Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Old 11-23-2019, 10:37 AM   #201
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,686
Quote:
Originally Posted by GTFan View Post
The more interesting question here is who doesn't, and why. And yeah should be a poll.
Older poll here:
Early Retirement & Financial Independence Community - View Poll Results

A newer one can be justified.
target2019 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-23-2019, 02:53 PM   #202
Dryer sheet wannabe
 
Join Date: Sep 2015
Posts: 14
Quote:
Originally Posted by Elizrogers View Post
When I first wanted to start putting savings into stocks, rather than just the bank, I didn't know how/where (and still don't) to purchase stocks/bonds. I was told I needed to go through a financial professional associated with a bank or financial institution as a conduit to get it done. So, I have always had a financial advisor, but he has never "advised" me to really do anything. When I first brought him money, we talked about my goals and he gave me his opinion on what distributions to make. But he has never called to suggest rebalancing, or advise that buying or selling one stock or the other would be beneficial. He really just administers my account and sends me distributions when I request them. So not so much an advisor, as an administrator. He recently joined Raymond James and my accounts moved from Wells Fargo to Raymond James. I get an invoice every year for like $75 administration fee, but I don't know how much more he gets in % of my account. He says just a pittance. I will probably not be adding any new money, now that I'm not working anymore, so it will just sit and draw/lose interest. How would I go about taking it back and administering it myself? And would that not require selling all and reinvesting the cash elsewhere. If so, that sounds like it could incur big losses, since I know nothing about when is a good or bad time to sell and I've always heard accumulation over the long haul is how to grow investments, so never to cash out. Obviously, I am clueless about how investing works.
I'm going to be frank, since I've transitioned from advising to trading for an institution to an independent trader I no longer speak the advisor speak. I may upset some people.

Unless you're the advisor's top five percent of his book you won't get the TLC that you feel you deserve. A lot is dependent on the the actual designation of your advisor and the way the account and brokerage/advisor/firm is set up.

Truth is that practically all IAR's, RIA's, CFP's etc. have never even placed an active trade in their lives. Ask him/her if they've short stock or how to place a synthetic short call...

You see these advisors or just like you guys. They know as little or you may know more about the mkt than they do. Heck, the 20 yr vet next to my corner office didn't even know what the russell 2000 was. That's not saying that they're bad people, but a guy that walks in with a massive "circle of influence" that knows nothing is promising as opposed to someone that's been reading Kiplinger since five years old but is an introvert.

They don't have the time away from building and maintaining their business. They do exactly what the most of you are doing...the fund will do the work...more on that later. If a client likes individual securities than they'll call up the trading desk or use the an third party or own platform to place the trade. And no, the platforms don't look anything like what you'd imagine. Basically plain Jane..just enter the cusip or ticker.

They don't look at look at charts and know nothing of technicals(which are total BS btw) They don't know what really is moving price much like 99% of diy'ers. Some may even get sick to their stomachs if they knew what's really going on and are exposing their retirement money from home.

Wallstreet...Banks more precisely is about A.U.M.. If you've started to have a suspicion as you progressed in your investing you aren't far from the mark. Being an advisor is about running a business whether as an inde or captive. We were well versed in the lingo and what to say to you. To add to the perspective, the actual traders, market makers and specialists can give two iotas about the fundamentals of a company and its balance sheet. Equities aren't even something I trade anymore with all their drama...what vehicle doesn't have theirs.

Much of investing is common sense. There is a difference in which "phase" you're in. Are you in the accumulation in your life or crossed over to distribution side.

If you're in the prior, take full advantage of any 401k. Not for the return, but the match - that's golden. Forget trading - period. You are NOT a trader. If you enjoy buying individual stocks and it makes you feel you're progressing than more power. To the rest of you, don't get into that rut. Everyone has that uncle that friend that said they knocked it out of the ballpark with such and such stock. Trading is not what you think it is. My world is different. What you may see as a great yearly return is likely what I pull out in a week, I still remain grounded. To strangers that ask I sell corporate insurance.

I behoove you to max out your 401k to the match and nothing else. If you want more growth but the SP500 for growth that's it. You can do this with etf or funds - I think Vanguard has at least one. If I was still an advisor and didn't cared less about making my gross I'd also tell you to load up on preferred stock for the dividends. And that doesn't mean the 10% oil and gas companies. I've seen plenty of them along the participation programs blow-up take a chunk out of client portfolios in the office. You want a big well known name and a preferred that is callable. Because somewhere down the line it is going to get called back a par. Don't complicate and worry about your average price.

You need to to take advantage of insurance products. For those that are younger and in their accumulation phase - whole life. Not just any, make sure that it's older MUTUAL company like Mass mutual etc. If you work with an advisor that can't get products from companies like that - dump him. He's selling proprietary or limited lines. If you're in the eclipsing on the distribution phase of your life (around 5 years and on to retirement) you need to ANNUITIZE.

Gone are the days of Defined Benefit Plans. Wall street took care of that with the inception of the defined CONTRIBUTION plans. It took all the burden off the company and put it on to you. You are aware that you start taking distribution each time you kill off your growth. I'm sure you've seen the Monte Carlo scenario your genius advisor output from his retirement calculator which by the way anyone can get myriads online. They're a dime a dozen. REMEMBER, math is not money and money is not math. You need to maximize your efficiency with annuitization and possibly other insurance insurance products like Long-term care if you consider it.

Realize the SP is up 15% for this year and 55% for the past five. If you or anyone else is "trading" your retirement money and you haven't beat this your playing games. I don't want to piss people off, but most mutual fund managers can't even do this - especially in the long-term. So again quit the baloney and just by the index tied.
allstock is offline   Reply With Quote
Old 11-23-2019, 03:37 PM   #203
Full time employment: Posting here.
dirtbiker's Avatar
 
Join Date: Apr 2019
Posts: 630
Quote:
Originally Posted by allstock View Post
I'm going to be frank, since I've transitioned from advising to trading for an institution to an independent trader I no longer speak the advisor speak. I may upset some people.

Unless you're the advisor's top five percent of his book you won't get the TLC that you feel you deserve. A lot is dependent on the the actual designation of your advisor and the way the account and brokerage/advisor/firm is set up.

Truth is that practically all IAR's, RIA's, CFP's etc. have never even placed an active trade in their lives. Ask him/her if they've short stock or how to place a synthetic short call...

You see these advisors or just like you guys. They know as little or you may know more about the mkt than they do. Heck, the 20 yr vet next to my corner office didn't even know what the russell 2000 was. That's not saying that they're bad people, but a guy that walks in with a massive "circle of influence" that knows nothing is promising as opposed to someone that's been reading Kiplinger since five years old but is an introvert.

They don't have the time away from building and maintaining their business. They do exactly what the most of you are doing...the fund will do the work...more on that later. If a client likes individual securities than they'll call up the trading desk or use the an third party or own platform to place the trade. And no, the platforms don't look anything like what you'd imagine. Basically plain Jane..just enter the cusip or ticker.

They don't look at look at charts and know nothing of technicals(which are total BS btw) They don't know what really is moving price much like 99% of diy'ers. Some may even get sick to their stomachs if they knew what's really going on and are exposing their retirement money from home.

Wallstreet...Banks more precisely is about A.U.M.. If you've started to have a suspicion as you progressed in your investing you aren't far from the mark. Being an advisor is about running a business whether as an inde or captive. We were well versed in the lingo and what to say to you. To add to the perspective, the actual traders, market makers and specialists can give two iotas about the fundamentals of a company and its balance sheet. Equities aren't even something I trade anymore with all their drama...what vehicle doesn't have theirs.

Much of investing is common sense. There is a difference in which "phase" you're in. Are you in the accumulation in your life or crossed over to distribution side.

If you're in the prior, take full advantage of any 401k. Not for the return, but the match - that's golden. Forget trading - period. You are NOT a trader. If you enjoy buying individual stocks and it makes you feel you're progressing than more power. To the rest of you, don't get into that rut. Everyone has that uncle that friend that said they knocked it out of the ballpark with such and such stock. Trading is not what you think it is. My world is different. What you may see as a great yearly return is likely what I pull out in a week, I still remain grounded. To strangers that ask I sell corporate insurance.

I behoove you to max out your 401k to the match and nothing else. If you want more growth but the SP500 for growth that's it. You can do this with etf or funds - I think Vanguard has at least one. If I was still an advisor and didn't cared less about making my gross I'd also tell you to load up on preferred stock for the dividends. And that doesn't mean the 10% oil and gas companies. I've seen plenty of them along the participation programs blow-up take a chunk out of client portfolios in the office. You want a big well known name and a preferred that is callable. Because somewhere down the line it is going to get called back a par. Don't complicate and worry about your average price.

You need to to take advantage of insurance products. For those that are younger and in their accumulation phase - whole life. Not just any, make sure that it's older MUTUAL company like Mass mutual etc. If you work with an advisor that can't get products from companies like that - dump him. He's selling proprietary or limited lines. If you're in the eclipsing on the distribution phase of your life (around 5 years and on to retirement) you need to ANNUITIZE.

Gone are the days of Defined Benefit Plans. Wall street took care of that with the inception of the defined CONTRIBUTION plans. It took all the burden off the company and put it on to you. You are aware that you start taking distribution each time you kill off your growth. I'm sure you've seen the Monte Carlo scenario your genius advisor output from his retirement calculator which by the way anyone can get myriads online. They're a dime a dozen. REMEMBER, math is not money and money is not math. You need to maximize your efficiency with annuitization and possibly other insurance insurance products like Long-term care if you consider it.

Realize the SP is up 15% for this year and 55% for the past five. If you or anyone else is "trading" your retirement money and you haven't beat this your playing games. I don't want to piss people off, but most mutual fund managers can't even do this - especially in the long-term. So again quit the baloney and just by the index tied.
You lost me at "what you may see as a great yearly return is likely what I pull out in a week." Classic internet bravado.

And then recommending whole life as opposed to term to a group of people who are actively planning for retirement? Pfft. Take the money you spend on whole life premiums, subtract the cost of a similar term life policy, invest the difference in an index fund and see where you're at. You're WAY better off with a term policy. If you're properly planning for retirement, the invested savings listed above alone will be worth far more than a whole life policy will be by the time a term life policy is up.

And then recommending an annuity? As a former life, health, and annuity insurance salesman, I'm going to guess you also drank the kool-aid? The only people I've ever known who recommend whole life and an annuity in the same breath are people working on commission to sell these products (like I once was). Oh, and the company I worked for instructed us to identify as 'advisers' or 'planners' instead of salespeople, which we actually were.
dirtbiker is offline   Reply With Quote
Old 11-23-2019, 03:51 PM   #204
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 22,973
Quote:
Originally Posted by dirtbiker View Post
You lost me at "what you may see as a great yearly return is likely what I pull out in a week." Classic internet bravado.
But the paragraphs preceding that seem to be on the mark.
__________________
Living an analog life in the Digital Age.
Gumby is online now   Reply With Quote
Old 11-23-2019, 03:53 PM   #205
Full time employment: Posting here.
dirtbiker's Avatar
 
Join Date: Apr 2019
Posts: 630
Quote:
Originally Posted by Gumby View Post
But the paragraphs preceding that seem to be on the mark.
Quite true. I was actually on board until that part, and then it spiraled. I guess I should have mentioned that I do agree with his first part. Having seen the BS that goes on behind selling insurance products, how they sell the salesmen on the process, and how the sale is far more important than if it does the client any good, it touched a nerve.
dirtbiker is offline   Reply With Quote
Old 11-23-2019, 04:04 PM   #206
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 22,973
Also, he is quite right to suggest that you contribute enough to get the maximum company match in your 401k. If you got a dollar for dollar match for 20 years and whatever asset you were invested in made zero gain over that whole 20 year period, your average annualized rate of return on your contributions would still be 6.77% (if I have done the math properly).
__________________
Living an analog life in the Digital Age.
Gumby is online now   Reply With Quote
Old 11-23-2019, 04:26 PM   #207
Recycles dryer sheets
 
Join Date: Jun 2018
Posts: 203
Allstock seems to be someone that was hanging with the wrong crowd. There are plenty of ethical and qualified advisors.

Your calculation is dead on.
Kelor is offline   Reply With Quote
Old 11-23-2019, 04:33 PM   #208
Full time employment: Posting here.
dirtbiker's Avatar
 
Join Date: Apr 2019
Posts: 630
Quote:
Originally Posted by Gumby View Post
Also, he is quite right to suggest that you contribute enough to get the maximum company match in your 401k. If you got a dollar for dollar match for 20 years and whatever asset you were invested in made zero gain over that whole 20 year period, your average annualized rate of return on your contributions would still be 6.77% (if I have done the math properly).
I agree with his assertion that you should contribute to get the 401K match, but I disagree with his assertion that you should "max out your 401k to the match and nothing else." Why not max out the 401K to the max as allowed by the government and take advantage of the tax advantages?
dirtbiker is offline   Reply With Quote
Old 11-23-2019, 04:40 PM   #209
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 22,973
Quote:
Originally Posted by dirtbiker View Post
I agree with his assertion that you should contribute to get the 401K match, but I disagree with his assertion that you should "max out your 401k to the match and nothing else." Why not max out the 401K to the max as allowed by the government and take advantage of the tax advantages?
I never got a match at all, but I still maxed out my 401k every year. However, as I contemplate the tax torpedo that will arrive when my RMD's start, I am beginning to understand that it may have been wiser to save some of that money on an after-tax basis.
__________________
Living an analog life in the Digital Age.
Gumby is online now   Reply With Quote
Old 11-23-2019, 04:45 PM   #210
Thinks s/he gets paid by the post
 
Join Date: Jul 2009
Posts: 1,605
I’m not sure I follow the logic ...
stephenson is offline   Reply With Quote
Old 11-23-2019, 04:51 PM   #211
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 13,203
Quote:
Originally Posted by Gumby View Post
I never got a match at all, but I still maxed out my 401k every year. However, as I contemplate the tax torpedo that will arrive when my RMD's start, I am beginning to understand that it may have been wiser to save some of that money on an after-tax basis.
Maybe. It depends on your marginal tax rate at the time vs. what it will be with RMDs, or earlier if you can convert some of it. When I was converting the max I was in the 28% or higher tax brackets. I'm paying the price now, but I'll be converting or withdrawing at less than this tax rate, so it was a good move for me.

To say "don't defer more than matching" with no regard to this type of information is not helpful at all. Neither is "defer the max", btw.
RunningBum is offline   Reply With Quote
Old 11-23-2019, 04:52 PM   #212
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,337
Quote:
Originally Posted by Dtail View Post
So you are outperforming both of the paid FA services. What does that tell you, at least for now?
Actually, beating paid FAs net of fees is not a particularly high bar. A better question is how are @studman's equities doing compared to a simple passive equity portfolio?
OldShooter is offline   Reply With Quote
Old 11-23-2019, 04:56 PM   #213
Full time employment: Posting here.
dirtbiker's Avatar
 
Join Date: Apr 2019
Posts: 630
Quote:
Originally Posted by Gumby View Post
I never got a match at all, but I still maxed out my 401k every year. However, as I contemplate the tax torpedo that will arrive when my RMD's start, I am beginning to understand that it may have been wiser to save some of that money on an after-tax basis.
I guess it depends upon how you invest and if you'll be making more in withdrawals in retirement vs. working income (IOW, which tax brackets will you be in).

If you buy and hold until retirement, you may be better off in after-tax contributions. However, you've got to pay taxes initially, which cuts down on the amount you can invest, and if you sell stocks along the way, you've got to pay taxes on your gains, which eats into your profits, and thus the amount that is compounded.

I think that in most cases, most people are better served using tax-deferred methods, if possible. Even though you're paying taxes at retirement, you're likely able to grow that nest egg much bigger in a tax deferred account. But, this isn't blanket advice, as it can vary from situation to situation.
dirtbiker is offline   Reply With Quote
Old 11-23-2019, 05:01 PM   #214
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 22,973
Quote:
Originally Posted by stephenson View Post
I’m not sure I follow the logic ...

Suppose, for example, that you have income over expenses sufficient to max out your 401k, but not more. Suppose that, like many companies, your employer will match your contribution up to x% of your salary. To put numbers on it, suppose your company will match dollar for dollar up to $12,000. The max 401k contribution for 2019 is $19,000. Sure, you should put in $12,000 to get the match, but the question is what to do with the remaining $7000 that you have available to save - do you go ahead and max out the 401k or do you pay the taxes now and put the balance (~$6000) in a Roth IRA?

The answer depends on your tax bracket now and your expected tax bracket when you are 70 years old and required by law to start taking money out of your 401k (the RMDs). If you are only in the 12% bracket now, but the RMDs will be taken when you're in the 24% bracket, it makes more sense to pay the taxes now and invest $6000 in a Roth IRA. (the balance net of federal tax would be $6160 but the Roth contribution limit is $6000)
__________________
Living an analog life in the Digital Age.
Gumby is online now   Reply With Quote
Old 11-23-2019, 05:02 PM   #215
Recycles dryer sheets
 
Join Date: Oct 2011
Location: Hillsboro MO / Dunedin FL
Posts: 79
Manage our own....
stlguy57 is offline   Reply With Quote
Old 11-23-2019, 05:09 PM   #216
Full time employment: Posting here.
dirtbiker's Avatar
 
Join Date: Apr 2019
Posts: 630
Quote:
Originally Posted by Gumby View Post
Suppose, for example, that you have income over expenses sufficient to max out your 401k, but not more. Suppose that, like many companies, your employer will match your contribution up to x% of your salary. To put numbers on it, suppose your company will match dollar for dollar up to $12,000. The max 401k contribution for 2019 is $19,000. Sure, you should put in $12,000 to get the match, but the question is what to do with the remaining $7000 that you have available to save - do you go ahead and max out the 401k or do you pay the taxes now and put the balance (~$6000) in a Roth IRA?

The answer depends on your tax bracket now and your expected tax bracket when you are 70 years old and required by law to start taking money out of your 401k (the RMDs). If you are only in the 12% bracket now, but the RMDs will be taken when you're in the 24% bracket, it makes more sense to pay the taxes now and invest $6000 in a Roth IRA. (the balance net of federal tax would be $6160 but the Roth contribution limit is $6000)
Good point on the Roth. When I was replying earlier, I was only comparing 401K vs after-tax account, which is incomplete, as the Roth should come into play. My bad.
dirtbiker is offline   Reply With Quote
Old 11-23-2019, 05:12 PM   #217
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
Yes, there are some valuable nuggets of wisdom in allstock's post, but it took a big turn south when he advocated whole life insurance. I worked in financial management for one of the large mutuals (not MML but one of their mutual competitors) for 12 years and later had many as clients. Whole life is a great product for people and situations where there is a permanent need for life insurance like some family farms and small businesses, estate and succession planning, etc. ... but most families' need for life insurance is only for 20 to 30 years, and for them BTID (buy term and invest the difference) is better in those situations.

That said, the whole life policy that I naively was sold when I was a 21 year old fresh faced college grad hasn't done all that bad... a 5% return ignoring the value of the life insurance coverage and a 7% after-tax .... in both cases based on the IRR of premiums in relation to CSV and the tax-free death benefit, respectively.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 11-23-2019, 05:18 PM   #218
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
Quote:
Originally Posted by dirtbiker View Post
I guess it depends upon how you invest and if you'll be making more in withdrawals in retirement vs. working income (IOW, which tax brackets will you be in). ....
It is mostly just a tax rate arbitration play... current marginal tax rate when income is deferred vs marginal tax rate when withdrawals are made.... what you invest in doesn't matter much (assumes that you would invest in same asset class and have the same returns whether taxable or tax-deferred).

Many people don't think much about what their tax rate in retirement will be when the defer/contribute... even those that do give it some thought presume that their tax rate in retirement will be lower than when they defer (I would have been in that category)... and in most cases it is a reasonable assumption.

The good news... you win either way. If your tax rate in retirement is less than when you deferred the income then you save on taxes. If your tax rate in retirement is the same or higher than when you deferred then you have been more financially successful than you anticipated... so congratulations!
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 11-23-2019, 05:26 PM   #219
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,337
My experience is that the know-it-alls usually know the least. My favorite internet cartoon: https://en.wikipedia.org/wiki/On_the...you%27re_a_dog
OldShooter is offline   Reply With Quote
Old 11-23-2019, 05:26 PM   #220
Full time employment: Posting here.
dirtbiker's Avatar
 
Join Date: Apr 2019
Posts: 630
Quote:
Originally Posted by pb4uski View Post
It is mostly just a tax rate arbitration play... current marginal tax rate when income is deferred vs marginal tax rate when withdrawals are made.... what you invest in doesn't matter much.
It's not that simple. It's not what you invest in, but how you invest. IOW, if you buy and hold vs. selling frequently. In an after-tax account if you are selling your gains frequently (or even infrequently), your annual capital gains tax bill will decrease your earnings, which will also decrease your compounded interest on those earnings. If you buy and hold until retirement, than it is just a tax rate arbitration play.
dirtbiker is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Many retirees could outlive a million dollar nest egg omni550 FIRE and Money 97 06-13-2013 03:56 PM
From totally free checking to totally fleece checking easysurfer FIRE and Money 47 06-30-2012 01:23 AM
How To Tap Your Nest Egg & Not Go Broke REWahoo FIRE and Money 4 07-16-2005 08:51 AM
"The Debate Over Nest Egg Math" Nords FIRE and Money 23 04-25-2005 04:42 PM

» Quick Links

 
All times are GMT -6. The time now is 07:25 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.