Investing for Retirement

A place to discuss everything else
User avatar
dfw_pilot
Site Admin
Posts: 2329
Joined: Sat Jan 28, 2017 3:19 pm
Location: DFW Metroplex
Grass Type: Bermuda
Lawn Size: 5,000 ft²
Mower: Toro GM1000
Contact:

Stick with Bond Index Funds

Post by dfw_pilot » Fri May 04, 2018 11:53 pm

Grass Clippins wrote:
Fri May 04, 2018 9:01 pm
"There are many people now thinking that bonds may out perform stocks in the next decade." You may want to research the relationship that bonds have to rising interest rates.
I don't think it's that simple, especially with bond index funds. Either way, you won't find me recommending 100% stock portfolios to any one, for the reasons I've already listed several times. My crystal ball on interest rates and stock performance over the next decade is very hazy, so I always think diversification is the best solution. Plus, bonds have some great characteristics, like having a larger market than the stock market, allow for bond ladders, and have poor correlation to stocks which increase returns. Though quirky, I really love the Rick Van Ness tutorials.
The Bermuda Triangle | Sprayer Wand | Invest for Retirement | PWS
- A clear conscience is a great pillow -

User avatar
pennstater2005
Moderator
Posts: 4557
Joined: Mon Jul 17, 2017 6:16 am
Location: Western PA
Grass Type: Northern Mix
Lawn Size: 15,000 sq ft
Mower: Husqvarna YTH18K46

Re: Investing for Retirement

Post by pennstater2005 » Sat May 05, 2018 6:17 am

@dfw_pilot You need to post more over at Bogleheads!
"Perfection, like infinity, is unobtainable, even at places like Augusta. It's the journey toward the goal that holds all the fun, joy, and reward." - dfw_pilot

Lawn Fertilizer Calculator

Credit

User avatar
Grass Clippins
Posts: 357
Joined: Sun Apr 29, 2018 8:42 pm
Location: Marietta, GA
Grass Type: Titan Ultra TTTF
Lawn Size: 18000
Mower: Hustler Raptor

Re: Stick with Bond Index Funds

Post by Grass Clippins » Sat May 05, 2018 7:56 am

dfw_pilot wrote:
Fri May 04, 2018 11:53 pm
Grass Clippins wrote:
Fri May 04, 2018 9:01 pm
"There are many people now thinking that bonds may out perform stocks in the next decade." You may want to research the relationship that bonds have to rising interest rates.
I don't think it's that simple, especially with bond index funds. Either way, you won't find me recommending 100% stock portfolios to any one, for the reasons I've already listed several times. My crystal ball on interest rates and stock performance over the next decade is very hazy, so I always think diversification is the best solution. Plus, bonds have some great characteristics, like having a larger market than the stock market, allow for bond ladders, and have poor correlation to stocks which increase returns. Though quirky, I really love the Rick Van Ness tutorials.
I hear you, good write up. My problem with bonds is that to many people don't understand them and yet they invest in them. They look at the 10 year return and buy the MF or Index based off of that info alone, they don't understand that they are looking at performance based on a market with declining or flat interest rates. That is no longer the environment we live in. They also don't understand that in the MF or Index they don't actually own the bond. If/when the price drops due to interest rates they can't just ride it out until maturity, they go down with the ship. Don't get me wrong, there will always be a market for bonds but it's won't be what it was and folks who are closing in on retirement have to own them for diversification. But the experienced person who is 10 to 15 years away from needing their money could do so much better without them. Keyword there is experienced, experienced investors stay invested. Unexperienced investors sell low and buy high, that's about 90% or the general population. I'm not disagreeing with you just giving my opinion.

JulietAlpha
Posts: 3
Joined: Mon Jun 04, 2018 8:55 pm
Location: Columbus, OH
Grass Type: Kentucky Bluegrass/Fescue
Lawn Size: 10k
Mower: Push

Re: Investing for Retirement

Post by JulietAlpha » Mon Jun 04, 2018 9:18 pm

Slight drift from saving for retirement for yourself, to helping your kids save for retirement. I wanted to do a cool thing for each of my kids to set them up with some retirement savings. My initial thinking, without researching anything, was to put 5.5k into a Roth IRA for them at their 5th birthday and again at 10 and 15. Then when they graduate college hand it over and tell them YOUR WELCOME! With some limited research you probably already know you have to have earned income in order to contribute to the Roth IRA, so that's not going to work. I don't really want to contribute more to our 529, we contribute a good amount and will use current income to pay for the rest. My next thought is to just make a brokerage and put the money in there and at graduation time, gift it to them to put into their own retirement accounts. Having not thought deeply about that yet, I'm sure there will be some tax annoyance this way.

Any workarounds to the Roth IRA idea or better idea then a standard brokerage account and gifting?

Amazing posts by the way.

User avatar
Ware
Site Admin
Posts: 7703
Joined: Fri Jan 27, 2017 10:56 pm
Location: Alma, Arkansas
Grass Type: Bermuda
Lawn Size: 7,500 sq ft
Mower: Toro GM1600
Contact:

Re: Investing for Retirement

Post by Ware » Mon Jun 04, 2018 10:13 pm

JulietAlpha wrote:
Mon Jun 04, 2018 9:18 pm
Slight drift from saving for retirement for yourself, to helping your kids save for retirement. I wanted to do a cool thing for each of my kids to set them up with some retirement savings. My initial thinking, without researching anything, was to put 5.5k into a Roth IRA for them at their 5th birthday and again at 10 and 15. Then when they graduate college hand it over and tell them YOUR WELCOME! With some limited research you probably already know you have to have earned income in order to contribute to the Roth IRA, so that's not going to work. I don't really want to contribute more to our 529, we contribute a good amount and will use current income to pay for the rest. My next thought is to just make a brokerage and put the money in there and at graduation time, gift it to them to put into their own retirement accounts. Having not thought deeply about that yet, I'm sure there will be some tax annoyance this way.

Any workarounds to the Roth IRA idea or better idea then a standard brokerage account and gifting?

Amazing posts by the way.
I'm in a similar situation where we are funding the 529's near my comfort level. For now I am also saving some in a brokerage account earmarked for each child - which will hopefully help them do something like avoid PMI when it comes time buy their first home. Personal decision, but I do not put that money into custodial accounts. That way it does not become theirs if they turn 18 and decide to join the circus. There will no doubt be some tax annoyance with this approach, but the government - they're pros at getting their part.

Once they are old enough to actually earn some income from summer or part time work, you can open a Roth IRA for Kids, and even help them fund it...

A contribution to a Roth IRA for Kids can be made if a minor has earned income during the year. Eligible income can include formal employment income or self-employment income. Activities like babysitting or mowing lawns can qualify a minor for Roth IRA contributions. Note that in some cases self-employment taxes (Medicare and Social Security) can apply so it's advisable to consult with a tax professional. The current maximum annual contribution is $5,500, or the total of a child’s earned income for the year—whichever is less. For example, if your daughter earned $2,000 during a summer job, you could contribute up to $2,000 to a Roth IRA in her name. If your child is not filing a tax form that covers his or her earned income, consider maintaining a written log of their earnings in case the IRS asks questions.

User avatar
dfw_pilot
Site Admin
Posts: 2329
Joined: Sat Jan 28, 2017 3:19 pm
Location: DFW Metroplex
Grass Type: Bermuda
Lawn Size: 5,000 ft²
Mower: Toro GM1000
Contact:

Re: Investing for Retirement

Post by dfw_pilot » Tue Jun 05, 2018 6:53 am

JulietAlpha wrote:
Mon Jun 04, 2018 9:18 pm
you have to have earned income in order to contribute to the Roth IRA, so that's not going to work.
That's right, however, you can get creative, as long as you save documentation. Can your kids work in your home office? Can they be models for the blog you run? Can they mow lawns? As long as they are paid a "going rate", they'll be fine; i.e. not $5,500 to run a lemonade stand. You can also do the "daddy match" where they earn $5000 but don't want to put all $5k into their Roth, so you let them keep the five thousand and you put your own five into their Roth.
JulietAlpha wrote:
Mon Jun 04, 2018 9:18 pm
My next thought is to just make a brokerage and put the money in there and at graduation time, gift it to them to put into their own retirement accounts. Having not thought deeply about that yet, I'm sure there will be some tax annoyance this way.
I think the tax annoyances will actually be lesser doing the brokerage account than setting up UTMA accounts.

JulietAlpha wrote:
Mon Jun 04, 2018 9:18 pm
Any workarounds to the Roth IRA idea or better idea then a standard brokerage account and gifting?
Like Ware, I do the brokerage account method. Having all your funds in one account is both easier to keep track of, and allows you to get into the Vanguard Admiral shares (cheaper) sooner. I run a spreadsheet to keep track of who owns what in the brokerage account. For example, I have four kids and the oldest gets 10%, the next ones get 9%, 8%, and 7%, and I get 66%. Because their ages are staggered, they'll each have roughly the same amount when they reach age 25. I then have a second sheet that shows what the new balance is if they spend something of their slice of the pie. This way, the account money they have doesn't hurt as bad toward financial aid, I can more easily keep track of it, and the tax implications are less than UTMA's.
The Bermuda Triangle | Sprayer Wand | Invest for Retirement | PWS
- A clear conscience is a great pillow -

User avatar
Ware
Site Admin
Posts: 7703
Joined: Fri Jan 27, 2017 10:56 pm
Location: Alma, Arkansas
Grass Type: Bermuda
Lawn Size: 7,500 sq ft
Mower: Toro GM1600
Contact:

Re: Investing for Retirement

Post by Ware » Tue Jun 05, 2018 8:13 am

dfw_pilot wrote:
Tue Jun 05, 2018 6:53 am
...Can they mow lawns? As long as they are paid a "going rate", they'll be fine; i.e. not $5,500 to run a lemonade stand.
Yet another advantage of maintaining a reel low lawn that needs to be mowed several times a week. :lol:
dfw_pilot wrote:
Tue Jun 05, 2018 6:53 am
...the account money they have doesn't hurt as bad toward financial aid, I can more easily keep track of it, and the tax implications are less than UTMA's.
Good point on the financial aid implications. A custodial UTMA account is reported as the student’s asset on the FAFSA, which can significantly increase the Expected Family Contribution (EFC) - compared to assets held by the parents.

JulietAlpha
Posts: 3
Joined: Mon Jun 04, 2018 8:55 pm
Location: Columbus, OH
Grass Type: Kentucky Bluegrass/Fescue
Lawn Size: 10k
Mower: Push

Re: Investing for Retirement

Post by JulietAlpha » Tue Jun 05, 2018 10:23 am

Ware wrote:
Mon Jun 04, 2018 10:13 pm

I'm in a similar situation...
dfw_pilot wrote:
Tue Jun 05, 2018 6:53 am

That's right...
Thank you both for the responses. Looks like it will be the brokerage account until they make some income.

I started doing steps similar to these you wrote about since I started to make actual money when I was young. It feels good to finally see the fruits of all this planning for the past decade coming to fruition and being able to do something like this.

User avatar
massgrass
Posts: 219
Joined: Wed Aug 16, 2017 8:09 pm
Location: SE MA
Grass Type: mixed
Lawn Size: 13k
Mower: Deere LX173, Toro TimeMaster

Re: Investing for Retirement

Post by massgrass » Tue Jun 05, 2018 2:05 pm

I'm a little farther down the road with the 529/Roth IRA situation for children. My oldest just graduated from high school and we've stopped contributing to his 529 since we have more than enough to cover undergrad tuition at his school of choice between the 529 balance and scholarships. This year we made a 2017 Roth IRA contribution on his behalf based on his income from a part time job and will likely continue to do so until he is done with school and out working on his own.

I was fortunate enough to start investing in the 401k at my first job out of college as soon as I was eligible. My hope is that the head start we will be able to give him will put him in an even better financial position than my wife and I have been able to attain.

User avatar
dfw_pilot
Site Admin
Posts: 2329
Joined: Sat Jan 28, 2017 3:19 pm
Location: DFW Metroplex
Grass Type: Bermuda
Lawn Size: 5,000 ft²
Mower: Toro GM1000
Contact:

Re: Investing for Retirement

Post by dfw_pilot » Tue Jun 05, 2018 2:07 pm

Great work, MassGrass! Compounding is your friend, and it's much more powerful than large deposits later life.
The Bermuda Triangle | Sprayer Wand | Invest for Retirement | PWS
- A clear conscience is a great pillow -

User avatar
dfw_pilot
Site Admin
Posts: 2329
Joined: Sat Jan 28, 2017 3:19 pm
Location: DFW Metroplex
Grass Type: Bermuda
Lawn Size: 5,000 ft²
Mower: Toro GM1000
Contact:

Taxable Accounts

Post by dfw_pilot » Wed Jun 13, 2018 8:03 pm

Taxable Accounts

Image
Overview: A taxable brokerage account is often maligned because it doesn't offer the same tax protections of accounts like 401(k)'s or IRA's. However, there are lots of great reasons to have a brokerage account. Excellent for long term savings goals and piggy backing on to retirement accounts, they are a great addition to have for your overall retirement and savings goals.

People often think brokerage accounts are just for buying and selling stocks. They can be, but I don't recommend buying individual securities because of uncompensated risk. Passive index funds however, are a great way to invest in taxable accounts for their tax efficiency. But why use a taxable account? They offer lots of benefits regular retirement accounts can't. Also, if you have a 401(k) or IRA, you really should be using a brokerage account!

Like the name implies, taxable accounts have tax consequences when you sell the investments you've purchased. This is unlike retirement accounts where you can buy and sell without worry of paying taxes on any gains. Because of this, you need to be selective in what you buy because you may hold that investment for a long time before selling it and realizing a gain.

Benefits

One of the best benefits of the taxable account is the lower capital gains rates on any earnings that you've held for longer than a year. Depending on your tax bracket, these are 0%, 15%, or 20% for long term capital gains (LTCG). This is in contrast to retirement accounts like a 401(k) or IRA, where withdrawals are taxed at income rates. For example, earning less than $78,750 [2019] filing jointly, enjoys the 0% LTCG tax rate. This can be a great place to earn extra tax free income by selling appreciated shares.

Tax loss harvesting is a great way to use a brokerage account. When you lose money in an investment, the government lets you take up to $3,000 off your taxes each year. At the next dip, I plan on selling what I have in my account, realizing the loss, then buying a similar fund so I can keep my money in the market. If I realize a $9,000 loss, I can deduct $3,000 for three years. If the market falls but I don't sell (don't tax loss harvest), I'd still be down in my accounts, but I wouldn't have a deduction at the end of the year. TLH sounds complicated, and sometimes it feels like it can be, but there are lots of tutorials online that help make sense of it.

Traditional versions of 401(k)'s and IRA's have RMD's, or 'required minimum distributions' when you reach 7012 years old. These aren't terrible because if you don't need the money, you can simply reinvest them. However, taxable accounts never have RMD's tied to them. Taxable accounts are also great to leave to heirs because they get a step up in basis upon your death. This means your heirs get the funds, but pay tax on the gains from the day they receive them, not the day you bought the funds. There are also a lot of low-cost investment options you can choose from in a taxable account, unlike many 401(k)'s.

Taxable accounts are also a great way to give to charity. Instead of writing a check to our church or favorite charity each month, I put that money in our brokerage account. Then, if it grows, the charity gets the money plus the gains, tax free. I also don't pay taxes on the gains of donated shares. If the market plummets and I lose money, I'll tax loss harvest and either donate other shares, or donate cash. It's a real win-win. Shares to charity are a great way to flush out capital gains, especially on money you were going to donate anyway. A donor advised fund is a good vehicle for this as well.

With short investing horizons like saving up for a car or house downpayment, savings accounts or CD's (Certificates of Depression) are best. Money for goals that mature within five years or less should probably be out of the market. But if you want to save up for a child's first car, first house, wedding, round the world vacation, etc., taxable accounts can give you more leverage with market gains and compounding. I'm currently saving for all the expenses my four young daughters will cost me one day.

Save the tax break

Finally, it's all about the tax savings. Everyone should have either a 401(k), IRA, or both. If you have a traditional 401(k) or traditional IRA, you need a brokerage account. Let me explain. Traditional IRA's and 401(k)'s are tax deferred meaning you are currently getting a tax break to put money in those accounts. You'll have to pay taxes on that money and its gains upon withdrawal in retirement. But for now, contributing to a 401(k) means you are paying less in taxes. You have two choices with that tax break: spend it or save it.

Take your marginal tax rate (your tax bracket rate) and multiply it by the amount you put into the traditional IRA or 401(k) each month. Then, invest that difference instead of spending it on yet another Starbucks coffee. If you put $1,000 a month into your 401(k) and you are in the 24% tax bracket, then you are saving about $250 a month in taxes. Again, you can spend that money, or you can save it. I choose to save it. Send that $250 to your brokerage account, and buy something simple like VTSAX, a passive total US stock market fund. Set that transfer to run automatically each month and you'll be all set, with it being out of sight and out of mind.

Remember, if you have $1 million in a 401(k), you don't really own all of it, the government owns about 25% of it. You really own about $750,000, depending on tax rates. But what if there was a way to own all of it? There is! If you have been diligently "savings the tax break" into a brokerage account, along with your 401(k) deferrals, you'll also have a healthy amount of money in your brokerage account. If you have $200,000 in your taxable account, you'll have enough to offset a lot of the taxes you'll owe on your 401(k) withdrawals. The numbers and percentages can differ, but the principle is the same: save your tax deductions in a brokerage account. It will help you save more for retirement, and it's a hidden way of saving without spending that money willy-nilly without a purpose.

Roth Accounts

One note, the point of saving the tax break only works with traditional pre-tax accounts. If you have a Roth 401(k) or Roth IRA, this doesn't apply. Why? Because you've already paid the taxes to get that money in the account. There is no tax break. Roth accounts "pre-pay" the taxes now but then are tax free in retirement. $1,000,000 in a Roth 401(k) really is 1 million bucks because the government doesn't own any part of it.
I'm still a big believer in the saying "a tax deferred is a tax not paid." That means that future tax law is unknowable, so defer the taxes as long as you can to avoid dealing with them. I put money into my traditional tax deferred accounts while "saving the tax break" to get the tax cut now, and I'll deal with future tax rates in the future.

The Bermuda Triangle | Sprayer Wand | Invest for Retirement | PWS
- A clear conscience is a great pillow -

User avatar
Grass Clippins
Posts: 357
Joined: Sun Apr 29, 2018 8:42 pm
Location: Marietta, GA
Grass Type: Titan Ultra TTTF
Lawn Size: 18000
Mower: Hustler Raptor

Re: Investing for Retirement

Post by Grass Clippins » Wed Jun 13, 2018 8:34 pm

Very nice. Someone with a Roth 401K could still save for future taxes owed on the employer contribution, if your employer matches it's almost always on a pretax basis, even if you select 100% Roth Employee Contribution. In your example they could save 25% (tax rate) of 5% (employer match).

User avatar
dfw_pilot
Site Admin
Posts: 2329
Joined: Sat Jan 28, 2017 3:19 pm
Location: DFW Metroplex
Grass Type: Bermuda
Lawn Size: 5,000 ft²
Mower: Toro GM1000
Contact:

The 529 Account

Post by dfw_pilot » Sat Jun 16, 2018 3:45 pm

The 529 Account

Image

Overview: Once your retirement savings is on track, saving for college is another big goal for most people. There are lots of ways to save for college, but the 529 Plan offers the best options. There are no income limits to using one, anyone can give to your child's account, the beneficiary can be changed to another child if needed, everything grows and is withdrawn tax-free if used for education, and front loading the account really boosts your gains. Use any state plan you like, but your own state might offer a tax deduction for using theirs, so check first.

Better than other accounts

If you need to save for college, the 529 is a fantastic way to do so. Money goes in (with a possible tax credit depending on your state), grows tax free, and then comes out tax free upon withdrawal if used for education expenses.

This is a better deal than saving in a taxable account because there isn't a tax drag on your investments in the 529. It's also better than an ESA because the contribution limits are higher in a 529. For 2018, you can put $15,000 per year per child into a 529, or $30,000 per year if you are married filing jointly.

Finally, the 529 beats a UTMA account because the 529 counts less against financial aid than a UTMA account. Remember, too, that a UTMA account is the child's money. When the child reaches the age of majority, they control the money. If she wants to sell paintings out of a van in a parking lot and use the UTMA money to fund her boyfriend's tattoos, you can't stop her. The 529, however, is controlled by the account owner (you), not the child. We all hope that our kids will grow up to be responsible adults, but just in case that doesn't happen, the 529 gives you a bit more control and options later on.

Save for retirement first

Remember: retirement is mandatory, but college is optional. So, make sure you are on track with your retirement savings before affording the luxury of college saving. I would generally recommend knocking down high interest debts, saving up to the match in a 401(k) account, and funding Roth IRA's before getting very far into saving for college. YMMV. A child's diploma won't feed you in retirement. Kids can work to pay for college, they can go to an affordable school with lower fees, and they can even get loans if they have to. Therefore, don't kill yourself saving for college at the expense of your own retirement. I was an RA in one of the dorms at Purdue, which paid for my last two years of school. My sister got a full scholarship to school. If your child ends up like we did, it would have been better to have more money in your retirement accounts than saved up for higher education.

Use any state plan

All states provide a 529 plan, and no matter where you live, you can use any state's plan. No matter which state your child attends college (or studies abroad), the 529 money can be used no matter which plan it's in. It's best to check out your own state's plan first, because they will often give you a tax credit for doing so. I'm in Texas with no income tax, so I use the Vanguard plan (Nevada) because it has fantastic options with low fees. Utah, New York, and Ohio are some others that use low-fee funds. Also, if you move, find a better plan, or feel stuck in a bad plan, you can always transfer your funds to a new state plan. I switched from the Ohio to the Nevada plan a while ago and all it took was a notarized form and a few days to transfer.

Have more than one

Maybe your state offers a tax benefit for making 529 contributions, but you aren't happy with the investment options within the plan. In this case, have two 529's! If your state gives you a $2,000 tax deduction and you plan on investing $12,000 per year, you could: Invest the first $2,000 in your own state's plan for the tax deduction, and put the last $10,000 into a better plan, like Utah, Ohio, NY, or Nevada.

Switching the Beneficiary

One of the best features of a 529 plan is being able to switch the beneficiary. You are the account holder and your child is the beneficiary. To be a beneficiary, he or she needs a SSN. I started saving for our children's college before they were even born. I did this by being both the account owner and the beneficiary at the same time. This allowed us to get a head start on saving, which is important due to compounding. When each daughter was born and her SSN was received, I'd open a new 529 account and transfer the assets from my name to hers. Easy. There are other benefits to this, too. What if one of your children doesn't go to college? Transfer their assets to another child or cousin. Another option is to simply leave the money in their account. If or when they have their own children, they can transfer that money (that has now been compounding for decades) to their own childrens' accounts. That then saves them the hassle of saving for their own kids. Or, transfer the money back to yourself and get that soil science degree you always wanted. This flexibility is what makes the 529 amazing.

Front loading isn't just for washing machines

The IRS allows people to front load 529 plans up to FIVE years worth. Married filing jointly gift limits for 2018 are $30,000. Times five is $150,000. This is what the very wealthy do, and it's really smart: Drop all $150k into their child's 529 account the day it opens. They then never have to save again because that much money compounding for 18 years is more than the child would ever spend in undergrad school. MBA, med, or law school, anyone? The point is that if you have a wealthy relative that wants to unload money prior to being hit with an estate tax situation or just be generous, the 529 is flexible enough to handle that situation.

Withdrawals or Cashing out

There are a lot of expenses that are covered by the tax-free 529 plan. Tuition, room and board, fees, books, computers, and even meal plans are covered. If you buy a house for your child to live in off campus with the plans to sell it after graduation, you can even pay yourself back with the rent money charged. The rent just can't be more than the room fees of the dorm. As always with tax related account spending: Keep receipts and good records.

Hopefully it never comes to this, but you can always get a lot of your money back if you absolutely have to. Like an IRA, you pay a 10% penalty and income tax on any gains. Ouch. Try not to do that. Penalties might be waived for things like the death of the beneficiary or scholarships, but cross that bridge when you get there. Instead, I'd look at ways to transfer those assets to some other family member first. Or send them to me - I have four daughters, haha.

Graduate easily without debt
SavingForCollege.com
Vanguard 529
Utah 529
Ohio 529
New York 529
The Bermuda Triangle | Sprayer Wand | Invest for Retirement | PWS
- A clear conscience is a great pillow -

User avatar
pennstater2005
Moderator
Posts: 4557
Joined: Mon Jul 17, 2017 6:16 am
Location: Western PA
Grass Type: Northern Mix
Lawn Size: 15,000 sq ft
Mower: Husqvarna YTH18K46

Re: Investing for Retirement

Post by pennstater2005 » Sat Jun 16, 2018 4:12 pm

dfw_pilot wrote:
Sat Jun 16, 2018 3:45 pm
Remember: retirement is mandatory, but college is optional. So, make sure you are on track with your retirement savings before affording the luxury of college saving.
This part is so important and something I occasionally stress to co-workers if they're up to hearing my rants :D
"Perfection, like infinity, is unobtainable, even at places like Augusta. It's the journey toward the goal that holds all the fun, joy, and reward." - dfw_pilot

Lawn Fertilizer Calculator

Credit

User avatar
Grass Clippins
Posts: 357
Joined: Sun Apr 29, 2018 8:42 pm
Location: Marietta, GA
Grass Type: Titan Ultra TTTF
Lawn Size: 18000
Mower: Hustler Raptor

Re: Investing for Retirement

Post by Grass Clippins » Sat Jun 16, 2018 6:07 pm

Georgia Path 2 College is a good one for Georgians. No fee to open, no annual fee, no load funds. 0.19% management for All Equity Fund (because I'm wild and he 14 week old son). For Georgia Residents contributions are deductible up to $4,000 each year per beneficiary for joint income tax filers, and up to $2,000 each year per beneficiary for all others.

User avatar
dfw_pilot
Site Admin
Posts: 2329
Joined: Sat Jan 28, 2017 3:19 pm
Location: DFW Metroplex
Grass Type: Bermuda
Lawn Size: 5,000 ft²
Mower: Toro GM1000
Contact:

Re: Investing for Retirement

Post by dfw_pilot » Sat Jun 16, 2018 6:56 pm

I forgot to mention that as far as investments are concerned, I really love the target date funds or the ones specifically managed for certain types of risk, i.e. conservative, moderate, or aggressive. That way, the funds are low fee, managed, and rebalanced. They are truly a contribute and forget type of thing, which is great for no-fuss investing.
Grass Clippins wrote:
Sat Jun 16, 2018 6:07 pm
For Georgia Residents contributions are deductible up to $4,000 each year per beneficiary
Man, that's fantastic! I got $2k in Ohio and get none now.
The Bermuda Triangle | Sprayer Wand | Invest for Retirement | PWS
- A clear conscience is a great pillow -

Buddy
Posts: 113
Joined: Mon Apr 23, 2018 10:04 am
Location: SE Mass
Grass Type: KBG/PRG
Lawn Size: 7,000 sq ft
Mower: Toro

Re: Investing for Retirement

Post by Buddy » Mon Jun 18, 2018 11:12 am

I'm looking at the Fidelity 529 plan for Mass residents. I'm going with an age based strategy, but need to select which type of funds. I can select:

Fidelity Funds - 100 % of your contributions will be invested in a portfolio of Fidelity mutual Funds (Exp ratio gross 0.95%)

Fidelity Index Funds - 100% of your contributions will be invested in a portfolio of Fidelity index funds (Exp ratio gross 0.13%)

Multi Firm - 100% of contributions will be invested in a portfolio that includes funds from different companies that include Fideltiy.

Any suggestions on the funds vs index funds?

User avatar
dfw_pilot
Site Admin
Posts: 2329
Joined: Sat Jan 28, 2017 3:19 pm
Location: DFW Metroplex
Grass Type: Bermuda
Lawn Size: 5,000 ft²
Mower: Toro GM1000
Contact:

Re: Investing for Retirement

Post by dfw_pilot » Mon Jun 18, 2018 11:40 am

Without knowing what the underlying funds are, I'd pick the Fidelity Index fund option. The reason being that the expense ratio is so much cheaper than the 0.95%, it has less to overcome before it starts making money. Therefore, in the long run, it will most likely make more money.

The bigger thing to look at would be what are the funds invested in from all three choices. The age based strategy is a good one, where they manage the risk based on age. If they slowly move the allocation from stocks to bonds over 18 years, I'd go with the cheapest option that does that. My money would be on the age based index fund option.
The Bermuda Triangle | Sprayer Wand | Invest for Retirement | PWS
- A clear conscience is a great pillow -

Buddy
Posts: 113
Joined: Mon Apr 23, 2018 10:04 am
Location: SE Mass
Grass Type: KBG/PRG
Lawn Size: 7,000 sq ft
Mower: Toro

Re: Investing for Retirement

Post by Buddy » Mon Jun 18, 2018 12:11 pm

dfw_pilot wrote:
Mon Jun 18, 2018 11:40 am
Without knowing what the underlying funds are, I'd pick the Fidelity Index fund option. The reason being that the expense ratio is so much cheaper than the 0.95%, it has less to overcome before it starts making money. Therefore, in the long run, it will most likely make more money.

The bigger thing to look at would be what are the funds invested in from all three choices. The age based strategy is a good one, where they manage the risk based on age. If they slowly move the allocation from stocks to bonds over 18 years, I'd go with the cheapest option that does that. My money would be on the age based index fund option.
Thanks for the insight. My understanding of all this is fair I guess you could say. But some information goes above my understanding. Will review some more of the information/charts provided and see what I can make an educated decision on. Thanks for the insight, and love the thread very informative!

User avatar
massgrass
Posts: 219
Joined: Wed Aug 16, 2017 8:09 pm
Location: SE MA
Grass Type: mixed
Lawn Size: 13k
Mower: Deere LX173, Toro TimeMaster

Re: Investing for Retirement

Post by massgrass » Mon Jun 18, 2018 9:26 pm

I use the Fidelity index fund-based portfolios with the MA 529 accounts for my kids. They're basically the institutional version of the former Fidelity Spartan low-cost index funds, which are very competitive with their Vanguard counterparts.

Post Reply