and ordinary brokerage accounts are all just different types of investment account. Within that account you can buy or sell mutual funds or stocks or bonds as you see fit.
The only differences are in tax treatment and in availability of funds. For tax treatment:
-An IRA contribution gets you a tax break now. Your contributions are subtracted from gross income for income tax calculation purposes. Your investments then grow tax-free (that is, you can buy and sell investments or reinvest dividends without incurring taxes). Once you start withdrawing money on the other side, that money is treated as income for tax purposes.
-A Roth IRA contribution does not get you any tax breaks now. Your contributions don't affect your current tax payment at all. Your investments grow tax-free, just like the regular IRA. On the other end, you take out money tax-free. You will not have to pay income taxes for withdrawals from a Roth IRA.
-Putting cash in a regular brokerage account does not get you any tax breaks now. Your investments will not grow tax-free, so you'll need to pay capital gains taxes when you sell an investment for gain, and dividends will also hit your taxes. Withdrawing money from the account doesn't do anything tax-wise, except in that to get that cash you're likely selling something and thus incurring capital gains taxes as mentioned above.
Short version: IRA means no taxes now, no taxes while growing, taxes on withdrawal. Roth means taxes now, no taxes while growing, no taxes on withdrawal. Regular brokerage means taxes now, taxes forever.
The only advantage a regular brokerage account has over either kind of IRA is that the money is always available to you without penalty. Pulling money early from an IRA (excepting some specific uses) will incur penalties and taxes, and ditto from a Roth, except that you can pull money up to your total contribution amount from a Roth without penalty. As far as just dumping money in, investing in a fund that will grow over time, and leaving it there until retirement age, both the IRA and the Roth strictly dominate the regular brokerage account.
The only differences are in tax treatment and in availability of funds. For tax treatment:
-An IRA contribution gets you a tax break now. Your contributions are subtracted from gross income for income tax calculation purposes. Your investments then grow tax-free (that is, you can buy and sell investments or reinvest dividends without incurring taxes). Once you start withdrawing money on the other side, that money is treated as income for tax purposes.
-A Roth IRA contribution does not get you any tax breaks now. Your contributions don't affect your current tax payment at all. Your investments grow tax-free, just like the regular IRA. On the other end, you take out money tax-free. You will not have to pay income taxes for withdrawals from a Roth IRA.
-Putting cash in a regular brokerage account does not get you any tax breaks now. Your investments will not grow tax-free, so you'll need to pay capital gains taxes when you sell an investment for gain, and dividends will also hit your taxes. Withdrawing money from the account doesn't do anything tax-wise, except in that to get that cash you're likely selling something and thus incurring capital gains taxes as mentioned above.
Short version: IRA means no taxes now, no taxes while growing, taxes on withdrawal. Roth means taxes now, no taxes while growing, no taxes on withdrawal. Regular brokerage means taxes now, taxes forever.
The only advantage a regular brokerage account has over either kind of IRA is that the money is always available to you without penalty. Pulling money early from an IRA (excepting some specific uses) will incur penalties and taxes, and ditto from a Roth, except that you can pull money up to your total contribution amount from a Roth without penalty. As far as just dumping money in, investing in a fund that will grow over time, and leaving it there until retirement age, both the IRA and the Roth strictly dominate the regular brokerage account.
ChanDangle
Member
Quick question is whole life insurance ever a good option?
I've generally focused on 401k over Roth IRA because I'm a federal employee, and the TSP has very low expense ratios. Most other times it makes sense to do as you said.
Though, around when I turned 30 last month, I decided to look at my 401k and Roth IRA and evaluate how I was doing. Between the two, I had around 1.25x my salary. Doing some math, and taking into consideration the pension I'll receive assuming I stay with the fed, I decided I was overcontributing and decided to dial back to 5% for the match, and pay off my house faster. Generally not considered advisable due to the low interest rate on the mortgage (3%), but I think I can easily pay it off within the next 5 years. That's short enough term that I think I'd be more comfortable having the house paid off.
I've been full blown Roth for my 457b, but recently I have started to realize I should flip back to Traditional. I'm aiming for an earlier retirement, and even with a pension I can't imagine a scenario where my taxable retirement income is greater than it is now. A reduction of 18k in the 25% bracket is a sizable chunk I can put towards an IRA, down payment, or car bill... Those are my current thoughts right now I'm sure there are quite a few more factors to consider before making the change.
Darren870
Member
If you have dependants. My opinion is that you shouldn't mix it with investments either.
Get term and that's it.
Randolph Freelander
Member
guess the author
Bogle?
guess the author
Donald Trump
guess the author
Charmander
The walrus was Paul? Wait, wrong George Martin.
MidgarBlowedUp
Member
To clarify my earlier post asking questions about 401k and taxes.
I guess what I'm trying to figure out is how to get the most money out of this now and later.
I'm sure maxing it pre and post will get me the most money but I can't live on nothing. I have some debts I want paid off in the next 6-9 months too. As it is, I'm putting in enough to get the maximum company match. I'm considering putting in more, which will mean smaller paychecks. This is OK if I get more taxes back at the end of the year.
So lets say I elect to put $100 each pay period into 401k pretax.
Is that $100 completely pretax or just federal pretax?
And even if it is federal pretax is Fed MED & Fed OASDI still taken from it before it's put in my 401k?
If it is, will any of that, plus state taxes, be reimbursed to me in the form of a tax refund assuming my AGI drops into a lower tax bracket?
or
Is my AGI lowered before I do my taxes at the end of the year due to my 401k pretax contributions? Meaning it shouldn't matter come tax time.
I guess what I'm trying to figure out is how to get the most money out of this now and later.
I'm sure maxing it pre and post will get me the most money but I can't live on nothing. I have some debts I want paid off in the next 6-9 months too. As it is, I'm putting in enough to get the maximum company match. I'm considering putting in more, which will mean smaller paychecks. This is OK if I get more taxes back at the end of the year.
So lets say I elect to put $100 each pay period into 401k pretax.
Is that $100 completely pretax or just federal pretax?
And even if it is federal pretax is Fed MED & Fed OASDI still taken from it before it's put in my 401k?
If it is, will any of that, plus state taxes, be reimbursed to me in the form of a tax refund assuming my AGI drops into a lower tax bracket?
or
Is my AGI lowered before I do my taxes at the end of the year due to my 401k pretax contributions? Meaning it shouldn't matter come tax time.
Darren870
Member
This might be a question for the accounting program your work uses. If the application calculates tax with your 401k allocations. I wouldn't be surprised if they were all different.
You might be able to figure this out now with your last payslip and an online calculator.
I'm going to assume your tax on your paycheck is calculated with the 401k contributions excluded. Meaning you won't get any extra back.
Pre-tax 401k deductions reduce your income tax (federal for sure so I assume state also). They do not reduce your Medicare or Social Security contributions because those are based on your gross earnings.
See
http://finance.zacks.com/401k-deductions-reduce-fica-wages-2641.html
http://finance.zacks.com/calculate-ss-taxes-after-pretax-deductions-1636.html
So upping your pre-tax contribution may give you a bigger refund at tax time unless you also adjust your withholding, but you're not getting any sort of big Medicare/Social Security contribution refund.
My company automatically adjusts the withholding based on 401K contributions. I would assume most others do as well. One ought to be able to figure it out by looking at their paystub.
Is there any guide or help in deciding where to put your money if you want to retire early?
I would like to retire around 50 to 55, but my Roth IRA and 401k won't be accessible without penalty. I know that you can roll over funds to minimize early withdrawal penalties, but I feel like there is probably a smarter way to save my money.
Does anyone know of a good reference guide for this kind of situation?
I would like to retire around 50 to 55, but my Roth IRA and 401k won't be accessible without penalty. I know that you can roll over funds to minimize early withdrawal penalties, but I feel like there is probably a smarter way to save my money.
Does anyone know of a good reference guide for this kind of situation?
Randolph Freelander
Member
You can withdraw contributions from your Roth IRA penalty-free at any time, so that's one avenue. As far as your 401K, one option is to take "substantially equal payments" for a minimum period of time to avoid the penalty.
See:
http://www.bankrate.com/finance/retirement/penalty-free-401-k-ira-withdrawals-1.aspx
https://www.irs.gov/retirement-plan.../retirement-topics-tax-on-early-distributions
Just bought my first stock today.
Question- If I buy a mutual fund through a bank vs buying it myself using quest trade do I still pay the same fees? I'm Canadian if that helps.
Question 2- I have 10,000 I would like to invest. Is there any stocks/etfs people recommend, preferably on the tsx.
Question- If I buy a mutual fund through a bank vs buying it myself using quest trade do I still pay the same fees? I'm Canadian if that helps.
Question 2- I have 10,000 I would like to invest. Is there any stocks/etfs people recommend, preferably on the tsx.
PflargBlarg
Member
Just bought my first stock today.
Question- If I buy a mutual fund through a bank vs buying it myself using quest trade do I still pay the same fees? I'm Canadian if that helps.
Question 2- I have 10,000 I would like to invest. Is there any stocks/etfs people recommend, preferably on the tsx.
I wrote a, too large, post way back here http://www.neogaf.com/forum/showpost.php?p=136790344&postcount=1519 on Canadian investing if you're interested in that. I'll actually probably go review it sometime soon and update it now that you've reminded me.
1. I haven't looked but there shouldn't be any transaction fees for buying mutual funds. Everywhere I've used has $0 commissions on mutual fund transactions. If you're talking about actual fund management fees then yeah, they're the same no matter how you buy them as they are intrinsic to the fund, not the place where you bought them.
2. I mention it in my post, but the 'gold standard' for easy DIY investing is Canadian Couch Potato model portfolios http://canadiancouchpotato.com/model-portfolios-2/
Read through that page and make your decision based on that information.
Keeping in mind that I don't know what the minimum amount is to start a Merrill Edge account... I did some "back of the envelope" calculation on what to do with a cash reawrd card from Bank of America.
If I generate about $200 a year in cashback rewards with my Bank of America card and invest it once annually it into a Merrill Edge mutual fund account with a 5% return (would rather be pessimistic), in 30 years it would be worth $13,280 after taking out an annual $7 transaction fee but adding in a 10% bonus for depositing into a "bank of america" account. This is not accounting for inflation which would by default end up with me paying more for stuff and therefore generating even more cashback and thus a higher end value.
If I generate about $200 a year in cashback rewards with my Bank of America card and invest it once annually it into a Merrill Edge mutual fund account with a 5% return (would rather be pessimistic), in 30 years it would be worth $13,280 after taking out an annual $7 transaction fee but adding in a 10% bonus for depositing into a "bank of america" account. This is not accounting for inflation which would by default end up with me paying more for stuff and therefore generating even more cashback and thus a higher end value.
Save what you can, when you can. Even small monthly amounts. I started out with $50/month into my Roth when I was in college, as that was all I could afford. It added up.
Saving money is always advisable, but $13000 doesn't go a long way now and it surely won't go a long way in 2045. Any way you could kick in $50 a month?
Randolph Freelander
Member
Friends, neighbors, countrymen.
The KOD is real. I remind you of this because whenever I hit some threshold, or do some independent investing on the side, the market invariably tanks. If I buy VTI, the market loses points. If I put a nice lump sum into my Roth, same. I topped off my 401K last year on August 14, a date indicated by the red line in the image below. Observe what came after.
I tell you all of this because today is my last 401K contribution of the year.
Get your sell orders ready.
The KOD is real. I remind you of this because whenever I hit some threshold, or do some independent investing on the side, the market invariably tanks. If I buy VTI, the market loses points. If I put a nice lump sum into my Roth, same. I topped off my 401K last year on August 14, a date indicated by the red line in the image below. Observe what came after.
I tell you all of this because today is my last 401K contribution of the year.
Get your sell orders ready.