z31maniac

Based on family history (Alzheimers, Dementia, Heart, etc)

I'll be surprised if I make it to the current life expectancy.

aidandj

iTrader: (5)

<br />
<br /><br />
<br />The way my dad spoke about him is that he lays it all on the table for my dad. Tells him everything he can do, and the breaks it down into smaller decisions. I.e. high risk vs low risk. Do you want to invest in new tech or stable big companies. My dad pays some amount when buying stock and none when selling. He also has some money in managed funds. Where you put money in and then get a return based on the funds that are managed.

xturner

I think this is right. My wife and I have always lived well below our means in those areas and the payback has been great. I was a chef years ago, so eating at home isn't a drawback, but our house was very affordable, and we never sprung for the expensive car. Most of the people I know in Fairfield County with our income are riding around in A6/7's, 5-series and E-classes while we have a 10-yr-old TSX, my 1990 Miata and a 2001 Silverado, all bought with cash.

We own our house in CT outright, and have a small mortgage on our place in Maine. There are very legitimate arguments to be made that I should have big mortgages on both, but....

We are both 59, and only working because my wife actually likes her job, and I'm not sure what else to do yet. We can retire next week if we want - it gives you an entirely different perspective on a job to know you can tell your boss to **** off and walk.

All that money I could have spent on cars and restaurants and a McMansion went into 401k's, index funds, and a handful stocks that I have traded over
the last 25 years or so. I spent my 20's making(and losing) memories instead of money, so it was a later start than some.

I think putting the most possible into a 401k is probably the best/easiest way to start - consider that because it's pre-tax, your first-year return is equal to your marginal tax rate - 17%, 28%, higher - plus employer match plus whatever it grows. That's a hard rate to beat these days anywhere.

I have no advice on choosing other investments, because mine were the result of advice from a very astute FIL and good luck. Finding financial advice you can really trust is very tricky - clearly a job for MT.net! I got smart/lucky with a few stocks, and they allowed me to pay for the houses.

I like index funds(TIAA/CREF and Vanguard are 2 I've owned) because they generally do as well as or better than standard mutuals, and they have lower costs.

patsmx5

iTrader: (16)

Your math is simple, and right. In fact I agree with pretty much everything you said.

Based on your math, everyone should be retired at 40. And in reality, life happens and a large percentage of the population don't retire before 40. Thus while your math makes sense, and is right, and I agree with it too, reality is it too is doesn't have a high success rate. Though it has potential.

Anyways my goals for retirement are different than yours, thus my approach is different. I could not work for someone else and reach my retirement goals. I tried to actually, and it wasn't working.

cyotani

iTrader: (8)

<p>saving up for a house in california kills any chances I have at early retirement.&nbsp;</p><p>&nbsp;</p><p>But I enjoy my job so far. Switching to a part time contractor would be ideal for me.&nbsp;</p>

Ryan_G

iTrader: (8)

Unless you choose to sell the house in California when you retire and move to a lower cost of living area. As long as the home maintains or builds value it can be a good investment. If you, however, plan to live in it forever than that is an entirely different story.

aidandj

iTrader: (5)

<p>Just spent half an hour on the phone with the meryl lynch guy. First we talked about what kind of IRA to put money in and I think a Roth IRA is the way to go. Althought my tax rates might go up, if I retire, or start making less money. Or tax rates in general skyrocket (very possible) then I will be happy I put it in.</p><p>Then in a few months after a couple pay checks and helping the savings. Look at my monthly spending, decide how much I should keep in savings for emergencies, and start putting the rest of my paycheck in some sort of investment. He suggested mutual funds to start with.</p>

sixshooter

iTrader: (12)

Your easy button is the devil. Merrill Lynch is a very high commission full service brokerage. I'm sure the broker is very professional and treats your dad with great respect and works diligently to earn his trust, but he is extracting huge amounts of cash from your father's retirement savings and the money he is likely saving to support your mother and pass on to you as inheritance. The transaction fees at ML are much higher than they should be. But the big commissions are in the management fees and hidden within the funds themselves. The most important numbers to look for are management fees and expense ratios.

And expense ratio is a number with a decimal point in it. It is a multiplier. However much money you have in the fund is multiplied by the expense ratio and that is how much money the bankers take from you each year. They take it even if they screwed up and you lost money with the investment they chose for you.

The management fee is another fee that is similarly multiplied and deducted.

Ok, Merrill Lynch (owned by Bank of America) has funds on their website to chose from with a expense ratio (just picking one that looks like the middle of the range) of 1.270. Vanguard Small Cap Index fund has an expense ratio of .09. So, let's say you have $10K in each fund. Merrill takes $127 and Vanguard takes $9. You see why Merrill guy has a nice car and a country club membership? Vanguard is investor owned so they keep costs down. As Ryan was saying, you don't need suit-and-tie guy to shake your hand and tell you how smart you are to let him help you. Ryan is saying "index funds" simply because they are safe, easy, and the expenses are low.

Really quickly, small cap, mid cap, large cap just refer to the size of the various companies on the stock market. General Electric is large cap. Cummins Engines is a small cap. Cap is short for capitalization, or money. There are many more small cap companies than large cap. More terminology: index funds, just like an index lists everything covered in a book, an index of stock market funds is just one of everything. Therefore a small cap index fund is a fund that has a little piece of all of the small companies on the stock market. That includes everything from engine manufacturers to biomedical companies, restaurants to homebuilders, aerospace to Abercrombie.

The last time I checked, the Vanguard's Small Cap Index Fund had just under 1500 companies in it from all types of companies so you are automatically diversified, spread out for your own protection. And, if you think logically about it, a small company has a much greater chance of growing by 10% in a year than a very large company, and many do. Small cap index funds typically outperform the stock market average or S&P500 by a large gap. Another really nice thing about an index fund is that it doesn't require much fund management (deciding which funds to include) so the expense ratio is usually quite low.

Managed funds have high commissions. I'm sure the broker is a very nice guy.

Small cap index funds don't require you being concerned with high or low risk. They are safe, cheap, and will make you money over time without worry.

^This.

I'm not quite on Ryan's plan (anybody want to buy a lake house?) when it comes to austerity, but I buy used vehicles with cash and have nearly paid off my small primary house.

sixshooter

iTrader: (12)

You can open an IRA or just simply buy mutual funds without any help by just going on Vanguard.com and opening up an account. It really is very easy.

Here is the list of funds in the Vanguard Small Cap Index Fund, which is pretty interesting to look through: https://personal.vanguard.com/us/Fun...sortOrder=desc

Stealth97

iTrader: (5)

I've been sitting on a modest 5 figure bank account for the last decade accumated from rent income, and holy cow I finally got around to seeing how I can grow it.. I cant belive how much more I could have with a few decent investments... Shoved half of it into a few vanguard funds. Been about a month so far and the markets have been rough, lost about $80 So far. Not ready to jump into stocks yet.

I wasn't really raised with an investment mentality.. The most anyone in my family has ever done was CDs, big banks are all they know. I'll be breaking that cycle.

mgeoffriau

iTrader: (7)

Vanguard Index Funds are fantastic. Look for well balanced index funds with low fees. The lower the fee, the better. Unless you make it your full time job, you're not going to time the market swings correctly, and even the guys doing it for a full time job screw it up more often than not.

I will throw a little bit of caution on going too heavy on the small cap index, though. The last 5-10 years has been historically out of the norm in small cap performance, so when you look at index performance it looks like small cap is the best deal. That doesn't mean that it will be true over the next 5-10 years, however. If you expand the history out to 30 or 40 years, then you'll see more of a balance between small cap, med cap, and large cap funds.

sixshooter

iTrader: (12)

The long term average is what you want to keep your eye on. If you are looking to park money for a few months, use a bank. If you are interested in 10%+ growth over the long haul instead of losing money in a savings account at .03%, then you are ready. The whole stock market average since 1965 is about 10% growth per year. The small cap index will usually significantly outperform that.

Individual stocks are for the very well educated with lots of time to devote to a second job of market watching.

mgeoffriau

iTrader: (7)

Off topic but what happened to props? Was going to prop some posts and it's gone.

aidandj

iTrader: (5)

Damn not what I wanted to hear. More reading it is. My IRA is through my job because they match.

patsmx5

iTrader: (16)

Listen to this guy, he's 100% right. Again, who cares the most about your money?

But to the OP, you said one thing right: Minimize lifestyle creep. This will help a lot.

cyotani

iTrader: (8)

<p></p><p>&nbsp;</p><p>Thats where I'm at too. Retirement savings is max out 401k that employer will at least partially match, max out max roth 401k contribution. Any exccess disposible income goes into a mutual fund which is my emergency fund and savings for a down payment on a house.&nbsp;</p><p>&nbsp;</p><p>Well, minus the miata investment which has the best return of investment of all options. Miata is on average rate of return&nbsp;of 15% of my happiness.&nbsp;</p>

sixshooter

iTrader: (12)

sixshooter

iTrader: (12)

Matching is awesome. Use that. It is free, automatic growth on top of everything else you will make. Put all you can into it. Just choose wisely with regard to expense ratios when choosing which fund(s) within your company 401k to invest in. The company will have a list of funds to choose from. Some will be more expensive than others. If you provide a copy of that list, I would be happy to take a look at the funds and tell you a little about the choices. It is tough to navigate when starting out.

Stealth97

iTrader: (5)

Honestly I don't know when I'll need it. A/C could blow up in the rental property, roof could fall in, whatever. Its a safety net, I won't die if I loose some and its been sitting doing nothing for years. Not interested in investing in more real estate, savings accounts suck so I thought id try some index funds. Bought VSTMX and VGSTX to start.

aidandj

iTrader: (5)

<p></p><p>Thanks 6. I have to wait for like a week or so to get added to the financial benefits system. I'll shoot you a PM then.</p>