exactly. and the smart ones that saw their money plummet by half thought this was the greatest day ever, because they sat on those shares and pumped even more and more and more into those same funds while that was happening. Sitting on bonds and locked into CDs with shitty interest rates compared to the 33% and 20% climbs after 08 would have been very bad in comparison.
The only people that lost on stocks those years were the ones that committed the one true sin by selling off their funds: buy high, sell low! d'oh! On top of that, if you were well-invested and living off of dividends, you really weren't hurt at all being 100% into stocks: Dividends kept coming in while the value of those stocks slowly recovered over 1 year, then skyrocketed. Hindsight, of course--but you just have to accept that the market always goes up and grow thick skin to those dips. Not saying that it's easy. All this assumes a few things: one still had a job and income during that time, so no reason to care about retirement for a few years, and either already retired/living off of dividends or close enough to retirement and well-invested ahead of time where it didn't really matter.
the market will crater, but it will always go up, and without fail. Bonds and REITs and other classes are great for stability, but not when you're young and have a few decades to grow wealth. REITS and certain bond funds aren't that great for taxable account either, because they aren't as tax efficient as low-fee stock index funds.
Hmmm. What do you think about me keeping say 20% in that 2055 Target Date Fund, and then 40% each into FUSVX and FSEVX? Actually, it's probably best if I move completely out of that Target Date Fund, I'm guessing. The expenses are pretty high. I'm pretty risk tolerant cause I'm only 33 and unfortunately won't be retiring any time soon, but I also don't want to completely get fucked and lose everything.
This is why the Fed bailout of the market in '08 was bad. You have young investors like zenfamous and jlee thinking the market will always go up and never fail so you should always buy the dip because you will always be rewarded. And the sad truth is they're right. Scary, isn't it?
Like the indexing folks say: If you index, you get the market average, which has historically been pretty decent in the US. If average is pretty good, and you can get it without paying a lot, why not?Sad truth...or awesome truth? :awe:
Like the indexing folks say: If you index, you get the market average, which has historically been pretty decent in the US. It's about all you can do is hope for the best.
(I guess you could always bet the other way around and do an index that shorts the market. Maybe preppers are gunning for the collapse of society so that their investment scheme will pan out.)
Since you already have some in the target retirement, that adds plenty of diversity and stability...far more than you would ever need at your age. General rule of thumb for early investing is 100% stocks. slowly re-balance into bonds as you approach retirement (greater stability). This is exactly what target retirement funds do, btw...but they start with some of that diversity already, which I believe to be far too safe.
If it were me, I would transfer both accounts nearly 100% into VTSAX if I could (VTSMX if your Roth doesn't have the minimum to qualify for admiral shares). But again...nothing wrong with keeping the target retirement if the fee is low, and that is pretty low.
You're also 26...do you want to retire in 10 years? Wouldn't that be awesome? How about spending, like...no money and putting away 50% or more of your income into tax-deferred (401K), tax-sheltered (Roth), 100% TAX FREE (HSA) and your own taxed brokerage account? (to provide interest and dividend income by the time you are ready to retire like a god king at 36?, before tax-advantaged accounts take over in your golden years)
(this is insane to most people, btw...and with good reason. Only recommended if you are happy being a cheapo like myself and/or have a vast income that you can stash away with little hit to your normal habits)
http://www.mrmoneymustache.com/
http://www.madfientist.com/safe-withdrawal-rate/
http://www.madfientist.com/ultimate-retirement-account/
This is why the Fed bailout of the market in '08 was bad. You have young investors like zenfamous and jlee thinking the market will always go up and never fail so you should always buy the dip because you will always be rewarded. And the sad truth is they're right. Scary, isn't it?
Heh....Japan Nikkei closed at 38,915.87 on December 29, 1989. Twenty years later, on March 10, 2009, the Nikkei closed at 7,054.98, down 82% from the peak. Today, the Nikkei closed at 16,107. I'm not saying the same will happen to the US. But Japan bailed out the zombie banks and businesses rather than letting them fail. The US government and the Fed did the same in 2008 rather than letting the zombie banks and businesses fail. But the US stock market recovered and hit all time high so everyone is happy and the Fed is a hero. The market will continue to go up forever because the Fed won't allow it to fail. Failure will be impossible.
I would say in a general sense I'm thinking along similar lines, but to do something that early would require a lot more research and effort than I'm willing to take considering I don't really have any interest in anything financial. It isn't fun for me, and that is a big part of it.
They way I'm leaning is more put back as much as I can while living relatively modestly (small house, very low COL in Oklahoma) but while not being at all afraid to splurge on nice things. For example, I only own 3 guns now, two pistols and a shotgun - but I know I plan to get more so when time came to buy a gun safe, I could get a cheaper 12 gun model that would be plenty adequate and have room to grow for $500 and use it for 15 years, but instead I got a 24 gun water/fireproof one for $1000 that I very well may never replace.
And really, I like my job too much to retire that early. I wouldn't want to not work, and not just because I would get bored at home. I truly love my job and it pays very well so by continuing to work into my 50s I can have a significantly higher standard of living, and still retire easily by 60 at the latest and go hang out at my dream house (literally, my biggest plan in life is to literally design my own dream house and build it. Like everyone plans, but maybe, MAYBE 5% of people actually do) on 40 acres in rural america somewhere.
Heh....
If a system can be stabilized, it can continue for a very long time.
(This is my usual queue to reference this page.)
Many human habits tend to favor positive feedback though, which can lead to very rapid growth in the short term, but big problems in the long.
All you can do is hope things keep going on their general trend, or else you can take a risk and bet that they will fail.
I guess the only way both sides of that debate could lose is if the market just flatlines.
In lieu of knowing the future, there's not much else to do.
That sounds right to me. Most important thing is your savings rare. Above all else, don't even bother talking about retirement...just don't spend money if you want to become wealthy at a relatively young age. Sounds like you're well on the path. First is eliminating debt and refusing to never take on more debt (mortgage s OK, I guess....but there is a school of argument against that, as well ). Save, no debt, then invest. That's all really. If you just plan to save most of your money (that 10% annual recommendation you always here is the target for that want to retire at age 60). If you can learn to save 50% or even more, you've effectively trained yourself into a lifestyle that will not only last you a lifetime, but generate more wealth than you thought possible.
Better yet, if you actually enjoy your job and plan for that income for a long time, that's fantastic. Either way, saving as much as you can when you can--first goal is Fuck You money--enough of a stash to live jobless for about 3-5 years if you had to but, more importantly, if you choose to. That kind of money gives you power. Once you determine that value, you continue on your current path or just go find something more fun and interesting to do with yourself.
read this
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
scroll down to the chart that gives you years-to-retirement based on annual savings rate. This follows the "4% rule," which is explained within that post.
That really isn't my goal, either. Not yet, anyway. I'm simply working to train myself with some of these disciplines to see what I can do for myself within the next 3 or 5 years, then go from there.
Hmmm. What do you think about me keeping say 20% in that 2055 Target Date Fund, and then 40% each into FUSVX and FSEVX? Actually, it's probably best if I move completely out of that Target Date Fund, I'm guessing. The expenses are pretty high. I'm pretty risk tolerant cause I'm only 33 and unfortunately won't be retiring any time soon, but I also don't want to completely get fucked and lose everything.
Fuck You money is good, Fuck Me money is better. Then you have enough money to screw yourself over so long as the other guy gets screwed also
Well, what I meant by the "don't wanna get fucked" was that I'd be willing to completely ditch the Target Date Fund and go with 50/50 FUSVX/FSEVX as long as those are diversified enough.I would ditch the target date fund and stick to something like 75% between FUSVX/FSEVX and the remaining in a total bond index fund? It sounds like you are worried about getting fucked, so bonds will offer good stability with slower growth.
Also look into REITS--real estate investment trust...or something like that. These funds invest in, well, buildings--corporate office buildings, retirement homes, vacation hotels, etc. It's like owning real estate/rental income but without landlording duties. The advantage of these is they act as a hedge against Hyper Inflation (there are some that still fear this happening), but it is both historically unlikely (only once, after the Civil War in the US, I think), famously with Weimar Germany pre-WWII, and of course Zimbabwe most recently....well, we aren't Zimbabwe and we aren't about to start WW1 and have the rest of the world punish us through sanctions (OK, unless we elect Trump)
The other advantage to REITs is that they tend to pay dividends frequently, so people often use them as income-generating funds. Because of this, they aren't very tax efficient, but if you keep them in your IRA or 401K, that isn't a problem (no taxes on dividends/returns). It's a commonly recommended type of fund for diversity, and real estate is more stable than equities, but like bonds grows slower.
Bonds are a hedge against deflation, which is a real problem and is why the Great Depression happened. I guess that is still so terrifying that they remain very popular...but they are also very popular because they are very stable. When retired and depending on that income, you want bonds.
Japan Nikkei closed at 38,915.87 on December 29, 1989. Twenty years later, on March 10, 2009, the Nikkei closed at 7,054.98, down 82% from the peak. Today, the Nikkei closed at 16,107. I'm not saying the same will happen to the US. But Japan bailed out the zombie banks and businesses rather than letting them fail. The US government and the Fed did the same in 2008 rather than letting the zombie banks and businesses fail. But the US stock market recovered and hit all time high so everyone is happy and the Fed is a hero. The market will continue to go up forever because the Fed won't allow it to fail. Failure will be impossible.
Well, what I meant by the "don't wanna get fucked" was that I'd be willing to completely ditch the Target Date Fund and go with 50/50 FUSVX/FSEVX as long as those are diversified enough.
From that screenshot I posted above, did you see anything for a total bond index fund? I don't know what that is though I'd guess it was a diversified set of bonds.
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The US stock market is much more diverse, while Japan's was tied closely to a real estate bubble in two metropolitan areas. Japan was also in a speculation bubble as a rising economic power, while the US has been a mature one for decades.
So no, I don't see something comparable happening within at least the next few decades in the US. China seems more likely thanks to the rampant fraud and higher level of corruption.
Not in that list, unfortunately. The bottom 4 funds are 3 bond funds and one stable (mostly bond?) fund.
The exp ratio on those is 0.8-1% that is very bad. Googling those, I didn't get much information from Morningstar about how they are invested (are they broad..basically Index type funds or targeted investments). High exp ratios like that generally indicate that they aren't index funds, so involve more management.
If those really are all your options and you still want bonds, then you should probably open your own IRA through Vanguard or Fidelity or whomever if you don't already have one and purchase some bonds there. But if you really don't mind the wild ride of stocks, then ignore them altogether and stick with those 2 Fidelity equity funds--those look solid.
Still, opening your own taxable brokerage account as soon as you can is always a good idea. Might as well start building a future income source asap.
I think I'm gonna stick with that Targeted Fund, but only maybe 20% or so, with the rest split between those two Fidelity funds.
I do want to open an IRA (probably Roth?) too. Actually I was thinking of going to a financial adviser and just telling them what my current status is and ask for their advice.
Roth's are great and for good reason. Personally, I like them as a tax-free "personal loan device" I don't know all of the details, but I believe that whatever principal is invested after 5 years (and it's 5 years for each lump sum investment on your 5500 maximum each year) can be withdrawn at any time without penalty or tax. Only the returns are locked away until age 59 1/2.
Or something like that. Basically, after 5 years, if you maxed that year out, you can withdraw $5500 without paying a penalty and without paying taxes on income. 6 years, you can withdraw $11k, 3 years, $16.5k, etc. Again, assuming max annual contributions. I wish these things were beaten into my head when younger--doesn't this sound like a great way to save money (money that earns money) for some time if you have a 5+ year home purchase plan?
There are also arguments against Roth that prefer the untaxed deposit and growth of the traditional IRA
http://www.gocurrycracker.com/roth-sucks/
(essentially, your initial $5500 in the Tr IRA is worth more than the $5500 in a Roth, so grows more over the years, with the same protected tax growth.). You need around 6800 to get the 5500 to deposit into the Roth (assuming 20% Tax rate)...so that's $1300 less in capital that could have been growing in that Tr IRA, and add that up each year.
I think ideally you want one of each if you can afford to contribute to each one annually. Especially because of the mechanations of the Tr IRA > Roth IRA conversion ladder scheme to never pay taxes on any of it.
http://www.madfientist.com/traditional-ira-vs-roth-ira/
As for me, I don't have a Roth. Not now, anyway. I have one Tr IRA that I opened to roll over all of my old 403B accounts and put all of that into VTSAX, and max contribute each year. I plan to focus on my 403B and the IRA, but I also want to go heavy into the taxable brokerage account. The only way to have actual fuck you money is to grow it in an account that isn't locked away and/or significantly disadvantaged with withdrawals. I know I will open a Roth at some point, primarily to begin that conversion ladder some years from now.
The best option, right now, is the HSA
http://www.madfientist.com/ultimate-retirement-account/
If you have a high deductible Health Plan, then you can access one of these. If so, you should open one ASAP. Max annual contribution is $3500. It is tax free contribution, tax free growth, and tax free withdrawal--so basically a Roth and IRA combined. Greatest thing ever. Withdrawals are used to pay for qualified out-of-pocket medical expenses (like Co-pays or fancy lumbar chairs, many other things), so best thing is to pay for all of that out of pocket, pile up those receipts in a safe spot over the years, then pay yourself back through your HSA every once in a while. This is a relatively new tool so who knows how long it will be around and if it remains this awesome, but it's not like Congress is suddenly going to take your money away without warning and a plan to move it out without penalty in the event that HSA becomes obsolete (they exist only because of the growth in high-deductible health plans).
As for a financial adviser--first see if your company has an office that offers these services for free, even your 401k Rep can tell you all you need to know. There are good ones out there, but they seem few and far between. Many are not Fiduciaries and so have no incentive to look out for your best interest--only to sell you advice and shitty funds that only serves to line their pockets.
BUT--you should seek advice. I'm just regurgitating information that I learned recently from internet strangers, as well as info that I ignored years ago from smarter friends.
Payroll-deducted HSA contributions are also pre-FICA, which saves you another 7%.
Listen to Exterous.
<SNIP>
remember: when the market is down, that is GOOD for you. Your money purchases more shares than they could before. If possible, this is when you want to increase contributions. The market only ever goes up in the long term.
lotsofthings