As I am also on the FIRE train, target date funds don't work for me. You can definitely do worse thatn FXAIX, I have that one in my mix too. :)
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Retirement-Era |OT| How to Invest For Retirement
- Thread starter TheTrinity
- Start date
- OT
The only thing here is that I want to make sure that down the road, I don't mess up the process of my portfolio allocation as I near my retirement. I've had a separate ROTH IRA account that I will need to properly manage the same way anyways. I guess I won't be sure until I know whether early retirement is a sure thing. It will depend on a ton of factors, but for me I think it would most likely be at age 50 to 55 which is 20 to 25 years from now for me.
I'm really just trying to work towards getting my retirement accounts to a level for which if I drastically decreased contributions in 3 years, the balance would be still large enough to grow by its self to support my future retiement.
I'd like to enjoy my life as much as possible from 30 to 50s. This retirement account is literally just a way to survive on a fairly comfortable income in event I don't have a family that can support me.
During this period of reduced contributions, I would be focusing more on rental investment property, downpayment for my Mom's house, and other family related items.
Speaking of savings accounts, my 2.50% savings account with the local bank already went down to 2.41%. Still better than virtually anything else on the market and there's instant transfers with checking, so I'm staying put for now. If it gets below 2%, I'll start looking again.
So for my 401k plan under fidelity I do have the option of the following:
Fidelity® 500 Index Fund
Vanguard Institutional Total International Stock Market Index TRUST
Vanguard Institutional Total Bond Market Index TRUST
I called Fidelity and they confirmed that I wasn't going crazy - they just started offering all these in April. I think I'm going to go with the 65% US, 25% Int'l, and 10% bond allocation on these (similar to my ROTH IRA account with fidelity).
The trust versions of the last two funds are apparently exactly the same as the fund, except the expense ratio is slightly lower.
I think I'm going to to pull the trigger today and be done with it.
Fidelity® 500 Index Fund
Vanguard Institutional Total International Stock Market Index TRUST
Vanguard Institutional Total Bond Market Index TRUST
I called Fidelity and they confirmed that I wasn't going crazy - they just started offering all these in April. I think I'm going to go with the 65% US, 25% Int'l, and 10% bond allocation on these (similar to my ROTH IRA account with fidelity).
The trust versions of the last two funds are apparently exactly the same as the fund, except the expense ratio is slightly lower.
I think I'm going to to pull the trigger today and be done with it.
Target Date funds work just fine with early retirement. Just set the retirement date to whatever matches your desire glide path for bond allocation. There can be some complications with making adjustments if it is a taxable account, but since you are talking about a 401K that isn't really an issue.
The value in going with a single-fund approach is that it creates fewer openings for making behavioral errors. Once you understand the basics, it's those behavioral errors that really hurt your returns, and they don't show up when looking at historical fund returns.
Reading the OP, yeah it'd be nice for me to buy ETFs, but they are all expensive. I work for Raymond James Financial, and we have a list of securities regulated in regards to what we can buy/cannot buy. Cannot hold outside brokerage accounts too.
Are mutual funds really that bad due to expense ratios? They're cheaper per share wise and netting some great returns lately.
I don't want to buy into the market yet due to how bad the Q3 earnings report will potentially be. Everyone is beating their 52 week highs, too.
Are mutual funds really that bad due to expense ratios? They're cheaper per share wise and netting some great returns lately.
I don't want to buy into the market yet due to how bad the Q3 earnings report will potentially be. Everyone is beating their 52 week highs, too.
I have already changed my election. I can always switch back down the road to a different target date if I have second thoughts. I'm still 35 to 27 years off from my "normal" retirement
I'm looking for a High Yield Savings Account to stash my emergency fund into. Is Wealthfront safe? They offer 2.57% and FDIC insurance which... seems high?
Any thoughts on this or your experiences with high yield savings accounts?
Any thoughts on this or your experiences with high yield savings accounts?
Thanks. Them being new to Savings Accounts and being an outlier in terms of interest rates has me nervous to bite the bullet. But then again, its FDIC insured so technically there's no risk of losing it so???? I'll sleep on it a few days.
I can't seem to get a good answer to this online.
I have a 401k and a pension (401a?) that combined will go over the 19500 limit this year but won't if they are separate. So, are they separate or do I need to put less into the 401k?
I have a 401k and a pension (401a?) that combined will go over the 19500 limit this year but won't if they are separate. So, are they separate or do I need to put less into the 401k?
So currently my money is in VANGUARD FEDERAL MONEY MARKET FUND (Settlement Fund) and I wanted to move it to something that would return more. Since I'm in my late 20's I kind of want to just dump the money somewhere and just forget about it. Someone here told me that VTSAX or VTI is a good way. Does anyone else have any other opinions ?
Recently got hit by a wave of unexpected expenses while also taking care of some other things and my emergency savings have plummeted. Also recently found out that I'll need to move. I think there is unfortunately a possibility that I'll need to raid my Roth IRA to make sure I can cover a first month and security deposit for wherever I end up unless I can pull something off. Still reaaaaally hopeful I wont have to. Only just started the IRA this year. Don't want to have to essentially start all over again next year
I think you can take out contributions for this year and then put them back in before april.
You can also take out contributions at any time penalty free, just not earnings. Obviously not recommended but the option is there.
Thank you. That's good to know should it come down to this. If it does, I think I can probably get it back in by April of next year if I really push for it. I had been under the impression that since it's a Roth that I could take out anything out at any time, including earnings. So it's great to be aware of this beforehand
If you take out earnings before 59 1/2 you pay an early withdrawal penalty.
Exception I believe is you can take out up to 10,000 for a first time home purchase.
I am switching companies and I need help with my current retirement accounts.
$22k in pension
$70k in 401k split between Roth and regular.
About $10k-ish of my 401k is regular.
I want to move everything to a Roth IRA with indexed funds that mimic the market. Best avenue and options? The pension can be moved to an IRA (I called and checked). I don't think my current company offers recharacterization to Roth for any of this.
I'm assuming that I need to move the pension and the $20k of regular 401k into some sort of vehicle separate from the vehicle I would be moving my Roth 40k money into, recharacterize the $32k over a few years to Roth and transfer to the Roth IRA I had set up for the 401k Roth money? Is there a more efficient way to do it?
I believe I can keep all the funds in their current places at my old company indefinitely as of right now, if that helps.
$22k in pension
$70k in 401k split between Roth and regular.
About $10k-ish of my 401k is regular.
I want to move everything to a Roth IRA with indexed funds that mimic the market. Best avenue and options? The pension can be moved to an IRA (I called and checked). I don't think my current company offers recharacterization to Roth for any of this.
I'm assuming that I need to move the pension and the $20k of regular 401k into some sort of vehicle separate from the vehicle I would be moving my Roth 40k money into, recharacterize the $32k over a few years to Roth and transfer to the Roth IRA I had set up for the 401k Roth money? Is there a more efficient way to do it?
I believe I can keep all the funds in their current places at my old company indefinitely as of right now, if that helps.
You can probably keep your funds and account with the old company, but you are likely paying extra fees.
If you specifically want to have all the money in a Roth that sounds like the way to go.
If I were in that situation (and with any luck I will be soon) I'd probably just keep the Roth and traditional funds as-is. I have a Vanguard Roth and I'd just roll my traditional 401K to my Vanguard account, but keep the Roth and traditional separate. At least as far as I'm aware there's no reason you can't do that, but I haven't really researched yet. Even though I'm at a stage in life where I'm leaning Roth, paying the taxes on recharacterization of money already invested seems iffy to me since that's money that could be growing in the long term.
If you specifically want to have all the money in a Roth that sounds like the way to go.
If I were in that situation (and with any luck I will be soon) I'd probably just keep the Roth and traditional funds as-is. I have a Vanguard Roth and I'd just roll my traditional 401K to my Vanguard account, but keep the Roth and traditional separate. At least as far as I'm aware there's no reason you can't do that, but I haven't really researched yet. Even though I'm at a stage in life where I'm leaning Roth, paying the taxes on recharacterization of money already invested seems iffy to me since that's money that could be growing in the long term.
I was researching on Vanguards' website just now and it seems like it is actually pretty easy? I think I might move the $22k pension over to Vanguard because it's only paying 3%-ish APR and I want to get that money in the market. Then, I'll think about possibly converting it to Roth down the road.
You mention something about fee increases when I leave my current company if I keep the funds there? Is that a thing?
You mention something about fee increases when I leave my current company if I keep the funds there? Is that a thing?
Once you leave a company any fees they were paying for your 401K fall back on you. That's why it's best to do a rollover, either to your new company's 401K or to your own IRA like Vanguard or Fidelity.
I prefer the personal IRA route because it gives you more options, and it's more predictable. Don't want to get a new job and throw all your retirement savings into a 401K where all the funds have high fees.
I prefer the personal IRA route because it gives you more options, and it's more predictable. Don't want to get a new job and throw all your retirement savings into a 401K where all the funds have high fees.
I'm not making any decisions yet but just going to drop this in here to hear some opinions on it.
My family is about to get an inheritance estimated to be between $50-$100k. Could possibly be more but not sure how it's all divided up in the end.
Anyways me and my wife were discussing what would be our best option(s) so I figured why not just read what others might think. Please note my wife's opinion in the end still outweighs all of you, lol.
We owe $160k on the house still, 20k on a vehicle, 10k in 401k loan and maybe $1,200 on a credit card.
We know we want to wipe out the car right away and my 401k and credit cards too but what about what's left over? Do I pay towards the house or do I invest it? What would you do here for long term financial security if you were in my position?
My family is about to get an inheritance estimated to be between $50-$100k. Could possibly be more but not sure how it's all divided up in the end.
Anyways me and my wife were discussing what would be our best option(s) so I figured why not just read what others might think. Please note my wife's opinion in the end still outweighs all of you, lol.
We owe $160k on the house still, 20k on a vehicle, 10k in 401k loan and maybe $1,200 on a credit card.
We know we want to wipe out the car right away and my 401k and credit cards too but what about what's left over? Do I pay towards the house or do I invest it? What would you do here for long term financial security if you were in my position?
Whatever has the highest interest rate should go first.
If you don't have an emergency fund, you should put a fair bit into that too.
F
Also, I'd personally pay off anything with >5% interest rate before even thinking about investing anything, by order of highest interest rate first. (so that's probably going to be your credit card first, then maybe your car? I'm not sure what your interest rates on mortgage/vehicle/401k loan are).
5% is like borderline because on the one hand, you're likely to make more money per year by investing it than by paying off a loan, but that takes as LOT of mental fortitude and it's a lot better for peace of mind to just pay off the loan...
OP
OP
Yeah honestly, even if the mortgage rate isn't that high I would probably still put a chunk of the money towards it. It's probably not the most 'efficient' but removing the mental weight of mortgage payments earlier doesn't have a price and it's a guaranteed rate of return which is also great.
That's what I would likely do anyway,
That's what I would likely do anyway,
Thanks for the replies everyone. Lots of things going on now and too many questions that I can't even begin to answer right now.
If this isn't the thread for this please let me know and direct me if at all possible.
There are 2 kids and a total of 7 grandkids who may be getting some of the inheritance with the vast majority going to the 2 kids, one of which being my father in law. As of right now it seems the estate is worth upwards of $2m.
My father in law believes he is getting around $800k or so and was considering splitting that in half and giving half of that initial split to my wife and half to my sister in law.
I have to assume he is safe inheriting his $800k but if he wanted to divert $200k of that our way I have to believe it will be taxed to the high heavens.
We are going to have him see a financial planner to steer him through everything. Just wondering if anyone has any insight on a situation like this.
Again thanks for the replies.
If this isn't the thread for this please let me know and direct me if at all possible.
There are 2 kids and a total of 7 grandkids who may be getting some of the inheritance with the vast majority going to the 2 kids, one of which being my father in law. As of right now it seems the estate is worth upwards of $2m.
My father in law believes he is getting around $800k or so and was considering splitting that in half and giving half of that initial split to my wife and half to my sister in law.
I have to assume he is safe inheriting his $800k but if he wanted to divert $200k of that our way I have to believe it will be taxed to the high heavens.
We are going to have him see a financial planner to steer him through everything. Just wondering if anyone has any insight on a situation like this.
Again thanks for the replies.
If he wants to give 200k to your wife, there will be no taxes because he will file a gift tax return and it goes against his lifetime exclusion.
Thank you. I was reading up about the lifetime exclusion but not sure how it all works. We will of course speak with everyone about this and see where it goes.
You literally have nothing to do besides depositing the check in your bank account. He has to do the gift tax return.
So when looking up loan repayment strategies pretty much everything just points to snowball vs avalanche. But wouldn't paying down based on interest generated actually be the most long term efficient?
ex: 3 (fictional) loans with monthly interest
Loan 1: 3% - 2,000 = $60/month
Loan 2: 4% - 10,000 = 400
Loan 3: 4.5% - 5,000 = 225
Snowball says pay off loan 1 then 3 then 2 based on the principle.
Avalanche says pay down 3 --> 2--> 1
But wouldn't it be better to pay down loan 2 until it's generated interest is less/equal to loan 3 then pay them down alternating/equally?
Obviously there is no mental reward of finishing a loan as all 3 would end at a similar time.
ex: 3 (fictional) loans with monthly interest
Loan 1: 3% - 2,000 = $60/month
Loan 2: 4% - 10,000 = 400
Loan 3: 4.5% - 5,000 = 225
Snowball says pay off loan 1 then 3 then 2 based on the principle.
Avalanche says pay down 3 --> 2--> 1
But wouldn't it be better to pay down loan 2 until it's generated interest is less/equal to loan 3 then pay them down alternating/equally?
Obviously there is no mental reward of finishing a loan as all 3 would end at a similar time.
All things equal (meaning that you take away the psychological effect of having fewer loans), if there is no repayment penalities and you will reimbursement an equal amount in the future (i.e. regardless of the minimum repayment you pay the same total amount and any amount over the minimum is applied to the highest interest loan).
It would be more beneficial to repay highest interest 1st.
This does that your loan are will NOT finish at the same time (because you'll repay the highest interest ones first). Your premise is flawed because any anticipated repayment will do that regardless or the order.
So by your example, I would do Avalanche.
The main problem often don't apply the surplus once they pay off a loan. So by example, if that 225$ is not applied to loan 2 once loan 3 is paid off. Ideally you should never consider the minimum as the target payment.
It become more obvious the highest rate the interest are. Total payment remaining equal, highest interest loans should be prioritized.
Also if the interest are really low, if you are disciplined, you can even consider investing the surplus instead. This is not for everyone though.
The number on the right i.e. 60/400/225 is the amount of interest generated each month, not the repayment amount. So my question is wouldn't it still be better to pay down (not off) loan 2 first until the generated interest is equivalent to loan 3 at which point you could/should pay down Loans 2 and 3 equally until all 3 loans are generating $60 in interest each month.
Reasoning being despite loan 3 having the highest interest rate, it isn't actually generating the most additional debt (interest) each cycle, loan 2 is instead. So even if one targets Loan 3 you are still generating more additional debt each cycle than if you paid loan 2 down first.
If you pay an extra $100 on loan 3, the total generated interest the next month (for all loans) will be lower than if you paid $100 extra on loan 2.
It doesn't matter what the balance of each loan is, every dollar that is accruing more interest in one loan is worth paying off before the one with the next highest interest rate.
The only potential exception I can think of to this is if the interest paid on the higher interest rate loan was tax deductible or something.
We sold my husband's final shares in his company stock (that he got as part of his compensation package) literally hours before he announced the tariffs. Got lucky.
I used it as a chance to do some tax loss harvesting in my taxable account. For retirement investors with a long investment horizon remaining, the market dips are more of an opportunity than a hazard.
Of course if this leads to a full-on recession, that will be a difference story.
That's great!
I will be be on full on buying mode during this period.
I've already positioned myself to be maxing out my retirement accounts for the next few years. I'm already comfortable with my emergency cash savings, so I like to take an opportunity to bump up my taxable investment accounts
lol welp.. we all knew it was coming sooner or later.
Glad to have to sooner so it can also end sooner?
Depending on how poorly the market is performing and while it continues on its downslide, I may shift to paying off my student loans and mortgage faster and start buying back in when there is some recovery.
Glad to have to sooner so it can also end sooner?
Depending on how poorly the market is performing and while it continues on its downslide, I may shift to paying off my student loans and mortgage faster and start buying back in when there is some recovery.
The stock was also at an all-time high due to the quarterly earnings report. 50% gain from the 3 years ago when it was received!
Also, there are plans to increase my hours at work soon. I currently work 16 hours; if I work 20 hours or more, once I reach 1000 hours in a year, I will qualify for the 401(k). It includes a 3% safe harbor. Pending discussion with my husband, I plan on maxing it out. I already max out my Roth, so that'll be an additional $19k plus the 3% in the retirement coffers. If I for some reason drop my hours to lower than 20 after qualifying, I will STILL qualify because I will be grandfathered in due to previously qualifying.
Also depending on how many hours they give me, I may also ask my husband to max out as well. He's currently at 16% plus a 3% match; I believe he needs to go to 20% to max out at the $19k. My husband also maxes out a Roth. We're in great shape as it is, but I have told my husband I think he can retire early (actually at this rate, I KNOW he can in 10 years or less), and I want to keep to that.
He's 11 years older than me and has much more time-consuming and creative hobbies outside of work, plus needs to do much of the household chores due to my arthritis, yet still works full time. Meanwhile I'm the one who wants to increase my hours to 3-4 days a week, lol. I love my current job. If I get to 30 hours, I can qualify for medical insurance, which at my job is very generous and low cost for the employee. That's the main reason my husband is keeping his current job (I have a bunch of chronic illnesses, which is why I work part time in the first place). So lots to think about, but I think we're still in good shape overall.
That's a shame about the chronic illness, but hopefully you can hit that 30 hour mark. Having the ability to save like that, still live comfortably, and having medical insurance is a trifecta for families IMO
So my husband agreed to put his 401(k) at 20% right now as opposed to waiting as it'll only be about $150 more per paycheck. Because the website is shit, you can't put a dollar amount in, only a %. So he won't max out this year, but he will next (though I will likely have to adjust to 21% or something as I'm sure the IRS will raise it to $19.5k). I'm sure I could put a higher % for the rest of the calendar year so he'd max, but meh, he's close enough with the 16% for much of the year so far. I also forgot to mention that his contributions to the 401(k) are Roth, while the employer's are pre-tax. Like 90% of our retirement savings right now is post-tax, which is awesome. Even if our tax rate is lower in retirement, I like knowing that almost all of our retirement is post-tax and we don't have to put that into account with retirement planning.
It would be easy to discount all of this, but the tax savings could be significant. This is more relevant for people trying retire early. If early retirement is serious option for you both, I would consider allocating more to traditional 401K, especially if you're already maxing out ROTH IRA. You could then take the tax savings from the traditional 401K and invest it in taxable accounts. The whole idea behind this is to create buckets of accounts that you can eventually choose to withdraw from a strategic way if you want to go the early retirement route. This is would I'm personally working on.
Even if tax rates do increase and the brackets change, I think there will still be a good amount of income that you'll be able to withdraw from while paying zero or little tax on condition that you don't need to withdraw a significant amount of money each year during retirement (50K a person is tax free if you plan it right).
Today for an individual tax payers, you can essential withdraw 12K tax free because of the standard deduction that all Americans receive. Then you can receive 38K of capital gains tax free up to 38K. These amounts are nearly double for MFJ taxpayers. Therefore, if you only need 100K between you to or a little more, you would ideally want to have buckets of funds to choose from. If you have a high traditional 401K balance, you will have more flexibility as you can do a ROTH ladder conversion to convert some of your 401K balance to ROTH in a strategic way to have early access to retirement funds. You end up paying tax on a time where your income level is relatively low (that's when you would do this this conversion), but gives you access to the w/e you converted after a period of 5 years. You would keep doing this each year during the beginning of early retirement. To supplement your living expenses before getting access to the converted funds, you would want to withdraw from your a bucket of taxable investments (the non-retirement account) because a certain portion (around 78K for MFJ filers) would be tax free. And then going further, you can could potential take money from cash savings and existing ROTH contributions that you have already paid tax on a long while ago and take from this before hitting your taxable investments.
For me, I'm personally hedging against tax rates being a lot higher in the future so I want to diversify my options so in the future, I can choose where to withdraw from in case I need to early retire.
1) See the 4 points included here: https://thefinancebuff.com/case-against-roth-401k.html (btw, I don't agree that the ROTH 401K, shouldn't be used - I just like the points that were brought up and people often don't understand the main point that in retirement you're filling up the LOWEST bucket first)
2) Then watch this very good video explaining the items I touched on above in a much clearer way, with illustrations: https://streamable.com/5gqcs
3) Then read this for en explanation on the different scenarios between investing in only ROTH, only traditional, traditional with ROTH ladder conversion, taxable only investments, etc: https://www.madfientist.com/how-to-access-retirement-funds-early/
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This is some great info, thank you.
We currently have a sizable amount in savings- probably enough to last us over 3 years if we both lost our jobs. I'm gonna be honest, I know you're not supposed to time the market but man I am wary of investing in taxable accounts right now because I know we're going into or are already in a recession. At least you get tax advantages with 401(k)s, IRAs, and HSAs that soften the blow of a recession a little. So currently, we got nothin' for taxable investment accounts. It's something to think about. If I do get my work's 401(k), I will consider doing pre-tax and then dumping the savings into taxable when the time comes. That'll probably be around when the recession hit so the market will be on sale, lol. $100k would be way more than enough for us in retirement. We make more than that but spend way less; that's how we are able to max out all this shit no problem. Helps immensely that we paid our mortgage off very early and bought at the bottom of the market.
I got my local bank's high interest savings account in Jan. 2.5% then. That was going from Capital One (legacy ING Direct account) with 1% interest, so very worth it. The account went down to 2.41% in Juneish and then 2.35% last month to now 2.3%. Sounds like I'm still doing pretty good then compared to the market rates.
I completely botched the order of where you would withdraw from first for retirement btw. I went back to edit my post. The links I posted explain everything though (at least see the video if nothing else).
For my work retirement account, 70% of it currently ROTH. One cool thing is that when I leave my company and convert it to a ROTH IRA, apparently the entire basis (not sure if it's this or Fair Market Value) at that point counts as the contribution amount. This means that I should be able to withdraw from it tax and penalty free, as long as the ROTH IRA account has existed 5 years. 20 years or so from now, if I wish to retire, I think that this will be a pretty big bucket I can take from while doing the ladder conversions. I'll need to keep good records of the basis at conversion though.
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Thanks man. This is some really great stuff and I really appreciate it.
For Roth 401K money, it's only the basis, but the rollover is tax free. The 5-year rule is based on the year you opened the Roth IRA.
For Pre-tax 401K money, it's the full amount, but you pay income tax on the full amount immediately. The 5-year rule is based on the year the conversion was performed.
For After-tax (non-Roth) 401K money, it's the full amount, but you pay income tax only on the earnings. The 5-year rule is based on the year the conversion was performed*.
* There is debate about whether the 5-year rule applies to the full amount or only the earnings. Tax laws often neglect to set out explicit rules for after-tax non-Roth funds.
I guess now would be a great time to move my funds from my margin account to my TFSA, correct?
Gotta take that hit to "income" eventually, better sooner than later, and I guess while the market is temporarily Trumpified-down, I'll "minimize" the tax impact...
Gotta take that hit to "income" eventually, better sooner than later, and I guess while the market is temporarily Trumpified-down, I'll "minimize" the tax impact...