yeap, got a target 2040 retirement fund with vanguard for my wife and a target 2050 retirement fund with T Rowe Price for myself. haven't been able to put in as much as I want, but focusing on getting rid of my loans first.
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Personal Finance Advice and Education! (8 Viewers)
- Thread starter No. 16
- Start date
ghostguy123
Footballguy
Well right now I am putting I think 12% of my pay into Fidelity. Been doing that a few years. Unfortunately they only match half what you put in, up to 6% (so if you put in 12%, they only give you 3%).
I would just like to get the money into something that looks the best for around 2040 or 2045, something I don't need to pay attention to.
That's why I put it in that fund to begin with.
I would just like to get the money into something that looks the best for around 2040 or 2045, something I don't need to pay attention to.
That's why I put it in that fund to begin with.
Andrew74
Footballguy
If you don't want to have to think about your investment mix, a target date fund is nice as it adjusts the mix to a more conservative stance as you age. You should check how the fund's mix changes as you near the target date (what they'll call the glide path) to make sure you understand how much equity risk you'll take at the "retirement date". You can then buy a shorter or longer fund if it is too aggressive/not aggressive enough.
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ghostguy123
Footballguy
Yeah I see that the funds get less risky as time goes on and it nears the target date.
I definitely don't mind the risk for now, since I don't plan to touch it for quite a while and can withstand the ups and downs.
The 2040 fund seems logical since that is the year I turn 60. Will I retire by then?? Who the F knows. Hell, 25 years from now most people might not even be able to retire until they literally can't work anymore.
No. 16
Footballguy
So 4 years after starting this thread looks I'm in need of some help. The marriage, house, and kids that I had planned went out the window with Alyssa. In that time I have saved about 60k in cash and blown the rest on ####### women and abusing substances.
In the past 6 months I took a permanent position so now I have benefits (at the cost of schedule flexibility and take home wages)! I work for the government so they take money pre-tax for a pension plan. My pension if I stay with the county will be 2% x Years of service of my last 3 avg years salary (Work 30 years, last 3 years avg = $100,000, get 60,000 per year). I don't know if I will stay with the county for my entire career but it's part of the benefit package so nothing I can really do about that.
However, I do have a question about what more can I be doing. The county offers a deferred compensation plan (457) which is basically like a 401k (tax-deferred, $17,500 contributions per year), with the main difference being no penalty for taking out money before 70 or whatever it is with a 401k. I have also yet to start a Roth IRA and my income level still qualifies for max contributions.
I still want to eventually buy a home or condo, but prices right now in the Bay Area are crazy.
So basically in what order should I fund these options? Do I start a Roth only? Contribute to both? Any suggestions? Thanks.
In the past 6 months I took a permanent position so now I have benefits (at the cost of schedule flexibility and take home wages)! I work for the government so they take money pre-tax for a pension plan. My pension if I stay with the county will be 2% x Years of service of my last 3 avg years salary (Work 30 years, last 3 years avg = $100,000, get 60,000 per year). I don't know if I will stay with the county for my entire career but it's part of the benefit package so nothing I can really do about that.
However, I do have a question about what more can I be doing. The county offers a deferred compensation plan (457) which is basically like a 401k (tax-deferred, $17,500 contributions per year), with the main difference being no penalty for taking out money before 70 or whatever it is with a 401k. I have also yet to start a Roth IRA and my income level still qualifies for max contributions.
I still want to eventually buy a home or condo, but prices right now in the Bay Area are crazy.
So basically in what order should I fund these options? Do I start a Roth only? Contribute to both? Any suggestions? Thanks.
proteus126
Footballguy
You are penalized for early withdrawal from a 401k plan under 59 1/2 years, not 70. At 70 you must begin taking distributions from your 401k or you get penalized. No difference between the 401k and the 457 that I can tell, really.
1. Secure the maximum employer matching contributions to your 401/457 type plan, if any. My employer matches 5%, so I would be an idiot not to invest at least 5% to get their full match. Free money.
2. Fully fund your Roth, and make sure that your investment is targeted for growth (risk) since all gains are tax free.
3. If you still have spare cash flow, up your contribution to your 401/457 plan. I invest 10%, putting me at a 15% fund rate adding my employer match. That is sufficient.
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if you are 30 or younger, steps 1-3 above will ensure that you have enough for retirement at age 60 even without your pension
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4. Accumulate enough cash to be able to pay 20% down on your home purchase
5. Buy the home when steps 1-4 are done and you can still afford to make mortgage payments.
6. If anything is left over, open an investment account (like Vanguard) and begin making monthly contributions to one of their low-fee index funds - this will grow wealth that can be used to cover the gap between retirement and when you start hitting your 457 and Roth IRAs, or to allow you to defer Social Security for a few years in order to increase your monthly payment once you do start collecting. If you prioritize home purchase over this, you may not be in a financial position to get this going for quite a while yet. If so, so be it.
Having a 60% of your high-3 pension is invaluable for retirement. Keep the job and work to full retirement unless you hate the job.
-Will
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You could fund the 401k and 457 and really crush your tax liability. Check this guy out: http://rootofgood.com/make-six-figure-income-pay-no-tax/
proteus126
Footballguy
How old are you?
My following answers assume that you are in the neighborhood of 30 years old:
"Yes", ignore step 1.
"Absolutely" to fully funding the Roth.
"Probably" to putting the max in the 457.
Why not a "Yes" for the last one? The max for Roth is $5500, which means if both the Roth and the 457 are maxed you are squirreling away $23k each year, building a massive IRA balance that you can't get at until you are 60. At first that gives me pause. Especially given that you will have a nice retirement income. You might want part of that money invested in a non-IRA so you can get at it at your discretion. Say if you want to retire at 55, defer your retirement benefits until age 60+, and need money to cover the gap. Hard to answer unless you really think about what your likely major life events will be.
However, since most people are financially irresponsible (including me), yeah, you might want to just err on the side of maxing the 457. At least for the first 5 to 10 years - that money grows the most by the time you are 60. Maybe max it out for a while and then drop back to $10k / year down the road, and start building up the investment account instead. Maxing out trains you to get by on a smaller income. Yes - people can and do go too far. Re-evaluate in 5 years, would be my suggestion.
-Will
sbonomo
Footballguy
It is amazing to me how much i get taxed. I don't qualify for the majority of these savings (i make more than 150k per year so there the majority of these savings go away for me) nor am i able to take advantage of retirement instruments outside of my 401k. Boohoo to me i assume, it just seems so unequitable for anyone that is at the bottom of the AMT range.
Grahamburn
Footballguy
sbonomo
Footballguy
Wow because of this thread I found out my wife has a 457 she can contribute to. Is there any downside? Seems like it can be an emergency fund as well since there is no penalty for taking the money out. This should help keep us in the roth/ no amt agi range. Assuming no crazy deductions, the AMT usually kicks in around $180k if filling jointly?
Rick James
Footballguy
how hard would it be to roll over a 403(b) into a 401(k)? Different companies.
It depends. First, 403b can't be rolled over unless the employee has separated from service. If so, then the new 401k has to allow for incoming transfers. If those conditions are met it shouldn't be too hard.
proteus126
Footballguy
I don't have any familiarity with other vendors. I've heard people mention Schwab, but I have no experience with them.
I'm sure you could satisfy your curiosity via Googling various questions.
For your second question, I don't know how Vanguard designates accounts or what that might mean. I own an investment account. My Roth is with someone else. If you are setting up a Roth with Vanguard then by definition that is a "retirement account", I guess.
The real question is what you actually invest in. I'm assuming Vanguard would allow you to invest your Roth money in a variety of mutual funds. VFINX is their S&P 500 Index fund, with a 0.17% expense ratio, which is a good place to start looking. Up 11% per year since inception in 1976, pretty much just like the S&P 500 growth over that time. Or try the Target Retirement 2050 fund, where they start you off aggressively invested and over the years rebalance the fund to become more conservative to protect your wealth. Since you are 30 years from retirement you can afford to be aggressive.
-Will
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A lot of the best/lowest cost mutual funds are managed by Vanguard so if you want to invest in their stuff it makes a ton of sense to just open an account with them and avoid the transaction fees you'd have to pay with other brokerages. For example, if I want to buy VFINX in my Scottrade account, there's a $17 transaction fee.
When I set up my IRA many years ago I did so at Scottrade because I wanted to invest in individual stocks and they had the lowest transaction fees for company stocks at the time. Now I think the fees for those transactions are basically the same across a number of brokerages, and in fact Vanguard gives you X number of free trades if you have Y invested with them, IIRC. I should probably consolidate my accounts there but I don't really want to deal with the paperwork.
Dentist
***Official FBG Dentist***
i think you have this all wrong. my knowledge of these accounts is that they are generally invested in things with high fees and loads, there is a penalty for withdrawl, etc.
double check
It really depends on who you work for as these are plans for government employees. Generally, 457 plans are very good investment vehicles. They shouldn't have any sales loads, They often have nice investment choices, and there aren't back end loads. On occasion, though, you may find smaller units of government where a friend of the head guy set the plan up. So it does pay to check what you are being offered, but in general they are good deals. In addition, they don't count as a salary reduction so they can be done on top of other retirement plans allowing for some very large annual contributions to be made.
This is what I thought. Shes a public school teacher so a large group. I'll check on the investment vehicles before we start. I probably won't start with it for another few years, but it seems like a great way to lower AGI, and can almost serve as an emergency fund if the no penalty thing is true.
Dentist
***Official FBG Dentist***
my wife was a teacher and the investment options were nothing but life insurance companies with variable annuities
I made that horrible mistake once... and am stuck in one at work... i'd rather not invest than open another one of those plans
Dentist
***Official FBG Dentist***
I have a question.. and I hope wilked sees this, but am open to input from anyone.
So.. most of us know that Index fund investing is the way to go.
HOwever, these days there are like a thousand different stock indexes
S&P 500
Dow 30
EAFE this or that
Wilshire 5000
FTSE this or that
Russell 2000, 3000, 1000
S&P midcap 600
some bond index
I'm sure there are better and worse indexes out there to follow... as in not all index funds are created equally.
What is the best index to follow for your domestic stock needs, international stock needs, small cap/mid cap stock needs, bond needs, etc.
I figure fees can't be the only thing that determine what index fund to choose... after all once you get below 20bps we're splitting hairs between 9 bps and 18 bps.. so that's not a good way to pick a fund.
So.. most of us know that Index fund investing is the way to go.
HOwever, these days there are like a thousand different stock indexes
S&P 500
Dow 30
EAFE this or that
Wilshire 5000
FTSE this or that
Russell 2000, 3000, 1000
S&P midcap 600
some bond index
I'm sure there are better and worse indexes out there to follow... as in not all index funds are created equally.
What is the best index to follow for your domestic stock needs, international stock needs, small cap/mid cap stock needs, bond needs, etc.
I figure fees can't be the only thing that determine what index fund to choose... after all once you get below 20bps we're splitting hairs between 9 bps and 18 bps.. so that's not a good way to pick a fund.
No. 16
Footballguy
That's actually what I was asking. It probably is better to pick your own funds, but the Target Retirement funds are intriguing to me. I understand the general principles, but again why not trust people who do this for a living especially since since we're talking about mutual funds vs. stock picking.
403b plans are also known as TSAs or tax sheltered annuities. When they first came about annuities were the only option to invest in, and fixed annuities at that. A school district that doesn't offer mutual funds as an option is not doing their employees any favors. Annuities have their place, but in general not within a 403b plan. But why are you stuck in one at work?
They do not have the penalty for early withdrawal but you will still owe income tax. It's great when a district offers this plan.
Any tsp contributors out there? Got a raise and want to increase to 10%. Ive been fully 401k, but not sure if I should, or how much, put into the Roth 401. I expect to stay in the same tax bracket.
Also, what funds are people in? Ive been in 2050, more aggressive, but its been pretty average compared to c and s funds.
Also, what funds are people in? Ive been in 2050, more aggressive, but its been pretty average compared to c and s funds.
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Dentist
***Official FBG Dentist***
The American Dental Association plan that my employer signed us up for years ago is with AXA Equitable.
Fortunately because of the size of the plan the costs aren't as bad as they could be.
But I still pay 0.38% for the most basic s&p 500 fund and then on top of that there is the dreaded "mortality risk" % that's added on for another 0.5% because it's a variable annuity
so basically I'm stuck paying nearly a full 1% no matter what I do....
Again, this is hardly tragic... but if I wanted my money out I'd be subject to a 5% forfeiture fee on top of any taxes and other BS
The bottom line is that you should never invest any money with life insurance companies.
My wife's life insurance company for part of her 403B has a 1% risk and mortality expense and charges 0.5% for the s&p 500 fund.. so i'm dinged for 1.5% before I even get started in that account.. with no match.
We quickly switched to another company with that one.
dino259
Footballguy
Might want to think about going to your own Ira account. This would give more flexibility than being stuck with the company's 401k options and fees. And if you change jobs again you would have to roll it over again.
proteus126
Footballguy
Get the agency Max of 5% first by investing at least 5% in the TSP. Then max the Roth. Then increase your TSP contribution to 10%. If you can afford it, then increase TSP to 15%.
I'm in the TSP. I'm 44, and have been a Fed since age 30. I contribute 10%, with the agency matching the first 5%, for a total of 15%.
Previously I was with a contracting company that only matched 1.5%. So from age 21 to 30 I was contributing to that 401k 15% and they added their measly 1.5%.
Overall, there has been a consistent flow of 15% of my gross income to a 401k style retirement plan. Based on the performance from 1992 to now I feel that I have contributed adequately to be able to fund a retirement beginning at around age 57, assuming Social Security and FERS income in retirement. Had I only invested 5% (feds matching another 5%) in the ages 30-44, I think I would feel more comfortable delaying retirement about 2-3 years.
If you are under 30 and can afford it, I'd try to put as much into the Roth and TSP 401k as I could. Those early contributions dominate final performance. 8% return over 30 years will multiply that early money by a factor of 10.
In the TSP, I have been generally allocated 70% to the C fund (S&P 500) and 15% each to the S and I funds (small cap, international). I have never invested in one of the lifecycle funds, and certainly not the F or G funds, because I have preferred to be more aggressive. Now that I am about 13 years from retirement I am contemplating moving it all to the 2030 or 2040 fund - to get some income protection. If I chose 2040 over the 2030 it would be to stay on the aggressive side. I feel comfortable staying aggressive because I have also built up a solid investment account, have significant home equity, and have the FERS retirement as well as Social Security to provide good retirement income. You have to set your aggression level based on those kinds of considerations.
My Roth was established before the feds offered one, so I fund that a la carte. And that is my #1 priority after securing the Federal 5% match.
Regarding which Fed fund to invest in, in general, you can't go wrong if you dump it all into your age-appropriate lifecycle fund. But yes, it will underperform the C fund over the years. But with the C fund you can get caught with your pants down if you stick with it all the way to the end.
Random
Footballguy
I set one up for my wife (teacher) a few years ago, and they let me pick where to set it up. Ours is at Vanguard.
Posting by phone so excuse the typos. I about to be 35 and have 1.5 times my salary in my tsp.
So 5% in traditional tsp and 5% in Roth tsp. Not sure how agency contribution works with that (splits, first 5%, or how I tell it).
sbonomo
Footballguy
This thread has some great info thanks. Quick question, my wife works at a part time job that offers no 401k. I make over 200k per year (promise not a look at me). How can I get her more pre tax savings outside of her IRA? We have historically filed jointly which I think will change this year (first year she has worked) if that helps.
Sweet, I'm going to look into what is offered. I will be forced to sell stock options in a few years, so if we can get extra money in pretax somewhere it can really help keep the agi down.
Chadstroma
Footballguy
I am not exactly expert level on this but one thought is do you and/or wife work offer HSA's with insurance? If so, you can max out the contributions there. In retirement, you can use the HSA for your retirement medical expenses so it becomes a specialized retirement account (assuming you don't end up needing before retirement). For a family, I believe the max contribution is something around $6,500 a yr.
sbonomo
Footballguy
I make too much at my employer and my wifes "job" does not offer. Job = works at a yoga studio 20-25 hours per week.
xulf
Footballguy
Otis
Footballguy
God I'm so bad at money. I made a crapload this year and still somehow am behind the 8 ball. Bought a new and pricey home and did a lot more work on it then we intended and didn't track it all well. I pay estimated taxes and didn't plan well enough for that either. I bet I am worse with money than anyone else on this whole board. Dead last. Srsly. I will challenge all comers!!
sbonomo
Footballguy
no it actually pisses me off. "Dink's" are supposed to have dual incomes.... Not yoga passes..I have been trying to get her to work for years.
Chadstroma
Footballguy
I am not 100% sure (again, this is not my exact area) but I am pretty sure there is not. The only prerequisite that I know of is that your insurance plan is a high deductible insurance. Beyond that there is a limit on how much you can contribute- $3000 for an individual and $6500 for family (or something close to that). I am pretty sure that you can open an HSA on your own as well even if your company does not offer one.
Chadstroma
Footballguy
I have seen it over and over and over again of people who know how to make money but have no idea how to manage it. This is especially true (in my experience) of lawyers but professionals in general. Though I have never seen an engineer who was a mess.
For most of them, I think the problem is the 'keeping up with the Joneses' in having to have the expensive cars, clothes, home, etc. Second biggest problem behind that is time and focus- they are spending so much time making the money that there is not much left over to take care of the mundane things like actually paying bills on time.
Random
Footballguy
Grahamburn
Footballguy
Bumped up the 401(k) contribution for 2015. Should be retired in no time. 
bushdocda
Footballguy
Thoughts on exercising vested stock shares versus holding them ? We have to sell to cover taxes no matter what and my thoughts are to monetize the full vested quantity each year during the exercise period given a favorable share price and given that more shares vest each year.
Am I off in my thinking that I should sell and reinvest for diversification out of the company stock which we will continue to vest in and accumulate a small amount annually via ESPP?
Past few years we sold to use proceeds to buy our home so this is the first year we don't have a use for the funds yet?
Other info- maxing 401ks, not funding IRAs from old 401ks each year (will commence this year). IRAs and 401k in your standard mix of mutual funds so I don't necessarily want to just buy more mutual funds with the stock proceeds but I'm also seeking cautious growth. Or a boat.
Thanks in advance for any input.
Am I off in my thinking that I should sell and reinvest for diversification out of the company stock which we will continue to vest in and accumulate a small amount annually via ESPP?
Past few years we sold to use proceeds to buy our home so this is the first year we don't have a use for the funds yet?
Other info- maxing 401ks, not funding IRAs from old 401ks each year (will commence this year). IRAs and 401k in your standard mix of mutual funds so I don't necessarily want to just buy more mutual funds with the stock proceeds but I'm also seeking cautious growth. Or a boat.
Thanks in advance for any input.
Dentist
***Official FBG Dentist***
Did you ever read millionaire next door?
I'd argue I might be nearly as borderline dysfunctional on the hoarding side.
I don't know many people with a healthy relationship with money, it's either to loose or too tight. With the far worse and more prevalent problem being too loose.
