Question about pensions, I didn't want to start a whole new thread for it. I got a letter in the mail from the wife's previous employer Prudential. She worked there from ~2000-2011. The letter was basically a note about "Use of excessive retirement plan assets to provide retiree medical benefits and life insurance coverage". Whatever. No action required.

On a later page it said this:


Your estimated accrued pension benefit not yet being paid to you:

*Traditional Pension Formula
The amount shown below represents your monthly deferred pension benefits, payable as a single life annuity beginning at age 65, determined as of January 1, 2013.
- $733.31, determined under the terms of the plan


*Cash Balance Formula
The amount shown below represents your account balance, determined as of July 1, 2013
- $308.43, determined under the terms of the plan



What does this mean exactly? Does that mean the wife gets a one-time check for $733 when turns 65 or does she get a monthly check for $733?

by annual charge, do you mean expense ratio or something else?

1.3% ER would be high but not totally nuts (esp when options with 5% front load fees are on the table!). i pay 0.05-0.07% for my total us stock market index funds.

stop using a bank and start using a discount broker? there are some that serve international customers.

lmgtfy.

with more information about the whole picture, i can give better advice.

i guess i don't understand what's going on with this money. if it's part of your general retirement portfolio, i'd consider the whole thing at once and balance the stocks here with the "financial product linked with bonds"[1] and maybe your real estate holdings. come up with an asset allocation appropriate to your situation, then fill it in.

if the cash is for some intermediate goal ("i want to buy a house in 5-10 years when the right opportunity comes along"), then i wouldn't put it in stocks. your reasoning for this is correct: stocks are extremely volatile, so in 5 years you could easily have 50% less cash than you started with. if you're really okay with that ("if the market does poorly, i'll buy a smaller house or wait a few more years, nbd") then sure, go ahead.

it is far from impossible for stocks to lose money over a 20 year span. markets can remain irrational longer than you can remain solvent --some famous guy.


[1] although this sounds sketchy as hell. don't buy investments you don't understand. i see no reason not to hold a well-diversified bond index fund instead of whatever this is.

london,

i'm not an expert in pensions (they are entirely unheard of in my line of work, and they're basically an endangered species in the US anyway) nor in annuities (generally only appropriate for people who are old or who have special needs) but i read this as:

- if your wife waits until age 65, she can get $733/mo from the pension.

- if she takes a lump sump disbursement now, she gets $308.43.


that sounds like a pretty nice deal for waiting, but:

- how much do you trust your pension provider to be solvent in 30 or so years?

- what does $733/mo look like in inflation-adjusted dollars in 30 or so years?

- how much can you expect that $308 to grow to if you invested it in your portfolios instead?


there are annuity calculators online where you can model different scenarios.

Thanks for the answers, let me try to be more specific.

- by annual charge I meant management fee, 1.25% actually. Also I see most of those funds got a morningstar rating. How much attention should I pay to those ratings? Also how the heck do you manage to get only 0.05% fees? I checked many kind of funds and banks both in Singapore and HongKong but never came across anything near this low. Is it just because fees are much lower in the US in general compared to other parts of the world?

- I always thought using a big reputable bank was my only option. I searched online banks for a while but couldnt find anything good. Never heard of a discount broker before (I really am illiterate there), I guess Ill do some research there.

-Whats going on with this money? Basically Im just a 26yrs old that has been relatively successful playing poker for a few years and I try to increase my networth by investing my winnings as best as I can. I am currently sitting on a chunk of cash thats losing to inflation. I dont have any intermediate goal (except for finishing to buy my home by early 2015) but I dont rule out some sort of opportunity presenting itself in a few years, be it some property, business or whatever else.
Then again my main concern is trying to grow my networth as efficiently as possible.

- concerning [1], I didnt explain it well but I perfectly know what that is, thats basically a contract that locks money for 10 yrs (you can cashout before but then you pay 33% taxes on winnings) and that is 100% money guaranteed (unless the bank bankrupts, and even then I think most of it would be government guaranteed), it usually grows 2-3% a year. Banks invest depositors money almost exclusively in bonds and its by far the most prominent financial product in france.

i hold vtsax but you should be able to buy the etf version, vti, from any discount broker. ER on both is 0.05%

though actually if you're going to do it this way, i'd hold vt instead. diversification!

given your updated description, i'd say holding this cash in equities is ok assuming you can handle the swings. as a poker pro, you ought to have a good understanding of variance and your psychological tolerance for variance.

i have part of my portfolio set aside as a house/airplane/****-you-employer fund. since i don't have any specific timeline for those goals, i leave the money with the rest of my portfolio. i also swing the needle a little more to the conservative side to account for this chunk -- an extra ~5% in fixed income compared to where i would otherwise be. you could consider a similar approach.

your bond-like investment sounds like a Certificate of Deposit (CD), which is a perfectly reasonable fixed income vehicle (assuming you get something similar to FDIC insurance, meaning that default is impossible unless the us government defaults). however if that money is really invested by the bank "almost exclusively in bonds", the risk profile there may be different. caveat emptor.

Country: USA
Income: 80K, +- what the poker gods feel like doing to me
Risk Tolerance: Medium-High
Timeframe: Long-term (I am 29)
Debt: None
Other Information: I am way over-rolled for the games I play and the bankroll is in high-yield savings / CDs. Investment money is separate in that sense.

VTSAX (Total Stock Market): 52%
VFWAX (FTSE All-World ex-US): 20%
VBTLX (Total Bond Market): 15%
VSMAX (Small-Cap): 10%
VTIBX (International Bond): 3%

Will be making maximum contributions to a Roth (or traditional if I don't qualify), and probably hold it in total stock market.

Thoughts?

pokerfink,

you never responded to my response to your pm.

be extremely careful about separating bankroll (working capital) from retirement savings. short-term needs belong in liquid savings.

the traditional vs roth decision involves a number of tradeoffs, but note that you can do a "backdoor roth" contribution even if you're above the normal roth contribution cutoff.

i'm unclear on where you would be holding these investments. does all your investable cash fit in your roth, or is there taxable space as well? you should consider all your investment accounts together as a single portfolio, and you should not hold bonds in taxable space.

i like your proposed asset allocation, but here are some comments:

small cap tilt is fine as long as you understand what it means and why you're doing it. why small cap instead of small cap value?

i think i would skip international bonds for now for a few reasons:

- 3% of your portfolio isn't going to move the needle in any appreciable way. wait until you have a larger allocation to fixed income before slicing-and-dicing.

- international bonds funds are more expensive.

- based on my reading, it seems the jury is still out on the merit of international bond funds. vanguard only added them to their target date funds in the past few months.

that said, i find reasonable the naive argument that international bonds provide extra diversification over domestic bonds alone. i'm keeping an eye on this and may add international bonds to my portfolio in the future.

Be extremely careful in what sense? My bankroll is in liquid savings (and it's staying there), and is large enough that my risk of ruin is negligible. This investment money primarily comes from family (short story is my brother got into finance when we were little, my grandfather told him to pick a stock to buy for us, he picked apple, I run good. The apple has been liquidated into this money).

It's almost all in taxable space. I will be moving as much as I can each year into sheltered space. I was planning on holding Total Stock Market in the IRA.

ETA: I assume that the 52% I hold in total stock market should include the IRA holdings, yes?

I learned about the backdoor Roth the other day via this forum, so thanks.

Any particular reason why you would suggest small cap value? It has slightly underperformed the small cap fund in the very short time period it's been around.

My uncle suggested the same thing (he works at honigstock group).

Going to put 1% more into total bonds and 2% into the international stocks.

Thank you very much for your thoughts, and I will reply to your PM.

1. it's my standard advice. i'm sure you've been around 2p2 long enough to see otherwise smart poker pros do incredibly, unbelievably stupid and degenerate things to evaporating their bankrolls.

2. your first post wasn't super clear about the separation. good fences make good neighbors, etc.

yes, allocate across everything. but actually you'll want the bonds in the IRA because bonds are tax-inefficient. TSM is fine in taxable.

if your bond allocation both doesn't fit into your IRA and is a significant amount of cash, you might want to look at a municipal bond fund to hold in taxable space. (if it's not a significant amount, i wouldn't worry about the extra complexity).

fama-french.

what's your reason for overweighting small caps?

have you looked at overweighting REITs?

past performance is almost never a good reason to do anything.

Country you live in
CANDA
Income
70k(give or take,I play poker ldo)
Risk Tolerance
Medium
Timeframe for investment
1-4 years but with future reinvesting/growth in the same market
Debt
$0
Any other information you might have that would help us

I want to invest in real estate. I currently have 1 house at approx 200k, 1 almost finished house where I will be living that is 100k to completion and approx 200k liquid. I want to purchase a condo in the 150-180 range and then rent it out but don't want to buy all of it from liquid. I have some tax related questions and also some loan/mortgage questions. If anyone can help please send me a PM.

Just set up my 401k at John Hancock through work (confirmed ****ty options and web interface extremely difficult to navigate)
Age: 23
Income: Over $40K after Overtime
8%- 10% of check

Lifestyle Fund - Growth Portfolio(JILGX)- 20%
Science & Technology Fund(JESTX)- 40%
DFA Emerging Markets Value Fund(DFEVX) - 40%

I think i did a decent job.

Wanted to get into the Health Sciences fund but of course it doesnt show up on my allocation for whatever reason.

As posted previously I do have a Roth IRA with a retirement fund and now a undervalued stocks fund for 6200.

Not trying to be a dick or anything, but that seems like a terrible allocation. It's completely unbalanced.

Help?

It depends on what your options are, but 100% in the LifeStyle Fund would be a very reasonable option. It appears to be 51% domestic, 25% international, 15% bonds, and other. But again, it depends on your options.

if you truly wanted all three of those funds. I would switch the allocation to like 80% lifestyle fund, 10% science and growth and 10% emerging markets. Use a program like SigFig, it will help you visualize your asset allocation better to give you an idea of what and where your holdings are investing in.

Maybe I should consider the aggressive lifestyle if I'm all in . I'm under the impression it's a mix of their other funds.

I thank you for the hint. I think I'm locked into this mix for a month or something. But I am looking for some sort of aggressive funds for capital growth. I really didn't do much more than think science and emerging markets should be solid investments. I just threw in the lifestyle for no real reason. Would it be logical to either do aggressive lifestyle100% or one of these industry funds at 85%with 15% in bonds.


I could make a list or screenshot of what the options are

blah,

read a book and get your **** together. you're all over the ****ing place bro.

does that sound like something a savvy investor would say?

I know the standard advice here is to keep short-term capital (ie poker bankroll) in high yield savings.

Thoughts on keeping it in a bond fund like Vanguard Total Bond? What are the chances that the Bond Fund depreciates by any meaningful value?

Its worst year was 2005, where the capital return was -2.03%, but still made money with dividends (2.49% total return). It generally returns about 5% total. In the current climate where you can maybe get 1% in high yield savings, isn't this a way better option?

Assuming you're properly (and probably over) rolled for the games you play so that your risk of ruin from poker is negligible.

FDIC insurance tho.

Aren't Vanguard funds considered like 99.9999999% safe?

if all we're looking at is return, why not put this cash into equities which "generally return" 7-8%+?

you're thinking about this backwards. you don't get to pick what kind of return you get. all that you can control is how much risk you assume.

to me, your bankroll is business capital. you could need it any time to sustain your livelihood. i would not put such an asset at any risk. fdic-insured savings is as close to "zero risk" as you can get in a world with bird flu and nuclear weapons.

if you're willing to tolerate more risk, bond funds offer more expected return in exchange. the main type of risk affecting bond funds is interest rate risk. how much a bond fund is affected by interest rate changes is related to the bond fund's duration. this makes perfect sense if you understand what bonds are and how they work, but i'll leave that as an exercise for the reader. e.g. you can look upthread for my discussion with dale about the "point of indifference".

if you were to use a bond fund, you'd probably want to use one with a shorter duration, i.e. a short-term bond fund. of course, the shorter duration, the less risk, and therefore the less expected return. see how risk drives your decision again?

if by "safe" you mean "i am confident that when i wake up tomorrow i'll still own shares of a mutual fund that holds the stocks or bonds it says it holds", then sure, i'm 99.999999% confident.

if by "safe" you mean "cannot lose value", then you are missing some fairly basic concepts about how markets work.

bottom line: don't **** around with your bankroll imo.

OK, but all you need is another 1987 or 2008 to happen where you lose 20% of your funds value in a week. Is that something you'd want to put a poker bankroll in?

Also, expecting 5% when the current yield is 2.4% is pretty lol. If you're willing to accept a loss, then fine, but don't think you're going to get 5% or even a positive return. Also, just as an example, YTD the total bond fund is down 2.6% in total return (including dividends).

TBF is not an appropriate place to hold cash, imo. It should be for a longer horizon. Also, the difference between the 2.4% TBF yield and the 1.0% online saving rate doesn't seem worth the risk for cash holdings.

Since no one answered, it looks like the company switched plans late in her tenure there. Those are two completely separate plans listed. Basically she gets a monthly 733 at age 65 from the old plan, and is entitled to a current lump sum of 308 from the new cash balance plan.