Retirement-Era |OT| How to Invest For Retirement

[Gabriel]

I think I might do a bit more research to get comfortable with what an HSA actually is and the differences between a 401k or an IRA, but I imagine that I am going to eventually invest in the US Stock Index Fund that my HSA offers.

Click to shrink...

I've had a HSA for many years - just be careful you don't lose sight of the main purpose of these when choosing how you allocate your money - paying your medical bills! I keep an amount equal to my deductible in the money market fund so I don't have to sell into a down market to pay for an unexpected expense. Additionally, most HSAs have a debit card that will only draw from that money market account - have friends that learned the hard way when it declined despite the HSA having plenty of money, just not where they needed it to be. Once you have built that up, then invest the rest. Hopefully your choices are better than mine - I have 3 funds to choose from in mine, one of them a bond fund. Meh.

 

[Piecake]

Fidelity has so many funds and I don't know which one works for me. https://www.fidelity.com/mutual-funds/fidelity-funds/overview

I just want to put my money in a retirement account and forget about it for 40 years @_@.

Right now I have a bit of stocks here and there, mostly tech companies, and the rest in Fidelity bundles. I have FEQTX and it's doing okay, but I'm not sure if at the age of 30 I should keep going for the "income oriented" ones. Can I still be risky? I'm thinking Large Growth for now but I'm not really sure what the sub accounts really mean.

Click to shrink...

I would recommend investing in two or three funds

Fidelity® Total Market Index Fund (60-80%)
Fidelity® Total International Index Fund (20-40%)
Fidelity® U.S. Bond Index Fund (personal choice)

I am 33 and I am still 100% stocks, and I will be 100% stocks until I am like 50 or 55 years old.

My investment timeline is 30 years. Why do I care if the market crashes in 10 years? It will recover and it will start making gains again. That market crash 10 years from now is COMPLETELY irrelevant to me. When I am in 50s I will start investing in bonds though, because that is when market crashes start becoming a lot more relevant. You don't want to be 100% stocks in a market crash when you need to sell some of those stocks to pay for food and rent. That's a great way to lose a lot of money.

If you really don't want to mess with the allocations yourself, just get a target date index fund. Pick when you are going to retire, and get the fund that comes closes to that date. The asset mix will slowly become more conservative as you get older so you won't have to touch it yourself.

Click to shrink...

The only downside of that scenario is that you can't do what I am talking about above. If you only have a target date fund you can't sell of bonds while in retirement during a market crash because all you have is that target date fund.

Now, I think Tokkun's point about the more individuals get involved in their investing the worse off they will be, which means that Target Date Funds make a lot of sense. At some point, however, the people who invested in those TDFs definitely should move towards separate stock and bond funds or else they are likely going to lose a decent chunk of money during retirement.

 

[Gabriel]

Now, I think Tokkun's point about the more individuals get involved in their investing the worse off they will be, which means that Target Date Funds make a lot of sense. At some point, however, the people who invested in those TDFs definitely should move towards separate stock and bond funds or else they are likely going to lose a decent chunk of money during retirement.

Click to shrink...

Agreed! I'm hopefully about 10 years out from retirement and I'll change my IRA from the target fund when that happens, but my primary investment vehicle is my 401k which uses a target date allocation model rather than a target fund itself, so it already is individual stock and bond funds.

Not that I really need either I have a defined-benefit pension as well, but you can never have too much savings!

 

[Nista]

Glad to see this thread back up and running. I'm still not all that familiar with the ins and outs of retirement investing, but I guess i need to spend more time with it now that I've hit the big 4-0 panic point of "Hmm am I going to be living out on the streets when I'm 70?"

I rolled an old defunct employer 401k over into a Betterment IRA recently, so I could actually manage the funds and invest more in it in the future. The whole impending doom feeling I have about the US market due to politics and such really worries me that there will be another hit like in 2008. Does it really matter if it's all in index funds for the most part?

Also for those of us without access to a 401k atm (employer too small to offer one, not considered self employed so i can't take out a solo one) is there anything else you can do besides put in the full 5500 a year into an IRA?

 

[Piecake]

Glad to see this thread back up and running. I'm still not all that familiar with the ins and outs of retirement investing, but I guess i need to spend more time with it now that I've hit the big 4-0 panic point of "Hmm am I going to be living out on the streets when I'm 70?"

I rolled an old defunct employer 401k over into a Betterment IRA recently, so I could actually manage the funds and invest more in it in the future. The whole impending doom feeling I have about the US market due to politics and such really worries me that there will be another hit like in 2008. Does it really matter if it's all in index funds for the most part?

Also for those of us without access to a 401k atm (employer too small to offer one, not considered self employed so i can't take out a solo one) is there anything else you can do besides put in the full 5500 a year into an IRA?

Click to shrink...

Market Timing basically never works, so ignore those thoughts of impending doom and just invest. Studies indicate that, generally, the sooner you get the money into the market the better off you will be.

And if the market crashes in 5 years, who cares? It is completely irrelevant to you because your investment timeline is 25 years. You only lose money if you sell, and you certainly should not be selling your retirement funds when you are 45.

Only start worrying about market crashes when you get about 10-15 years before retirement, and that is when you should be moving much more into bonds.

As for lacking a 401k, about the only thing you can do is invest in a taxable account. If you have an HSA that could also work.

 

[PopcornMegaphone]

I want to post some random thoughts about international equities. This post is for anyone who is skittish about investing international or would like to understand the benefits of international equities investing better.


The Case for International Equities

It's totally understandable that someone might be skeptical about investing internationally. In the last 40 years US index funds have performed much better than international. Here's a chart that illustrates that fact:

Domestic has routed international. However, there's several reasons why I think international equities diversification is still a very attractive option to any portfolio:


1) Japan has been a huge drag on international performance. In the late 80's Japan's stock market valuation was higher than the US. So if you purchased an international index in the late 80's and 90's you were mostly buying Japanese stock. Today Japanese stocks represent about 17% of an international index. In essence you don't have to worry as much about one country tanking the index anymore. More on Japan later.

2) In the past 5-10 years international index fees have gone down significantly. For example, Vanguard's total international has a 0.11% expense ratio which is very reasonable.

3) Portfolio diversification. Let's get back to Japan. Here's the horror story of Japan's stock market in one graph:

Japan still hasn't recovered from its high in the 80's. Now you may look at this graph and think to yourself this is why I don't want to invest international. However, I take the opposite view. There's no rule that says this type of performance can't be the US in the future. I'm not saying it's likely, but it is possible. That's why diversification is powerful/important for any portfolio. International equities gives you significant diversification if the US market tanks like Japan.

Now, some will argue "big US companies do a lot of business overseas so I'm basically diversified in international". However, a Vanguard white paper shows that the correlation isn't as high as most people imagine (figure 2). Additionally, you'll be missing out on industry weighting:

Lastly, a portfolio made up solely of U.S. firms, which are more concentrated in biotechnology, computer equipment, information technology and IT services, and software, would be underweighted in "old world" industries such as electrical equipment, durable household goods, and automobiles. In other words, an all-U.S. portfolio would lose not just investment opportunities but also the diversification benefits of a portfolio that's more evenly distributed across industries.

Click to shrink...

4) Another concern with international is currency fluctuation risks. However, the same Vanguard white paper demonstrates long term currency fluctuations do not materially impact equities prices and actually help with diversification (page 12).

5) I hesitate to post this last point because it's slightly a market timing thing, but here we go...

(credit to tokkun on another forum for the graph)

Valuations for US equities are historically high right now. It's worth noting, valuations are only a good predictive factor of market returns in the long term (10+ years) and have little correlation with returns in the short term (< 3 years). However, if you are planning to keep your money invested for a long time it doesn't hurt to be aware of valuations. For instance, take this graph from here (page 11):

Higher CAPE means higher valuations. CAPE for the S&P 500 is currently ~31. In non-US developed markets it is roughly 20. CAPE isn't a perfect measure, but if historical patterns hold, it is more probable that we will see higher returns in the next 10-15 years from non-US markets.


How to Add International Equities to a Portfolio

I'm a big fan of the simple boglehead 3 fund portfolio. It's how I invest. That said, even if you don't utilize a 3 fund portfolio adding international equities exposure is conceptually easy to do. My recommendation is to add 20-40% international equities to your overall equities exposure with a low cost index fund. According to Vanguard, 20% international equities gives you over 80% of full diversification benefits. 30% is 99% of full diversification benefits. 40% is almost full market weighting.

Here's how international equities weighting works in practice (I arbitrarily added 20% bonds, however your allocation might/should be different):

20% (Over 80% of full diversification benefits)

80% Equities
20% Bonds

80% Domestic Equities
20% international Equities

That means for every 100 dollars you invest it should have the following allocation:

Equities - $80 (domestic vs international allocation formula below)

.....80% Domestic Equities - $60 = 80 * .8
.....20% international Equities - $16 = 80 * .2

Bonds - $20


30% (Over 99% of full diversification benefits)

80% Equities
20% Bonds

70% Domestic Equities
30% international Equities

That means for every 100 dollars you invest it should have the following allocation:

Equities - $80 (domestic vs international allocation formula below)

.....70% Domestic Equities - $56 = 80 * .7
.....30% international Equities - $24 = 80 * .3

Bonds - $20


40% (almost full market weighting)

80% Equities
20% Bonds

60% Domestic Equities
40% international Equities

That means for every 100 dollars you invest it should have the following allocation:

Equities - $80 (domestic vs international allocation formula below)

.....60% Domestic Equities - $48 = 80 * .6
.....40% international Equities - $32 = 80 * .4

Bonds - $20


Summary

Investing in international equities is something you should consider. Anywhere from 20%-40% ratio to your overall equities portfolio can provide significant benefits.

Let me know if you have any questions or concerns.


***PopMegaphone is not a licensed financial adviser and provides investment advice for entertainment purposes only. Not available in all 50 states. Void where prohibited.***

 

[Spine Crawler]

so i finally pulled the trigger and i am now investing a 1/5 of my monthly savings into a MSCI world index fund. The rest sits on my bank account with a measly 0,04 % interest rate. I may add MSCI Emerging Markets or some individual stock market indexes. I plan to reinvest all dividends into individual stocks.

 

[Darkatomz]

I've learned so much reading every post in the last thread, really have to say thanks to Piecake and all of the usual posters. You guys are a wealth of knowledge and have learned so much about investing in general.

Seriously, 'Absolutely Everyone Who Lives Should Read This Material'-level of stuff most people will never pick up through college, even with multiple fields of study. I have seen some incredible returns over my first 5yrs, and I don't worry too much about any inevitable crash, since long-term, notable events will still pale in return to long-term gains and the effects of compound interest. So thanks again everyone, cheers!

 

[Balbanes]

I would recommend investing in two or three funds

Fidelity® Total Market Index Fund (60-80%)
Fidelity® Total International Index Fund (20-40%)
Fidelity® U.S. Bond Index Fund (personal choice)

I am 33 and I am still 100% stocks, and I will be 100% stocks until I am like 50 or 55 years old.

My investment timeline is 30 years. Why do I care if the market crashes in 10 years? It will recover and it will start making gains again. That market crash 10 years from now is COMPLETELY irrelevant to me. When I am in 50s I will start investing in bonds though, because that is when market crashes start becoming a lot more relevant. You don't want to be 100% stocks in a market crash when you need to sell some of those stocks to pay for food and rent. That's a great way to lose a lot of money.



The only downside of that scenario is that you can't do what I am talking about above. If you only have a target date fund you can't sell of bonds while in retirement during a market crash because all you have is that target date fund.

Now, I think Tokkun's point about the more individuals get involved in their investing the worse off they will be, which means that Target Date Funds make a lot of sense. At some point, however, the people who invested in those TDFs definitely should move towards separate stock and bond funds or else they are likely going to lose a decent chunk of money during retirement.

Click to shrink...

When you say 60% and 40% for the different index funds, are you referring to all past and future contributions? Right now I'm saving up a lump sum to start an account with Fidelity and plan on continuing to throw money at it each month. If I have another $100 sitting around, $60-80 would go total market and $20-40 would go international?

I've also never signed up for one of these.
Is it a very complicated process / how much should I aim to start with?

 

[PopcornMegaphone]

When investing for retirement I just do the following:

1) Follow a low cost three fund portfolio. More on the 3 fund portfolio below
2) Decide the % you want of each fund. A good place to start looking is the vanguard target date retirement funds. For example, if you project your retirement to be 2040ish Vanguard has the following asset allocation:

87% Stocks
13% Bonds

60% domestic equities
40% international equities

Personally I do a little less international, but that's a reasonable %.

3) Make sure you're tax efficient. For example, put your bonds in a tax advantaged account like an IRA or 401k. International funds are mostly in my taxable account.
4) Re-balance once a year and when your allocations are significantly out of wack due to a huge up/downswing.
5) Don't time the market or sell in a panic. Just make regular contributions.


Another option is a target fund, but I only really like those if they are low cost and in a tax advantaged account. The Vanguard target fund has low fees, but the fidelity target fund at my work has fees about 3x of a Vanguard Target Fund.

But the 3 fund portfolio is the nuts. According to this portfolio study it rocks other investment strategies:

In 2013, Rick Ferri, CFA and Alex Benke, CFP® released the results of a study where they compared the performance of actively managed investment portfolios to those of index-based portfolios.

The actively managed approach relies on the skill and expertise of investment professionals to generate superior returns. The index-based approach relies on mutual funds and ETFs that simply track the market.

What they found was pretty incredible.

Despite all of their training, all of their knowledge, and all of the time spent trying to find the best opportunities, the investment professionals repeatedly failed to beat a simple index-based investment strategy.

For example, when Ferri and Benke evaluated a simple three fund portfolio made up of US stocks, international stocks, and US bonds, they found that the index-based portfolio outperformed the actively managed portfolio 82.9% of the time.

Not only that, but the professionals typically underperformed by 1.25% per year. And the small number of professionals who managed to outperform the market only did so by 0.52% per year.

In other words, not only were there far fewer winners than losers, but the losers lost by much more than the winners won by.

Now, you could argue that a three fund portfolio is too simple and therefore not a fair comparison. After all, most investment professionals create more complicated portfolios in an effort to capture extra returns and limit the downside risk.

Luckily, Ferri and Benke looked at that scenario too.

What they found was that the more complicated you made the portfolio, the more likely it was that the index-based strategy would win. For example, when they looked at a 10-fund portfolio that included a wide range of asset classes, the index-based portfolio produced better returns 89.9% of the time.

And by the way, these were not isolated findings. Study after study has demonstrated the superiority of index funds over actively managed funds.

The big breakthrough here was the realization that combining index funds in a portfolio increases that advantage even further.

That finding has some pretty powerful implications for you as you create your own personal investment plan.

Click to shrink...

Link


The results for active funds/portfolios are even worse when you factor survivor bias.

 

[TheTrinity]

I've learned so much reading every post in the last thread, really have to say thanks to Piecake and all of the usual posters. You guys are a wealth of knowledge and have learned so much about investing in general.

Seriously, 'Absolutely Everyone Who Lives Should Read This Material'-level of stuff most people will never pick up through college, even with multiple fields of study. I have seen some incredible returns over my first 5yrs, and I don't worry too much about any inevitable crash, since long-term, notable events will still pale in return to long-term gains and the effects of compound interest. So thanks again everyone, cheers!

Click to shrink...

Yep, it's lovely ain't it. I was without a job for around a month but after paying expenses and whatnot I'm still set to end the month with more money than I started it with, by doing absolutely nothing. Now of course returns have been pretty crazy this last little while so that's not exactly normal, especially since I have a relatively small net worth still. But it's a nice indicator right.

 

[Nista]

Market Timing basically never works, so ignore those thoughts of impending doom and just invest. Studies indicate that, generally, the sooner you get the money into the market the better off you will be.

And if the market crashes in 5 years, who cares? It is completely irrelevant to you because your investment timeline is 25 years. You only lose money if you sell, and you certainly should not be selling your retirement funds when you are 45.

Only start worrying about market crashes when you get about 10-15 years before retirement, and that is when you should be moving much more into bonds.

As for lacking a 401k, about the only thing you can do is invest in a taxable account. If you have an HSA that could also work.

Click to shrink...

Well I have actually put some of my emergency fund savings this past month into a relatively conservative index fund taxable account on the robo-site, rather than letting it sit in a savings account. Our insurance is a PPO, so I don't have any HSA access at this point. So I guess I'll see how that all pans out.

The international equities info up above is pretty interesting, one of my older retirement accounts has a world growth fund and though the rate of return isn't as great at the US one, it has been a steady one. Though that one is through American Funds, so you guys would all hate the fees on it. :)

 

[HyperionX]

My view on investing for retirement is slightly different than what I'm reading on this thread. Since CAPE is around 31 for the S&P 500 right now, history has shown that your expected 10-year return is going to be something like 2-3% at best. There is also a real chance it will be negative over the next 10 years. Since that is a pretty low number, I would consider investing very conservatively right now, like going with a 60/40 or even a 50/50 split in stocks/bonds.

That might sound overly cautious, but I don't feel it that way. The rate of return for most bonds is also going to be in the ballpark of 2-3%; basically the same as stocks right now. So in other words, you're merely swapping out a risky investment for a safer one that will likely give the same return. And if the market does crashes, you'll have plenty of capital sitting around to reinvest into the market. This part should not be confused with "timing the market" since all you're doing is waiting for stock valuations to become more reasonable. When they are, you should then be plowing your money into stocks regardless of any market ups or downs at that time.

Now, if you really do have a 25-40 year investment window, such a thing might not matter and in that case it might geniunely make sense for you to just put everything into equities. The counter-argument is that you may have a sudden need for cash, forcing you to sell at a loss. This could be true regardless of your current age. The other thing I want to point out that is that you should try to maximize your returns whenever possible. In particular, you should avoid buying assets you know are overvalued, even if that goes against the widely held notion that stocks always outperform bonds in the long run.

The last thing I want to point out is that going "all in" on equities is a very recent phenomenon. Historically, putting large quantities of your assets in bonds has always been considered a smart play, and going too heavily into equities has generally been considered a form of gambling. I find it hard to believe that investors were actually being stupid over the last few centuries of investing, and only recently did people suddenly just grasp the concept of equities outperforming bonds. It sounds worrisomely like the phrase "this time is different," a phase that is usually associated with large losses and not profits.

 

[Piecake]

When you say 60% and 40% for the different index funds, are you referring to all past and future contributions? Right now I'm saving up a lump sum to start an account with Fidelity and plan on continuing to throw money at it each month. If I have another $100 sitting around, $60-80 would go total market and $20-40 would go international?

I've also never signed up for one of these.
Is it a very complicated process / how much should I aim to start with?

Click to shrink...

Your asset allocation. Basically decide whether or not you want to hold 60% US and 40% international or 80% US and 20% international. Once a year, rebalance your holdings to ensure that you are at your preferred asset allocation.

It doesn't need to be exact, and being off for a year or two or three when you are just starting out is fine.

For example, Vanguard mutual fund have a minimum of 3k and a roth max is 5.5k. Obviously, you can't invest in two mutual funds just starting out.

Easy solution is to just invest 5.5k in the US stock market this year and get your international exposure next year.

 

[PopcornMegaphone]

The last thing I want to point out is that going "all in" on equities is a very recent phenomenon. Historically, putting large quantities of your assets in bonds has always been considered a smart play, and going too heavily into equities has generally been considered a form of gambling. I find it hard to believe that investors were actually being stupid over the last few centuries of investing, and only recently did people suddenly just grasp the concept of equities outperforming bonds. It sounds worrisomely like the phrase "this time is different," a phase that is usually associated with large losses and not profits.

Click to shrink...

I'm not a huge fan of market timing, but if some folks on here are 100% US equities I think now is good time to consider implementing a 3 fund portfolio. It'll take some of the heat off the heavy US equities weighting and add diversification. I'm 40 and here's my current allocation:

84% Stocks
16% Bonds

70% domestic equities
30% international equities


Ten percent of my overall portfolio is domestic stock/options I received from my company that I'm holding on to for tax purposes (I sell as quickly as I can). That stock is part of my domestic equities allocation. I plan to retire before 65 so I'm a little more aggressive on the bonds side. I think 5-13% is a bit more standard at my age.

No one knows what the future will bring, but low cost index diversification is wonderful thing.

 

[FliX]

Excellent posts PopcornMegaphone

Has anyone posted this yet. If not it has its place in the new retirement OT.

 

[filkry]

Someone tell me it's a bad idea that I'm holding off on buying more VTI/VXUS because I'm waiting for a crash.

 

[FliX]

Someone tell me it's a bad idea that I'm holding off on buying more VTI/VXUS because I'm waiting for a crash.

Click to shrink...

It's a bad idea.
Meet Bob, he is the worst market timer ever he only bought at peaks. The key to his success though is that he never ever ever sold!
http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Always buy when you have the funds. Time in the market >> Timing the market!

 

[ZackieChan]

HSA question - What is the advantage of paying out of pocket now for medical expenses, then taking them out later on from your HSA (after retirement)? Is this like with the Roth IRA, where you're banking on your income being higher later on, so you want to go tax advantaged later? Or is it because you want more in the account so it will compound more over time?

 

[Deleted member 13131]

HSA question - What is the advantage of paying out of pocket now for medical expenses, then taking them out later on from your HSA (after retirement)? Is this like with the Roth IRA, where you're banking on your income being higher later on, so you want to go tax advantaged later? Or is it because you want more in the account so it will compound more over time?

Click to shrink...

It's because of the growth. The advantage is you are letting the money in the HSA grow, and then paying with those newly expanded funds.

Simple example:

You get a bill for $100. You pay it out of pocket.

The $100 you left in the HSA grows to $200 over the next 15 years.

You reimburse yourself the $100 and have $100 left in the HSA from the growth. That is on top of the tax benefit that came at the time of the contribution to the HSA.

 

[ZackieChan]

It's because of the growth. The advantage is you are letting the money in the HSA grow, and then paying with those newly expanded funds.

Simple example:

You get a bill for $100. You pay it out of pocket.

The $100 you left in the HSA grows to $200 over the next 15 years.

You reimburse yourself the $100 and have $100 left in the HSA from the growth. That is on top of the tax benefit that came at the time of the contribution to the HSA.

Click to shrink...

Got it. I'm a math moron, so that's very helpful!

 

[TheTrinity]

Wow, what a month that was. I ran my spreadsheets last night and was up almost 8000 in the retirement portfolio. If only every month was like this eh?

 

[Izayoi]

It really sucks knowing I'm missing out on this insane bull run because my wife and I have our down payment cash out of the market...

I really should stop listening to Marketplace.

 

[Gabriel]

The $100 you left in the HSA grows to $200 over the next 15 years.

You reimburse yourself the $100 and have $100 left in the HSA from the growth. That is on top of the tax benefit that came at the time of the contribution to the HSA.

Click to shrink...

Problem with this is you would be required to keep all your medical receipts for the last 15 years, and be able to prove you didn't get reimbursement in some other way. Hope you don't lose anything!

This is also tying up money that could have been invested in a 401k or IRA, unless you are already maxing both (if available).

 

[Jill Sandwich]

I think I need to do a finance course to understand this thread.

 

[TheTrinity]

I think I need to do a finance course to understand this thread.

Click to shrink...

Let me know if there's anything I should make more clear in the initial posts. Ideally, I want an absolute beginner to be able to come in and read the first post and get started. Maybe get down to absolute basics on what stocks bonds and so forth actually are?

 

[Deleted member 13131]

I think I need to do a finance course to understand this thread.

Click to shrink...

It seems intimidating getting going, but you really need to understand a handful of things to get going with a sound retirement strategy.

The basics of mutual funds, index funds, costs, how the retirement accounts work and the basic principles of retirement saving are all you need to get going. If you have specific questions or want pointers to primers on topics, we can help.

I suggest reading the OP straight through and following the links he has in there. It will be a small time investment but you'll be on solid footing.

 

[Masta_killah]

Currently in the military and enrolled in TSP. I have some funds in Fidelity when I was in the civilian sector and was wondering if I can/should roll over those funds to my TSP account? Or should I invest it in something equivalent to the C or S fund that I have for TSP on Fidelity? The amount that I have is around 2k. Also, the fund is a rollover IRA and from what I've read online it's a leftover from my old 401k from my old job that went under.

Ideally, I'd like to invest it into something so I can start getting some interest on it. So far the rollover IRA has earned only $1 since last year. :/

 

[Violence Jack]

So after reading the OP 3 times over now, how do I know how much is required to start? I have a 401K from about 8 years worth of contributions but no idea how much is in there yet (switched companies, but I think it all got diverted to one place). Can I take money that I've been saving and just start up an IRA or index fund? I think I want to put the majority into stocks for now, and go with bonds a little later. I'm in my mid-30s now, but I don't think I've waited too long to start investing from what I've been reading so far.

 

[Jill Sandwich]

I'm coming in blind. I have no clue what mutual or index funds are. Also I'm in the UK so a lot of this won't apply in my case.

 

[Piecake]

Currently in the military and enrolled in TSP. I have some funds in Fidelity when I was in the civilian sector and was wondering if I can/should roll over those funds to my TSP account? Or should I invest it in something equivalent to the C or S fund that I have for TSP on Fidelity? The amount that I have is around 2k. Also, the fund is a rollover IRA and from what I've read online it's a leftover from my old 401k from my old job that went under.

Ideally, I'd like to invest it into something so I can start getting some interest on it. So far the rollover IRA has earned only $1 since last year. :/

Click to shrink...

It sounds like your money in your IRA is still in a money market account. You will need to use that money in that money market account to buy index funds.

I would recommend the funds listed in the OP (or their equivalent).

So after reading the OP 3 times over now, how do I know how much is required to start? I have a 401K from about 8 years worth of contributions but no idea how much is in there yet (switched companies, but I think it all got diverted to one place). Can I take money that I've been saving and just start up an IRA or index fund? I think I want to put the majority into stocks for now, and go with bonds a little later. I'm in my mid-30s now, but I don't think I've waited too long to start investing from what I've been reading so far.

Click to shrink...

You need to do a 401k rollover. You should talk to the investment company where you want to start up a IRA (like Vanguard or Fidelity) about it and they can walk you through it. You will also need to talk to the company that managed your 401k (not your place of employment) about doing a rollover. So, for example, if you worked at Microsoft and their 401k was managed by Fidelity, you will want to talk to Fidelity.

If you don't follow the guidelines of it it can result in a taxable event, which is something you do not want.

Once your 401k money is into an IRA, you can invest that money into any fund or stock that you want.

I'm coming in blind. I have no clue what mutual or index funds are. Also I'm in the UK so a lot of this won't apply in my case.

Click to shrink...

https://www.bogleheads.org/wiki/Vid...osophy#Invest_early_and_often_.28Rule_.232.29

Watching it in video form instead of reading it might be helpful. This is a good set of videos that give a good overview of investing for retirement.

 

[Violence Jack]

You need to do a 401k rollover. You should talk to the investment company where you want to start up a IRA (like Vanguard or Fidelity) about it and they can walk you through it. You will also need to talk to the company that managed your 401k (not your place of employment) about doing a rollover. So, for example, if you worked at Microsoft and their 401k was managed by Fidelity, you will want to talk to Fidelity.

If you don't follow the guidelines of it it can result in a taxable event, which is something you do not want.

Once your 401k money is into an IRA, you can invest that money into any fund or stock that you want.

Click to shrink...

I think I almost have it. So to clarify:

if I have $30,000 in account A (from old job) and $35,000 in account B (current job), I can take one of those accounts and go to Vanguard to open an IRA. Then from that IRA, invest in index stocks and bonds while continuing to let the other account build?

 

[ZackieChan]

Problem with this is you would be required to keep all your medical receipts for the last 15 years, and be able to prove you didn't get reimbursement in some other way. Hope you don't lose anything!

This is also tying up money that could have been invested in a 401k or IRA, unless you are already maxing both (if available).

Click to shrink...

Luckily we have the cloud now! I'll have them saved in Dropbox and Google Drive, as well as my in-home backup drive. You have to work hard to lose things digitally these days...

I think I need to do a finance course to understand this thread.

Click to shrink...

https://www.amazon.com/dp/B01KOXY2U6/?tag=era0f0-20
Mike Piper's books are great, easy reads that explain things well.
Then again, you're in UK, so I don't know how helpful that will be. He runs a site called Oblivious Investor, as well.

 

[Deleted member 13131]

Problem with this is you would be required to keep all your medical receipts for the last 15 years, and be able to prove you didn't get reimbursement in some other way. Hope you don't lose anything!

This is also tying up money that could have been invested in a 401k or IRA, unless you are already maxing both (if available).

Click to shrink...

Only for major medical reimbursements, and the bar is apparently pretty high. I paid a $3600 hospital bill out of pocked a couple years ago because we'd let the HSA get too low. We topped it up over the next year and when I did the reimbursement, I of course had the bills ready for evidence. They were not required for the reimbursement, just a pledge that it was for a medical expense. I uploaded a scan of them anyways as an optional backup, just in case of audit.

Kinda surprised me. Not sure how much that varies by plan, state, etc.

 

[Flo_Evans]

I'm no expert but here is my strategy.

10% (+2-3% employer match) straight off the top into a simple IRA, 100% S&P500 allocation. I started this is 2009 at zero and now have over $100k! better than nothing. Should reach a million in 25 more years or so.

I then have a scottrade account for short term savings (currently trying to save for a vacation property!) where I pick individual stocks I think will do well.

 

[Piecake]

I think I almost have it. So to clarify:

if I have $30,000 in account A (from old job) and $35,000 in account B (current job), I can take one of those accounts and go to Vanguard to open an IRA. Then from that IRA, invest in index stocks and bonds while continuing to let the other account build?

Click to shrink...

You have two good options with Account A. You can either roll that over into your account B. This means that that you now only have 1 401k account, which would have 65k in it.

Or, you can roll the 30k in account A into a IRA at vanguard, fidelity or where ever. Then use that IRA to invest in stock and bond index funds. If you choose that scenario you would have 2 accounts. Your Account B 401k and your new IRA.

I would generally recommend going with option two.

 

[Violence Jack]

You have two good options with Account A. You can either roll that over into your account B. This means that that you now only have 1 401k account, which would have 65k in it.

Or, you can roll the 30k in account A into a IRA at vanguard, fidelity or where ever. Then use that IRA to invest in stock and bond index funds. If you choose that scenario you would have 2 accounts. Your Account B 401k and your new IRA.

I would generally recommend going with option two.

Click to shrink...

Thank you for the advice. Going to look into doing this within the next few days.

 

[EkStatiC]

I waited for this thread to pop up, i dont know who got the idea even in the first place but thanks a lot.

 

[PantherLotus]

Thanks for getting this thread going, OP and everyone. Mostly lurking but learning from y'all!

 

[hockeypuck]

I'm no expert but here is my strategy.

10% (+2-3% employer match) straight off the top into a simple IRA, 100% S&P500 allocation. I started this is 2009 at zero and now have over $100k! better than nothing. Should reach a million in 25 more years or so.

I then have a scottrade account for short term savings (currently trying to save for a vacation property!) where I pick individual stocks I think will do well.

Click to shrink...

A million in savings even in 2017 can be difficult to live on during the retirement phase, especially if you want to live in an urban setting. Using the 4% rule,a rule of thumb that may not be conservative enough,you're living on roughly $40,000 a year (before taxes). 40K a year 25 years from now will probably not be enough to live comfortably. Consider increasing your 401K contribution, assuming you have access to low-cost index funds.

(I am also being cynical and assuming your real estate investment goes bust)

 

[Flo_Evans]

A million in savings even in 2017 can be difficult to live on during the retirement phase, especially if you want to live in an urban setting. Using the 4% rule,a rule of thumb that may not be conservative enough,you're living on roughly $40,000 a year (before taxes). 40K a year 25 years from now will probably not be enough to live comfortably. Consider increasing your 401K contribution, assuming you have access to low-cost index funds.

(I am also being cynical and assuming your real estate investment goes bust)

Click to shrink...

I've got some other things cooking without getting too specific. The vacation property is going to be a (hopefully) self sufficient farm.

The wife also has some savings (although she is not currently working) and should get a substantial inheritance.

I try and have as many unrelated things as possible going. I also try and not worry too much about it. My brother kicked it at 42 and my dad had a massive stroke at 60. The best investment I can probably make is healthy living. :P

 

[Einbroch]

After actually doing the math, I need to convince my wife that we need to ditch our financial planner. Even if we invest nothing else, the 0.94% fee will cost us over 200k by the time we retire.

Now, how to convince her. I probably need to do some research and convince her I can confidently invest our money in the same things our planner is. Time to read.

 

[Soda]

After actually doing the math, I need to convince my wife that we need to ditch our financial planner. Even if we invest nothing else, the 0.94% fee will cost us over 200k by the time we retire.

Now, how to convince her. I probably need to do some research and convince her I can confidently invest our money in the same things our planner is. Time to read.

Click to shrink...

A 1% fee is awful. Show her the math using fee calculators. That's a good hard evidence starting point.

 

[Walter White Walker]

After actually doing the math, I need to convince my wife that we need to ditch our financial planner. Even if we invest nothing else, the 0.94% fee will cost us over 200k by the time we retire.

Now, how to convince her. I probably need to do some research and convince her I can confidently invest our money in the same things our planner is. Time to read.

Click to shrink...

I fired my financial advisor several years ago and never looked back. It's not nearly as hard to manage your own investments as they do their best to make you believe it is so they can line their own pockets with your money.

 

[hendersonhank]

Simple newbie question: If I have a Fidelity account that consists of a money market (where my transferred funds from my bank account go before I buy some funds) and the fund(s) I have bought, when I sell a fund and the proceeds go to the MM but stay in that Fidelity portfolio, do I still pay capital gains on it? Or only when I transfer from the account to my bank?

 

[Walter White Walker]

Simple newbie question: If I have a Fidelity account that consists of a money market (where my transferred funds from my bank account go before I buy some funds) and the fund(s) I have bought, when I sell a fund and the proceeds go to the MM but stay in that Fidelity portfolio, do I still pay capital gains on it? Or only when I transfer from the account to my bank?

Click to shrink...

Is it a taxable account? Yes, you pay capital gains when you sell a fund, assuming you made money on it.

 

[meow]

I have some money with Wealthfront, one of the robo funds, which super diversifies your investments.

I just started so it hasn't moved much but you typically hear things like "80/20 stocks/bonds" and to only invest in the index funds. Though all of these except the Natural Resources are just Vanguard index funds. Is there any advantage in using one of these sites instead of just getting an account with Vanguard and buying them yourself? And does this super diversification end up being safer and/or more profitable in the long run?

Click to shrink...

Quoting this. I'm absolutely behind the game in terms of investing (and this year would have been insanely great for it). Ive been looking into wealthfront so I'm hoping others here can give some opinion on it if they've got one.

(Also to the user I quoted, I'm not sure how much personal info is passed out, but maybe we can do the referral to wealthfront, we would both get more money freely managed, correct?)

 

[Darren870]

To the self employed of retirement-era, or I guess anyone that knows.

I'm self employed and am going to "pay" myself this year. Does anyone know How much to I need to pay myself in order to fund my Roth completely? Do I have to make more then $5,500 to pay into it?

 

[Piecake]

Quoting this. I'm absolutely behind the game in terms of investing (and this year would have been insanely great for it). Ive been looking into wealthfront so I'm hoping others here can give some opinion on it if they've got one.

(Also to the user I quoted, I'm not sure how much personal info is passed out, but maybe we can do the referral to wealthfront, we would both get more money freely managed, correct?)

Click to shrink...

Personally, if you spend a little bit of time reading up on index funds and retirement investing you'll soon realize it is just so easy that you don't need to pay someone to do it for you.

Also, that portfolio seems to have a lot of pointless funds in it, likely to look like they are doing a lot of work for you.

You really only need 2 to 3.

To the self employed of retirement-era, or I guess anyone that knows.

I'm self employed and am going to "pay" myself this year. Does anyone know How much to I need to pay myself in order to fund my Roth completely? Do I have to make more then $5,500 to pay into it?

Click to shrink...

https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people

I don't know, but this might help

 

[meow]

Personally, if you spend a little bit of time reading up on index funds and retirement investing you'll soon realize it is just so easy that you don't need to pay someone to do it for you.

Also, that portfolio seems to have a lot of pointless funds in it, likely to look like they are doing a lot of work for you.

You really only need 2 to 3.

Click to shrink...

I admit I'm only just restarting to read about all of this again. The rebalancing and reinvesting is intriguing to me, and both it and Betterment can do automatic tax loss harvesting. Maybe my solution for now should be to spread my investments in several places (like between a robo advisor and Vanguard or Fidelity) and see if I see any differences.