3 ms·

Heres a plan for you, 1. open a brokerage account with your bank, 2. buy vanguard index funds for the next 20 years, 3. retire.

criddell 9y ago
That's roughly my plan. The details are what get me. I need to buy index funds and usually you are advised to save as much as you can. I want the advice that shows me how little I can save. My kids are only going to be kids once and I'm not going to forgo taking them to Disney or work stupid hours so that I can live like a king when I'm old. My goal is to live as well as I can today while still being certain that I'm not going to be a burden on anybody when I'm 80. Paying an expert for advice appeals to me just because I have no confidence that I'm not taking something important into account.
- kogepathic 9y ago
  > Paying an expert for advice appeals to me just because I have no confidence that I'm not taking something important into account. I've got good news and bad news for you. The good news is that you're not as clueless as you think. The bad news is that person you're paying to give you advice? They also don't have a clue, but it's their job to make you feel like they do. Anecdotal evidence: 12 years of investing with Edward Jones in various mutual funds (2005-2017), and I would have made waaaay more money if I'd just bought ETFs to begin with. Sure, a financial advisor is comforting to talk to, but the fees they charge are murder on your long-term return, and in the end they're just paid to spend all day reading strategy papers which at best will give them the same return as a cat picking stocks. [0] [0] http://www.businessinsider.com/cat-beats-professional-stock-traders-2013-1?IR=T http://www.businessinsider.com/cat-beats-professional-stock-...
  - logfromblammo 9y ago
    All available evidence points to x% of financial advisors being no better at picking investments than those they are advising, and the remaining (small) fraction capturing all the additional value they provide, and then some, via their fees. So either your advisor is good, and you pay them more than they are worth, or your advisor is bad, and you still pay them more than they are worth. You cannot create more (dollar-denominated) value for yourself by engaging a financial advisor. You aren't missing anything. You need extraordinary skills, contacts, or crimes to beat the market, and if you had what it took, you'd already be in the financial industry. So just buy the index funds and hold them in a non-margin account, year after year, until you can live for a year on 3% of your accumulated principal. That's all the investments advising you and everyone else in the 99% will ever need.
    - criddell 9y ago
      So, say I had $1 million in my retirement account at age 67 (I have maybe 1/2 that today). I could use $30k of that each year on top of my social security benefits, correct? Seems like I will want about twice that. Maybe $2 million saved so I can have $60k / year and I don't think that's going to happen. Shit.
      - logfromblammo 9y ago
        The prevailing advice for a long time was 4%, but bond yields have been so low for so long, that people have been questioning whether 4% is truly safe any more. If you're retiring at 67, 4% is probably safe. $1.5M would be an acceptable target for you at that age.
        criddell 9y ago
        Thanks for taking the time to write all this. I'm going to dig into this some more (I really dread it) but I'm guessing I need to save another $500k or so over the next twenty years. Not impossible but not painless either. I'm glad I started college savings accounts for my kids when they were born. They should each have $75-100k in them by the time they need it. Not enough, but it's a start.
- mattferderer 9y ago
  Go with Wealthfront or Betterment. Wealthfront is cheaper I believe if you don't have over 100K invested. All you have to do is set up a bank account to automatically put money into your account every so often. That's easy to do on their platforms. They'll keep it balanced among several ETFs based on how risky you're feeling. You won't have to pay any fees to purchase or sell the ETFs like some places charge. They do a great job of making sure you understand where you're at & what you're likely to retire with. They also post plenty of information to help you understand your investment.
- neogodless 9y ago
  The actual math for how much you need to save is, roughly: 25 times your annual expenses. At your age, with a US assumption, you have the benefit of Social Security almost certainly providing you a good portion of income at Age 67 (any time between 62 and 70 is reasonable, and taking SS at age 62 is best unless you are very likely to live past 84.) Ignoring SS, if you invest 25 times your annual expenses into a 60%/40% stocks/bonds split, your expenses will be roughly 4% of your investments, so you withdraw 4% each year. Your investment growth (including dividends) may or may not exceed your expenses, but, overall, you should make it 30 years without running out of money. [0] What you need to do is determine your expenses (including Disney trips), and make sure you don't exceed that budget once you stop having income. (Of course, you can and should adjust if things go better or worse than expected when you're retired.) [0] https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study
- tomjen3 9y ago
  If you want an idea, try to figure out the cost of annuity for the amount you want to retire with. That is probably a good target for how much you should save.

criddell 9y ago

That's roughly my plan. The details are what get me. I need to buy index funds and usually you are advised to save as much as you can. I want the advice that shows me how little I can save. My kids are only going to be kids once and I'm not going to forgo taking them to Disney or work stupid hours so that I can live like a king when I'm old. My goal is to live as well as I can today while still being certain that I'm not going to be a burden on anybody when I'm 80. Paying an expert for advice appeals to me just because I have no confidence that I'm not taking something important into account.

kogepathic 9y ago
> Paying an expert for advice appeals to me just because I have no confidence that I'm not taking something important into account. I've got good news and bad news for you. The good news is that you're not as clueless as you think. The bad news is that person you're paying to give you advice? They also don't have a clue, but it's their job to make you feel like they do. Anecdotal evidence: 12 years of investing with Edward Jones in various mutual funds (2005-2017), and I would have made waaaay more money if I'd just bought ETFs to begin with. Sure, a financial advisor is comforting to talk to, but the fees they charge are murder on your long-term return, and in the end they're just paid to spend all day reading strategy papers which at best will give them the same return as a cat picking stocks. [0] [0] http://www.businessinsider.com/cat-beats-professional-stock-traders-2013-1?IR=T http://www.businessinsider.com/cat-beats-professional-stock-...
- logfromblammo 9y ago
  All available evidence points to x% of financial advisors being no better at picking investments than those they are advising, and the remaining (small) fraction capturing all the additional value they provide, and then some, via their fees. So either your advisor is good, and you pay them more than they are worth, or your advisor is bad, and you still pay them more than they are worth. You cannot create more (dollar-denominated) value for yourself by engaging a financial advisor. You aren't missing anything. You need extraordinary skills, contacts, or crimes to beat the market, and if you had what it took, you'd already be in the financial industry. So just buy the index funds and hold them in a non-margin account, year after year, until you can live for a year on 3% of your accumulated principal. That's all the investments advising you and everyone else in the 99% will ever need.
  - criddell 9y ago
    So, say I had $1 million in my retirement account at age 67 (I have maybe 1/2 that today). I could use $30k of that each year on top of my social security benefits, correct? Seems like I will want about twice that. Maybe $2 million saved so I can have $60k / year and I don't think that's going to happen. Shit.
    - logfromblammo 9y ago
      The prevailing advice for a long time was 4%, but bond yields have been so low for so long, that people have been questioning whether 4% is truly safe any more. If you're retiring at 67, 4% is probably safe. $1.5M would be an acceptable target for you at that age.
      - criddell 9y ago
        Thanks for taking the time to write all this. I'm going to dig into this some more (I really dread it) but I'm guessing I need to save another $500k or so over the next twenty years. Not impossible but not painless either. I'm glad I started college savings accounts for my kids when they were born. They should each have $75-100k in them by the time they need it. Not enough, but it's a start.
mattferderer 9y ago
Go with Wealthfront or Betterment. Wealthfront is cheaper I believe if you don't have over 100K invested. All you have to do is set up a bank account to automatically put money into your account every so often. That's easy to do on their platforms. They'll keep it balanced among several ETFs based on how risky you're feeling. You won't have to pay any fees to purchase or sell the ETFs like some places charge. They do a great job of making sure you understand where you're at & what you're likely to retire with. They also post plenty of information to help you understand your investment.
neogodless 9y ago
The actual math for how much you need to save is, roughly: 25 times your annual expenses. At your age, with a US assumption, you have the benefit of Social Security almost certainly providing you a good portion of income at Age 67 (any time between 62 and 70 is reasonable, and taking SS at age 62 is best unless you are very likely to live past 84.) Ignoring SS, if you invest 25 times your annual expenses into a 60%/40% stocks/bonds split, your expenses will be roughly 4% of your investments, so you withdraw 4% each year. Your investment growth (including dividends) may or may not exceed your expenses, but, overall, you should make it 30 years without running out of money. [0] What you need to do is determine your expenses (including Disney trips), and make sure you don't exceed that budget once you stop having income. (Of course, you can and should adjust if things go better or worse than expected when you're retired.) [0] https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study
tomjen3 9y ago
If you want an idea, try to figure out the cost of annuity for the amount you want to retire with. That is probably a good target for how much you should save.