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Old 08-11-2013, 11:55 AM   #21
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I thought I might use the $250k to purchase a rental property, but some things I've read recently have scared me off from the idea (see earlier post Today, 08:12 AM). Now I don't have much of a plan.

I read a post elsewhere that I could read a book called '4 pillars' to learn about AA.
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Old 08-11-2013, 12:30 PM   #22
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I thought I might use the $250k to purchase a rental property, but some things I've read recently have scared me off from the idea (see earlier post Today, 08:12 AM). Now I don't have much of a plan.

I read a post elsewhere that I could read a book called '4 pillars' to learn about AA.
That is a good idea. 4 Pillars is an excellent start.
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Old 08-11-2013, 01:10 PM   #23
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Now my question: I have some stocks vesting in a few months, and I'm not sure what to do with the money. After taxes etc., it will be about 100k. I feel nervous about putting all of it into the stock market, because I feel like the market is really high right now. Any suggestions? Here are my current investments:
Various people here have pointed out that the single greatest bull market most of us have ever seen and will ever see, mostly happened when valuations (prices relative to some stable measure of earning and cash flow power) were already high.

Nevertheless, in my book this I speculation, not investment. If you instincts and will power are pretty good, keep your powder dry if you want to. Otherwise, the stable AA method works like religion- no matter how things break out there, if you keep faith you can feel sure that you are living righteously.

When I think about it, equity investing in general must at times have elements of religious faith. You see that on boards like this one during periods of stress. Plenty people trying to help one another to "keep the faith".

Ha
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Old 08-11-2013, 02:40 PM   #24
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Various people here have pointed out that the single greatest bull market most of us have ever seen and will ever see, mostly happened when valuations (prices relative to some stable measure of earning and cash flow power) were already high.

Nevertheless, in my book this I speculation, not investment. If you instincts and will power are pretty good, keep your powder dry if you want to. Otherwise, the stable AA method works like religion- no matter how things break out there, if you keep faith you can feel sure that you are living righteously.

When I think about it, equity investing in general must at times have elements of religious faith. You see that on boards like this one during periods of stress. Plenty people trying to help one another to "keep the faith".

Ha
I think I'd have trouble reading your book, if it's all written like the bolded part!

People can and should do what they want with their money. I just can't read the signs of a recovery or drop myself, so I go with a stable AA. When asked for advice, that's the advice I give. Apparently I have plenty of company.

Mostly in my post I wanted to point out the issue with the tax managed fund being in a Roth, which turned out to be just a reporting mix-up. I decided to add my advice to the main question, and acknowledged that timing the market was another option, but I have no advice to give in that case.

As far as keeping the faith, the worst thing you can do in either strategy is to change it in times of stress. That leads to buying high and selling low. I don't see a problem with giving support to someone to keep them from making that mistake.
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Old 08-11-2013, 03:25 PM   #25
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Hi,

Congratulations: $100-$350k allocation seems like a great problem to have.

I think a general bogleheads.org/Vanguard/Bernstein etc strategy is to pick an asset allocation you can stick with; don't attempt to market time and use low "core" cost index funds.

My asset allocation is slightly different from the majority as I have decided to include single family rental homes into the allocation. So in your situation, I have decided to allocate the next chunk to purchase a rental (which does require having a larger than ideal chunk in cash).

So I think my 2c advice is consistent with quite a few others: determine an asset allocation with which you can commit. ie Start from the top level strategy:
(1) main question, does your asset allocation include rental properties? If so you may want to use a high % of your available cash to reduce leverage or you may be comfortable so long as cashflow neutral. If you do then there is quite a lot you will want to understand to select the property.
(2) If not lump sum or sounds like you may be happier to dollar cost average your $100k into that asset allocation.

From my personal experience, I have had difficulty when I did not view investment decision such as yours in terms of what I am really considering is a possible change in asset allocation. If I am correct about the $100k it is already stock, so if you weren't considering a change in asset allocation you would have no trouble lumping it into different mutual fund basket of stock?

All the best.
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Old 08-11-2013, 08:47 PM   #26
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I think I'd have trouble reading your book, if it's all written like the bolded part!
Fortunately I am not interested in selling one.

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People can and should do what they want with their money. I just can't read the signs of a recovery or drop myself, so I go with a stable AA. When asked for advice, that's the advice I give. Apparently I have plenty of company.
For sure you do, which does not make it effective, or ineffective. Also, if you are implying that I think I can read signs of a drop or a recovery, you have misread.
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I don't see a problem with giving support to someone to keep them from making that mistake.
Neither do I! If this is intended in some relation to what I said about keeping the faith, it is a misreading. I don't see anything "wrong" with it, and if I did I would not likely say so. Unless something is clearly counterfactual, I am not in the habit of making a value judgment on it. It is way too easy to be wrong, or to misunderstand, or to offend.

Ha
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Old 08-12-2013, 11:31 AM   #27
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I'll respond to a point in your OP; I'm a software engineer turning 61 in a few months. I took my current position at age 53, so not all older techies find it hard to get a job. I've always clung to the bottom rung though - from what I've seen, middle management types have the most problems getting hired in their (our?) dotage. If your company has a technical path, that's the path to take. Oh, and do keep those skills up to date! Good luck.
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Old 08-12-2013, 11:33 AM   #28
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Hi Slowsaver,

You have done real well building your nest egg. No debt with a substantial cash savings. Nice Job!

Now, with that in mind, I would take the $100,000 and split it equally between 10 stocks. Ten that will work well for you over time are ABT, CVX, D, JNJ, MO, PEP, PG, PM, WMT, XOM. All pay solid dividends and all have a history of raising them yearly.

With the $100,000 split equally between the ten your first years income from dividends will be about $3,100 based on the current prices. With dividends reinvested and no new money added, in twenty years the dividend income should be close to $36,400 per year. This is based on each companies history of CAGR for the dividend and using a fed tax rate of 15%. Not sure about your state tax rate.

Now if you were to add $10,000 per year for twenty years and split it equally between each stock and continue to reinvest the dividends, your dividends at year twenty would be close to $73,700. That would take you to 59 and add some nice spending money for your retirement.

Just my two cents, what ever you decide on I'm sure you will be fine.
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Old 08-13-2013, 04:04 PM   #29
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I too am in the IT field and one thing I noticed was your max Roth contributions. While I don't make anymore than the market rate nor do I have as much saved up as you I haven't been able to contribute to ROTH for several years due to the ROTH AGI limits.
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Old 08-13-2013, 05:47 PM   #30
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I too am in the IT field and one thing I noticed was your max Roth contributions. While I don't make anymore than the market rate nor do I have as much saved up as you I haven't been able to contribute to ROTH for several years due to the ROTH AGI limits.

My income is also too high, I have been using a loophole in the tax law to put money into the Roth. If you first contribute to a traditional IRA (but don't deduct the contribution on your taxes!), then you can roll it over to the Roth. I do this every year, once per year.
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Old 08-14-2013, 11:03 AM   #31
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Ah, thanks for clarifying. I had heard of it but I didn't know how that worked. So you deposit $5k into your IRA and then 'roll it over' to Roth? or do you contribute $10k to IRA and roll over $5k of it into Roth? Also is the roll over done by calling Fidelity/Scottrade etc?

I did want to also comment that you guys have done really well! congrats! and I share the same concerns as you about the company/job situation and age etc- I'm 38 and my title is sr. mgr IT infrastructure. In other words the dreaded middle management lol. I have thought about opening up a small consulting business or even something completely different from my field like owning a franchise or becoming landlords but haven't had the capital or the comfort level to do it yet.
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Old 08-14-2013, 02:55 PM   #32
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In doing some research about the IRA to ROTH conversion process I came across this article: Warning About Roth IRA Conversions: Often Misunderstood IRS Rule Can Cost You Money and Aggravation - Forbes

"The IRS does not allow converters to specify which dollars are being converted as they can with shares of stock being sold; for the purposes of determining taxes on conversions the IRS considers a person’s non-Roth IRA money to be a single, co-mingled sum.
Hence, if a person has any funds in any non-Roth IRA accounts, it is impossible to contribute to a Traditional IRA and then “convert that account” to a Roth IRA as suggested by various pundits and the Wikipedia piece referenced above – conversions must be performed on a pro-rata basis of all IRA money, not on specific dollars or accounts."

Sorry about going off-topic a bit but thought I mentioned it in case you aren't aware.
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Old 09-01-2013, 07:35 PM   #33
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In doing some research about the IRA to ROTH conversion process I came across this article: Warning About Roth IRA Conversions: Often Misunderstood IRS Rule Can Cost You Money and Aggravation - Forbes

"The IRS does not allow converters to specify which dollars are being converted as they can with shares of stock being sold; for the purposes of determining taxes on conversions the IRS considers a person’s non-Roth IRA money to be a single, co-mingled sum....
The biggest hurdle for most people to roll over the traditional IRA to a Roth is the tax hit. Since I only used a 401k, I never had any money in a traditional IRA before. So I created one just to put 100% after-tax money into it, then rolled it to the Roth (so it is back to $0). I realize this might be a problem for someone who already had a pre-tax traditional IRA. I did not have one, so I didn't need to specify which dollars are being converted (all of them were).

Having said this, I still would not be surprised if I get audited one day. I get a 1099-R from Vanguard every year, and struggle with my tax software to convince it that I was not taking an early distribution -- it's just a conversion. So far, the IRS has left me alone (fingers crossed).
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Old 09-01-2013, 08:07 PM   #34
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I didn't like being an IT manager. Lack of marketability was one of the reasons. I went back to school after having kids get more tech oriented skills. I have done either consulting or worked in our small business since.

I think if you have the time, finances and inclination to keep learning new software it is possible to keep the income up - even in the advanced ages of 40+.
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Old 10-06-2013, 10:59 PM   #35
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Hi Slowsaver,

I'm a big fan of reaching FI as the name suggests and my main financial focus is maximizing the number of assets that generate income toward that goal. DW and I try to accomplish this by both saving as much as possible (duh!) and also trying to minimize the part of our NW that doesn't make us any money. Of course, getting the best ROI is part of that equation as well, but let's just assume the generic 3-4% withdraw rate here.

I'll offer that half of the NW that you listed is tied up in a house. This may or may not be an "income" producing asset that justifies itself from a financial perspective alone, depending on where you live. Since it's just you and the husband, you could probably rent anywhere in the country for $2.5k / mo at the most and live in a decent area. I also see it as a dramatic overexposure to RE, but may be alone in that. Does your $700k house justify itself against that savings when also considering taxes, maintenance, insurance, and all that other stuff? Would it serve you better tied up in rental properties or perhaps more index funds along with that cash? Just by changing that house into another investment, you've got the assets to support a $30-$60k / year lifestyle right now as I see it.

So, would you rather just have a more carefree rental lifestyle with possible FI and save the expenses of the house? Of course, a "home" is an emotional thing as well. We own a piece of land that makes us nothing (but taxes are close to nothing as well) and I just can't bring myself to sell it as it's selling a dream.
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Old 10-13-2013, 04:52 PM   #36
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Looks like you have lot of US equity exposure and very limited international.....

With your portfolio I would invest this 100k in VXUS and VWO.
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