when DID you start?

Even with a late start and lower income, it is still possible to retire. 10 years of saving/investing 50-60% of your income and living below your means can lead to EARLY retirement for many people. Run the numbers and you may be surprised to find out you can get a lot closer than you think.

ar-jedi - could you please expand on this ^^^

Regards

I'm sure ar-jedi will respond, but there are cash equivalent funds where they stored in fund format (so that you have to execute a "sale" to pull cash out) instead of in cash format like a checking account.  We had one when we had an account at Ameriprise.  It lets you move money into/out of index funds, stock funds, bonds, etc. without having to put money into the brokerage account.

We got rid of ours (emergency cash fund) because it draws no interest whatsoever and with a savings/money market/checking account there is at least *some* interest.

On the other hand, I don't get nearly the same scrutiny when I ask for a $30,000 cashier's check from a brokerage account as I do from BoA or Wells Fargo.

While the "Magic of Compounding" is a very important element to grow your nest egg...

It seems most of what I see in 'investment' topics, are folks who 'depend' on 'investment's of SMALL FRACTIONS of their income $ in various 'STRUCTURED and LIMITED' financial institutions or devices, for what ultimately becomes the $$$ they will depend on later in life.


What about leveraging your TIME, ENERGY, INITIATIVE, KNOWLEDGE, COURAGE, and MOTIVATION -----to grow your Nest Egg EXPONENTIALY by starting a side-line business, or other endeavor, that capitalizes on your skills, and generate an additional income stream...

That may ultimately DWARF, compounding the pittance you put into 401k's, IRA's, etc. That the pittance may --or MAY NOT,  grow to, depending on how you [or Fate] TIMED the investment of it.  


Having some sort of sensible profitable business or sideline, can put you MILES AHEAD of your peers, who, similarly to those who receive a gubberment check, are essentially DEPENDENT on for the maximum the SYSTEM ALLOWS them to save.


Folks, limiting yourself to 'saving' within the System, you are just one of zillions of 'Drones' that will likely wind up somewhere on a Bell Curve of meager pots to piss in -when the ends of your stories are written.


There is an answer to break yourself out of the barnyard ----that most folks share, ----at one end or the other....

Consider MAXIMIZING your POTENTIAL, ---it isn't going to happen complacently sitting on your ass drinking beer and watching football...

If you do make an effort, --it doesn't matter where you start trying, the rest will take care of itself, one way or the other, just get started, even if's a part time job stocking grocery shelves as you grow the mindset to go to the next level, you might be surprised at the difference for the Better Life you enjoy.

Heck, not saying it's a good idea but if you are convinced the market is going to bottom out, get the biggest loan on your 401k that you can.  It will be in cash, and the 4+% interest rate you'll be paying back to yourself.  

Every time you post, the conversation sounds something like this in my head.



<ARFuser> "I have a question about this blue block."

<EXPY37> "See, that's where you went wrong.  It is green.  I only deal with green blocks and you're foolish if you don't as well."

<ARFuser> "No, it's blue."

<EXPY37>

<ARFuser>

Some folks will ignore any pertinent suggestions to improve their chances of success in life...

When it doesn't fit their motivations or lack of same.






If ONE person gets useful encouragement from my post above, and acts --even a little bit on it, the post will have served its purpose.

I appreciate the people who sell when the market gets low.

I have 29 years before I use my 401k. I put in 5%.

I buy stock in another account when the market drops and sell on this highs. I use those earnings to buy silver and ammo.

ok it's covered above but let me clarify from a high altitude at the following link (note: for purposes of what we are talking about, an IRA is functionally equivalent to a 401k)
http://www.ar15.com/forums/t_1_5/1669572_If_you_had_1k_to_invest.html&page=3#i49571557

see also
http://www.ar15.com/forums/t_1_5/1669572_If_you_had_1k_to_invest.html&page=3#i49571729

ar-jedi

ok i found the one i really wanted:

http://www.ar15.com/forums/t_1_5/1672620_Vanguard__Fidelity__TD_Ameritrade_or_another__For_IRAs__small_time_investing_and_speculating_for_fun.html&page=1#i49699589

ar-jedi

Do you have any thoughts on who best to work with for the backdoor conversion?  Whether it be better fee structure or customer service experienced with the setup > conversion?  I know you're a Fidelity fan and I have my 401k there.

I'd like to move my wife's remaining IRA (401k rollover) and our Roths (from way back when) away from Ameriprise, and per above Fidelity is likely the first choice.

diversify

Mutual funds (small and large cap, domestic and foreign). Roth IRAs, and 403bs and a pension (small)...

The trick is to plan (as best you can) to retire with a) no debt, no mortgage on home or vehicle b) enough income generating savings to cover 80% of estimated living expenses. Now, 80% of your current salary is what today? Consider how much inflation may eat into your savings when you retire.

I figure I'll need to work until I'm 72 and I figure I'll need to save for 20 odd years of retirement but depending on the situation may keep a part time job anyway.

What might the world be like in 2050? We might be living on a base in geosync orbit, on the moon and on Mars. Life expectancy might be 120.... the current trajectory of things is not a given to continue forever. So all our worries and fears today might be footnotes in the history books in 30 years.

Been largely in cash for a while now. When market was near 17,200 high a while back I sold half of my remaining funds at a nice gain. A large cap fund bought around $11.75 for $14.95 and an international fund similar story.

Both had been bought on the dips.

Keep putting away for retirement as ONE PART of your financial plan. Don't neglect it.

FWIW, I know a lot of people that thought the sky was falling in: 93, 95, 98, 99, 2000, that "cashed out" 401K's, took the hit, etc. Some of them are old enough to where they should NOT have to work any more but are still working. It's not hard to figure that the two issues are related.

Your Roth, your 401K, etc. is part of your IF S does NOT HTF plan. You need to have that also...

Lowdown3

just note, however... if your company downsizes you, that 401k loan is payable immediately.  if you can't pay it back in full, it is treated as an early distribution and as a result your butthole is going to be sore from the nice people at the IRS.  this is the primary risk factor with taking a 401k loan.  

ar-jedi

Yes, which is why I am not saying it's a good idea.  But it would be an option to look at if one was thinking of cashing out and taking the butthole reaming anyways just to get out of the 401k.  

1) any IRA custodian should be able to handle a conversion/re-characterization.  i see "from the forums" that folks have done backdoors at Vanguard and Fidelity, among others, without issue.
http://blogs.marketwatch.com/encore/2013/11/05/roth-ira-conversions-spike-sharply/
https://www.fidelity.com/insights/retirement/the-drawback-to-one-type-of-roth-conversion
https://www.google.com/search?q=fidelity+back+door+conversion

2) the real problem is on your end -- ensuring that you don't step on an IRS landmine when you do the conversion.  for the most part that has to do with the "cream in the coffee" rule, where you can't just lop off  "a little bit" from your Trad IRA and convert it to a Roth.  
https://www.google.com/search?q=cream+in+the+coffee+IRA

3) IMHO, consolidation of accounts under one roof is very beneficial.  for one, you get aggregate AUM trade pricing.  for two, your asset allocation is simplified.  for three, funds conveyance between accounts is simple.  for four, very convenient tools exist to help you simplify your financial life.(*)

(*) Fidelity FullView and Fidelity BillPay, applications within my standard Fidelity account, are simply awesome.  i can see my "big picture", across all accounts (incl local banking, mortgage, credit cards, etc etc etc), and pay ALL my bills in one place.  then, because i have self-diagnosed transient OCD, i can ask, "self, how much did we spend on natural gas last year?".  then, i can bitch at my wife for leaving the door open so the dogs/cats can go in and out.  or, "self, how much did we spend on auto repairs last year?  what about the year before?  is the rate of climb indicative of needing a new Ferrari/Porsche/Lambo, or should we keep the old one?" -- that sort of stuff.
https://www.fidelity.com/cash-management/faqs-full-view
https://www.fidelity.com/cash-management/bill-pay/overview

find a system that works for you.  for me, FullView and Billpay work.  after 10 years of usage, i think i spend a tenth of the time "doing bills" and i have ten times the amount of data in front of me that i did previously.  

ar-jedi

No plans to touch any existing accounts, merely relocate them to another firm.

We've been pretty satisfied with Fidelity so far.

What the heck are you investing in that you are worried it is a 100% loss?

obviously, frozen concentrated orange juice futures.

ar-jedi

FWIW... DOW up 1.3% yesterday (a single day)... happy I stayed in despite all the naysayers that said ending QE would kill the market...

Surprisingly, for every doom and gloomer ready to dump and run, there's a savvy buyer looking to make a profit on their panic.

Who'da thunk it?

No kidding... just on personal investments alone I "made" a few thousand yesterday.... and the market opened in the green again (riding right around 1% gains)...

My 401k and my Roth made significantly more (due to a higher balance even though they are slightly more conservative than my personal stuff).

Glad you guys made some money but do you really think the market will continue up after QE is over and rates start to rise? I missed selling before the last crash even though I told other people it would be a good time to get out. Didn't take my own advice and had to hold and buy more to recoup my losses. If I had sold, I'd be way ahead. What worries me the most about this market is the lack of any volume. That recent inter day drop shows how volatile the market is now. Any bad news and it's going to tank. Nothing goes up forever. I sold out when the dow was around 16k so I've missed some gains but I just don't see it going a lot higher under the current conditions. I'll buy back after the next big drop. I know some say you can't time the markets but look at the charts. If that's not a bubble I don't know what is.







 

the "market" is not a monolithic entity that raises all boats when the tide comes in, and conversely does not drop all boats when the tide goes out.  

sector rotation, study it.

see the following post for a GREAT table of returns showing sector rotation:
http://www.ar15.com/forums/t_1_133/1665650_Whats_the_deal_with_the_Fidelity_Contrafund_Fund_.html&page=1#i49342081

international markets -- including the headwind/tailwind introduced by the relative currency values, study it.

for that matter, run your portfolio through M*'s free InstantXray tool and find out where you are sitting, then figure out how to balance it if needed.
see
http://www.ar15.com/forums/t_1_133/1665650_Whats_the_deal_with_the_Fidelity_Contrafund_Fund_.html&page=1#i49341910

ar-jedi

Thanks, I'm looking for something to invest in but right now I'm out of ideas. Commodities are tanking, I made good money in bonds but how much longer can that last with rates ready to rise, and stocks just seem over priced.
 

"i feel ya brotha!"

bonds are definitely in slack tide, and holding on much longer may expose you to rising rates and falling prices.  
large cap stocks are premium priced.   midcaps less so.   IJJ or IJH?

i have been holding IJJ in the "10K example" portfolio since day 1:
http://www.ar15.com/forums/t_1_133/531982_The_10K_Portfolio.html&page=6#i49691057
(and day 1 = 8 years ago was initially pretty tragic -- how i managed to start a sample portfolio right before the banking/auto/insurance/mortgage meltdown i will never know... )

but time has been kind to the model, and although i've thought about tinkering with it i haven't seen a huge pressing need.  of course i am irritated that the reference index fund (FFNOX) has me by a couple of percentage points, but that is also indicative of the fact that international and midcaps have trailed the large caps found in the S&P500 component of FFNOX.  one day in the not too distant future i hope to make up that ground.  otherwise, i'll be equally as "bad" as most active managers are in terms of beating a market index reference.  for full disclosure i own a hell of a lot of FFNOX in my 401k...

i did screw up this example long term investment by not making the portfolio grow with additional annual contributions.  i think that from a teaching perspective, it would have been better to invest 10K and then add 1K each of the following years.  this approach i could probably back-model and post the results but i haven't done it yet.  though, i also think it's a little disingenuous to do this since the gains from the additional contributions made when the market was truly in the tank (2008/2009-ish) would look very pretty right now; so in one sense i would be taking advantage of the rearview mirror.

ps
i know this is likely to cause ARFCOM to implode but it's probably a very good time to be borrowing money...
car, investment property, business loans, capital improvements, etc

ar-jedi

This TOOO funny!

Happy today, jump out a window the next, get happy again, jump...


Pissst ---QE will likely NEVER END

IT CAN'T!

Can anyone begin to figger out why????

Gonna try to ride it out?

My "play money" portfolio is allocated as below, 95% US based stock (in mutual funds) with misc cash/intl holding making up the balance. Am I playing it way too risky here?

15   13    9
18   14   10
9     8     3

My retirement investments are similar but a little more conservative. I have a bit more international with a more diversified stock holding (some more conservative stocks).

FWIW, I'm not that smart when it comes to the market but I have some common sense. What goes up must come down etc. I don't buy on past earnings in the traditional sense. I look at the charts and buy what I think it "undervalued" according to it's long-term history. IE, If I see a fund that has a 10 or 20 year average gain of 12.3% but this year's gain is 1.1% and the 3-year is 2.6%, it shows that it has great potential for gains but hasn't done very well this year. That tells me that market sector has more potential for a comeback than some other sector that is rolling on huge gains for the year. Is that a bad strategy to use?


I won't be jumping out any windows... I think the only people that do that are the ones that dump all their hope, all their money, everything they have into the market and lose big. I'm well diversified in life (IE, I didn't dump everything I have in the market) and the amount of money I'm holding in risky investments either A) is a fairly small amount comparatively speaking, or B) time is on my side (retirement) and I can withstand a market correction or 2 ...

I agree. I just bought 2 cars with borrowed money and refied the house. I figured how much lower could rates go



 

I have no issue with re-financing at [significantly] lower interest rates...

Predicated that the Borrower understands that the re-fi loans are MOST likely RECOURSE, including Home loans, ---and in the event unforeseen events cause the Borrower not to be able to repay the loan, the Lender may have the option of taking whatever you have ---to satisfy the debt...

Also that the Borrower has sufficient personal self-control not to use the new likely lowered personal expenses to leverage even MOAR debt, ---digging his debt hole deeper...

That the $$$ is used for long term PRODUCTIVE/BENEFICIAL purposes, part of a well thought out strategy...

And a few other things...

note: the IRS has "clarified" -- in a positive manner for the long term investor -- an even a better option (assuming you have an active 401k):

http://www.fatwallet.com/forums/finance/1401959/

and see
http://www.forbes.com/sites/ashleaebeling/2014/10/15/aftertax-401k-rollovers-advanced-version/
also
http://www.bna.com/recent-irs-guidance-b17179896457/

ar-jedi

http://www.forbes.com/sites/ashleaebeling/2014/10/15/aftertax-401k-rollovers-advanced-version/

Use a self directed IRA, you can invest in real estate using it and no penalty until you cash it out.

How closely held can the RE be???

I think that's the bugaboo...

Do you think it's worth reducing pretax contributions in order to fund post tax 401k>Roth rollover contributions?

The Self directed IRA owns the RE, just like a stock or a bond.  You, your kids, spouse, etc cannot take possession of it unless you personally buy a part of it.  Think like investment properties.  

So you couldn't buy a rental property, take possession of it, and manage it as an income generating business for your IRA?

There's a few posts about rolling the 401k into an IRA. A few years back I looked into what could and couldn't be taken from you in a law suit. If I remember correctly your 401k is off limits but the IRA can be used to pay a judgement. I'll see if I can find the article I read.

since the IRS has clarified this...

*assuming you had an investing surplus*, it's worth exceeding the 401k pre-tax limit (2014: $17.5K) and putting the excess into your 401k as post-tax (the 2014 limit for the TOTAL pre- + post-tax contribution is $52K).  hence, *assuming your had an investing surplus AND your 401k plan allows in-service distributions of post-tax contributions and gains*, you could for example pull $10K (post-tax) per year from your 401k plan and convert it to a Roth IRA.  this works around two problems: 1) the AGI limit on Roth contributions, and 2) the current $5500 limit on IRA contributions.

if your plan does not allow in-service distributions of post-tax contributions and gains, then you really have no downside other than the limited investment options inside your 401k.  your post-tax contributions are simply "stuck" inside your 401k until you terminate employment.  at that time, given the legal clarification provided by the IRS (but people have been doing forever anyway), you convert your post-tax monies into a Roth IRA.

either way this seems like an excellent option for fully tax-protecting investment monies.    

as usual, the ARFCOM answer is "get both" -- a combination of pre- and post-tax vehicles.  you never know what the future holds.

as for reducing your pre-tax to fund post-tax, i think this would have to be sorted out individually.  i would favor a "surplus" approach (noted above) for two reasons:
1) employer matching may differ for pre- and post-tax, and will probably not exceed a match on the 401k pre-tax limit,
2) post-tax contributions will not reduce your AGI, which during peak earning years will result in higher marginal taxes.

ar-jedi

I get the huge benefit of taking your previously tax-deferred post-tax contributions and diverting them to a no-tax Roth - but as you note, below, that wasn't the question (I can usually do the easy ones on my own). "Should I pay taxes on my post-tax IRA or pay no taxes on a post-tax Roth?" is not a question I expect many to have trouble answering.



Good point about the AGI reduction loss.  I guess what you're comparing (assuming pre- and post-tax contributions were to go into the same investments) is a) the cost of the deferred tax on your distributions vs. b) the cost of current tax + investment value loss (w/compounding interest) + potential cost of additional taxes due to AGi increase.

Plugging a few numbers into bankrate's calculators, if you put $10k/year of pretax money into a 401k/IRA and get 7% growth, you have around $1.6M of tax deferred value at age 65.  If you put half in pre-tax ($5k) and half in post-tax ($3750, assuming 25%), you end up with $800k in tax deferred and $555k in tax free value @ age 65.  

I'm too dumb to calculate the loss in taxes based on minimum distributions from the pre-tax accounts vs. the required SOL, but my gut says to stick with tax deferred until you max it out and can afford the "surplus" post-tax IRA > Roth conversion.  I'm not sure if our 401k contributions move us down a tax bracket every year, but even if its 1 in 3 I'm betting its worth it vs. the loss on tax-free gains.