This almost sounds like, "two rights can make a wrong".
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Retirement-Era |OT| How to Invest For Retirement
- Thread starter TheTrinity
- Start date
- OT
Reached an important milestone today. 20% of our magic number saved and invested. :D
FIRE here I come, slow and steady....
FIRE here I come, slow and steady....
I've been mapping out a plan to retire pretty early and it's pretty tricky since a good chunk of my funds will be in retirement accounts.
I'll have a taxable portion, plus Roth accounts to draw contributions from before official retirement age, but doing the calculations definitely isn't straightforward since you can't really just go off of a straight "amount needed to retire" since some of that may be locked up until age 59 1/2.
I'm wondering how others account for this, or do you just consider "total amount needed" as a good enough gauge and make sure a certain portion of that is in taxable/Roth contributions?
One thing that's working in my favor is my job allows after tax contributions that roll into the Roth portion of the 401k, so I'm trying to take full advantage of that since I can draw on the contributions before retirement.
For Roth 401k -> Roth IRA rollovers, are the contribution/earnings amounts carried over? I'd assume so, but just curious how it's determined what you can withdraw without penalty from a Roth IRA that has been rolled into.
I'll have a taxable portion, plus Roth accounts to draw contributions from before official retirement age, but doing the calculations definitely isn't straightforward since you can't really just go off of a straight "amount needed to retire" since some of that may be locked up until age 59 1/2.
I'm wondering how others account for this, or do you just consider "total amount needed" as a good enough gauge and make sure a certain portion of that is in taxable/Roth contributions?
One thing that's working in my favor is my job allows after tax contributions that roll into the Roth portion of the 401k, so I'm trying to take full advantage of that since I can draw on the contributions before retirement.
For Roth 401k -> Roth IRA rollovers, are the contribution/earnings amounts carried over? I'd assume so, but just curious how it's determined what you can withdraw without penalty from a Roth IRA that has been rolled into.
That's just how the tax law works. You either accept the mortgage interest deduction for what it is, or you leave money on the table.
If growth is what you seek, total market index funds aren't what you should be invested in.
There's an index which tracks only FAANG (Facebook, Apple, Amazon, Netflix, Google) and that index is up 34% this year. Yeah.
FAANG is literally only those 5 individual stocks so if you wanted to, it would be easy to buy just those 5 stocks and have them in your diversified portfolio. This is how you juice a portfolio for growth. It also adds volatility but if you're not planning on selling, peaks and valleys mean little to you as long as your long-term growth outpaces whatever market index you benchmark yourself against.
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Always take the bird in hand, over two in the bush and pay off that mortgage. I've done it twice, there is no better feeling than not having a decent chunk of income going towards paying off a house. With the tax law changes it turned out to even be a better decision. It gives you a ton of flexibility.
Real special index until it isn't because you are far too tied to the fate of just five companies. Everyone is better off in index funds where you invest in everything, including the FAANG companies. Just because these specific stocks have performed well lately means absolutely nothing that they will continue to do so, hence why anyone seriously investing for retirement needs to be very diversified.
The real science of investing says do index investing because absolutely no one can predict what will happen with any particular company in the future.
What's everyone's general "I need this amount to retire" amount? One million per household member?
I've pretty much calculated if I included expected pensions and social security (CPP and Old Age Securuty for us Canadians), we'd only need about one million total for my husband and I to retire comfortably on a 4% withdrawal rate, but I figure a lot of you guys are way more ambitious and probably have higher incomes (and with that, higher cost lifestyles) than us.
I haven't been through real market downturn yet, so I'm anxious about it coming up (Thanks Tromp). My husband, who isn't as into the whole investment scene has been in one, and he panic-pulled his money out in 2008. If only I had known and had control of it all back then..!
I've pretty much calculated if I included expected pensions and social security (CPP and Old Age Securuty for us Canadians), we'd only need about one million total for my husband and I to retire comfortably on a 4% withdrawal rate, but I figure a lot of you guys are way more ambitious and probably have higher incomes (and with that, higher cost lifestyles) than us.
I haven't been through real market downturn yet, so I'm anxious about it coming up (Thanks Tromp). My husband, who isn't as into the whole investment scene has been in one, and he panic-pulled his money out in 2008. If only I had known and had control of it all back then..!
My wife and I found a few calculators online and ultimately landed on needing around $1.3 million each. We also assumed $0 in social security and $0 from pensions because we don't have pensions and don't want to rely on whether or not social security is still solvent in 40 years.
I inherited a bit of money in 2008 and invested every penny I could get my hands on from 2008 to 2009. That'll probably be the best financial decision I'll ever make in my life. Downturns don't generally.matter if yourey invested broadly and aren't needing the money for an extended period of time (10+ years).
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I understand the conservative $0 from social security but I've read up on it and the chances of it running out are very low. Even the worst projection just has it going down to 73% (our CPP is even more solid). I don't think it's unreasonable to count on it.
SS doesn't pay enough for subsistence already. 73% of that is probably not worth figuring, just assume you won't have it and you'll be safe when estimating your retirement needs.
I'm a little confused and want to make sure I understood this right. They limited deductible mortgages, but this isn't linked to SALT. Is that right?
SALT is limited. Mortgage interest isn't. But many people will not hit sweet spot where itemizing makes sense before of the SALT limit, rendering the deductible mortgage interest useless for those people.
Well mortgage interest IS limited (mortgages capped at $1MM I think, no?). But now I get what you're saying.
Yeah it is limited to 1MM mortgages, but most people won't reach that (and the limit wasn't changed with the new tax bill IIRC). Meanwhile MANY people (me included and our taxes honestly are not that high) will reach the SALT limit.
The mortgage interest deduction limit was reduced to $750K in the tax bill. This only applies to mortgages taken out after it went into law.
Since there is now a $2K gap between the SALT limit and the standard deduction, if you are hitting the SALT cap, you effectively lose out on deducting the first $2K of your mortgage interest.
Based on historical data, if you are withdrawing 4% of your starting value per year (or in other words, you save up 25X your yearly expenses) and you have your money in a mixture of stocks & bonds, there is something like a 95% probability that you will not run out of money indefinitely, and in most cases you end up with more money than you started with.
Using the 4% rule, $1M would allow you to spend $40K / year. How does that stack up against your current expenses?
Of course, the biggest deficiency of this type of analysis is that it is very difficult to project your expenses in retirement if you are still young. It depends a lot on your health, as well as things like the cost of health care and tax rates which are difficult to predict.
Start here with the theory: Shockingly Simple Maths Behind Early Retirement
The classic calculator: cFIREsim
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And further to that, the 4% rule calculations are very rigid and assumes that you will take out the same amount every year (increasing with inflation). I think it's fair to say that someone who retires and then their investments take a dive 6 years in will take that into account and cut spending for that year. Note that this can be a tough thing to do if you're taking a lean FIRE approach.
I'll still be able to work, and I'm planning to retire in Thailand, so it'll be cheap. With that and the amount of money I'm putting away each year (knock on wood), I should be able to cut down on work quite a bit at 55 and be totally finished by 60 or so. That "work" would be easier work like teaching other lawyers, creating courses and other lean online businesses, and mediation in my particular niche.
Sadly, I started really late in life.
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On the upside, at least you don't live in Vancouver.
For the upcoming year our household income will be roughly around 200k. Can we buy a home of any sort that isn't garbage? No of course we can't. What we can buy are condos in buildings built in the 70s and early 80s that haven't been renovated since then or are next to train tracks.
Delightful.
For the upcoming year our household income will be roughly around 200k. Can we buy a home of any sort that isn't garbage? No of course we can't. What we can buy are condos in buildings built in the 70s and early 80s that haven't been renovated since then or are next to train tracks.
Delightful.
You can probably buy a parking spot for a year with 200k in Vancouver.
This rthread reminded me to come back here haha:
https://www.resetera.com/threads/a-...-old-age-the-least-prepared-in-decades.50823/
1.3 each is a lot! So you're thinking about 50k each person? I guess that sounds reasonable, or even fairly good assuming all debts are paid and you no longer have things like kids to worry about. You're lucky you got to invest during that downturn!
I'm aiming for about 35-40k each, but I'm including social security. Otherwise I GUESS I'll be at subsistence levels at 20k each.
I'm not counting on inheriting much, but that might also be something to plan for down the road.
I still have to figure out how to get my parents' house in the next coupel of years and having the money to reno it since it's in really bad shape, but trying to find the 100-200k to fix it up is still better than trying to buy something in better shape in Toronto at this point.
Even the condo I'm in now that has close to zero amneties, has its collpasing underground parking in repairs, and is due for who knows what other problems since it was built in the 70s, has doubled in price since we bought it in 2013. Though maybe 250k is still an ok price for a 2 bedroom 1k sqft ner a subway station.. Pretty sad.
Yeah, I feel quite lucky to have invested when I did. It was just good timing, nothing at all related to my skill or knowledge of investing. My wife and I don't have any kids yet, but expect to have 1 or at most 2 in our mid-30s, but even then, our kids should be nearly out of or actually out of college by the time we retire and (hopefully) not very dependent on us at that point.
https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementIncomeCalc.jsf
I went back and used that above calculator, and even if I give it a "$0" for social security, I think we may have over-shot our needs, a bit. Maybe we're closer to 1M instead of 1.3M each. I guess we should re-assess, just to be sure... and we planned to re-assess anyway every few years, and it has been about a year since we last worked it out. According to the Social Security website, I should be getting about $1,000/mo at retirement which sounds pretty dang good and a lot higher than I anticipated.
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That sounds downright cheap to me. Although even at that price I'm not sure I would buy a 70s building. There's so many lurking problems in something that old.
I honestly don't know how people survive out here. We likely have a massively higher income than most of our friends and eventually rent increases will force us out if we stay here. You can find a place to live for cheap enough if you go far enough out but I certainly don't want a lifestyle where I'm commuting 1 hour+ each way for work. Why even bother living in the Vancouver area at that point?
The social security website assumes that what you make now is the highest you'll make. Your ss is based off the 30 highest years you made money. If you believe you'll make more than you'll have more ss.
I don't know if the ss website has built in the 25% cut to benefits in 2036 unless Congress changes something.
Hey InvestEra, I'm looking to make some money in my checking account work for me. Are Index Funds the best place to put $10K? I don't really trust myself to put that kind of money into individual stocks.
I'm looking at FUSVX from Fidelity. Is anyone here in there already?
I'm looking at FUSVX from Fidelity. Is anyone here in there already?
Most of our money is in FUSVX.
Make sure you have an emergency fund first and foremost. Then play with the rest.
Make sure you have an emergency fund first and foremost. Then play with the rest.
Yeah this is outside of my 401K and my 10K emergency savings fund.
If anyone cares, did a call with accountant yesterday, and it seems the best route is to take advantage of the foreign earned income exclusion and just put my retirement savings in a regular investment account. I'll be investing in the same index funds as my 401(k), and it doesn't seem like it will be an issue. I think the $18000 or so I save a year will be better spent putting it into my investment account anyway - that should add up over the next decade or so...
Vanguard. It's easy. Go to "Personal Investors", click on "open an account" and it will step you right through the process.
I'm at Schwab but if I had to do it over again I would have gone with Vanguard. My fees aren't any higher than Vanguard but I really like the structure of Vanguard and how it is owned by its funds.
Second for Vanguard. I use them for my IRAs. Their website is NOT user friendly, imo. That said, they are the best way to go, low fees, great results, and they are their for the customer.
If you want easy, open your IRA, pick a target date, set up automatic investment, and you're done.
Yeah, there is. The Target Date funds (which are good, especially for beginning investors), are a $1,000 min. Other funds are usually a $3,000 minimum.
Same, but Schwab has that investor checking account that's fee-free, perfect for my digital nomad ass. Can't quit them.
This question is not necessarily about retirement, but the thread seems to be the closest (either this or the CC rewards thread). I called my credit card bank to ask for a lower APR. The customer service immediately started talking about transferring my balance to a different line of credit. I might consider doing that, but I still want this credit card to have a lower APR. It has been at 17% forever (I got this card when I was a teenager). I have a good credit score, so I am unsure why it could not occur. Any advice on lowering APR for a credit card?
OK. Since a 401k is not about timing the market and is more about getting into the game as early as possible…
…if I have enough liquid savings to pay for several months of expenses, should I front load my contributions next year and hit my 18.5k annual cap in 5 months? I think the max contribution on my Vanguard is 75% of my paycheck.
Maybe that'll mess with my tax withholding in the later months but that would just balance out once I file my returns, right?
…if I have enough liquid savings to pay for several months of expenses, should I front load my contributions next year and hit my 18.5k annual cap in 5 months? I think the max contribution on my Vanguard is 75% of my paycheck.
Maybe that'll mess with my tax withholding in the later months but that would just balance out once I file my returns, right?
Are you even able to do that? At the 401(k) at my employer, you can only change contribution rates ever quarter. I would check what your plan allows.
Well, I shouldn't need to change my rates multiple times in a short period. Change it to max contributions before the end of the year so it takes effect by the first paycheck of 2019. Once I hit 18.5k, they should automatically stop deducting from my subsequent paycheck. I'll have to change my contributions back from zero for 2020 but that'd be months down the line.
I front load my 401k. No problem. At the beginning of the year I set my 401k contributions to 70%, which is the max on my plan.
Time in the market ftw.
Uhm.. I just found out that one day, probably long before I retire, I will recieve a pretty gigantic inheritance that have been secret to mostly everyone. It's from one of my parents (who are divorced and not re-married) and I am an only child. Now all of my savings this far seems like peanuts. But I guess it is teaching me to save consistently and how to invest which will help me organize and not screw up this lump sum that I'll probably get. I asked why they don't buy something huge/fun or travel and they said that they already live the life they want and don't want to change lifestyles because this is how they got to where they are and this is the life they want to continue.
Both my parents have always been modest with money and raised me to take care of myself. The only time I have gotten money were at birthdays and special occasions (to be fair they helped me with half of a down payment on my first apartment which I know many people don't have the opportunity to do). Since I got my first job I have been fully responsible for my own cashflow.
I guess I just needed to write this out, and I don't want to tell anyone I know. I will keep saving as I have (I am 50/25/25 in stocks/funds/liquidity at the moment, willing to take some risk as I have a stable income and pretty young) but right now my monthly transfers feel even smaller than they did before...
Both my parents have always been modest with money and raised me to take care of myself. The only time I have gotten money were at birthdays and special occasions (to be fair they helped me with half of a down payment on my first apartment which I know many people don't have the opportunity to do). Since I got my first job I have been fully responsible for my own cashflow.
I guess I just needed to write this out, and I don't want to tell anyone I know. I will keep saving as I have (I am 50/25/25 in stocks/funds/liquidity at the moment, willing to take some risk as I have a stable income and pretty young) but right now my monthly transfers feel even smaller than they did before...
Honestly I would not bank on any inheritance. Who knows what might happen between now and then. New marriage, Vegas, IRS, a cult...
Just stick with your plan and if it comes it is an added bonus.
Just stick with your plan and if it comes it is an added bonus.
Yup. Plus end of life care can be ridiculously expensive. I am "technically" due for inheritances from my parents and my aunt and uncle but I'm not counting on shit.
Yup, that is my plan. I just needed to tell someone I guess.
I have the luck of being born in an incredibly generous country as far as wellfare and healthcare goes (in Scandinavia).
I do this with 100% of my paycheck.
If you are making traditional (tax deductible) contributions there is a 2nd financial benefit to it, assuming you are not making quarterly tax payments. It shifts the weight of your income tax payments toward the end of the year, so you end up paying less in taxes once you factor in the time-value of money. The savings may be a couple hundred dollars a year depending on your marginal tax rate.
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I guess my first question is why do you even care what your APR is? You shouldn't be carrying balances on your cards in the first place.
I've had cards for a long while and I don't have a clue what the APR is on any of them.