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Old 10-23-2020, 03:48 PM   #111 (permalink)
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We should set up our info for referrals.

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Old 10-23-2020, 05:32 PM   #112 (permalink)
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Some thoughts on the recent conversation:

You don’t want to retire or graduate college in a recession. (Your first salary will set your salary for the rest of your life even when changing companies). There is nothing you can do about graduating into a recession but some basic planning can remove the risk of retiring into a recession.

Attempting to time the market is a fools game. Only 29% of actively managed funds beat their target index after fees in 2019. Or to put it another way 2 out of 3 managers cost their clients money. That is with trained professional managers with teams of researchers who’s full time job is to study the market. Any individual that thinks they can do better is kidding themselves.

The best thing for us mere mortals to do is start investing early, dollar cost average, invest in something simple like target retirement fund with low fees AND LEAVE IT ALONE. Way too many people freak out every time the market dips and cash out. That just locks in the loss.

I’m also surprised how many people don’t invest enough to get their company 401K match. That is free money – a guaranteed return. Even if you took the money out every year and paid taxes and penalties you would still be ahead. (That would be stupid but less stupid than not taking free money from your company)

HSA’s are a FANTASTIC retirement account. Tax free contributions, tax free investment growth, and tax free withdrawals.

Another tip – any “financial advisor” you aren’t paying isn’t an advisor they are a salesman. Unless you have a signed fiduciary agreement they have no legal obligation to give you good advice. My wife and I got screwed early on by Ameriprise and my parents got screwed when he cashed out his 401K by an advisor they knew through church.

*Advise from a guy who graduated in 2000. I'm still got a lot to learn. For example, we were talking with our financial planner yesterday and learned about SMAs (Separately Managed Account)
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Old 10-23-2020, 05:48 PM   #113 (permalink)
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All good stuff. I'll add that going to college during a recession is a good idea because if you aren't working you might as well be learning. College is a double cost in that you have to pay for it, and you lose the time you could have been earning.

From Mr. Money Mustache

This is the order of priority. Note that maxing HSA contributions is #3. It's the most important thing besides throwing away free money or paying too much interest on something.

Quote:
0. Establish an emergency fund to your satisfaction
1. Contribute to your 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
5. Max 401k (if
- 401k fees are lower than available in an IRA, or
- you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
- you earn too much for an IRA deduction and prefer traditional to Roth, then
swap #4 and #5)
6. Fund a mega backdoor Roth if applicable.
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.
8. Invest in a taxable account and/or fund a 529 with any extra.

WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks
1. Company match rates are likely the highest percent return you can get on your money
2. When the guaranteed return is this high, take it.
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs for that purpose.
At worst, the HSA behaves much the same as a tIRA after age 65.
4. Rule of thumb: traditional if current federal marginal rate is 22% or higher; Roth if 10% or lower, or if MAGI is too high to deduct a traditional IRA; flip a coin otherwise.

For those willing to expend a little more energy than it takes to flip a coin, consider comparing current marginal tax saving rate vs. predicted marginal withdrawal tax rate.
If current > predicted, use traditional. Otherwise use Roth.
See Credits can make Traditional better than Roth for lower incomes and other posts in that thread about some exceptions to the rule.
See Traditional versus Roth - Bogleheads for even more details and exceptions.
The 'Calculations' tab in the Case Study Spreadsheet (CSS) can show marginal rates for savings or withdrawals*.
Remember to include all income-dependent effects in your marginal tax rate.
The CSS does include most federal and state brackets, credits (Child Tax, Education, ACA, Earned Income, etc.), phase-ins, phase-outs, and IRMAA tiers.
It may not include some state tax details, FAFSA Expected Family Contribution, and other items irrelevant to most but important to some.

5. See #4 for choice of traditional or Roth for 401k. In a 401k there are no income-based limits for deductions or contributions.
6. Applicability depends on the rules for the specific 401k. See Mega Backdoor Roth IRA.
7. Again, take the risk-free return if high enough. Note that embedded in "high enough" is the assumption that your alternative is "all stocks" or a "fund of funds"
(e.g., target retirement date) that provides a blend of stock and bond returns. If you wish to consider separate bond funds, compare the yield on a fund
with a duration similar to the time remaining on the loan, and put your money toward the one with the higher after-tax interest/yield.
8. Because taxable earnings will still help your FI journey. If your own retirement is in good shape, and you choose to provide significant help for children's college costs,
a 529 plan may be appropriate. Similar to "put on your own oxygen mask before assisting others," do consider funding your own retirement before funding 529 plans for children's college costs.
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Old 10-23-2020, 06:44 PM   #114 (permalink)
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All good advise. After my first job as a Vietnam era vet with a wife that demanded income equality, I was locked in until the personal computer era. That gave me a second chance. They would hire any one that could do the work.
Quote:
Unless you have a signed fiduciary agreement they have no legal obligation to give you good advice. My wife and I got screwed early on by Ameriprise and my parents got screwed when he cashed out his 401K by an advisor they knew through church.
My plan was to minimize contact with financial and government agencies. It hinges on living within Social Security's stipend. It's worked for me for eleven years so far.
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Old 10-23-2020, 06:45 PM   #115 (permalink)
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That's a great list Mr. Money Mustache has some good advise. (He also has some impractical and opinionated advise like we should all live 2-3 miles from work and ride bicycles everywhere)

We hit step 8 a few years ago
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Old 10-23-2020, 06:48 PM   #116 (permalink)
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Quote:
Originally Posted by freebeard View Post
My plan was to minimize contact with financial and government agencies. It hinges on living within Social Security's stipend. It's worked for me for eleven years so far.
Care to explain what a Social Security stipend is?
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Old 10-23-2020, 06:50 PM   #117 (permalink)
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Quote:
Originally Posted by JSH View Post
That's a great list Mr. Money Mustache has some good advise. (He also has some impractical and opinionated advise like we should all live 2-3 miles from work and ride bicycles everywhere)

We hit step 8 a few years ago
Seems we're on similar trajectories. We graduated the same time (except I only graduated HS) and I was set myself back about 2 years, but onward we go.

I'm not a very driven person, but I like to avoid the most easily averted financial pitfalls, and can get extremely motivated if something is interesting enough.
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Old 10-23-2020, 07:38 PM   #118 (permalink)
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I graduated the first time in 2007 and my agency doesn't offer... anything.

I keep checking Indeed, the Arizona Education Employment Board [whose certificate just expired, so it is now considered unsafe] and the local school district's employment page. I do not know where else to check. I periodically look at the pages for every district within an hour.

People always say "Don't use indeed, use Monster\Jobing\whatever."
"Indeed searches Monster\Jobing\whatever."
"Use Monster\Jobing\whatever."

I love how people don't listen when they tell me what to do. Then again, whenever I have any kind of issues with anything, people tell me "Just get a new one."
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Old 10-23-2020, 08:22 PM   #119 (permalink)
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Quote:
Originally Posted by JSH
Care to explain what a Social Security stipend is?
The eagle poops on the third Wednesday every month.

Quote:
Stipend
A stipend is a regular fixed sum of money paid for services or to defray expenses, such as for scholarship, internship, or apprenticeship.Wikipedia
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Old 10-23-2020, 08:23 PM   #120 (permalink)
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Quote:
Originally Posted by JSH View Post
Attempting to time the market is a fools game
Agree here with a caveat. I've been meaning to invest in the market all along but hadn't. When March saw a 1/3 drop in market value, it was a no-brainer to jump in. Predicting the bottom is impossible, but at some point it should become obvious that there exists an opportunity to invest at a great discount.

Had I been investing in the market all along (dollar cost averaging) I'd have been money ahead even if I had somehow managed to time the market pretty close to the bottom. Since I hadn't done that, the perfect opportunity was in March, and I had been discussing doing just that with friends but was slow to shuffle funds around and really get serious about the plan.

That said, I believe the rapid recovery was largely people realizing this opportunity to invest at a discount. This is the dead-cat bounce. I expect another drop in market value the next round of lockdowns and city burnings, and as businesses begin running out of options to stay afloat. We haven't experienced the trickle down effects this massive disruption has been to the full extent.

I expected the drop in market value to occur right about now, so I'm clearly wrong. Now I tend to think we're looking at January or so.

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