Discussion in 'Business, Careers & Education' started by mikeman, Feb 2, 2011.
WTF, where is the correction? Just put my VXF order in and then the market popped.
My employer has a bunch of Vanguard products. Can't beat it. Allocation is small (20%), mid (10%) and large cap (50%) plus a non-Vanguard international index (20%).
It would be stupid not to have a Roth and Traditional mix. No one can say for certainty what tax rates will look like in 30 years. The CW is "Oh they will skyrocket due to the need to fund entitlement programs," but this doesn't take into account potential actions in the political arena. Who's to say a future Congress and President won't slash entitlements? Or big tax cuts will occur due to years of strong growth?
Yeah. my 401k is all traditional, and my IRA is all roth and I plan to keep contributing to traditional IRAs and rolling them into the roth every year.
Don't know what I will do if I switch jobs and have to roll the 401k into a traditional IRA (because my current understanding is that that would interfere with making rollovers on the new annual money). I suppose I could always roll it into a new employer's 401k if they offer good plans, but that robs me of the opportunity to take full control of the money.
That way I have some money in each boat...if taxes change and one ends up better...I've got it. If my situation changes and I end up in different tax brackets...I've got it.
edit: although I do find it unlikely that taxes will get much *lower* (especially capital gains). They have lots of room to go up...but I think the more likely changes in the future to worry about are changes to the legal status of various retirement vehicles, and unanticipated changes in your own retirement status (e.g. the Roth is great if you expect to be in the same or higher tax bracket when you retire...but what if you aren't?)
I lean towards the Roth because I have every intention to make more money in the future. I assume that means I'll be in a higher tax bracket, though I don't want to be mansion-living, multiple-car owning (maybe a motorcycle, though). Am I thinking along the correct line?
I am not looking for a house in the next five years. I just want to live simply for now, but indulge in some travel before settling down. A friend of mine suggested that my savings be 2/3 in some "secured" savings, and 1/3 in "risk" (the S&P index is what I have in mind). Also, with these combined savings being 33-34% of my total income (a percentage which I chose somewhat randomly), am I being too severe on myself or am I being too optimistic, and should I readjust?
As for risk tolerance, I took the "Investment Risk Tolerance Quiz at http://njaes.rutgers.edu:8080/money/riskquiz/, and scored a 22, putting me at a "a below-average tolerance for risk" (one point from "average/moderate tolerance".
@SchwererGustav - Bogleheads actually has a setup for the Thrift Savings Plan! (http://www.bogleheads.org/wiki/Thrift_Savings_Plan) Looks like you don't have a large number of options so below would be similar to my setup I use:
40% - C Fund
10% - S Fund (These two (C & S) together give you 50% Total Stock Market which is what I try to do)
20% - I Fund (Or whatever International exposure you feel safe with)
30% - G Fund - Unique fund where you can never lose your principle
This gives you a solid portfolio with 70% Stocks, 30% Bonds. I run an 80/20 for a little more risk.
@otc I rolled over an old 401k into a Trad IRA and was going to do the Trad to Roth rollover later but now you have me a little worried. Looks like I have some more research on that topic but I am not close to starting that.
If you want to roll it all over, you are fine. What I understand from Piob's description, is that you can't just make your 5500 annual traditional IRA contribution and roll it over to a Roth when you already have a sizable traditional IRA (such as from rolling over a 401k). Something to do with how they view all separate IRA accounts as a single quantity...so instead of rolling over just the 5500 (which shouldn't have any significant taxable gains), you end up being forced to roll over a portion of the total IRA (which includes taxable gains).
To roll everything over...I think you are still fine.
Thanks @jbarwick , for the TSP break down. It looks like a decent start, though I wonder if it's too much stock.
What about the Roth TSP? I can contribute to both, and don't know whether I should. Also, any opinions as to whether I should readjust this "one-third of my income" idea and consider outside savings options?
Also, I'm not familiar with the tradition of this thread, but should I keep posting here, or send you PMs in the future?
Either or it leads to good discussion if people want to add. There are others that pop in from time to time that add a lot of insight.
You can contribute to both (Trad and Roth) but I think there is a maximum combine contribution. We allocate 20% gross to retirement and will probably raise that a bit but 33% is great...just don't sacrifice having a life for that savings rate. Outside of our retirement savings we have a 6 months emergency fund which is all of our expenses for 6 months since we are dual income. This covers the unlikely event of both of us being unemployed. On top of that 6 months of savings...which if you don't have should come before retirement savings....we have money for home improvements, cars, and that sort of thing we will buy in the future.
Touching on an emergency fund, read up on what you think yours should be. 6 months is high for some people and low for others who like 12 months but that is a lot of cash just sitting idle not making anything in a checking/savings/money market/CD ladder or whatever you have. We get some sort of 1% bonus on top of our meager 0.65% or whatever our savings rate is if we have an automatic transfer of at least $10 a month.
I'll keep writing here since I agree that this information could be helpful to other readers.
As you say about the six month emergency fund, perhaps I'll build that up first. My current savings don't equal what I expect to make in six months. As I meet that goal, I can use the time to better learn about the two plans and others.
I'll speak with my human resources liaison to see whether I can open these plans later and under what circumstances. Do you reckon this to be wise, or should I still attempt to make some contribution?
I would contribute up to whatever the match is if that is offered since that is "free money" as they say. Then you can save money for an emergency fund. Most of the time, one you are past your probationary period, you can contribute to your retirement anytime. You would just adjust the % on some sort of company website and it will start withdraws in a paycheck or two.
I would love to treat you to a few drinks, jbarwick. I'm appreciating the insight.
The only problem is that the more questions I ask, the more I learn of what I don't know - and that leads to more questions.
Any of you guys pick up some goodies over the past two weeks?
I just picked up some ISTIX yesterday and some other previously-mentioned goodies over the past week... so far I'm up over $500!
nice day for forum favourite EPZM.
Sold it today, will get back in when it dips again
Been doing that with gwph too, easy 10% every few days
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