Official Investing Thread

Discussion in 'The Mainboard' started by Joe Louis, Jul 12, 2010.

  1. Ralph

    Ralph Well-Known Member

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  2. Gallant Knight

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    The amount of 50+ year olds I represent for car wrecks who ask for a $600 litigation case loan at 25%+ interest rates is staggering
     
  3. billdozer

    billdozer Well-Known Member
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    Even then a 33% increase is really good. Congrats.
     
  4. momux

    momux AFAM Scholar
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    I always knew people didn’t save shit but I’m somewhat surprised at the income numbers. Doesn’t take as much as you’d think to be in the top 10/5/1 percent of household incomes.
     
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  5. Stagger Lee

    Stagger Lee Crazy. Sexy. Cool.
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    Looks like fun. I'm in. About 300 shares at $5.42. Will put a stop loss in at $5.20 for half of those.
     
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  6. Stagger Lee

    Stagger Lee Crazy. Sexy. Cool.
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    Holy usury, Shylock. Is there an exception to the interest rate cap for litigation-related loans?
     
  7. Cheshire Bridge

    Cheshire Bridge 2017 & 2019 National Champions - Clemson Tigers
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    That stop loss will execute tomorrow or Monday more than likely lol
     
  8. Struggler

    Struggler Well-Known Member
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    $199 to $309. 50+%(includes dividend from 2018)
    The 60+ with only $600. Ouch.
    Ran an 8% yearly return on my 401k through a compounding calculator. I could take out $25k a month from 60-80. I doubt I’ll be invested for that type of gain at 60, but if I were that brave...
     
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  9. HuskerInMiami

    HuskerInMiami Well-Known Member
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    Gotta factor in inflation too. I have a little over 50k in my 401k and I am about to turn 30. it said I'd have over 5 million by retirement. Not going to look how much that would equate to factoring in inflation.

    (Can I just drop my expected return by 2-3% and solve my problem?)
     
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  10. billdozer

    billdozer Well-Known Member
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    I run my prediction calculators with 4% growth to account for inflation. That way it's in "today's dollars". For example:

    =-FV(4%,21,yearly $ into 401k,0,0)-FV(4%,21,0,current 401k $ value,0)-FV(4%,21,company match $ into 401k,0,0)

    This would give me the end value after 21 years.

    (% growth,years until retirement,money added each year,current value,0=end of period)

    I've got a spreadsheet that does that for each year so I can track what I've got with what my goal is so I can see how it's doing.
     
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  11. billdozer

    billdozer Well-Known Member
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    Yeah, you can just drop the percent to account for inflation. That would give you the numbers in today's dollars. Inflation for the last couple decades is around 2.5%.
     
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  12. Ty Webb

    Ty Webb A donut without a hole, is a Danish.
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    Fucks up your compounding doing it that way. The longer the time horizon, the less accurate it will be,.
     
  13. The Hebrew Husker

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    I know this question will have a million answers, but in general what % of pay do you all disburse to each outlet? I’m looking at it now trying to decide what to adjust.

    Currently I have it set to blindly put a % into my 401K and bank savings. The remainder goes into checking, and then I take just a regular “transfer” into my Roth I opened 3Q18.

    I guess the big question will be if my increased adjustment goes into 401K or Roth.
     
  14. momux

    momux AFAM Scholar
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    Just FYI this is not mathematically exactly right but for all intents and purposes is close enough.
     
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  15. The Hebrew Husker

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    As a pessimist I always go ultra conservative when trying to estimate that stuff too.
     
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  16. momux

    momux AFAM Scholar
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    Fundamentally the question you’re asking is how should you allocate your savings between tax deferred plans (most 401k and traditional IRA) vs tax exempt earnings (Roth Ira and Roth 401k). Generally there’s no concrete “best strategy” on this unless you can predict your future taxable income and the corresponding federal tax code.

    Personally I like to diversify so I have about a 60/40 split between traditional and Roth.
     
  17. Struggler

    Struggler Well-Known Member
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    Have your returns been that low the past couple decades? I’ve averaged 12% a year since 2001.
     
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  18. Ralph

    Ralph Well-Known Member

    I was having a conversation last week with my financial advisor on this topic. I have a Roth and another account with him/them and a 401k just at work/fidelity. His opinion for my situation was to put 100% into tax deferred (401k) until you're maxed and then put into a Roth. His opinion was my tax bracket I'm in now is more than likely going to be higher than whatever I'm in when I'm 70 or 80, even if the tiered tax system goes up. That's what I was doing anyway, but made the strategy seem even more sound coming from him (combined with the fact that he'll get less money that way). Who knows if that will hold true for the tax brackets, but that's what it is today.

    Let me know if I'm talking out of my ass on that.
     
    #10918 Ralph, Jul 25, 2019
    Last edited: Jul 25, 2019
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  19. momux

    momux AFAM Scholar
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    Last part yeah you are (talking out of your ass). Assuming tax rates are the same it doesn’t matter if you pay the tax up front or at the end.
     
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  20. Ralph

    Ralph Well-Known Member

    Whoops yeah, I see my error in my quick math I was doing. Thanks, edited.
     
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  21. momux

    momux AFAM Scholar
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    Honestly a lot of people have this misconception. To your point it is even used as a sales tactic sometimes.
     
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  22. Houndster

    Houndster Ball don't lie
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    Taxes aren’t going down and I like the ability to take Roth contributions out if necessary.
     
  23. billdozer

    billdozer Well-Known Member
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    No, but I am conservative in my estimating. My actual returns have been similar to yours. I'd rather miss low and be able to retire earlier and/or have more that I am planning for. Plus as I get older, I'll be increasing my bond holding which will make the returns lower.
     
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  24. billdozer

    billdozer Well-Known Member
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    Yeah, I know, but it's a simple formula for use in Excel and is good enough for me for theoretical predictions 20 years out.
     
  25. Struggler

    Struggler Well-Known Member
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    Gotcha. I’ll retire at 55 and live on my pension till 60. Then decide how much to tap the 401k.
     
  26. billdozer

    billdozer Well-Known Member
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    I personally do all of my 401k contributions to Roth. I aim to max out my 401k contributions. I get a 6% match from work that would go to pre-tax, plus I get a 6% cash balance that acts like pre-tax contributions. Accounting for my Roth IRAs, I end up having a 60% Roth/40% Traditional split in my accounts.

    That decision will also depend on how good your 401k options are. I have Brokerage link, so I can get whatever low cost funds I want or any ETFs. If your choices are bad, you may be better off getting the company match, filling up a Roth or Traditional IRA, then doing any remaining into your 401k. You can also look into a HSA if that's an option.

    As for the paycheck withdrawals, I put the percent in needed to fill up my 401k and the rest goes to my bank or 529 plans. I will lump into Roth IRAs.
     
    #10926 billdozer, Jul 25, 2019
    Last edited: Jul 25, 2019
  27. billdozer

    billdozer Well-Known Member
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    Gotcha, no pension here except for a cash balance plan that I will probably roll into an IRA. So I have to account for all of my retirement funds. Currently shooting to retire by 57 when my youngest would be getting out of college.
     
  28. momux

    momux AFAM Scholar
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    I’ve posted about earlier in this thread but it’s probably a point worth repeating.

    If you have the ability to contribute the max to your 401k, there is an advantage to choosing Roth rather than traditional. Because the limits do not differentiate between pre and post tax dollars, you can actually tax shield more dollars by electing for a Roth.

    I’ll give a quick illustrative example. If you contribute the full 19k after tax dollars to a Roth 401k, all of that money is tax exempt for earnings. If by comparison you contribute the max to a traditional 401k, you have only shielded 19k of pre tax dollars (equivalent to shielding 19*(1- your marginal tax rate) which is obviously less than what the Roth is.
     
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  29. billdozer

    billdozer Well-Known Member
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    Yeah, that's how I was looking at it, plus I think taxes will be higher later on. I have been considering if I should go more to Traditional to better fit into the progressive tax brackets with how standard deductions are set up. From what I've read, it's really better to be in Traditional if you are in the 22% bracket and expect to be there or lower in retirement.
     
  30. Joystick Izzy

    Joystick Izzy Well-Known Member
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    That isn't entirely true, if you consider that the current tax deferral is happening at someone's highest marginal rate, whereas when that person takes it out of retirement the money will first be coming out of the lower marginal rates until those "buckets" are filled. Most people don't need a ton of money to live off in retirement, especially when they reach their 70s and beyond. It's probably negligible if you're making $50k right now. But I'd think anyone making substantially more (which is everyone on this board, right?) would benefit from using as much tax-deferred space as possible, then using Roth money as an arbitrage to keep from entering a higher tax bracket as needed.
     
  31. kentucky_dawg

    kentucky_dawg Fan of: Georgia :\
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    Out of curiosity, what was your method for choosing the 529 plan (assuming you went out of state)? I'm going to be in this boat soon and from everything I've read KY's option is garbage, so I'll need to look elsewhere.

    Also, have you looked into the Fedelity rewards credit card? You get 2% back on everything and it can be rolled into a 529 plan with them.
     
  32. Frankie Carbone

    Frankie Carbone eh che se dice
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    That’s what my understanding is as well. I rather pay as little amount of taxes now from my current bracket levels to help fund things like a Roth to offset those later and much lower taxable distributions
     
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  33. lechnerd

    lechnerd They say Monaco is a sunny place for shady people
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    I have the card. It’s amazing.

    I have tons of friends that have cards that give them all kinds of airline miles on purchases. A Fidelity 529 card is definitely the prudent way to go through life.
     
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  34. billdozer

    billdozer Well-Known Member
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    Went with the instate SC one just using a target date fund.
     
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  35. The Hebrew Husker

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    Yes, to follow up I was also wondering how much people funnel into their savings/emergency fund type account. I guess this is more for the people who don't max out IRA/401K throughout the year and throw the leftover into checking/emergency saving type deposit accounts
     
  36. The Hebrew Husker

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    Also, again maybe I'm just overly pessimistic but I guess I just assume the annual income via wages now will be higher than the annual distributions I take from 401K/IRA in 40 years. Although, I guess I will say in a few years when I free up 500/month not going to student loans, my retirement contributions will go up quite a bit from that alone.
     
  37. kentucky_dawg

    kentucky_dawg Fan of: Georgia :\
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    Good to hear, I plan on applying for one here soon. I saw some weird verbiage on their application site that maybe you can help me out with.

    On their FAQs, it says:

    Is this saying I need to have a 529 plan already opened and funded with Fidelity in order to contribute the reward points I accumulate?
     
  38. kinghill

    kinghill Well-Known Member
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    r u srs rite now
     
  39. lechnerd

    lechnerd They say Monaco is a sunny place for shady people
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    It certainly sounds like that but I never had an account with them before the card. The rewards automatically go into the Fidelity 529 plan at the end of each month. Any time I have a big purchase I try as hard as I can to use my card. My wife’s car was purchased with the card, the dealer said they wouldn’t take a CC, I threatened to walk and they ran it.

    I do remember starting with a very low monthly limit like $500/month or something. I’ve called about three times over 5 ? years and now it’s at $30k/month. I don’t spend that much but the available credit helps my credit score. If you ever want to make a one time very large purchase just call them and as long as you are a good borrower and pay on time they should approve it. They are a little overprotective calling a bunch if I purchase something while vacationing outside of TX. I guess that’s good but it can be cumbersome.
     
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  40. kinghill

    kinghill Well-Known Member
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    If we could continue the Traditional vs Roth 401K chat some more...

    So if my current tax rate is 24% what should I put in the "retirement tax rate" in this calculator?

    https://www.bankrate.com/calculators/retirement/401-k-or-roth-ira-calculator.aspx
     
  41. billdozer

    billdozer Well-Known Member
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    It's a guess. It will depend on how much you think you will withdraw in retirement and what you can guess the tax rates will be at the time.

    People smarter than me have put these together:

    General guidelines
    The following guidelines are relevant for most investors, e.g., they assume a marginal withdrawal tax rate of 15% or more. See below for explanations, and remember to check your own situation.

    Non-tax considerations (401(k) vs. IRA, regardless of whether traditional or Roth):
    • If your employer matches 401(k) contributions, put enough to get the maximum match in the 401(k) before contributing to any IRA.
    • If you have inferior options in the 401(k), prefer an IRA to unmatched 401(k) contributions.
    Tax considerations:
    • If your current marginal tax rate is 15% or less, prefer a Roth.[note 1]
    • If you expect to have higher marginal rates than your current marginal rate for most of your career, prefer a Roth.
    • If you will have a traditional account or a pension large enough to meet your expected retirement expenses (and you expect to take that pension shortly after retiring), prefer a Roth.[3]
    • Otherwise, prefer a traditional account.
    https://www.bogleheads.org/wiki/Traditional_versus_Roth
    https://www.bogleheads.org/forum/viewtopic.php?f=2&t=281352

    Also some spreadsheets you can play around with:
    Personal Finance Toolbox
    Traditional or Roth 401k
    https://www.bogleheads.org/wiki/Tools_and_calculators#Retirement_calculators
     
  42. Ralph

    Ralph Well-Known Member

    I have that card as well and it's great. We put anything and everything on it, then I just wait until I have 25,000 points and transfer it to a regular ole fidelity brokerage account. Then I can just withdraw it and it's like 2% going back in my pocket or invest it. We get a state tax write-off for 529s in GA if you use their plans so I just do that, but the CC would be a great way to fund 529s.
     
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  43. Lipp

    Lipp Spartan Dawg
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    What are the best ways?
     
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  44. Joystick Izzy

    Joystick Izzy Well-Known Member
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  45. Tammy Chiggers

    Tammy Chiggers Well-Known Member
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    So, if in max tax bracket currently, you give this same advise?
     
  46. billdozer

    billdozer Well-Known Member
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    I think the 22% or 24% bracket is about the max where it makes sense. Anything above and traditional is better, especially if you can drop a tax bracket with the pre-tax deductions.
     
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  47. Tammy Chiggers

    Tammy Chiggers Well-Known Member
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    Agree, this might work in a lower tax bracket. Doesn't work in max brackets
     
  48. momux

    momux AFAM Scholar
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    I’m not saying what anyone should or shouldn’t do in that post. All I am saying is that a Roth allows you to gain a tax shield on more funds (19k of after tax dollars is more than 19k of pre tax dollars).

    Trad vs Roth is a very dependent on individual circumstance. I personally diversify between the two to help hedge against the possible scenarios.
     
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  49. Joystick Izzy

    Joystick Izzy Well-Known Member
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    Your mistake is that you make an unfair comparison here. $19k pretax dollars in a 401k would only end up being $15k or less post-tax dollars, depending on the bracket.

    If you want a fair comparison, compare $19k in a Roth 401k to $19k in a 401k plus another $5k of tax savings in a taxable account over time.
     
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