kutta
Footballguy
Cool. Thanks for serving FUBAR.
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PBS Frontline : The Retirement Gamble, sorta Must See (5 Viewers)
- Thread starter Smack Tripper
- Start date
Think it's Dentist that is on record that the gov't doesn't want to encourage fiscal responsibility b/c we are such a consumer based economy. Imagine if all of a sudden if we flipped a switch and everyone in the country saved 5% more money in 2016 and beyond than they currently did.Agree, parents can only teach so much anyway. My parents (well my Mom) were very thrifty when I was growing up, so I carried that over to my financial behavior. We were lower middle class but we always had enough, they weren't in debt or behind on stuff as far as I know. My Dad always said, "Dr D Jr, that kid likes money." I do, and still do but I also am not one to blow it. I will spend big on vacations and experiences though, something they would never do.
Now? My Dad told me they had $9k in CC debt and they are retired on a pretty good pension. I'm like
They buy all kinds of dumb #### now, especially my mom. They have $16k in their checking account too, makes no sense. My Mom has lost her mind these days, buying all kinds of crap I'm going to someday just throw away. Not hating on them getting things that make them happy in their senior years either, this is all dumb #### like those diet plans and junk from QVC. If they were in debt because they were traveling and living life, I'd be cool with it. I figure their house is worth $130k and it's paid for, as long as they don't leave my sister and I with over $130k in debt we're good.
RUSF18
Footballguy
I just went to bump up my 401K contribution from 6% to 7.5% (my company matches 7.5%, so I figured 15% total was a nice round number) and Fidelity says my contribution election needs to be in 1% increments. Obviously it's not a big deal but is there any conceivable reason why that should be? Just found it surprising.
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Dentist
***Official FBG Dentist***
Correct.
I try to preach financial responsibility and investing to people I actually like.
But the reality is that if everyone somehow woke up tomorrow and ran their finances like someone who's frugal and fiscally responsible did, that the impending stock market crash would make 2008 look like a minor blip on the radar.
So... because I have so much invested in American enterprise.... I need people to keep acting stupid.. my investments, my hopeful early retirement DEPENDS on it... it's a real catch 22.
On the other side of the coin, though I am in fear that the impending retirement crisis whereby all these people who have saved nothing are going to turn things into a sob story that the media picks up and then the general free-spending public is going to make their appeal to congress for a bailout.... and they just might get it... and who's going to pay for that? The fiscally responsible... and that makes me sick.
It feels like there is no win sometimes... just have to sock as much money away and hope the irresponsible don't get those bailouts.
Random
Footballguy
That time of year again where I struggle with the decision of why should I contribute to retirement accounts. I do contribute to my 401K to get the match, but beyond that, I struggle to lock my money away for 20+ years when retirement accounts are such a small (and getting smaller to non existent) part of my retirement plan. I make far superior returns on my investment/rental properties without any constraints.
Doctor Detroit
Please remove your headgear
wilked
Footballguy
Random
Footballguy
RUSF18
Footballguy
Are you flipping those properties, getting long term rental income, or both? What are you doing with those returns you're referring to...buying more properties? I would think you would still want to build your liquidity as a safety net. But yeah I think it's perfectly fine to have the majority of your retirement assets be in real estate as long as you're not being overly speculative.
Random
Footballguy
Right now, they are all rentals. We have flipped in the past. Returns go to paying them off and purchasing more.
Random
Footballguy
Just putting it out there (again) to see if anyone has any advice I can sink my teeth into. In a way, I feel a little "guity" (?) not contributing more to retirement accounts.
Juxtatarot
Footballguy
Gawain
Footballguy
2016 Changes:
My 401K from 15% to 17%.
Wife's 401K from 10% to 11%.
(She makes more than me, so we keep our contributions about even $$-wise). At least partially fund a Roth IRA for her out of my bonus. (Mine is fully funded.) Purchase at least 1X$50 Series I bond a week. Start a 529 for our firstborn due end of April.
My 401K from 15% to 17%.
Wife's 401K from 10% to 11%.
(She makes more than me, so we keep our contributions about even $$-wise). At least partially fund a Roth IRA for her out of my bonus. (Mine is fully funded.) Purchase at least 1X$50 Series I bond a week. Start a 529 for our firstborn due end of April.
RUSF18
Footballguy
Seems like you're making this more complicated than it needs to be. Obviously it's smart to contribute enough to get your company match which is free money, so you have that taken care of. Contributing more allows you to earn money on pre-tax dollars whereas your RE investments are using post-tax money, so that's another benefit. The other is that having a sufficient amount of liquidity should always be something sought out, especially when you never want to be forced into selling a property at any point just to free up cash.
And then of course, there's that elephant sitting there that there were probably a lot of people who had a similar plan as you did 10 years ago and that went to ####. If RE is going to be basically your entire retirement plan, I would think it would be wise to have a very solid plan of slowly divesting some of those assets so you don't find yourself so concentrated.
Doctor Detroit
Please remove your headgear
Well you are saving on taxes now by using a traditional 401k, or you are using the Roth to protect that money from taxes when you retire. Another consideration is 401k money is protected in the event of bankruptcy.
wilked
Footballguy
You da man
Basically you are where I want to be. I think Roth will be tough this year for me, we are saving for an addition on the house, and I wish I had the cheddar to do I bonds right now
Rick James
Footballguy
401(k) money is protected from lawsuits. I'd wager that most people don't really need to worry about this, but since you are a landlord of several(?) properties, you are probably more likely to be sued than someone who isn't a landlord. Just a thought.
You guys are barking up the wrong tree here- Visa and MasterCard aren't the lenders.
Random
Footballguy
Valid, but we do carry a hefty umbrella policy for this reason. I know its not airtight, but baring any negligence, it should cover most situations in the unlikely event we get sued.
Chadstroma
Footballguy
I really wish that schools would add some personal finance as part of basic education. So many people have no clue. I would have been one of them if I didn't end up working in banking. Now, I give mini-crash courses in personal finance on a daily basis- and I work in an upper class area.
How are returns on rentals taxed if the "profit" is being used to pay down principal?
Dumbed Down Example
- You rent out an apt for $1000/month
- Your monthly expenses (all inclusive) are $700/month
- If you "pocketed" that $300, you'd pay taxes on it
- If you take the $300 and pay down your principal, are those $300 still taxed?
Random
Footballguy
Gawain
Footballguy
I'm not a bond guy at all, so take what I say with a major grain of salt. Series I bonds are safe, but offer very minimal return. They need to be held for 5 years to gain any real value. There's a fixed interest component and a variable interest component that floats based on the inflation index. I'm putting a small amount into the i bonds for two reasons. One, the wife and I are planning on leaving Long Island around the end of 2021 when our school loans are gone and we're completely debt free. There would be a year's worth of bonds ($2600) that we could use if needed for home improvements, but aren't liquid cash that would get spent. Second, you can use bond interest to pay for higher education tax-free. While I expect higher gains from a 529, having a little in reserve can't be a bad idea. Also, we are 100% stocks in our retirement accounts. I'd like to add a little to bonds just as a hedge. Series EE bonds pay almost no interest, but double in value in 20 years. For a long term hedge, they're not bad, but we are restricted to 10K a year per SSN.I don't know enough about TIPS, T-Notes or T-Bonds to speak on these vehicles. I am going to look at long bonds with coupon payments as a means to protect retirement income.
Juxtatarot
Footballguy
Sabertooth
Footballguy
I really need to be in this thread. Great reading fellas.
regularguy
Footballguy
TF> Part of your monthly expense though is the depreciation of the property (building, not land) so you do get that tax benefit.
Chadstroma
Footballguy
It looks like I am just about where I was in my retirement accounts as I was back in 2008. Man, I took a hit and then it took a while to get a decent paying job again. Such is life.
Jayrod
Footballguy
Taxable income <> cash flow
Due to depreciation, interest, insurance, property taxes and upkeep/repair expenses, I've never seen a rental profit turn a taxable profit in the first few years.
Depending on the interest rates, rolling your extra cashflow into either another property or other investments is usually a better investment than paying down the principal.
wilked
Footballguy
I want inflation protection in my portfolio. People aren't talking about it since we have been in a low-inflation environment for a long time, but our parents now it well, having lived through 10-15% inflation.
https://upload.wikimedia.org/wikipedia/commons/thumb/2/20/US_Historical_Inflation_Ancient.svg/2000px-US_Historical_Inflation_Ancient.svg.png
Today I have half my bonds as TIPS, but a lot of people prefer i-bonds over them. I just haven't made the effort to accumulate them yet
https://upload.wikimedia.org/wikipedia/commons/thumb/2/20/US_Historical_Inflation_Ancient.svg/2000px-US_Historical_Inflation_Ancient.svg.png
Today I have half my bonds as TIPS, but a lot of people prefer i-bonds over them. I just haven't made the effort to accumulate them yet
BeTheMatch
Footballguy
Can you buys TIPS through most online brokerages? I haven't looked. And then what length did you buy yours at? (I think that's how they work, right? Different terms on them?)
Tom Hagen
Footballguy
Loan principal payments are not deductible since loan proceeds are not taxable income.
wilked
Footballguy
I own this
https://personal.vanguard.com/us/funds/snapshot?FundId=0119&FundIntExt=INT
Average effective maturity 8.7 years
SFBayDuck
Footballguy
Looking to unload the two Target Date funds I have in two separate rollover IRAs, likely just replace with some index funds. Total newbie question, but how do the mechanics of that work? If I sell, I understand it takes three days to settle. If that's the case, does it mean I can't re-invest for three days? And if so, doesn't that take another three days to settle? And if so, doesn't that mean that money is effectively out of the market for six days?
Or is that all untrue and I can just sell and buy something new whenever I'm ready?
TIA
Or is that all untrue and I can just sell and buy something new whenever I'm ready?
TIA
BeTheMatch
Footballguy
If you're just exchanging from one fund to a different fund at the same company, it should all get done in one day - selling at end of day and then buying at beginning of next. At least I think that's the case.
DevilDog919
Footballguy
Hoping for a little help here. Have read through this for awhile, still really don't know as much as I should about my retirement savings.
I'm a federal employee, so I am using the Thrift Saving Plan. I'm 30 and don't plan on retiring until 60. Currently putting 8% of my check into a Roth, company matches 5%. My allocation is 80% into 2050 L Fund and 20% into the G Fund (Government Securities).
After reading the last several posts, it seems the 2050 L Fund is not a good choice? Also, the G fund is the most secure of the funds but also the lowest interest. Maybe thats a bad choice also? As far as I can tell, the fees seem to be the same in all of the funds. I could be wrong about that though.
Really just unsure what funds I should be getting into at this stage. Someone at work told me how to allocate funds, but I'm fairly certain the majority of you guys know alot more than he does about this stuff. Anyone familiar with the TSP and the funds able to give me a little advice?
I'm a federal employee, so I am using the Thrift Saving Plan. I'm 30 and don't plan on retiring until 60. Currently putting 8% of my check into a Roth, company matches 5%. My allocation is 80% into 2050 L Fund and 20% into the G Fund (Government Securities).
After reading the last several posts, it seems the 2050 L Fund is not a good choice? Also, the G fund is the most secure of the funds but also the lowest interest. Maybe thats a bad choice also? As far as I can tell, the fees seem to be the same in all of the funds. I could be wrong about that though.
Really just unsure what funds I should be getting into at this stage. Someone at work told me how to allocate funds, but I'm fairly certain the majority of you guys know alot more than he does about this stuff. Anyone familiar with the TSP and the funds able to give me a little advice?
wilked
Footballguy
The 2050 L Fund is a great choice. You can see what it is invested in here
https://www.tsp.gov/InvestmentFunds/FundOptions/fundPerformance_L2050.html
Basically it is:
45% Total US Stocks (basically owning most of the stock market)
15% Small Caps (think higher growth / yield potential, at a higher risk)
25% International Stocks (Good for diversifying)
12% Government Bonds
3% Corporate Bonds
At your age that is a pretty solid asset allocation.
Now, you made this 80% and added 20% G, so you are really more like:
35% US Stocks
12.5% Small Cap
20% International
30% Gov Bonds
2.5% Corporate Bonds
Most would suggest that is a little bond-heavy for your age, unless you are particularly conservative with money. Only you can answer that.
My suggestion - make it 100% 2050 L fund and call it a day. TSP funds are the best in the biz (super low cost), and that L fund diversifies you nicely.
https://www.tsp.gov/InvestmentFunds/FundOptions/fundPerformance_L2050.html
Basically it is:
45% Total US Stocks (basically owning most of the stock market)
15% Small Caps (think higher growth / yield potential, at a higher risk)
25% International Stocks (Good for diversifying)
12% Government Bonds
3% Corporate Bonds
At your age that is a pretty solid asset allocation.
Now, you made this 80% and added 20% G, so you are really more like:
35% US Stocks
12.5% Small Cap
20% International
30% Gov Bonds
2.5% Corporate Bonds
Most would suggest that is a little bond-heavy for your age, unless you are particularly conservative with money. Only you can answer that.
My suggestion - make it 100% 2050 L fund and call it a day. TSP funds are the best in the biz (super low cost), and that L fund diversifies you nicely.
Doctor Detroit
Please remove your headgear
L2050 has this breakdown:
C Fund (S&P) 44%
S Fund (Small caps) 15%
I Fund (international) 25%
G Fund (short-term govt treasuries only issued to TSP) 12%
F Fund (Barclay's Index) 3%
So you have 32% in the G fund which IMO for your age, is too much.
My allocation is 40% C, 25 S, 23 I, 7 G, 5 F and I'm ten years older. I usually only keep 5 percent in G but in this volatile market I like a little more not for security, but to be used as cash in a buying opportunity. I may then move 3 or 4 percent from G to one of the stock funds based on market movement and trends, that's my extent of market timing.
Having 7% going to Roth and the 5% match going to traditional is fine for your age, eventually as you move up in grade and get older, you may want to move some of that 7% to traditional to get the tax break now.
You're doing well though IMO, every time you get a step increase your contribution 1%. Promotion, at least 1% if not more until you get to the maximum allowed of $18k per year.
The L funds are fine if you just want to passively manage your account. The L funds are already pretty conservative with a heavy lean towards the G fund (12%, 20%, 30% for 2050, 2040, 2030 respectively), so there is no need IMO to have any more G fund dedicated to your allocation. Go with what you are comfortable with though. Ric Edleman and Dave Ramsey, two very famous financial advisers, recommend a mix of 60% C and then 40% I or S with no G or F. Find your happy medium and what you feel comfortable with, invest and prosper. gllllllll
DevilDog919
Footballguy
Thanks wilked and Doctor Detroit! Definitely didn't want to be bond heavy, I'm not really conservative, so I'll take that 20% out of the G fund and most likely just allocate it 100% in the 2050 L as wilked suggested since its also pretty close to Doctor Detroit's allocations.
DD, I do plan on raising my contributions each time I get a step increase. I appreciate the advice from both of you guys.
DD, I do plan on raising my contributions each time I get a step increase. I appreciate the advice from both of you guys.
Johnnymac
Footballguy
Man I love this thread. I have learned so much here (FFA in general).
I have my 401K through work with TIAA-CREF. I'm 53 years old and have about a 70/30 equity/bonds mix. I'm way behind the 8 ball on my retirement savings (I know, life got in the way) and felt like I needed to really go with more risk in an effort to gain some $$ in order to play catch-up. Last year when I went to re-balance I opted to go against the idea. I figure at my age I really can't afford another crash and expect to be able to gain it back.
Thoughts on this?
Also, I have a roth with Ameritrade where I basically like to buy individual stocks, although I do throw some money at a vanguard dividend ETF. Ameritrade charges $10/trade and was thinking about maybe moving it to another online brokerage. Are there better ones out there? Bad idea? I mean, I have no idea how hard or easy it is to do.
I have my 401K through work with TIAA-CREF. I'm 53 years old and have about a 70/30 equity/bonds mix. I'm way behind the 8 ball on my retirement savings (I know, life got in the way) and felt like I needed to really go with more risk in an effort to gain some $$ in order to play catch-up. Last year when I went to re-balance I opted to go against the idea. I figure at my age I really can't afford another crash and expect to be able to gain it back.
Thoughts on this?
Also, I have a roth with Ameritrade where I basically like to buy individual stocks, although I do throw some money at a vanguard dividend ETF. Ameritrade charges $10/trade and was thinking about maybe moving it to another online brokerage. Are there better ones out there? Bad idea? I mean, I have no idea how hard or easy it is to do.
wilked
Footballguy
Johnnymac, don't shift your portfolio to equities in an effort to 'catch up', this is the gambler who heads back to the ATM after he lost his 'max betting amount', in an effort to recoup his losses.
At 53, you have time, focus on increasing savings, consider working a little longer if needed. What are your total assets saved at this point?
At 53, you have time, focus on increasing savings, consider working a little longer if needed. What are your total assets saved at this point?
Johnnymac
Footballguy
The thought of working until the day I die is not a pleasant one. Unfortunately it may be a reality in my case.
Johnnymac
Footballguy
Well, I have roughly $120,000 in my 401K, another $5,000 in a supplemental plan through my employer, and around another $3,000 in my Ameritrade acct. I have only had the brokerage acct for about 18 months.
Was not going to go 100% equities but I admit I considered it. When I re-balanced last year I actually moved more conservative.
Johnnymac
Footballguy
I am a homeowner, about 90 grand left on my mortgage. No pension and I'm 53. So you can see I have a ways to go.
I get a 200% match on my 401K. I work for the state which takes out 5% of my pay per month to contribute to my 401K. The state doubles that each month (10%).
matuski
Footballguy
Binky The Doormat
Footballguy
When do you expect to retire and how much is your expected pension?Johnnymac said:
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