dickey moe
Fingerpicker
Dave has a lot of good recommendations, but his approach is too simplified in some areas. Agree that you have to take the employer match.
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PBS Frontline : The Retirement Gamble, sorta Must See (1 Viewer)
- Thread starter Smack Tripper
- Start date
Doctor Detroit
Please remove your headgear
How so? If you mean that paying off only debt at the "expense" of everything else, then I agree. But I think his general approach is on point, it's just that he's a bit too stringent in staying within the lines. Interested to hear your thoughts on this though.
I know I'm not buying a new car for ten years. I leased one last year after a car accident totaled a car I had just paid off, and I've been off course ever since. Really hard to find decent used cars in my area though under $10k, but I'm gonna buy the car when it's over and then sell it to get my initial down payment back (because it'll be three years old with 36k miles, worth way more than the turn in value). Sorry, tangent...carry on.
If I'm not mistaken, he recommends paying of the debt that has the smallest outstanding balance...even if another debt has a higher interest rate.
Doctor Detroit
Please remove your headgear
Yeah you're right. Agree, that doesn't make a whole lot of sense either does it? I have one fairly high APR card and they won't lower my rate, so I'm paying that off and canceling it. I have another with more money on it, but it's 6%. I don't have $20k in CC debt either, but anything over $3k starts to get me nervous. I went a long time carrying almost no CC debt, I liked those days.
Read this before you cancel - http://www.fool.com/personal-finance/credit/dont-cancel-that-credit-card.aspx
Sand
Footballguy
Everything he does is about psychology rather than absolute dollars and cents. Paying something off gives people a feeling of accomplishment and helps them stay on track. Laying out simple rules for getting debt done first, then an emergency fund, then investment, etc. is again tailored to keeping people in line. His advice is great for people who have no financial sense and little self control - it gives an order to the chaos. For those with a modicum of both it makes sense to be a bit more sophisticated with the decision making.
fatguyinalittlecoat
Footballguy
I was under the (maybe mistaken) impression that it would better for me when applying for new cards to cancel an old card or two. Is that clearly wrong? I'm not a huge fan of any of my three current credit cards.
Per the article: "Why cancel cards at all? It may sound like the lending industry loves customers who have gobs of plastic, but as with most things, it's best not to binge. According to Fair Isaac, once you acquire more than seven revolving debt accounts, your FICO credit score begins to suffer a little. And while simply closing accounts won't necessarily have an immediate positive effect, over time it could boost your credit score. So let's see if it's time to break up with some of your banks."
For me personally, I have 3 cards. Any spending all gets paid off in its entirety each month
1. My primary card (Visa) - 95% of my spending goes to this
2. Secondary card (Amex) - 5%
3. Card I don't use (old Visa) - never use this, just don't cancel it for reasons stated in the article
I can't forsee a reason why I would ever get a new card...thus never cancelled the oldest one
Sand
Footballguy
Lots of rewards cards out there to harvest if you have good credit scores. That and ones do pop up that are simply better offers than other cards on a permanent basis - I use my Fidelity Amex for everything but groceries and gas. 2% cash back on everything adds up quick.
Steve Tasker
Footballguy
I also have an old credit card that I barely use that I haven't cancelled. I've got 3 recurring transactions that go onto it per month for a total of like $40. I don't see any good reason to close it though for the reasons noted above.
fatguyinalittlecoat
Footballguy
Thanks all. I guess my question was whether it will have an impact when getting a new card. Right now I have three credit cards, I think combined they probably give me a $75,000 credit limit, theoretically. Unfortunately we do have some credit card debt but nowhere near those limits.
In my uninformed mind, I was thinking that if I applied for a new card, the credit card company would be reluctant to extend me credit because our combined limit seems pretty high. I thought that if I cancelled a card or two I would be better off because the new card company would see that I couldn't run up more debt than I could handle. Is that just totally wrong?
In my uninformed mind, I was thinking that if I applied for a new card, the credit card company would be reluctant to extend me credit because our combined limit seems pretty high. I thought that if I cancelled a card or two I would be better off because the new card company would see that I couldn't run up more debt than I could handle. Is that just totally wrong?
My philosophy is pick the 2 best ones that suit you and don't revisit every time you see a good promotion.
Shadowfax
Footballguy
I think you are just totally wrong. Part of your FICO score is based upon age of credit so keep your cards. Another part is on credit utilization (total balances/total limits) and the lower the better. A higher CU ratio could mean that you might be having financial issues, higher risk of over extension which could lead to trouble making future payments, etc. All this causes lenders to be reluctant to issuing you additional credit.
I don't know what the magic utilization % should be but I have heard you should never be above 20% and 1-10% is best. So closing a card could dramatically increase your %....if you carry balances. If you use CC and pay them off every month, that's the best. If you don't use them at all, it won't hurt you but it won't help you either. So don't close them, use them every now and then so the lenders don't close them.
Ted Mullins
Footballguy
Yeah, I think the snowball thing is meant as a psychological incentive - you pay off that smallest debt first so you feel like you are getting somewhere...I suppose that could be beneficial if you are way behind but doesn't make sense IMO. I have a small student loan at 2.5% and a larger one at 5.8%. I'd never pay extra on that 2.5% loan before paying off the other one or putting money into investments. He also seems to promote actively managed mutual funds over indexes, which seems to be an unpopular opinion. However, a lot of the spending/debt stuff he recommends seems good to me.
Doctor Detroit
Please remove your headgear
Sorry for getting off track a bit. Let me close that sidebar by saying I will close that card because it has a $85 annual fee and a 15% APR which they are not willing to budge on. I don't care how it impacts my credit, I have great scores and I really can't think of anything I absolutely need to buy on credit in the next ten years.
Decent recent Time Magazine article here:
2030, the year Retirement Ends
A few good facts in here and some background on the California Secure Choice Retirement Savings Program, which is something more states are going to try to employ.
I don't think the article is designed to frighten people, but does anyone here who has been involved in this conversation from the beginning believe that there won't be a slew of poor elderly folks when we are in our 60s? And why aren't we moving the social security age back? Anyone turning 18 this year should be at least 72, I'm fine with getting mine at 70. FIX IT!
Decent recent Time Magazine article here:
2030, the year Retirement Ends
A few good facts in here and some background on the California Secure Choice Retirement Savings Program, which is something more states are going to try to employ.
I don't think the article is designed to frighten people, but does anyone here who has been involved in this conversation from the beginning believe that there won't be a slew of poor elderly folks when we are in our 60s? And why aren't we moving the social security age back? Anyone turning 18 this year should be at least 72, I'm fine with getting mine at 70. FIX IT!
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Sarnoff
Footballguy
Agreed. I'm convinced the only way to fix Social Security is a staggered rollback on ages. If you're over 40, no change. 35, you have to wait another year. 30? 2 years more. 20? 3 years more. Anyone under 18 now should be in the 70s.
FUBAR
Footballguy
Just remember he's selling to the masses of ignorant people who need simple rules. And he probably can't get into the gray too much, as people will hear "he said its okay to invest in X before paying off debt, so I'm going to invest in Y too" people tend to find ways to justify bad decisions and he doesn't want to encourage anything that could be misapplied.
Ted Mullins
Footballguy
Bloomberg article about best/worst retirement plans at some of the larger companies -
http://www.bloomberg.com/news/2014-07-22/conocophillips-best-among-401-k-plans-with-facebook-last.html
some of those 401K plans are amazing...ConocoPhillips with a 900% match on the first 1% contributed!
http://www.bloomberg.com/news/2014-07-22/conocophillips-best-among-401-k-plans-with-facebook-last.html
some of those 401K plans are amazing...ConocoPhillips with a 900% match on the first 1% contributed!
mquinnjr
Footballguy
Do they also offer a defined benefit pension though included? Not many big companies do any more, and that makes a massive difference which needs to be laid out in the table. Big companies have recently killed their defined benefit pension plans, and shifted those monetary contributions to defined contribution plans (401k's) via increasing the match percentage. Pensions are a massive cost to a large company that offers them, and they are on the hook to "true-up" the employee based upon the plan document defined benefit pension amounts as an annuity, no matter how the plan assets invested do. Killing the pensions and shifting the funds to a defined contribution account saves the respective companies a ton of money, and also shift the burden of investing that money in funds and dealing with the investment gains/losses to the individual employees.
So, this is flawed without representing the companies that still offer defined benefit pension plans in combination with a defined contribution 401k match.
Dentist
***Official FBG Dentist***
thanks for sending that article. enlightening read.
You're going to be seeing more and more articles like this now.. and then you're going to see it play out in front of our eyes over the next 20 years.... and unfortunately for rich FBG's... I feel like they are going to be coming for us... the people that put away as much as they legally could trying to do the right thing.
A few things I took away from the article:
California retirement plan kind of scares me... on one hand I think it's well known that if you don't force someone to do something that the odds are they won't do it... which is why the 401K and Roth IRA system aren't going to work for so many people. Even intelligent people I know who make a decent chunk of money won't bother reading just ONE good book on personal finance and investing and then execute the strategies they read... and then even if they DO they don't have the discipline to stick with the plan. This doesn't even begin to touch upon the people that don't know the S&P 500 from the Daytona 500 and who think Large Caps are when a dentist puts crowns on your teeth that are too big.
Financial prospectus's are admittedly too long and the language used in them is far above the average reading level.... I can't imagine trying to adequately come up with a good financial plan if I was stupid and or struggled to read well like many of the bottom 50%... which takes me to my second point.
To come up with a government based 401k/ira style system means taking on some of the wealthiest companies in America in the financial services industry... good luck with that. I would enjoy seeing the mutual fund industry and their loaded fees and active management that doesn't work (in most sectors) die a fast and painful death... but I can't see it... there's too much money at stake.
Anyway... it will be interesting to see how things shake down... but the news is going to sensationalize a lot of stories of the poor elderly in our society and talk about how the system failed them rather than the fact that they made a SLEW of poor financial decisions and didn't save properly in the vehicles that were available to them in their working years.
Sand
Footballguy
dickey moe
Fingerpicker
Not to mention the completely unrealistic assumptions on annual returns assumed for these pension funds.
Ted Mullins
Footballguy
This is a fair point - I evaluated the 401K article vs my current employer's offering. I guess as a "millenial", I have never even really considered the possibility of getting a pension outside of some government positions.mquinnjr said:
It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
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Doctor Detroit
Please remove your headgear
So what would most people think about personal tax rates over the next 30 years?
Less than now
About the same
Higher than now
I have been reading some stuff saying that it probably will stay about the same short-term, but could rise in 20 years or so given all the variables. I think it's an interesting conversation.
Less than now
About the same
Higher than now
I have been reading some stuff saying that it probably will stay about the same short-term, but could rise in 20 years or so given all the variables. I think it's an interesting conversation.
Sarnoff
Footballguy
I like how California guaranteed results for teacher pensions. "Oh, the stock market didn't return 10% this year? I guess the taxpayers will make up the difference!"
Doctor Detroit
Please remove your headgear
Yeah, I went through the details of Detroit's pension system and those of a couple of smaller towns in Michigan and it was the same story. Not sure who is to blame but how they got away with designing them in that manner is obnoxious. The federal government's system has a surplus, because there are no back room deals going down or palms getting greased.
Paying 2 and 20 while underperforming the market puts you in a big hole. Not to mention that pension funds end up in the worst investments because they are less sophisticated. It is a big problem.It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
mquinnjr
Footballguy
Yeah if any companies out there still offer pensions, it's the subset in the linked article. If you include pensions, it would catapult any of those companies that have one to near or at the top of the list.
So everything would be rosy if they took their small allocations (those which have any allocation that is) in alternatives and put it in the stock market? The reason they added alternatives in the first place is because they under fund the plans, and then we had two market crashes and pathetic bond/cash rates.Paying 2 and 20 while underperforming the market puts you in a big hole. Not to mention that pension funds end up in the worst investments because they are less sophisticated. It is a big problem.It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
It's a minor issue, but far from the cause or solution.
Doctor Detroit
Please remove your headgear
Judge Smails
Footballguy
If you have a separate 100+K to roll over into an IRA vehicle - where would you put it and why?
Dentist
***Official FBG Dentist***
"ConocoPhillips estimates that an employee could retire at 60 after 35 years of service with savings of $3.8 million, adjusted for inflation, assuming a starting salary of $75,000 and increases of 4 percent a year."Ted Mullins said:
Yowsa. Good lord it would awesome to be 25 years old making 75k a year in Houston where the cost of living is nothing. I made barely half that at that age. And LOL at 4% raises every year, I need to get into Energy!
Setting aside your fondness for strawman agreements, a quarter of AUM is hardly small allocation. It has a material impact even if it isn't the largest one.So everything would be rosy if they took their small allocations (those which have any allocation that is) in alternatives and put it in the stock market? The reason they added alternatives in the first place is because they under fund the plans, and then we had two market crashes and pathetic bond/cash rates.Paying 2 and 20 while underperforming the market puts you in a big hole. Not to mention that pension funds end up in the worst investments because they are less sophisticated. It is a big problem.It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
It's a minor issue, but far from the cause or solution.
Sand
Footballguy
Sadly I don't have the 500k to diversify in Cambria's smallest account size. I love Faber's ideas and he is able to leverage bond yields high enough at a low enough cost to effectively run the model he uses. No way for a small guy to lever up like that. One of those cases where the big guy can do something that the small fry simply can't do.It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
I'd say close to the same. I don't think the public has much more appetite for higher rates.
The fees are a small part of that minority allocation, and I already pointed out that they only fairly recently began investing in those instruments to diversify and change their risk profile.Setting aside your fondness for strawman agreements, a quarter of AUM is hardly small allocation. It has a material impact even if it isn't the largest one.So everything would be rosy if they took their small allocations (those which have any allocation that is) in alternatives and put it in the stock market? The reason they added alternatives in the first place is because they under fund the plans, and then we had two market crashes and pathetic bond/cash rates.Paying 2 and 20 while underperforming the market puts you in a big hole. Not to mention that pension funds end up in the worst investments because they are less sophisticated. It is a big problem.It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
It's a minor issue, but far from the cause or solution.
If you now admit that it isn't the largest factor, why is it the only thing you mentioned in your post? Oh, that's right, because it pushes your narrative that "greedy wall street" is the root cause of all problems, including pension shortfalls.
Okay, but we're talking about pension funds here.Sadly I don't have the 500k to diversify in Cambria's smallest account size. I love Faber's ideas and he is able to leverage bond yields high enough at a low enough cost to effectively run the model he uses. No way for a small guy to lever up like that. One of those cases where the big guy can do something that the small fry simply can't do.It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
Sand
Footballguy
Sorry - I guess I shifted in personal investment stuff. Pensions can obviously afford to get into these vehicles.Okay, but we're talking about pension funds here.Sadly I don't have the 500k to diversify in Cambria's smallest account size. I love Faber's ideas and he is able to leverage bond yields high enough at a low enough cost to effectively run the model he uses. No way for a small guy to lever up like that. One of those cases where the big guy can do something that the small fry simply can't do.It's more of a diversification tool, but either way it's far from the main reason why pensions are in trouble.
Judge Smails
Footballguy
Open. I have my main IRA with my brother in law in a managed account at Wells Fargo. Rates of return have been good. Hard for me to totally comprehend fees though. Pay for X, but get Y off for amount in there, how long, etc. Probably won't switch it, as he does give me good advice, but I don't just want to automatically roll another decent sized sum into it without considering other options. Like directly into a Schwab/Fidelity/Vanguard low fee index fund based IRA, etc. Don't have to have all of my eggs in one basket. My managed fund is pretty well balanced. Age weighted, suited to my risk tolerance levels, growth but also some other plays if the market turns south (short funds, etc). Just not sure what to do with this rollover amount.
xulf
Footballguy
I think this is impossible to predict. I have a ROTH option for my 401K and just started putting 60% of my contribution into it and 40% into my pre-tax. I am in a little bit of a different situation because my wife just quit her job to go back to school so our total income this year and next are going to be lower than the following years. I am trying to get some better distribution of pre-tax and post-tax to allow for non-taxed flexibility of withdrawing later.
Predictable. The next time I read a response from you where you don't erroneously attribute what I think will be the first.
I think it's very likely that taxes are higher, although it doesn't have to be in the form of higher rates necessarily- changing the brackets, fewer/less generous deductions and credits, higher state and local rates, more "fees", etc.
I agree that the public doesn't have much more appetite for higher rates, but that's generally only if it means higher rates for them personally. If the choice is cutting services for them or raising rates on others, it's pretty easy.
Great job explaining why you chose to post about something way down on the list of reasons why pensions are in trouble.Predictable. The next time I read a response from you where you don't erroneously attribute what I think will be the first.
It isn't way down my list. It is a serious issue that isn't getting enough coverage due to the complexity/opacity of the alternative investment and pension industries.Great job explaining why you chose to post about something way down on the list of reasons why pensions are in trouble.Predictable. The next time I read a response from you where you don't erroneously attribute what I think will be the first.
You're obviously not interested in discussing it and explaining it or myself to you would be a waste of time.
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