californiamilleghia said:Beanie Babies........
how many people used retirement money to "invest" in collectibles ?
my friend made a lot of money selling stuff to these "investors"
My wife has an ex-coworker who put a substantial portion of his discretionary savings into Beanie Babies at the height of the craze. I have no idea when (or even if) he ever tried to cash out, but he must have lost 10s of thousands of dollars.
RX Reven' said:BTW, I had a one hour call with a Fidelity financial advisor last week. She had good qualifications, was well spoken, and advised me that I was making a mistake to not have "three months of cash reserves on hand".
I would have received the exact same advice 30 years ago and had I taken it then, I'd be $535,000 poorer today. Do the math, three months thirty years ago was 10K, three months today is 30K so the average of 20K compounded at 12% annual growth for thirty years is $535,000.
It should be noted that you were perhaps fortunate in that you didn't need a cash reserve during the last 30 years...like any sort of investment advice, it all depends on the amount of risk a person is willing to take. A person in otherwise good financial shape could get hit by a bus tomorrow and then need to have extra money on hand, but there's no way to know that today.
My NSX has had a 30% increase in value in 4.5 years, that's the most fun for that kind of return that I've had.
I have a similar question. Let's say something about 6 figures sitting in a savings account. No credit card debt, no mortgage, 1 car payment, retirement accounts are good. Want to be able to access the money just in case I want to buy something that's 5 figures or more (land, special car I don't need, etc). But, I don't like how its just sitting there.
In reply to yupididit :
Similar question, similar answer. I would transfer the funds into a brokerage account, then gradually move into the market with index funds and/or other mutual funds.
1988RedT2 said:In reply to yupididit :
Similar question, similar answer. I would transfer the funds into a brokerage account, then gradually move into the market with index funds and/or other mutual funds.
Yep, open a vanguard or other brokerage account, throw it in an index fund and reap the overall rate of return of the market.
Talk to a tax person, but my understanding is as long as you withdraw less than the principle you put in, you don't even have to pay gains tax as you're not removing the profit portion?
WonkoTheSane said:Talk to a tax person, but my understanding is as long as you withdraw less than the principle you put in, you don't even have to pay gains tax as you're not removing the profit portion?
I'm not a CPA, but my understanding is that managed mutual funds will pass capital gains through to you based on the transactions they engage in during a year. In theory index funds do this too, but because they engage a lot fewer transactions it often doesn't show up. The broker will send you a 1099 at the end of the year listing this.
When you sell mutual fund shares you will pay capital gains based off the purchase price and how long you held the shares.
I've saved every old radiator and heater core I've ever come into possession of. Basically I can turn it into cash any day that the scrap yard is open.
ProDarwin said:Fidelity/Vanguard investment account.
Vanguard is also my choice.
Not exactly what your looking for, but check out series I bonds.
Seems to me it’s the best CD type product out there.
Folgers said:Not exactly what your looking for, but check out series I bonds.
Seems to me it’s the best CD type product out there.
I bought I bonds earlier this year. You're limited to $10K a year purchase. Spouse can also buy $10K per year. Chirren probably could too.
z31maniac said:ProDarwin said:The question is how liquid does it need to be?
With a brokerage account you can get money out fairly quickly. I would argue any time you need 5 figures worth of money, you can wait a day or two, because those types of purchases typically arent cash. With the exception of ransom.
Oh it would never need to be RIGHT NOW. But maybe within a week or so? My credit cards are all 0 balance and between the 3 I think I have $70-75k in limit.......so I have more than enough for any kind of emergency.
My 401k is already through Fidelity, do you guys think it best to just open a separate account there and move forward that way?
Yes, just open a brokerage account there.
If you don't have a Roth IRA, might want to open one of those there as well.
Before you go and find a different institution to move the money, check if you bank have investment possibilities. What you are looking for is no-load index funds which do really well, and if your bank can offer them, it may be more straightforward to stay at one institution. For sure, it would make taking money out easier if you need it.
Man, thank you everyone (I can't name you all, but please know I really appreciate it). That's why I ask these questions here because I know I will get knowledgeable answers.
I'm going to open up an investment account with Fidelity, since that is where my 401k is.
OF course, if anyone has more advice I want to hear it.
ProDarwin said:z31maniac said:ProDarwin said:The question is how liquid does it need to be?
With a brokerage account you can get money out fairly quickly. I would argue any time you need 5 figures worth of money, you can wait a day or two, because those types of purchases typically arent cash. With the exception of ransom.
Oh it would never need to be RIGHT NOW. But maybe within a week or so? My credit cards are all 0 balance and between the 3 I think I have $70-75k in limit.......so I have more than enough for any kind of emergency.
My 401k is already through Fidelity, do you guys think it best to just open a separate account there and move forward that way?
Yes, just open a brokerage account there.
If you don't have a Roth IRA, might want to open one of those there as well.
I don't have a Roth IRA, and I know it's post-tax. That allows you to hedge your bets vs future tax rates.............anymore insight? Like I said, I'm a sponge trying to soak up all the knowledge.
Roth IRA isn't so much betting because in your case you wouldn't have access to a traditional IRA. You may not use it now, but in the case that you have extra $ in the future you want to invest its a good option to have.
A Roth is a retirement type account, but if you want to save in addition to your 401k its a good option. Its a tool to maximize tax sheltering along with your 401k and HSA.
ProDarwin said:Roth IRA isn't so much betting because in your case you wouldn't have access to a traditional IRA. You may not use it now, but in the case that you have extra $ in the future you want to invest its a good option to have.
A Roth is a retirement type account, but if you want to save in addition to your 401k its a good option. Its a tool to maximize tax sheltering along with your 401k and HSA.
Which means that in THIS case, it's not a good idea, since having reasonably liquid money is needed. If that account gets too large, then contributing to a Roth or any other IRA would be a great idea. But until you have that buffer account, focus on good funds to invest into.
BTW, it's good to also consider what funds to invest in- as a 6 month risk is not the same as 6 year or 16 year.
Yes exactly. I should have clarified. It is not a good option for liquidity, but it IS a good option for investments beyond that.
stuart in mn said:RX Reven' said:BTW, I had a one hour call with a Fidelity financial advisor last week. She had good qualifications, was well spoken, and advised me that I was making a mistake to not have "three months of cash reserves on hand".
I would have received the exact same advice 30 years ago and had I taken it then, I'd be $535,000 poorer today. Do the math, three months thirty years ago was 10K, three months today is 30K so the average of 20K compounded at 12% annual growth for thirty years is $535,000.
It should be noted that you were perhaps fortunate in that you didn't need a cash reserve during the last 30 years...like any sort of investment advice, it all depends on the amount of risk a person is willing to take. A person in otherwise good financial shape could get hit by a bus tomorrow and then need to have extra money on hand, but there's no way to know that today.
The cash that you invest is still accessible, it's not locked away forever. Getting hit by a bus just means clicking on a sell button. You'd have some taxes to pay, but it would be on money you would not have had, had you left it in a savings account.
I had a similar situation to yupididit, some extra money laying around burning a hole in my pocket. I almost bought a 1966 Marauder when I already have two nice fun cars so decided instead to open a "racing annuity" fund. It's made me $9000 so far in returns, and that's after a disastrous first year or so when I was playing with stocks instead of just buying an index fund.
The only time having your emergency fund invested would be a problem is if you need it and the value at that time is lower than when you invested it. After a few years even a market crash will not wipe out your invested emergency fund, as long as you've left it in diversified investments and not played around with it.
This whole thread makes me think, how much do I really need in an "emergency fund." What emergency could there be where I really need it to be accessible today?
Currently I have a similar conundrum of having cash sitting doing nothing. I have great credit and can access a lot within two weeks so why am I sitting on cash. Other than knowing some upcoming house projects to spend money on why do I have more than $5k sitting still.
dculberson said:stuart in mn said:RX Reven' said:BTW, I had a one hour call with a Fidelity financial advisor last week. She had good qualifications, was well spoken, and advised me that I was making a mistake to not have "three months of cash reserves on hand".
I would have received the exact same advice 30 years ago and had I taken it then, I'd be $535,000 poorer today. Do the math, three months thirty years ago was 10K, three months today is 30K so the average of 20K compounded at 12% annual growth for thirty years is $535,000.
It should be noted that you were perhaps fortunate in that you didn't need a cash reserve during the last 30 years...like any sort of investment advice, it all depends on the amount of risk a person is willing to take. A person in otherwise good financial shape could get hit by a bus tomorrow and then need to have extra money on hand, but there's no way to know that today.
The cash that you invest is still accessible, it's not locked away forever. Getting hit by a bus just means clicking on a sell button. You'd have some taxes to pay, but it would be on money you would not have had, had you left it in a savings account.
I had a similar situation to yupididit, some extra money laying around burning a hole in my pocket. I almost bought a 1966 Marauder when I already have two nice fun cars so decided instead to open a "racing annuity" fund. It's made me $9000 so far in returns, and that's after a disastrous first year or so when I was playing with stocks instead of just buying an index fund.
The only time having your emergency fund invested would be a problem is if you need it and the value at that time is lower than when you invested it. After a few years even a market crash will not wipe out your invested emergency fund, as long as you've left it in diversified investments and not played around with it.
Exactly...the worst case scenario is that I lose my source of income at the same time that my investments are significantly devalued; let's say by 50%.
Ok, so now I have to sell what was 40K in stock to get that 20K in cash resulting in a 20K loss relative to having a three month cash reserve.
Do the math, I'd have to experience 26.75 horrible black swan events to offset the missed opportunity of not staying fully vested all these years getting that 12% average annual ROI.
In reply to Andy Neuman :
We prefer to track/organize our money by using separate accounts, and we keep (~$8k) in an account that we don't touch. That will cover a years worth of property taxes and home insurance, and is a backup fund in case my car E36 M3 the bed tomorrow or anything else happened.
Our primary checking account is where work checks deposit, and we pay bills from, then use the rest to move to investment accounts. It's peace of mind to have some cash out, and we are really aggressive with investing other wise.
z31maniac said:RX Reven' said:z31maniac said:ProDarwin said:The question is how liquid does it need to be?
With a brokerage account you can get money out fairly quickly. I would argue any time you need 5 figures worth of money, you can wait a day or two, because those types of purchases typically arent cash. With the exception of ransom.
Oh it would never need to be RIGHT NOW. But maybe within a week or so? My credit cards are all 0 balance and between the 3 I think I have $70-75k in limit.......so I have more than enough for any kind of emergency.
My 401k is already through Fidelity, do you guys think it best to just open a separate account there and move forward that way?
It sounds like you and I are in similar financial situations.
For me, my credit card is my cash reserve (one month access to 50K at zero interest) and whatever cash I have on-hand gets thrown towards paying down debt.
I owe 32K to the penny on my mortgage (3.625% 30 year fixed) and ~6.5K on a car loan and about $250 on my credit card. My eldest daughter will be starting college this September and I'm on track to be debt free by then.
BTW, I had a one hour call with a Fidelity financial advisor last week. She had good qualifications, was well spoken, and advised me that I was making a mistake to not have "three months of cash reserves on hand".
I would have received the exact same advice 30 years ago and had I taken it then, I'd be $535,000 poorer today. Do the math, three months thirty years ago was 10K, three months today is 30K so the average of 20K compounded at 12% annual growth for thirty years is $535,000.
Not to disparage Fidelity but my financial advisor wasn't a Fiduciary, kept moving me towards annuities / heavily managed mutual funds (1.2% to 3.0% annual management fees) and even their calculator was wildly biased as I only had three scenarios to pick from (the market does much worse than average, worse than average, or average during my retirement years). Give me a break, that's obviously a tactic to draw me into ridiculously expensive "safe' investments...how about a simple 90% confidence interval.
Anyway, screw the "experts"...we're so far ahead of where we'd be had we listened to them our whole life that we can afford to continue to be aggressive.
Pay off your debt and use your credit cards for emergency cash.
I know from previous monetary discussions, you have been much smarter with your money than I was. I think about all the money I spent on cars/booze/going out/vacations through my 20/30s (I turn 40 this Sunday) I'd probably have well in excess of the "3x your yearly income in your 401k at 40" vs the 1x amount.
Any suggestions on being able to find a good fidiciuary?
First, don't beat yourself up over spending money on cars, booze, etc...the only thing that matters is asking "what is the smartest thing for me to do right now". Anything else is totally unproductive.
I've never had a financial advisor, Fiduciary or otherwise but I think any Fiduciary associated with a large, respected firm, Schwab, Edward Jones, etc. is likely to be pretty good.
Only thing I will add is you make $$$ by spending what you have wisely ,
I buy my groceries when the store has 2 for 1 sale or something like that , I try and buy enough for 3-4 months when they will have a sale again ,
Get the stores discount card , normally it's set up with your cell phone so you do not have to remember to bring the card ,
my locals stores have Pepsi / Coke 12 packs for 4 packs for $10-$12 plus tax when on sale , compared to $6.99 if you buy one....
Also helps to have extra food around when we have another big earthquake !
californiamilleghia said:Only thing I will add is you make $$$ by spending what you have wisely ,
I buy my groceries when the store has 2 for 1 sale or something like that , I try and buy enough for 3-4 months when they will have a sale again ,
Get the stores discount card , normally it's set up with your cell phone so you do not have to remember to bring the card ,
my locals stores have Pepsi / Coke 12 packs for 4 packs for $10-$12 plus tax when on sale , compared to $6.99 if you buy one....
Also helps to have extra food around when we have another big earthquake !
That's unrealistic to buy groceries for 3-4 months at a time. Unless you only eat canned and frozen food. We have to go every 10 days or so because my kids eat A LOT and they eat fresh fruits and veggies. Obviously we have some non-perishable foods too but that doesn't account for a significant portion of our grocery shopping.
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