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Old 02-05-2017, 09:37 AM
 
Location: NYC
2,910 posts, read 1,589,162 times
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Quote:
Originally Posted by goodlife36 View Post
I took a look at the 2015 Target fund and the stock percentage is 45. Will I have to choose my own funds at that point? I know this is a long way off. I am just curious.
So I am inferring from this & some other statements you are younger & not at the cusp of retiring soon, sorry if I am misreading. But if you are in your 30's - early 40's & probably 25 or so years before retirement I will amend my earlier note about a 50/50 (or so) stock/bond allocation.

I believe a younger person with 20-30 years of growth ahead should be mostly in stock funds, entirely in stock funds if you are under 35 yo. because even if, actually when, you hit a recessionary period like we had in 2009 you have plenty of time to recoup & then increase your net worth greatly (assuming you don't panic & pull your $$$ out of the funds as they sink, what goes down rises very quickly again & dramatically increases your pile as long as you let it ride)

The bonds are there as a counterbalance to the stock value swings & you can start to add them in greater proportion as you get closer to retirement age, maybe starting in mid 40's say, you can decide that. The 50/50 or 60/40 allocation is for those of us near or at the start of retirement mostly, although your own values of safety & being able to sleep at night should decide the ultimate proportion. But younger - no need for bonds I say....
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Old 02-05-2017, 09:42 AM
 
Location: Central Massachusetts
4,800 posts, read 4,848,939 times
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Quote:
Originally Posted by goodlife36 View Post
I am going to get the ball rolling next Friday.

I am still going back and forth between Traditional vs. Roth. Does it pay to forgo a tax deduction for 24 years? I do not know. Wait! Mathjak said it is possible to draw money on a traditional IRA and not pay taxes. If a single person draws between $700 and $800 per month, is there are way to get around the taxes? If not, how much would my tax liability be? This investing stuff is cool. It just occurred to me the money I amass is not fixed. It will continue to grow. I never thought about the 50/50 split between stocks and bonds. I think I am actually starting to get this. I hope.

I looked at the funds a little closer. The Star expense ratio is pretty high. It is .34. As I stated before, the Target fund 40 expense ration is .16. (Stocks 87.5) It is a balanced fund and has performed at a rate of 5.35% over the past ten years. The performance since its inception is 6.39%. Isn't that a little low? Some of the calculators use 7.00%. Why is it a balance fund when most of the investments are in stocks? The Wellington expense ratio is .26 and has performed at 6.92 over the past 10 years. I think the Target Fund is the better of the two options. What do you think?

I am not sure if I will be able to make annual deposits. It is so much easier to have the money taken out once a month. I may deposit extra money annually if there is a surplus at the end of the year. If I make annual deposits, how will I benefit from gains during the year?
First bolded. the reason in the difference of expense ratio is that the Star is a managed fund with an active manager trading or rebalancing the stocks within the funds as well as other functions. The target fund has a book rule. It will not make daily balance adjustments and will be more monthly or quarterly. There is the difference explained in a lay term.

Second bolded. One reason for my point about doing it is that you have nothing to start with in the fund so getting it started is good. The second is you are limited to only $5,500 a year until you reach age 50 in either traditional or Roth or any combination thereof. That number then goes to $6,500 as the law is now. I do not know your financial situation so which ever is easiest. The key is to reach that number by the end of the year.


Quote:
Originally Posted by goodlife36 View Post
I took a look at the 2015 Target fund and the stock percentage is 45. Will I have to choose my own funds at that point? I know this is a long way off. I am just curious.
2015 has gone to more or less an income fund.

Target funds are geared with a balance of funds from an index series of stocks, bonds. treasuries, CD's and the mix depending on target date and or risk aversion.

Quote:
Originally Posted by goodlife36 View Post
Also think on this your take home pay in retirement will be more of a percentage of your gross pay than it was while working. Just about 30% more. That is an important number to remember when planning.


I am unclear on the statement above. Let's say, my gross is $4000 per month and it drops to $2000 when I reach retirement age. How will the statement above impact this?[/quote]

You also asked a question trying to figure out which is better. Well here is another twist for you to ponder. If you want to lower your taxes now then take the traditional IRA. If you are more concerned about taxes in the future then Roth is your vehicle.

lastly the question about your gross to your net. When you are working towards retirement your gross will be affect to become your net by FICA OSI Federal taxes savings, union dues and things like that. In retirement you don't have those. Your gross pay may be 1/3 less or 1/2 less but the range after the deductions for federal taxes, state if any, will be very different. I hope that explains the 30% net pay difference.
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Old 02-05-2017, 10:27 AM
 
3,997 posts, read 3,221,666 times
Reputation: 13017
Quote:
Originally Posted by goodlife36 View Post
That is cool. So there are funds that will pay dividends and you can take a monthly draw on. I am going to ask the financial rep at Vanguard about this. How did you do when the recession hit? Investing in all stocks seems so risky to me.

What made you choose a Roth as opposed to a traditional IRA? From your post, it looks like this is your only retirement fund in addition to Social Security.
Back when I opened a ROTH (I will forever be grateful to that bank employee who mentioned to me, have I ever thought of opening an IRA? My answer was "whats an IRA?". I started reading, and Im so fortunate that I listened to that advice.), I wasnt making much money, so I really didnt need the deduction. When I was looking at the long haul, I figured what little deduction I could take now would pale against what 20 years of growth and reinvesting dividends would give me when I finally did retire. I think I made the right decision.

I have over 60 dividend stocks. Ive only had one that cut dividends. The rest have all stayed the same, or raised their dividends over the past 5 years that Ive started with dividend stocks. I may even get to the point to where I can live strictly on dividends and Social Security, tho theres really no need for me to. I plan on leaving this earth with zero.

The beauty of investing in dividend stocks with raise the dividends annually, is that no matter what the stock market does, up, down, huge raise, or crash, dividends usually will stay the same. Now that depends on investing in blue chip stocks with great financials.

Theres a lot of good websites on retiring on dividends. Its only one way of looking at saving for retirement, but it is working very well for me.
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Old 02-05-2017, 10:55 AM
 
71,595 posts, read 71,751,865 times
Reputation: 49209
remember the last 5 years have seen amazing times for stocks . it is in troubled times that dividends are more likely to be cut or suspended. just as making up short falls from assets that have dropped can become a reality .

you hear everyone even talk of the dividend aristocrat group like they were somehow immune to the pitfalls that hit stocks and magical in behavior . .

that royal group has impeccable credentials so you keep seeing just invest in this group and call it a day .

however what constitutes this group changes all the time so get ready for lots of selling trying to keep up as they get bumped and replaced AFTER THE FACT THEY DID NOT LIVE UP TO EXPECTATIONS . you could be behind the curve here very easily .

these dividend aristocrats are not somehow immune to all the things that effect company's and stocks . Just like other companies, their outcomes change.

in 2009 there were 52 stocks that met the group’s strict criteria.

As of 2012, there were 51.

But of those 51, 13 were different than the original set. So over the course of just 3 years, there was a 27% change in the group’s composition.

in fact going back to 1989's list :

Of those 26, seven are still on the list today, ten were removed because they either cut or froze their dividend, four were removed for an unknown reason, and the remainder were aquired at some point. So at least ten of the 26 had an outcome that is different from the assumption of dividend growth every year through thick and thin.


just treat these dividend payers as you would any stocks and just watch your draw rate and you should be fine . don't expect magic to happen though and make sure your plan counts on them failing to deliver at times .

Last edited by mathjak107; 02-05-2017 at 11:11 AM..
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Old 02-05-2017, 12:52 PM
Status: "Gaining Stability." (set 12 days ago)
 
5,684 posts, read 5,936,216 times
Reputation: 4432
Quote:
Originally Posted by Hefe View Post
So I am inferring from this & some other statements you are younger & not at the cusp of retiring soon, sorry if I am misreading. But if you are in your 30's - early 40's & probably 25 or so years before retirement I will amend my earlier note about a 50/50 (or so) stock/bond allocation.

I believe a younger person with 20-30 years of growth ahead should be mostly in stock funds, entirely in stock funds if you are under 35 yo. because even if, actually when, you hit a recessionary period like we had in 2009 you have plenty of time to recoup & then increase your net worth greatly (assuming you don't panic & pull your $$$ out of the funds as they sink, what goes down rises very quickly again & dramatically increases your pile as long as you let it ride)

The bonds are there as a counterbalance to the stock value swings & you can start to add them in greater proportion as you get closer to retirement age, maybe starting in mid 40's say, you can decide that. The 50/50 or 60/40 allocation is for those of us near or at the start of retirement mostly, although your own values of safety & being able to sleep at night should decide the ultimate proportion. But younger - no need for bonds I say....
I am going to take the 2040 target fund. The stock percentage is 87.5.
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Old 02-05-2017, 01:10 PM
Status: "Gaining Stability." (set 12 days ago)
 
5,684 posts, read 5,936,216 times
Reputation: 4432
Quote:
Originally Posted by golfingduo View Post
First bolded. the reason in the difference of expense ratio is that the Star is a managed fund with an active manager trading or rebalancing the stocks within the funds as well as other functions. The target fund has a book rule. It will not make daily balance adjustments and will be more monthly or quarterly. There is the difference explained in a lay term.

Second bolded. One reason for my point about doing it is that you have nothing to start with in the fund so getting it started is good. The second is you are limited to only $5,500 a year until you reach age 50 in either traditional or Roth or any combination thereof. That number then goes to $6,500 as the law is now. I do not know your financial situation so which ever is easiest. The key is to reach that number by the end of the year.




2015 has gone to more or less an income fund.

Target funds are geared with a balance of funds from an index series of stocks, bonds. treasuries, CD's and the mix depending on target date and or risk aversion.





I am unclear on the statement above. Let's say, my gross is $4000 per month and it drops to $2000 when I reach retirement age. How will the statement above impact this?
You also asked a question trying to figure out which is better. Well here is another twist for you to ponder. If you want to lower your taxes now then take the traditional IRA. If you are more concerned about taxes in the future then Roth is your vehicle.

lastly the question about your gross to your net. When you are working towards retirement your gross will be affect to become your net by FICA OSI Federal taxes savings, union dues and things like that. In retirement you don't have those. Your gross pay may be 1/3 less or 1/2 less but the range after the deductions for federal taxes, state if any, will be very different. I hope that explains the 30% net pay difference.[/quote]

Are you saying people who reach retirement age do not have to pay FICA? If your tax liability is lower, why is the Roth so attractive?
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Old 02-05-2017, 01:29 PM
Status: "Gaining Stability." (set 12 days ago)
 
5,684 posts, read 5,936,216 times
Reputation: 4432
I am going with the Roth. I do not qualify for the tax deduction on my taxes.
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Old 02-05-2017, 01:30 PM
 
Location: Saint Johns, FL
1,193 posts, read 942,811 times
Reputation: 1267
Quote:
Originally Posted by carnivalday View Post
Back when I opened a ROTH (I will forever be grateful to that bank employee who mentioned to me, have I ever thought of opening an IRA? My answer was "whats an IRA?". I started reading, and Im so fortunate that I listened to that advice.), I wasnt making much money, so I really didnt need the deduction. When I was looking at the long haul, I figured what little deduction I could take now would pale against what 20 years of growth and reinvesting dividends would give me when I finally did retire. I think I made the right decision.

I have over 60 dividend stocks. Ive only had one that cut dividends. The rest have all stayed the same, or raised their dividends over the past 5 years that Ive started with dividend stocks. I may even get to the point to where I can live strictly on dividends and Social Security, tho theres really no need for me to. I plan on leaving this earth with zero.

The beauty of investing in dividend stocks with raise the dividends annually, is that no matter what the stock market does, up, down, huge raise, or crash, dividends usually will stay the same. Now that depends on investing in blue chip stocks with great financials.

Theres a lot of good websites on retiring on dividends. Its only one way of looking at saving for retirement, but it is working very well for me.
Agreed. Working well for me also.
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Old 02-05-2017, 01:34 PM
 
Location: Central Massachusetts
4,800 posts, read 4,848,939 times
Reputation: 6379
Quote:
Originally Posted by goodlife36 View Post
Are you saying people who reach retirement age do not have to pay FICA? If your tax liability is lower, why is the Roth so attractive?
Yes when you are no longer working FICA and a lot of the other taxes are not taken out.

Well the key here is Roth is tax free forever (until they change the law). I am not saying that they will and chances are they will not but..... Roth is attractive because all income drawn from there is tax free. Whether is your principal or the interest reinvested. All tax free and not subject to RMD (required minimum distribution). Oooops I just added in a wrinkle. Sorry when you reach 70 and a half Uncle Sam wants his deferred income. All that money you and everyone else has been socking away in tax deferred accounts. The IRS has a chart you need to follow at that point. Just keep that in the back of your mind. Not something you need concern yourself yet.

But here is the deal. I think I would take the tax deduction now and let the chips fly if I were you. The deduction can help you make the next years contribution. I don't know if that makes sense but you have something special in that you have a pension that will help go a long way in your retirement. A good number of states have no income tax on that pension income. Others have exclusions of part of it. Others will tax it as normal income. Even on that last one there are few that do not have some of that income exclusion. That is me and not everyone else. If you are married you should talk to your spouse and explain this choice. I will be willing to bet that they would rather have some extra now in the building process.

I say that you are doing just fine. You can only do what you can. Live today as well as plan for tomorrow.
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Old 02-05-2017, 03:19 PM
 
3,997 posts, read 3,221,666 times
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David Fish, over on Seekingalpha, compiles a list of what he calls the Dividend Champions. The Champions are companies that have raised their dividends for 25 consecutive years or more. He also compiles a list of the Challengers and Contenders, which have raised their dividends for, I think, 10 years and 5 years, tho I could be wrong on those years.

Some of the Champions include companies like Genuine Parts, Proctor and Gamble, 3M, Johnson and Johnson, Coke, Lowes, Colgate, Pepsi, Walmart, Con Ed, McDonalds and many more. Theres a lot of really good dividend investors over at Seekingalpha, including David Fish, Chowder, Chuck Carnevale, Brad Thomas, among many others, that will give a good education on dividend investing, if you are so inclined to do some reading.

They changed my life.
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