Investing for Retirement

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thrill
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Re: Investing for Retirement

Post by thrill »

Not quiiiiiite there yet with my 10% contribution rate, but this is good to know. I hadn't thought about maximizing your contribution efficiency to get max employer match without going over your limit end of year.

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Felix The Cat
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Re: Investing for Retirement

Post by Felix The Cat »

Luckily, my employer does a rebalancing in March of the following year to adjust the match if I hit my IRS limit before the end of the year. There's enough variability in my income that it would be a pain to have to plan it all out so meticulously.

Speaking of tweaking 401k contribution rates, I completely forgot to consider the 12k deduction on my taxable income when submitting my rates earlier this year. My plan allows me to designate a percentage of my contributions to be pretax or posttax so now I just realized I did way more pretax contributions then I needed. I was afraid I'd go above the income limit for a full Roth IRA contribution.

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G. Keenan
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Re: Investing for Retirement

Post by G. Keenan »

Does anyone have experience with a "robo" advisor broker like Wealthfront or Betterment? They charge a flat .25% management fee on top of whatever fees the various ETF's they sell charge (0.03% to 0.50%). Other than that, there are no fees and you get a lot of management tools, automatic portfolio rebalancing, and automated tax harvesting. They are a fiduciary, do not sell their own funds, and do not earn any commission from the funds they sell. So basically you are paying for their software management tools of the ETFs in your portfolio and the automated processes for rebalancing and tax harvesting.

Michael
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Re: Investing for Retirement

Post by Michael »

***Bragging alert***

I've mentioned to my wife about my goal to FIRE (Financial Independence/Retire Early) for a few years now. Understandably, from her perspective, it’s always seemed like an abstract concept in the far future (if ever). A few days ago, as I was doing a re-balance of our investments, my wife sat down with me as I ran the numbers. I showed her even with back testing through events like the great depression, the data shows we should be able to FIRE with a nice upper middle class lifestyle in roughly 6 years. My wife was shocked and she's totally on-board now. She might even be due for a significant raise in the near future that may push that timeline up even more. Basically this hypothetical 3-fund portfolio thing I was talking about is starting to come together nicely. I suspect I’ll stay with my current career longer, but it’s nice to know we are on track to be completely independent from “the man”. We’re also discussing the possibility of working an extra year to save for a year of world travel staying at nice hotels, etc. Feels good man.

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IMADreamer
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Re: Investing for Retirement

Post by IMADreamer »

Michael wrote:***Bragging alert***

I've mentioned to my wife about my goal to FIRE (Financial Independence/Retire Early) for a few years now. Understandably, from her perspective, it’s always seemed like an abstract concept in the far future (if ever). A few days ago, as I was doing a re-balance of our investments, my wife sat down with me as I ran the numbers. I showed her even with back testing through events like the great depression, the data shows we should be able to FIRE with a nice upper middle class lifestyle in roughly 6 years. My wife was shocked and she's totally on-board now. She might even be due for a significant raise in the near future that may push that timeline up even more. Basically this hypothetical 3-fund portfolio thing I was talking about is starting to come together nicely. I suspect I’ll stay with my current career longer, but it’s nice to know we are on track to be completely independent from “the man”. We’re also discussing the possibility of working an extra year to save for a year of world travel staying at nice hotels, etc. Feels good man.

Nice and congrats. The best part about fire is not necessarily quitting work, it's knowing you can.

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G. Keenan
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Re: Investing for Retirement

Post by G. Keenan »

High level question about ETFs:

Do ETFs actually own shares in individual companies? Like, is any given ETF composed of stocks in x, y, z companies that have been combined together in such a way that they add up to track the total market, or is the ETF just a shadow of something more concrete? Basically, are ETFs the new mortgage backed security? If Vanguard or Blackrock or iShares go poof overnight like Bear Stearns, what are their index investors left with? SIPC insurance?

Just wondering in a meta way.

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Re: Investing for Retirement

Post by Michael »

ETF index funds own the underlying assets.

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G. Keenan
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Re: Investing for Retirement

Post by G. Keenan »

Michael wrote:ETF index funds own the underlying assets.
Cool.

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GeddyWrox
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Re: Investing for Retirement

Post by GeddyWrox »

I came for the baseball discussion, but I stayed for the insider trading tips.

LOL

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Re: Investing for Retirement

Post by Michael »

Michael wrote:If you have a really good rate on your mortgage paying it off early is the last thing you want to do. Long term you're better off investing that money.
Generally I think this is true, but can I be a hypocrite?

My wife and I are getting close to critical mass, so we've decided to cool down the level of aggression of our 3-fund portfolio by increasing our bond allocation. After taking a closer look we realized our 2.75% mortgage is actually the best place to stash our excess cash when you consider yields on bonds indexes funds are paying around 2.2% . I think the mortgage is almost a guaranteed better rate in the near future and it's even more desirable now that we've lost our home mortgage interest tax deduction. Additionally, with new bond purchases, I'd either need to make room for them in my 401k or take a tax hit on the income in our taxable account. I'm not super hyped for either of those options.

I think the main arguments against what we're doing are the following:

1) You lose liquidity. this isn't a concern for us.
2) Mortgages are a hedge against inflation. This is a nice to have, but not a near term concern.
3) Home equity is not a bond. This is true, but we still have around 19.5% bonds allocation in our investable assets, which is still slightly conservative given we are in our early 40's.

So I think we've decided to make a large payment and cut our mortgage down from 8 years to roughly 3 1/2.

Let me know if I'm missing anything GRB universe.

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