Author Topic: Critque my path  (Read 15846 times)

blackjack

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Critque my path
« on: December 17, 2013, 06:24:01 PM »
I'll make 50k this year, next year 70k and 90k by 2015..im 29 goal is to retire in 10-15 years (I'll get 1500 a month from my pension at 65 y/o)
my 401k has no matching
Roth 401k (employer, prudential)
 S&P 500 EQUITY INDEX FUND Added Large Cap Stock - Blend 25 %
 S&P 400 MIDCAP INDEX FUND Added Mid Cap Stock - Blend 25 %
 RUSSELL 2000 INDEX FUND Added Small Cap Stock - Blend 25 %
 INTERNATIONAL INDEX FUND - Blend 25 %

Roth IRA 2045 Vanguard Target Retirement Fund or maybe there star fund
Im going to max out my both
then with my extra saved money im going to open a brokerage account getting VTSAX

daverobev

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Re: Critque my path
« Reply #1 on: December 17, 2013, 06:41:52 PM »
For 10-15 years, you probably want to start putting bonds in.

You haven't said what your spending-in-retirement is going to be - estimate? Or your budget, etc.

Not sure about the US retirement plans, so I'll leave others to comment.

blackjack

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Re: Critque my path
« Reply #2 on: December 17, 2013, 06:45:30 PM »
20-30ka year

KingCoin

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Re: Critque my path
« Reply #3 on: December 17, 2013, 06:55:33 PM »
100% equities is super aggressive. Not necessarily "wrong", but you're not getting any of the benefits of diversification.

blackjack

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Re: Critque my path
« Reply #4 on: December 17, 2013, 07:06:29 PM »
i'll eventually put more into my brokeage account as i build up


KingCoin

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Re: Critque my path
« Reply #5 on: December 17, 2013, 07:10:41 PM »
i'll eventually put more into my brokeage account as i build up

But you said your brokerage account was going to be 100% equities too. Might be worth reading a book on portfolio construction if you're not up to speed. The Intelligent Asset Allocator by Bernstein could be a good place to start.

blackjack

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Re: Critque my path
« Reply #6 on: December 17, 2013, 07:14:50 PM »
I'm trying but I just dont the mind to do all this... I just know I can save 50-60% of my income .. I just want to park my money somewhere and set it to auto contribute and forget about it

golfer44

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Re: Critque my path
« Reply #7 on: December 17, 2013, 07:23:30 PM »
Seems like he has some % of bonds in his Roth, via the Target Retirement. Still pretty heavily slanted, though.

This should take 10 minutes to read:

http://www.bogleheads.org/wiki/Asset_allocation

blackjack

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Re: Critque my path
« Reply #8 on: December 17, 2013, 07:38:02 PM »
hows my 401k and ira investment?
so id want like (VBMFX) and (VTSAX) in my taxable account?

golfer44

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Re: Critque my path
« Reply #9 on: December 17, 2013, 07:57:01 PM »
Check out http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement (cliff notes, keep bonds in tax-advantaged accounts - your 401k and Roth IRA)

Curiosity - what do you do for work allowing you such increases in salary?

blackjack

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Re: Critque my path
« Reply #10 on: December 17, 2013, 08:04:02 PM »
im a UPS driver... I get an increase in pay rate, plus we just got a new contract which increases top hourly wage ($37/hr (currently its at 32) and i have the option to work 60 hours a week

also i know prudential offers us the Bright Horizon Target fund which i may switch to that for my 401k if not i should at least add the BOND MARKET INDEX FUND?

« Last Edit: December 17, 2013, 08:13:43 PM by blackjack »

matchewed

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Re: Critque my path
« Reply #11 on: December 17, 2013, 09:28:26 PM »

blackjack

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Re: Critque my path
« Reply #12 on: December 18, 2013, 05:44:55 AM »
thanx it seems the target date funds for both roth 401k and roth IRA would be best for me since there meant just to set up and leave alone but the Bright Horizon funds have a higher cost structure than the Index funds

« Last Edit: December 18, 2013, 05:47:06 AM by blackjack »

KingCoin

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Re: Critque my path
« Reply #13 on: December 18, 2013, 08:49:14 AM »
thanx it seems the target date funds for both roth 401k and roth IRA would be best for me since there meant just to set up and leave alone but the Bright Horizon funds have a higher cost structure than the Index funds

Yeah. You can just figure out the contents of the target date and try to mimic with low cost funds.

Also, it's worth grabbing some books on introductory investing and personal finance. I know it's a chore, but there's no substitute for actually understanding this stuff yourself. It's really not overly complicated. Fortunately, you're already on the right path (investing saved money in low cost index funds). A book like A Random Walk Down Wall St is written in a non-technical, easy-to-grasp way.

blackjack

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Re: Critque my path
« Reply #14 on: December 21, 2013, 01:26:43 AM »

blackjack

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Re: Critque my path
« Reply #15 on: December 21, 2013, 09:39:44 AM »
your personal opinions would be appreciated

Another Reader

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Re: Critque my path
« Reply #16 on: December 21, 2013, 10:47:16 AM »
Prudential was the company offering the 457 plan where I last worked.  Their offerings were expensive and of poor quality.  There was lots of turnover as their three star actively managed funds mysteriously deteriorated into two star funds, which had to be replaced at the end of the year under the plan rules. 

The teamsters either negotiated their own funds or these are your plan's add-on costs to the underlying fund costs.  Pull up a couple of detail sheets on these funds and see what the real expenses are before making any final decisions.

In general, where Prudential has an interest, I would favor the index funds.  The three US stock index funds are likely among the better choices.  I would want to know what was in the international index fund before investing.  Cash waiting to be invested should probably be directed to the stable value fund, as it probably pays a decent interest rate.  I still have cash sitting in the old 457 because it's paying around 3 percent.  I'm not personally a fan of bond funds right now because of interest rates.  In your shoes, I would look at the holdings and average durations.  If they are any longer than tomorrow (ok, maybe three years), I would hold off for now.  My bet is average duration is going to be 6 to 8 years.  Others will disagree and tell you to come up with a long-term asset allocation and invest accordingly.

If the underlying fund expenses are high, check out the brokerage account option.  Once you have a sizable stash, paying Prudential brokerage fees in return for access to better funds and ETFs may be worth the price.

Let us know what you find out.  Who knows, maybe Jimmy Hoffa is running the Prudential UPS Teamsters 401k plan under an assumed name as his job in the Federal Witness Protection Program and got the UPS drivers a sweetheart deal!


blackjack

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Re: Critque my path
« Reply #17 on: December 21, 2013, 10:55:45 AM »
Fees
4
Investment Fee 6 bps
Custody Fee 0.28 bps
Redemption Fee* 2.00%
Fund Characteristics
1,2
Dividend Yield 3.04%
Beta 1.00
Number of Issues 910
Wgt Avg Market Cap $62.7 billion


United Kingdom 22.03%
Japan 21.49%
France 9.71%
Australia 8.04%
Switzerland 9.09%
Germany 8.66%
Europe Other 16.37%
Pacific Rim Other 4.61%

blackjack

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Re: Critque my path
« Reply #18 on: December 21, 2013, 10:59:11 AM »
Bond market Index Fund
Treasuries 36.36%
Agencies 4.35%
Finance 7.02%
Industrial 12.34%
Utilities 2.37%
Yankees 5.85%
Mortgages 29.67%
Asset-Backed Securities 0.32%
CMBS 1.72

Fees
4
Investment Fee 4 bps
Custody Fee 0.28 bps


Another Reader

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Re: Critque my path
« Reply #19 on: December 21, 2013, 11:06:54 AM »
Still not sure about the underlying fund expenses.  They are charging you fees to invest in the fund and to hold it for you.  It's not clear what fees are being charged to manage the underlying fund.  Do you know if these funds are exclusive to UPS? 

Looks like the international fund is comprised of stocks from developed countries, with Japan representing the largest Asian holdings.  No emerging market stocks, so less volatility and risk.  If I were interested in diversifying in businesses headquartered outside the US, I would consider this fund.  Look at the holdings, you will probably see a lot of companies whose names you recognize - large cap multinationals that do business here as well as in their own countries.

blackjack

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Re: Critque my path
« Reply #20 on: December 21, 2013, 11:16:55 AM »
I am not sure ... I'm very new to all this and trying to gather as much as I can....
I considered switching my 401k allocation to the BRIGHT HORIZON 2045 FUND


Fund Breakdown

U.S. Large Cap Stocks 40.18%

U.S. MidCap Stocks 12.99%

U.S. Small Cap Stocks 4.79%

International Stocks 25.62%

U.S. REITs 1.21%

U.S. Bonds 15.22%

U.S. TIPS 0.00%

Short-Term Investments 0.00%
« Last Edit: December 21, 2013, 11:19:36 AM by blackjack »

Another Reader

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Re: Critque my path
« Reply #21 on: December 21, 2013, 12:09:21 PM »
Prudential does not have a fiduciary responsibility to you and I would not pay them to construct a portfolio for me.  The "advisor" where I worked pushed annuities to unknowledgeable folks retiring with good pensions and social security that expressed a desire to leave something for the kids.  In whose interest was that?  Are these target date funds comprised of other funds?  If so, you are paying fees on top of fees. 

You are your own best money manager.  To be good at it, you have to get educated.  Start with the Bogleheads series and the JL Collins series of articles referenced here and in other threads.  In the meantime, pull up the actual data (usually a pdf document) on each of the funds and read it carefully.  Become familiar with the terminology and the elements of comparison.  As you accumulate more money, you will also gain a lot more knowledge and experience. 

At your age, many folks would suggest heavy investment in stocks for the highest returns over a long time horizon.  In your shoes, that's what I would do.  But start on the education first.

blackjack

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Re: Critque my path
« Reply #22 on: December 21, 2013, 12:32:06 PM »
in your personal opinion would something like this be useful

 S&P 500 EQUITY INDEX FUND Added Large Cap Stock - Blend 25 %
 S&P 400 MIDCAP INDEX FUND Added Mid Cap Stock - Blend 20 %
 RUSSELL 2000 INDEX FUND Added Small Cap Stock - Blend 20 %
 INTERNATIONAL INDEX FUND - Blend 20 %
 BOND MARKET INDEX FUND - Blend 15%

Vanguard Roth IRA (star FUND)

This would be a start until I gather more knowledge and money

Another Reader

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Re: Critque my path
« Reply #23 on: December 21, 2013, 01:18:09 PM »
Without knowing the exact investments in the international index and bond index funds, that's generally the kind of portfolio that I would consider at your age with your income prospects.  The Star fund can be replaced once you reach the minimum investment requirement for other funds if you like.  However, I strongly recommend you start reading before you commit large sums of money to any funds.

blackjack

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Re: Critque my path
« Reply #24 on: December 21, 2013, 01:23:59 PM »
For the time being you'll get more out of this than me..
International
https://www.retirement.prudential.com/RSO/web/fundsheets/UPSINT.pdf

Bond
https://www.retirement.prudential.com/RSO/web/fundsheets/UPSBMI.pdf

I do appreciate your opinion.



Another Reader

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Re: Critque my path
« Reply #25 on: December 21, 2013, 01:52:21 PM »
The bond fund looks like a standard bond index fund with an average duration of 5.5 years.  If you believe you need bonds at your age and you are not concerned about rising interest rates, this is a broad slice of the US bond market, including government and corporate bonds.  The international fund focuses on developed economies outside the US.  It's weighted towards large cap companies.  If you drink Nestlé's chocolate milk , drive a Toyota or use Shell gasoline, you are adding to the revenues of the companies in the index.

I can't really comment about buried expenses.  Perhaps there is someone here more familiar with the Prudential-UPS Teamsters arrangement and the structure of the funds that can.

Edit:  Stop and ask yourself if it is wise to take investing advice from strangers on the internet before you commit your money.  Taking short cuts with your money, even starting out, has risks.  The more you educate yourself BEFORE you invest, the more confident you can be in what you select.
« Last Edit: December 21, 2013, 01:55:55 PM by Another Reader »

blackjack

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Re: Critque my path
« Reply #26 on: December 21, 2013, 02:08:31 PM »
Thanx i'm not taking anyones advice but i do benefit from others opinions on the subject.. i'll continue to learn and educate myself

annaraven

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Re: Critque my path
« Reply #27 on: December 21, 2013, 09:15:22 PM »
I recommend you check out Motley Fool. Great group of investment oriented folks who can educate you on this stuff.

And. Benjamin Graham, I believe, recommended having your split no more extreme than 25%:75%, either direction. Somewhere between 25% and 75% equities, and same for bonds. But not 10% of one, 80% of the other.

At your age, 25% fixed income (bonds, munis, and the like) makes sense.  But don't go below that.

Just some ideas. Good luck.

AlexK

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Re: Critque my path
« Reply #28 on: December 21, 2013, 10:38:57 PM »
I think you are OK to be 100% in equities. But don't take my word for it, go here:

http://www.cfiresim.com/input.html

Use the "Investigate" feature to check the probability of success versus asset allocation. For my situation I am at about 100% success if I stay 70% to 100% equities. Below that the probability of success drops like a rock. My graph is below.




blackjack

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Re: Critque my path
« Reply #29 on: December 22, 2013, 08:12:28 AM »
Thanx I did add the Bond Index fund at 15% and will open up my Vanguard ROth IRA (target fund date)
This is going to be the hardest thing for me learning about this stuff.... The easy part is i'm able todo save 50% of my income and willing to live frugal


aj_yooper

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Re: Critque my path
« Reply #30 on: December 22, 2013, 08:24:56 AM »
I would check your tax bracket because it looks like you are in the 25% spot.  If you intend to retire at a lower bracket, I would put my money in a standard non-taxable 401k and not do a Roth IRA at all as you will be paying higher taxes on that money now than you would in retirement.  The tax difference is huge-10%. 

Another Reader

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Re: Critque my path
« Reply #31 on: December 22, 2013, 09:17:05 AM »
I would consider the traditional 401k but I would probably continue with the Roth IRA.  The contributions can be withdrawn and RMD's are not required.  If you continue on the wealth building path, not being required to take distributions can be helpful with income planning as you approach 70.  I'm forced to take RMD's from an inherited IRA that I would rather keep intact.  It changes my income and tax planning, especially because of AMT.  I have older friends from work that are paying through the nose with a paid off house, a six figure pension income, and RMD's on a seven figure portfolio.  They have zero tax shelter.

aj_yooper

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Re: Critque my path
« Reply #32 on: December 22, 2013, 10:09:08 AM »
I would consider the traditional 401k but I would probably continue with the Roth IRA.  The contributions can be withdrawn and RMD's are not required.  If you continue on the wealth building path, not being required to take distributions can be helpful with income planning as you approach 70.  I'm forced to take RMD's from an inherited IRA that I would rather keep intact.  It changes my income and tax planning, especially because of AMT.  I have older friends from work that are paying through the nose with a paid off house, a six figure pension income, and RMD's on a seven figure portfolio.  They have zero tax shelter.

For OP, he can convert his 401k to a Roth when he retires.  He didn't mention he had other assets in his post.

Your friends might consider visiting a tax planning shaman to cure their pain.  It might also be a good time for them to do family gifts or charitable contributions. 

blackjack

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Re: Critque my path
« Reply #33 on: December 22, 2013, 01:05:28 PM »
What's a sweep account and is a Roth IRA
Brokeage account let you buy stocks
?

Another Reader

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Re: Critque my path
« Reply #34 on: December 22, 2013, 01:21:39 PM »
A sweep account is where the money goes when it's not invested in a specific stock or mutual fund.  For example, if you deposit money on the first but don't invest until the 15th, the money has to sit somewhere until it's needed.  Same with selling and not reinvesting at the same time and with dividends that are not reinvested.

If you are looking at the Vanguard site, you are being asked if you want an account in a specific mutual fund or if you want a brokerage account you can use to buy stocks and other mutual funds.  If you want a brokerage account, there are better places than Vanguard.  If you want to buy a specific Vanguard fund, open a mutual fund account for that fund.  If you want to expand your Roth IRA investments to another Vanguard fund or two, just open the mutual fund account for that fund when you are ready to invest in that fund.

blackjack

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Re: Critque my path
« Reply #35 on: December 22, 2013, 02:24:02 PM »
is this correct under my vanguard account
Roth IRA

Vanguard Prime Money Market Fund
Vanguard Target Retirement 2040 Fund
-----------------------------------------------------------

Roth IRA Brokerage Account—
Sweep account—Roth IRA Account


I just want a simple roth ira with a vangaurd target fund
then i want a brokerage account and eventually get VTSAX or something

Another Reader

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Re: Critque my path
« Reply #36 on: December 22, 2013, 02:54:28 PM »
It looks like you are opening a brokerage account for your Roth.  In your shoes, I would call Vanguard, tell the rep exactly what you want to accomplish, and let them walk you through the process.  You can have one brokerage account for your taxable account and one for your Roth if you want that. 

In my experience, I much prefer Fidelity or Schwab for brokerage accounts.  I own a number of mutual funds and ETF's as well as individual stocks and for me these companies work better.  However, if you want to buy a combination of Vanguard funds and individual stocks in your accounts, it might be less expensive and involve less paperwork to keep everything at Vanguard.

blackjack

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Re: Critque my path
« Reply #37 on: December 22, 2013, 03:04:51 PM »
Thx you been most helpful

btw do I even need the prime money market? I plann on keeping it at zero

all my cash savings is going into an ING account i have set up but i guess i could switch it to vanguard
« Last Edit: December 22, 2013, 03:12:36 PM by blackjack »

Another Reader

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Re: Critque my path
« Reply #38 on: December 22, 2013, 03:31:51 PM »
If you do not want a brokerage account, you do not need the prime reserve money market account.  If you have a brokerage account, you must have a sweep account.  Call Vanguard, they will explain this.

Savings are different than investments.  I do not put emergency funds or other savings in brokerage accounts because they pay little or no interest.  Banks and credit unions work well for savings.  You can do a little better than Capital One/ING at Sallie Mae Bank or GE Capital Bank, which offer accounts at 0.90 percent.  Ally Bank is at 0.85 percent and offers interest bearing checking as well.  Research credit unions and you may find one with a high yield checking account.  These accounts have requirements, but pay better interest.  Check out www.depositaccounts.com for more information.

If you are interested in cash savings for a mid-term goal, check out Pentagon Federal credit union.  The APY for 5 and 7 year CD's is 3 .04 percent through December.

blackjack

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Re: Critque my path
« Reply #39 on: December 22, 2013, 03:44:20 PM »
My goal is to max out 401k+roth IRA
VTSAX in the taxable account
rest keep in cash (saving for a house)

This is what I gathered from jlcollinsnh....

I also just got a book The Intelligent Asset Allocator

I will call vanguard and explain this to them hopefully they can set up and or correct my account if need be

Another Reader

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Re: Critque my path
« Reply #40 on: December 22, 2013, 04:00:13 PM »
How long until you want to buy a house?  If the purchase is several years away, look at the Pentagon CD's.  As interest rates rise, you can shorten the terms of new CD's to match your purchase date.

JL Collins' approach is very simple and it works well.  You can tweak it as you become more knowledgeable.  A lot of folks will try to make investing sound like rocket science when you can achieve the desired result with some basic knowledge.  What you are doing now will provide you with the basic knowledge.

UPS driver is a great job as long as Amazon and E-Bay are in business.  I know at least one person from your red and blue competitor that retired with a seven figure portfolio by following your path.  Time, consistency and the magic of compounding are all that are needed.

blackjack

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Re: Critque my path
« Reply #41 on: December 22, 2013, 04:36:03 PM »
House within a few years... Yes my job is great for just delivering packages , plus I there
Happy to give me the extra ot hours