educate me 401-k

[nhbubba]

Lazy portfolios - Bogleheads

Fidelity has funds that map directly to the Vanguard funds listed. I'm sure other major investment firms do to. All of them are in my 401k plan. Bet they are in yours too.

[Petorius]

Lazy portfolios - Bogleheads

Fidelity has funds that map directly to the Vanguard funds listed. I'm sure other major investment firms do to. All of them are in my 401k plan. Bet they are in yours too.

I have been thinking about how to do this, and naturally over-complicating it. Thanks!

[TheIglu]

Heh, I forgot, I'm already in a Roth, not a 401k.

[RandyO]

Not that it obviously has worked out well for you, but you're worried about FDIC insurance but put all your eggs in one mutual fund basket?

it was the long term strategy my broker advised to me a little over 40 years ago, (the one mutual fund is very diversified within itself) now that I am nearing retirement, my broker is going to start advising me to move things around a bit.


My current plan is to retire in 4 years to a life of riding, early retirement next month doesn't work for me

[nhbubba]

In my opinion you should have started the shift out of aggressive growth funds and into bonds years ago. You should be rebalancing at least twice a year. It takes like an hour of your time tops.

[RandyO]

In my opinion you should have started the shift out of aggressive growth funds and into bonds years ago. You should be rebalancing at least twice a year. It takes like an hour of your time tops.

there is always more to story, everyone in my family uses the same broker, my dad has been filtering money over to trust funds, that is taken into account when my broker advises

[xsiliconkid]

as a minimum add in what gets you the maximum matching company contribution...that is free money

[nhbubba]

What really sucks is this thread just basically talked me out of buying a new KTM next year.

[e30addict]

What really sucks is this thread just basically talked me out of buying a new KTM next year.

Maybe you should watch this then

[tsorfas]

What really sucks is this thread just basically talked me out of buying a new KTM next year.

That's silly. I'm usually the opposite influence.

[Bonk!]

"So i dont believe in any retirement plan. I am a firm believe that I save my money and invest my own way in things I believe in and trust.
I really am clueless about that stuff. some people I know put 10% and are well over 50k in about the same time (maybe a year more)."

"My retirement goal age is 35. It's a dream as much as a goal but that's what I want to accomplish in my life."

I'm not sure I've ever seen two more incongruous statements! No offense (and I didn't read the whole thread so I don't know what others have said), but if you're asking these questions there's no way you should be managing your investments until you have a whole lot more knowledge. Any idea how much you'd have to stash away to be able to retire (or work for yourself) at age 35? Do a little research on what healthcare costs alone would be. Real estate is just as risky as equities: both are reasonably secure long term investment vehicles, but both can crater and you need to be able to ride that out. When the markets last crashed (both stocks and housing) smart investors were able to convert to cash and avoid huge losses, whereas many amateur house flippers wound up lining up at the courthouse. IMO, if your goal is a VERY early exit from the workforce you need to find a good investment advisor (non-commissioned based) and listen to him/her. Save every penny you make, maximize your 401(K) contributions and diversify.

I never had aspirations to be my own boss: I work for a company that deals with start-up investments and 95% of them wind up in the dumpster. I have actively and aggressively managed my investments (with statistically above average results) and just now at the age of 50 do I have enough tucked away to contemplate retirement with enough to last 30 years. As with everything, hope for the best but plan for the worst. But, good luck with it - if you find a way to get out of the rat race at 35 write a book!

[CEO]

This seems to be a recurring theme where sav doesn't really know much about a topic but has a very strong opinion about it and comes in asking questions when he really doesn't want to hear the answer... lol

Sav one note, please don't confuse investing with stock trading. They are VERY different. Investing is a long term plan to grow yourself a big chunk of money and it is much safer and secure and less risky than stock trading. An investment portfolio includes stocks, bonds, and potentially other items. If you are more risk averse, you can more heavily be in govt bonds, t-notes, etc... which are guaranteed but less return. Then within stocks there are a range of markets and areas to get into; some have more security than others. Tech indexes can be volatile, long-term a commodity index is usually less so. You can get into international stuff, etc. A diversified portfolio is how you manage risk. If all of this sounds like too much, then just pick one of those good funds/etfs that have a risk profile that matches your risk level desired and pump a shit ton of money into it and don't think about it (except to watch it grow and in ten years you have a million bucks and you're smiling).

I don't understand how keeping a house or paying it off or any increases in its value has anything to do with the fact that you pay less than ~5% on that debt while the market is returning double digits.

CEO is right, you've lost money paying down the debt. It could have gone the other way-there is always risk-but it didn't.
And honestly, beating the very low mortgage interest rates we are looking at these days isn't that hard.

I went through the same thing with my father last year. He told me to stop paying the house down so aggressively. I really hate saying it.. but my old man was right, I was wrong.

Precisely. If you want to hold the house as an investment that is fine, but telling yourself it isn't a risk is fooling yourself. I turned around a house for 40k profit in two years during a market lull, I made a smart/lucky buy. However a couple years earlier if I did the same thing I would have lost my shirt. And let's all just agree that paying down the debt with rates as they are these days is just plain silly; I don't think anyone can argue that.

[SVRACER01]

Yeah, I'm not doing nothing. Company matches 50% up to 5%. So I pay 5%, they pay 2.5%. That's all I got in there.

then you should be putting in 10% to get more of their money

i got some advice about my 401k from my uncle. he says that if you can choose your investments then you should base risk on age. if youre 35, then 50% of your investment should be low risk/return, then rest in high risk/return (based on 70 retirement age). as you get older you adjust it to reduce the money put into high risk/return. the goal being that the closer you get to retirement, the more stable your money will be.
with sav planning to retire at such a young age, would something like CDs be better for him?

[obsolete]

This seems to be a recurring theme where sav doesn't really know much about a topic but has a very strong opinion about it and comes in asking questions when he really doesn't want to hear the answer... lol

Sav one note, please don't confuse investing with stock trading. They are VERY different. Investing is a long term plan to grow yourself a big chunk of money and it is much safer and secure and less risky than stock trading. An investment portfolio includes stocks, bonds, and potentially other items. If you are more risk averse, you can more heavily be in govt bonds, t-notes, etc... which are guaranteed but less return. Then within stocks there are a range of markets and areas to get into; some have more security than others. Tech indexes can be volatile, long-term a commodity index is usually less so. You can get into international stuff, etc. A diversified portfolio is how you manage risk. If all of this sounds like too much, then just pick one of those good funds/etfs that have a risk profile that matches your risk level desired and pump a shit ton of money into it and don't think about it (except to watch it grow and in ten years you have a million bucks and you're smiling).

Precisely. If you want to hold the house as an investment that is fine, but telling yourself it isn't a risk is fooling yourself. I turned around a house for 40k profit in two years during a market lull, I made a smart/lucky buy. However a couple years earlier if I did the same thing I would have lost my shirt. And let's all just agree that paying down the debt with rates as they are these days is just plain silly; I don't think anyone can argue that.

I think he's going the rental route in terms of investment in housing, which can be very lucrative but just as risky. Not to mention a lot of work, unless of course you hire a property management company. At that point you should have a good amount of properties to help differ the cost of that. I know a few guys with a lot of rental property and they do very well with it, but they still work and they don't considering owning all the properties as retirement.

[tsorfas]

You will allow me to argue all day that living debt free is not silly at all. You can talk about low rates and all these theories but the money you lost in interest I refuse to lose as well. That money is better in my pocket, a removed expense from my life and the feeling that nothing can financially remove me from my house.

I want control of my investment. I want to be able to affect how my money grows. Yes the real estate market is maybe as much unpredictable. But I have so control based on what I can fix in a house or when I want to sell. Same with a small business I do my research and I open what I want. Then yes traffic and economy are factors but my skills and products are also major factors that u have control over.
Stocks/bonds/etc I don't have any control over. That's what I don't like.

You also have the wonderful option to complete ignore any thread/post by me since almost none is ever directed to you.

- - - Updated - - -

I think he's going the rental route in terms of investment in housing, which can be very lucrative but just as risky. Not to mention a lot of work, unless of course you hire a property management company. At that point you should have a good amount of properties to help differ the cost of that. I know a few guys with a lot of rental property and they do very well with it, but they still work and they don't considering owning all the properties as retirement.

You have a very good understanding of what I have in mind. The general
Idea is right. I just have a few more hidden cards

[obsolete]

What do you have in terms of hidden cards with rental property? PM me if you don't want to talk about it publicly, but I'm interested as I may be going that route this year.

[tsorfas]

Also I should make clear that my definition of retirement is: having the ability to wake up and say today I'm not doing anything. On any given day.
I don't consider property management really a job. Some might. I personally do not.

[SVRACER01]

i have a friend that owns an apt building. he lives there for free as his tenants pay all his bills. he works full time for motorcycle parts and beer...mostly beer.

[e30addict]

You will allow me to argue all day that living debt free is not silly at all. You can talk about low rates and all these theories but the money you lost in interest I refuse to lose as well.

Maybe not silly, but do you realize that mindset could be lengthening the time it takes to achieve your goal?

The term commonly tossed around is "other peoples money" and it can really work for you. On one hand, you're focused on "LOSING " money to interest, but on the other hand you can't see the GAINS you could be missing out on. Interest works both ways. It's not always you paying someone

I've said it in other threads and I'll repeat it here. Debt itself is not bad. Debt managed improperly can destroy you. A lot of people, yourself included, seem to have a mental block when it comes to debt. I used to see it all the time financing cars. People would insist on paying cash when there was 0% financing available. You actually cost yourself more money by paying cash in the pursuit of not having debt, yet a lot of people refuse to see it.

They would commonly say if they pay cash it costs them nothing, so why finance at 0%? That is not really true though. By paying cash they (you) LOSE the ability to earn interest on that money, or buy other things with it if they choose. That is absolutely a cost. Even if that cash was just sitting in a savings account earning a paltry 1% it COST them 1% (plus what they lose in compounding over time) to use it. Basically, by paying cash instead of taking out a 0% loan, they just LOST a minimum of 1% (again + compounding). If the money had been invested in something that earned a higher rate the cost is just that much higher. See how a scenario like that could make it take longer to reach a financial goal?

For kicks, lets look at that with some basic numbers. You are looking at a $30,000 car. You can write a check and avoid debt or you finance the car at 0% for 60 months. If you write a check you lose the 30k instantly to a depreciating asset. If you left that same 30k in something that earned 5% and didn't touch it for 5 years you would have a tick over 38K sitting there.

You LOST out on $8,000 because you did not want debt

[nhbubba]

IMO, if your goal is a VERY early exit from the workforce you need to find a good investment advisor (non-commissioned based) and listen to him/her.

Eh. I agree with most of your post, but not all of it. I think a lot of people underestimate how easy it is to "exit" the workforce. It requires sacrifice and some very deliberate choices. But in a large portion of this country, the cost of just living is shockingly low. You just have to cut your non-essential expenses. Once you cut your expenses, your income requirements drop substantially.

The catch is your desired standard of living. Just surviving isn't much fun. Most of us on this forum are into motorcycles. Motorcycles ain't cheap. Racing LRRS ain't cheap.

The key is to get your passive income up and your costs of living down such that you spend less than you make. Do that and you don't have to work anymore.


I also disagree that you need a personal investor. I meet all kinds of people that want to refer me to their 'guy'. "My guy is goooood!" Press them and they don't actually know wtf their "guy" is doing.

Is he beating the indexes? Indexes? What are his costs? What sectors has he got you in? Why?

And few of these 'guys' want to answer these questions.

I'm sure there are some gold plated "guys" out there that shit gold plated advice and beat the market all the time, every time. I personally have given up on trying to find one of them and diy this one. As mentioned, I'm big on these index funds. This way I ride the market and hedge using bond indexes. This keeps my costs hysterically low. Costs are right there on the label and we we all know what's up. At the same time I don't need to check the market or my stocks 5000x a day. I have a formula and I stick to it.

The downside is I only see whatever return the market sees. I've decided I don't have to beat the market to get where I want to be.

Your mileage may varry; but unless you pick stocks professionally or as a hobby, I doubt it will.

- - - Updated - - -

i got some advice about my 401k from my uncle. he says that if you can choose your investments then you should base risk on age. if youre 35, then 50% of your investment should be low risk/return, then rest in high risk/return (based on 70 retirement age).

FWIW: I think this is far, far too conservative. I believe most prevailing wisdom would suggest more like 20% low-risk bonds and the rest in more aggressive stocks.

Vanguard has a very nice tool for this : https://personal.vanguard.com/us/fun...ion?reset=true

[gumby]

Excluding the beneficiary of a windfall, not sure I'd be overly concerned with the financial decisions of a $30k cash-paying buyer.

[breakdirt916]

crap...nhbubbs has a lot of points that I agree with...live cheap, make passive income, retire

the question I'm trying to determine, is what other ways to make passive income besides owning a rental property/stocks, owning a patent on something, having 30 vending machines setup around town, a viral website, being at the top of a pyramid scheme, or owning a buncha franchises/small businesses and hiring a manager that's not fucking you up the ass by stealing your money, banging your wife, and riding your bike...my goal is - live cheap, workout, save a ton of cash, put up with having roommates to help pay off rental property as fast as possible (10 years?), rent out 2-3 units @ $2k/month (very common in socal), then work part-time and ride full time...until part-time work gets in the way and full time riding becomes my life...then rent out all the units of rental property and buy/live in a sprinter

[nhbubba]

Why I Put My Last $100,000 into Betterment

Interesting review of a service that helps you use Vanguard index funds. They automagically rebalance for you and use something called "Tax Loss Harvesting".. which I admit to knowing nothing about.

Probably doesn't work for a 401k though. And the tax thing doesn't matter on a tax shielded retirement plan.

[Billy]

I think a 401K/Roth IRA is a good thing to contribute to. Would suck to retire and have nothing to live off of. If you're one of those people who is planning on living off just social security, good luck. All I have to say about that.

I've had a 401k since I was 25 (now 32) and It's grown quite a bit in those years. I'm no expert in the topic but you should ALWAYS match the maximum what your employer does. So if your employer matches 100% at 5% then you should as a bare minimum, do 5%.

I recently changed jobs so I had to do a bunch of 401k crap. I switched my investment elections to a Pyramis Core Lifecycle 2045 Commingled Pool Class V. This plan is based upon your age and your expected retirement date range. In plain English, it's self adjusting so when you're young, it invests in riskier choices, as you age it changes to less riskier options.

[Bonk!]

I recently changed jobs so I had to do a bunch of 401k crap. I switched my investment elections to a Pyramis Core Lifecycle 2045 Commingled Pool Class V. This plan is based upon your age and your expected retirement date range. In plain English, it's self adjusting so when you're young, it invests in riskier choices, as you age it changes to less riskier options.

One thing to watch for with this, and you're a long way away, is that many of these plans go conservative pretty early. If you're relying on this investment to last through until your ultimate demise, make sure you're calculating how much you'll need the investment to continue returning after retirement.