But the rules say:Quote:
Originally Posted by Loki
a. start putting money into your 401k asap - the younger the better (the miracle of COMPOUNDING!)
b. every little bit counts - a buck, ten bucks, a hundred bucks - no amount is too small.
c. just set up an automatic withdrawal from every pay check and soon you won't even miss it.
The rules say you have to be making enough money to cover expenses first. :noob:
Do you actually have access to a 401k? Are you technically part time or temporary employment?Quote:
Originally Posted by Loki
It's not full-time/part-time here; it's percentage appointments. I'm on a high enough appointment to get all the benefits. No idea about a 401k; grad students don't make enough to save anything. We're lucky if we break even.Quote:
Originally Posted by EyeKhan
How about you start a retirement account and get back to me with the results in twenty years. In the past we've discussed your assumtion of the continuation of the 8% average market gain. I showed you how 20 year lulls have existed. Well this current lull is not only extending beyond 20 years it is also losing people money.Quote:
Originally Posted by Loki
And the Sage Advice always said: Buy a house, as long as you're in a solid neighborhood the value will always at least hold but likely go up! Well, I just sold the house I owned for thirteen fucking years at 40k less than I paid for it and that's after putting 30k into hard upgrades. Mind you my city, state and region never had a bubble-run-up in housing prices. Just a crash.Quote:
Originally Posted by Being
The sages say: "Oy! That's never happened before. Wow, who woulda thunk it?" And that's the fucking point. Modern home ownership in the masses is only five or six decades old, and the "Ownership Society" concept even less. But every dick in the woods knew just what to do vis a vis home ownership. Well, I and everyone else in the country who had to sell a house in the last three years got royally fucked by that Sage Advice because guess what? They were wrong.
Yeah, that's a tough pill to swallow. And you didn't even mention the premium you were paying above the cost of renting instead of buying. :(Quote:
Originally Posted by EyeKhan
Its extremely frustrating, let me tell you. Based on the Sage Advice, that was supposed to be at a minimum like putting money into a bank account so long as I took care of the house and the neighborhood didn't fall apart. I did, and it didn't. But because some jackasses in Las Vegas and LA (gigantic simplification, noted) spent a whole hell of a lot of money driving up property values to wholly unsupported levels, I lost my ass. Nobody could have predicted that and that's why when someone says "this is what you do" I'm not buying it. Anything can happen when your nut is at the mercy of the Market, especially insufficiently regulated markets.Quote:
Originally Posted by Being
If you want certainty, go to a communist country. Risk is inherent in a non-command economy.Quote:
Originally Posted by EyeKhan
Yeah, ok. Remember the Soviet Union?Quote:
Originally Posted by Loki
Yeah, for seven decades, everyone had a job and no one lost their savings. :noob:Quote:
Originally Posted by EyeKhan
Remember that when you watch your retirement funds dwindle away 30 years from now. Try not to complain too loudly lest someone brings up your post history.Quote:
Originally Posted by Loki
See sig.
Ok, now you really have hit the rock bottom of lazy answers.Quote:
Originally Posted by Loki
Oh, by the way, putting money aside for 15 years in a low risk fund got me a return that wasn't even on a par with if I'd put the money under my mattress.
Considering that Being makes absurd claims in every thread he posts in, I find that it makes no sense in trying to come up with reasonable counter-arguments until he actually makes it clear what his point is.Quote:
Originally Posted by Hazir
I have made my point perfectly clear. You simply deny reality and continue promoting the notion that history is the ultimate guide to economic stability. All the while ignoring recent history.Quote:
Originally Posted by Loki
I remember things differently. Everybody who paid attention was saying there was a housing bubble and that it would burst sooner or later for years before it actually did. Many people ignored their warnings. I remember someone (not you, I'm pretty sure) taking shots at me because I said there was a housing bubble and that it was going to pop. "A lot of people say that, but it hasn't happened yet so it won't!" The problem wasn't that the information wasn't there or that the underlying rules that guide these things were wrong, it's that everyone was ignoring the information and underlying rules.Quote:
Originally Posted by EyeKhan
I'm sorry you took a loss on your home sale. It sucks, the timing is bad luck, and there was some risk anyways though maybe you got hit harder than most, but it doesn't invalidate everything people know about economics.
Does this mean you're retired now?
Plus haven't people been predicting the collapse of the Detroit-area economy for a decade now? :confused:
Exactly. I burst out laughing when I read "buy as much house as you can afford." That's OK if you have sufficient down payment AND you define "afford" very conservatively. My wife and I budgeted what mortgage payments we could afford based on this assumption: if we had half of our income at the time, we could scrimp and save and barely manage to keep the house. Anything more is unwise. Houses are terrible as investments, beyond being better than renting.Quote:
Originally Posted by Lewkowski
As for paying down your principle, why? Our mortgage is at 4.75%. Over 30 years, my retirement investments will yield much higher than that. With those kinds of mortgage rates, paying down early is as silly as paying off student loans early. You're citing dogma from a time when people had much higher interest rates on their mortgages.
Otherwise, I agree with Wiggin (and Fuzzy). People like to believe they live in unique times. That's the idiocy behind the "new economy crap" that got banks to put our entire system at risk. Guess what fellas? It's just the old economy with some assholes trying to pull the wool over your eyes.
But you're not appreciating the issue of luck. For example, if your company moved you to certain parts of the country in, say, early 2008, you may have paid a premium for your house and then lost 50% of its value over the ensuing two years. A lot of people have lost their jobs, and unless you're wealthy that's going to cause a lot of financial hardship. So while I totally agree that the frugal measures described here are a great idea, it's no safety net. There are people with great financial hygiene who are really hurting.Quote:
I've met very few people who maxed out their 401(k) contribution and didn't get over their heads in debt that are having financial difficulties.
PS another good rule of thumb: keep enough money for 3 months of frugal living in a liquid source. You can pay wicked penalties from removing money from retirement accounts, so you need a rainy day fund.
The bath I took was a result of the bubble, and probably of the collapse of GM and Chrysler, but it had nothing at all to do with me participating in the bubble or of over inflated house prices in my region. I followed all the rules to the letter. The rules, which were wrong, never allowed for what happened. Which is my point.Quote:
Originally Posted by Wraith
The timing could not have been worse. I bought my new house pre-crash and sold my old post. Know about economics? Are you serious? The subject is as much about human behavior in the context of culture as anything else. It sure as he'll isn't a hard science you can ever know anything enduring about. Which again is somewhat my point.Quote:
I'm sorry you took a loss on your home sale. It sucks, the timing is bad luck, and there was some risk anyways though maybe you got hit harder than most, but it doesn't invalidate everything people know about economics.
Does this mean you're retired now?
Also, no, I'm nowhere near retirement. This is just an exercise in frustration and recognition that all the advisors out there with their rules of thumb are at least in part far too confident in their knowledge.
The 'rules', such as they are, did though. Bubbles don't only impact people who buy into the bubble. It sucks, yes, but it doesn't really invalidate anything.Quote:
Originally Posted by EyeKhan
BTW, I've never heard that "buy as big a house as you can" financial guidance. What I've always heard is more along the lines of "Never buy a house as an investment, they're terrible for that. Buy one to live in it."
Just to be clear, there was no bubble in SE MI at all. Period. Second, the 'rules' I grew up w/ included 'buy a house and take care of it.' You are fortunate with your more savvy Sage.Quote:
Originally Posted by Wraith
Or our unabiding faith in authority and experts.Quote:
Originally Posted by EyeKhan
Tear says it's the same old economy as ever, with wool over our eyes. I saw a stat the other day, that 63% of our GDP is run through just six financial institutions. No, it didn't used to always be this way. And it's never been this bad to have a fricking savings account or CD with returns of 1-2%. What a joke.
The biggest bubble that ties all other bubbles into this massive floating illusion is the explosion in credit and debt. Consumers, businesses, municipalities, states, federal....international and sovereign debt. Trillions and trillions of unfunded 'liabilities'.
Yes, it's frustrating to have done all the right things, saved hard and invested, not loaded up on debt (hell, I haven't used my credit card for about a year now...) But financial "hygienics" won't help the 70 year old whose retirement got busted up, and their time is running out. Golden Years, huh? Not traveling the world, volunteering, or spoiling grandkids, but being a Walmart greeter, or as choobie says---fipping burgers. yay
Well, if this little crisis taught me one thing it is; never buy a new house before you have sold the old one.
Please. That's not an argument against a complex system, it's just an argument for prudent policy and careful investment.Quote:
Originally Posted by Being
*shrugs* Not precisely; investing certainly has an element of risk (as is any 'hoard' of wealth, regardless of where you put it), but it isn't gambling in that any worthwhile investment means you own a chunk of something real - the gamble is generally in the asset allocation and the timing of asset redemption. Anyways, no one has argued that there is anything 'sure' about investing, it's obviously a risky endeavor (even cash is risky in that it's fiat currency, and precious metals or other commodities have bubble/etc. risks as well). We just argue that the basics of wise investing and risk management aren't fundamentally different today than they were a hundred years ago - some people just ignore the wisdom of time.Quote:
Originally Posted by EyeKhan
The 'progression' you're positing is meaningless - they have to do with changing demographics, not changing principles of economics and investing. People don't 'of course' lose in the stock market, and I challenge you to show me how that's true.Quote:
The complexity is aggravated by the constantly changing conditions. A hundred years ago people relied on sticking money in their mattresses and the compassion of their children. Sixty years ago it was the defined pention programs. Twenty years ago it was the 401k. Now what do we have? Bankrupt pension programs because program managers were allowed to gamble - and lose - them in the stock market while shorting contributions based on unrealistic projections of returns. So the solution to that fuck up was to have individuals gamble their own money in the stock market, and of course lose. Hey, I know, lets put social security in the stock market, maybe the third time's the charm.
There's some risk in any retirement scheme, whether it's a defined benefit or a defined contribution. There's no certainty in life; you think the governments can cope with longevity and market risk any more than an individual? The only issue is that a government will fall back on debt to deal with risk, when an individual doesn't really have the option. Obviously, this is an incentive for better risk management on the part of the individual saver than a government or corporation would ever have - it's their retirement that's on the line.Quote:
Maybe people shouldn't have to rely on gambling in a too-complex-to-understand and likely loaded system to provide for their health and welfare when they can't work anymore. This model of retirement care is fundamentally a fucked up joke. Its more about allowing savvy investors to harvest money from the rest of the population. :down:
You're quoting one black swan event as proof of some fundamental change in long-term best practices? It's always possible to cherry-pick results to argue 'things are different this time'.Quote:
Originally Posted by Being
Total lie. No one has argued that buying a house is for everyone - that's an aberration of the real estate bubble. They're not a great investment - highly illiquid, subject to very high taxes (on the principal value and not a realized gain, either!), etc. Sure, in some circumstances they can give high yields, but the market is awfully tough to predict. You also happened to catch the very worst time to sell a house.Quote:
Originally Posted by EyeKhan
*shrugs* It's no secret that in some markets renting is far cheaper than buying.Quote:
Originally Posted by Being
Cherry-picked data.Quote:
Originally Posted by Hazir
This is obviously a tough decision - principle paid down on a debt is sometimes a good idea compared to investing in something illiquid, as it gives you some leeway on future loan payments. This is really only true for limited paydown of the principle, though.Quote:
Originally Posted by ']['ear
Agreed, but I'd say at least 6 months is necessary. We've got 8 months worth of cash plus plenty of principle we can pull out of a Roth IRA penalty-free if need be. It's all about risk management - the cash is paltry compared to retirement savings after a few years, but gives a very hefty margin of safety so you don't need to liquidate assets in a down market.Quote:
PS another good rule of thumb: keep enough money for 3 months of frugal living in a liquid source. You can pay wicked penalties from removing money from retirement accounts, so you need a rainy day fund.
Your interpretation of the rules is what's wrong, either that or someone stupid was advising you. You're bandying about arguments that are functionally no different than the worst of the house flipping advisers back in the boom and claiming it's fundamental rules of investing.Quote:
Originally Posted by EyeKhan
Please show me your investment portfolio.Quote:
Originally Posted by wiggin
My wife and I have two retirement accounts; a 401k from her employer and my Roth IRA. Given our age, we are heavily invested in fairly risky equities. Our primary allocation is split between a domestic stock market index fund with a very low expense ratio, a slightly pricier managed US growth fund, a large and well-known non-US developed world fund, and an emerging markets fund. We have a trivial allocation to a high-quality domestic bond fund. As of now, we have no investments in real estate or other investment vehicles other than a large cash reserve.
Not that it's any of your business, or is even remotely pertinent.
Oh, it is pertinent. Who do you rely on for the ratings of those funds? Or do you do all the research yourself?Quote:
Originally Posted by wiggin
I don't really rely on ratings, though the Morningstar ratings at least use a fairly transparent system so I occasionally look at them. Ratings are unimportant for index funds (my core holding), and we chose the best available options from the wifey's 401(k) plan based on our own rubric and asset allocation strategy. The basic things we looked at included the long-term performance of the fund against relevant indices, time since inception, expense ratios and other fees, longevity and experience of fund managers, asset allocation inside each fund and core holdings, fund strategy, turnover, quantity of managed assets, etc. Primarily, we looked for relatively passive investment strategies based on sound fundamentals in stable funds - with as low an expense ratio as possible and no load.
So you've built a matrix that proves your choices are the best of all your options?Quote:
Originally Posted by wiggin
There's no way to know what the 'best choice' is except by a post-facto analysis. Anything can change - my asset allocation can be off due to unforseen macroeconomic changes, the funds can suffer due to investor panic, requiring selling poorly performing assets in a down market, expense ratios can change, etc. I have established my own weightings on the basis of my personal risk tolerance and beliefs about the world economic system. I doubt I am getting the 'best' option, but I'm getting my best option given the choices.
At the end of the day, I do not expect to significantly outperform the greater market, if at all. I'm okay with that; I think people who think they can consistently time the market or choose the best fund are dreaming, since the majority of funds also fail to do so. I just try to spread the different risks around and change my asset allocation on the basis of a predetermined plan, not transient fluctuations in the market.
What are you getting at? What's your point?
My point is that you are not doing anything different than several million Americans started doing 30, 40, 50 years ago who are now screwed because they invested wisely according to current economic philosophy. If we hit another 20 year lull 10 years before you retire, will you have time to rethink your choices?Quote:
Originally Posted by wiggin
Well, I'm doing things a little bit differently in that my expenses are far lower than people a few decades ago. But in principle my investment strategy hasn't changed, no.
Please describe this '20 year lull'. If you mean that stocks have underperformed bonds to date, I have two points: 1) You're cherry picking results, and this last bit is a fluke. 2) My asset allocation will shift very heavily towards bonds and other fixed-income securities as I get closer to retirement (I would probably even stay away from bond funds at latter times, opting instead for bond ladders and the like). This will significantly reduce my market risk and cushion any blow to the rest of my portfolio.
People still made plenty of money in the last two decades, despite the fact that we're currently in a trough. Dividends are dividends, and even growth stocks have produced returns. It's just that bond returns have been better, since stocks have been hammered lately. This isn't invalidating anything I said; for that matter, the comparisons you are addressing refer to domestic stocks, which totally ignores my large exposure to international equities, which further mitigates the poor performance of the domestic stock market in recent years.
All I'm hearing is that you're not happy the US stock market has had trouble lately. Boohoo. A sufficiently diversified portfolio wouldn't have been completely trashed by this downturn, and even more importantly, good enough risk management would allow people to ride out a downturn and allow their assets to regain value before liquidation. What's wrong with the basic investing strategy?
Anecdotal maybe, but we are talking about actual results. The 'plan' however tiny was not significantly different from the average pension plan. The result was abysmal given the fact that the plan ran over a total of 15 years. One not a single of my other investments have I ever made any money. With the money I lost before I decided to pull out alltogether I could have bought a nice family car. And FYI; I did check how the funds I pulled out of did after I pulled out, and I can assure you; there is no sign they are doing any better than when I got out.Quote:
Originally Posted by wiggin
IIRC you were locked into a 15 year index fund that matured thereabouts of a few months ago, yes? It's no wonder that you didn't make any money, in the middle of the worst worldwide recession in 80 years. Individual retirement plans don't work like that; you can tailor your asset allocation over time, forgo withdrawals when asset values take a hit, etc. You had no long-term dollar cost averaging, no graded withdrawals, nothing. Just a lump sum in the beginning and end. That's not a very realistic situation, and specifically goes against the received investing wisdom - your investment effectively tried to 'time' the market, which is an awful idea.
That's what I mean by cherry-picked data - it's one data point at a specific time that means nothing about the general assertions Chaloobi and Being et al are making about the viability of basic investing wisdom.
I was just quoting the recommended minimum. We have over 6 months (not exactly sure where we are, actually). We also have a couple of Roths. I'm glad to be there despite my health adventures of the last two years.Quote:
Originally Posted by wiggin
My main financial regret is having done grad school and postdoc in very expensive places, so I could save little. Actually, that's my second regret. My first is that I had no capital at all to buy a condo in either place. Had I done so, I'd probably have a 200-400 extra nestegg at this point. I knew it, too, but just had no money. Proves the adage that it takes money to make money.
How's a senior citizen living on fixed income, with limited future time, supposed to ride it out and regain value?Quote:
All I'm hearing is that you're not happy the US stock market has had trouble lately. Boohoo. A sufficiently diversified portfolio wouldn't have been completely trashed by this downturn, and even more importantly, good enough risk management would allow people to ride out a downturn and allow their assets to regain value before liquidation. What's wrong with the basic investing strategy?
wiggin, the 'cherry-picking' isn't the data. It's the timing, and it matters. (Not to be confused with timing the market...) You may have an unabiding faith in business as usual, but the billions (trillions?) of dollars that left the market say differently. There is too much volatility and uncertainty for the "older" investor.Quote:
That's what I mean by cherry-picked data - it's one data point at a specific time that means nothing about the general assertions Chaloobi and Being et al are making about the viability of basic investing wisdom.
And don't forget that we aren't really known for a populace of financially savvy people---that's why there are advisors, fund managers, planners---even HR depts and 401-K managers. Complexity and innovation itself isn't bad in and of itself, ubt you're missing a key element in what we're bitching about here: even doing the right thing has hammered millions of people. Trust and confidence is lost. People are worried, and for good reason.
Even the traditionally safe bond market is being tested (when govts start buying bonds there's trouble) and muni's are wrapped up in bankrupt states. Banks borrow from a discount window and buy treasurys, instead of lending to each other or consumers. And no--it hasn't always been this way.
Their actual income requirements should be far lower than what they normally pull out; they can drastically reduce their withdrawals. Furthermore, it is frequently cited that retirees should keep at least a year worth of cash reserves, which allows one to slightly 'ride out' collapses in the value of investments. Lastly, someone actually in retirement should have sufficiently diversified assets that a pummeling of the stock market won't kill them - perhaps keeping a small annuity to provide basic expenses, or with larger bond holdings, reverse life insurance plans, whatever. Stocks are obviously a decent part of any portfolio if you want to stay ahead of inflation, but they should *not* be relied upon in retirement.Quote:
Originally Posted by GGT
The specifics of this black swan event do require changed behavior of a transient manner, in accordance with investing fundamentals.Quote:
You may have an unabiding faith in business as usual, but the billions (trillions?) of dollars that left the market say differently. There is too much volatility and uncertainty for the "older" investor.
We can read that kind of traditional analysis at financial/investment web sites wiggin, it's just repeating what financial advisors say, over and over....but that's what Choobie, Being and I are daring to question. After so many experts were wrong, and we challenge how much risk and structural problems they underestimated, it's hard to keep buying their standard line.
But I'm glad you have such confidence in your strategies, and all the fundamentals. Too bad we can't fast forward a few decades to see how well that plays out for ya.
:coffee:
You have yet to explain why my strategies wouldn't have worked, even in this downturn. This downturn has been bad for people's portfolios, but it's only been disastrous for those who (a) panicked and cashed out their assets, missing much of the recovery or (b) didn't have good risk management/asset allocation for their needs. Violating either of those is going against the common wisdom on investing, and is how people get into trouble.