Also an Investment Advisor. I would line up more with CF2 although conceptually, a case can be made for what many have posted here BECAUSE, if you have a process and stick to it sans emotion (REALLY -->> read the Dalbar study that goobear referenced it will blow your mind the first time you read it) you will probably do just fine. Identifying your appropriate allocation, rebalancing and keeping fees to a minimum, are the tricks to doing well. The one item I didn't mention is keeping your mistakes to a minimum as well. The Dalbar study shows you the destructive power of investing emotionally and how reacting to market shifts and news will destroy a portfolio.


I would likely be called a Core and Explore investor... again, along the lines of CF2... Core (using index/passive funds/ETF's) for the Large Cap Portion and then individual names (stocks) or funds for the Explore or mid/small/international/Emerging/frontier portion... rebalancing and always thinking in terms of your situation and any changes in your plan/needs that might cause you to change your allocation. Most don't have the discipline to do this themselves which is why Investment Advisors exist...

anyhow, I could go on and on but its all been said in one form or fashion already.... similar to CF2...

CalAlumnus13;842387407 said:

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I'm 26 and have all of my (meager) retirement savings in the Vanguard Target Retirement 2050 fund. Am I a fool?

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You are a wise man. Now you just have to figure out what you're going to do with all of your free time you'll have from not wasting it on investing decisions.

Honestly, when it comes to dumping money into retirement accounts it's all automatic and basically all you have to do is "sit there and do nothing" (to quote someone in the financial services business). Overcoming the money that the investment advisor will charge year after year is not easy. (Sorry all you investment advisors on this board). I am proof that putting money aside for 30 years in retirement accounts, and not paying much attention to it, is pretty much all you need to do. If you are too emotional to do that then find a friend or family member that can get you through the 'tough' times. 'Tough' meaning: "Hey, stocks that I won't sell for 30 years just went down in price. Hey wait, I'm buying them every 2 weeks. They are on sale!!!" When you are ready to retire I can see the need for a one time visit to someone who may be able to instruct you on how and when to take withdrawls. But even that doesn't seem too hard. I'm currently working on that. Whatever let's you sleep at night though. If you can handle paying someone for financial advice year after year then do it. I can't and didn't. And I did see what a financial advisor can do for you with my mother's money and my mother-in-law's money. Obviously I wasn't impressed enough to put my money with him. Nothing bad just not very impressive.

petalumabear;842387443 said:

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Also an Investment Advisor. I would line up more with CF2 although conceptually, a case can be made for what many have posted here BECAUSE, if you have a process and stick to it sans emotion (REALLY -->> read the Dalbar study that goobear referenced it will blow your mind the first time you read it) you will probably do just fine. Identifying your appropriate allocation, rebalancing and keeping fees to a minimum, are the tricks to doing well. The one item I didn't mention is keeping your mistakes to a minimum as well. The Dalbar study shows you the destructive power of investing emotionally and how reacting to market shifts and news will destroy a portfolio.


I would likely be called a Core and Explore investor... again, along the lines of CF2... Core (using index/passive funds/ETF's) for the Large Cap Portion and then individual names (stocks) or funds for the Explore or mid/small/international/Emerging/frontier portion... rebalancing and always thinking in terms of your situation and any changes in your plan/needs that might cause you to change your allocation. Most don't have the discipline to do this themselves which is why Investment Advisors exist...

anyhow, I could go on and on but its all been said in one form or fashion already.... similar to CF2...

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CalAlumnus13;842387431 said:

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Is there a rule-of-thumb for 401k contributions (aside from "as much as possible")? Counting employer matches, I'm contributing about 15% of my salary currently.

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That contribution amount (15%) is more than most I know, so kudos to you for taking retirement seriously. Many do not. If you are allowed to do more, and you can swing it, particularly when younger, which I gather you might be (graduated last year?), front load such accounts as much as possible. If feasible, also set-up an IRA, and indeed young, a Roth IRA should be considered. If and when you have kids, educational accounts (choices there too), establish them immediately and front load to your pain point.

I did the max allowed with my employer, and they match 100%, up to certain amount, which is not uncommon. I now don't do the max and only do up to what they match 100%, for two reasons: 1) I've already front-loaded the 401k pretty heavily, especially during down times, so the account is looking quite good and feeding itself nicely with dividends and I sell covered calls and 2) I can now better use or parlay those salary funds in my other non-employer accounts...

I purposely have my contributions go into cash, and then self-direct when I sense it's an ideal time to buy. I'm one of those folks who believes in always having some cash on the sidelines. I never go less than 20% cash in any account, and often stay around 40 to 50% so I have some "shopping" funds when stocks goes on sale. Oct 15th and 16th were shopping dates to add to positions for me, in various accounts...

Cal89;842387505 said:

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That contribution amount (15%) is more than most I know, so kudos to you for taking retirement seriously. I did the max allowed with my employer, and they match 100%, up to certain amount, which is not uncommon.

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Heh, it's not too much out of my pocket. It's actually 13.5% of my salary, for which I only contribute 5% total: My (public sector) employer does a 2:1 match for 401k, up to 4% (so that's 12%), and then a 0.5:1 match for 457, up to 1% (so that's another 1.5%). I'm also paying into the pension system, though that's somewhat separate.

I'm about to change jobs, though, and my new employer won't offer *any* match. I'll probably end up doing 10% into a 401k while I finish paying off my student debt, and establish reciprocity and keep paying into the public pension system with my new employer.

CA13, congrats on the new position. I wasn't aware of employers not doing any kind of match these days, but then I've been with the same one now for almost 15 years... Stock purchase perks, typically called ESPP, options, as well retirement contributions are all part of the total compensation package...

In the public sector, you might have a retirement option at 20 years. Not sure, but if so, you might want to factor that into your retirement planning...

If you don't have an IRA, it would seem prudent to create one now, then you should be able to roll your 401k into it.

Bobodeluxe;842387117 said:

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Unless you are a company insider, no one knows the value of an equity better than the market. Rebalancing is the modern, more palatable, version of broker churning.

Buy stocks and hold. Pay attention to the news. Adjust holdings cautiously. Retire early on the dividends.

When questioned, respond, "I built that."



😜

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While i don't take issue with investment advise here (we are in the someone else handles our financial investments category), I can tell you that if the "I built that" is meant as a real estate reference, I caution that real estate also is best left for those with the inside knowledge. It seems when the market, either stock or real estate, gets hot, everyone jumps in. When I hear people discussing their investments in either market when getting a haircut, etc. I know its time to get the heck out.

Sell the news is often prudent. It is on the cover of the magazine, water cooler talk, or the aforementioned barber shop, it's generally old news, from a profit perspective...

82gradDLSdad;842387491 said:

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Honestly, when it comes to dumping money into retirement accounts it's all automatic and basically all you have to do is "sit there and do nothing" (to quote someone in the financial services business). Overcoming the money that the investment advisor will charge year after year is not easy. (Sorry all you investment advisors on this board). I am proof that putting money aside for 30 years in retirement accounts, and not paying much attention to it, is pretty much all you need to do. If you are too emotional to do that then find a friend or family member that can get you through the 'tough' times. 'Tough' meaning: "Hey, stocks that I won't sell for 30 years just went down in price. Hey wait, I'm buying them every 2 weeks. They are on sale!!!" When you are ready to retire I can see the need for a one time visit to someone who may be able to instruct you on how and when to take withdrawls. But even that doesn't seem too hard. I'm currently working on that. Whatever let's you sleep at night though. If you can handle paying someone for financial advice year after year then do it. I can't and didn't. And I did see what a financial advisor can do for you with my mother's money and my mother-in-law's money. Obviously I wasn't impressed enough to put my money with him. Nothing bad just not very impressive.

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Generally right. I will say this however....if you are getting close to retirement....meaning 1-2 years and you are just sitting there and doing nothing, you may be in for an unpleasant surprise. I picked up a number of clients in 2008/2009 that were ready to retire, but had to push-back due to their portfolio being down 35-40% during the crash. They unfortunately had advisers that also didn't communicate enough about making meaningful changes as these investors got closer to retirement.

Over a period of 12 months, they lost the equivalent of what it took them 10-15 years to save up. Drop in investment value, lack of regular income in the form of a paycheck and a need of starting to take income from investments that were down in value...scared a lot of soon to be retiree's, for good reason. We can mention taking the income from these investments and not having to sell, but remember...lots of companies starting cutting back on their dividend distributions...think large financial companies...which many retiree's had in their portfolio's.

So to you're point...I agree...no need to be making a bunch of changes to your investment portfolio, but I would consider that once you don't have that regular paycheck as a safety net, actively managed investments paired with a financial plan that someone has spend some time developing specifically for your retirement situation would be prudent. My 2 cents.

I meant to bump this thread a few days ago, during the BYE week, but I couldn't find it (thanks Cal Fan_2). And I guess some others liked it, too, so here you go for one more go-round...

(I always considered myself basically financially literate, but I didn't know what the heck an ETF was... had to google it.)

PS: Beat the Trojans!

Cal_Fan2;842387440 said:

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The rule of thumb most financial folks would say is to put in the percentage up to what the employer matches, then the rest in an IRA, brokerage account etc. The reason is you want to get the full match, but after that, you'll have way more choices in a self directed IRA then what an employer sponsored 401k offers. So, if they match up to 15%, then put in 15%. The rest you should do on your own since you'll have more options in something like a Schwab IRA. This of course depends on how much you make and if you qualify. If you don't need the pre-tax advantage, I'd put the rest in a ROTH IRA since you won't be taxed on ANY distributions in the future and you don't have to worry about the RMD (required minimum distribution) There are of course things to consider like what you think your tax bracket is now and what you think it may be in the future. This is what I did for many years......

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Excellent advice. I would only add that whenever possible move maximum monies into a Roth IRA for the reasons you have given but also when one has too much (percentage wise) in traditional IRAs and 401K the tax implications can be excessive. Start early with as much money out of the taxable accounts after you utilize them for entering tax advantage. I think this is something that can be overlooked early, and then much later on a big tax bill comes due. Finding your ceilings on taxes for 2014 in December, you can move monies from traditional to Roth IRAs to bring you to that tax ceiling, and also have those monies in the Roth compounding, but untaxed at withdrawal later on.

OdontoBear66;842399166 said:

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Excellent advice. I would only add that whenever possible move maximum monies into a Roth IRA for the reasons you have given but also when one has too much (percentage wise) in traditional IRAs and 401K the tax implications can be excessive. Start early with as much money out of the taxable accounts after you utilize them for entering tax advantage. I think this is something that can be overlooked early, and then much later on a big tax bill comes due. Finding your ceilings on taxes for 2014 in December, you can move monies from traditional to Roth IRAs to bring you to that tax ceiling, and also have those monies in the Roth compounding, but untaxed at withdrawal later on.

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I think it's a very rare case when you start having seriously negative tax consequences from having too much money in your traditional IRA's and / or 401k. In 2014, if you are retired and your only source of income is money you are withdrawing from traditional IRA's and / or 401k's, then if you withdraw $100k and you are married, your federal income tax burden is 16.7%

Not many people are going to be in the position to withdraw $100k annually from these accounts (not if they want them to last very long). But if you are in that position or better, by all means be careful with the taxes.

dajo9;842399229 said:

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I think it's a very rare case when you start having seriously negative tax consequences from having too much money in your traditional IRA's and / or 401k. In 2014, if you are retired and your only source of income is money you are withdrawing from traditional IRA's and / or 401k's, then if you withdraw $100k and you are married, your federal income tax burden is 16.7%

Not many people are going to be in the position to withdraw $100k annually from these accounts (not if they want them to last very long). But if you are in that position or better, by all means be careful with the taxes.

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For once, I was trying to avoid being political, but I do believe in my kids and grandkids lifetimes, the need for tax monies will be much greater than today as well, and to have as much money as possible "coffee canned" (if you will allow that to mean cash or cash convertible) is good strategy.

And also, those numbers ($100,000) plus may be much more common in the future. For example, when I started being gainfully employed and saving in the late 60s, I thought if I ever had $300,000 in retirement savings I would be a fat cat. Little did I know. But, of course, our first house was $29,600 in Los Gatos that recently sold for $1.2M. Little do we know about what the future holds. Meantime, beware the taxman.

OdontoBear66;842399391 said:

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For once, I was trying to avoid being political, but I do believe in my kids and grandkids lifetimes, the need for tax monies will be much greater than today as well, and to have as much money as possible "coffee canned" (if you will allow that to mean cash or cash convertible) is good strategy.

And also, those numbers ($100,000) plus may be much more common in the future. For example, when I started being gainfully employed and saving in the late 60s, I thought if I ever had $300,000 in retirement savings I would be a fat cat. Little did I know. But, of course, our first house was $29,600 in Los Gatos that recently sold for $1.2M. Little do we know about what the future holds. Meantime, beware the taxman.

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Fair enough. You are afraid that in the future income taxes will go up substantially but not inheritance taxes. You may be right, but I don't think oversaving in retirement accounts because of taxes is a significant concern for a populace that is undersaving.

In regards to your second paragraph, income tax rates grow with inflation, so it's a moot point.

dajo9;842399406 said:

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Fair enough. You are afraid that in the future income taxes will go up substantially but not inheritance taxes. You may be right, but I don't think oversaving in retirement accounts because of taxes is a significant concern for a populace that is undersaving.

In regards to your second paragraph, income tax rates grow with inflation, so it's a moot point.

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My point relates to moving as close to cash ( meaning Roth IRAs, stocks & bonds on which you pay cap gains, etc) and if possible with cash you got from appreciation in a home sale once, twice, or thrice that was under $500K. Now if you were to draw 50/50 from a traditional IRA and the non taxable accounts of which I speak, your retirement taxable income goes way, way down. You have to do the work from day one after school though, and that is one of the biggest gifts we have given the kids. Learn to catch a fish vs. eating a fish. And even with that strategy you will wind up paying a lot of taxes, just less.

What multiple of your household salary should one have saved/invested by each decade of one's life? And when determining that amount does it matter if it's in tax deductible retirement accounts vs roth vs taxable account vs rental real estate? Cause when one comes up with a net worth number, a lot of that number may or may be owed to the government when cashed out or some of it might be locked away in RE which has no liquidity.

CalAlumnus13;842387407 said:

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I'm 26 and have all of my (meager) retirement savings in the Vanguard Target Retirement 2050 fund. Am I a fool?

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Thanks for the tip. I moved my wife's entire account into the Vanguard Target 2060 trust. She doesn't care. I otoh am not unhappy with the results.

way to resurrect a 3 year old thread joey

SadbutTrue999;842845210 said:

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way to resurrect a 3 year old thread joey

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Yeah. Sorry about the clash boot, hope you're doing well elsewhere.

Cal_Fan2;842387110 said:

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As a retired Investment Adviser and someone who has invested for 30+ years, things have changed quite a bit but if you are an investor instead of a trader, it makes sense to re-balance about once a year. Various studies show different findings...some say every 2 years, some every year but you really don't need to do it more than that unless you are using ETF's for tactical asset allocation as opposed to strategic asset allocation. I actually use both mutual funds and ETF's depending on the situation and asset class. Most, but not all, ETF's are passive like index funds. If you do your homework, you'll find some classes like Large Cap are very efficient markets and active mgmt is less proficient. In asset classes like small cap international, emerging markets, fixed income,etc, the markets are less efficient and active mgmt. can more easily beat a passive index. All depends on if you are allocating AMONG and WITHIN each asset class (ie: value vs growth vs blend etc). I have several funds, many closed now to new money, that have handily beat indexes over a decade. I use ETF's primarily for some Beta enhanced Large and Small Caps, MLP's, REIT's and tactical allocation with some sector funds and a few others. I primarily use Mutual funds but I delve deep into Sharpe, Treynor, Sortino ratios, upside vs downside capture ratios, std. deviations, beta, alpha who the manager is and their track record etc....

In the long run, if you are an investor as opposed to a trader, it is more important that you asset allocation it set according to time horizon, risk tolerance etc. I don't use the old style asset allocation, but more of a Paul Merrimen one that keeps almost all allocations somewhat equal among asset classes. It takes a lot of homework if you want to fine tune it, but if you like simple and easy, index funds and ETF's are fine and rebalance one a year or so. More important to reallocate between fixed income and equity then between equity classes with I do because I do more advanced stuff.....many variables to hold account for if you really fine tune your portfolio.....

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Since this thread has bounced back up again, the advice given here by Cal_Fan2 is unbelievable. If you have any time, inclination, and/or interest you would be very well served to watch Paul Merriman's 1 hour 30 minute presentation. He is a retired FA, and is now just interested in teaching, and he does so for free. He wants us to learn in a fiduciary way. He gives a great breakdown of asset allocation and what it means in each instance, so that one who is getting started can benefit as well as one in retirement. You just fit yourself into the growth desire weighed against the risk---and he shows that. Also, some very good teachings on disbursement where he shows how a flexible 6% withdrawal can work indefinitely (as verified by back testing over time) but it MUST be "flexible". Great stuff that once absorbed you can simplify your life exponentially, as well as your angst. Glad I went back three years later and re-read this thread. Having managed accounts both in bonds and equities I have also kept monies to myself and invested in growth/dividend type stocks very successfully. But Merriman's concepts are very tempting.