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Need some advice. About 30% of my 401k is in my employers stock fund, the rest in a vanguard 2050 target fund. My 3% employer match goes into the employer fund, all of my own contributions go into the target retirement fund. The company stock has actually done quite well, and my rate of return over the past year alone on the company stock is ~20%. This, plus the fact that due to the default contribution mix that I didn't change, up until a year or so ago I was putting some portion of my own contributions into company stock, is why its now 1/3 of my retirement portfolio. Is this too much exposure to one stock? Should I re balance my 401k and put say 2/3 of the company stock into the target fund? Do I need to worry anything about tax stuff if I do that?
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Oct 15, 2014 19:37
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Mr. Glass posted:Too bad I'm already at the cap Said this out loud yesterday, but my wife's not capped yet!
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Oct 15, 2014 19:49
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GanjamonII posted:Need some advice. About 30% of my 401k is in my employers stock fund, the rest in a vanguard 2050 target fund. You're way overexposed. Yeah your returns have been ~20% but that's just numbers growing on a screen. Those numbers can drop just as easily - look at this week's roller coaster of a market as an example! What happens if your employer tanks? You'd have stock worth nothing AND no job. With an index fund at least, yeah it would take a hit if a business were to go under, but the rest of the businesses within the index would stabilize the value. If I were you I'd be moving the employer stock out whenever I could (Some require you to hold onto it for a certain amount of time to become 'vested'). Drewski fucked around with this message at 19:53 on Oct 15, 2014 |
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Oct 15, 2014 19:50
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Ok I figured as much and am going to change it up. Is there some target (10%?) that I should stick to?
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Oct 15, 2014 19:56
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I'd be interested in hearing experiences of public service pensions. I'm obliged to join a final salary DB pension. The current terms are really good. However, I won't be retiring for another 35 years or so and I'm worried the benefits will change or be reduced. Any public service goons got some advice? Have your pension terms changed over the course of your career?
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Oct 15, 2014 19:58
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GanjamonII posted:Ok I figured as much and am going to change it up. Is there some target (10%?) that I should stick to? personally I would completely remove as much direct exposure (i.e., not counting inclusion in a fund portfolio) your retirement fund has to your employer's stock as you can. your short term financial stability is already directly linked to your employer staying profitable, which is bad enough; you definitely don't your long term financial stability tied to that as well.
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Oct 15, 2014 20:01
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GanjamonII posted:Ok I figured as much and am going to change it up. Is there some target (10%?) that I should stick to? If I were in your shoes, I'd keep as little in there as possible. As in, if there is a vesting period, moving it out shortly after vesting, and if there wasn't, moving it out immediately after it lands in my account. Edit: Perhaps a better answer is the following, how much of your retirement account would you be ok with losing on the same day you lose your job? You have to decide if you are being paid well enough for the increased risk you are taking by holding your company's stock vs a diversified fund and the fact that the performance of that stock is correlated with your employment, perhaps not highly correlated, but correlated nonetheless. MickeyFinn fucked around with this message at 20:08 on Oct 15, 2014 |
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Oct 15, 2014 20:01
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My dad turned 70 today and I've been talking to him a bit about retirement (something he doesn't want to do). But he mentions he has a "sep account" (cep?) with Edward Jones that he has put $50k into for the past 2 or 3 years and will continue to do for a few more years. What exactly is this account he's talking about, and is there something better he could do?
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Oct 15, 2014 20:06
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Gorman Thomas posted:Now would be a good time to start upping those 401k contributions. As a young investor, this is pretty fun to watch (as long as I don't lose my job).
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Oct 15, 2014 20:11
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Droid Washington posted:My dad turned 70 today and I've been talking to him a bit about retirement (something he doesn't want to do). But he mentions he has a "sep account" (cep?) with Edward Jones that he has put $50k into for the past 2 or 3 years and will continue to do for a few more years. What exactly is this account he's talking about, and is there something better he could do? SEP IRA. Generally a very good choice and often has very high contribution limits. He is doing real well with $50K a year. Can he do better? Yes, by dumping Edward Jones.
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Oct 15, 2014 20:14
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80k posted:SEP IRA. Generally a very good choice and often has very high contribution limits. He is doing real well with $50K a year. That's awesome to hear, thank you. I just wanted to make sure he's on the right track because there are times he gets swooped away by sales talk.
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Oct 15, 2014 20:22
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Droid Washington posted:That's awesome to hear, thank you. I just wanted to make sure he's on the right track because there are times he gets swooped away by sales talk.
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Oct 15, 2014 20:27
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gvibes posted:He is most likely getting fleeced by Edward Jones. Probably in loaded funds. I take it maybe I should mention to him to have it moved? I hear Vanguard in this thread a lot, maybe there?
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Oct 15, 2014 20:30
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Droid Washington posted:I take it maybe I should mention to him to have it moved? I hear Vanguard in this thread a lot, maybe there? The short answer is yes, but I would not get too pushy. It would be a lot better for you to buy him a book, and tell him that you have been learning a lot about the importance of low cost. If he doesn't come to a decision on his own to move to Vanguard, I wouldn't impose too much, but of course, it depends on your relationship with him. Williams Bernstein's 4 Pillars book is often recommended, but he actually wrote a more recent book that is quite a bit easier to read and understand. (edit: called the Investors Manifesto) 80k fucked around with this message at 20:41 on Oct 15, 2014 |
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Oct 15, 2014 20:38
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80k posted:The short answer is yes, but I would not get too pushy. It would be a lot better for you to buy him a book, and tell him that you have been learning a lot about the importance of low cost. If he doesn't come to a decision on his own to move to Vanguard, I wouldn't impose too much, but of course, it depends on your relationship with him. Williams Bernstein's 4 Pillars book is often recommended, but he actually wrote a more recent book that is quite a bit easier to read and understand. Thank you. I need to learn some of this for myself anyway as I'm graduating college soon. I'll hit Amazon for some of his books.
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Oct 15, 2014 20:41
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Droid Washington posted:Thank you. I need to learn some of this for myself anyway as I'm graduating college soon. I'll hit Amazon for some of his books. BTW, 4 Pillars is still the best, IMO. But his Investor's Manifesto is a nice gift for someone who may not want to be as nerdy about finance.
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Oct 15, 2014 20:43
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Droid Washington posted:Thank you. I need to learn some of this for myself anyway as I'm graduating college soon. I'll hit Amazon for some of his books. Four Pillars would be really good for you read. It'll give you a very solid base of knowledge to discuss the subject with your dad. Then you'll know if that's the right book for him to read. Probably is if he's in business and earning a good income.
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Oct 15, 2014 23:28
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GanjamonII posted:Need some advice. About 30% of my 401k is in my employers stock fund, the rest in a vanguard 2050 target fund. Yeah I would rebalance since you never want to have too much allocation for the company stock. There's not tax implications since 401k only has tax once you start taking money out of it. Until then you can buy, sell and rebalance your allocation without any tax worries. Make sure check if you have some good low cost options available for the funds.
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Oct 15, 2014 23:50
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adamarama posted:I'd be interested in hearing experiences of public service pensions. I'm obliged to join a final salary DB pension. The current terms are really good. However, I won't be retiring for another 35 years or so and I'm worried the benefits will change or be reduced. Any public service goons got some advice? Have your pension terms changed over the course of your career? Public sector retirement plans are allowed to change their rules as time progresses. The scope of the changes allowed depends on the state of residency and many other factors. Some changes are implemented "across the board" and all participants are affected. However, some rules target specific generations (E.G. People hired after 10/15/2014 get half a percent multiplier less than people hired before 10/15/2014). It's likely that your plan will change in the next 35 years. Changes could be positive or negative for participants, depending on what changes occur. However, there is a good chance that some portion of the benefit will remain. Changes commonly need to be "bargained" for between the employer, retirement plan, and the participants. All parties retain the right to file lawsuits against changes that they determine to be unfair. There are perks to having a DB benefit, but there are also downsides. A generous plan may sound awesome, but you need to consider whether the retirement plan will still have money in 30 years. Some plans have a terrible funded ratio and likely need to make changes or implode. Retirement plans are required to perform "actuarial valuations" on a regular basis. You can normally obtain this "valuation report" to see the specific financial status of the plan. The valuation reports are normally available online or from your HR\Retirement Department. This report might also describe the effective benefit provisions, which would hint at the frequency of historical changes. A public pension should not be treated as guaranteed. You should still save for retirement elsewhere. The introduction of defined contribution (DC) and hybrid (DB & DC) are commonly implemented to place more responsibility onto the employees.
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Oct 15, 2014 23:58
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Droid Washington posted:I take it maybe I should mention to him to have it moved? I hear Vanguard in this thread a lot, maybe there?
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Oct 16, 2014 00:05
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I need to reallocate my 401K, which is a piece of poo poo Hartford/Massmutual plan with like 12 funds most of which have total fees north of 2%. I contribute the employer matching 3% and made some terrible blind-guess allocations three years ago, which I've forgotten all about until now because I was busy zapping Grad PLUS loans as fast as possible and it's tough to beat 8.5%. Next month the PLUS loans will be dead and I'm starting to pay attention again. I started maxing a Roth IRA which is all in VFFVX (2055 target fund), and since that's mostly domestic stocks I was going to put half of the 401K in bonds (also they are the cheapest available fund) and the rest in international or blends with international components. 45% GSGOX (bonds) 25% AWPAX (international) 25% RIRCX (blend) 5% OPGSX (gold & mins ron paul 08; i have this already from being dumb and 26 so i'd rather not sell at the bottom) My other options are: ALARX (expensive large cap), HIAVX (cheap large cap), LVOAX & SSVSX (expensive mid caps), IGNYX (natural resources), RIDCX (another blend), SGQAX (another international), IARAX (real estate), and HUBBX (short bonds, totally pointless with the fees they charge). Does this look about right? The 401K contributions end up being about the same as a maxed IRA, so with VFFVX being 90/10 that should give me a reasonably balanced portfolio leaning towards stocks. Also, should I even bother going past my employer match? These fees are incredibly lovely, but is just the tax benefit alone enough to make it worthwhile? (Add 1.05% in "program and administrative charges" to whatever expense ratio you find on Google/Morningstar  )
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Oct 16, 2014 00:07
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Aw man, so the lady at First Command e-mailed me a few days ago asking when I wanted to come in for more consulting. I e-mailed her back, saying that my plans have changed and I have no intention of meeting with the financial advisor or anyone from First Command, and then thanked them for their time. Maybe 2 hours later I got a call from the financial advisor who was just dumbfounded on why I wouldn't want FREE financial counseling that I had won in a raffle-"This is the first time anyone has ever turned us down. I just want to learn what I did so I can improve next time." I told him I had done some research and I didn't believe in the whole life insurance he was pushing on me the second I walked in the door, nor did I appreciate him bashing my current investments. Dude was pretty aggravated and I just had to keep on saying how I'm not interested and he just couldn't believe this and to not worry about the whole life insurance-it's not a dealbreaker and if I don't want it he won't force the issue. At least he was finally cordial enough to say he respected my opinion and then hung up on me.
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Oct 16, 2014 00:10
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nwin posted:Aw man, so the lady at First Command e-mailed me a few days ago asking when I wanted to come in for more consulting. I e-mailed her back, saying that my plans have changed and I have no intention of meeting with the financial advisor or anyone from First Command, and then thanked them for their time. Are you sure you haven't made a big mistake? I mean, they're not third command, they're not second command, but FIRST COMMAND. Do you want to be second place in life? I mean look at this guy from the website. Why don't you trust this man above history, math, statistics, and reason? 
baquerd fucked around with this message at 01:17 on Oct 16, 2014 |
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Oct 16, 2014 01:12
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GanjamonII posted:Need some advice. About 30% of my 401k is in my employers stock fund, the rest in a vanguard 2050 target fund. Slightly different, but kind of the same. Before I started caring about investments, I stockpiled stock from my company stock purchase plan. I'd say a good 75% of my money was locked up in my company's stock. After I started reading this thread, books about investing, etc, I immediately liquidated all of it (it was at a decade high at that point). I am still enrolled in my company's SPP up to the max contribution amount, but I will be selling it after it gets into long-term capital gains tax territory from now on (assuming I'm making profit). Company stock is an option for our 401k funds as well, but there's 0% chance I'd ever put anything in it.
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Oct 16, 2014 01:20
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I'd only buy company stock if they offered a good match (at least 25%) and weren't too strict about trading. My company offers 25% match on up to $184/pay period but its $40 per trade  . I have company stock at around 10% of my total assets right now, which is a bit high, but I plan on selling off all the positions every 6 months or so for the free money.
Gorman Thomas fucked around with this message at 02:07 on Oct 16, 2014 |
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Oct 16, 2014 02:05
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Gorman Thomas posted:I'd only buy company stock if they offered a good match (at least 25%) and weren't too strict about trading. My company offers 25% match on up to $184/pay period but its $40 per trade Assuming you work for a decent mid/large cap company it's free money given the base discount and also how in some cases employee stock purchase will also give the lowest price during the buy-in period. Main thing is not getting too greedy and if you are more conservative just to sell it as you meet the minimum holding requirement.
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Oct 16, 2014 02:55
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One thing I am still bad about is trying to time the market, I invested about $20k at the start of the year, let the money pile up and on this dip have bought a couple thousand worth of stock. I want to get into a set habit of investing X amount every X time period. I would also like to tighten up what I invest in. When I started it was mainly safe blue chips now it is more Vanguard ETFs. I think I have ok allocation, but no forward plan So I have left over about $1-1.5k a month. I use Scottrade as a broker so each trade is $7. This is Money outside 401k, etc. I have a long term horizon, no debt, no upcoming major expenses, etc. So what makes the most sense? What do I invest in, how much, how often? I want to make it a thing I just do and not watch and guess at the market.
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Oct 16, 2014 06:50
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Can I get some advice on my ESPP situation? I'm currently contributing 10% gross, and receiving a 50% match. The shares purchased with me 10% are immediately available for transfer/sale, but the shares purchased with the 50% match are subject to a 1 year holding period. So, starting next June I will have match-purchased shares available every 2 weeks. Here are the fees for the plan: Share Purchase Withdrawals Fee * Web based transaction Market order $25 /withdrawal * Limit order $35 /withdrawal Brokerage Commission (if applicable) * 3¢ per share (minimum of $29/trade) Service Fee * $5.00 CAD per EFT * Cheques $10.00 per cheque in currency of cheque * Wire (domestic, electronic only) $20.00 per wire in currency of wire * Wire (US and international, electronic only) $5.00 per wire USD * Stop payment $25 in addition to normal cheque charge * Certified cheques $15 in addition to normal cheque charge Share Transfers (only applicable for Share Purchase and Holding Accounts) * Physical Security Registration (not including third party charge) $50 plus out of pocket expenses * Electronic Transfer (delivered electronically to another broker) $35 per delivery So, $25 for a market order + $5 for a transfer, or just a straight up transfer for $35 (I'd have to sell through my discount broker, and end up paying commission to them). My ultimate goal is to sell these shares and use the funds to purchase ETFs (I have a separate discount brokerage account), but I'm wondering when/how I should go about selling? I currently have $1,377.88 available, and $688.94 locked up for a year from original purchase, staggered in 2 week increments. I'm not sure how long I'll be at this company, and upon termination the entirety of the shares will be wholly available, regardless of purchase date, but the value of this ESPP fund is already larger than my entire ETF portfolio... Any advice or insight on how to proceed?
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Oct 16, 2014 07:17
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Foma posted:One thing I am still bad about is trying to time the market, I invested about $20k at the start of the year, let the money pile up and on this dip have bought a couple thousand worth of stock. I want to get into a set habit of investing X amount every X time period. I would also like to tighten up what I invest in. When I started it was mainly safe blue chips now it is more Vanguard ETFs. I think I have ok allocation, but no forward plan
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Oct 16, 2014 13:04
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Arae posted:Public sector pension advice
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Oct 16, 2014 19:26
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Foma posted:One thing I am still bad about is trying to time the market, I invested about $20k at the start of the year, let the money pile up and on this dip have bought a couple thousand worth of stock. I want to get into a set habit of investing X amount every X time period. I would also like to tighten up what I invest in. When I started it was mainly safe blue chips now it is more Vanguard ETFs. I think I have ok allocation, but no forward plan It rarely makes sense to contribute to a taxable account before maxing tax advantaged space. Dollar cost averaging is great, but it hurts paying a trading fee each month. If you want vanguard etfs make an account at vanguard and pay zero trade cost. Efficient fund placement is crucial in taxable to minimize tax drag and short term capital gains. You want a fund with minimal turnover (forces short term capital gains) and minimal dividends/interest payments. This way you only pay cap gains when you sell and you have more control (sell in low income years to minimize taxes). Good funds for taxable are total us stock market (low turnover) and total international stock (low turnover and you get a foreign tax credit that you wouldn't otherwise get in a 401k). small cap stocks are generally bad in taxable because of excessive turnover. Reference http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement Velochis fucked around with this message at 20:40 on Oct 16, 2014 |
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Oct 16, 2014 20:35
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etalian posted:Yeah I would rebalance since you never want to have too much allocation for the company stock. Should I rebalance now while the market is down? Should I wait for the company stock to go up (if it does I mean)? Should I try to rebalance it over some period of time? The company is in talks for a leveraged buy out if that makes any difference. I do not know what this would do for me as a shareholder, I am kind of new to this whole thing (and why I want to just stick it in a target fund and not worry about it).
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Oct 16, 2014 20:52
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GanjamonII posted:Should I rebalance now while the market is down? Should I wait for the company stock to go up (if it does I mean)? Should I try to rebalance it over some period of time? Don't Try To Time The Market (tm)
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Oct 16, 2014 22:05
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Velochis posted:You have 1.5k a month left over after maxing your 401k (17.5) and ira (5.5k)? I usually fill up my IRA around Tax time every other year (for both years), if you count that it is more around $800-1000 depending on the month, left over. I Max out my 401k as much as they match (I put in 10 they match 5). I want don't know if I want to put more in my 401k after match, isn't that money locked in? I would rather have access to it, not knowing what I want to do in the future. It looks like I need to set up a Vanguard account (UGH paperwork). Do you pay turnover taxes with an ETF? I never noticed it (maybe it gets baked in).
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Oct 17, 2014 02:03
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GanjamonII posted:Should I rebalance now while the market is down? Should I wait for the company stock to go up (if it does I mean)? Should I try to rebalance it over some period of time? Pick a random date at any time in the year. Got it? Great. Rebalance that date every year. I actually do it twice, but the main thing is don't change when. *edit* I see you mean as far as your large chunk of company stock currently. For that, don't let what the market is doing influence your call. It could go up, down, who knows, don't guess. Bob Mundon fucked around with this message at 03:06 on Oct 17, 2014 |
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Oct 17, 2014 02:57
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Foma posted:Do you pay turnover taxes with an ETF? I never noticed it (maybe it gets baked in). One of the more subtle advantage of ETFs is they are more tax efficient than mutual funds. Basically since the collection of stocks get captured in single security, there's no moving stocks in and out like a mutual fund, hence ETFs have more tax efficiency.
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Oct 17, 2014 03:25
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ETFs suffer turnover in the same way as index mutual funds. Consider an s&p 500 etf. Imagine the 500th and 501st smallest stocks switch ranks. An s&p500 etf is forced to liquidate positions in the previously 500th ranked stock to buy the new guy.
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Oct 17, 2014 15:25
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Velochis posted:ETFs suffer turnover in the same way as index mutual funds. Consider an s&p 500 etf. Imagine the 500th and 501st smallest stocks switch ranks. An s&p500 etf is forced to liquidate positions in the previously 500th ranked stock to buy the new guy. Well, etalian is right that generally ETF's have better tax efficiency than funds, but not for the reasons he mentioned (or maybe just needs to be clarified). What you mentioned is exactly correct, reconstitution of the index affects index funds and ETFs no differently and results in equal turnover. ETFs however, have an advantage that reduces turnover in that there are no cash redemptions from investors. Retail investors must sell the ETF through a broker and the shares stay intact. Because there are no forced sales of securities within the fund, there was no turnover as a result of redemptions. This will reduce turnover of the ETF. Additionally, ETFs actually do have a redemption method, but in fact it is advantageous. Institutional investors can redeem an ETF but instead of receiving cash, they receive the underlying securities "in kind" (so the ETF fund does not have to make a sale). This structure was designed to ensure the net asset value of the underlying securities does not deviate from the price of the fund. On the flipside, the same situation applies to creation of ETF's... Securities "in kind" can be used to create new ETF shares. As a result, any deviations from net asset value to the price of the ETF will be arbitraged away before it becomes meaningful. The ability to get rid of securities "in kind" during the redemption actually allows the fund to get rid of securities with the highest cost basis, reducing the overall cost basis of the ETF. The above method does NOT reduce turnover in the ETF. It improves tax efficiency because it lowers the tax burden when turnover inevitably occurs during reconstitution , which means that it often has turnover without distributing capital gains. Now here's the kicker… At Vanguard, the ETF and index funds have exactly 0 difference in tax efficiency, because the ETF is another share class of the index fund. That means that redemptions from the index funds negatively impact itself and the ETF shares in terms of turnover. But the unique method of redemptions with ETFs improves tax efficiency both for itself and the index fund. 80k fucked around with this message at 17:56 on Oct 17, 2014 |
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Oct 17, 2014 17:31
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moana posted:Just dumped 10k into my solo 401k. Your post motivated me to contribute a chunk to mine yesterday too, thanks! (happy to see today is green again)
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Oct 17, 2014 17:54
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So what's the opinion on employee stock purchase programs? My company does the standard 15% off the market rate and only has a month waiting period until you gain ownership of the shares. On the downside it's foreign Canadian company which has US subsidiaries which means it has the foreign currency fluctuation issue.
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Oct 17, 2014 23:35
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