http://thewolfweb.com/message_topic.aspx?topic=634591

1/2/2014 11:19:08 AM

28 years old

$43,330.97 in 401k equivilent (Thrift Savings Plan); contribution capped

Personal Investment Performance (PIP) for the past 12 months ending 11/30/2013 is 30.76%.

Expected Balance in 2033 (first year eligible for retirement in 2013 dollars): $975,792.00

Monthly Pension if I retire when eligible in 2033 (in 2013 dollars): $1,483.00
Monthly Pension if I retire when 63 (in 2013 dollars): $2,583.00

Current cash assets: $27,000+
Mortgage: $140,000 (paid ~25,000 towards principal)
Current non-employment related investments: $50,000+
Student loans: PAID
Car: PAID

not too bad for 5 years of work

1/2/2014 11:27:29 AM

Nice! And since no one reads the last post

Personal Rate of Return from 01/01/2013 to 12/31/2013 is 30.1%

1/2/2014 11:32:48 AM

I might be hitting up this thread in about a month after I'm done with my taxes. It's the biggest year I've had with my business and I want to start looking at more investment options.

Right now, at 30, I'm sitting with:

- $35k+ in a Roth IRA
- $20k in cash (saving and checking)
- $50k in grad school loans left
- $237k mortgage (about $30k paid)

I think that's it. I hate my student loans, but oh well. Mortgage is high, but the housing in my area has boomed since I purchased. Similar houses are going for close to $300k right now. Hopefully I'm going to have at least $20k to play with after taxes. Not really sure which direction to head.

1/2/2014 12:40:34 PM

Why so much cash on hand?
Do you guys have families or something?

1/2/2014 12:42:13 PM

I have a checking account that pays 3.99% APY on up to $25,000, so I keep that much in the bank as a "low risk" investment (pays better than government bonds, CDs, etc); the other 2K or so is my "go bag" money.

1/2/2014 12:53:39 PM

Even though I've cut down on my cash over the past several years, I still keep too much cash out myself as well. Just conservative with my emergency fund I guess. That's not bad with the 3.99% checking though. My emergency fund is mainly just in a Money Market and then I keep enough to pay bills in my checking account. I do keep more than I really need to probably in our emergency fund. We're just already investing so much each money I start to get weary of being too exposed.


[Edited on January 2, 2014 at 1:05 PM. Reason : ]

1/2/2014 12:54:56 PM

yeah, I figure it's pretty good having 25K in fluid assets with immediate access that I can get 3.99% on; I'm pretty conservative with "emergency funds" too since I'm used to growing up poor, so I like being able to have that money for a just-in-case situation. everything else I'm invested in is high risk, including my TSP (currently 50% S Fund, 50% C Fund), since I'm looking to be in the market long-term

1/2/2014 1:02:29 PM

Similar to how I am too. The stuff I do have invested is all high risk/stock heavy. And truthfully, at this point I invest to the point that nothing is "left" over anymore. So I stopped building the cash fund awhile go. After 401ks, Roth IRAs, and then monthly expenses and taxes, everything else gets funneled into investments. So, I have totally changed my mindset there, but it's the cash I already built-up and saved that I haven't whittled down as much and keep similar numbers to you in terms of cash on hand.

[Edited on January 2, 2014 at 1:08 PM. Reason : ]

1/2/2014 1:08:12 PM

Quote :

"Why so much cash on hand?"

(1) I don't know what to do with it...there's where you guys come in

and...

(2) My business can be up and down. I'm terrified of having a bad 6-12 months and getting penalized for going into my investments to pay mortgage/loans.

I didn't grow up with a lot of money, so I'm kind of scared to use it. Sounds bad...but its the truth.

1/2/2014 1:31:58 PM

Yeah, if your income fluctuates a ton I can certainly understand.
How'd you get 3.99% money market?

[Edited on January 2, 2014 at 2:35 PM. Reason : ]

1/2/2014 2:34:45 PM

it's one of those "have direct deposit, electronic statements, and perform 10 debit transactions a month" kind of checking accounts; I use the debit card to get a cheeseburger a few times a week to hit the 10 transactions, and everything else just kinda happens. if I didn't meet the requirements, the interest is something like .10 APY or something pitiful.

1/2/2014 3:58:49 PM

Link?

1/2/2014 4:38:40 PM

https://www.community1.com/pg_View.aspx?PageID=586

I don't know if they offer the 3.99 to new customers though; I've had an account with them since I was 13. it used to be over 4%, but they dropped it a year or so ago. I think it was 2.50 or something like that for new accounts. I can't see where they claim what the rate is now, it used to be on that page. I only know I'm still getting it because I see the interest deposit in my account every month

1/2/2014 5:04:31 PM

What's everyone's thoughts on Roth vs traditional 401k? My marginal federal tax rate is 25%, and I'm not at the contribution limit yet. Last year I did 6% traditional. I think a blend of traditional and Roth may be wise, because it won't be subjected to required minimum distributions (though Roth 401ks are, but I plan to roll over into an IRA when its possible, which have no RMDs).

Does anyone have any suggestions on benefits/detriment?

1/4/2014 10:51:56 PM

I have a Roth 401k with work and a Roth IRA that I fund on my own (as well as some miscl. stocks). Being young I don't see much benefit using a traditional rather than a Roth.

1/5/2014 5:39:49 PM

But if you're not maxing out the 401k you can contribute more, save the taxes at the marginal rate, and then pay taxes later... Which the aggregate tax at current tiers would take quit a bit of income to meet your current marginal rate.

There is a benefit to traditional, but I think there's also benefit to having some money that won't be subject to RMDs

1/6/2014 1:22:54 AM

Quote :

"I have a Roth 401k with work and a Roth IRA that I fund on my own (as well as some miscl. stocks). Being young I don't see much benefit using a traditional rather than a Roth."

Ditto.

Quote :

"But if you're not maxing out the 401k you can contribute more"

I don't really see how this is beneficial.

1/6/2014 9:45:43 AM

Just started looking at Future Advisor. Did you adjust much based on what it told you? The "benchmark" they show vs my portfolio is consistently fairly impressive gains over the past 5 years considering I have been very happy with how I did on my own. But I'm not sure how much I really want to mix up since I've had a pretty good system (also, I am not looking to sell a bunch of stuff to re-balance right now after just doing some re-balancing at the end of the year)

(although, I don't have my 401k added yet because I'm still trying to see if I can add mine)

[Edited on January 6, 2014 at 10:16 AM. Reason : ]

1/6/2014 10:09:22 AM

I never signed up for future adviser. Do you think it's worth it?

1/6/2014 10:19:39 AM

hard to say. I will mess around with it some more and let you know. It's free unless you want to actively do anything via that account so I don't see why it wouldn't be worth poking around at least and just seeing what they say/ let them poke holes in your setup. One of the things I am struggling with right now on their site is that it is duplicating my Vanguard taxable account because my wife's Vanguard account links to it as well (I guess just via a beneficiary...I don't see it on Vanguard's site when I log in). So I think that screws with their diversity calculation some.

The biggest changes they recommended for me were:

-Your recommended actions increase exposure to REITs. (I have none directly)
-Your recommended actions protect you against unexpected inflation by increasing your exposure to Treasury Inflation Protected Securities. (I have none directly).
-Increase holdings in Small Cap & Value Funds

For reference, I simplified my accounts awhile back and for the most part have had:

VTSAX Vanguard Total Stock Market Index Fund Admiral Shares
VTIAX Vanguard Total International Stock Index Fund Admiral Shares
VSGAX Vanguard Small-Cap Growth Index Fund Admiral
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares

a mixture of smaller things I "play" with at Etrade

then Vanguard Target Retirement 2050 for both our Roths and a similar holding in my company's 401k.

While I wouldn't totally go against my strategy and make all their changes, it is at least interesting to see their feedback on what I should be exposed to more and I'd at least consider putting some more money in the 3 areas they recommended.

[Edited on January 6, 2014 at 10:37 AM. Reason : ]

1/6/2014 10:22:21 AM

Bonds eh.....

1/6/2014 11:15:04 AM

Quote :

"I don't really see how this is beneficial."

Because the traditional distributions could be taxed at a lower overall rate... Ie, if you make 75k now, the tax sheltering of traditional is 25%... But if you took even a 90k distribution in retirement, the whole thing won't be taxed at a full 25%, due to the progressive structure. I think you'd have to exceed 100k for that to happen.

If the aggregate rate at retirement is 25% its a wash, lower traditional is be best, higher, Roth is best.

Edit: here's some numbers... for a single person, at current brackets, a 125k distribution pays a tax bill of roughly 22.5%. So if you save 12.5k this year on a traditional basis, say its worth ten times as much at retirement. 125k, turns a tax bill of 22.5% of that, leaving you with $96,875 (married it'd be like $101k). That same money on a roth basis would be something like $9375. Same returns gives you $93750 tax free... Looks like a pretty clear benefit.


The issue for me is deferring distributions, so I want a portion to be Roth. How much I'm not sure.



[Edited on January 6, 2014 at 7:24 PM. Reason : .]

[Edited on January 6, 2014 at 7:26 PM. Reason : .]

1/6/2014 7:04:06 PM

Makes sense, but I am maxing mine out, in addition, I do think tax rates will go up, plus not all companies offer the roth 401k, so I'd take advantage of it while you can. You can always backload a traditional 401k with pretax investments later on down the road.

1/6/2014 9:32:29 PM

If you're maxed out through 17,500 then yeah Roth allows you to effectively exceed what you can with a traditional.

The taxes being raised thing is interesting, I agree they'll probably go up, but not much, if at all on the first $100,000 I wouldn't think.

1/7/2014 1:22:38 AM

Currently on track to retire in 2032, 3 years ahead of my original plan. I'd still like to get it down another couple of years and get out at 50 instead of 55, but we'll see. At minimum I would like to be semi-retired by then. Maybe work 6 months out of the year from age 50-55 or something.

This year was pretty good, next year should be better since I no longer have a car payment, no real debt outside of student loans, and some potential for a pay grade bump which could be worth a pretty nice chunk.

1/7/2014 1:32:59 PM

Nice.

Very similar targets for my wife and I. Right now I'm 55 or bust with the obvious goal of making it even sooner. I imagine it will get tough though at the end there knowing when to actually bow out of the job market. However, like you, I plan for my wife and I to probably work some sort of part-time gig (my current job would allow for that as lots of "retired" people come back to work now and then), to bridge or maybe even into actual retirement. I wouldn't mind working somewhere part time where I get a lot of personal interaction.

What are you doing to prop yourself up for the pre-government-retirement retirement? By that I mean accounts you may not want to or may not be able to touch right away. For now, beyond maxing traditional 401k and Roth IRAs, we are just shoveling a lot of money into the Vanguard funds I use and have attempted to up those taxable retirement contributions every year. We have been thinking about getting into rental properties though to provide additional income in retirement as well.

1/7/2014 2:48:03 PM

Quote :

" 55 or bust "

1/7/2014 3:34:43 PM

I have a Vanguard account and have been thinking about rebalancing. To those of you who have Vanguard, do you rebalance your portfolio? Is it easy to do? I know there are limits to how often you can sell each Index.

Index Funds like S&P 500, Small Cap, International don't yield much dividends, I have had several people tell me it's better to opt for funds that have a higher dividends, thoughts? Just thinking about long term holdings and whether dividends should play a larger role.

1/25/2014 9:33:11 PM

I tell my parents to chase dividend funds but at our age we should be going for growth, not income.

1/27/2014 10:13:34 AM

I agree.

1/27/2014 10:24:10 AM

So in my TSP I have the following allocations:

70% - S Fund (Small Cap)
20% - C Fund (S&P 500 match)
10% - I Fund (International)

I guess I'd like to retire in 25ish years.

Too aggressive? It's hard to pull back when my 12 month Rate of Return was 34%!

3/14/2014 1:08:32 PM

Personally I don't think you could be too aggressive still 25 years out and trying to retire early. I'd say that's kind of what it takes, even though there is obviously slightly more risk involved.

3/14/2014 1:35:14 PM

Eh, I think you're a little overexposed in small cap and underexposed in international.
I'd probably balance it out a little, but that really depends on what makes up international.
How much of the small cap is value vs growth?
I'm super lazy with my new 401k (mainly b/c it's so tiny) and just put it all in SPTN TOT MKT IDX ADV

3/14/2014 1:56:40 PM

Anyone else try Future Advisor?

3/14/2014 2:35:17 PM

Quote :

"Anyone else try Future Advisor?"

I had never heard of it, but just checked it out. It sounds intriguing, but I'm skeptical that they'd earn their keep at .5%. It sounds like they mostly keep your portfolio balanced and steer you to low-cost index funds, which is what I do already. It seems ironic that a company trying to skim off .5% is preaching low-cost.

3/17/2014 10:23:17 AM

Speaking of cash on hand, does anyone have any good guidelines on how much to keep, ie how much in a savings account and how much in higher risk, but liquid individual brokerage accounts.

3/17/2014 10:49:37 AM

no

3/17/2014 3:36:59 PM

^^ I have been thinking about this recently as well.

I have always tried to keep a target budget for my monthly expenses and will adjust as my situation changes (usually with every pay raise or if I notice mint.com getting way off expected values). My monthly expenses (incl. mortgage, groceries, eating out, car insurance, utilities, car maintenance, etc) is about $3,300. I have always read that you should keep 6 months of cash ready for emergencies. However, when I got married last year, I feel less at risk if I were to lose my job so I didn't think I needed to keep $15 to $20k in cash laying around, so here is what I do:

1. Keep $10k in cash in savings (about 3 months).
2. Every month, contribute what I can to my savings (including bonuses, tax refunds, second job paychecks, etc).
3. Once I get to $15k in savings, transfer $5k to my vanguard account.

This works for me, as I have a minimum of 3 months of expenses in my savings account at all times. In an emergency, I could transfer money back out from vanguard within a couple days.

My "savings" vanguard account is more conservative than my retirement accounts. In my savings vanguard account I have ~60% in domestic/foreign total stock funds, ~15% in REIT, and ~15% in short term bonds and inflation protected bonds. Comparatively in my retirement accounts, I have 5% in emerging markets, 15% in REIT, 45% in mix funds (wellington and target 2050), and 35% in a variety of stock funds.

Right now this works for my risk tolerance and personal situation. $10k is enough for me to feel like I could cover myself in an emergency (especially with wife's minimal first-year teacher income and access to vanguard savings fund), but I don't feel like I have too much just sitting in an account not gaining any type of interest. If an emergency comes and the stock market is down and I have to sell investments at a loss, so be it, but it was better than getting next to nothing in a CD or savings account at a bank.

3/18/2014 11:59:19 AM

Yeah, I keep about 10K cash on hand as well but obviously I could sell stock or tap my roth if I really needed $. My individual brokerage accounts probably has my most risky stuff i.e. individual stocks. I almost view it as play money compared with my 401k which has a a much larger balance, but is all in mutual funds.

3/18/2014 12:13:35 PM

I don't let my checking go below $5K, which I can get at via ATM, and keep another $30K in a "high yield" (0.75% ) savings account that I can transfer over in a day. Figure that's enough to get me out of a real jam.

3/18/2014 2:27:52 PM

I keep a year's expenses cash on hand and feel less dumb about it after reading: http://www.amazon.com/Antifragile-Things-That-Gain-Disorder/dp/0812979680

Having that keeps you protected against shitty jobs and local economic downturns.

A lot of your are doing way better than I was 5 years out, but I got hit pretty fucking hard from the 2008 stuff.

3/18/2014 2:29:14 PM

Jesus. That's a lot to have in cash.

3/18/2014 3:58:14 PM

this may be a better thread for this question:

I guess I don't know as much about 401ks as I should... but what is the point of a company offering a 401k plan, if they do not contribute to it? You can get a 401k from any bank... so why would a company have a plan if they don't contribute? Am I missing something?

3/20/2014 1:41:39 PM

direct payroll deduction? Or can you set that up with your own 401k external to a company too? Never really thought about it.

3/20/2014 2:05:33 PM

Quote :

" You can get a 401k from any bank"

No, you can't.

3/20/2014 2:40:05 PM

you know what I mean

3/20/2014 2:43:48 PM

Actually, I have no clue what you mean.

3/20/2014 3:23:52 PM

I guess you are purposefully being obtuse.

Here's the point:

https://www.google.com/search?q=401k&oq=401k&aqs=chrome..69i57j69i61.1610j0j1&sourceid=chrome&espv=210&es_sm=93&ie=UTF-8#q=open+401k

no employer needed.

3/20/2014 3:43:30 PM

You cannot enroll in a 401(k) without first having an employer, unless you yourself are the employer. - See more at: http://wiki.fool.com/Can_I_Invest_in_a_401(k)_Without_an_Employer%3F

[Edited on March 20, 2014 at 3:54 PM. Reason : ]

3/20/2014 3:52:24 PM