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PBS Frontline : The Retirement Gamble, sorta Must See (1 Viewer)
- Thread starter Smack Tripper
- Start date
Judge Smails
Footballguy
Binky The Doormat
Footballguy
Yeah Judge, isn't clear. I would think they would want +/- 1% management fee. The last financial advisors I had used the Wells Fargo Compass program (builds an all-stock portfolio). My market index funds outperformed it - 3 years running. #### those guys.
That's good. A lot of CFAs think they can beat the market or deliver lower risk. Don't listen to them
Random
Footballguy
Its not that good anymore. Still good, but not like a few years ago. And some of them needed extensive work.
Seriously one of the things I really don't get. I just looked up your zip. $700K for the cheapest property listed. There are 18 under $50K here (one listed at $6K). Blows my mind people pay that much for "nice weather" and "views" and whatnot. Not a jab at you at all, but I dont understand how (normal salaried) people make it in those areas.
FUBAR
Footballguy
Sure, your point reflects a failure to plan - unless I'm missing where all asset classes have fallen that severely at once. Which is why I asked if it's happened.
FUBAR
Footballguy
That's nuts. Seriously? If you're able to recoup the buying price with one or two years of rent, that seems an easy decision. I'd be curious to see the risk analysis and wonder why others haven't driven up the prices.
Random
Footballguy
I honestly have no idea what this risk analysis is you speak of. I mean, we know what areas of town to stay out of. We generally know who not to rent to (occasionally we get bad tenants, but we are generally 100% occupied). Prices have gone up since the 2010-2014 days, but we can still pick up some good deals here and there. The realtors (and some LLs looking to get out) know who we are and will call us if they need a quick sale.
Just this past December, we looked at a LLs entire portfolio (10 duplexes). He didn't take care of his properties, so they sat on the market for 6+ months without any offers. $70-$90K list price for each of the duplexes. We made an offer for all of them, very much under asking, but about what they were worth in the condition they were in. He balked. We ended up getting the two best ones (with tenants) for $60K total. They rent for $2025/mo total. I really have no idea why he sold.
But in all honesty, this cannot be looked at the same way you guys look at investments. Its a part time job. And sometimes its very stressful. I had 2 evictions last month (but only 4 others in the 8ish years of doing this).
Steve Tasker
Footballguy
You can buy houses for literally $1 here sometimes on city foreclosures. I think you have to submit detailed plans to commit to $x dollars of guaranteed renovation costs though, and they're always absolute gut-jobs in the middle of the worst neighborhoods on the city. You also have to use the house as a personal residence, not a rental, for at least 3 years. Pretty neat program. CNN article.
FUBAR
Footballguy
The only thing that's been holding me back from getting into rentals is that I think you're much better off if you live nearby and can do some work yourself. Plus knowing the area has to be key. By the time we've been in an area long enough to know where to avoid, where to buy, and find deals, we move. That's changing now, so we'll keep an eye out.
I forget if you mentioned it, but can you make these investments with Roth funds? Something like forming an LLC to own these buildings and investing in that LLC with your Roth?
Chadstroma
Footballguy
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Zegras11
Footballguy
first bold - highly recommend this.
I'm a RE agent now. I did a deal last year where my client had his IRA actually buy the property and his IRA owns it. If that's what you want to do, let me know if you want more info. If you want to use/borrow the funds and own it outside an IRA, I'd talk to a CPA
CR69
Footballguy
Having an income producing rental property inside a Roth IRA is not a good idea imo. You're basically using a tax advantaged account to hold a vehicle that already has several tax advantages. Better to use them for flipping properties where you can shelter the profits instead of paying short term gains.
Zegras11
Footballguy
I'm not sure if my client had them in a Roth IRA or not. For him, he could not take the funds out now unless he took the penalty and paid the tax. There are not many lenders that make IRA RE loans. The one we found required a 15 yr loan, 40% down, as his has to be non-recourse. With his age at 44, the scenario of buying was actually best for him. He can sell them when he's 59.5 and they will be paid off. We figured he'll make 12-17%/year before taxes and that's not including any rent raises.
SFBayDuck
Footballguy
No doubt, I'm living in one of the five most expensive counties in the entire country. I live in the cheapest city in the county, and you are correct that $700K is pretty much the starting point for anything here. Sucks. My ex-wife and I got ourselves caught right in the middle of the mortgage crisis last decade, and I've been renting ever since. I will move away from here when I can (when daughter graduates high school - I have split custody so not going anywhere until then), back up to Oregon which is much cheaper but still nothing like the market you're describing.
The concepts of middle class and wealth are so skewed in an area like this, it's ridiculous. Hedge fund guys and tech executives abound, and all of the ex-wives I know around here (other than mine!) make more than I do just in yearly alimony and complain that they're stuck in a $1.2M 3-bedroom bungalow (that their ex paid for) while ex-hubby has a $5.9M Italian style vila up on the hill (these are just examples in the town I used to live in, although the story is real again and again). In 99% of the country my compensation would be upper middle class, and here I'm scraping by and happy I've been able to contribute what I can to my 401K and trying to keep my credit card debt low. It's frustrating to not be able to max out my retirement, have no debt, and have a nice fat emergency fund, but between rent, everything else being expensive ($65-$85 is pretty much "dinner for two" out, which is why we rarely do that), alimony, child support, etc, you do what you can to stay afloat. I've run the numbers on the difference between the max contribution and what I'm doing and what that would look like at 65 and that's when it gets real depressing - really missing out there on the compounding over the next 20 years. But it is what it is for now, so I'm doing the best I can.
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ghostguy123
Footballguy
This is actually what concerns me. Not everyone can do well investing, so I worry that somehow someone of high power figures out a way to screw people who invest this way with people flocking to index/passive funds. Something like taxing earnings in 401Ks and 403Bs or some crap. Or a higher tax percentage when withdrawing from one of these accounts. Something dumb that makes it a lot less lucrative long term.
ghostguy123
Footballguy
Random/Getz.......with all your rentals do you have a property manager who takes care of everything (or maybe most things) for you?
I am just wondering what the cost of a true property manage would be for multiple properties. Someone who fields all calls and takes care of getting things fixed (barring something major of course).
edit..............meant to ask this in the landlord thread, my bad, though people might be interested in knowing
I am just wondering what the cost of a true property manage would be for multiple properties. Someone who fields all calls and takes care of getting things fixed (barring something major of course).
edit..............meant to ask this in the landlord thread, my bad, though people might be interested in knowing
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FUBAR
Footballguy
Understood, but what if the Roth is the only pile of money you have available for this purpose? Other than the kids' educational IRAs which I wouldn't use for this purpose.
I can't use my TSP in this manner and don't have sufficient funds to purchase a rental property outside the Roth (or TSP). If I could use the Roth, mine has enough for a small house or maybe a condo, my wife has enough for a nice(ish) house or two cheaper places.
Another thought (and it really is just a thought), if we could pool Roths, we could buy a beach house to rent out as an investment and occasionally rent from ourselves.
Buck Bradcanon
Footballguy
Zegras11
Footballguy
I have a prop mgr that lives on site. She takes care of everything. When we just had the 3 and 4 units, we had two handyman that took care of everything
ghostguy123
Footballguy
Oh yeah you have one huge building dont you.
Sand
Footballguy
On the campaign trail there has been lots of talk about a .5% transaction tax on stock trades. If this were to come to pass it would dramatically raise the cost of these vehicles (due to both the cost of the tax and the spread increase the illiquidity would produce).
mquinnjr
Footballguy
Sand
Footballguy
I'm trying not to make this a political thread (we certainly have enough of those and I'm as guilty as anyone in indulging. Ok, maybe less than Tim...). I just wanted to point out there are items out there that may raise the cost of passive investing.
mquinnjr
Footballguy
Objectively, taxing investment activities makes my blood boil. Staying within the lane of just investing so as to keep the thread on point, a tax of this nature would discourage saving where a good chunk of the population presently couldn't be bothered to save for retirement (or even non-retirement investments), no matter how you lean on other political topics.
To add, I'm socially moderate to slight left leaning, fiscally very conservative. Not a big Pres. Obama fan in general, but couldn't have been happier with how he handled the Fiduciary Standards rules for financial advisors to act in the best interest of their clients vs. putting them in the highest commission vehicles. Huge step for American investors in the right direction.
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ghostguy123
Footballguy
Yeah, it just seems like there is no way that the powers that be would allow some huge majority of people to just sit back and collect good gains on passive investments forever, especially not when the masses are flocking to it. We just have to home they only screw with it a little and not a ton.
wilked
Footballguy
Fee only, but they have to manage your money and take a percentage of it?
Skip the advisor, post your assets / portfolio here (or better yet, bogleheads.org), do it for free
Chadstroma
Footballguy
For directly held money such as an IRA or just money invested- there is nothing much that can be done. For plans administered on the behalf of employers, it is all about how driven your employer is to protect you as an employee and give keep costs down. Other than that the only way that they can get to you is through taxation as was brought up.
Yet another reason for FairTax.
Binky The Doormat
Footballguy
RUSF18
Footballguy
If you're living off withdrawals, your portfolio shouldn't take a "wallop" due to a stock sell off because you shouldn't be anywhere near that exposed to the swings of stocks. Hence "failure to plan".
Binky The Doormat
Footballguy
I got it RUSF.
FUBAR got off on a tangent on a point I made about the difficulty of making up losses when you are drawing and no longer working. I used the example of "if you lost 50% - just remember, just have to now gain 100% to get back to where you were."
FUBAR's tangent was "if you planned appropriately, you won't be 50% down ...just 38%."
OK.
Who would try and argue against appropriate financial planning? And whether you lose 38%, 25% or even 10% - it doesn't change my point about it being more difficult to come back when you aren't adding to the portfolio.
Binky The Doormat
Footballguy
FUBAR
Footballguy
The 38% number was in response to your using 2008 as an example of a 50% loss. If you were near retirement and planned appropriately you wouldn't have been down 38% either.Binky The Doormat said:
My original point was simply to refute the comment that someone near retirement would have to gain 100% to make up losses of a stock market crash.
In the end, our points aren't that far apart here; when you approach retirement, don't put all your investments in one class.
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SFBayDuck
Footballguy
It's probably been discussed in here, but with the recent talk about increasing diversification and adjusting your equity/bond ratio as you near retirement, I figured I'd get people's thoughts. Does the Bogle "your age in bonds" allocation rule-of-thumb seem reasonable to people?
I'm 43, figuring 65ish retirement so 22 years to go, and I'm at about 5% bonds. One of my 401K funds is about 10% bonds (and slowly rising, it's a Target Date fund), while the other investments I have are prior 401Ks rolled into IRAs (mostly index funds) that are 100% equities. So my bond allocation is slowly going up as I continue to contribute, but I currently don't have plans to re-allocate significantly any time in the next several years. Of course with the above discussion of the cost of living in my area and how I'm unable to max out my 401K I'm willing to be aggressive for now to try and make some of that up.
I'm 43, figuring 65ish retirement so 22 years to go, and I'm at about 5% bonds. One of my 401K funds is about 10% bonds (and slowly rising, it's a Target Date fund), while the other investments I have are prior 401Ks rolled into IRAs (mostly index funds) that are 100% equities. So my bond allocation is slowly going up as I continue to contribute, but I currently don't have plans to re-allocate significantly any time in the next several years. Of course with the above discussion of the cost of living in my area and how I'm unable to max out my 401K I'm willing to be aggressive for now to try and make some of that up.
NutterButter
Footballguy
Too conservative for me. 120-age is stocks. Rest is bonds. And I'm not going anywhere near bonds until I'm 10 years out from retirement at which point I plan to follow that formula provided we aren't in the midst of a market crash.
Judge Smails
Footballguy
May do that. I see your posts and know you and others are way better at this than I am.wilked said:
FUBAR
Footballguy
That's pretty close to our plan. I view bonds as a defensive tool, along with insurance, any pension and owning your home outright. At this point in our life, insurance is our primary defense. Eventually the other three will gain prominence.
Our retirement accounts are about 2.5% bonds right now but we have more in our near term (about a year out) account and kids college accounts. ETA: I'll probably move more into bonds in the next few months, around 10% seems right. But that's largely because we have a decent pension.
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mquinnjr
Footballguy
In my 401k I do 20% bonds, 20% company stock, 60% Russel 3000 index. 20% bonds is a hedge against the 20% company stock (JNJ), and the other 60% is a mix of 3000 stocks so I'm good with that, even though 20% in bonds would be viewed as too conservative at 32 years old. Whatever works for you really, following at least loosely the tried and true passive investment axioms.
wilked
Footballguy
last one... Increasing risk (i.e. Stocks) because you are 'behind' on savings is akin to the gambler increasing his bets because he is down (I'll back off my bets once I recover my losses). It's not a smart move or winning formula.
For or the investor behind on savings, better to focus on how to save more and preserving what you do have, vs risking more in the hopes of higher return
For or the investor behind on savings, better to focus on how to save more and preserving what you do have, vs risking more in the hopes of higher return
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Regardless of your age, if have 20 plus years until retirement, you should be at least 90% stocks....imo.
You will have time to recover if the market goes in the pooper for a little bit.
I'm about 20 to 25 years (hopefully) until retirement and I'm about 95% stocks at the moment.
You will have time to recover if the market goes in the pooper for a little bit.
I'm about 20 to 25 years (hopefully) until retirement and I'm about 95% stocks at the moment.
FUBAR
Footballguy
agreed, but you should have a plan to get that allocation closer to 50/50 over those 20 years.
wilked
Footballguy
We've enjoyed a nice 8 year 'run-up' in equities, so it's not surprising that many are pro-equity right now, advising 90+ percent
http://finance.yahoo.com/echarts?s=^gspc+interactive#{"range":"max","allowChartStacking":true}
Back in 1999/2000 you couldn't find anyone advising bonds as well. And sure, we've recovered from the dips, somewhat quickly overall. But it doesn't mean the next one will be like that. There's nothing to say that the next 20 years don't look like this
http://finance.yahoo.com/echarts?s=^N225+Interactive#symbol=^N225;range=my
And should it look like that, you are going to wish you had diversified instead of being 95% equities. Just recognize that there might be some recency bias in your gusto for exposure to risk / equities.
http://finance.yahoo.com/echarts?s=^gspc+interactive#{"range":"max","allowChartStacking":true}
Back in 1999/2000 you couldn't find anyone advising bonds as well. And sure, we've recovered from the dips, somewhat quickly overall. But it doesn't mean the next one will be like that. There's nothing to say that the next 20 years don't look like this
http://finance.yahoo.com/echarts?s=^N225+Interactive#symbol=^N225;range=my
And should it look like that, you are going to wish you had diversified instead of being 95% equities. Just recognize that there might be some recency bias in your gusto for exposure to risk / equities.
NutterButter
Footballguy
i knew that post was coming
Exactly....you go back to 1999, which is 17 years ago. You proved my point, actually twice.
20 years is enough time to recover from a dip in the market.
