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10-21-2014 , 03:46 PM
#3201
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Quote:
Originally Posted by Atlantis1
How much do you think you would need to retire in 25 years? Without putting extra money into it over the years. In an average western country.
How much do you need to live on now? If we assume you can get by on the median US household income of 52,000 a year now, in 25 years you will need a $110,500 a year (3% inflation) for the same standard of living. A safe withdrawal rate is 3%. That means you need somewhere around $3.8 million. To get to $3.8 mill with an investment return of 8% a year compounded over 25 years you need ~$550,000 today.
The "I have XX money to invest, where should I put it?" Thread Quote
10-21-2014 , 05:44 PM
#3202
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Quote:
Originally Posted by unfrgvn
How much do you need to live on now? If we assume you can get by on the median US household income of 52,000 a year now, in 25 years you will need a $110,500 a year (3% inflation) for the same standard of living. A safe withdrawal rate is 3%. That means you need somewhere around $3.8 million. To get to $3.8 mill with an investment return of 8% a year compounded over 25 years you need ~$550,000 today.
I did a similar back of the envelope calc like this except I went with a lower safe withdrawal rate since retirement is starting at age 48 instead of 60 and possible longer life span in the future (2.5% withdrawal).

I also went with a lower investment return number as at 5 or even 10 years out from retirement, in order to reduce variance, the equity bond ratio will be such that 8% a year returns would be unlikely so went with a more conservative 6%.
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10-21-2014 , 08:46 PM
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Thanks a lot for the advice. 550k is lower than I expected with inflation etc. and yes 20-30 years is indeed a mistake.
The "I have XX money to invest, where should I put it?" Thread Quote
10-21-2014 , 09:30 PM
#3204
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Quote:
Originally Posted by amoeba
I did a similar back of the envelope calc like this except I went with a lower safe withdrawal rate since retirement is starting at age 48 instead of 60 and possible longer life span in the future (2.5% withdrawal).

I also went with a lower investment return number as at 5 or even 10 years out from retirement, in order to reduce variance, the equity bond ratio will be such that 8% a year returns would be unlikely so went with a more conservative 6%.
Of course, all assumptions are open to argument, but I think mine were pretty middle of the road. A 50/50 portfolio has returned 8% since 1926, a 70/30 has returned 9%:
https://personal.vanguard.com/us/ins...uth-about-risk
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10-23-2014 , 10:39 AM
#3205
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Originally Posted by LT22
Yes, generally there's a penalty if you take it out early. For example, Ally Bank


2 years or less....60 days of interest
3 years...90 days of interest
4 years...120 days of interest
5 years or longer....150 days of interest
I'm not saying this is the case here, but too many times I've seen someone scared to pull their money out of a CD because they hear the word penalty. They are scared of losing x days of interest because they forget/ don't realize how little the CD is paying.
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10-23-2014 , 10:46 AM
#3206
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Quote:
Originally Posted by unfrgvn
How much do you need to live on now? If we assume you can get by on the median US household income of 52,000 a year now, in 25 years you will need a $110,500 a year (3% inflation) for the same standard of living. A safe withdrawal rate is 3%. That means you need somewhere around $3.8 million. To get to $3.8 mill with an investment return of 8% a year compounded over 25 years you need ~$550,000 today.
I didn't check your math, but I think you went above and beyond in terms of doing work to answer his question. However, a 3% withdrawal rate is a bit nitty and is that $110k in retirement inflation adj until his life expectancy?
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10-23-2014 , 01:08 PM
#3207
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Quote:
Originally Posted by amoeba
I did a similar back of the envelope calc like this except I went with a lower safe withdrawal rate since retirement is starting at age 48 instead of 60 and possible longer life span in the future (2.5% withdrawal).
.

Quote:
Originally Posted by bahbahmickey
I didn't check your math, but I think you went above and beyond in terms of doing work to answer his question. However, a 3% withdrawal rate is a bit nitty and is that $110k in retirement inflation adj until his life expectancy?
amoeba thought the withdrawal rate was too high at 3%. However, good point is that I did not inflation adjust subsequent years withdrawals. I figured his social security would kick in at some point to account for that.
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10-23-2014 , 03:37 PM
#3208
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Quote:
Originally Posted by unfrgvn
amoeba thought the withdrawal rate was too high at 3%. However, good point is that I did not inflation adjust subsequent years withdrawals. I figured his social security would kick in at some point to account for that.
I didn't read carefully enough, because I didn't realize you ignored SS. Again, you went above and beyond the call of duty, but you can't ignore SS or assume that inflation is 0% from age 48 to death. Obviously, adding both of these makes the calculations more difficult.




Anyone who feels like answering, please do: How much value is there for having an investment professional(s) put together a long-term financial plan, that will answer these types of questions, using your updated personal information and meeting with you once a year to go over it? (please indicate about how old you are or how far you think you are from retirement)
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10-23-2014 , 05:33 PM
#3209
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Quote:
Originally Posted by bahbahmickey
Anyone who feels like answering, please do: How much value is there for having an investment professional(s) put together a long-term financial plan, that will answer these types of questions, using your updated personal information and meeting with you once a year to go over it? (please indicate about how old you are or how far you think you are from retirement)
This sounds great as long as he's not charging a % of my assets.

His advice definitely does not double in value if my portfolio grows from 500k to 1 million.

If we are talking a flat fee for such services I'd be interested if price was right.
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10-23-2014 , 05:42 PM
#3210
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Quote:
Originally Posted by unfrgvn
amoeba thought the withdrawal rate was too high at 3%. However, good point is that I did not inflation adjust subsequent years withdrawals. I figured his social security would kick in at some point to account for that.
Most of the generally accepted sustainable withdrawal rate models include an inflation adjustment.
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10-24-2014 , 01:41 AM
#3211
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Quote:
Originally Posted by CohibaBehike
This sounds great as long as he's not charging a % of my assets.

His advice definitely does not double in value if my portfolio grows from 500k to 1 million.

If we are talking a flat fee for such services I'd be interested if price was right.
Do you also have an issue with real estate guys charging more for a more expensive house?

It seems odd that you care about how the fee is calculated. It should come down to if you think the price is right.

What price would you be willing to pay for this if it's a one time deal?
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10-24-2014 , 09:49 AM
#3212
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Quote:
Originally Posted by bahbahmickey
Do you also have an issue with real estate guys charging more for a more expensive house?
Yes, this is the biggest scam in the real estate industry. My father and his siblings are looking to sell my grandparents house valued between 1.5-2m and I'm begging them not to use a broker because you are just lighting that money on fire.

What value are they providing selling a house that is more expensive vs selling a house that is less expensive?
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10-24-2014 , 12:54 PM
#3213
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Quote:
Originally Posted by CohibaBehike
Yes, this is the biggest scam in the real estate industry. My father and his siblings are looking to sell my grandparents house valued between 1.5-2m and I'm begging them not to use a broker because you are just lighting that money on fire.

What value are they providing selling a house that is more expensive vs selling a house that is less expensive?
They don't have to pay 6%. I bet they could find a broker willing to take a set fee.
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10-27-2014 , 02:12 PM
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I was wondering what everyone thought about having bond exposure in your portfolio. I'm in my early 20s and was thinking about putting around 10% of my portfolio into bonds.

I was thinking about investing in the Vanguard Long-Term Bond Index Fund (VBLTX). Any thoughts are very much appreciated. Thanks.
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10-27-2014 , 05:20 PM
#3215
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Quote:
Originally Posted by dishwasher22
I was wondering what everyone thought about having bond exposure in your portfolio. I'm in my early 20s and was thinking about putting around 10% of my portfolio into bonds.

I was thinking about investing in the Vanguard Long-Term Bond Index Fund (VBLTX). Any thoughts are very much appreciated. Thanks.
Everyone thinks something different. A good argument can be made for anything from 0 to 40% bonds in your portfolio, even at your young age. I certainly think a 90/10 split is reasonable for someone in their 20's. I assume you understand that a 100 or 90% equity / bond portfolio is more volatile than a 60/40 split and have the appropriate risk tolerance to ride out the variance of the market?

Having said that, I would favor VBMFX (Vanguard total Bond Market) over the long bond fund that you listed. There is a large expectation that the Fed will raise interest rates soon and the longer duration your bond fund is the more that will negatively impact it.
Last edited by unfrgvn; 10-27-2014 at 05:27 PM.
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10-27-2014 , 09:43 PM
#3216
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Quote:
Originally Posted by unfrgvn
Everyone thinks something different. A good argument can be made for anything from 0 to 40% bonds in your portfolio, even at your young age. I certainly think a 90/10 split is reasonable for someone in their 20's. I assume you understand that a 100 or 90% equity / bond portfolio is more volatile than a 60/40 split and have the appropriate risk tolerance to ride out the variance of the market?

Having said that, I would favor VBMFX (Vanguard total Bond Market) over the long bond fund that you listed. There is a large expectation that the Fed will raise interest rates soon and the longer duration your bond fund is the more that will negatively impact it.
Thanks for your response. With the fed increasing rates in the near future, QE ending and a potential end to the bond bull market.. would these bond investments be losing value drastically or since they are paying coupons would they just be yielding lower investments then if I waited to invest.
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10-27-2014 , 10:01 PM
#3217
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Quote:
Originally Posted by dishwasher22
I was wondering what everyone thought about having bond exposure in your portfolio. I'm in my early 20s and was thinking about putting around 10% of my portfolio into bonds.
No one would strongly argue against something like this. Personally, I'd go for the growth because of the long time horizon. If putting 10% in bonds makes you sleep easier, then by all means, do it.
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10-27-2014 , 10:15 PM
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Quote:
Originally Posted by wil318466
No one would strongly argue against something like this. Personally, I'd go for the growth because of the long time horizon. If putting 10% in bonds makes you sleep easier, then by all means, do it.
Would you have any advice on how to reallocate my portfolio. I am planning on selling Cisco and Pepsico and moving to an all mutual fund/etf based portfolio. Just been a little lost in direction on trying to set up a balanced portfolio recently. Was looking into possibly adding bond index as mentioned earlier and any other advice would be greatly appreciated.

12% - cash
14% - Cisco
14.5% - Pepsico
Matthews Asian Growth and Income Fund - 17.5%
Vanguard International Equities ex US ETF (VEU) - 12%
Vanguard Total Stock Market ETF (VTI) - 30%
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10-27-2014 , 10:18 PM
#3219
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Quote:
Originally Posted by dishwasher22
Thanks for your response. With the fed increasing rates in the near future, QE ending and a potential end to the bond bull market.. would these bond investments be losing value drastically or since they are paying coupons would they just be yielding lower investments then if I waited to invest.
This link explains it better than I can.
http://www.schwab.com/public/schwab/...est-Rates-Rise
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10-28-2014 , 01:29 AM
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Quote:
Originally Posted by dishwasher22
I was wondering what everyone thought about having bond exposure in your portfolio. I'm in my early 20s and was thinking about putting around 10% of my portfolio into bonds.

I was thinking about investing in the Vanguard Long-Term Bond Index Fund (VBLTX). Any thoughts are very much appreciated. Thanks.
It would help to know your risk tolerance and time horizon. Are you saving for retirement or a house that you plan on buying in a couple years?
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10-28-2014 , 04:35 AM
#3221
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Quote:
Originally Posted by wil318466
No one would strongly argue against something like this. Personally, I'd go for the growth because of the long time horizon. If putting 10% in bonds makes you sleep easier, then by all means, do it.
You spelled "if it keeps you from selling at the bottom" wrong.
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10-28-2014 , 11:56 AM
#3222
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Quote:
Originally Posted by dishwasher22
Was looking into possibly adding bond index as mentioned earlier and any other advice would be greatly appreciated.
Try reading one or more of these books, that would be my other advice:
The Smartest Investment Book You'll Ever Read: The Proven Way to Beat the "Pros" and Take Control of Your Financial Future by Daniel Solin


The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life by Bill Schultheis


How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn
by Allan S. Roth

Any of these books will help you to learn what principles should guide your portfolio decisions and none of them are tough to read.
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10-28-2014 , 12:04 PM
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Quote:
Originally Posted by dishwasher22
Thanks for your response. With the fed increasing rates in the near future, QE ending and a potential end to the bond bull market.. would these bond investments be losing value drastically or since they are paying coupons would they just be yielding lower investments then if I waited to invest.
The short answer is that - just like stocks - the expected future is already priced in. IMO you should not expect to know more about the future than everyone else.
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10-29-2014 , 10:17 AM
#3224
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Income: Around $100k
Risk Tolerance: Average
Timeframe for investment: 20 years
Debt: None
Any other information you might have that would help us

I have about $25k to invest right now and expect to add about $5k per month. I just want something fairly safe and most importantly easy. I don't know anything about investing.

I play poker for a living and have no plan for retirement, Are there some good private pension plans that are good and safe that you would recommend?
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11-02-2014 , 12:53 PM
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Tax question...

A friend of mine recently came into 100k from the sale of her deceased father's restaurant. If she wants to invest it all into a vanguard target retirement fund, does she owe taxes on the 100k before she puts it in, and if that's the case what's the tax situation like when in a year or two she goes to take out some money? Will she be double taxed or owe nothing/only be taxed on the money she made after the 100k?
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