blah blah finances blah blah

[rmd]

so, i've been pondering my finances lately.

as usual, i'm thinking that i should be saving more money. then again, i suspect that if i could retire this moment i'd still be thinking "man, i should be saving more money. what if..."

i'm thinking about talking to some kind of financial planning type, but haven't done anything about it yet.


[Poll #743154]

if you're local to me and have a financial planner you like, feel free to share the name. i have an irrational aversion to most "hey, talk to our financial planners" offers from amex et al since i pessimistically assume they're going to act in a way that maximizes their happiness in terms of "meeting boiler room quotas" and less to maximize my happiness in terms of "making me a lot of money".



thanks!

Comments

[tactical-grace.livejournal.com]

We had an initial meeting with a financial planner, and I have a big long set of forms to fill out so we can go back and start actually doing something intelligent with our money. He's in Westford, but if you're interested I'll pass on the name.

Problem is that the recommended amount (that I have heard) to save towards retirement is 20%, and 401k contributions max out at 15% or less, depending on how much money you make. So how to save the rest in a reasonable fashion?

[istemi.livejournal.com]

I have some fucking idea, but also a lurking conviction that I'll be eating catfood. I don't even LIKE catfood.

I moved up to the maximum 401K withholding this year. When I think about it, I start to make Homer Simpson noises ("But Ma-arge! I could buy DONUTS with that money!"). So I don't think about it. I'm very good at denial. Before that I was at the max my employer would match.

I feel another wave of denial coming on. Catfood makes me nervous.

[rmd.livejournal.com]

So how to save the rest in a reasonable fashion?

E-GOLD!

[rmd.livejournal.com]

okay, maybe not.

[istemi.livejournal.com]

So how to save the rest in a reasonable fashion?

Step 1: Collect the underpants.
Step 3: Profitability!

[lyonesse.livejournal.com]

i really like my financial planner, whose name is emmanuel gilmore. that said, he has moved to chicago and it might be kind of annoying to hook up with him as a new client right now. but he has a pal who's an old lady with a doctorate in mathematics who works in charlestown (they both work for ameriprise-formerly-amex, but they're actually friends) who he recommends for folks who don't want to deal with starting up with somebody remotely. if you want contact info for one or both drop me a line.

(btw, when i said i could retire now....i'm not independently wealthy, but i could be independently comfortably frugal, esp. if i rented out my entire house and lived somewhere cheaper myself. i think a lot about this, having a bit of an obsessive need to plan for getting the hell outta dodge.)

[dianec42.livejournal.com]

Dude, do you know how EXPENSIVE catfood is? My husband, the cats, and I will all be eating ramen noodles.

Mmmmm, donuts... yeah.

[istemi.livejournal.com]

You're right. Donuts are cheaper.

[wotw]

You do not need a financial planner. All you need is some
combination of bank CDs and Vanguard mutual funds. Probably
mostly the latter. No financial planner will give you better
advice than that.

[firni.livejournal.com]

You need a choice for "I *had* a 401(k) that I contributed a lot to BACK WHEN I WORKED."

[llachglin.livejournal.com]

I don't know how people save enough for retirement. My 401(k) is at 10%, so matched that makes 15%. I don't see my salary going up significantly and my retirement account is at a whopping $50K. Conservative estimates are that in 20 years, assuming continued deposits and a typical return, that account might be $500K. Then add in inflation. You're talking $25K/year in late 2020s dollars. Even extending retirement to 30 years out doesn't improve matters much. Social Security would be an absolute necessity if it wasn't likely that I'll also have some inheritance.

I was looking at online financial planning advice (mainly asset allocation advice from reliable places like Fidelity.) One of the more conservative estimates of allocation recommended calculating the portion of bonds to hold in order to plan for the "catfood" future, and then worry about allocating what was left over. That calculation basically says I should put everything into bonds. I'm currently going with a more aggressive (but hardly crazy) allocation of 25% bonds, with the rest split between domestic and foreign stocks of various sizes in various mutual funds. Then I'm reallocating the mix of each category on an annual basis. I started trying this basic allocation strategy last year, and it's time to do it again this year.

As far as I can tell, that kind of conversation is where financial planners will start, and then they'll go deeper and more complex depending upon your risk tolerance and desire to know more details.

[sierra-nevada.livejournal.com]

First, live cheaply. The more self-denial you can stand now, the more money you will have later. Always insist on good value for money. Consumer Reports (http://en.wikipedia.org/wiki/Consumer_Reports) is your friend.

Second, asset allocation (http://en.wikipedia.org/wiki/Asset_allocation), and index mutual funds (http://en.wikipedia.org/wiki/Index_fund). The basic bet with wide diversification (and a cheap, low turn-over, buy-and-hold strategy) is on human progress: the winners in your portfolio/mutual fund will win bigger (i.e. more than pay for) than the losers lose. Stock pickers win in the short term, but tend to lose in the longer term. Best way to evaluate an investments manager is against market performance itself (i.e. did s/he do better than market in an up market? Did s/he lose less than the market in a down market?).

[daspatrick.livejournal.com]

By the time any of this 'retirement' is scheduled to actually happen, I sorta bet that we are all fighting for fuel in a desert wasteland, all wearing modified football pads as body armor and the like.

So I guess I don't take the 'investment calculators' completely at face value.

[rmd.livejournal.com]

You do not need a financial planner.

see, that's what my DIY-ethic inner self wants to think. but on the other hand, i'm kind of dumb (uneducated, lacking clue) about money beyond what's in my pocket and what's in my bank account. during the 90's i made some in the market and lost some in the market. *shrug*

it's nervous-making terrain full of handwaving use of jargon that i do not parse and concepts that i'm only passingly familiar with in this context.

so, i ask the lazyweb. :-)

[rmd.livejournal.com]

one rough rule i've heard is that [(number of years till retirement) * 2] is the rough percentage of retirement investments that should be in higher risk investments.

[rmd.livejournal.com]

well, yeah. a whole lot of investment advice is flat-out snake oil.

[rmd.livejournal.com]

can't you sell the kid and roll the profits into the man's 401(k)?

[firni.livejournal.com]

He has 401(k)s from so many different companies that it makes my head hurt. AND a Roth IRA. Pain in the ass.

he's still worth more dead than alive, however...

[firni.livejournal.com]

Be still, my dog of war! I understand your pain. We've all lost someone we love, but we do it my way! We do it my way. Fear is our ally. The gasoline will be ours. *Then* you shall have your revenge.

[wotw]

I promise you; in this case your DIY-ethic inner self is right. Not
because there's anything particularly virtuous about doing it yourself
but because in this case there's practically no "it" to do. Put your
money in mutual funds and leave it there. Period.

I had dinner once with Fisher Black, who would surely have won the
Nobel Prize in economics if he'd lived long enough. At the time he
was working on Wall Street, devising financial instruments and earning
several million dollars a year. Here is what he told me:

"Guys like me should be taxed out of existence. All I do is devise
complicated financial strategies for people who would be better off
with bank CDs and Vanguard mutual funds."

I've posted a chart for you at www.homeport.org/~wotw/interest.xls .
It assumes you invest $100 a month; if you invest $1000 a month, multiply
all the numbers by 10. Et cetera. The interest rate is on the left;
the number of years till retirement is on the top. If you invest at 3%
for 30 years, you'll have $58,384. If you invest at 10% for 40 years,
you'll have $643,176. If you invest at 12% for 50 years, you'll have
$4,024,272.

The morals (and the only morals you need to know) are that the rewards
to risk-tolerance (which allows you to earn a higher interest rate) and
to patience are huge. A slightly higher interest rate or a slightly
longer time horizon translates into enormous numbers of dollars. I wish
someone had told me this when I was young.

The other thing you'll want to know is that the stock market historically
earns about 8% plus inflation. So if you put everything in the stock
market, you should use the 8% line, but read those numbers as inflation-
adjusted; i.e. after 40 years you'll have $352,987 in today's
dollars, which could be quite a bit more in 2046 dollars. If anything,
8% is a low estimate for stock market returns.

Remember this too: When you look at the change in the value of the stock
market over the past twenty years, you are not seeing anything like
the full rate of growth of a stock market investment, because your
investment earns dividends, which don't show up in the growth of the
Dow Jones average.

Now: If you want that 8% (in expectation of course; there's some risk of
disaster, though I judge that risk to be quite small), put everything in
the stock market (and don't don't don't try to pick winners; just use
mutual funds; someday if we're standing in front of a blackboard I can
explain why); if you want more safety, split between mutual funds and CD's;
if you can tolerate more risk, you can essentially earn 12 or 15 or 20
percent by investing in the stock market with borrowed money. (That's a
MUCH MUCH better way to earn high returns than investing in individual
risky stocks. Again, I can show you why on a blackboard someday.

Finally: No financial planner in the world can tell you anything that is
not either a) contained in the above few paragraphs or b) irrelevant or
c) wrong. Truly.

[llachglin.livejournal.com]

oh, and I misspoke--my 401(k) contributions are actually 9% (6% plus the match), I think. 10% is the ESPP amount, which with recent and likely upcoming stock performance for the Company is increasingly becoming a wash. The losses over the holding period has recently been almost enough to wipe out the 15% discount, and the income tax vs. capital gains benefit requires an additional 18-month hold that is largely eaten up by losses. It's still a net gain, but not much of one, and return on other investments is probably better. I guess I could up the 401(k) contributions to the maximum, even though none of the additional contributions would be matched.

This whole subject makes me depressed, which is why I don't think about it much. Yeah, I know, bad investment strategy.

[cz_unit]

Mmmm.... I so can't wait!

CZ

[daspatrick.livejournal.com]

Thank you.

[daspatrick.livejournal.com]

I mean, don't get me wrong, I follow it to a T. But the smart investor will simply sink a large tank of gasoline in a hidden location. And spend the rest on guns.

And football pads.

[hammercock.livejournal.com]

I currently contribute $1000/year (I think...or is it $1500? I'd have to check my pay stubs) to my 403(b), which is the one you couldn't remember. :-} My employer also contributes 9%, I think, to my pension plan. Both are managed by TIAA-CREF. I have an Edward Jones account in which I have a small investment fund, a Roth IRA to which I can't really afford to contribute much, and a small traditional IRA which I rolled over from an old bank. I also have part of a 401(k) which I received as part of my divorce settlement. I don't really expect, per se, to be able to collect on SocSec when it's my time, but if it's there, I'm sure it will be welcome.

What I'm really having fun doing is watching my Australian superannuation fund (kinda like TIAA-CREF) grow. I could take it out of the country, but the Aussie gov't would take 30% off the top for the privilege, and who knows what our gov't would take, so I just leave it there. When I'm finally at retirement age, it should be a good chunk of cash. If the US is totally sucktastic by then, maybe I'll try retiring to Australia. :-b

[surrealestate.livejournal.com]

If you invest through, say, your bank's investment services (I happen to have some Citizens accounts and opened a Roth through them a few years ago -- the investment company is separate, but connected), they will likely have someone who will help you figure out where the money goes and deal with paperwork issues and such without taking the sort of fees that (I imagine? I really don't know) a "financial planner" takes.

How much money do they take, anyway?

I pay them something like $20/year, which I know is less than a bunch of other banks around here. Doesn't seem to be a problem, though, given that the first year, I put in $3K and nine months later, it was at $3600.

[hotpoint.livejournal.com]

Well, usually the 20% rule-of-thumb also includes any contributions your employer makes on your behalf. Then you could also add money to a Roth IRA. Finally, you could put after-tax money into tax-friendly investments, like tax-managed mutual funds, stocks that don't pay much in dividends and municipal bonds. All of those would let you avoid having taxes eat away at compounding, which is a big factor in investing for the long haul.

[hotpoint.livejournal.com]

I have a few books I could lend you which expand on both the terminology and the DIY investing process wotw is describing. Whether you talk with a financial planner or not, you can get a better idea of what the jargon actually means and what's out there for you.

[r-ness.livejournal.com]

"Guys like me should be taxed out of existence. All I do is devise
complicated financial strategies for people who would be better off
with bank CDs and Vanguard mutual funds."

Vanguard and TIAA-CREF are my friends. Gotta love the expense ratios.

[r-ness.livejournal.com]

If the US is totally sucktastic by then, maybe I'll try retiring to Australia.

There's a plan!

[dianec42.livejournal.com]

Oh yeah, I remember our backup plan now. It involves moving to a place where they actually have a functioning health service. Probably the north of England.

Oh wait, the NHS will go tits-up long before we retire. Never mind.

[catness.livejournal.com]

Wow.

I finally wound up with jobs that had 401k plans, and managed to save up about $15K in a few years. Then in 2002 my $15K dwindled and dwindled and dwindled. When it hit $1200 I cashed it out, because I was making $9 an hour, and even taking the hit, the money was worth more to me *now* than it was ever going to be.

Retirement? Financial planning? I worry every day about being able to afford the transportation I need to actually get to my job. My financial plan is "Don't fuck up and you might be able to pay for the telephone *and* groceries." If it weren't for the generosity of friends, I wouldn't have a roof over my head, wheels to get from here to there, let alone these little niceties such as internet access and LJ. My last few years have been... interesting times, to say the last.

When I was a teenager, I watched with bemusement as a lot of my het classmates ran off and got married, and bought into The American Dream of breeding and home ownership. It looked like life-ending material to me. Now those girls are divorced, in their late 30s, re-evaluating their lives, wiser and hotter than they ever were, plus they have the house and their ex-husbands are paying them money for the privilege of banging younger women. Maybe I did it all backwards.

*blink*

[catness.livejournal.com]

Ahem. Bitter much? *sheepish laughter*

[miss-chance.livejournal.com]

Honestly, I'm pretty useless on this front. I recommend talking to Phi, though. He's pretty clear about this stuff, enough so that I feel relatively comfortable remaining useless.

A random stranger once highly recommended the book Girl , Get Your Money Straight (http://www.amazon.com/gp/product/0767904885/sr=8-1/qid=1149651050/ref=pd_bbs_1/002-7963256-1811267?%5Fencoding=UTF8) to me once, though. There's now a follow-up book, "Girl Make Your Money Grow," too. Dunno much about them, except that someone out there really thought they were great.

[sethg]

I agree. Get yourself a copy of A Random Walk Down Wall Street to help figure out which mutual funds to invest in, and how to allocate among them. And go with Vanguard or TIAA-CREF because they have the lowest fees and since (as you will learn from reading the book) mutual-fund managers are not provably better than monkeys with darts at predicting which stocks will go up, you might as well get index funds that don't skim too much off the top. (Philip Greenspun has an essay that explains in brief why non-index mutual funds are for chumps.)

Vanguard also has a series of "Target Retirement 20xx" funds, where they decide how to allocate money among various index funds so that you can retire in 20xx with a reasonable income stream. This might be the best option if you really don't want to spend time thinking about this.

[tactical-grace.livejournal.com]

Unfortunately, a Roth isn't an option for me. Figuring out tax-friendly investments is the main reason we're going the financial planner route, actually.

[keren-s.livejournal.com]

In 2000 I put a good chunk of money in a Vanguard 500 mutual fund. As the market crashed I got to watch it decline to just over half its value. However, because I did it on my own (in addition to the 401K and other tax deferred savings) I also had to pay taxes on the gains that were made for the various trades the fund made, even though overall the fund lost money. Wow, I thought, that really sucks. I have to pay money on my fund that is losing money. Any every year I have had to pay taxes and it still has not fully recovered its value.

Yet conventional wisdom would have had me continuing to put money into the fund every year, which would have meant I would have also ended up buying low for subsequent years and making money as it worked its way back up. Which I shoulda done but didn't.

I did continue to put money in the tax deferred retirement plans, though. Plus, I understand the thing is to put in funds every month, not just a lummp at one time every year, which further smooths the ups and downs of the market, so I do that.

*this in no way constitutes financial planning advice!*

[liralen.livejournal.com]

We've done the 401k thing. Also had a financial advisor in the mid 1990's that fucked us over with too much short term stock shit. So I got pissed off and studied up and managed my own stocks, did a good 20% over market for a while (yes, the bubble was good to me), and was unemotional (The Unemotional Investor is a book I loved) and sold every time the growth was "good enough" for me, plus what was essentially a CD disguised as an life insurance policy that intrigued me.

That got us up to a certain point.

We got bought. The options from that brought us along a lot further, but what really, really got us to make progress was when work offered the J Fellow a pre-tax salary deferral plan. It hurt, it was PAINFUL to have our salary basically cut by 60%, but we downsized the house, then paid for it with options and ESPP results when the market was high (You fools! Selling while the market is THIS GOOD, think of the money you'll looooose!! NOW I can say Nanny nanny boo boo.)

But we've basically been putting away the guy's salary for five years now, AND it's in what are basically mutual funds while the market was down and the growth in the last year or two has been kind of mind boggling.

We finally went looking for an advisor again, just to get a handle on what we had, what we wanted, and what it would take to get us to retirement and what were basically decent numbers with which to do a worst-case analysis. We were wary after the first fiasco so we asked a lot of questions in the initial interviews and were very clear on what we wanted and what we had no tolarence for. As usual, when finding a service person, we interviewed three different people together and pooled impressions and then decided.

We had more questions and details to our analysis than the guy had, but he was a good sanity check for us. Our subsequent option sales haven't been that much, but enough to get another good, insured mutual fund buy in (ask about value locking and other very interesting options on funds), and from the numbers of those plus our 401ks we're pretty much set after 63, but for the years until then we weren't sure.

With the independent analysis we found out there's pretty much a 50:50 chance we'll make it to 63 if we quit at the beginning of this year on an inflation adjusted amount of income that's about half again as big as what we're spending regularly today. So I'm definitely still "I need to just save a bit more..." but the J Fellow has jumped of the hamster wheel and is retiring at the end of the month, six extra months of income, which is to the better, but still... :-)

Personally, I've been less than happy with Vanguard, even over a decade of time. We're stuck with them for our 401k and with the spousal unit's deferred income thing, so we're making the best of it, but my S&P index fund with them has done better than the other funds I've had from them. I really, really liked my financial advisor's information about how well various funds have worked for him and which managers he trusts, not so much with the stock picking as with the amount of turn over, cost management, and capital gains tax management, which still makes a difference. After getting his advise on WHICH Vanguard funds to use, we've done a lot better with the 401ks than we ever did before.

[rmd.livejournal.com]

that's pretty cool, right there.

Regis The Angry Flower!

[jymdyer.livejournal.com]

=v= I don't know anything about finance, but I do know Bob The Angry Flower.

Re: Regis The Angry Flower!

[rmd.livejournal.com]

yes! i love that icon. i copied it from a friend of mine because it was so very cool.