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Personal Finance Advice and Education! (15 Viewers)

FUBAR said:
 It's also my biggest gripe about Dave Ramsey (he uses 12% in his calculations)
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That's ####### insane.  For my retirement calcs I use 4% real return (return - inflation).  Even under the rosiest scenarios 7% real return is the top end.  Which, coincidentally, is what pension funds like CalPers uses.  And they're severely underfunded.

 
Sand said:
I think it calculates too high of balances than it should.  In other words, it's non-conservative.  I'd run your same case on firecalc and see what you get.
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Oh. You can adjust the calculations of the rate of return. I typically put a 5% pre-retirement return and 3% post.

 
NutterButter said:
Under summary -> Statements, put in a date range and it will tell you how you did.  14.4% last year.  Not too shabby.   One last time, thanks obama.  
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Assuming you are talking about the Summary tab.  If so, I do not see an option to enter a date range (only shows the 1 year rate of return under the tabs).  Welcome any help in finding this, as I would love to run it on each individual account.

 
eoMMan said:
Is it also assuming you'll need the exact same amount of income in retirement that you have now?
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No you can adjust that too so that if you estimate needing less or more income than you currently make, you can enter that as a %. I estimate needing about 60-65% income replacement, because my mortgage will be paid off and we won't be saving 30% of our paychecks anymore. But we'll also probably do a bit more traveling than we do now

 
Cjw_55106 said:
What is his justification for using 12%?
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http://www.daveramsey.com/blog/the-12-reality

percent—whether you first heard Dave mention it in the Financial Peace University or you read it on daveramsey.com, it was undoubtedly followed by questions.

But most of those questions boil down to two important ones: “Can I really get a 12% return on my mutual fund investments, even in today’s market?”and “If I can, what mutual funds should I choose?”


Where Does It Come From?


When Dave says you can expect to make 12% on your investments, he’s using a real number that’s based on the historical average annual return of the S&P 500. The S&P 500 gauges the performance of the stocks of the 500 largest, most stable companies in the Stock Exchange. It is often considered the most accurate measure of the stock market as a whole.The current average annual return from 1926, the year of the S&P’s inception, through 2011 is 11.69%.That’s a long look back, and most people aren’t interested in what happened in the market 80 years ago.
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I would like to talk savings for kids, in particular for college.  I'm aware of 529 plans, but I'm not sure which way to go.  I plan on putting aside $150/month for each kid (3 kids).  I live in Oklahoma which has an "OK" plan (it has annual fees .50% and higher closer to 18) and not sure it outweighs the tax benefits (roughly $200 total for each year).

 
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rascal said:
I would like to talk savings for kids, in particular for college.  I'm aware of 529 plans, but I'm not sure which way to go.  I plan on putting aside $150/month for each kid (3 kids).  I live in Oklahoma which has an "OK" plan (it has annual fees .50% and higher closer to 18) and not sure it outweighs the tax benefits (roughly $200 total for each year).
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How old are your kids?  529 accounts are very good for younger kids as there is more time for the tax benefits of untaxed appreciation.  Also, another benefit is you can use one kids account for one of your other kids college costs if they wind up getting a scholarship or do not go to college.

 
Don't Noonan said:
How old are your kids?  529 accounts are very good for younger kids as there is more time for the tax benefits of untaxed appreciation.  Also, another benefit is you can use one kids account for one of your other kids college costs if they wind up getting a scholarship or do not go to college.
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8, 2, and 2

 
rascal said:
I would like to talk savings for kids, in particular for college.  I'm aware of 529 plans, but I'm not sure which way to go.  I plan on putting aside $150/month for each kid (3 kids).  I live in Oklahoma which has an "OK" plan (it has annual fees .50% and higher closer to 18) and not sure it outweighs the tax benefits (roughly $200 total for each year).
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I guess that would depend on how much you plan to have in there.  I decided upon the new york plan which doesn't go above .16%.

http://www.savingforcollege.com/529_plan_details/index.php?page=plan_details&plan_id=37

Here's the exact fund option I chose

https://www.nysaves.org/nytpl/fund/details.cs?fundId=1003015

 
Re: 529s, keep in mind that each state's rules differ as to what state plans are tax-deductible.  Some states allow you to contribute to any state's 529 plan and take a deduction.  Some states, like NY for example, only allow a tax deduction if you contribute to that particular state's plan.  Check your state's rules before making a decision.

 
Steve Tasker said:
Re: 529s, keep in mind that each state's rules differ as to what state plans are tax-deductible.  Some states allow you to contribute to any state's 529 plan and take a deduction.  Some states, like NY for example, only allow a tax deduction if you contribute to that particular state's plan.  Check your state's rules before making a decision.
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Are you saying that's there's plans that allow you deduct from your state taxes even if you don't live in the state of the plan?

 
NutterButter said:
I guess that would depend on how much you plan to have in there.  I decided upon the new york plan which doesn't go above .16%.

http://www.savingforcollege.com/529_plan_details/index.php?page=plan_details&plan_id=37

Here's the exact fund option I chose

https://www.nysaves.org/nytpl/fund/details.cs?fundId=1003015
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NY gets a lot of love from sites that rank plans. Vanguard also runs the Nevada plan IIRC, and handful of other states invest in Vanguard funds. I picked Nevada in large part because I can manage that account within my existing Vanguard and it's just administratively more convenient. 

 
rascal said:
I would like to talk savings for kids, in particular for college.  I'm aware of 529 plans, but I'm not sure which way to go.  I plan on putting aside $150/month for each kid (3 kids).  I live in Oklahoma which has an "OK" plan (it has annual fees .50% and higher closer to 18) and not sure it outweighs the tax benefits (roughly $200 total for each year).
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Do you have your retirement covered?  General rule of thumb is not to allocate any $$ into 529 until you've satisfied your retirement contributions.  Thought process behind that is that you can always get scholarships and loans for school (if they even go to college)...can't do that for retirment.

 
Tiger Fan said:
Do you have your retirement covered?  General rule of thumb is not to allocate any $$ into 529 until you've satisfied your retirement contributions.  Thought process behind that is that you can always get scholarships and loans for school (if they even go to college)...can't do that for retirment.
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I've run simulations on Firecalc and I'm good.

 
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rascal said:
I've run simulations on Firecalc and I'm good.
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:thumbup:

I have twin boys (almost 6).  I max their 529s every month and each year check the balances to see if they're still in line with what I expect their college expenses to be when they turn 18.  I'm using LSU as my baseline, b/c there's probably the most likely place they would end up.  There's likely a chance when they're around 16 or so where I would have to pull back the contributions based on some assumed performance metrics...but you never know.

 
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NutterButter said:
Are you saying that's there's plans that allow you deduct from your state taxes even if you don't live in the state of the plan?
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Certain states used to allow deductions for contributions to any state's 529 plan.  I can't say I've researched this in recent years, so I don't know if that's still the case.

 
Going to a fee only planner the first week of February.  Full blown financial plan.  Getting out of the wealth adviser stuff with higher fees and just go Boglehead model with Vanguard Admiral Shares.

 
Tiger Fan said:
Do you have your retirement covered?  General rule of thumb is not to allocate any $$ into 529 until you've satisfied your retirement contributions.  Thought process behind that is that you can always get scholarships and loans for school (if they even go to college)...can't do that for retirment.
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what do you considered "covered" as it relates to retirement? 

 
Rick James said:
what do you considered "covered" as it relates to retirement? 
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I assume he meant, "Do you have a retirement plan that you are able to fully fund?"  His stance, which I agree with, is if you are not able to save for retirement at the appropriate amount, you shouldn't be putting money aside for a 529.

 
rascal said:
I assume he meant, "Do you have a retirement plan that you are able to fully fund?"  His stance, which I agree with, is if you are not able to save for retirement at the appropriate amount, you shouldn't be putting money aside for a 529.
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:goodposting:

 
Just to get an assessment of reputation, what do y'all think of Edward Jones?   I just applied to work with them. 

 
rascal said:
I assume he meant, "Do you have a retirement plan that you are able to fully fund?"  His stance, which I agree with, is if you are not able to save for retirement at the appropriate amount, you shouldn't be putting money aside for a 529.
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and I'm asking how to define "appropriate amount"

 
Rick James said:
and I'm asking how to define "appropriate amount"
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First, you need to find out how much you need to live on now.  I would then make a decision on whether you need that full amount when you retire, unlikely, or if you expect it to drop X%.  I assumed I would need 80% of my current life requirements when I retire (no kids, will have a smaller house, probably one car, etc).

Second, go to firecalc and enter in what you need from above, your retirement balance/inputs/etc and see what it tells you.

Third, if firecalc says you are good (FWIW, I have zero situations when my plan fails and in fact end up with a healthy balance at age 90) then drink a cold one.  If it doesn't, re-evaluate your plan.

Fourth, Consider some other major events (living to 100), reduced/no SS annuity, etc and see if your plan still works. 

 
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FUBAR said:
Just to get an assessment of reputation, what do y'all think of Edward Jones?   I just applied to work with them. 
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I've never had exposure to them, but everything I read is that they are salesmen first - putting folks in very high expense funds and raking in as much as possible.  I'm not sure if EJ has a reputation for "helping".  You can read up on bogleheads - the opinion there is pretty low.

 
Rick James said:
and I'm asking how to define "appropriate amount"
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My personal philosophy on this is:

After I am able to max out my 403b/401k, roth IRA, and HSAs if I go that route, THEN I can put any left over savings into something like a 529. 

Chances are, I am not going to pay for my kid's college.  A whole other discussion from other threads, but  barring lucrative scholarships, I will be heavily encouraging the kids to start at community college and not going into life ruining debt with a crapton of student loans.

 
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ghostguy123 said:
My personal philosophy on this is:

After I am able to max out my 403b/401k, roth IRA, and HSAs if I go that route, THEN I can put any left over savings into something like a 529. 

Chances are, I am not going to pay for my kid's college.  A whole other discussion from other threads, but  barring lucrative scholarships, I will be heavily encouraging the kids to start at community college and not going into life ruining debt with a crapton of student loans.
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Do you have kids?

I understand this is your personal philosophy, so who am I to poo poo on it, but others have mentioned similarly.  And I'm pretty adamantly opposed to this as the be all, end all advice.  I don't believe there is any one size fits all personal finance advice....but, allow me to retort, because I hate the old, you can't borrow for retirement adage.

First off, everyone that posts here is in different stages of life and make varying salaries.  I'm probably a little older than some in this thread.  I have a child in college now.  I have junior in high school and then one more to go.

I started saving for college for the oldest about 15 years ago, and I wish I had ramped up savings on each earlier and more when I had the chance.  College is EXPENSIVE and only going to get more pricey on down the line.  Further, in my humble opinion, a college education is the best option I can offer to hopefully propel my children on a successful, rewarding career (read, get them the hell out of my house).  Seriously though, you only have 18 or so years to save for college educations.  And in MOST cases even less because lets face it, young children are expensive - I know my day care costs during the summer where almost double my mortgage - so it's hard to be in a financial position to start diligently saving early on, which limits the amount of time to save even moreso.  That only allows you a modest window of say 12-15 years to HOPEFULLY catch a bull market and see a decent return on investment on these funds.

Now, I was lucky int hat my oldest is bright and received scholarships.  In fact, we were able to save enough for that one, that we'll have excess funds to bump on down to the younger two.  If I wasn't lucky with a decent market and scholarships, we certainly would have fallen short on one if not all 3, by a lot.

Also, while you can borrow for college, it is quite costly and burdensome to do so.  I did not want to hinder my children with anchors upon graduation, rather I wanted them to explore and find something rewarding (hopefully financially sooner rather than later).

I believe if it's within your means to save for retirement, you should also be saving for higher education if you have children.  As I mentioned the time constraints on being able to save for college, your time frame to invest for retirement is much longer, often times 30-40 years.  You receive a supplement in retirement in the form of social security.  And, while you can't BORROW for retirement, although there are financial tools available such as reverse mortgages that really can let you borrow for retirement without having to pay out, you can ALWAYS WORK LONGER.  I know that's a bad phrase around these parts, but that's life.  A child in my eyes, is a responsibility.  Not every child can, or should go to college, but that money doesn't just disappear if they choose not to (or maybe they do at a later date in time).  And while consumer debt is a huge concern, student debt is also a tremendous concern and most credit card debit goes hand in hand with tuition debt.

I'm pretty pro-college, I know, so this obviously has a slant to it, but I really hate people saying they are putting off college funding until they are able to max out that, or max out this, or whatever.  You should at the very least hit the minimum to receive the maximum employer match on a retirement plan.  But, you're doing your family and children a disservice by foregoing saving for their education.  Oftentimes people spend this money on vacations, new cars, bigger houses, etc...

I just say this, wait until that tuition bill(s) hits your door and hopefully you'll be able to help out significantly with this expense.  And like anything, starting early is always better.

Lastly, I'll just add, that while you can't borrow for retirement for the elventy billionth time, successful children have been helping parents for hundreds of years.  And I hope my children read this post in about 30 years from now.

g'luck

 
I own my home (400) and a rent house (200) outright. I own all my cars (60) and have no debt. I also have about 150 in 401k/Roth and add about 25 a year to those.

My wife and I are 61. We' probably semi-retire 67 and full retire at 70 or so.

I applied for a cash out loan on my home for 80% of value at 4.375 rate.My intention is to buy more real estate or other investments I think I will safely beat the the 4.375 and I also anticipate the normalization of interest rates in 5-7 years, meaning I would have the benefit of extremely cheap debt.

Thoughts?

 
cosjobs said:
I own my home (400) and a rent house (200) outright. I own all my cars (60) and have no debt. I also have about 150 in 401k/Roth and add about 25 a year to those.

My wife and I are 61. We' probably semi-retire 67 and full retire at 70 or so.

I applied for a cash out loan on my home for 80% of value at 4.375 rate.My intention is to buy more real estate or other investments I think I will safely beat the the 4.375 and I also anticipate the normalization of interest rates in 5-7 years, meaning I would have the benefit of extremely cheap debt.

Thoughts?
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Risky.  Not necessarily a bad plan but understand the risk. 

 
FUBAR said:
Risky.  Not necessarily a bad plan but understand the risk. 
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I'm leaning another rent house, but that sure does put me heavy in real estate. It just seems safer/more secure to me.

It would essentially be the same as taking a note to buy the rent house, but getting a big discount on the rate.

 
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cosjobs said:
I'm leaning another rent house, but that sure does put me heavy in real estate. It just seems safer/more secure to me.

It would essentially be the same as taking a note to buy the rent house, but getting a big discount on the rate.
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IMO, it's not.  Austin has been pretty hot as of late, yes?  Has it seen a lot of appreciation?  If housing tanks as the Fed raises rates do you know how much the Austin market is set to lose?  More importantly can you get into a property that will allow you to cover this debt and then some to provide income? All real estate is local, so these questions are really tough to answer without local knowledge.  I throw them out as they need to be answered for your particular situation.

 
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guru_007 said:
Do you have kids?

Lastly, I'll just add, that while you can't borrow for retirement for the elventy billionth time, successful children have been helping parents for hundreds of years.  And I hope my children read this post in about 30 years from now.

g'luck
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Yes, I do, and banking on your kids to help you out in retirement isn't the best move IMO.

As for my own person way to go about this, yes, I will max things out for myself and my wife before we would do a college account.  However, keep in mind that if you go this route there is nothing keeping you from helping them out along the way if you can. 

 
Sand said:
IMO, it's not.  Austin has been pretty hot as of late, yes?  Has it seen a lot of appreciation?  If housing tanks as the Fed raises rates do you know how much the Austin market is set to lose?  More importantly can you get into a property that will allow you to cover this debt and then some to provide income? All real estate is local, so these questions are really tough to answer without local knowledge.  I throw them out as they need to be answered for your particular situation.
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Where would be the safest place to park it and not get killed on holding costs until CDs are paying 12%

 
cosjobs said:
Where would be the safest place to park it and not get killed on holding costs until CDs are paying 12%
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Here is you when CDs hit 12%.  

Seriously, this is why we've seen some segments go up drastically - REITs, utilities, junk bonds, etc.  Everyone is stretching for yields.  There really is no safe place for a high yield.  The safest place with yield for capital preservation is likely municipal bonds (MUB).  You still have interest rate risk, though.  There are term limited funds out there that have a definitive end date, but whether they are at reasonable prices or not I don't know offhand.

 
There's some posts in the thread about 401k contribution strategy but for the life of me I can't find it. Had to do with spreading the contribution so you would not hit the max and max it out early in the year. Can somebody point me in the right direction?  I've tried doing searches but not having any luck.

 
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AAABatteries said:
There's some posts in the thread about 401k contribution strategy but for the life of me I can't find it. Had to do with spreading the contribution so you would not hit the max and max it out early in the year. Can somebody point me in the right direction?  I've tried doing searches but not having any luck.
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Not sure about the post, but we use Fidelity through work and there's a simple calculator on there to help you take out the exact amount per pay check so you end up hitting the max at the end of the year.  Obviously could be a little tricky with variable pay, but you might want to check and see with your provider.

 
AAABatteries said:
There's some posts in the thread about 401k contribution strategy but for the life of me I can't find it. Had to do with spreading the contribution so you would not hit the max and max it out early in the year. Can somebody point me in the right direction?  I've tried doing searches but not having any luck.
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http://www.doughroller.net/retirement-planning/should-you-max-out-your-401k-early-in-the-year/

Basically it depends on how your plan is administered.  If you do max out early, one thing i like to do is just route that extra amount to savings or my index funds, vacation fund, etc.  I know last year i maxed out around September.  So i need to look into this with my plan as well. 

 
I'm finally at the point where I've maxed out my other financial options and now have excess funds - nothing much, a modest amount - to invest in the market in a regular ol' taxable brokerage account.  My general strategy is low maintenance buy-and-hold; I don't anticipate frequent trading or anything like that.  I will be investing in Vanguard funds/ETFs.

I have my Roth through Vanguard.  I've never had a problem with their service, but I don't really do much there other than making an annual contribution (or setting up weekly contributions) and an occasional rebalance.

Is there any reason I should use another brokerage for these investments other than Vanguard itself?  I think Dentist talks about Merrill Lynch, but I suspect he has a lot more money and trades more regularly than I would anticipate.  What do you guys use, if not directly through Vanguard?  I've heard decent things about TD Ameritrade too, at times.

 
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Steve Tasker said:
I'm finally at the point where I've maxed out my other financial options and now have excess funds - nothing much, a modest amount - to invest in the market in a regular ol' taxable brokerage account.  My general strategy is low maintenance buy-and-hold; I don't anticipate frequent trading or anything like that.  I will be investing in Vanguard funds/ETFs.

I have my Roth through Vanguard.  I've never had a problem with their service, but I don't really do much there other than making an annual contribution (or setting up weekly contributions) and an occasional rebalance.

Is there any reason I should use another brokerage for these investments other than Vanguard itself?  I think Dentist talks about Merrill Lynch, but I suspect he has a lot more money and trades more regularly than I would anticipate.  What do you guys use, if not directly through Vanguard?  I've heard decent things about TD Ameritrade too, at times.




 
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No, just use Vanguard.

 
Steve Tasker said:
I'm finally at the point where I've maxed out my other financial options and now have excess funds - nothing much, a modest amount - to invest in the market in a regular ol' taxable brokerage account.  My general strategy is low maintenance buy-and-hold; I don't anticipate frequent trading or anything like that.  I will be investing in Vanguard funds/ETFs.

I have my Roth through Vanguard.  I've never had a problem with their service, but I don't really do much there other than making an annual contribution (or setting up weekly contributions) and an occasional rebalance.

Is there any reason I should use another brokerage for these investments other than Vanguard itself?  I think Dentist talks about Merrill Lynch, but I suspect he has a lot more money and trades more regularly than I would anticipate.  What do you guys use, if not directly through Vanguard?  I've heard decent things about TD Ameritrade too, at times.
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I'm in the same boat, and am looking to diversify into some rental property (plan is to start really small).

 
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