Investing for Retirement

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TC2
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Re: Investing for Retirement

Post by TC2 » Mon Mar 11, 2019 9:29 pm

Thanks for some great advice! Started following it last year.

I’m currently invested in a selection of mutual funds. However, I recently came across ETFs and I’m wondering whether it’s a good idea to invest in these, particularly in a taxable account as I read they are more tax efficient? Would welcome any advice!

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Re: Investing for Retirement

Post by dfw_pilot » Mon Mar 11, 2019 10:18 pm

Hey @TC2, imo, I would just buy what's more convenient.

It may be different at other brokers, but my brokerage account is at Vanguard, so I'm more familiar with them. They have a (patented?) way to flush capital gains out of their mutual funds via trades from their ETF share class. In this way, their taxability is very similar. Looking at both VTSAX and VTI, the mutual fund and ETF of the total stock market, both have a turnover of exactly 3%. Essentially, turnover is how often the fund manager has to buy and sell to track the index. Anything below 25% is great for a taxable account. Interestingly, lots of actively managed funds have turnover in the 400% range, making them a poor choice (hint: stick with passive index funds). With any fund, you can check the tax analysis of a mutual fund verses ETF at places like Morningstar.

Some things to keep in mind: You can exchange a mutual fund for an ETF tax free, but once you have an ETF, you cannot exchange it back to the mutual fund share without a taxable event. At many brokers, the ETF class may have a lower expense ratio (ER), but the gap is closing. The ER is the same at places like Vanguard. ETF's have much lower minimums than most mutual funds. I know Fidelity has a few mutual funds with zero minimums, however.

Mutual funds can be purchases with partial shares, unlike an ETF. If you have $100 to invest, you can put all $100 into a mutual fund with an automated monthly contribution set up. If you have $100 to buy an ETF, but the price is $110, you can't buy it. Also, ETF trades need to be done during trading hours, whereas buying mutual funds is more like setting up auto bill pay at your bank.

If you are a buy and hold type investor, ETF's might have more temptation to sell during trading hours, whereas mutual funds trade at the end of the day. You'd definitely want to hold the ETF's long term to get the savings from any tax advantages. For what it's worth, most of the investment blogs writers I read every day who are smarter than me use the mutual fund class without any concern.
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Re: Investing for Retirement

Post by TC2 » Tue Mar 12, 2019 7:34 am

@dfw_pilot, that makes sense thanks! :thumbup:

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ETF vs Mutual Fund

Post by dfw_pilot » Fri Mar 15, 2019 2:52 pm

@TC2, I like Allan Roth, and this article about ETF/Mutuals showed up in my inbox today. Not much new over what I posted above, but more info on the subject. Cheers.
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Re: Investing for Retirement

Post by dfw_pilot » Wed Mar 27, 2019 1:36 pm

Half of older Americans have nothing in retirement savings.

48% of those 55 or older have nothing in an IRA or 401(k). 30% of those don't have a pension, either.

Don't end up like this, requiring full support from family and government. Make today the day you start to take control of your future with some of the information presented in this thread.
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Re: Investing for Retirement

Post by CenlaLowell » Wed Mar 27, 2019 10:39 pm

dfw_pilot wrote:
Wed Mar 27, 2019 1:36 pm
Half of older Americans have nothing in retirement savings.

48% of those 55 or older have nothing in an IRA or 401(k). 30% of those don't have a pension, either.

Don't end up like this, requiring full support from family and government. Make today the day you start to take control of your future with some of the information presented in this thread.
The thought of this makes me save more and more each year. Now imagine if Social security really cut benefits by 25% in 2034, crazy.
Killing two birds with one stone is the name of the game. :bandit:

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Re: Investing for Retirement

Post by Ware » Thu Mar 28, 2019 10:13 pm


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Re: Investing for Retirement

Post by dfw_pilot » Fri Mar 29, 2019 12:24 pm

Yahoo reported the first link, then Forbes said no, with a rebuttal, and now another Forbes article is a rebuttal to the rebuttal, lol. Probably some Fake News in there somewhere - I'll leave that to the pundits and GAO.

The bigger point isn't whether 50% or 25% or some other percent of Americans haven't saved enough for retirement. The point is: Are you saving for retirement? The beauty of retirement savings, like I've said before, is that it isn't a contest between you and your friends, neighbors, or co-workers, but between you and your future self.

When my dad passed away a few years ago, he left my mom with $0 in retirement savings, and a mortgage payment. They fell into that percentage of people who hadn't thought enough about or saved enough for the future. The hardest conversation I've ever had with my mom was telling her there wasn't any more money. It was their story that pushed me to finally learn more about what I can do to secure my own retirement.

Today brought us all one day closer to when we'll be retired. Hopefully this thread can provide some tools and confidence that you won't end up falling short, like so many [%?] already have.
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Re: Investing for Retirement

Post by macdawg » Wed Apr 03, 2019 2:29 pm

If we expanded Social Security to provide adequate retirement for the vast majority of Americans, workers’ payroll taxes would rise to about 30% of pay—up from around 12% today.
This is from the rebuttal of the rebuttal link above. Where is she getting this info?

I can tell you I pay 24% federal income tax, 7% city and state, 6.25 "social insecurity", 2% into family health insurance, thousands a year in property tax. I literally pay just shy of 40% now out of my paycheck to taxes. An 18% increase puts me at paying about 58% tax rate......I wish I was making this up.

This is proof social security is a failure. Not that it needs to be expanded.

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Long Term Thinking

Post by dfw_pilot » Sat Apr 27, 2019 10:27 am

Morgan Housel says:

Those who think investing will be easy if you just have a long-term mindset ignore that the long run is just a collection of short runs, each of which has uncertainty, volatility, and decisions that have to be dealt with.


Housel is one of the best writers in finance. This is a great reminder that long-term, "staying the course" can be difficult.
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Saving for a spouse?

Post by dfw_pilot » Fri May 10, 2019 3:04 pm

A recent study finds that dual earner couples often don't save enough in their retirement accounts.

Since dual-earner households generally earn more than one-earner households, they need more savings. But only about half of private sector workers have a workplace retirement plan at any given time, and people rarely save outside of such plans. As a result, only one person in many dual-earner couples is actually saving. In this situation, the spouse with a plan should save more to make up for the non-saving spouse.

Don't be average, be better than average. Always calculate your retirement savings based on total take home pay, not just from the person with the 401(k) at work.
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Re: Investing for Retirement

Post by FATC1TY » Sat May 11, 2019 10:47 am

What’s a good starting point to help lessen the tax burden of a large capital gain event?

Looking like I could potentially be on the hook for roughly 90k in taxes, and need to find creative ways along with helping to grow some of the money long term.

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Re: Investing for Retirement

Post by dfw_pilot » Sat May 11, 2019 11:01 am

Do you donate to charity?
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Re: Investing for Retirement

Post by Grass Clippins » Sat May 11, 2019 12:13 pm

@dfw_pilot :lol: That question reminds me of a joke about a stripper named Charity....

@FATC1TY What is the capital gain on and how long did you hold it?

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Re: Investing for Retirement

Post by dfw_pilot » Sat May 11, 2019 12:24 pm

@Grass Clippins, lol.

Donor advised funds could help. Leaving them to heirs can help, too.
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Re: Investing for Retirement

Post by JP900++ » Sat May 11, 2019 1:04 pm

Grass Clippins wrote:
Sat May 11, 2019 12:13 pm
@dfw_pilot :lol: That question reminds me of a joke about a stripper named Charity....

@FATC1TY What is the capital gain on and how long did you hold it?
Hard topic.

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Re: Investing for Retirement

Post by FATC1TY » Sat May 11, 2019 7:34 pm

Grass Clippins wrote:
Sat May 11, 2019 12:13 pm
@dfw_pilot :lol: That question reminds me of a joke about a stripper named Charity....

@FATC1TY What is the capital gain on and how long did you hold it?
It was on profit interest in a company that was acquired. At the close of the deal the value was realized, and an award was made. Was given to me with a value of zero. I had the shares for over 3 years I think.

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Re: Investing for Retirement

Post by Grass Clippins » Sat May 11, 2019 7:57 pm

FATC1TY wrote:
Sat May 11, 2019 7:34 pm
Grass Clippins wrote:
Sat May 11, 2019 12:13 pm
@dfw_pilot :lol: That question reminds me of a joke about a stripper named Charity....

@FATC1TY What is the capital gain on and how long did you hold it?
It was on profit interest in a company that was acquired. At the close of the deal the value was realized, and an award was made. Was given to me with a value of zero. I had the shares for over 3 years I think.
Yeah you're definitely going to need to see a CPA. I do Financial Planning for a living (CFP) and when I run into these issues I always refer to a CPA for liabilities sake. Congratulations on that profit though!

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Re: Investing for Retirement

Post by dfw_pilot » Sat May 11, 2019 8:30 pm

Tax issues can be sticky and personal, so I agree about the CPA. Just don’t let the tax tail wag the dog. IE, don’t be talked into something dumb like buying an annuity or whole life insurance just to avoid taxes. Congrats on the good problem to have. Cheers!
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Re: Investing for Retirement

Post by Drewmey » Tue May 14, 2019 7:04 am

Man, I just randomly found this thread. Surprised and glad to see the useful info here. I have always been interested in saving and track my expenditures pretty religiously in an excel spreadsheet. My wife and I had a savings rate of 57% last year. Shooting for 45% savings rate this year as we are having our first child and planning to renovate (2) bathrooms. Also hoping this is the first year I max my 401k deferral, currently on track.

Any FIRE followers/people with the mindset on here?
Last edited by Drewmey on Tue May 14, 2019 7:15 am, edited 1 time in total.

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