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I'd normally suggest CD's but the rates right now are probably horrible. If it's a material amount of money being saved for a long time (years not months) I'd invest it in a very conservative lazy portfolio, but I have a pretty high risk tolerance and that is undoubtedly risky. A high yield savings account or other risk free vehicle is the right answer for most people.
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Mar 4, 2016 23:00
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antiga posted:I'd invest it in a very conservative lazy portfolio Out of curiosity and for my education, what would this portfolio look like for you? 100% bond funds, any exposure to large cap equity?
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Mar 4, 2016 23:02
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That question merits more research than I've done, to be honest. Snap judgement, maybe 20-40% equities for 2-7 years expected savings. Lazy answer: match target retirement fund AA for the closest year to when you want to buy. E: checked and that looks to be 40e:60b, a little higher on equities than I thought antiga fucked around with this message at 23:39 on Mar 4, 2016 |
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Mar 4, 2016 23:35
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antiga posted:I'd normally suggest CD's but the rates right now are probably horrible. High yield savings will give you close to 1% with no risk. If you're willing to take a little more risk there's bond funds that will pay out ~3% a year in interest payments with very minor fluctuations in principal. A catastrophic year for bonds is losing like 5% of your money.
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Mar 4, 2016 23:39
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Decided to take a look into my superannuation. It's the compulsory retirement account Australians get, where employers have to pay an extra 9.5% of your salary into this account directly; and it get's taxed at 15% no matter what your actual tax rate is of your salary.  looking into paperwork a bit further, i see a $5 a month fee and 0.80% fee on the investments themselves. So call it roughly 1% overall.  i'm born in 1987, so this '1980's lifestage option' is effectively a target date retirement fund. self managed superannuation funds are a whole other ballgame in australia, i have to set up a legal structure and make myself director etc etc. Since it's compulsory the vast majority just go with these bank managed options. Any thoughts? It looks like an ok asset allocation to me and i'm not actually putting any of my own money in, it's just employer contributions so the fees don't feel too bad to me.
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Mar 5, 2016 07:37
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I'd worry less about the fees (which are a little high but not crazy) and more about the allocation. Between 40% and 50% of your portfolio is tied up in the Australian market. Australia's economy comprises only about 1% of the global economy. So you are very heavily overweighted in a relatively small market. Additionally, because you live in Australia, an Australian economic crash would be a double whammy: you'd take an outsized hit to your portfolio at the same time you'd be facing an increased risk of job loss, lower wages, etc. I'd suggest trying to reconstitute your portfolio to more closely capture the balance of the total world market if possible. But it sounds like that may be difficult/impossible.
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Mar 5, 2016 09:02
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pig slut lisa posted:I'd worry less about the fees (which are a little high but not crazy) and more about the allocation. Between 40% and 50% of your portfolio is tied up in the Australian market. Australia's economy comprises only about 1% of the global economy. So you are very heavily overweighted in a relatively small market. Additionally, because you live in Australia, an Australian economic crash would be a double whammy: you'd take an outsized hit to your portfolio at the same time you'd be facing an increased risk of job loss, lower wages, etc. Would it be a good plan this year as i begin investing in ETFs with my post-tax savings, to go for US total market Vanguard ETFs (0.05% ER) and consider those + my super when looking at overall allocation?
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Mar 5, 2016 09:40
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waloo posted:Not really referring specifically to the quoted post, but when saving after tax dollars for something (ie a house) does that mean just dump it into a savings account until some sufficiently high dollar threshold is met? What vehicle is preferred here? What's the timeline on buying the house, and how much are you putting in each month? Money Market accounts are better than savings accounts: http://www.investopedia.com/articles/02/120602.asp Money Market Funds are okay and pretty stable, but some do have expense charges that may eat into any returns. If you're putting in enough at a time and have a definite timeline, Municipal Bonds with a coinciding maturity date are a good option. Plus, if they're issued in your state are (mostly) tax free and with interest rates up, you can probably buy some on the secondary market at a decent discount, and you will certainly get a better rate than a savings account. My Q-Face fucked around with this message at 11:15 on Mar 5, 2016 |
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Mar 5, 2016 11:12
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My Q-Face posted:If you're putting in enough at a time and have a definite timeline, Municipal Bonds with a coinciding maturity date are a good option. Plus, if they're issued in your state are (mostly) tax free and with interest rates up, you can probably buy some on the secondary market at a decent discount, and you will certainly get a better rate than a savings account. No definite timeline yet. That said, how much is "enough" re quoted bit, and how does one go about doing that? Edit: since all this money is in Vanguard already would it be dramatically more expensive to just shift it all to vcaix or its admiral equivalent? I am in CA for the moment anyway. waloo fucked around with this message at 20:58 on Mar 5, 2016 |
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Mar 5, 2016 19:17
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waloo posted:No definite timeline yet. That said, how much is "enough" re quoted bit, and how does one go about doing that? The timeline is important because it will affect the price and yield of the bond, as well as whether or not you can liquidate it quickly. If you're looking at a very short timeline (less than one year) look closely at the commissions your broker charges. If the interest is not enough to cover the commission charges from buying and selling, stick with a money market account. (Not a money market fund or etf, you won't make enough to cover the expenses associated with buying the funds and depending on how short the timeline, may lose money as a result. Especially on an etf). Also, if interest rates rise significantly in that time, you may have to sell the bond at a discount from what you bought it at, which is tax deductible, but is still a loss. Tax free municipal Bonds are sold individually with a $1000 face value (or more, for example 5000 and 10000), so you can't buy 600 or 1500 worth of bonds. Usually they're sold in minimum blocks as well, so you may have to buy 5 or 10 at a time. So if you have enough put away already, you can buy a block. If you're putting away 500 a month, you can buy a block of 5 after ten months. There are bond mutual funds that let you put a smaller amount in each month and still accrue interest, but these can have fees and expenses and sales/refund charges associated with them, and may or may not be tax free, so read carefully. You will have to pay to put your money in and pay to get it out, so you'll want a return that will beat the charges if you want to use this to buy a house in a few years. You can buy them on the secondary market from other investors, sometimes for a premium, sometimes for a discount. It depends on where current rates are when you buy them, compared with their coupon rate. The coupon rate is per face value, so if you buy a 3.3% tax free municipal bond in California you will get 3.3% of 1000 tax free each year, even if you paid 980 for the bond. You will also get $1000 back when the bond matures, but you will have to pay taxes on the discount if you bought it on the open market (Though this is spread out over the period you own the bond, so if you buy a bond at 980 and it matures in four years, each year you will have to pay taxes on accreted value of the bond - the discount divided by the years to maturity when you bought the bond so in this case $5 per year- You still get the full face value back when it matures and since you already paid taxes each year for the accretion, you won't have to pay taxes on that $1000). This works the other way, too. If interest rates fall, a bond may sell for a premium, meaning you pay 1020 for a bond with a face value of 1000 (and the coupon value may be 4%, but it's 4% of $1000), but the loss is amortized over the life of the bond so you can deduct that from your taxes each year and you get $1000 back at maturity, in addition to the interest. If you bought from the initial issue at a discount, the accreted value is tax free, it only becomes taxable if you buy or sell on the open market. If you buy an original issue discount 30 year bond and when you go to sell it in 5 years, it's selling for a premium, any value over the accreted value is taxable. So if you buy an original issue 30y CA State bond at 970, then when you go to sell it in 5 years and it sells for 1150, you will have to pay taxes on the difference between 975 and 1150. (But not on the interest earned up to that point, or on the difference between 970 and 975) As for how, check with your brokerage or dig into the website. I know e*trade has an option that lets you search for, screen and trade bonds. I don't know how Vanguard does it, but they do too. As with stocks, there are commission charges. (But there will be commission charges on stocks, bonds, ETFs and Mutual funds too) Disclaimer, I've been reading up on it a lot, but I haven't done it myself yet. I don't know how it works regarding how you receive interest payments and such; I don't know if you get the certificates sent to you and you send in the coupons or take them to the bank, or if the brokerage does that for you and deposits the money in your account. Read up on Your broker's site.
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Mar 6, 2016 00:37
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Whether VCAIX is a better value depends on your time horizon and how much you're putting in. It looks pretty good, but realize that there are expenses and fees beyond the commission(the fund manager will get a piece and also has to pay commissions whenever they buy or sell assets in the fund), and the NAV can fall (but then, so can bond prices if you decide to sell on the open market instead of holding to maturity), and you will have to pay a redemption fee to get your money out of the fund. The nice part is you can pay into it regularly without having to save up 5000 a pop, and since it's Vanguard, the fees are probably pretty decent, plus you don't have to wait for new bond issues to get the best deal. Edit: also, whether it's tax free or not depends on if you're a resident: i.e. You pay taxes in California, not just if you live there but are a resident elsewhere. Otherwise your home state will want a piece. (But you can do Muni bonds/funds in your home state tax free even if you're temporarily living in CA) My Q-Face fucked around with this message at 01:04 on Mar 6, 2016 |
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Mar 6, 2016 00:49
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32 years old and retirement accounts currently look like: Vanguard Roth: Total balance $34,000 72% - Total Stock Market 18% - Total International Stock 10% - Total Bond Market Roth TSP expected balance by the time I leave military service next year and have to cease contributions: $14,000 Currently I mimic the AA of my Roth using G,C,S, & I funds. I've been weighing the idea of slowly migrating all of my TSP into the G fund to act as the entirety (for now) of my fixed-income holdings. The benefits of that fund in particular are that it has roughly the return of intermediate-term treasuries with essentially zero capital risk. Assuming I don't find other federal employment to resume contributions, the TSP balance will eventually not keep up with my desired percentage of fixed-income allocation and I will have to pair it with a bond offering from Vanguard. Is their total bond market fund a reasonable enough choice for this, or is it worth considering something more specific like an intermediate-term investment grade or a long-term treasuries fund at like a 70/30 G-to-bond-index ratio? Or perhaps with the TSP balance expected to remain as small as it is, it's not worth the hassle and better to just leave it with the same AA as the Roth? Gray Matter fucked around with this message at 19:19 on Mar 7, 2016 |
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Mar 7, 2016 19:13
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My Q-Face posted:Edit: also, whether it's tax free or not depends on if you're a resident: i.e. You pay taxes in California, not just if you live there but are a resident elsewhere. Otherwise your home state will want a piece. (But you can do Muni bonds/funds in your home state tax free even if you're temporarily living in CA) I am a resident of CA now but just not particularly wedded to staying. Suppose I manage to get 100k saved up in these CA bonds. If I end up cashing out to buy a house in CA then great, tax advantages abound. What if I end up moving to another state? How does that work out tax wise?
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Mar 10, 2016 16:59
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waloo posted:I am a resident of CA now but just not particularly wedded to staying. Taxes paid on the interest are ordinary annual income taxes. They are tax free as long as you live in the state where they were issued. (This applies to bonds issued by cities and municipalities within that state as well). If you move to another state, you would pay state income tax there only on the interest earned after you start paying taxes in the new state, and then only if your new state has an income tax. The federal tax and capital gains rules don't change just because you don't live in the state that issued the bond.
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Mar 10, 2016 19:50
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My employer finally started depositing into my HSA. It's only got $450ish in there right now, and Wells Fargo seems to set a minimum of $1,000 that you must keep in cash at all times, but will invest over that for you. Here are my options... they appear to range from 0.2 (certain "classes" of certain funds which I don't fully understand), to over 1%. Does anyone else have experience with these funds/advice? I'm fully maxing IRA and 401k annually + have some additional taxable investments, so I can select funds optimally within these for tax considerations and rebalance elsewhere if needed. I'm planning on maxing the HSA $3,500 limit annually, so it will make up no more than 10% of my total retirement savings (and even less once I start withdrawing from it for health spending.) 
Blinky2099 fucked around with this message at 22:21 on Mar 12, 2016 |
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Mar 12, 2016 22:18
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I keep my max out of pocket in cash in my HSA and then invest above that. I prefer to have the $3500 laying around if poo poo hits the fan medically.
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Mar 13, 2016 15:42
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Wife and I visited a financial planner on recommendation from a friend. Their big trick to beating the market and having better retirement security is a whole-life insurance policy. Generally bad because of the possibly minimal gain versus huge commitment, I imagine? I saw that universal no lapse life insurance is perhaps a better option because it's literally just life insurance and not anything related to cash allocations, etc. Thoughts? I figure I know the answer already but I want some confirmation.
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Mar 13, 2016 18:11
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What country? Actually Canadian? But basically, don't try to beat the market - just ride it on its long term way to prosperity. There is no reason you need to beat the market. It is not a zero-sum game.
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Mar 13, 2016 18:14
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French Canadian posted:Wife and I visited a financial planner on recommendation from a friend. Their big trick to beating the market and having better retirement security is a whole-life insurance policy. Generally bad because of the possibly minimal gain versus huge commitment, I imagine? My understanding is that Whole Life and Universal Life are both terrible products. Term Life will come out significantly cheaper for the actual insurance, while the difference can be invested and earn a much higher return compared to either product. In addition, if you have a Whole Life policy and you die, your beneficiary receives only the insurance payout. The extra money you paid in is lost, unless you spend even more to have your beneficiary receive the cash portion as well.
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Mar 13, 2016 18:26
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totalnewbie posted:What country? Actually Canadian? But basically, don't try to beat the market - just ride it on its long term way to prosperity. Nope, title is misleading. I live in Wisconsin.
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Mar 13, 2016 18:27
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French Canadian posted:Wife and I visited a financial planner on recommendation from a friend. Their big trick to beating the market and having better retirement security is a whole-life insurance policy. Yeah, just don't talk to this person anymore. At best, he is too poorly educated about insurance and savings to be able to give you good advice. At worst he is intentionally out to screw you so he can make money. That's the typical range for consumer grade financial "advisors" who are in actuality salespeople paid on commission. If you need life insurance, get term life insurance. Then read the OP for ideas how to dispose of your retirement savings.
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Mar 13, 2016 18:40
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Do not become involved with a financial advisor who advocates using life insurance as an investment. He is not acting in your best interest.
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Mar 13, 2016 18:49
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French Canadian posted:Wife and I visited a financial planner on recommendation from a friend. Their big trick to beating the market and having better retirement security is a whole-life insurance policy.
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Mar 13, 2016 20:21
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I may be overly cynical, but I would be highly skeptical of advice coming form anyone who isn't a fiduciary. I just watched the Enron documentary and it had a scene with them advising their employees to put all their retirement into their company stock 
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Mar 13, 2016 21:28
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CopperHound posted:I may be overly cynical, but I would be highly skeptical of advice coming form anyone who isn't a fiduciary. I just watched the Enron documentary and it had a scene with them advising their employees to put all their retirement into their company stock I actually can't tell if they're a fiduciary or not. They operate a Wisconsin-based office that uses products from this group: https://www.ohionational.com/portal/site/client/
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Mar 13, 2016 23:12
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French Canadian posted:I actually can't tell if they're a fiduciary or not. They operate a Wisconsin-based office that uses products from this group: https://www.ohionational.com/portal/site/client/ If you need life insurance select quote got my wife a million dollar policy on me pretty cheap. If you need financial advice read a few books and then invest in some index funds.
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Mar 14, 2016 03:01
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CopperHound posted:I may be overly cynical, but I would be highly skeptical of advice coming form anyone who isn't a fiduciary. French Canadian posted:I actually can't tell if they're a fiduciary or not. They operate a Wisconsin-based office that uses products from this group: https://www.ohionational.com/portal/site/client/ Er, I don't think that fiduciary means what you think it means. I think want you want is a fee based advisor, preferably a CFA or CFP. Those tend to be independent of the big firms, while "financial advisors" work for established IAs or B-Ds as agents or reps and are, as you said, glorified salesmen. But they kind of have to be because you need to be sponsored to be able to get registered in the first place, and you need years of experience to get your CFA. Life insurance is not an investment in the way they want you to think it is, but whole/universal/variable does generate value in a way term doesn't. It will grow your net worth and act as collateral if you need a loan down the road. Term insurance is better as a proper insurance policy, but only until it expires, after which you need a new term policy which will cost you more because you're older, you have new health issues, fewer years until you die, and the market price has gone up due to inflation and other factors. The downsides to term are that it expires and Term doesn't affect your net worth at all, so you can't borrow against it. That's pretty much it.
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Mar 14, 2016 06:25
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And is borrowing against a whole life policy of sorts a general poo poo show to begin with?
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Mar 14, 2016 17:40
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The poo poo show starts one step earlier when you buy the whole life policy in the first place.
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Mar 14, 2016 17:44
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Here's the thing. Everyone is guaranteed to die. Imagine you're an insurance company. Why would you want to sell an insurance policy that 100% of your policy holders will end up making claims against? So, a term life insurance policy makes sense to an insurer because instead of a gamble on whether or not a particular human being will die, it's a gamble on whether or not they'll die before they hit a certain age. That's a gamble where you can take actuarial tables, work out death rates and costs and risk factors etc., and come up with a dollar figure you can charge your customers, that gets you a profit and fully funds the rate at which you'd need to pay out. From an individual's perspective, death is certain. The purpose of a life insurance policy ought to be hedging against the chance of a premature death: dying unexpectedly early, in a way you didn't otherwise plan for. If you just want to ensure that when you die (and again, death is certain) your "final expenses" will be paid for? Then save or invest some money and make sure it'll eventually be enough, by the time you're at the age of probably 50% chance of having died by then. If your funeral and other final expenses are gonna be like $20k in today's dollars, then make that your death savings goal. Assume you'll live to at least your mid 70s (or your 50s if you're a smoker) and aim to hit that inflation-adjusted $20k on that date. If you want to ensure that there's money for your final expenses, plus money to support your dependents, if you die early? That's where a life insurance policy makes sense. And it should be a term life insurance policy, because after the term is up, hey: you'll have saved up enough to cover what you needed to cover. Because you knew all along you were going to die, right? Every dollar spent on a life insurance policy other than term life, is a dollar you should have just put into savings and invested against your eventual, inevitable doom. If you instead pay an insurer for a whole life policy, what are they doing with the money? They're investing it for you, on your behalf, but extracting a bunch for their own profits, and those are their only profits since they can't just build a profit into their total insured portfolio the way real insurance works, because - and this bears repeating - 100% of whole life insureds are going to die, so unless they can deny or drop some of them, their total on-the-books liability is equal to the payouts every single customer is contracted for on their death. Why pay those profits and fees instead of just taking the exact same amount of money and investing it yourself in low-cost passively managed index mutual funds? You'll wind up with more money if you die on time... and even more than that if you die later than expected. Hey, if you wind up living extra-long, the amount above your expected final expenses can become additional retirement savings, to live off of! Neat! Buy term life to cover the period from now until the point where you'll no longer be concerned about your dependents needing a sudden wad of cash if you bite it. Put whatever extra you'd have spent on whole life, into your retirement savings pile, and call it a day. Leperflesh fucked around with this message at 19:44 on Mar 14, 2016 |
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Mar 14, 2016 19:41
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That is a good post. You absolutely should have good insurance when it is appropriate but do not intertwine insurance and retirement savings. It is bad news.
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Mar 14, 2016 19:46
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Term life insurance if you have dependents otherwise none.
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Mar 14, 2016 20:33
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Leperflesh posted:Here's the thing. Everyone is guaranteed to die. Imagine you're an insurance company. Why would you want to sell an insurance policy that 100% of your policy holders will end up making claims against? This is a good post that should be in the OP.
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Mar 14, 2016 20:39
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cowofwar posted:Term life insurance if you have dependents otherwise none. Maybe include spouse too, even if you're a DINK. And pets if you're feeling eccentric and want a news story about you leaving a million dollars to your cat.
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Mar 14, 2016 20:47
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I had a guy pitch me life insurance once by coming at it from this angle (only applies to people with pensions): when you make your pension distribution selection, often there is an option to take 100% of your payout monthly until you die or leave X% to your surving spouse if you die first. Many people choose the survivor option because X = roughly 70-80% or so so you think, yeah I'll take a little less now and that way my spouse will be taken care of if I happen to die first. In that case it'd be cheaper (so the guy said and supported with numbers he probably made up) to buy life insurance for yourself instead and take the 100% monthly until your death. Of course this only works for people who don't save anything aside from their pension. But I had to give it to him, it was a pretty compelling suggestion. I of course politely declined because I'm a BCF reader who maxes out my tax differed accounts and hopes to retire early, etc.
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Mar 14, 2016 21:06
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And if you have no dependents, but your job buys unnecessary life insurance for you anyway as part of the benefits package...  Mine is going to my brother's family, which I told them, but I don't really want to tell him how absurdly much it's for. No matter how much we love each other, it would be a legitimate incentive for fratricide.
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Mar 14, 2016 21:08
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baquerd posted:Maybe include spouse too, even if you're a DINK. Agree with this.
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Mar 14, 2016 21:12
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Guinness posted:This is a good post that should be in the OP. Good idea, I linked to it there.
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Mar 14, 2016 21:24
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Guinness posted:This is a good post that should be in the OP. It really is.
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Mar 14, 2016 22:11
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Of course, life insurance is definitely worth it if you have a policy that allows you to invest based on last week's prices.
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Mar 14, 2016 22:21
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