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Str8BacardiL
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I just signed up for Vanguard and put the money in the 2050 fund. I had been meaning to do this for a long time but the recent passing of my grandmother gave me a bit of a wake up call. She grew up very poor and saved her entire life. She left a my father and my uncle stacks of US savings bonds in her safety deposit box, and some more bonds for my sister and I. We all know the govt bonds are a rip off. The staff at the bank got a kick out of them since they are such a vestige of the past and there were so many to count. She also left an exorbitant amount of money in the bank, a paid off house in excellent condition & no debt. She left my father and uncle a note in the box that said aren't you glad I pinched pennies so I had something to leave for you. It's all very impressive for someone who worked their career as a state employee and could have easily gotten in the trap of living check to check.

It is also tax time and my wife and I are getting killed as usual. I want to get our tax burden down. It looks like if I throw the full $5500 in before filing I can reduce the amount I owe by $1250?

I know with a Roth you don't get any deduction now, but save on taxes later. Many people say that is the way to go. I know for a fact if I go with the Roth I will take the money back out later since there is no penalty for doing that. I am completely self employed and my wife is full time employed at a company that will probably never offer a 401k.

I have some questions though.

1) Is Vanguard the best place to do this?

2) Is the 2050 fund the best place to put the $?

3) Any other basic info I should know about this stuff? I have no experience with it.

4) Any other questions I should be asking?

The only reason I have put this off for so long is a fear of getting screwed. I understand houses. I know what makes them worth more to rent and sell. We have been buying one up whenever we can pull it off figuring that we will be sitting pretty when they are all paid off around the time we retire. That is a legitimate strategy that many people are successful with. Its also lot of work and sometimes repairs hit you over the head at a bad time. If something happened to me pre-retirement my wife could not deal with all of that on her own.

Thinking about regular investing makes me think of the douchebags that perpetuated the mortgage meltdown. I do not really trust the government to regulate anything, and overall do not trust anyone else who just gets paid off short term results. I am hoping to do this in a way that the money is pretty safe, but can also grow since we have time to let it do its thing. I would love to hear from people who are wiser about this stuff than me.

1/3/2017 1:21:19 AM

slckwill577
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I'm not an expert at all, but that's pretty much exactly what I did.

I went with a Roth and contribute the max every year. It's definitely a good start.

1/3/2017 8:02:33 AM

wdprice3
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Max Roth and leave it alone.

1/3/2017 8:25:52 AM

dannyp45
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I think this short read will help you with your questions.

https://www.etf.com/docs/IfYouCan.pdf

1/3/2017 9:05:15 AM

DonMega
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Quote :
"I know for a fact if I go with the Roth I will take the money back out later since there is no penalty for doing that."


Then don't do the Roth. Put the money in a traditional IRA. The power of investing at a younger age is the compound interest, and if you take it out, you lose that benefit. Yes, you will save on your taxes if you put your money into a traditional IRA, but you will pay the taxes when you take the money out when you retire.

Generally when trying to decide between Roth and Traditional, you think about whether you will have a higher income now or when you retire. Since a lot of people expect their income to grow over their lifetime, they will make less now than they will in the future. If you make less now, you will pay less taxes now, so you do a Roth (and if you make more now, pay taxes later, so you do traditional). But in your case, do the traditional so you don't take the money out early, that is more important than the tax considerations.

I use vanguard, and they are highly recommended because they have a low cost. The 2050 plan is a good option if you just want to dump money in and not worry about rebalancing over time.

1/3/2017 9:25:28 AM

NCSUMEB
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Would never do a target fund. Stick it in an S&P ETF with Vanguard if passive investing is your strategy. I don't want any periodic re balancing without me pulling the trigger, have no idea of the ER on a target fund either, probably higher than a passive ETF though.

As far as all the mathematical reasons already laid out ITT, the behavioral issue is why most guys tell you to do a Roth because most people tell their HR to "deduct X dollars (or X percent) and put it into retirement." In this situation, the Roth is beneficial over the Trad because it's already taxed and comes out tax free and people work it into their budget (the $X being taken out post or pre tax) anyway so it might as well be a Roth.

[Edited on January 3, 2017 at 9:39 AM. Reason : .]

1/3/2017 9:38:56 AM

PackBacker
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Quote :
"I have some questions though.

1) Is Vanguard the best place to do this?

2) Is the 2050 fund the best place to put the $?

3) Any other basic info I should know about this stuff? I have no experience with it.

4) Any other questions I should be asking?"


First off...Roth vs Traditional depends on your tax bracket. If you and your spouse (if applicable) make $150k+ per year, it may make more sense to go traditional. As someone mentioned, its all about your tax rate now vs when you retire. If you make $200k per year, well, you'll probably be in a lower tax bracket when you're 65 and retired..a traditional would make more sense.

1) Vanguard is as good as any....arguably the best
2) Depends. The only good thing about that fund is that it adjusts your stock/bond/cash allotments as you approach your retirement year (2050, in this case) automatically. They take a lot of money off the top of your balance each year for this convenience, however. If you will never ever consider reallocating your IRA, this may be the option for you. However, if you can remember to look at it every couple of years and learn a bit basics about allocation vs. age, its a terrible choice to use a target fund.

Take a look at the funds "expense ratio". It is a measure how of "expensive" the fund is....the lower the better. The expense ratio how much (in percentage points) they take of your balance each year you own that mutual fund...that's whether the value goes up or goes down. For instance, a 0.5% difference in the expense ratios between managed vs index funds doesn't seem like a lot, but compounded over 40+ years with hundreds of thousands of dollars in the fund...it can be enormous. See overly simplistic chart that doesn't even list the 2% expense ratio considered below...research how it affects you :



I, personally, would do something like 70/20/10 for someone in their 20's-30's. Thats domestic/emerging/bonds. I'd also buy index funds (An entire market index like VTI), an emerging market index fund, and a bond fund. As you approach retirement, step out of stocks and more into bonds. Research allocations.

3) There is no better long term investment than a diversified portfolio for the average person. Dont be a nervous investor. If it goes down, it will come back. Over long spans (10+ years), you will generally make a lot of money. Add money consistently to it throughout your life if possible, and reinvest dividends.


[Edited on January 3, 2017 at 10:31 PM. Reason : ]

1/3/2017 10:24:46 PM

JohnnyBoy
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^ If you're making 200k you're not eligible for a Roth IRA so the point is moot at that point. I can't remember the cutoff's exactly but I know 200k is definitely not eligible if you file single and is right at the end of the line if married filing jointly.

[Edited on January 4, 2017 at 8:32 AM. Reason : .]

[Edited on January 4, 2017 at 8:33 AM. Reason : .]

1/4/2017 8:32:28 AM

ClassicMixup
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^backdoor Roth IRA if you hit the limit. Basically, there are no income restrictions on traditional to Roth conversions, so if you contribute to a traditional with after-tax $ and then decide to convert to a Roth, magi doesn't come into play. Obviously can't take a deduction on your taxes going that route (though if you are phased out due to income for a Roth and have an employer sponsored benefit plan, chances are you phase out of IRA deductions anyways).

Though to the points made earlier, if you are phasing out of a Roth now chances are you're in a higher tax bracket than you'll be at retirement (assuming you don't think tax brackets are going to be significantly higher 20-40 years from now). Your cash flows into retirement may not be structured the same way as your current earnings so even if you are making more, your taxes could be less (salary now vs capital gains on investments then).

If you have a good sense of where you want to be in retirement, you may opt to contribute to both pre and after-tax accounts so that you have flexibility in retirement draws (take x from a pre-tax/traditional making sure to stay within a certain income range for your desired tax bracket, then supplement it with after-tax/Roth)

Str8BacardiL it may be beneficial to talk to a financial planning firm to delve into your specific situation. They can be low fee / non-commission based or charge a 1 time fee to set up a path/plan to retirement/financial independence.

1/4/2017 9:15:27 AM

Douche Bag
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Made my contribution today.

1/4/2017 10:57:57 AM

mofopaack
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If you want to hedge, split between traditional and roth. who knows what tax rates will be in the future, or what your income will be. So if you want to hedge, allocate to both.

1/4/2017 4:05:02 PM

Lionheart
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^This.

Great thing is that with the Roth you know exactly what you will be getting out because no Tax but with traditional/401K you get the tax benefit now via reduced taxable income (I don't know that I really buy the reduced tax rate down the line, who knows what will happen in 30 years).

I max a roth and get as much as I can stand into 401K.

1/4/2017 4:47:11 PM

A Tanzarian
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Quote :
"If you have a good sense of where you want to be in retirement"


This is the key. You need to figure out when you want to retire, how long you will be retired, and how much you'll need annually. Knowing these things will help you determine where your retirement income will come from, how to minimize taxes, how much to save (is $5,500 a year even enough?), where to put the money (Roth, Traditional, non-retirement, etc.), how aggressive you need to be with investments, etc.

You don't necessarily need a financial advisor, but, if you're uncomfortable doing it yourself, find an advisor with a fiduciary duty to you.

http://www.napfa.org/HowtoFindAnAdvisor.asp

1/4/2017 4:57:12 PM

PackBacker
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Quote :
"^ If you're making 200k you're not eligible for a Roth IRA so the point is moot at that point. I can't remember the cutoff's exactly but I know 200k is definitely not eligible if you file single and is right at the end of the line if married filing jointly."


Very true...wasn't considering that. Not sure of the 2017 caps and phase-out levels are.... I was just trying to make the point that the higher your salary is when you're being taxed, the more likely the traditional is better since you'll (presumably) be in a low tax bracket at 65ish. Granted, that's assuming they dont raise taxes on EVERYONE a lot between now and then, which i suppose is remotely possible

[Edited on January 4, 2017 at 8:29 PM. Reason : ]

1/4/2017 8:28:26 PM

PackBacker
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Quote :
"^This.

Great thing is that with the Roth you know exactly what you will be getting out because no Tax but with traditional/401K you get the tax benefit now via reduced taxable income (I don't know that I really buy the reduced tax rate down the line, who knows what will happen in 30 years).

I max a roth and get as much as I can stand into 401K."


Crazy theory that I know a lot of people are fearful of (Speaking of "knowing what you'll have" in a Roth retirement).

There are SOME out there that think with all of the smart wealth in this country contributing their money to ROTH, there is going to be a TON of income that the government can't get thier hands on 20-30 years from now. Thus, many limit thier Roth contributions (i.e. diversify...do a Roth IRA and a Traditional 401k, for example) just becuase they're fearful the gubbmint will move more towards a VAT tax system to get their hands on some of that 'hidden' income they cant tax (again!)

That would certainly pretty unpalatable politically....but its certainly a crazy theory worth considering and remotely planning for.

BTW, I am not advocating not doing a ROTH. I am, like many others, advocating mixing taxed & untaxed retirement accounts. If you max a Roth IRA, consider doing your 401k pretax/traditional (Even if a Roth option is available)




[Edited on January 4, 2017 at 8:40 PM. Reason : ]

1/4/2017 8:35:48 PM

theDuke866
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Quote :
"since you'll (presumably) be in a low tax bracket at 65ish. "


Fuck that, I'm gonna be rich.

1/4/2017 9:22:51 PM

Jrb599
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^

1/4/2017 9:39:53 PM

Lionheart
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Quote :
"That would certainly pretty unpalatable politically....but its certainly a crazy theory worth considering and remotely planning for. "


Yeah certainly a possibility and I have heard similar theories about this too but like you say politically it would be really challenging to get something like that done.

1/5/2017 9:28:26 AM

face
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My opinion (and I've read tons of theories given that I worked in the industry ten years) is that they will not tax the distributions on your IRA.

However, they will count the distributions as "income" when calculating your social security eligibility.

A popular idea is "means testing" which basically means if you have "enough" income you wont qualify for full social security benefits. So they could say you are drawing enough income from alternate sources so you don't receive as much (or any?) of your allotted social security benefits.

It's not really "fair" but fair won't matter when we are bankrupt.

A VAT of some sort is fairly likely as well as we continue to spiral towards economic instability

[Edited on January 5, 2017 at 10:45 PM. Reason : A]

[Edited on January 5, 2017 at 10:47 PM. Reason : A]

1/5/2017 10:42:54 PM

NCSUMEB
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I think everyone under 45 knows or at least plans on getting exactly 0 dollars from SS

1/6/2017 10:03:22 AM

theDuke866
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I don't think it'll be zero. I think it'll be big cut. I'm gonna be fucking pissed, because it wouldn't have been necessary if they hadn't waited forever.

1/6/2017 10:56:12 AM

Lionheart
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Well that and it's basically a pyramid scheme assuming indefinite population growth and full employment.

That's not a political judgement on the program's intent or goals btw, just a statement about the implementation.

[Edited on January 6, 2017 at 11:21 AM. Reason : clarification]

1/6/2017 11:20:30 AM

NCSUMEB
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Quote :
"I don't think it'll be zero. I think it'll be big cut"

Given that us young folk will have put 6.2% up to $125k for 30+ years, it'll wind up being a negative return with standard inflation baked in come 2040 and beyond. Or even better, they may jack up the income limit or the % payroll deduction. My guess is more of the former.

1/6/2017 12:07:03 PM

quiksilver
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Sounds like you may be a good candidate for a SEP IRA. Allows tax deductible contributions above what you can do with a Traditional IRA. Basically a way to set up a 401(k) like plan for those who are self employed. Instead of $5,500 you can contribute the lesser of 25% of income or $53k (2016) or $54k (2017). This would definitely help manage your tax situation more effectively. Also, give you flexibility to save more in good years and scale back in bad years as Im sure your income in your line of business fluctuates.

[Edited on January 6, 2017 at 3:57 PM. Reason : More info]

1/6/2017 3:45:55 PM

David0603
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Quote :
"^backdoor Roth IRA if you hit the limit. Basically, there are no income restrictions on traditional to Roth conversions, so if you contribute to a traditional with after-tax $ and then decide to convert to a Roth, magi doesn't come into play. Obviously can't take a deduction on your taxes going that route "


Why even have an income limit on roth iras then?

1/7/2017 1:09:30 AM

ClassicMixup
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^because tax policy can be changed by deep pockets

When the Roth concept was created, the language specifically restricted contributions based on income. All that needed to change was the income limit on traditional IRA conversions (lifted from 100k magi in 2010). In lifting conversion limits, a back door was opened. Easy sell to policy makers as company pensions had all but went away and more of your workforce had tax-deferred retirement accounts...then Roths come along and your six-figure crowd complains that their money is tied up in tax-deferred accounts

Note, the back door is straight forward in the OP's situation as he doesn't have a traditional IRA currently. If you have pre-existing tax-deferred IRAs you have to prorate your conversion across the total so it can get a bit more complex

1/7/2017 8:27:50 AM

Str8BacardiL
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Already made $8

1/7/2017 4:38:29 PM

David0603
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^^ Thanks, I did a bunch of reading on it last night. Are any of you doing this? Over 50% of my ira and 401k portfolio is made up of funds that have already been taxed, so not sure if I want to eventually switch back to using a traditional 401k instead of roth.

1/7/2017 6:09:07 PM

quiksilver
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Have several clients that do it every year. It's a pretty common and seamless practice. There is nothing illegal or audit provoking about it if thats what you are wirried about.

1/8/2017 6:50:36 AM

kiljadn
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yeah i would stay the hell away from a target date fund.


I've been using a robo-advisor (futureadvisor) for the past 3 years, and have been pretty satisfied with the returns I've gotten. It's nice because you avoid the "one size fits all" bucketing you get with a target date fund, and there's automatic tax-loss harvesting.

1/8/2017 2:43:47 PM

OmarBadu
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^ any reason you use futureadvisor over wealthfront or betterment?

1/8/2017 2:48:38 PM

quiksilver
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I too am not a fan of target dates due to poor performance. However, they serve their purpose for 401k investors who just need to set it and forget it. When I do 401k enrollments I sit with two types of ppl. One type understands asset allocation and the need to rebalance and manage so we draw out a balanced portfolio. The other just needs to be convinced it's easy to put away a percentage of pay for the future. For the latter, target dates are the way to go. Also, in this scenario tax lot harvesting has no benefit and would likely only result in higher maintenance costs.

1/9/2017 6:00:04 AM

NCSUMEB
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^, I'm just curious, is it common place in the industry to advise based on the person's investing aptitude rather than their best interest?

1/9/2017 12:26:22 PM

Lionheart
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^Can't speak from the industry but the thing to remember is the "person" in personal finance. People aren't fully rational beings so sometimes the purely financially best approach isn't best if people can't or won't follow through with it.

This is why you see people pitching the "Snowball" (http://twocents.lifehacker.com/more-research-shows-that-the-snowball-method-is-the-bes-1790533681) method on debt repayment as opposed to doing the "smart" thing of paying the highest interest rate debts first. Getting small wins promotes better behavior and speeds up for instance.

If someone can't handle a more complicated portfolio better to give them something simple and manageable rather than the alternatives. Same reason you always get asked about risk tolerance when doing investing. Someone could mathematically determine the sweet spot risk for you but if you aren't comfortable with it you probably won't in vest enough.

1/9/2017 12:39:58 PM

NCSUMEB
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I think paying off debt and investing are different segments of personal finance and certainly one could make the guess that they are quite opposite in clientele, particular if that debt is anything besides medical (i.e. out of your control). I certainly agree that you can lead a horse to water but.....I can't imagine sitting in an expert's office (regardless of the subject) and defying them. Especially a series of them if you got second and third opinions which in this case would happen regarding target funds. I'm going to go out on a limb and guess that target funds bring in heftier commissions and less work for advisers/brokers.

1/9/2017 4:08:15 PM

Lionheart
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^eh having access to capital doesn't inherently make you smarter or more apt to make good decisions or taking expert advice.

Look at the NFL for example. All the owners are billionaires. Some owners know more than others, they find good or bad people to run things for them, and some meddle constantly and others are hands off. The league is built for parity because each owner can only spend the same amount as the others and the bad owners are given extra changes to get good through the draft but some still can't do it and act irrationally by firing a coach every other year when the best teams all have stable coaching situations and team building.

Don't miss the forest for the trees here. No matter what the domain of discussion we have here, human beings do not make purely rational decisions all the time and acting that way is settings yourself up for failure if you don't consider the psychology of things.

1/10/2017 12:43:10 AM

quiksilver
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Good question. The quick answer is not usually. Most of my clients get the same level of investment quality and advice. That goes from the little old widow who doesnt have the least investment acumen or millions of $$d to the high new worth CFO. We always put client first and dont dumb down the investments just because they are not "sophisticated" investors. That is unless the producta are more risky and require that level of knowledge to enter into the contract (private equity for example). Not all products fit all these nvestors. HOWEVER in the exaple i made before we are talking about 401k investors who wouldnt even save if it wasnt easy and will likely never log in again. The best thing for that investor is something that at least gets them taking advantage of the company match. With retirement savings contributiona are much more important than outperformance. Basically its more important to convince them that saving is easy and good than expect them to take your advice and rebalance every now and then.

[Edited on January 10, 2017 at 8:25 AM. Reason : .]

[Edited on January 10, 2017 at 8:27 AM. Reason : .]

1/10/2017 8:21:28 AM

Air
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A couple of posters above have mentioned staying away from "Target" funds.

Can you share your reasoning behind this recommendation?

Is the recommended alternative a total market index fund?

1/10/2017 10:19:28 AM

DonMega
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not to put words in their mouth, but I think those criticizing target date funds don't like someone else determining their asset allocation and would prefer to do it themselves.

In regards to your question of other options: If you look at vanguard's 2050 plan, you can see it is made up of their total stock index, total international stock index, total bond market index, and total international bond index. If you went with the total stock index fund you would just be choosing a more specific (less diversified) investment option than the target retirement fund (which may or may not be your preference).

For my IRA, I have my own selection of funds that I rebalance myself once or twice a year. I check the asset allocation at least monthly (if not weekly), but I resist the urge to "tinker" with my retirement accounts and instead focus on steady contributions. For my wife's IRA, she is 100% in a target retirement fund. I bet she has no clue how much she has saved, and I doubt she has logged in since we set up her account 10 years ago. She just knows that she is saving a set amount each month and it is all being managed in a target retirement fund. We choose the 2060 since it would be more aggressive than her actual retirement year fund (we may decide to shift this as we get closer to retirement, but that is 30 years away).

1/10/2017 10:48:45 AM

wahoowa
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Target funds also have much higher fees, in general, than allocating manually, because you are paying someone to manage your account. A simple index fund will be much cheaper, and, on average, will beat the returns of a managed account. The only benefit is set-and-forget and reduce risk when approaching retirement age.

1/10/2017 11:39:44 AM

quiksilver
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Target dates are a little more expensive because of the overhead of rebalancing and underlying allocation management. In 401k plans the difference is often not enough to outweigh the benefit of having someone keep an eye and keep your allocation the same and allow you to save mindlessly. Being in a group plan helps keep costs low just like with health insurance. I simply have found in my experience they tend to underperform a well allocated and managed portfolio. And this goes for all of them Vanguard, Fidelity, American Century.. etc. a story that may make this argument was a friend of mine who asked me to look at her porfolio in 2009. She couldnt understand why she lost 100s of thousands when her step father who is a "saavy investor" had right before the crash made her portfolio much more conservative. I looked at the portfolio and the change he made was to future contributions only and over time her portfolio went from a nice moderate 65/35 stock to bond blend to 95% exposure to stock due to drift and never rebalancing. In this scenario she would have been better off in a Target Date than listening to her "saavy" family member. My point is that target dates are not right for everyone but they do serve a purpose for those who are not going to have a professional help them along the way if they dont really understand the moving parts. I have no target date funds for my individual clients because Im watching the wheel. But i do have a lot of target dates on the books in K plans because they ARE in the best interest of some participants.

[Edited on January 10, 2017 at 12:01 PM. Reason : .]

[Edited on January 10, 2017 at 12:04 PM. Reason : .]

[Edited on January 10, 2017 at 12:06 PM. Reason : Fat fingers]

1/10/2017 11:58:12 AM

NCSUMEB
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You mentioned timing the market by the stepfather in that example. Scary stuff for non wall street types, and its even scary for them to be doing it. If you are more than 5-7 years out from needing the money I don't see any reason to not be 95% stocks if not more, she'd obviously be fine now. She only "lost" if she sold. She'd be better off if she still has the 95% stock portfolio but I guess that's not the case. Target funds may "serve a purpose,"but mathematically they don't. I haven't seen a scenario where they work out for anyone at any age with any financial goals whatsoever vs the many other alternatives. I guess I'm saying it doesn't take much to teach someone face to face why this is. Maybe 15-20 minutes worst case, but the commissions/maintenance fees are high so I guess that's why they exist.

I guess it just seems prudent to never touch the nest egg and live off the returns. So I don't see a situation where I'll ever be 5-7 years from needing the nest egg, that's the goal. Won't ever be less than 95% stocks if not higher. It is definitely a valid point that getting people to invest at all is 90% of the battle, the other 10% is gravy in the big scheme with Americans psychology wise.


[Edited on January 10, 2017 at 1:48 PM. Reason : .]

1/10/2017 1:42:30 PM

Air
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Thanks for the responses.

For reference, what is considered "High" as a fee? For reference, I think my 401k is in a 2055 Target fund with Fidelity, @ 0.67% fee. Thats $6.70/$1000/yr? Is that High?

1/10/2017 1:52:10 PM

quiksilver
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Modern portfolio theory definitely has proven over time that your theory of buying 95% stock until you are 5 years from a liquidity event is definitely a losing strategy and not the most risk effective way to successfully raise your probability of success of reaching your goals. That is a much different can of worms though. I did keep her from selling and we weathered the storm. She was in her 50s and should have NEVER been 95% stock 12-15 years from returement. Once the markets have recovered we have mitigated some of her risk. One major flaw in the assumption that whe would be better off by just throwing all her money in stock and never decreasing risk over time is the amount of time it takes to make up for the opportunity costs associated with not losing it all. If your theory was correct it would only take 5 minutes to tell someone buy SPY until you are 60 and then start hedging back. However, your theory has been proven incorrect many many times and so it takes more than 5 minutes to make a blue collar worker a saavy and risk understanding investor. Also, it appears you think I or other financial professionals are not willing to spend time with people to answer questions and target dates make me more money and allow me to just be lazy. This is not true. My cost to administer a K plan is a % of the plan balance (a meager one at that). It downt matter to me what a participant invests in as long as it is in their best interest. As a result recommending a target date fund may hurt my bottom line in the long run (under your theory that buying 95% stock is the way to go). But i wont make unsuitable recommendations as a fiduciary in the hopes that the market will run and my fee gets fatter. The fact of the matter is most of the time when i do 401k enrollments i spend a day doing pro bono work trying to help out the little guys in the company that would not have access to a financial advisor so that I keep my clients who are business owners happy. Its actually a day that i really enjoy as i am able to spend hours educating those who arent wealthy or fortunate enough to have top level advice at no cost to them.

[Edited on January 10, 2017 at 2:22 PM. Reason : .]

1/10/2017 2:18:06 PM

quiksilver
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Air. No that is not high by industry standards.

1/10/2017 2:18:45 PM

NCSUMEB
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I was more just talking aloud, not questioning anyone or the industry. I'm not necessarily asking about this specific situation you described but in general, could you expound upon this:

Quote :
"One major flaw in the assumption that whe would be better off by just throwing all her money in stock and never decreasing risk over time is the amount of time it takes to make up for the opportunity costs associated with not losing it all"


[Edited on January 10, 2017 at 3:12 PM. Reason : .]

1/10/2017 3:03:00 PM

kiljadn
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Quote :
"any reason you use futureadvisor over wealthfront or betterment?

"


no real reason other than they worked with TD Ameritrade and i already had my 401k rolled over into an IRA there.

1/10/2017 4:14:02 PM

PackBacker
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Quote :
"For reference, what is considered "High" as a fee? For reference, I think my 401k is in a 2055 Target fund with Fidelity, @ 0.67% fee. Thats $6.70/$1000/yr? Is that High?"


I think anything approaching 0.75%-1% is considered relatively "high". If it works for you, great.

However, an index fund like VTI has an expense ratio of 0.05%.

Imagine you happened to have an average balance of $500,000 over your 30 years investing in your account. Compounded over 30+ years, that 0.5% difference of a half million can be enormous. If you have any investing accumen and can adjust your portfolio every 2-5 years as you age...you're probably better off going with very low cost index funds

Generally, you pay more for a managed target fund, and they never will beat the underlying index over a 30+ year span (Well, its nearly impossible)

[Edited on January 10, 2017 at 4:18 PM. Reason : ]

1/10/2017 4:15:52 PM

OmarBadu
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^ agreed

1/10/2017 4:30:17 PM

David0603
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Why shouldn't someone be in 95% in equities 15 years out from retirement?

1/10/2017 10:10:02 PM

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