Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-26-2011, 07:13 PM   #41
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,608
Quote:
I wouldn't advocate just putting money in the bank. .... People should be looking at long term CDs....
Now I'm just confused about what you are trying to say.
__________________

__________________
growing_older 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 12-27-2011, 12:05 AM   #42
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,870
Quote:
Originally Posted by tightasadrum View Post
Nords,
My daughter, home for Christmas, showed me here 401K options, a list of about 10 funds with two different investment groups and one MM-type fund. I asked her how she decided on the five she picked: highest return. That was it. I asked her what the expenses were in the funds...blank look. After looking at each fund, with simple links shown directly on her 401K company website, we found the expenses for each fund. Most of the funds she was in had an expense ratio north of 3.5% AND, ...wait for it... a 5.5% load, either A, B, or C. Since she is the person that communicates directly with the "financial advisor" for her company, I suggested that she do some one-on-one with this guy about what she and the others were really paying and why. They might get a break of fees, but she sure better find out. It turns out the FA is a son of someone the CEO knows.
Her biggest concern before I looked at it was that the NAV had mostly gone down since she jumped in. I told her at her age, 24, lower NAV was her friend, but expenses were her biggest enemy and to look into it.
I will say that I was pleased that she had made the decision to invest after pulling together her emergency cash fund. Free matching money from employer is immediate growth. Like your daughter, investment research is not high on her priorities list.
Drum, your story about your daughter is a little like the one with my ladyfriend. A few months ago, her small medical office was taken over by a large hospital. This is good for her for many reasons, one of them being her larger employer has a 403(b) with a company match. My ladyfriend has some IRAs from previous jobs (two of them are sorta combined) and received about $20k from her old employer's profit-sharing plan she could rollover into the 403(b). But when we checked out the many mutual fund options, I was dismayed at the absurdly high expense ratios, many of them in the 2-3% range, for funds which were not showing very high returns. Now her IRAs are mostly stock oriented so I felt she, age 49, needed to have a bond-oriented fund to act as a counterweight to better balance out her AA. (She was not really aware of the concept of AA so I had to explain it to her.) At least the two best choices, a stable value fund and the PIMCO Total Return bond fund, appeared promising. (I was in the latter for a few years in my former complany's 401(k).) I explained the difference between the two and she selected the PIMCO fund.

She later told me that she had some coworkers asking HER for advice because they were even more clueless about what to do with the profit sharing proceeds they were going to receive (and if they did not do a rollover, would unwittingly cash it out and pay lots of needless taxes, an even worse option). Lucky for her she had me to advise her.
__________________

__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 12-27-2011, 12:21 AM   #43
gone traveling
 
Join Date: Sep 2011
Location: Placerville
Posts: 161
Well, here I am, coming into my final year before retiring and coming out of the closet as a self proclaimed saver. I won't ever put another dime in the stock market. I began saving for my retirement in 1983, putting 10% of my pay every year faithfully in various mutual funds without any help or advice other than free advice on my choices. I put this away through work in a 401K and 457 plan. The company that handles these deposits, Great West, was not allowed to advise any of the employees on what or how to invest. I could find no outside investment business who would advise me either. Best I could find was companies who told me that after I retire and I could transfer my accounts to them they would manage my funds. So, what's a 27 year old supposed to do? I tried and tried to understand the world of finance. Quite frankly, if I could have understood my choices and options and what would be the best ways to invest in the 401K and 457, I most likely would have then been able to find work in this area. But this is not my bag of tea. I'm not interested in how the markets work. I'm interested in electronics and how to make technology work. THAT is what I am good at, not investing. For 20 years I tried to figure out what would be good choices, but instead, I always and consistently made the wrong choices. Eventually, in frustration of loosing my money and having realized I would have done better to put it in a coffee can under my bed than to the thieves I was now perceiving the who investment world, I decided I couldn't go wrong with an S&P500 mutual fund that tracked the S&P500. I was wrong again. Over 3 years I lost more than 30% of my initial investment. Finally sick of it all and down to a dollar amount that would jeopardize my ability to retire at 55, (I planned to retire a few years ago, but a 40% loss on the S&P nixed that dream), I put it all, what remained anyways, into a Wells Fargo fund that was basically a savings account. Over the last 3 years, I've had it grow an average of almost 3%. Compared to the S&P over the last 3 years, I've made the right choice.
People here toss around the term 'risk assessment' For the life of me, what is it you guys do for a living that you could risk loosing your hard earned money in a market governed by a bunch of 25 to 30 year old kids who seem to speculate and panic over every little news story and thereby drive the value of YOUR labor and the dollars you earned into the ground?! At least with a savings account, I am able to control the hemorrhaging of inflation to my money.
I've taken jr. college courses, read books, joined forums even and I find all the acronyms to be just as confusing as if I were reading them for the first time. I'd do better to learn how to count cards and hit the black jack tables in a casino than to try to follow the ins and outs of the stock market. The only thing I can understand is that I am able to realize 2 cents for every dollar I put into my Wells Fargo account for the past year and that no matter what Greece, Italy, Enron, Chevron, WalMart or anyone else might do, they can't steal my money from me if I don't 'invest' it in their companies. I may be way wrong with my thinking, but I see myself as a shill for a big ponzi scheme every time I listen to the financial report on the news or read about it in the papers.
I wish everyone the best of luck with their investments, but for me, without the aid of anyone who's able to advise me since they can't manage my work place 401K/457 accounts, I will leave the investing to you. I'll never be able to understand what it would take to make my own decisions, so at least I'm glad the Wells Fargo Stable Return fund is an option I can trust not to steal me blind or lead me over a cliff like some sort of lemming.
__________________
skipro3 is offline   Reply With Quote
Old 12-27-2011, 08:37 AM   #44
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,977
I am sure everyone here has seen this in some form or another. What the future might bring is unknown.

And it might be instructive to run FIRECALC with a 50:50 equity:bond asset allocation (or the default)
AND
then run the same scenario with a 100% cash allocation. [hold generated income constant, or adjust cash to hold probability of success constant].

The difference in income or probability of success will be markedly different.

In an age when reportedly most people don't/won't have enough to retire with a 60:40 AA, those who can realistically retire with 100% cash equivalents would have to be exceedingly rare.

I hope we're all successful whatever our investing approach.
Attached Images
File Type: jpg Stocks-Bonds-Bills-and-Inflation.jpg (78.0 KB, 28 views)
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 12-27-2011, 09:02 AM   #45
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by skipro3 View Post
Well, here I am, coming into my final year before retiring and coming out of the closet as a self proclaimed saver. I won't ever put another dime in the stock market.


........I wish everyone the best of luck with their investments, but for me, without the aid of anyone who's able to advise me since they can't manage my work place 401K/457 accounts, I will leave the investing to you. I'll never be able to understand what it would take to make my own decisions, so at least I'm glad the Wells Fargo Stable Return fund is an option I can trust not to steal me blind or lead me over a cliff like some sort of lemming.
This is a little extreme, even for me, but I think the sentiments are spot on. I've done well following a conservative Boglehead approach using TIAA Traditional as my savings component and taking profits in good times to pay off the mortgage. My intent in starting this thread was not to recommend a saving only approach, but that it should be a bigger part of most portfolios. I'm glad of my 25 years of 3% or 4% guaranteed return in TIAA Traditional given the volatility I look back on. I'm setting up my retirement so I can live off the TIAA Traditional annuity and social security, giving me the freedom to "play" with the rest of my "investments".
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-27-2011, 09:18 AM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,977
Quote:
Originally Posted by nun View Post
My intent in starting this thread was not to recommend a saving only approach, but that it should be a bigger part of most portfolios.
For example, what range of equity:bond:cash asset allocation are you recommending? From the start of this thread, it's seemed like an answer in search of a question, I've thought some specifics might help your case. If it makes you more comfortable, I'm at 52:39:9, though I expect to reduce my cash position over time.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 12-27-2011, 09:31 AM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,284
Quote:
Originally Posted by Midpack View Post
I am sure everyone here has seen this in some form or another. What the future might bring is unknown.

And it might be instructive to run FIRECALC with a 50:50 equity:bond asset allocation (or the default)
AND
then run the same scenario with a 100% cash allocation. [hold generated income constant, or adjust cash to hold probability of success constant].

The difference in income or probability of success will be markedly different.

In an age when reportedly most people don't/won't have enough to retire with a 60:40 AA, those who can realistically retire with 100% cash equivalents would have to be exceedingly rare.

I hope we're all successful whatever our investing approach.
+1 I don't know how people can say they want to get out of 'risky' stocks after they run and understand those scenarios. Seems the 'riskiest' thing you can do is drop your equity allocation too low.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 12-27-2011, 09:42 AM   #48
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by Midpack View Post
For example, what range of equity:bond:cash asset allocation are you recommending? From the start of this thread, it's seemed like an answer in search of a question, I've thought some specifics might help your case. If it makes you more comfortable, I'm at 52:39:9, though I expect to reduce my cash position over time.
I'm not recommending any particular AA, just saying that saving is all too often ignored and a stable value/CD ladder/TIAA-annuity/I-bonds should be the core of a portfolio. After the "six month emergency fund" mantra, saving it is completely left out of the equation. A fixed return component should be higher in everyone's thoughts when it comes to retirement savings.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-27-2011, 09:44 AM   #49
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Quote:
Originally Posted by Midpack View Post
I'm at 52:39:9, though I expect to reduce my cash position over time.
Is that equity:fixed-income:cash? We plan to reduce our cash position also as it is almost at 40%. Our YTD is pretty anemic because of the high cash position.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 12-27-2011, 09:46 AM   #50
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,977
Quote:
Originally Posted by nun View Post
I'm not recommending any particular AA, just saying that saving is all too often ignored. After the "six month emergency fund" mantra it is completely left out of the equation. A fixed return component should be higher in everyone's thoughts when it comes to retirement savings.
Fine, if long term history (ie chart above) is any indication that simply means you'll have to work much longer and/or accept much less income each year in retirement. You can quantify with FIRECALC. All part of the risk tolerance decision we each have to come to grips with...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 12-27-2011, 10:58 AM   #51
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by Midpack View Post
Fine, if long term history (ie chart above) is any indication that simply means you'll have to work much longer and/or accept much less income each year in retirement. You can quantify with FIRECALC. All part of the risk tolerance decision we each have to come to grips with...
I'll meet my retirement goal, as Zvi Bodie says "When you shift into safe assets, as I have done, you give up the thrill of victory and the agony of defeat". The thing is I don't trust FIRECALC enough to make it the core of my planning as it relies on past data. My basic expenses will be more than paid for by CD ladder, SS and my TIAA traditional.....any equity gains will be reinvested, they aren't necessary for me to live off.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-27-2011, 11:59 AM   #52
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Quote:
The thing is I don't trust FIRECALC enough to make it the core of my planning as it relies on past data.
Unfortunately, no future data exists. All financial models are based on historical data.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 12-27-2011, 12:09 PM   #53
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,977
Quote:
Originally Posted by nun View Post
My basic expenses will be more than paid for by CD ladder, SS and my TIAA traditional.....any equity gains will be reinvested, they aren't necessary for me to live off.
Congratulations, we should all be so "well positioned." I wouldn't take any risk if I didn't have to...who would?
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 12-27-2011, 12:21 PM   #54
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by Midpack View Post
Congratulations, we should all be so "well positioned." I wouldn't take any risk if I didn't have to...who would?
Actually I forgot to include rental income.....but that's very reliable too.

As we approach retirement age people do look to preserve capital more than in the accumulation phase. I think there should be a greater emphasis on capital preservation in accumulation and not this 100% focus on unrealistic growth.....
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-27-2011, 12:35 PM   #55
Thinks s/he gets paid by the post
Nemo2's Avatar
 
Join Date: May 2011
Location: Belleville, ONT
Posts: 4,320
Quote:
Originally Posted by Spanky View Post
Unfortunately, no future data exists. All financial models are based on historical data.
Damn! Because that would've been handy.
__________________
"Exit, pursued by a bear."

The Winter's Tale, William Shakespeare
Nemo2 is offline   Reply With Quote
Old 12-27-2011, 02:20 PM   #56
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,284
Quote:
Originally Posted by nun View Post
The thing is I don't trust FIRECALC enough to make it the core of my planning as it relies on past data.
So what do you use for planning? It seems to me you are planning that these resources will be able to provide even if we have high inflation.


Quote:
My basic expenses will be more than paid for by CD ladder, SS and my TIAA traditional.....any equity gains will be reinvested, they aren't necessary for me to live off.
I think another way to look at that is - if you have a portfolio that is sufficient to provide for you with little/no equities, you probably also have a portfolio that could handle a big downturn in the market, and still survive as well or better. At that point, you can choose either path, whichever you feel more comfortable with. I guess I'm just saying that it doesn't really make CDs, etc a less risky way to go, it is the large portfolio that lowers the risk.

If you plug that larger portfolio into FIRECALC, with your AA, I'd bet it would tell you the same thing.

Just to be clear - I'm not criticizing your decision in any way, and I don't even see anything wrong with it (not that it matters, who the heck am I?) I'm just trying to look at it in a different light.


-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 12-27-2011, 02:44 PM   #57
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by ERD50 View Post
So what do you use for planning? It seems to me you are planning that these resources will be able to provide even if we have high inflation.
I've used FIRECALC and OPR and read the 4% SWR papers and looked at efficient frontiers, but I took "psychohistory" (any Azimov fans out there) with a grain of salt and I use a Siberian mine full of the stuff when it comes to predicting investment returns. So I've always had a core of boring investments that will provide my retirement income with minimal risk and volatility. I believe that financial planners should be pointing people in a more balanced direction.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-27-2011, 03:42 PM   #58
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by nun View Post
. So I've always had a core of boring investments that will provide my retirement income with minimal risk and volatility. I believe that financial planners should be pointing people in a more balanced direction.
One word Hyperinflation. Equity investors in the Weimar Republic actually did ok while bond/cash were wiped out. There are no risk free investments.
__________________
clifp is offline   Reply With Quote
Old 12-27-2011, 04:00 PM   #59
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,431
In the final analysis, a guy (or gal) is entirely responsible for maintaining his (or her) assets, and is free to do whatever he (or she) feels comfortable with.

I knew a guy who said that buying stocks was gambling. Note that he meant any stock, not just penny stocks, or foreign small-caps, or some bitty pink-sheet Canadian mining stocks. So, I had to ask him why. His answer was that was because any stock could go down! Of course that was true, so I did not dispute that. He equated any risk at all with gambling!

So, what did he like, I asked. Well, this being in 2005, he was upgrading to a bigger house. We were not close friends, and so I had never been to his existing home that he was upgrading from, but knew that he and his wife made good money. So that new house that he was buying had to be a spectacular mansion. He said "nobody ever lost money in their house".

Well, this guy was perhaps 10 years younger than me, but even at that age, I thought he should be through a mini housing bust already in his life. As I remember, there was one in the late 1980s or early 1990s. Perhaps he was not a homeowner then to know that one does not always make money with houses.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 12-27-2011, 04:08 PM   #60
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 6,334
Quote:
Originally Posted by scrabbler1 View Post
403(b). But when we checked out the many mutual fund options, I was dismayed at the absurdly high expense ratios, many of them in the 2-3% range, for funds which were not showing very high returns.
Boy, this is all too familiar! My 403b options are ALL load funds except for the MM fund. The yearly fee on the MM fund wipes out the interest earned in this low yield environment. This is all to common.
__________________

__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
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
Interesting article on 'saving clubs' deserat FIRE and Money 7 11-22-2011 02:05 PM
Income investing and total return investing. clifp FIRE and Money 18 09-03-2011 10:17 AM
Clyatt, ETFs for Rational Investing Portfiolio? REattempt FIRE and Money 8 08-02-2011 04:48 PM
What percent of my income should I be saving in order to FIRE? nico08 FIRE and Money 23 07-06-2011 12:03 PM

 

 
All times are GMT -6. The time now is 03:36 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.