Author Topic: Living On The Edge With My 401k?  (Read 13287 times)

Radagast

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Re: Living On The Edge With My 401k?
« Reply #50 on: July 13, 2016, 01:46:58 PM »
OK I read the links provided. What was interesting to me is that the bogleheads.org link showed the similarities between Vanguard and Fidelity, or at least the funds they use and their different names for the same thing. From reading MMM I really wanted Vanguard VTSAX, VFIAX, and VEXAX in some mixture.

Alas and alas, when I saw what these were called at Fidelity, I was shocked, hurt, and disillusioned to see they aren't offered in my plan. I took the liberty of taking a screen shot, blacking out my company stock name for old time's sake. You can see that atm it's up 33% for the year. Lucky me.

I've attached what my plan will let me invest in as a .jpg attachment. Doesn't seem too exciting, but maybe you experienced people can see a smart allocation strategy?

Every single one of those has "index" at the end, so I suspect they are exactly what you want. If you click on each you can probably see the fund name and ticker symbol.

andy85

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Re: Living On The Edge With My 401k?
« Reply #51 on: July 13, 2016, 01:56:42 PM »
VSTAX is the total stock market index fund

The VIFAX is just an S&P index...and personally, if i am going to hold a total stock index fund, i am not going to hold an S&P fund too. they would probably track very close to one another.

VEXAX is a mid/small cap stock index fund, which is actually riskier than a total stock market fund i would say

from your image i would chose:
RSP total us stk ind (similar to the vstax)
RSP US bond index
if you want international exposure, RSP Int'l stk index

The allocations would be up to you...i'd probably do something like
70% US
20% international
10% US bonds

based on your apparent risk aversion, maybe anywhere from a 70/30 to 50/50 split of US/Bonds with no international


There is no need to hold more than one target retirement fund. You can pretty much mimic any target fund with the fund options you have.

Also, pick up the new book by JL Collins 'the simple path to wealth'....he really harps on not timing the market and ignoring the talking heads on tv

Edit: to clarify i meant US bonds
« Last Edit: July 14, 2016, 06:18:35 AM by andy85 »

Zx

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Re: Living On The Edge With My 401k?
« Reply #52 on: July 13, 2016, 05:35:25 PM »
VSTAX is the total stock market index fund

The VIFAX is just an S&P index...and personally, if i am going to hold a total stock index fund, i am not going to hold an S&P fund too. they would probably track very close to one another.

VEXAX is a mid/small cap stock index fund, which is actually riskier than a total stock market fund i would say

from your image i would chose:
RSP total us stk ind (similar to the vstax)
RSP bond index
if you want international exposure, RSP Int'l stk index

The allocations would be up to you...i'd probably do something like
70% US
20% international
10% bonds

based on your apparent risk aversion, maybe anywhere from a 70/30 to 50/50 split of US/Bonds


There is no need to hold more than one target retirement fund. You can pretty much mimic any target fund with the fund options you have.

Also, pick up the new book by JL Collins 'the simple path to wealth'....he really harps on not timing the market and ignoring the talking heads on tv

Well, I'm just going to swallow the risk aversion. I don't have enough in play to really be that concerned in any event. I'm taking your advice for now and reading that Collins book you mentioned.

pbkmaine

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Re: Living On The Edge With My 401k?
« Reply #53 on: July 13, 2016, 05:43:16 PM »
Could you get me the ticker (five letters ending with X) for the 2030 target date fund, so I can be sure it's the Fidelity Freedom Index? I want to check the expense ratio.

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Re: Living On The Edge With My 401k?
« Reply #54 on: July 13, 2016, 06:09:20 PM »
Could you get me the ticker (five letters ending with X) for the 2030 target date fund, so I can be sure it's the Fidelity Freedom Index? I want to check the expense ratio.

I looked at the 2030 target date fund, all the tabs, and never saw any ticker symbol of any kind?

I can give you the expense ratio via copy/paste:

Morningstar Category
Target-Date 2030
Fund Inception 7/13/2009

Expense Ratio 0.1% ($1.00 per $1000)

If this should have a ticker symbol, where would I look?

pbkmaine

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Re: Living On The Edge With My 401k?
« Reply #55 on: July 13, 2016, 06:18:36 PM »
Sometimes companies do a custom target date fund. Fund inception date is almost right for the Fidelity Freedom Index 2030. Expense ratio is low. Let me dig a little.

Zx

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Re: Living On The Edge With My 401k?
« Reply #56 on: July 13, 2016, 06:26:42 PM »
Sometimes companies do a custom target date fund. Fund inception date is almost right for the Fidelity Freedom Index 2030. Expense ratio is low. Let me dig a little.

Expense ratio for my company stock is .008%...lol...dividend is paying this Friday. Alas and alas, my future money is going elsewhere.

pbkmaine

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Re: Living On The Edge With My 401k?
« Reply #57 on: July 13, 2016, 06:46:16 PM »
Past performance is no indicator of future returns, dagiffy. I can't get a handle on your target date funds. The expense ratio would indicate Vanguard, but the inception date would indicate American Funds. Sigh.

I'm inclined to go with Andy's suggestion, but to up your bonds to something more in line with your risk tolerance. 50% Total Stock Market Index, 15% International Index, 35% Bond Index, maybe?

Zx

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Re: Living On The Edge With My 401k?
« Reply #58 on: July 13, 2016, 11:59:00 PM »
Honestly I have taken my risk intolerance and chucked it out the window. I am not going to invest with much fear, just by sheer force of will. I took his advice but I am still investing a small percentage in my job stock. Before too long my company stock will be a very small percentage of my overall portfolio, and I look forward to the day that happens.

Zx

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Re: Living On The Edge With My 401k?
« Reply #59 on: July 14, 2016, 12:07:59 AM »
My job transferred to Oakland will include a lot more overtime and the guys tell me to expect to make about 150 to 160 K. If you add that to my wife's income it should be I don't know 170, 175K.

At my old job I was making about 115K and so I was content to put 8% into 401(k) because the company would match 6% and so I would leave it at that. But with the increasing income though I would like to protect a little in the affective tax rate increase, so I increased my contribution to 15% and my company still contributing the 6%.

At the same time I am slogging away at my school loan debt and that is my number one priority. We are making minimum payments on the cars living frugally and intentionally and intellectually finding ways not to spend money and will keep our heads down to the grindstone and keep going like this. Pretty soon we will look back and be happy and how far we've come.

homestead neohio

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Re: Living On The Edge With My 401k?
« Reply #60 on: July 14, 2016, 07:25:27 AM »
daggify, I think chucking fear can work, especially when starting to invest small amounts.  At this point, you contributions are going to blow out of the water any balance variations up or down due to market conditions.  This will slowly change over time, though.  Eventually market changes dwarf contributions.  That can make a risk-averse person panic and do dumb stuff.  You need to basically ignore your day to day balance changes and gain faith in your strategy so you don't bail on it later.  Pick an asset allocation that objectively makes sense (check!).  Then don't fuck with it.  Don't check your balances more than once per month, but I recommend quarterly.  Don't sweat market drops, expect them.  Rebalance annually, and automate that if you can.  You are investing with a 30+ year time horizon, even if you plan to be FI in 10 years.  "Set it and forget it" is your very. best. friend.  This will lower the amount of "sheer force of will" you need to keep it going. 

You can always consider a different asset allocation in FI.  I'm comfy chasing high returns at 90% stock and 10% REIT during the "accumulation" phase I'm.  I think my risk tolerance will change when I walk away from employment and enter the "drawdown" phase.  I'll want to hang on to what I've got, but keep some big chunk in the market to be sure it doesn't run out.  Haven't worked out that split yet, but I have a few more years.  Just know that is down the road. 

Congrats on the increased income.  You may want to do a separate case study thread on these forums to ensure your other finances are optimized given your income changes.  Focusing on reducing taxes is a good idea!  At this higher income and 15% contribution rate you will likely max your 401k limit of 18k this year.  Congtratulations!  Is a 401k or other tax deferred account available to your wife?  If you file jointly, can she contribute 100% of her money to it? It will reduce your marginal joint tax rate.  Your income is too high for traditional IRA, and probably too high for Roth. 

You mention minimum payments on car notes.  You are paying highest interest rate debts first, right?  Keep killing that debt.  If you haven't seen Eric222's journal called My life is an exploding volcano of awesomeness, check it out.  He's killing huge debt and growing income, too, just started 401k investing.  I love his quote "Stamina is the next level of badassity."

Where did you put the red flags?  They were so pretty.  Did you pass them on to someone else?

Greenpez

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Re: Living On The Edge With My 401k?
« Reply #61 on: July 14, 2016, 08:38:14 AM »
 at 150k and 15% you will overshoot 18k in a year (but maybe not with what's left of this year) make sure to check back later this year so you can max your contribution but also so you can get the max company match.

Zx

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Re: Living On The Edge With My 401k?
« Reply #62 on: July 14, 2016, 10:44:38 AM »
at 150k and 15% you will overshoot 18k in a year (but maybe not with what's left of this year) make sure to check back later this year so you can max your contribution but also so you can get the max company match.

I am 51 years old so I actually get 24,000 for my 401(k). But for the first six months of the year I've only been taking out 8% so I will need to do some calculations to make sure I don't hit the max before the last paycheck because they told me if I hit the max before the last paycheck come, then the company will not match from then on.

Also, my base pay is 105k, it's the OT that puts the wage up there so far. Someone told me that I can call Fidelity and have that percentage apply to all of my income on every check. I will have to see if that is true.

Zx

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Re: Living On The Edge With My 401k?
« Reply #63 on: July 14, 2016, 10:51:41 AM »
daggify, I think chucking fear can work, especially when starting to invest small amounts.  At this point, you contributions are going to blow out of the water any balance variations up or down due to market conditions.  This will slowly change over time, though.  Eventually market changes dwarf contributions.  That can make a risk-averse person panic and do dumb stuff.  You need to basically ignore your day to day balance changes and gain faith in your strategy so you don't bail on it later.  Pick an asset allocation that objectively makes sense (check!).  Then don't fuck with it.  Don't check your balances more than once per month, but I recommend quarterly.  Don't sweat market drops, expect them.  Rebalance annually, and automate that if you can.  You are investing with a 30+ year time horizon, even if you plan to be FI in 10 years.  "Set it and forget it" is your very. best. friend.  This will lower the amount of "sheer force of will" you need to keep it going. 

You can always consider a different asset allocation in FI.  I'm comfy chasing high returns at 90% stock and 10% REIT during the "accumulation" phase I'm.  I think my risk tolerance will change when I walk away from employment and enter the "drawdown" phase.  I'll want to hang on to what I've got, but keep some big chunk in the market to be sure it doesn't run out.  Haven't worked out that split yet, but I have a few more years.  Just know that is down the road. 

Congrats on the increased income.  You may want to do a separate case study thread on these forums to ensure your other finances are optimized given your income changes.  Focusing on reducing taxes is a good idea!  At this higher income and 15% contribution rate you will likely max your 401k limit of 18k this year.  Congtratulations!  Is a 401k or other tax deferred account available to your wife?  If you file jointly, can she contribute 100% of her money to it? It will reduce your marginal joint tax rate.  Your income is too high for traditional IRA, and probably too high for Roth. 

You mention minimum payments on car notes.  You are paying highest interest rate debts first, right?  Keep killing that debt.  If you haven't seen Eric222's journal called My life is an exploding volcano of awesomeness, check it out.  He's killing huge debt and growing income, too, just started 401k investing.  I love his quote "Stamina is the next level of badassity."

Where did you put the red flags?  They were so pretty.  Did you pass them on to someone else?

The red flags are still here. I'm using them as tablecloths and coasters on the coffee table. I need to keep them close at hand just in case they are needed. I will look at this legendary Eric222 journal. 

My wife is self-employed so I believe I can open up an 401 account for her and put money there, too. I don't want to get carried away, though, because my student loan is at 111,000 and the interest is about 7.5%(Right next to the interest-rate it says, in red, "these rates are set by Congress").

With my matching I make 6% on my money so I can justify putting in some but I don't think we should max out both of us because the interest rate on my student loans is lethal and that should go down to zero first. The two cars are 1.99% and 2.99%. Highest interest rate first and it just so happens to be $111,000, so it's time to get to work.

homestead neohio

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Re: Living On The Edge With My 401k?
« Reply #64 on: July 14, 2016, 11:48:11 AM »
Maybe.  I don't have high income or high student loan debt, I suggest starting a case study thread to get advice on optimizing from those who have been there, done that.  This thread looks like it is only about 401k asset allocation, but your optimizing should go further.  I'm too lazy to do much research or maths for you, but at 175k you'd be in a 28% marginal tax bracket.  You can invest 401k $ pre tax and not pay that 28% tax, then some amount of student loan debt is tax deductible if your MAGI is <160k.   

https://www.irs.gov/publications/p970/ch04.html

I expect you are right with 111k debt at 7.5%, that is the target to aim every dollar at once you secure the 401k matches (and we all know matches lead to FIRE).  We're just all so excited to get you investing more and keep taxes low.  It is worth the effort to put enough in 401k that you stay below 160k MAGI to get the deduction.

Good luck optimizing your optimizations.

Zx

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Re: Living On The Edge With My 401k?
« Reply #65 on: July 14, 2016, 01:10:51 PM »
Maybe.  I don't have high income or high student loan debt, I suggest starting a case study thread to get advice on optimizing from those who have been there, done that.  This thread looks like it is only about 401k asset allocation, but your optimizing should go further.  I'm too lazy to do much research or maths for you, but at 175k you'd be in a 28% marginal tax bracket.  You can invest 401k $ pre tax and not pay that 28% tax, then some amount of student loan debt is tax deductible if your MAGI is <160k.   

https://www.irs.gov/publications/p970/ch04.html

I expect you are right with 111k debt at 7.5%, that is the target to aim every dollar at once you secure the 401k matches (and we all know matches lead to FIRE).  We're just all so excited to get you investing more and keep taxes low.  It is worth the effort to put enough in 401k that you stay below 160k MAGI to get the deduction.

Good luck optimizing your optimizations.

omg every time I turn around here I learn something else. Never heard of MAGI. I guess because I never made this much money before, not even close. The job I had when I found MMM and this lifestyle paid 64k, so this is new ground for me. I know it's about X's and O's and finding that sweet spot. I still need to get Collins' book and perhaps find some info or a calculator to discover just how to play it for optimization.

Thanks for your input, you and everyone else. First time I ever came on here, people were clubbing me in the head and telling me to divorce my wife to get ahead financially. Glad to see I just got some slaps upside the head, timely wisdom, and encouragement this time.

homestead neohio

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Re: Living On The Edge With My 401k?
« Reply #66 on: July 14, 2016, 02:25:50 PM »
First time I ever came on here, people were clubbing me in the head and telling me to divorce my wife to get ahead financially.

And you came back?  That is a red flag, right there. 

omg every time I turn around here I learn something else.

You will get many more experienced advice givers to help you optimize if you start a case study thread instead of relying on a 401k allocation thread.  Now that I said it three times I'll shut up.

Best of luck, daggify. 

Zx

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Re: Living On The Edge With My 401k?
« Reply #67 on: July 15, 2016, 08:56:52 AM »
Where on the forum do you start a case study? I searched for the words "case study" and got no hits.

homestead neohio

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Re: Living On The Edge With My 401k?
« Reply #68 on: July 15, 2016, 09:06:49 AM »
Where on the forum do you start a case study? I searched for the words "case study" and got no hits.

Read this:

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

Then go to the Ask A Mustachian section of the forum and start a new post with your specific financial picture and questions following that format you just read about. 

http://forum.mrmoneymustache.com/ask-a-mustachian

I'll be curious to see what advice you get given differences in our finances.

Dicey

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Re: Living On The Edge With My 401k?
« Reply #69 on: July 16, 2016, 07:10:06 AM »
I still need to get Collins' book and perhaps find some info or a calculator to discover just how to play it for optimization.
Have you been reading his blog, especially the investment series? I'd start there, 'cause it's free and smaller chunks of new info might be less intimidating + good comments. jlcollinsnh.com

Also, is your wife's salary really 20-25k or is that a typo?

Zx

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Re: Living On The Edge With My 401k?
« Reply #70 on: July 16, 2016, 08:10:34 AM »
I have read his series, yes.

And yes that is my wife's salary, as living in California she cannot use her massage license and so she is relegated to working at someplace like Tuesday Morning for $10 an hour, for example. I'm hoping she can find contract work as an organizer, as she has done this for many in Oregon with rave reviews.  Anything she does she pretty much gets rave reviews, though. Anyone she works for soon adores her and wants her around all the time, especially if they get sick or have surgery or come down with cancer or something.

The forum already eviscerated her for her job and income, though, in their classic cruelty and tough love brutality. I made the mistake of reading some suggestions from here about her job to her. She was upset for a week and really has no interest in anything I find on this forum. She will follow my lead for the most part but wants absolutely nothing to do with Mustachians at all.

Dicey

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Re: Living On The Edge With My 401k?
« Reply #71 on: July 16, 2016, 08:21:32 AM »
Oh, dagiffy, I am sorry that happened. My thinking was more along the lines of wondering why you were living apart. I had kind of assumed that you both had good-paying jobs that weren't portable as the reason you were living apart. Now even more confused. She's in CA too?

Off the top of my head, Costco, Nordstrom and Trader Joe's all pay better than $10/ hr for retail work.

Feel free to ignore if this is too personal. No trashing from this quarter, only admiration.

Zx

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Re: Living On The Edge With My 401k?
« Reply #72 on: July 16, 2016, 08:20:21 PM »
Oh, dagiffy, I am sorry that happened. My thinking was more along the lines of wondering why you were living apart. I had kind of assumed that you both had good-paying jobs that weren't portable as the reason you were living apart. Now even more confused. She's in CA too?

Off the top of my head, Costco, Nordstrom and Trader Joe's all pay better than $10/ hr for retail work.

Feel free to ignore if this is too personal. No trashing from this quarter, only admiration.

It's not too personal. When I was offered the job in SF she declared she wasn't prepared to be moving down there again. I think because of jobs or different circumstances we moved 8 times in 3 years. She also hated the bay area with its traffic and difficulty getting out of town on a Friday due to the sheer parking lot syndrome on the freeways. She had lived in Portland for over 30 years and had a network of friends she loved and who loved her, and many of those depended on her for a variety of things and paid her well for being there.

She also couldn't use her massage license in CA nor could she have her network of friends to do things with....so, we decided she'd stay in Portland, give her the chance to say the long goodbye to all her clients, and make use of the greater income she'd have in Portland. She got an apt in the basement of a friend's mansion, for which she pays 425 per month, I moved into my car and the clock has been ticking ever since.

We've picked January for her to move down, but might wait till later because I signed a year long lease on July 1, the day before she announced she wanted to move down to the bay with me. Talk about bad timing!