PBS Frontline : The Retirement Gamble, sorta Must See (2 Viewers)

[bushdocda]

Not sure how I missed this. I work closely with senior housing and the income profile of the senior demo is in some cases over 3/4 from SS and pensions. Now that could be that investments weren't prioritized bc they had these streams to rely on but generally the next generations retiring won't have this luxury and better be saving their asses off.

:captainobvious:

 

[culdeus]

Not sure how I missed this. I work closely with senior housing and the income profile of the senior demo is in some cases over 3/4 from SS and pensions. Now that could be that investments weren't prioritized bc they had these streams to rely on but generally the next generations retiring won't have this luxury and better be saving their asses off.

:captainobvious:

Lets just say hypothetically you have a workplace that pays you a 100% match on 4%. At 50k salary you are now looking at a 401k balance of roughly 150k in deposits and maybe another 100k in appreciation. And that assumes people haven't pulled off loans from it all that time, etc. etc. and don't do what many do which is sock it in all cash. "Because I don't trust the markets"

There are going to be some seriously poor people, or people that work to death. Luckily, the obesity problem will kill far more than smoking ever dreamed of killing.

 

[wilked]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

what other debts do you have?

950 in a signature loan, paid pretty much all the interest on this as the early payoff option is 983. Monthly payments are 160.430 capital one card, ~12% interest (Its close to that anyhow) 25 min monthly payments

4500 salie Mae student loan, early pay off is at 3800, was originally 7k, monthly payments are 140

16k car loan was originally 19k, monthly payments are 350

~15k student loans, federal differed ATM

Rent, 1100 a month, lease is up in June

You need to add interest rates.

I would try to wipe out the top 2 this month (prioritize them). From there, will need interest rates on the $4.5k, $16k, and $15k. How long are the student loans deferred for? Before you get too excited about prioritizing investment you will likely be best served wiping out your debt.

 

[Spin]

Current situation: I'm 28, and currently contributing 6% to my 401k offered through work which matches 100% on the first 3% then 50% on the next 2%. I have it setup to increase this 1% each year (when I get a yearly merit increase usually around 3-5% even if I don't get a promotion) So I'll continue to contribute and won't notice the difference.

I have plans to make this a bit more aggressive but we have some debt we need to pay off first, as well as saving for a house.

I wasn't sure which group to be investing in, so I asked the guy who sits behind me (he's a director at the company and sounds like he has a much better idea about what is best then I do), and he recommended the current one I have 100% of my money into.

Here are my current investment options, curious if you guys agree with him or I should be moving it into another fund/account.

http://postimg.org/image/qzfpk68rt/

what other debts do you have?

950 in a signature loan, paid pretty much all the interest on this as the early payoff option is 983. Monthly payments are 160.430 capital one card, ~12% interest (Its close to that anyhow) 25 min monthly payments

4500 salie Mae student loan, early pay off is at 3800, was originally 7k, monthly payments are 140

16k car loan was originally 19k, monthly payments are 350

~15k student loans, federal differed ATM

Rent, 1100 a month, lease is up in June

You need to add interest rates.

95

I would try to wipe out the top 2 this month (prioritize them). From there, will need interest rates on the $4.5k, $16k, and $15k. How long are the student loans deferred for? Before you get too excited about prioritizing investment you will likely be best served wiping out your debt.

Yah, no way I'd be able to pay them off this month, maybe in February, but doubt that as well. Our "extra debt" cash is going towards capital one atm, then we'll apply that to signature loan and pay that off early as well. If we stick to current plan, we'll have both of them paid off in 4 months. From there our goal was to pay off the Salie Mae which would be paid off in another 7 months, then work on the car loan, then student loan.

Student loans are deferred til July.

Yah, the plan was to get out of debt then up our retirement to 10% of my check. I was just making sure my current fund was the right one, or if there was a better option.

 

[inca911]

Super newb question.. My company doesn't match, they just simply give a certain percentage (3 or 4% I think) towards 401k. I do another 4% on top of that. But from a couple of the posts above it sounds like rather than contributing towards the 401k account I've had for quite some time, I would be better off using that money towards a Roth IRA? What is the difference between the two, just that Roth is more flexible in regards to withdrawing it if I need it?

Generally speaking, I would contribute to the Roth IRA and not the 410(k) in this instance, until the Roth IRA is fully funded. Just switch to automatic contributions to a Roth IRA and you won't see any day-to-day difference. Vanguard is where I have mine.

Roth IRA 101:

• Can get principle out anytime for any reason, no penalties. Huge advantage over 401(k), especially in emergencies since this is a savings account if you want it to be (until you get a cash reserve, typically conservatively invested). Note that if you pull $ out, you can't put them back in.
• $ going in are post-tax. Early in a career with a low tax rate, this is a big advantage since you get more $ in.
• Earnings in Roth IRA are not taxed. At all. Ever.
• NO TAX on distributions from Roth IRA during retirement (i.e., NOT counted as income for tax purposes in retirement)
• Contributions to Roth IRA get phased out at Modified Adjusted Gross Incomes (MAGI) of $112k to $127k (i.e., can't fund Roth IRA at $127k MAGI)
• Max this year is ~$5,500 or $6,500 if you are >55YO

401(k) 101:

• Pre-tax $ go in, so you do have more invesment dollar power vs. Roth IRA; however,
• ALL distribusions are taxed in retirement as income. That's not all bad, since if you are in a 28% bracket now, and at 15% in retirement, you can immediately see that's "avoiding" 13% tax by putting money into a 401(k). Huge benefit!
• Can get employer loans based on a % of your 401(k) balance. Have to be employed though.
• Max this year is $17,500

So a mix of Roth IRA + 401(k) in retirement allows you to pull from 401(k) up to a tax breakpoint, then pull Roth IRA money to avoid higher tax rate in the next bracket. Add in HSA dollars to fund all health expenses tax-free, and Social Security (which will probably all be taxable in 15 years, instead of the $25k per year that is not taxed as income now), and you can see how the blend should be setup to work.

 

[inca911]

HSAs usually have a 2k min to invest. You are locked in to your provider. If you are in year 1 and have some cash on hand you can go ahead and make a contribution to get over the minimum to invest and then roll from there. Just make sure you don't overtop the max or you pay a penalty. I forget what the max is this year $5600 or something.

I believe $6,550 is the 2014 max for HSA contributions. Note that your employer's contributions also count against this maximum (i.e., if they put in $1k, you can only add $5,550).

 

[inca911]

950 in a signature loan, paid pretty much all the interest on this as the early payoff option is 983. Monthly payments are 160.430 capital one card, ~12% interest (Its close to that anyhow) 25 min monthly payments

4500 salie Mae student loan, early pay off is at 3800, was originally 7k, monthly payments are 140

16k car loan was originally 19k, monthly payments are 350

~15k student loans, federal differed ATM

Rent, 1100 a month, lease is up in June

You need to add interest rates.

Yah, no way I'd be able to pay them off this month, maybe in February, but doubt that as well. Our "extra debt" cash is going towards capital one atm, then we'll apply that to signature loan and pay that off early as well. If we stick to current plan, we'll have both of them paid off in 4 months. From there our goal was to pay off the Salie Mae which would be paid off in another 7 months, then work on the car loan, then student loan.

Student loans are deferred til July.

Yah, the plan was to get out of debt then up our retirement to 10% of my check. I was just making sure my current fund was the right one, or if there was a better option.

Still need interest rates to help with an educated opinion. All borrowed money certainly isn't all the same (e.g., deductible interest for qualified student loans, or mortgage interest), so you need to do the math on it. For example, paying off your Sallie May loan early may effectively "pay" you $700 on a $3,800 total investment (instead of paying $4,500 slowly). That's an 18% guaranteed return, on top of avoiding the interest on that $3,800 (even though that interest is likely tax deductible)--a massive opportunity!

You can't pay it off at once, but you can intelligently create a debt plan based on knowing where your debt falls, and paying it off from worst debt to best.

 

[UniAlias]

Super newb question.. My company doesn't match, they just simply give a certain percentage (3 or 4% I think) towards 401k. I do another 4% on top of that. But from a couple of the posts above it sounds like rather than contributing towards the 401k account I've had for quite some time, I would be better off using that money towards a Roth IRA? What is the difference between the two, just that Roth is more flexible in regards to withdrawing it if I need it?

Generally speaking, I would contribute to the Roth IRA and not the 410(k) in this instance, until the Roth IRA is fully funded. Just switch to automatic contributions to a Roth IRA and you won't see any day-to-day difference. Vanguard is where I have mine.

Roth IRA 101:

• Can get principle out anytime for any reason, no penalties. Huge advantage over 401(k), especially in emergencies since this is a savings account if you want it to be (until you get a cash reserve, typically conservatively invested). Note that if you pull $ out, you can't put them back in.
• $ going in are post-tax. Early in a career with a low tax rate, this is a big advantage since you get more $ in.
• Earnings in Roth IRA are not taxed. At all. Ever.
• NO TAX on distributions from Roth IRA during retirement (i.e., NOT counted as income for tax purposes in retirement)
• Contributions to Roth IRA get phased out at Modified Adjusted Gross Incomes (MAGI) of $112k to $127k (i.e., can't fund Roth IRA at $127k MAGI)
• Max this year is ~$5,500 or $6,500 if you are >55YO

401(k) 101:

• Pre-tax $ go in, so you do have more invesment dollar power vs. Roth IRA; however,
• ALL distribusions are taxed in retirement as income. That's not all bad, since if you are in a 28% bracket now, and at 15% in retirement, you can immediately see that's "avoiding" 13% tax by putting money into a 401(k). Huge benefit!
• Can get employer loans based on a % of your 401(k) balance. Have to be employed though.
• Max this year is $17,500

So a mix of Roth IRA + 401(k) in retirement allows you to pull from 401(k) up to a tax breakpoint, then pull Roth IRA money to avoid higher tax rate in the next bracket. Add in HSA dollars to fund all health expenses tax-free, and Social Security (which will probably all be taxable in 15 years, instead of the $25k per year that is not taxed as income now), and you can see how the blend should be setup to work.

Thank you. This is very helpful.

 

[Slapdash]

Thought this was an interesting convo. The bold address a point that Dentist and others like to make in discussions that I do not agree with:

Mr. Money Mustache: How did your own life lead you into this prominent role as a spokesperson for social change? Did it start in childhood or was it caused by experiences as an adult?

Juliet Schor: I was interested in activism early on. I started reading critical books when I was young and by the time I was in high school I had become an organizer for the United Farmworkers Union, the Cesar Chavez group that was boycotting lettuce and grapes, to improve conditions for migrant farmworkers. I also became active in anti-war activities in high school and started a group called Students Against the War. My parents had been politically active when they were young, although I didn’t know this until I was in a teenager.

MM: I often get complaints to the effect of, “Well, if everyone did what you are doing (saving more, consuming less, and working less after financial independence), the economy would collapse.” I disagree and I think the economics would work out surprisingly well if we added more free time for all of us into the equation. What do you think would happen, and how might we make the shift over a period of time?

Juliet Schor: I’ve written about this, particularly in the epilog to The Overspent American. If people gradually transition to less consumption, the economy will adjust. The main reason is that downshifting also results in fewer hours offered in the labor market. So demand and supply of labor are gradually reduced in tandem. That means less consumer demand shouldn’t result in higher unemployment, which is the main thing to worry about. The key here is gradual. A sudden cutback in consumer demand will lead to panic and recession. In the US, we need to consume less, save and invest more, in the right kinds of things: clean energy for one.

MM: Economists say that productivity per hour is the key to a society’s standard of living. Under a Plenitude model, if we tended to work a bit less on average, would you expect to see our productivity increase (due to reducing stress and harvesting only the best hours from the minds of workers) or decrease (perhaps due to losing some economy of scale from such massive production)?

Juliet Schor: A Plenitude model should result in higher productivity, because you are right, shorter hours tend to be associated with higher per hour productivity. People can work more intensively and with better results if they have to do it for a shorter time. That’s what historical experience shows. For businesses, it’s the per hour productivity that’s key. Costs really depend on that, because many people are paid by the hour.

MM: I find that regardless of how much my own family earns (or does not earn, depending on the year), our spending remains roughly constant around $25,000 per year. Do you find yourself maintaining a lower-than-average spending or consumption rate in your own lifestyle? And if so, do you ever notice a culture clash when visiting high-income friends and colleagues with more typical lifestyles?

Juliet Schor: I think our expenses are declining. Some years ago we stopped eating out much. We drive very old cars. We put a lot of insulation into our home, which dramatically reduced our heating bills. We are doing much less leisure travel than we used to because we are concerned about our carbon footprint. We refinanced our mortgage. Right now both children are out of the house, so that reduced out food costs. We’ve had heavy educational expenses for our children, so that’s going in the other direction. But that’ll be over fairly soon.

MM: Another criticism of moving our culture away from work-to-consume is that we would become bored and stagnate with all the extra free time. I disagree, as I find that since retiring from real work, I do a similar amount of productive stuff each day, it just doesn’t feel like work anymore. Do you think the American public could properly handle a big reduction in working hours and increase in free time?

Juliet Schor: I think it varies by group. Women have traditionally had an easier time. I think that there are sub-groups within young adults who are desperate for more time. I don’t think we’ll stagnate, but it is true that there is a skill (or art) to spending time. As the economist Tibor Scitovsky argued, we need to cultivate the skills to spend time in ways that yield high well-being. Gardening, DIY, hobbies and excellent activities for doing so.

MM: You have been encouraging us to get back into a more local, community-based economic model. I have been doing this a lot in recent years, just because it is fun. But I always assumed the national/international model is more efficient, and the local way (like keeping chickens even though they cost more than buying the best organic eggs at a store) was more of a luxury. Do you think local trade can actually improve fairness, or the unemployment rate, or some other measurable thing?

Juliet Schor: The national/international model looks more efficient than it is because it’s not paying its true costs in terms of carbon pollution, and the unemployment it leads to at home. I do think that localizing will reduce unemployment by creating more demand locally, and that in turn leads to more fairness/less inequality. In Plenitude I argued that new high tech small scale technology makes local production more efficient than in the past*. I think that’s one key to why local economies are now a viable alternative to the giant corporations and globalized structures. Their resilience in the face of uncertainties such as disasters and financial panics is another.

MM: A lot of this has to do with bringing the human race back to the rhythm of its own planet. Anyone with a scientific background can see how quickly we are tearing this place apart, but most consumers are blissfully unaware of the direct connection between shopping and destroying.

Juliet Schor: Amen. Before Donella Meadows died she and I discussed this issue of rhythms. The ecological problem can be summed up as a gap between the fast pace of the economy and the rhythms of the planet.

MM: But how much consumption is a sustainable amount? If the wealthy countries cut their resource consumption in half, or in four, would that do the trick? Or are there other quantifiable changes that need to be made?

Juliet Schor: The key right now is carbon. Rich countries need to decarbonize completely, at a rate of about 8-10% reductions per year over the next couple of decades. That’ll also reduce resource consumption, because energy demand drives the demand for other resources. That’s the goal we need to focus on.

MM: I have become a big fan of the data-driven philanthropy of Gates Foundation and others like it. But I can’t help noticing that increasing the income of less wealthy nations also increases their love of cars, fast food, trash, and all of our own problems. Will they have to go through everything we did, or is it possible for an economy to go from poor to wealthier and become ecologically friendly?

Juliet Schor: There’s no question poor countries can leapfrog as we call it, with cleaner technologies, and especially renewable energy. Rapid transit bus systems, solar and wind power, enhancing small scale food production for local use are all trends that are growing in global south countries.

MM: Finally, other than adopting a better life ourselves, what steps do you recommend that more committed people can take to help nudge the world towards the Plenitude model for living?

Juliet Schor: Right now our biggest task is to take on the fossil fuel companies who are driving the world off the climate cliff. Pushing Obama on Keystone XL is a start, and trying to prevent any new fossil fuel investment is key. Today I read a great piece in Rolling Stone about yet another Koch Brother (Billy) exporting what may be the dirtiest fuel in the world, petcoke, from the US. We need to expose and stop that.
http://www.rollingstone.com/politics/news/how-the-u-s-exports-global-warming-20140203

MM: Thanks very much for sharing your time with us, Juliet! Although I take an unusual approach with this blog, coming at the issue from the backside of individualism, personal wealth, and with occasional profanity, we clearly have the same goals in mind and it is great to have you on the team. Thanks for everything you do.

http://feedproxy.google.com/~r/MrMoneyMustache/~3/DhsN47_btY4/

 

[Steve Tasker]

Social Security (which will probably all be taxable in 15 years, instead of the $25k per year that is not taxed as income now),

This is slightly misleading.

Social Security income is taxed at up to 85% currently, but it depends on your other income during the year. Someone who has minimal income other than Social Security might pay tax on 0% of the Social Security. Someone who has significant other taxable income may pay tax on up to 85% of it. It's not a blanket $25k exemption, which appears to be what you're saying here.

 

[Dentist]

Thought this was an interesting convo. The bold address a point that Dentist and others like to make in discussions that I do not agree with:

i read Mr. Money Mustache and I've seen him touch on that subject before.

Now if by gradually reduced the rate of consumption you mean that this would occur over 50 years at an extremely low rate... then maybe it would work out.

But since our economy isn't very big on producing things and exporting them, I can't see where a decrease in human consumption wouldn't cause a pretty big crash in major corps that do the majority of their business on our soil.

Mr. money is being shortsighted and only argues the point to push his own agenda.. if more and more people even took 1/2 the steps to live a life more like him it would crush a lot of the retail industry not to mention anyone middle class luxuries. middle class luxuries being most chain restaurants, non-luxury automobiles, cable companies, electronics/gadgets, travel, etc.

There is just a MASSIVE % of the our U.S. economy based upon the stuff that mr. money mustache (or even general tightwads with plenty of money like me) won't buy or will only very rarely buy.

Most people live beyond their means.. and we need them to keep doing so (heck even a business like mine needs people to keep doing so... I'd make less money without people's vanity causing them to want/need cosmetic services and other elective things that they have to finance out because they live paycheck to paycheck).

People don't spend that money = less need for those services = more unemployment = recession/depression.. it's a long downward cycle.

 

[culdeus]

People don't spend that money = less need for those services = more unemployment = recession/depression.. it's a long downward cycle.

I'm not sure about that, It may be an oversimplification. I would think that if you took away upper middle class luxury you could see deflationary pressure on items further down the food chain lifting the lower class. I think to a certain extent this is how the market for food has stayed in check here.

Japan is the classic example of an economy that just simply stopped spending money and having babies. Children, to me at least, are the ultimate middle class luxury. There is nothing more absurdly expensive than having children and many do it for society/vanity sake. When the middle class stops having kids, then you should hit the panic button. Not when they stop getting a blooming onion at Outback.

There is lots to learn from their (Japan and lesser extent West Europes) ups/downs that we have't really begun digesting.

 

[Spike]

i watched this.

if you keep up with financial news, it was nothing new.

just a statement on how fund fees are terrible and you should buy index funds. any personal finance book worth its salt has been saying that for over 15 years.

Basically it was a sob story on how there's going to be a retirement crisis because the burden for retirement got shifted from it being done for them via pension, to having to do it themselves via 401k.

The story was spot on.. but i always hate how frontline angles their stories.

People could be in great shape financially if they just took the time to read one good personal finance book and then did a little keeping up.

Admittedly the financial world can be intimidating. but it's hilarious that people will work hard making money, work hard spending hours researching a TV to buy or clothes to wear... but don't give a crap about the tens or hundreds of thousands in their retirement accounts because it's not fun.

Pound foolish, penny smart.. typical coupon clipping american

Which index funds?

And what book would that be?

 

[culdeus]

i watched this.

if you keep up with financial news, it was nothing new.

just a statement on how fund fees are terrible and you should buy index funds. any personal finance book worth its salt has been saying that for over 15 years.

Basically it was a sob story on how there's going to be a retirement crisis because the burden for retirement got shifted from it being done for them via pension, to having to do it themselves via 401k.

The story was spot on.. but i always hate how frontline angles their stories.

People could be in great shape financially if they just took the time to read one good personal finance book and then did a little keeping up.

Admittedly the financial world can be intimidating. but it's hilarious that people will work hard making money, work hard spending hours researching a TV to buy or clothes to wear... but don't give a crap about the tens or hundreds of thousands in their retirement accounts because it's not fun.

Pound foolish, penny smart.. typical coupon clipping american

Which index funds?

And what book would that be?

VT 60%

AGG 35%

Cash or something cash like 5%

 

[Dentist]

People don't spend that money = less need for those services = more unemployment = recession/depression.. it's a long downward cycle.

I'm not sure about that, It may be an oversimplification. I would think that if you took away upper middle class luxury you could see deflationary pressure on items further down the food chain lifting the lower class. I think to a certain extent this is how the market for food has stayed in check here.

Japan is the classic example of an economy that just simply stopped spending money and having babies. Children, to me at least, are the ultimate middle class luxury. There is nothing more absurdly expensive than having children and many do it for society/vanity sake. When the middle class stops having kids, then you should hit the panic button. Not when they stop getting a blooming onion at Outback.

There is lots to learn from their (Japan and lesser extent West Europes) ups/downs that we have't really begun digesting.

isn't the birth rate declining in this country, especially amongst those who are in the greatest position to financially support a child?

I know plenty of people in/around my socio-economic class that are having zero or 1 MAYBE 2 kids because of their desires to live it up in their lives rather than sacrifice and slave to raise children... I'm guilty.. some people call it selfish... I don't know.... maybe it is...

 

[Dentist]

i watched this.

if you keep up with financial news, it was nothing new.

just a statement on how fund fees are terrible and you should buy index funds. any personal finance book worth its salt has been saying that for over 15 years.

Basically it was a sob story on how there's going to be a retirement crisis because the burden for retirement got shifted from it being done for them via pension, to having to do it themselves via 401k.

The story was spot on.. but i always hate how frontline angles their stories.

People could be in great shape financially if they just took the time to read one good personal finance book and then did a little keeping up.

Admittedly the financial world can be intimidating. but it's hilarious that people will work hard making money, work hard spending hours researching a TV to buy or clothes to wear... but don't give a crap about the tens or hundreds of thousands in their retirement accounts because it's not fun.

Pound foolish, penny smart.. typical coupon clipping american

Which index funds?

And what book would that be?

frankly if you read any of the books they would be ok.. I mean there's no use getting into philosophical debates over who's financial religion is the absolute best.. if you picked ANY of the mainstream ones and followed it it would be better than doing nothing.

Books I've liked: I will teach you to be Rich - Ramit Sethi. Stay Mad for Life - Jim Cramer Personal Finance for Dummies... Suze Orman, Dave Ramsey.... just pick one!

Index Funds:

VT - world stocks 90%

BND - bonds 10%

adjust the percent as needed for your age

 

[Dentist]

i watched this.

if you keep up with financial news, it was nothing new.

just a statement on how fund fees are terrible and you should buy index funds. any personal finance book worth its salt has been saying that for over 15 years.

Basically it was a sob story on how there's going to be a retirement crisis because the burden for retirement got shifted from it being done for them via pension, to having to do it themselves via 401k.

The story was spot on.. but i always hate how frontline angles their stories.

People could be in great shape financially if they just took the time to read one good personal finance book and then did a little keeping up.

Admittedly the financial world can be intimidating. but it's hilarious that people will work hard making money, work hard spending hours researching a TV to buy or clothes to wear... but don't give a crap about the tens or hundreds of thousands in their retirement accounts because it's not fun.

Pound foolish, penny smart.. typical coupon clipping american

Which index funds?

And what book would that be?

VT 60%

ITOT 35%

Cash or something cash like 5%

lot of overlap between VT and ITOT - don't need them both

 

[culdeus]

People don't spend that money = less need for those services = more unemployment = recession/depression.. it's a long downward cycle.

I'm not sure about that, It may be an oversimplification. I would think that if you took away upper middle class luxury you could see deflationary pressure on items further down the food chain lifting the lower class. I think to a certain extent this is how the market for food has stayed in check here.

Japan is the classic example of an economy that just simply stopped spending money and having babies. Children, to me at least, are the ultimate middle class luxury. There is nothing more absurdly expensive than having children and many do it for society/vanity sake. When the middle class stops having kids, then you should hit the panic button. Not when they stop getting a blooming onion at Outback.

There is lots to learn from their (Japan and lesser extent West Europes) ups/downs that we have't really begun digesting.

isn't the birth rate declining in this country, especially amongst those who are in the greatest position to financially support a child?

I know plenty of people in/around my socio-economic class that are having zero or 1 MAYBE 2 kids because of their desires to live it up in their lives rather than sacrifice and slave to raise children... I'm guilty.. some people call it selfish... I don't know.... maybe it is...

http://online.wsj.com/news/articles/SB10001424127887323375204578270053387770718

This is the article which sums this up (well, sum in a tl;dr sort of way).

My last post was made fast, it didn't exactly convey my meaning well. What I'm saying is it's not the lack of spending on things by people that are here that will put downward pressure on the economy, it's the fact that the people that actually would be spending that money is vanishing. That's the larger issue. Middle class birth rates in this country are still being propped up by educated immigrants. It's not nearly as dire as looking at the white people and isolating the others.

 

[Slapdash]

Thought this was an interesting convo. The bold address a point that Dentist and others like to make in discussions that I do not agree with:

i read Mr. Money Mustache and I've seen him touch on that subject before.

Now if by gradually reduced the rate of consumption you mean that this would occur over 50 years at an extremely low rate... then maybe it would work out.

But since our economy isn't very big on producing things and exporting them, I can't see where a decrease in human consumption wouldn't cause a pretty big crash in major corps that do the majority of their business on our soil.

Mr. money is being shortsighted and only argues the point to push his own agenda.. if more and more people even took 1/2 the steps to live a life more like him it would crush a lot of the retail industry not to mention anyone middle class luxuries. middle class luxuries being most chain restaurants, non-luxury automobiles, cable companies, electronics/gadgets, travel, etc.

There is just a MASSIVE % of the our U.S. economy based upon the stuff that mr. money mustache (or even general tightwads with plenty of money like me) won't buy or will only very rarely buy.

Most people live beyond their means.. and we need them to keep doing so (heck even a business like mine needs people to keep doing so... I'd make less money without people's vanity causing them to want/need cosmetic services and other elective things that they have to finance out because they live paycheck to paycheck).

People don't spend that money = less need for those services = more unemployment = recession/depression.. it's a long downward cycle.

[SIZE=10.5pt]I'm going to zero in here where I think your premise is flawed. The US does indeed produce and export a lot of goods and services. Indeed, we have the second largest export economy in the world. A savings increase should generally be accommodated by lower interest rates and currency depreciation. These would continue to adjust the economy in the direction of exports as our goods and services would be cheaper in other countries, particularly emerging markets. [/SIZE]

[SIZE=10.5pt]Alternatively, more savings by higher income earners could be met with either by a more redistributionist policy from the government or a greater preference for leisure. These would both move spending power to income-constrained households who would be more apt to spend it on goods and services that they need. [/SIZE]

[SIZE=10.5pt]You point out that a large amount of spending is done on luxury goods at the high end. That does not need to be the case for our economy. The free market should be able to adjust to a new equilibrium especially with monetary accommodation. To some degree, these trends are already happening. But it will be slow. [/SIZE]

 

[culdeus]

i watched this.

if you keep up with financial news, it was nothing new.

just a statement on how fund fees are terrible and you should buy index funds. any personal finance book worth its salt has been saying that for over 15 years.

Basically it was a sob story on how there's going to be a retirement crisis because the burden for retirement got shifted from it being done for them via pension, to having to do it themselves via 401k.

The story was spot on.. but i always hate how frontline angles their stories.

People could be in great shape financially if they just took the time to read one good personal finance book and then did a little keeping up.

Admittedly the financial world can be intimidating. but it's hilarious that people will work hard making money, work hard spending hours researching a TV to buy or clothes to wear... but don't give a crap about the tens or hundreds of thousands in their retirement accounts because it's not fun.

Pound foolish, penny smart.. typical coupon clipping american

Which index funds?

And what book would that be?

VT 60%

AGG 35%

Cash or something cash like 5%

Check my edit above.

 

[Dentist]

People don't spend that money = less need for those services = more unemployment = recession/depression.. it's a long downward cycle.

I'm not sure about that, It may be an oversimplification. I would think that if you took away upper middle class luxury you could see deflationary pressure on items further down the food chain lifting the lower class. I think to a certain extent this is how the market for food has stayed in check here.

Japan is the classic example of an economy that just simply stopped spending money and having babies. Children, to me at least, are the ultimate middle class luxury. There is nothing more absurdly expensive than having children and many do it for society/vanity sake. When the middle class stops having kids, then you should hit the panic button. Not when they stop getting a blooming onion at Outback.

There is lots to learn from their (Japan and lesser extent West Europes) ups/downs that we have't really begun digesting.

isn't the birth rate declining in this country, especially amongst those who are in the greatest position to financially support a child?

I know plenty of people in/around my socio-economic class that are having zero or 1 MAYBE 2 kids because of their desires to live it up in their lives rather than sacrifice and slave to raise children... I'm guilty.. some people call it selfish... I don't know.... maybe it is...

http://online.wsj.com/news/articles/SB10001424127887323375204578270053387770718

This is the article which sums this up (well, sum in a tl;dr sort of way).

My last post was made fast, it didn't exactly convey my meaning well. What I'm saying is it's not the lack of spending on things by people that are here that will put downward pressure on the economy, it's the fact that the people that actually would be spending that money is vanishing. That's the larger issue. Middle class birth rates in this country are still being propped up by educated immigrants. It's not nearly as dire as looking at the white people and isolating the others.

great article - i read the whole thing and it was fascinating.

 

[Dentist]

Thought this was an interesting convo. The bold address a point that Dentist and others like to make in discussions that I do not agree with:

i read Mr. Money Mustache and I've seen him touch on that subject before.

Now if by gradually reduced the rate of consumption you mean that this would occur over 50 years at an extremely low rate... then maybe it would work out.

But since our economy isn't very big on producing things and exporting them, I can't see where a decrease in human consumption wouldn't cause a pretty big crash in major corps that do the majority of their business on our soil.

Mr. money is being shortsighted and only argues the point to push his own agenda.. if more and more people even took 1/2 the steps to live a life more like him it would crush a lot of the retail industry not to mention anyone middle class luxuries. middle class luxuries being most chain restaurants, non-luxury automobiles, cable companies, electronics/gadgets, travel, etc.

There is just a MASSIVE % of the our U.S. economy based upon the stuff that mr. money mustache (or even general tightwads with plenty of money like me) won't buy or will only very rarely buy.

Most people live beyond their means.. and we need them to keep doing so (heck even a business like mine needs people to keep doing so... I'd make less money without people's vanity causing them to want/need cosmetic services and other elective things that they have to finance out because they live paycheck to paycheck).

People don't spend that money = less need for those services = more unemployment = recession/depression.. it's a long downward cycle.

[SIZE=10.5pt]I'm going to zero in here where I think your premise is flawed. The US does indeed produce and export a lot of goods and services. Indeed, we have the second largest export economy in the world. A savings increase should generally be accommodated by lower interest rates and currency depreciation. These would continue to adjust the economy in the direction of exports as our goods and services would be cheaper in other countries, particularly emerging markets. [/SIZE]

[SIZE=10.5pt]Alternatively, more savings by higher income earners could be met with either by a more redistributionist policy from the government or a greater preference for leisure. These would both move spending power to income-constrained households who would be more apt to spend it on goods and services that they need. [/SIZE]

[SIZE=10.5pt]You point out that a large amount of spending is done on luxury goods at the high end. That does not need to be the case for our economy. The free market should be able to adjust to a new equilibrium especially with monetary accommodation. To some degree, these trends are already happening. But it will be slow. [/SIZE]

could be. if done incredibly slowly I could see how it could work as things change and redistribute.

Make no mistake about it though... if even 50% of what's left of the middle class took 50% of Mr. Money mustache's ideas and implemented them overnight or even over a year or 2.... it would be a pretty big shock to the system.

I'm not worried about this happening though... when people find a way to save money in one category of their lives though, generally society can find another new "must have" to replace it to continue picking their pocketbook.

Who would have predicted 20 years ago that people would spend upwards of $1000-1200 a year for fully functioning phones with the internet in their pocket. Or that people would readily pay for subscription television and internet packages that ran them nearly another $2000 a year when TV is available free otherwise over-the-air (although admittedly this trend is shifting as we speak).

What will be next? I don't know... but you can count on the innovators to find the next must have to keep people from saving. You could double a lot of people's incomes and they still wouldn't find a way to save what they should.... it's a discipline issue as much as anything.

 

[Spike]

i watched this.

if you keep up with financial news, it was nothing new.

just a statement on how fund fees are terrible and you should buy index funds. any personal finance book worth its salt has been saying that for over 15 years.

Basically it was a sob story on how there's going to be a retirement crisis because the burden for retirement got shifted from it being done for them via pension, to having to do it themselves via 401k.

The story was spot on.. but i always hate how frontline angles their stories.

People could be in great shape financially if they just took the time to read one good personal finance book and then did a little keeping up.

Admittedly the financial world can be intimidating. but it's hilarious that people will work hard making money, work hard spending hours researching a TV to buy or clothes to wear... but don't give a crap about the tens or hundreds of thousands in their retirement accounts because it's not fun.

Pound foolish, penny smart.. typical coupon clipping american

Which index funds?

And what book would that be?

frankly if you read any of the books they would be ok.. I mean there's no use getting into philosophical debates over who's financial religion is the absolute best.. if you picked ANY of the mainstream ones and followed it it would be better than doing nothing.

Books I've liked: I will teach you to be Rich - Ramit Sethi. Stay Mad for Life - Jim Cramer Personal Finance for Dummies... Suze Orman, Dave Ramsey.... just pick one!

Index Funds:

VT - world stocks 90%

BND - bonds 10%

adjust the percent as needed for your age

So put 90% of what I have in my various 401ks into VT? Not a "all his eggs in one basket" sort of thing?

 

[Dentist]

i watched this.

if you keep up with financial news, it was nothing new.

just a statement on how fund fees are terrible and you should buy index funds. any personal finance book worth its salt has been saying that for over 15 years.

Basically it was a sob story on how there's going to be a retirement crisis because the burden for retirement got shifted from it being done for them via pension, to having to do it themselves via 401k.

The story was spot on.. but i always hate how frontline angles their stories.

People could be in great shape financially if they just took the time to read one good personal finance book and then did a little keeping up.

Admittedly the financial world can be intimidating. but it's hilarious that people will work hard making money, work hard spending hours researching a TV to buy or clothes to wear... but don't give a crap about the tens or hundreds of thousands in their retirement accounts because it's not fun.

Pound foolish, penny smart.. typical coupon clipping american

Which index funds?

And what book would that be?

frankly if you read any of the books they would be ok.. I mean there's no use getting into philosophical debates over who's financial religion is the absolute best.. if you picked ANY of the mainstream ones and followed it it would be better than doing nothing.

Books I've liked: I will teach you to be Rich - Ramit Sethi. Stay Mad for Life - Jim Cramer Personal Finance for Dummies... Suze Orman, Dave Ramsey.... just pick one!

Index Funds:

VT - world stocks 90%

BND - bonds 10%

adjust the percent as needed for your age

So put 90% of what I have in my various 401ks into VT? Not a "all his eggs in one basket" sort of thing?

you must not have looked at VT very closely if you think it is an "all eggs in one basket" type of thing.

This ETF holds over 5000 companies around the world. If anything it's the ultimate in diversification.

If you would feel better with a higher percentage of bonds, that would be completely reasonable.

 

[inca911]

Social Security (which will probably all be taxable in 15 years, instead of the $25k per year that is not taxed as income now),

This is slightly misleading.

Social Security income is taxed at up to 85% currently, but it depends on your other income during the year. Someone who has minimal income other than Social Security might pay tax on 0% of the Social Security. Someone who has significant other taxable income may pay tax on up to 85% of it. It's not a blanket $25k exemption, which appears to be what you're saying here.

Good clarification, as the determination of tax is based on the total combined income that is reported (i.e., adjusted gross income + taxable interest + 50% of SS benefit). If you want to avoid taxes in today's retirement situation, the goal is to keep your combined income around $25k.

For example, this mix of retirement funds results in a combined income of $25k, and an actual income of $32.5k:

• $15k SS benefit (only 50%, or $7,500, counts as combined income) <--typical monthly benefit is now ~$1,200
• $17.5k from 401(k)

With an income of $32k, using standard deduction + exemption, the tax owed will be less than $1k for the year, somewhere in the 2-3% range. If you need more income, supplementing with distributions from Roth IRA, that don't count as income, will keep you under the threshold and enjoying a low/no tax retirement.

Contrasting that example with a combined income greater than $34k:

For each $100 of additional income, now 85% of the previously untaxed SS benefits become taxable. Assuming a 25% tax rate on that $185 ($100 additional income + $85 of SS benefit taxation), you are now going to have to effectively pay $46.25 in tax (at least until you have all 85% of your SS benefits taxed). Nothing like an effective 46% tax rate on that $100 additional income to drive you crazy!

Minimizing expenses during retirement is one key to avoid needing larger income at retirement (e.g., having a residence paid off instead of paying to rent). Today, there are ways to figure out how to pay minimal tax. I fully believe that will change in the future, so younger savers should plan to pay taxes on all SS benefit, which includes 401(k) distributions. Having diversified sources of income is also key to being able to minimize tax during retirement, which is why paying off a residence in full and having a well funded Roth IRA are so very important in my retirement planning. Distributions from Roth IRA do not count as taxable income in retirement, thereby effectively "earning" 46% return on investment via tax avoidance. It's such an amazing retirement vehicle (especially when putting in money taxed at a low rate early in a career), and yet it is often ignored in favor of adding more to a 401(k). Yes, the 401(k) lets more pretax $ earn returns, but don't forget about the impact of the back end taxation. After getting free 401(k) match money from an employer, fully funding a Roth IRA then a 401(k) is most likely the optimal basic retirement solution. Don't forget that one can still get the principle from a Roth IRA out untaxed if needed, and even the earnings can be accessed in many instances without penalty (e.g., $10k for first time home purchase for Roth owner or direct family).

Edit to add:

If you retire, but decide not to get SS benefits right away (i.e., waiting for full retirement age), then pulling from the 401(k) first is generally going to be the best strategy since you will be in a nice low tax bracket for tax rate, and you'll protect your SS payments later from being taxed due to 401(k) distributions counting as income.

 

[Binky The Doormat]

Does anyone else think that the "wait to draw your SS $$s" is a government - illuminati-type driven campaign? I hope it works. Most people haven't done the simple math to understand that the break-even point is around 81 years of age. For those of you convinced that

1) the program is unsustainable and you should get what you can when you can

and

2) you are supremely confident at age 62 you won't get sick and die before 81 ...fire away.

simple break-even analysis:

http://www.fpanet.org/journal/CurrentIssue/TableofContents/WhentoStartCollectingSocialSecurityBenefits/

NOTE: I am not necessarily an illuminati believer ...but do believe some heavy planning/plotting #### goes down by the uber rich that has major impacts on governments across the world and the world market.

 

[wilked]

Reminder...folks have until mid April to contribute to 2013 Roth. Don't let the opportunity slip by...

 

[Binky The Doormat]

I recently retired and have moved all of our savings to Vanguard (had 401K with TRowePrice with my company and then other savings outside of that). I still haven't allocated everything - will be happy to report the experience and eventual performance for those interested.

After years of trying the investment advisor approach, doing a lot of research, and now REALLY wanting to put those fees in my pocket for retirement living Vanguard looks to be the way to go for the average guy. Fidelity has similar options, but Vanguard looked to have a better overall support service.

 

[KCitons]

Does anyone else think that the "wait to draw your SS $$s" is a government - illuminati-type driven campaign? I hope it works. Most people haven't done the simple math to understand that the break-even point is around 81 years of age. For those of you convinced that

1) the program is unsustainable and you should get what you can when you can

and

2) you are supremely confident at age 62 you won't get sick and die before 81 ...fire away.

simple break-even analysis:

http://www.fpanet.org/journal/CurrentIssue/TableofContents/WhentoStartCollectingSocialSecurityBenefits/

NOTE: I am not necessarily an illuminati believer ...but do believe some heavy planning/plotting #### goes down by the uber rich that has major impacts on governments across the world and the world market.

My wife also has a FERS supplement that will pay a percentage of her age 62 SS benefit, if she retires early. At minimum retirement age, they take her years of service, divide by 40, and multiply her SS Benefit at age 62.

As it looks right now, she would get about 80% of her SS payment from 56/2 until 62. We are looking into buying back some of her time when she first started. Depending on cost, it could increase her years of service up to 5 years. Increasing the Supplemental payment to about 95%. This would push her break even point out even further.

A lot of Federal Employees don't know about the FERS supplemental benefit.

 

[Dentist]

Reminder...folks have until mid April to contribute to 2013 Roth. Don't let the opportunity slip by...

what percent of Roth eligible people (or even ineligible ones that go backdoor like i just did) even do it? I know so few that do.

 

[mquinnjr]

Reminder...folks have until mid April to contribute to 2013 Roth. Don't let the opportunity slip by...

what percent of Roth eligible people (or even ineligible ones that go backdoor like i just did) even do it? I know so few that do.

I love it, 2011-on max Roth IRA contributions for me.

What I love is that it's tax-free earnings, and the principal can be accessed if I really, really need it if I ever exhausted my 6 months of "bunker cash" without penalty. I am going to keep the Roth IRA contributions going as long as my MAGI allows me to do so. I contribute the max of my employer match in a traditional IRA (6%), and am going to start tacking on COLA increases into a Roth 401k @ 2% increments until I max that out @ 17.5k as well at some point down the road.

The tax-free earnings are really, really powerful down the road. Great calculator to show you how: http://www.bloomberg.com/personal-finance/calculators/retirement/

 

[culdeus]

Reminder...folks have until mid April to contribute to 2013 Roth. Don't let the opportunity slip by...

what percent of Roth eligible people (or even ineligible ones that go backdoor like i just did) even do it? I know so few that do.

I love it, 2011-on max Roth IRA contributions for me.

What I love is that it's tax-free earnings, and the principal can be accessed if I really, really need it if I ever exhausted my 6 months of "bunker cash" without penalty. I am going to keep the Roth IRA contributions going as long as my MAGI allows me to do so. I contribute the max of my employer match in a traditional IRA (6%), and am going to start tacking on COLA increases into a Roth 401k @ 2% increments until I max that out @ 17.5k as well at some point down the road.

The tax-free earnings are really, really powerful down the road. Great calculator to show you how: http://www.bloomberg.com/personal-finance/calculators/retirement/

You post the right calculator? This doesn't have tax implications

 

[mquinnjr]

Reminder...folks have until mid April to contribute to 2013 Roth. Don't let the opportunity slip by...

what percent of Roth eligible people (or even ineligible ones that go backdoor like i just did) even do it? I know so few that do.

I love it, 2011-on max Roth IRA contributions for me.

What I love is that it's tax-free earnings, and the principal can be accessed if I really, really need it if I ever exhausted my 6 months of "bunker cash" without penalty. I am going to keep the Roth IRA contributions going as long as my MAGI allows me to do so. I contribute the max of my employer match in a traditional IRA (6%), and am going to start tacking on COLA increases into a Roth 401k @ 2% increments until I max that out @ 17.5k as well at some point down the road.

The tax-free earnings are really, really powerful down the road. Great calculator to show you how: http://www.bloomberg.com/personal-finance/calculators/retirement/

You post the right calculator? This doesn't have tax implications

This is just for Roth IRA's, which have no tax implications if earnings and principal not withdrawn until after age 59.5.

Pump in current age, expected retirement age (I use 60, when I can start early retirement at my employer with no reduced pension), current balance, annual contributions radio button (I use the max since it's what I currently contribute, and this will rise over time so the current max of $5,500 is somewhat conservative), I use 8% expected ROR, and hit Calculate to get an estimate of what I'm looking at from the Roth IRA as its own bucket.

 

[Tiger Fan]

Question for the backdoor roth folks. Once I hit my income limit (2012), I stopped making contributions to my roth IRA, and switched to solely contributing to my 401k. Obviously, I didn't know about the backdoor at the time.

I have a Rollover IRA account from a previous companies 401k with about $30k in it. No principal has been added to the account since 2005. So my questions are:

1. Can I move any of the $30K from the regular Rollover IRA via the backdoor method?

2. I can still deposit the full $5000 before April 1 into the Rollever and then initiate the backdoor?

 

[Balco]

I recently retired and have moved all of our savings to Vanguard (had 401K with TRowePrice with my company and then other savings outside of that). I still haven't allocated everything - will be happy to report the experience and eventual performance for those interested.

After years of trying the investment advisor approach, doing a lot of research, and now REALLY wanting to put those fees in my pocket for retirement living Vanguard looks to be the way to go for the average guy. Fidelity has similar options, but Vanguard looked to have a better overall support service.

The good thing about Vanguard too is that if you have $10,000 in one of their funds, they become Admiral Shares, which lowers the costs even more.

 

[KCitons]

How many of you are managing all of your retirement plan? I need to make a decision about where to put some cash we have saved. We met with a financial adviser/fiduciary from Wells Fargo, but I'm not sure I have a lot of confidence in him.

We've covered the my wife's retirement savings and pension. She's putting in 5% and getting the 5% match. We are going to up her contribution to 10% and open a Roth IRA for her. ($11k for 2013/2014) Based on numbers ran at Wells Fargo, our current savings plan will allow here to retire at 56 1/2. (this is without increasing her contribution or opening a Roth) I plan to work until 60 or later.

I'm left with figuring out how to set up my side. We are going to start a Roth for me as well. (same $11k). After that, we have roughly $100k that we need to invest. As the kids get older, we will have somewhere between $500 and $2000 each month that could be added to a retirement fund.

After meeting with the WF guy, I'm left with a couple of options.

- Increase the contributions to my wife's TSP. Starting next year she will be able to contribute $22,500 annually. Fees are low, but investment options are limited. (we would use our current savings to offset drop in paycheck)

- Max out the Roth IRA's each year and let WF manage the rest. Setting up automatic withdrawal from paychecks to decrease fees.

- Start Roth's outside of Well's Fargo, use a large part of our current savings to purchase Vanguard funds via my Wells Trade account. (limited cost, as I'm grandfathered in on the 100 free trades) Monthly contributions would go to Roth 1st, then overflow would go to more investing via Wells Trade account.

 

[Sand]

How many of you are managing all of your retirement plan? I need to make a decision about where to put some cash we have saved. We met with a financial adviser/fiduciary from Wells Fargo, but I'm not sure I have a lot of confidence in him.

We've covered the my wife's retirement savings and pension. She's putting in 5% and getting the 5% match. We are going to up her contribution to 10% and open a Roth IRA for her. ($11k for 2013/2014) Based on numbers ran at Wells Fargo, our current savings plan will allow here to retire at 56 1/2. (this is without increasing her contribution or opening a Roth) I plan to work until 60 or later.

I'm left with figuring out how to set up my side. We are going to start a Roth for me as well. (same $11k). After that, we have roughly $100k that we need to invest. As the kids get older, we will have somewhere between $500 and $2000 each month that could be added to a retirement fund.

After meeting with the WF guy, I'm left with a couple of options.

- Increase the contributions to my wife's TSP. Starting next year she will be able to contribute $22,500 annually. Fees are low, but investment options are limited. (we would use our current savings to offset drop in paycheck)

- Max out the Roth IRA's each year and let WF manage the rest. Setting up automatic withdrawal from paychecks to decrease fees.

- Start Roth's outside of Well's Fargo, use a large part of our current savings to purchase Vanguard funds via my Wells Trade account. (limited cost, as I'm grandfathered in on the 100 free trades) Monthly contributions would go to Roth 1st, then overflow would go to more investing via Wells Trade account.

I manage mine, but I find it fun. A couple things to note - while the TSPs are limited in options they are very cost efficient. That is very compelling, IMO. The thoughts on WF management comes down to fees. None of these investments will beat the averages, so the best way to increase return is to get to as low a fee structure is possible. That said, if you aren't "into" managing these type of things it may be worth it to have someone else do it.

 

[KCitons]

Thanks Sand. I may have to talk to someone else. The WF guy went from fact gathering to used car salesman pretty quick. I know we want to set up Roth's, but he started mentioning that he doesn't get paid unless the accounts are over $50k. This should have been obvious, since he had all of our financial information for nearly two weeks.

Once this was confirmed, he wanted to start the process of opening the accounts right away. But mentioned nothing about what he was going to do with the money. He ran through the fees, but gave us zero paperwork to view and discuss. This is when we pumped the brakes and said we need to take some time to decide if this is the best fit. My BS radar was starting to ring.

 

[Steve Tasker]

Thanks Sand. I may have to talk to someone else. The WF guy went from fact gathering to used car salesman pretty quick. I know we want to set up Roth's, but he started mentioning that he doesn't get paid unless the accounts are over $50k. This should have been obvious, since he had all of our financial information for nearly two weeks.

Once this was confirmed, he wanted to start the process of opening the accounts right away. But mentioned nothing about what he was going to do with the money. He ran through the fees, but gave us zero paperwork to view and discuss. This is when we pumped the brakes and said we need to take some time to decide if this is the best fit. My BS radar was starting to ring.

IMO, if you've got any shred of doubt, you shouldn't invest with the guy. There's nothing wrong with investing with a "guy" if you're not confident in your own abilities. In fact, I'd say that's an admirable quality, because a lot of people try to self-manage and have no idea what they're doing. The bottom line is that having a "guy" is going to cost you money. Obviously this isn't a surprise to you...but if you're going to have a financial advisor, you really need to trust in him. Just my two cents.

ETA - do you know any lawyers or accountants whom you trust? Or maybe a close friend who's very financially savvy? Ask them if they have anyone they could recommend.

 

[Doctor Detroit]

The TSP has an expense ratio of .027% which is 27 cents on every $1000. You aren't going to find that anywhere else and the options are just fine. The five funds track the S&P 500, the Dow Jones U.S. Completion Total Stock Market Index, the Barclays Capital U.S. Aggregate Bond Index, Morgan Stanley Capital International EAFE, and nonmarketable short-term U.S. Treasury security that is specially issued to the TSP. You also can do the life-cycle funds which has algorithms operate your investments for you based on age and time before retirement based on John Bogle's research in index tracking.

IMO if you have the TSP you max it out and max your Roths out before ever putting a dime elsewhere in the market. Screw having anyone manage my money when indexing has proven over time to be safer and usually more profitable.

 

[Dentist]

Thanks Sand. I may have to talk to someone else. The WF guy went from fact gathering to used car salesman pretty quick. I know we want to set up Roth's, but he started mentioning that he doesn't get paid unless the accounts are over $50k. This should have been obvious, since he had all of our financial information for nearly two weeks.

Once this was confirmed, he wanted to start the process of opening the accounts right away. But mentioned nothing about what he was going to do with the money. He ran through the fees, but gave us zero paperwork to view and discuss. This is when we pumped the brakes and said we need to take some time to decide if this is the best fit. My BS radar was starting to ring.

IMO, if you've got any shred of doubt, you shouldn't invest with the guy. There's nothing wrong with investing with a "guy" if you're not confident in your own abilities. In fact, I'd say that's an admirable quality, because a lot of people try to self-manage and have no idea what they're doing. The bottom line is that having a "guy" is going to cost you money. Obviously this isn't a surprise to you...but if you're going to have a financial advisor, you really need to trust in him. Just my two cents.

ETA - do you know any lawyers or accountants whom you trust? Or maybe a close friend who's very financially savvy? Ask them if they have anyone they could recommend.

Thanks Sand. I may have to talk to someone else. The WF guy went from fact gathering to used car salesman pretty quick. I know we want to set up Roth's, but he started mentioning that he doesn't get paid unless the accounts are over $50k. This should have been obvious, since he had all of our financial information for nearly two weeks.

Once this was confirmed, he wanted to start the process of opening the accounts right away. But mentioned nothing about what he was going to do with the money. He ran through the fees, but gave us zero paperwork to view and discuss. This is when we pumped the brakes and said we need to take some time to decide if this is the best fit. My BS radar was starting to ring.

IMO, if you've got any shred of doubt, you shouldn't invest with the guy. There's nothing wrong with investing with a "guy" if you're not confident in your own abilities. In fact, I'd say that's an admirable quality, because a lot of people try to self-manage and have no idea what they're doing. The bottom line is that having a "guy" is going to cost you money. Obviously this isn't a surprise to you...but if you're going to have a financial advisor, you really need to trust in him. Just my two cents.

ETA - do you know any lawyers or accountants whom you trust? Or maybe a close friend who's very financially savvy? Ask them if they have anyone they could recommend.

I understand being not confident, but I feel like some confidence could easily be gained by reading just one or two good personal finance/investing books.

And frankly if you are just smart enough to open a brokerage account and get a Vanguard Target Date Retirement Fund (or i-shares if you want an etf) that even something that simplistic is better than using an expensive "guy"

 

[NewlyRetired]

How many of you are managing all of your retirement plan?

I managed ours up until the day I retired and then we transitioned over to an adviser (mostly due to the bonds we wanted to get into).

 

[Binky The Doormat]

How many of you are managing all of your retirement plan?

I managed ours up until the day I retired and then we transitioned over to an adviser (mostly due to the bonds we wanted to get into).

Just the opposite. Consolidating most all of my stuff with Vanguard (post #1034). I am still transitioning prior holdings into Vanguard funds (and still keeping quite a few muni bonds I have - and got through and advisor) and have had a great experience. Their concierge service is very helpful and there are very good analysis and what if tools. I highly recommend it - and keeping a sizable chunk of money in my pocket instead of going to an advisor.

 

[Binky The Doormat]

Thanks Sand. I may have to talk to someone else. The WF guy went from fact gathering to used car salesman pretty quick. I know we want to set up Roth's, but he started mentioning that he doesn't get paid unless the accounts are over $50k. This should have been obvious, since he had all of our financial information for nearly two weeks.

Once this was confirmed, he wanted to start the process of opening the accounts right away. But mentioned nothing about what he was going to do with the money. He ran through the fees, but gave us zero paperwork to view and discuss. This is when we pumped the brakes and said we need to take some time to decide if this is the best fit. My BS radar was starting to ring.

i wish I had it do all over again. Go Vanguard funds aimed at long term growth and split in a couple funds - US and international. Read Bogelheads - you and me aren't beating the market and neither are the people pitching you.

 

[KCitons]

Dentist - this was my concern. He didn't give a breakdown of what he was going to do with any of the money we gave him. If he's just going to buy a mix of Vanguard and charge me a fee, I can do the same thing through my Wellstrade for much cheaper. I mentioned this twice during our conversation, basically I was treating it like a job interview. He dodged the question twice.

He didn't mention if he was opening an IRA, (separate of Roth's) but he mentioned it would be a joint account. This raised a flag due to the limits my wife may already reach with her TSP. If I'm correct she has a $17500 max this year. If she hits that max too early, she could lose the matching money from employer.

If it's not some type of IRA, then how is he going to offset gains when he feels the needs to make changes. He just wasn't very forthcoming.

This is where I'm at right now, if I handle this myself.

1 - Increase wife's contribution per paycheck to reach $17500 contribution by years end. (earmark $12k of savings to offset take home pay, as we can't make lump sum deposit)

2 - Start Roth IRA for both wife and myself with contributions for 2013/2014 (use $22k from savings)

3 - Start a Traditional IRA for myself. Assuming my max contribution is $17500. Not sure if I can contribute for 2013/2014? (use $17500 to $35k from savings)

after these three steps - we would have around $70-80k remaining. I could put $50k into Vanguard funds through my Wellstrade account. (as long as I don't need to sell, there will be minimum fees)

Going forward, we would divide contributions between Roth, Traditional, and Vanguard.

Binky - are you saying forego the Roth and Traditional and invest everything into Vanguard?

I should point out that my wife is going to be 50 next year, so she will have the catch up options available. I don't think I will be able to max out all of our IRA contributions each year.

 

[Binky The Doormat]

Dentist - this was my concern. He didn't give a breakdown of what he was going to do with any of the money we gave him. If he's just going to buy a mix of Vanguard and charge me a fee, I can do the same thing through my Wellstrade for much cheaper. I mentioned this twice during our conversation, basically I was treating it like a job interview. He dodged the question twice.

He didn't mention if he was opening an IRA, (separate of Roth's) but he mentioned it would be a joint account. This raised a flag due to the limits my wife may already reach with her TSP. If I'm correct she has a $17500 max this year. If she hits that max too early, she could lose the matching money from employer.

If it's not some type of IRA, then how is he going to offset gains when he feels the needs to make changes. He just wasn't very forthcoming.

This is where I'm at right now, if I handle this myself.

1 - Increase wife's contribution per paycheck to reach $17500 contribution by years end. (earmark $12k of savings to offset take home pay, as we can't make lump sum deposit)

2 - Start Roth IRA for both wife and myself with contributions for 2013/2014 (use $22k from savings)

3 - Start a Traditional IRA for myself. Assuming my max contribution is $17500. Not sure if I can contribute for 2013/2014? (use $17500 to $35k from savings)

after these three steps - we would have around $70-80k remaining. I could put $50k into Vanguard funds through my Wellstrade account. (as long as I don't need to sell, there will be minimum fees)

Going forward, we would divide contributions between Roth, Traditional, and Vanguard.

Binky - are you saying forego the Roth and Traditional and invest everything into Vanguard?

I should point out that my wife is going to be 50 next year, so she will have the catch up options available. I don't think I will be able to max out all of our IRA contributions each year.

I have both IRA and non-IRA holding accounts with Vanguard, I love the Roth IRA in addition to your work IRAs! You can just set up your Vanguard account as a Roth. Invest all you are allowed each year in that and then establish another account as a regular taxable account.

 

[NewlyRetired]

How many of you are managing all of your retirement plan?

I managed ours up until the day I retired and then we transitioned over to an adviser (mostly due to the bonds we wanted to get into).

Just the opposite. Consolidating most all of my stuff with Vanguard (post #1034). I am still transitioning prior holdings into Vanguard funds (and still keeping quite a few muni bonds I have - and got through and advisor) and have had a great experience. Their concierge service is very helpful and there are very good analysis and what if tools. I highly recommend it - and keeping a sizable chunk of money in my pocket instead of going to an advisor.

Yeah I think about it at times but things have been going well so I don't want to change.

I am paying ~1% in fees, but we also feel the advisor is probably doing at least 1% better than we could so it hopefully offsets.

 

[KCitons]

Thanks Binky.

Balco mentioned earlier that owning over $10k in Vanguard lowers the costs. Does it matter if I purchase them through Wellstrade or do I need to have a Vanguard account?

 

[wilked]

Question for the backdoor roth folks. Once I hit my income limit (2012), I stopped making contributions to my roth IRA, and switched to solely contributing to my 401k. Obviously, I didn't know about the backdoor at the time.

I have a Rollover IRA account from a previous companies 401k with about $30k in it. No principal has been added to the account since 2005. So my questions are:

1. Can I move any of the $30K from the regular Rollover IRA via the backdoor method?

2. I can still deposit the full $5000 before April 1 into the Rollever and then initiate the backdoor?

You are in the same position I am. Having that rollover IRA pretty much squashes the backdoor roth, from what I can tell

 

[wilked]

KCitons - what books have you read to help grow your knowledge base on retirement planning / investing? With hundreds of thousands of dollars (maybe millions?) at stake you must do some research