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A question was asked back on the third page about balancing retirement savings vs. large expenses in the short term (less than 10 years). I have the same concern. For background info, I'm 25 and make about 80K a year in the Los Angeles area, so it's a lot, but not really a lot. I put 5k into a roth IRA each year. I have a 403b retirement account which my employer puts 5% of my salary into as a gift, and then i can do my 15,500 of contributions. right now i'm putting in 900/month. This means I have close to 20K a year going to retirement, which is "great." I'm also contributing 500/month to a separate fund for a future house purchase. Since there is no "match" in my 403b, I'm thinking it wise to drop that monthly contribution to 400/month and put the new take home pay towards my house/large expense savings. I'd still be getting 17% of my pretax salary towards retirement, which is more than everything I've read states I should be contributing. My biggest struggle is overcoming the fact that I'm going to get taxed on my TDA investments eventually, and it's not throwing money away to pay the taxes now and invest it differently.
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Apr 5, 2009 19:47
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I am still confused by some of the basics of mutual funds and how they relate to retirement savings. Are they to be treated like any other stock, i.e. buy some cheap MF shares and in a year or two when they have increased in value sell them? Or is the idea that since the fund's manager will be buying and selling individual shares you are provided with a steady income from capital gains from those sales as well as dividends?
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Apr 8, 2009 01:53
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I have a few questions about 401k rollovers. As I understand, one can rollover a 401k to a Traditional IRA, then convert that TIRA to a Roth. I have also read that doing so affects one's MAGI, which must be less than $100k, but only until 2010 when that requirement is phased out. My first question is, how exactly do taxes come into play during the IRA -> Roth conversion? If I had a fictional $10k in a TIRA and my fictional flat tax rate was 25%, would I end up with $7500 in the Roth, or would the full $10k go into the Roth with a bill for $2,500 for me to pay out of pocket? Second, does a conversion count against the annual Roth contribution limits? Finally, is there any time limit to the conversion, e.g., can I just leave it in a TIRA until next year if I think converting will blow my '09 MAGI? Could I convert part of the TIRA now, and do the rest later?
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Apr 10, 2009 01:32
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Kobayashi posted:My first question is, how exactly do taxes come into play during the IRA -> Roth conversion? If I had a fictional $10k in a TIRA and my fictional flat tax rate was 25%, would I end up with $7500 in the Roth, or would the full $10k go into the Roth with a bill for $2,500 for me to pay out of pocket? $10K goes into the Roth with a bill for $2,500 to pay out of pocket. However, the first option ($7,500 going into Roth, and $2,500 withheld) is an option that the custodian will offer: DON'T DO THIS. The withheld amount would actually be considered an early distribution if you are under 59.5 which is subject to penalties. Paying out of pocket is the only reasonable to handle the conversion. Kobayashi posted:Second, does a conversion count against the annual Roth contribution limits? No. Kobayashi posted:Finally, is there any time limit to the conversion, e.g., can I just leave it in a TIRA until next year if I think converting will blow my '09 MAGI? Could I convert part of the TIRA now, and do the rest later? Conversions must be done by 12/31 of the tax year that you want it to count for. This is in contrast to contributions which can be done until tax filing deadline. You can do it all at once or in increments throughout the year. What MAGI are you worried about "blowing"? The MAGI requirement is to determine whether you are eligible for the Roth conversion. Once you meet that requirement, you can convert to Roth beyond the MAGI requirement.
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Apr 10, 2009 01:50
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Cross_ posted:I am still confused by some of the basics of mutual funds and how they relate to retirement savings. Are they to be treated like any other stock, i.e. buy some cheap MF shares and in a year or two when they have increased in value sell them? Sort of. Ideally you have some kind of mix between stocks and cash/bonds. If stocks go up a lot, you should be taking some profits and moving them over to the bond side of your portfolio. This is called rebalancing. Cross_ posted:Or is the idea that since the fund's manager will be buying and selling individual shares you are provided with a steady income from capital gains from those sales as well as dividends? No, not in general (unless the mandate of the fund is to provide steady income through a mix of high quality bonds and stocks of companies with a history of stable dividends). Mutual funds typically have a mandate to stick within a certain asset class. For instance, a domestic stock fund is going to be pretty much always fully invested in US stocks. Which means your portfolio value will be going up and down according to the general stock market (more or less). Your mutual fund manager ain't watching out for your best interests; instead, he is benchmark-focused, which ordinarily means hugging an index (there are obviously exceptions). So it is your job to manage risk in your portfolio and smooth returns... the ordinary investor accomplishes this by rebalancing (see above). 80k fucked around with this message at 02:20 on Apr 10, 2009 |
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Apr 10, 2009 02:13
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80k posted:What MAGI are you worried about "blowing"? The MAGI requirement is to determine whether you are eligible for the Roth conversion. Once you meet that requirement, you can convert to Roth beyond the MAGI requirement. Oh OK, I misinterpreted that then. Thanks for the good advice, as usual.
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Apr 10, 2009 20:17
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Edit: Scratch this.
Regnevelc fucked around with this message at 01:21 on Apr 21, 2009 |
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Apr 21, 2009 00:08
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A friend and I are having an argument about paying off loans vs. investing in the markets. I'm of the opinion that I should pay off my student loans first, as the interest on my loans (6.5%) is probably more than I would be making by putting it away in an IRA. He says that I should be putting away money despite this, because of the way that interest compounds. Currently I have a total of $11k in student loans, $7k in subsidized and $4k in unsubsidized loans. For the past year, I've been putting all of my extra money into paying it off (I already have ~8mo of savings). This fall, I'll be starting graduate school, and I'll be able to defer all of my loans, but the $4k unsubsidized loan will continue to accrue interest. So, my questions are: 1) If I have loans out at a greater interest rate than I would make in the markets, should I be putting all of my money into paying off the loan? 2) If I have 4k in debt @ 6.5%, should I pay that off or put my extra money into an IRA?
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Apr 21, 2009 00:17
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Well, I can't give you a ton of math and probabilities to make the decision, but I can say that my rule of thumb is: If I have debt, I focus 100% on that, because without that, how can I justify having savings?
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Apr 21, 2009 00:57
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Regnevelc posted:I am hearing that the international market will start their downturn shortly and that the U.S. Market will start their recovery. I think that advice sounds a little fishy. Why would the international market start their downturn shortly, they have pretty much been getting hammered along with the US. Vanguard All World ex US etf:  Vanguard European ETF:  Vanguard Pacific ETF:  Vanguard Emerging Market ETF:  These charts certainly do not indicate that the rest of the world is going to begin their downturn shortly...maybe you have been hearing about a different world. They may not be at the bottom but the rest of the world has also been caught up in the economic turmoil at about the same time.
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Apr 21, 2009 01:00
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Well, I heard this second hand from my bosses financial adviser. He could in fact be a loving retard (and it sounds like it).
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Apr 21, 2009 01:03
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For what it's worth the TSX has been in recovery for a month now; whether that's sustainable or a bear rally I won't pretend to know, though I suspect it's the latter. Things aren't nearly as bad here in Canada as they are in the U.S.   It's been posted a million times already, but this is what I remind myself of every time the market goes up, and why I'm not buying (not to mention the number of people beginning to default on credit cards): 
Fraternite fucked around with this message at 03:27 on Apr 21, 2009 |
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Apr 21, 2009 03:19
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Internet Meme posted:He says that I should be putting away money despite this, because of the way that interest compounds. Wouldn't loan interest compound the exact same way that investment interest compounds?
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Apr 21, 2009 04:31
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NZAmoeba posted:Wouldn't loan interest compound the exact same way that investment interest compounds? Yeah, that's exactly what I said, the interest on my student loans is higher than any returns that I would reliably get.
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Apr 21, 2009 05:00
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Fraternite posted:It's been posted a million times already, but this is what I remind myself of every time the market goes up, and why I'm not buying (not to mention the number of people beginning to default on credit cards): This is all very true, but remember that many of these adjust against the prime rate; which is basically at 0%. So it may actually IMPROVE the monthly payments for many people, at least until rates begin to climb. So it's not necessarily as bad as the graph implies.
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Apr 21, 2009 19:40
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Unormal posted:This is all very true, but remember that many of these adjust against the prime rate; which is basically at 0%. So it may actually IMPROVE the monthly payments for many people, at least until rates begin to climb. So it's not necessarily as bad as the graph implies. Also, as long as you're diversified (ETFs), isn't a down market the best time to buy? Even if prices of everything drop in the next year or two, that just means you're buying more at cheaper prices; aren't you planning to hold for decades?
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Apr 21, 2009 21:24
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Reposting from another thread because this is a more relevant location: I'm a full-time student, 20 years old, and I save a pretty large portion of my income (50% after money I put away for taxes). I'm an independent contractor, and I make $14,400 a year, roughly. I'm looking to open an account at Vanguard in the next month or so, but my limited knowledge of 401(k)s/Roth IRAs seems to be skewed when it comes to my situation. Can someone give advice as to what my options are as an IC and what would be the best choice?
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Apr 22, 2009 23:28
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Hey 80k, Do you buy individual stocks or do you use funds/ETFs for your equity exposure?
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Apr 24, 2009 22:12
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Ravarek posted:Hey 80k, I don't own individual stocks. Just index funds and ETF's.
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Apr 24, 2009 23:20
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Got a quick question about 401k rollovers. I worked for Circuit City and I need to make a decision on my 401k this month. I have about $7700 in there. I've been thinking about rolling it over into a traditional IRA, but I really hate the idea of contributing, without any employer match, into an account that will be subject to taxes at retirement. I'm concerned that taxes will be significantly higher in the future. What should I do with this money? Should I roll it into a traditional IRA and then open a Roth IRA and start over? Should I cash it out and use it for my tuition? (I pay my tuition cash, no financial aid and no loans) I just feel like paying into a traditional IRA with no employer contribution would be throwing money at future tax liability.
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May 2, 2009 04:47
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Are they getting rid of your 401k's or something, or the employer match? Just keep it there. Your earnings will accrue and only get taxed upon withdrawal. This compounding action is a very powerful thing
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May 2, 2009 07:16
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The Noble Nobbler posted:Are they getting rid of your 401k's or something, or the employer match? Just keep it there. Your earnings will accrue and only get taxed upon withdrawal. This compounding action is a very powerful thing They went out of business earlier this year. I assume that makes the 401k go away...but I don't really know any specifics, so it's kinda a guess.
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May 2, 2009 13:18
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Bob Cthulhu posted:They went out of business earlier this year. I assume that makes the 401k go away...but I don't really know any specifics, so it's kinda a guess. The 401K account doesn't go away... they money is his.
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May 2, 2009 13:57
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GOOCHY posted:The 401K account doesn't go away... they money is his. But wouldn't it need to be moved? Or does that just depend on where it's at now?
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May 2, 2009 17:12
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GOOCHY posted:The 401K account doesn't go away... they money is his. Because of the nature of the bankruptcy, the account has to be closed by May 21st. There is no one to pay the plan administration costs, and the plan dies with the plan sponsor. In addition to this, CC's creditors are using a loophole in some "primary contributor" rule to try and grab the portion of our 401ks that the company contributed over time, plus estimated earnings based on that amount. CC matches our pay 100% up to 5%, and 50% up to 7%. However, they vested immediately, and they rounded your income up for the purposes of benefits. For example, my salary was 53,251 but they matched based on 5% of 55,000. This meant that our "matching contributions" portion was larger than our "salary deductions". The creditors are using that excuse to get the accounts closed and put into a trust in CC's name pending further hearings. It's a giant loving mess. Anyway, we have to get our money out by the 21st to avoid this.
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May 2, 2009 17:16
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Bob Cthulhu posted:But wouldn't it need to be moved? Or does that just depend on where it's at now? Oh yeah. Since the company isn't paying anyone to sevice the accounts, it'll probably be liquidated and (should be) put it into a rollover ira
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May 2, 2009 17:16
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Sounds like you really have two questions: What to do with your existing 401k money, and how to invest in the future. For you existing money in the 401k, yeah, just roll it into a traditional IRA with someone like Vanguard. I did the exact same thing last week; it was extremely easy to do. In fact, Vanguard even set up a conference call between me and my 401k company on my behalf. What ended up happening was that my old company mailed me a check for the value of my 401k, which I then mailed to Vanguard. Couldn't have been much easier. For future investments, use a Roth IRA. You contribute post-tax dollars so that you don't have to pay taxes on future earnings. Finally, if you have the cash on hand, you can convert your rollover IRA to a Roth IRA by paying taxes on it now. I plan to do that with my rollover IRA next year, when I have the extra money.
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May 2, 2009 22:56
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Kobayashi posted:Sounds like you really have two questions: What to do with your existing 401k money, and how to invest in the future. I suppose that addresses my concerns about the tax implications. Just leave the money in a traditional IRA and start a Roth IRA. I have cash, but I am saving it for tuition over the next year. In fact, I've had to take a major pay cut after leaving CC and I'm very concerned about my finances through the rest of the year. Because if that I'm thinking of cashing out the remainder to keep on hand to cover tuition. Because I'm a full time student and I receive no financial aid or loans, I should be able to significantly offset some of the tax liability. Then whatever I have left over next year I can use to start my Roth IRA, then start contributing 5-10% to my 401k at my next job (I have a few good things in the works). Stupid? I'm only 26 and I really could use the money.
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May 2, 2009 23:22
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Well, one thing to keep in mind, if you cash out your 401k you have to pay a federal and state taxes on it, plus a 10% penalty.
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May 2, 2009 23:58
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Since I'll be getting my BS in a few weeks (in Cognitive Neuroscience) and have my employment situation figured out for a year or two, I thought now would be a good time to get some advice about getting my financials in order. Here's what I own: $1k in my BoA checking account. $500 owed on my credit card ($300 from March, the most balance I've ever carried to the next month) $2k in a normal T Rowe Price account, divided about equally between PREIX (S&P 500 index) and PEXMX (Extended market index) $1k in online poker money Quick financial history: About two years ago I started depositing $50/mo into both PREIX and PEXMX. Last year I burned through all my savings while studying abroad in London (kept up the deposits though). This year I'm living off-campus; I get a check from my grandparents every month that's the equivalent of on-campus room fees and meal plan ($1055/mo). I also make $50-$200/mo working part-time. I'm living well (Providence, RI for reference) but my finances are still month-to-month, as evidenced by the occasional need to carry over a credit card balace. Future plans: Upon graduation I will receive $2k from a National Merit Scholarship I won years ago (my grandparents decided to return any scholarship or financial aid awarded to their grandkids). June 1 I start working full-time for Brown University with a salary of $34k before taxes. I estimate a similar cost-of living for next year (~$1200). Rent will be $100-$200 lower (two couples in a two-bedroom apt) but I expect to spend more on entertainment. I will stay for one or two years before applying for grad school in Cognitive Science / Cognitive Neuroscience / Psychology. Most of these programs pay tuition and cost of living to grad students but it's not a sure thing afaik. Hopefully after grad school I can get a post-doc position and then a faculty position. As I see it, I'll use the scholarship money to pay off any credit card debt, buy some stuff I haven't been able to while living month-to-month (in desperate need of new clothes, etc), and make it to my first paycheck. Then I should have about $1200/mo extra income to save/invest. I'll probably stick it all in a savings account until I have 3 months living expenses, then increase my monthly investment contributions. How should I structure my investments? I have a high tolerance for risk and I'm 22 years old. Let's say I want to approximate IFA portfolio 90 (http://www.ifa.com/portfolios/p090/). How many different funds should I contribute to? My total capital is not enough to warrant holding all 11 funds they suggest. Is the top 6 worthwhile, or should I stick to 2 or 3 for now? Also, should some or all of this be going into a Roth IRA? I don't plan to make any big purchases such as a car or house anytime soon, but I might have to dip into savings for living expenses during grad school. Any thoughts would be appreciated.
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May 3, 2009 22:18
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My main question here is whether my portfolio is balanced - I still don't quite understand the principles there. I've gathered "save a lot" and "go for index funds," but the finer points elude me. Thanks for any advice anyone can give. I'm 25, and make ~$37000/year, but I'm debt-free and live pretty cheaply so can still save a lot. No upcoming major purchases. I contribute to employer match in a 401k (Vanguard Target Retirement 2050, ~$250 total ($125 of which is mine)/month). Maxing out a Roth IRA, also in Vanguard Target Retirement 2050. Still have some money to save/invest, so I keep at least $5000 in a money market savings account for emergencies, and have been splitting the rest equally between these funds (non-retirement): Vanguard 500 Index Fund Vanguard Extended Market Index Fund Vanguard Total International Stock Index Fund Vanguard Emerging Markets Stock Index Fund Is this balanced? Domestic and international, large cap and small, but all stocks and maybe too heavy on international? I really don't know. If it's not balanced, what else should I be looking at? (I've gathered from some advice there should be an REIT in there?) (note, I've "lost" a bunch of money so far, since I invested large amounts of my total savings in those funds right before the crash, but I know I'm not going to be taking the money out for many years, so no worries yet) onefish fucked around with this message at 05:00 on May 4, 2009 |
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May 4, 2009 04:58
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onefish posted:My main question here is whether my portfolio is balanced - I still don't quite understand the principles there. I've gathered "save a lot" and "go for index funds," but the finer points elude me. Thanks for any advice anyone can give. Foma fucked around with this message at 07:24 on May 4, 2009 |
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May 4, 2009 05:19
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edit: Nevermind, I don't think this post was helpful. Mashed Yeast fucked around with this message at 22:41 on May 6, 2009 |
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May 6, 2009 02:23
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Should I rollover my 401k? Here's my situation: I had a job from April 2007 - April 2008 with a 401k that I dumped a ton of money into. I pretty much picked a large variety of Fidelity's index/mutual funds out of a hat. Now that it's a year later, my fund down something like 40%+ just like everyone else. Since it's a retirement fund, however, my understanding is that it's best to hold on to them because in 30 years they'll go back up (hopefully) Everyone seems to advocate rolling over into a Roth, which I have also set up through Vanguard (I have some S&P500 shares in there). The thing is, wouldn't that be essentially buying high and selling low? I'm also hesitant to do this because I understand I'd need to pay the taxes out of pocket and I don't have that much money right now. I'm also dumb and invested entirely in stocks, but I'm at least relatively young (23) What's my best course of action right now? Killmaster fucked around with this message at 19:52 on May 7, 2009 |
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May 7, 2009 19:49
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Killmaster posted:Should I rollover my 401k? To convert a 401k to a Roth IRA you first need to convert it to a traditional IRA. You could choose to leave it there and continue to defer taxes until withdrawal in lieu of converting to a Roth. You could also choose to convert only part of the balance. On top of paying income taxes on the amount converted to a Roth IRA you also raise your AGI, which can exclude you from some tax credits. After the conversion you would be selling low and buying low. Ideally you would invest in similar asset classes in your converted IRA to maintain your desired asset allocation. There's a good chance the funds you're invested in are proxies for the S&P 500. Unless you have stellar funds with low expense ratios that you don't want to lose I think it's always worth it to convert. International funds usually suck in the 401k so you're forced to overweight your portfolio with domestic bonds and equity.
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May 7, 2009 21:38
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I was lucky enough (so far) to buy into VTI when it was around $39, and now that it's up to $45 or so I'm wondering if I should be taking those gains (or more?) out and putting it into something a little less volatile as this seems like absurd growth for what was a originally a long-term investment. Is there any conservative investing strategy to use in this situation?
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May 8, 2009 02:19
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Killmaster posted:
You're 23. Roll over to a traditional ira, and then leave that be and start a roth ira. There's no reason to convert because of the tax implications, but there's definitely reason to start contributing to a roth. Also, you wouldn't be buying high and selling low; you wouldn't be selling at all. Once you roll over into an IRA, just repurchase the shares immediately (they'll handle that for you actually, the process for rolling over 401k to IRA has become almost seamless).
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May 8, 2009 14:55
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I will be making a sizeable chunk of cash doing an internship this summer. Budgeting out for the next year leaves an extra couple thousand dollars that will just be sitting around. Would there be any reason not to pick out a solid, stable-growth company with a convenient share-purchasing plan (I like MCD, personally) and put the money there (while planning to continue adding to the investment)? Or should I just wait until I start a Roth in a few years and start buying shares then? My main goal isn't enormous profits; however I hate to leave cash just sitting around.
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May 8, 2009 20:41
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extra innings lovin posted:I will be making a sizeable chunk of cash doing an internship this summer. Budgeting out for the next year leaves an extra couple thousand dollars that will just be sitting around. Would there be any reason not to pick out a solid, stable-growth company with a convenient share-purchasing plan (I like MCD, personally) and put the money there (while planning to continue adding to the investment)? Or should I just wait until I start a Roth in a few years and start buying shares then? Why don't you start a Roth now and buy the MCD shares in it?
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May 8, 2009 20:55
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How important is it to start saving for retirement early when one partner is a lot younger (~13 years) and so will probably be working full-time at least that far into the other person's retirement? Just assuming that neither person has started saving for retirement (true for me, not for him but i have no idea what kind of retirement savings he does have)?
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May 8, 2009 22:42
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