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Ay caramba, I just got the annual 401k review deck from Fidelity for our company in preparation for our 401k committee meeting. In it there's a section that breaks down which funds represent what percentage of total plan assets. A small sampling: Spartan S&P 500 Index, 0.05% ER - % total plan assets: 1.8% Spartan International Index, 0.12% ER - % total plan assets: 1.3% Fidelity Leisure Portfolio, 0.82% ER - % total plan assets: 9.5% Baron Growth Fund, Retail - 1.30% ER - % total plan assets: 7.6% Jesus Christ people are bad at selecting funds. Granted we only got the Spartan funds (those above and some others) a year ago due to employee pressure but it just blows me away that something like 30% of the total plan assets are in funds with ERs above 0.80% when we have several fantastic, cheap Spartan funds available. I get it, not everyone has the desire or care to learn this stuff. But these are all highly experienced, highly paid engineering professionals making above six figures. It's worth a little bit of your time! This is why I don't trust Fidelity (or other) salespeople to pick good funds. If you don't know what to ask for, they just shovel poo poo in your face. Guinness fucked around with this message at 18:36 on Dec 17, 2014 |
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Dec 17, 2014 18:33
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I would mention it to your colleagues if you can. Maybe send out an email? Not sure if this is something your bosses would be okay with, but if you're willing to advise people, I say do it 
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Dec 17, 2014 18:46
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This was posted to /r/personalfinance and I had to share, especially since it rings so true for me from age 19-25.  http://www.dilbert.com/strips/comic/2014-12-16/
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Dec 17, 2014 20:18
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I can't believe there is such a thing as a leisure portfolio fund, let alone that it made it into a 401(k) plan.
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Dec 17, 2014 20:20
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moana posted:I would mention it to your colleagues if you can. Maybe send out an email? Not sure if this is something your bosses would be okay with, but if you're willing to advise people, I say do it Sending out an email seems like a really bad idea. You can offer education and frequently Fidelity offers X hours of education as part of their bundle. Getting people to actually pay attention is hard though, very few people want to talk about their 401k choices. We've had cheap funds for longer so our distribution isn't quite as bad, but we still have some people who have 100% of their money in a stable value fund (similar to money market but has tiny returns instead of 0 returns) or 100% in a sector they have experience with and see only upside. This is also why we don't offer the brokerage link option where people can pick from everything. While it would make more savvy employees happy, the damage that the less savvy ones could do to themselves is huge.
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Dec 17, 2014 20:37
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Does anyone here do dividend investing? I'm not talking necessarily about DRIPs, but is there a fund that invests solely in dividend-paying companies and allows you to reinvest the dividends, or take the distribution? As far as I know, a DRIP automatically re-invests the dividends. I'm trying to see the feasibility of living on dividend income in retirement (in addition to 401k and Roth IRA, of course)
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Dec 17, 2014 22:23
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Omne posted:Does anyone here do dividend investing? I'm not talking necessarily about DRIPs, but is there a fund that invests solely in dividend-paying companies and allows you to reinvest the dividends, or take the distribution? As far as I know, a DRIP automatically re-invests the dividends. I'm trying to see the feasibility of living on dividend income in retirement (in addition to 401k and Roth IRA, of course) https://personal.vanguard.com/us/funds/snapshot?FundId=0623&FundIntExt=INT#tab=0
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Dec 17, 2014 22:29
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Omne posted:Does anyone here do dividend investing? I'm not talking necessarily about DRIPs, but is there a fund that invests solely in dividend-paying companies and allows you to reinvest the dividends, or take the distribution? As far as I know, a DRIP automatically re-invests the dividends. I'm trying to see the feasibility of living on dividend income in retirement (in addition to 401k and Roth IRA, of course) Dividends are an incredibly common thing, and almost any mutual fund or ETF you own already pays them I'm sure. Some funds like the one linked above only invest in dividend paying companies, but broad-market funds and indexes still pay dividends. Dividends aren't really relevant on their own for any particular reason but tax planning. I think most experts would agree that no one can accurately predict the total return of a stock based on whether it has a dividend or not, so it really is just a tax thing. In general, dividends in retirement accounts are automatically re-invested by default and dividends in standard accounts are not. This is because your cost basis for each stock in a standard account matters for tax purposes, and it doesn't matter in a retirement account. In retirement, you would want to first live off of any dividends you receive in a taxable account. This is because you have to pay tax on them whether you spend them or not, so you may as well spend them first before you touch other money. Saying that you "want to live off of dividend income in retirement in addition to 401k" is a weird statement, and I am not sure you understand stocks and dividends.
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Dec 17, 2014 22:47
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I just watched a "financial advisor" get out of jury duty because he told the judge he's 100% on commission.
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Dec 17, 2014 23:15
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etalian posted:There's basically no reason to open up a company Roth, often it's just a clever trick to suck you into high ER funds associated with the 401k custodian. Why would you go traditional vs Roth 401k? I'm sure the answer is income related. So please give details on WHERE that change occurs. On the same token, you say often Roth IRA. Based on all your 401k comments, you ought to suggest Traditional IRA over Roth. DNK posted:I've written a couple posts about it in this thread (click the '?' below my username to view them), and the gist of Roth vs Traditional is that Roth is almost always a worse long-term investment option if you're aiming for steady disbursement.
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Dec 17, 2014 23:17
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SiGmA_X posted:You give such random info sometimes sir. The ER is identical, you just get a Roth option. For Traditional IRA you can get tax deduction on the full contribution but it has a income phase out for the deduction if you already have a work sponsored retirement plan aka 401k, 401b. If don't have a workplace retirement plan then you can always get the full deduction for your IRA contribution(single/head of household) or less than 181,000 AGI if your spouse has a workplace retirement plan. So assuming you can deduct it, you get a tax break now but have to pay Uncle Sam during distribution time. So most high income earners do a Roth IRA or go the even more clever IRA to Roth IRA backdoor trick. IRS guidelines for IRA deductions: http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits Omne posted:Does anyone here do dividend investing? I'm not talking necessarily about DRIPs, but is there a fund that invests solely in dividend-paying companies and allows you to reinvest the dividends, or take the distribution? As far as I know, a DRIP automatically re-invests the dividends. I'm trying to see the feasibility of living on dividend income in retirement (in addition to 401k and Roth IRA, of course) At least for taxable accounts you always have the option what to do with the money whether it's just buying more of originating equity, using dividends to buy more of your core position or in same cases you can just take cash for dividend which gets stored in a money market fund. etalian fucked around with this message at 00:52 on Dec 18, 2014 |
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Dec 18, 2014 00:47
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First of all, I didn't run any numbers because I think it's pretty self explanatory at the most basic conceptual level. Assumptions: 1) you disburse your retirement income in SEPPs 2) you are of a qualifying age 3) you don't have other retirement income sources other than IRA, 401k, and social security Okay, so you make money today and can either invest it pre-tax or post-tax. Without considering long-term outcome, pre-tax wins because it costs less for you (less taxable income). The taxation you avoid is at your highest marginal tax bracket. The long term outcomes of both differ from a total money perspective. Roth has less because it starts with less, but it isn't taxed when you disburse. Traditional has quite a bit more, but is taxed when you disburse. If you wanted one lump sum as soon as you're eligible, the outcome is Roth favored. You get taxed like a hellion on your six/seven figure traditional disbursement, but it's coming from a larger pile so it gets pared down to approximately the size of the Roth funds -- assuming your Roth contributions came from an income of at least $36,900, the difference is absolutely less than 15% (regardless of the size of your account) and for accounts under $406k would be absolutely less than 10%. Still, 10% of 400k is 40k and that's a lot of dollars, m'right? But that example isn't quite comparing apples to apples: the money that went into the Roth account was taxed at your highest marginal rate (for incomes $36k to $90k this means 25%) and the money that's coming out of your traditional is being taxed across ALL brackets, so that $406k disbursement is an effective 28.9%. Roth just beat Traditional 3.9% at the cost of having the investor pay a considerable amount more income taxes during the principal build-up (a cost/benefit not represented in these calculations). But even ~4% of 400k is 16k, and that's still a lot of dollars, m'right? Yup! But what kind of idiot disburses their entire 401k as soon as they're eligible? With a more modest $16k disbursement (4% of 400k...) combined with an expected Social Security payout of ~10,000 your effective AGI is like $21,000 or however voodoo SS income factors into AGI. Regardless, your effective tax rate is sub-15% until $45,000 taxable income. Even taking $90k/yr (from a correspondingly large 401k) has an effective tax rate of 20.42%. So the performance benefit is now knocking up to 10% in favor of Traditional and the benefit doesn't bump to Roth favored until your Taxable Income goes over $200,000 per year. These effects only get more pronounced when your highest marginal tax bracket is higher, and I'd like to reiterate that these performance benefits are seen with an income as low as $36k (and are still significant with sub-36k incomes if you can manage to save for retirement on that low of an income). Let's remember -- for the third time, now -- that you're also saving money during contributing years by not paying more in income taxes. More now AND more later, gently caress yeah! Roth is for stupidly big disbursements and not much else. If you have HUUUUGE taxable accounts because you're a trust fund kid who's also a stock wizard then Roth might be cool, idk. e: Roth IRA is still cool cuz of IRS rules (principal withdrawal) and having some Roth funds in Retirement is nice for flexibility, but seriously Roth 401k is a joke. DNK fucked around with this message at 01:03 on Dec 18, 2014 |
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Dec 18, 2014 00:50
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Droo posted:Dividends are an incredibly common thing, and almost any mutual fund or ETF you own already pays them I'm sure. Some funds like the one linked above only invest in dividend paying companies, but broad-market funds and indexes still pay dividends. No, I do understand them. I was asking if anyone planned to invest in funds that choose dividend-paying stocks (like the fund posted above you), and use the distributions to supplement their 401k distributions in retirement (or possibly to bridge the gap between early retirement and taking distributions). Maybe I worded it wrong, but I don't see why it's an odd statement...
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Dec 18, 2014 01:46
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There isn't a lot of difference, tax-wise, from exporting your dividends versus a controlled sell-off / rebalancing on non-dividend stocks if the account is non-tax-advantaged. Maybe it's less paperwork? I'm not really understanding why it'd matter unless there are specific tax advantages to dividends that I'm unaware of.
Bhodi fucked around with this message at 02:09 on Dec 18, 2014 |
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Dec 18, 2014 02:06
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Omne posted:No, I do understand them. I was asking if anyone planned to invest in funds that choose dividend-paying stocks (like the fund posted above you), and use the distributions to supplement their 401k distributions in retirement (or possibly to bridge the gap between early retirement and taking distributions). Maybe I worded it wrong, but I don't see why it's an odd statement... Well, your question is kind of ambiguous because you can adopt dividend strategies in 401k or IRA's. I think you are talking about dividends in taxable accounts because you want to live off dividends and create a stream of income to supplement your tax sheltered accounts? Well, this is more to do with taxable account investing than it is about dividends. The only reason to really focus on dividends would be if you are too lazy to sell shares. On the other hand, you can't really effectively manage a portfolio without occasionally selling shares. There is no reason to avoid selling shares in taxable accounts, if the goal is to live off your taxable savings, because it still a very tax efficient method for drawing down your assets, and over the longterm (assuming you choose a cap weighted total market funds) will be far more tax efficient than dividend focused funds. A total return strategy is preferable to a dividend strategy because it allows you to optimize tax efficiency (nothing beats cap weighted total market funds in taxable accounts, due to them having the lowest turnover, reasonably low dividend yields, and low fees) as well as pick asset classes using more reliable metrics for risk and return (like equity size and value). Dividends as a metric is not a reliable metric for filtering stocks for any reason other than because people like them. Higher dividends have a tendency to be value stocks, but value as an asset class is more effectively screened for by other metrics, the best being book-to-market. So from a portfolio design perspective: why do you want to only spend dividends? Did you know dividend focused strategies TEND to be value strategies, and if so, why not adopt a better-constructed value-tilted portfolio? In what way do dividends matter to you? Remember that most dividend focused strategies (Wisdomtree ETF's being an entire family of funds dedicated to them) will have higher turnover and higher costs than total market funds. Higher turnover means higher distributions. Higher dividends mean more income annually. These are all tax drags that will hurt your total return in a taxable account. Remember when you lock yourself into funds in a taxable account and hold for hopefully decades, you can't change them without incurring capital gains taxes. So choose your investments wisely, focusing on total return.
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Dec 18, 2014 02:15
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Broad market ETFs also pay a pretty decent dividend around 1.5-2% for US equities(VTI) and 3-3.5% for developed/emerging market ETFs(VWO/VEU). It also helps to remember from the Four Pillars, there is no big return without big risk. Many of the higher yield dividend stocks or preferred stock ETFs tend to concentrate in sectors like utilities or financial sector. etalian fucked around with this message at 03:54 on Dec 18, 2014 |
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Dec 18, 2014 03:52
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Or, as the Ferengi might put it -- "Rule of Acquisition #62 -- the riskier the road, the greater the profit". 
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Dec 18, 2014 06:29
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DNK posted:Roth is for stupidly big disbursements and not much else. If you have HUUUUGE taxable accounts because you're a trust fund kid who's also a stock wizard then Roth might be cool, idk. This is sorta the conclusion I came to. If someone is going for the typical upper middle class, big spender retirement lifestyle a ROTH seems like a good idea but I'd rather save money now with tax deductions, potentially get a tax credit and retire early on 25-30k a year. edit: I don't think I'm going to do this but what happens if someone rolls a roth into a traditional IRA? Do they get a tax discount based on that year's taxes or what? Sephiroth_IRA fucked around with this message at 14:57 on Dec 18, 2014 |
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Dec 18, 2014 14:54
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I couldn't decide whether to go Roth or conventional, so I'm just splitting 50/50.
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Dec 18, 2014 15:33
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I ran some numbers last night. The projection is surely a little off because i picked a tax bracket (& exemption/deduction) growth rate that roughly worked for 2012-13,2013-14&2014-15 - 1.66%, definitely not perfect but I didn't have a better idea for that, if someone has a suggestion I can try it out. I also used a 15% gross income savings rate, 3.5% income growth, 2.5% inflation, and 8% expected return, and a 80% retirement income rate. With 80k gross household (MFJ) income in 2014, retiring in 2051, and dying in 2081, I calculated you would have roughly 30% more net income while working if doing traditional, and 15% more retirement income in doing Roth. The lifetime NPV is ~1% greater for traditional than Roth due to more money on the front end. The Roth lifetime income would be worth 4% more over the traditional. E: Crap, I just realized I didn't phase out the exemption for high earners, but I think I'm OK because the floor for MFJ is over 200k IIRC, it's single that is 150k? Put that on tonight's todo list to check/verily/change. Bump gross MFJ income in 2014 to 180k, and I saw a ~5% increase in working net via Traditional, a 24% increase in retirement income, and the lifetime NPV was ~0.5% higher for Roth than traditional. The Roth lifetime income would be worth 16% more over the traditional. So a higher earner would save and have a substantially larger amount of money using a Roth 401k, while having a little less income during working years. A lower income worker would be better off using traditional as it gives more working income by a pretty substantial amount. I'm going to play with my model some more tonight and post it on Google Sheets and drop a link on here. I'd love feed back to improve it or to help me troubleshoot anything I hosed up - taxes or growth wise. I'm a newbie at this stuff. gvibes posted:I couldn't decide whether to go Roth or conventional, so I'm just splitting 50/50. SiGmA_X fucked around with this message at 16:47 on Dec 18, 2014 |
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Dec 18, 2014 16:20
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I'm not sure I understand your calculations. You are letting the tax adjusted savings rate vary between the traditional and roth scenarios? That isn't the way it works in real life. While working you have your normal lifestyle costs and at the end you have some free net cash flow to invest. The question at hand is "should I invest this $1000 of net money in Roth or should I do the equivalent $1000/(1-marginalRate) in traditional?" Both leave you with the same net income and the same tax-adjusted savings rate. You have to nail this part down or your optimization will end up with circular logic. It will all come down to current marginal rate vs effective tax rate in retirement. Traditional is going to be better for mostly everyone, the main exception being young college grads temporarily stuck in lovely retail jobs with no high interest debt, an existing emergency fund, enough net cashflow to invest at all and exceed any available company match, and a 401k plan that's decent enough that there is even a choice to be made in the first place. That being said I still support the use of Roth IRAs because of the other advantages they offer.
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Dec 18, 2014 17:22
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I'm currently doing some independent contracting in between full-time W2 jobs (that have a company-sponsored 401ks). Is there anything clever that I can do with my self employment income to boost my tax-sheltered retirement savings? I'm not sure if I'm eligible for a SEP-IRA or SIMPLE-IRA given that I will have a normal 401k.
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Dec 18, 2014 17:26
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turing_test posted:I'm currently doing some independent contracting in between full-time W2 jobs (that have a company-sponsored 401ks). Is there anything clever that I can do with my self employment income to boost my tax-sheltered retirement savings? I'm not sure if I'm eligible for a SEP-IRA or SIMPLE-IRA given that I will have a normal 401k. As far as I know, you can set up a SEP-IRA even if you are contributing to a 401k at another job. You can also have a SEP-IRA and still make contributions to your personal Roth IRA. (Or you can potentially set up your SEP-IRA to have non-SEP contributions). http://www.investopedia.com/articles/retirement/05/commonquestions.asp There are some exceptions... like you cannot do this if the contracting work you are doing is also in some way affiliated with the work you do as an employee for the same business. flowinprose fucked around with this message at 17:39 on Dec 18, 2014 |
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Dec 18, 2014 17:37
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Eyes Only posted:It will all come down to current marginal rate vs effective tax rate in retirement. People keep saying this but it's not really a practical way to think about it. Income goes into your IRA at your marginal tax rate, and it comes out at your marginal tax rate. Withdrawals from retirement accounts aren't magically treated any differently than other income. Most people near or at retirement age will have some combination of: Pension Social Security Part Time Job Income Royalty or Patent Income Dividend/Capital Gain Distributions from Taxable Account Spouse with a Job/Pension/Etc Rental Property Income If you are retired and have some combination of the above stuff, presumably you would live off of all that stuff first. If you still needed more money or had RMDs, then you add the taxable IRA withdrawals on top of all that stuff you would have anyway. I don't get to just fill up the 0% tax bracket with my IRA distributions because that doesn't make any sense.
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Dec 18, 2014 17:45
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For me, part of the benefit is that, since I am maxing my 401k, investing in a Roth 401k allows me to effectively invest more in your tax-advantaged accounts.
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Dec 18, 2014 18:17
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If you made $1 more today, how much would it be taxed? If you made $1 less today, how much wouldn't it be taxed? If you invest $1000 into Roth, where are those dollars coming from? (Hint: most people invest with money after core expense, i.e. the last dollars they earned. Even if you're investing with money immediately after core expenses, the beginning of 25% marginal rate is $36k -- it's not that high.) If you invest $1000 into Pre-tax, where aren't those dollars coming from? (Hint: it's unequivocally the last dollars) DNK fucked around with this message at 18:23 on Dec 18, 2014 |
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Dec 18, 2014 18:20
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flowinprose posted:As far as I know, you can set up a SEP-IRA even if you are contributing to a 401k at another job. You can also have a SEP-IRA and still make contributions to your personal Roth IRA. (Or you can potentially set up your SEP-IRA to have non-SEP contributions). Great, thanks! It also appears that I could potentially set up a Solo 401k and then deposit all of my profits into that account according to http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-401k-and-Profit-Sharing-Plan-Contribution-Limits. I assume that a match from the main company would count against the $52000 total employer contribution limit.
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Dec 18, 2014 18:25
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turing_test posted:Great, thanks! It also appears that I could potentially set up a Solo 401k and then deposit all of my profits into that account according to http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-401k-and-Profit-Sharing-Plan-Contribution-Limits. I assume that a match from the main company would count against the $52000 total employer contribution limit. If you already have a 401k from an employer, then a solo-401k would not have much advantage over a SEP-IRA. The administration rules for the solo-401k are a little bit more complicated, particularly once you get a large balance (over $250,000), as it will require different reporting to the IRS. So you might want to seriously consider doing the SEP over the solo-401k. Outside of the ability to make salary deferrals, I think the contribution limit calculations between the SEP and solo-401k are the same... The $52,000 (actually $53,000 next year) limit is combined between your contributions and the employer's matching. So you would have to subtract your contributions from that to get the employer limit. However, I'm not completely certain that this limit applies across multiple employers if they are unrelated... I would think it would be an exceptionally rare situation for you to be able to receive employer matching in excess of that combined limit, particularly at more than one company. If you were in that situation, I would recommend speaking to someone who is an expert on these matters before deciding what to do. flowinprose fucked around with this message at 18:44 on Dec 18, 2014 |
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Dec 18, 2014 18:42
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A SEP IRA has a contribution limit of about 18.5% of your 1099 income. It is some dumb formula like limit = (0.25/1.25) * (1099 income - 1/2 self employment tax)
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Dec 18, 2014 18:56
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Just got the initial details for my company's new 401k plan starting next year. Matching is 100% up to 3% and 50% on contributions past that up to 5%. Vesting period is 2 years. Work is paying all the plan admin fees and they didn't have the expense ratios in the packet I got but the guy said they tend to be around 1.25%. They seem to have ok options and have targeted retirement funds and stuff. The company is Principal Financial Group.
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Dec 18, 2014 19:11
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It also looks like a SEP-IRA or SIMPLE-IRA would limit my ability to do backdoor Roth conversions in the future. For what it's worth, the Vanguard solo-401k plan looks pretty cheap and easy (administrative fees of $20/year). But, considering that I'll only have a few thousand dollars in self employment income it doesn't really seem worth the trouble.
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Dec 18, 2014 19:12
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100 HOGS AGREE posted:they didn't have the expense ratios in the packet I got but the guy said they tend to be around 1.25%. quote:They seem to have ok options
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Dec 18, 2014 20:20
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100 HOGS AGREE posted:Just got the initial details for my company's new 401k plan starting next year. 1.25% ERs in a 401(k) is holy highway robbery e:fb
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Dec 18, 2014 20:25
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100 HOGS AGREE posted:Just got the initial details for my company's new 401k plan starting next year. My company goes through Principal for our 401k fund options suck too (only a few are below 1.0% ER). See if you have an S&P 500 index fund available, in my plan it has by far the lowest expense ratio (around 0.4% which is still way too high). If you do then use that as your main fund in your 401k and balance your portfolio out in an IRA with a total bond index fund and a total international stock index fund. If you also have an extended market index (or their S&P 400 and 600 index funds) then you can use those to approximate the total stock market (see here).
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Dec 18, 2014 20:29
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Does anyone know if Oppenheimer offers any kind of funds that just track major indeces? Our 401k plan only offers a few oppenheimer funds, and they suck. They're all actively managed chasing money with minimum 3% ER's. I was looking around on Oppenheimer's website and I didn't see anything that looked appealing either but maybe I'm missing something. If I can find some of those funds that do track indeces maybe I can convince our plan manager to add those in so I don't have to lament the fact that I have a 401k that is so atrocious with fund choices all my extra money goes straight into taxable accounts :\ All I want is the basics... Total US, total Global, total bond...
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Dec 18, 2014 20:44
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SeaWolf posted:Does anyone know if Oppenheimer offers any kind of funds that just track major indeces? Our 401k plan only offers a few oppenheimer funds, and they suck. They're all actively managed chasing money with minimum 3% ER's. Sorry but Oppenheimer is one of the most disgusting fund family I can imagine. They do have funds that track the benchmark (relatively) but not exactly index funds and fees are still high. Check this one out... one of their worst fiascos in an otherwise boring and core fund asset class: http://quotes.morningstar.com/fund/OPIGX/f?t=OPIGX - Too high of an ER for a bond fund? Check - take excessive risk to justify the higher fees but still lag the benchmark after fees? Check - When risk occurs, fund owners bear all the risk and lose 50% in the BOND portion of their portfolio just when they need their bonds the most (during 2008 financial crisis)? Check I cannot think of a worse example in the mutual fund world where retail investors are being completely deceived. Oregon 529 and several 401k plans sued Oppenheimer after all this poo poo. Rather than ask for Oppenheimer's best funds, you might want to request that HR find a fund family that is at least not the worst ever. BTW, Oppenheimer is still at it. Just a year or two (just five years after they blew up their bonds funds in 2008), a Virginia state muni bond fund was loaded up about 1/3 in Puerto Rican bonds and lost 15% that year. Another horrible result of taking excessive risk against their mandate to cover their high fees. 80k fucked around with this message at 21:10 on Dec 18, 2014 |
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Dec 18, 2014 21:03
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Eyes Only posted:I'm not sure I understand your calculations. You are letting the tax adjusted savings rate vary between the traditional and roth scenarios? That isn't the way it works in real life. While working you have your normal lifestyle costs and at the end you have some free net cash flow to invest. The question at hand is "should I invest this $1000 of net money in Roth or should I do the equivalent $1000/(1-marginalRate) in traditional?" Both leave you with the same net income and the same tax-adjusted savings rate. You have to nail this part down or your optimization will end up with circular logic. Correct, I am allocating a flat 15% of gross income to retirement. Retirement savings comes off the top, just like tax, and doesn't depend on your living expenses. At least this is how I treat it. The one exception is accelerating non-retirement savings - for example, personally I'm only doing 5% (match) retirement savings as the other 10% is going into downpayment savings (+ another 15-25% depending on the month, which varies with daily life purchases and budget, like you've mentioned). I was under the impression that this was the normal method of allocation. I don't plan to change my method, but I am open to alternatives for modeling purposes. There is clearly a large difference in take home pay (again, I would never consider retirement funds as take home, as it comes out before you receive your pay, even for an IRA) depending on the retirement fund taxability. I would love the threads input on contribution amount. It probably would make sense to bump the contribution % up a bit if you're using traditional because you get hammered with tax in retirement, which you don't for Roth. Also, tax in retirement won't change drastically, depending on withdraw amount. I plan for at least 80% (of working income) withdraw for the model, and probably more for my actual retirement - my grandparents did ~120% withdraw once retiring - travel is expensive. The only tax you save with traditional is FICA, which you save with Roth too. And you don't pay tax on gains with Roth... 100 HOGS AGREE posted:Just got the initial details for my company's new 401k plan starting next year. SiGmA_X fucked around with this message at 22:27 on Dec 18, 2014 |
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Dec 18, 2014 22:21
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edit: nevermind, I'm dumb. Though I will say that if he *is* going to be there through vesting, nowadays getting a 4% match on 5% is uncommonly nice even with that big expense haircut. Nail Rat fucked around with this message at 23:19 on Dec 18, 2014 |
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Dec 18, 2014 23:08
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Nail Rat posted:edit: nevermind, I'm dumb. E: My HR dept says they don't have a 401k committee and it's all ran by our retirement plan division (my company manages many $bn in retirement assets for hundreds of companies in the USA). Retirement plans says talk to HR. Lol  All I want are some of the other Vanguard options, that I can freaking see we hold for other companies 401k's because I'm the one who reconciles the trust accounts!! Bah!
SiGmA_X fucked around with this message at 00:06 on Dec 19, 2014 |
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Dec 19, 2014 00:03
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80k posted:Sorry but Oppenheimer is one of the most disgusting fund family I can imagine. They do have funds that track the benchmark (relatively) but not exactly index funds and fees are still high. Well gently caress! That's not at all encouraging. I can certainly try to talk to the company controller about it but I don't think that's gonna go anywhere. They only offer a 401k to say they offer benefits to make it look like a less lovely place to work. So sadly, the 10k I've already put in before I started reading here is going to lose 3% a year in fees plus the 5-8% it lags behind major benchmarks until I leave and can roll it over to vanguard which may be in a year or 10. Might it be worth it to pull the whole thing out despite the penalty because the penalty Prolly would only be a few % above what I'm losing by leaving it there year after year? Assuming I can't convince them to give us less lovely funds.
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Dec 19, 2014 00:55
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