Skip to comments.Financial Advice - Vanity
Posted on 01/31/2014 8:58:25 PM PST by Rural_Michigan
I spend a lot of time browsing FR, and have noticed a lot of FReepers have a lot of knowledge/opinions pertaining to finances. There also appears to be a good number of Freepers who are about retirement age with a good conservative viewpoint. Taking into consideration current events and the steady devaluation of the dollar, my question to the experienced Freepers out there is this:
Let's say you're 25, are debt free, make no car payments, earn O-2 pay and are unmarried. You don't have any retirement accounts but are apprehensive of starting an IRA or contributing to a Thrift Savings Plan because of general mistrust of the government and banks as well as the global economic system. You think metals are worthwhile, and buy small amounts of silver on an irregular basis. Other than that, all your savings goes into a savings account.
What would you do to prepare for retirement?
You don’t need a “Qualified” retirement account(s), those just are supposedly “tax advantaged” Most people to retire comfortably (and save for a rainy day) use “nonqualifed” money, be it savings, stocks/mutual funds, collectibles.
You might want to diversify your physical holdings, like coins or other precious metals. If you don’t trust brokerages etc, then it seems your best hope is physical custody, but then you have security issues. Otherwise, look into some diversified mutual funds.
Buy a good safe I guess and don’t tell anyone that you even have a safe. No sense tipping off anyone, even family, that you have other assets. JMHO off the cuff.
When I was in my mid-40s, I started a couple of annuities. One was an IRA and the other was a Mutual Fund.
Hindsight: I wish I had bought stocks for some of the major companies instead of the mutual funds. For MFs, you don’t really see much gain, as you don’t actually own the stocks. Had I, for example, bought Walmart, it has split several times and would be worth much more than the comparable amount invested in mutual funds. Of course, the advantage with mutual funds is that ‘their experts’ do the investing and you supposedly reap the results.
The IRA locked in a guaranteed annual return, which was a joke amount, at the time. General interest rates for bank money markets were around 8%, and the IRA guaranteed a return of 4%. Laughably low at the time. However, since interest has dropped to near zero on regular bank savings and CDs, that 4% looks pretty good now.
Seriously, what do you want out of retirement? I'm going to go into it a pauper, a property owning pauper, but cash poor. I do have a wonderful daughter, son-in-law, and grandkids. I'll do ok. I won't travel. Some things will be difficult. But at the end, family will hold my hand as I slip this mortal coil.
So? What do you see yourself doing in retirement?
Thank you for your service, LT.
Pay chart shows you’re making about $3,800 a month base pay as an O-2, is that correct?
Stay debt free.
Keep 8 month to a year pay in cash.
Diversify the rest. Gold, silver, ammo, guns. (if it all goes REALLY bad, guns and ammo are worth more than gold)
I am 50, retired USAF, and in addition to the above I also have stocks, IRA’s and savings in case society manages to keep it together.
Best advice I can give anyone is to live well below your income level and have a plan, for everything.
Learn how to live Amish.
No games, no BS. Get yourself enough silver in case you have a local economy going on, but beyond that put whatever resources you have in achieving the above.
What is coming will make the Great Depression look like a Sunday picnic, and we will all be lucky to live thru it.
depends how much federal income taxes u pay ... if it is a lot ... there is no reason not to fund a qualified plan thru work or max your Deductible IRA contribution. U got til 4-15-14 for 2013.
You'll be saving for your future while at the same time letting Uncle Sam use your money for his important projects.
At you age, if you can put money away pre-tax, into a thrift saving, 401k or 403B type account, it’s definitely worth it, because you are deferring the taxes, and you can still diversify within the accounts.
For regular amounts, putting money into stock type mutual funds is OK, because you average out the market’s ups and downs. Once you would actually have a larger chunk, then you would want to be more careful to diversify your “larger chunk”, but could continue to contribute into a stock mutual fund — don’t go for the high risk, just some “ordinary” stock fund with a decent record.
The world is always on the brink and it always seems it’s in the near horizon, but we never know.
I have known some people who were your age some 30-40 years ago and some did keep putting money away and did accumulate a nice chunk, and also know some who felt as you do and didn’t. Those who did are very well off now. Those who didn’t, not so much, but can’t go back in time...
Especially since you have no debt and are single, this is the time to save as much as you can, and max out your possible pre-tax savings. then if you can, do save after tax also and let this money accumulate and grow for the next 30-40 years.
Nobody knows about the future... But you can’t invest in the future with out taking a risk. If I were you, I would be diversified. Some in the market, some in metal, and some in real estate. Probably a 1/3 split...
I'm set. I've got all the skillsets for mid 1800s life. And I've done it for a couple of years.
“When I was in my mid-40s, I started a couple of annuities. ‘
The problem was the annuities, they are NOT worth it, because they get you with the “guaranteed” return and payout, but it costs you much more than it’s worth.
There are many good mutual funds you can invest in within a 401K type account, or IRA or after tax.
Annuities usually don’t use the best funds and the “guarantee” eats up a lot of your return.
Are you more worried about the return ON your principle or the return OF your principle? The reason I ask is that If you are concerned about a US bail in, you should consider non traditional investments such as over funding a whole life insurance policy. That would allow you borrow against your policy for mid and major purchases (car bank, etc). The concept is the one presented by bank on yourself. http://www.bankonyourself.com/#sthash.ExoyBe7V.dpuf
Not normally the investment that I would recommend but it is a good defensive strategy against confiscation of wealth.
A more middling strategy would be to invest in hard assets such as land, oil wells, metals, etc. Another option would be to accumulate some wealth and then invest in a business that provides a 10% return but is based on human needs such as food, shelter, etc.
A more aggressive approach would be to have your money into markets with stocks, bonds mutual funds. If you are not a very knowledgeable investor, then stick with index funds.
If you think that the economy is going to flat out collapse, buy a reloading machine, primers, brass and means to produce bullets and start reloading by the thousands. Of course, that would mean that you would have to have a location to secure the materials and the finished product. Great trading material HOWEVER, not a very liquid means of holding on to cash and would require you to have an ATF license to sell to cash out.
Read Dave Ramesy’s books and follow his advice. It’s the most common sense and disciplined method of savings, which is key to wealth creation. Open an IRA and contribute as much as you can. Read what financial experts are suggesting for diversification and follow their strategies, but always maintain a diverse mix of cash, individual stocks, and mutual funds or ETFs. Since no one can predict the future, the name of the game is to not put too many eggs in one basket. You’re a long-term investor, not a day trader, so you’ll have to develop the stomach for ups and downs, and feel confidence in the equity investments you make (i.e. buy blue chip solid performers, not fads or trendy stocks in unproven areas.
Assuming you’ll be managing your own account, get comfortable with reading and following finance trends so you can make adjustments accordingly. Even in a recession, people still drink beer, but once you start following financial trends you might find that buying shares of BUD produces better yields than, say, Wal-Mart.
Still, you’re doing to “lose money” some weeks/months (like now) but you’ll make money onbalance, e.g. the value of your portfolio will grow over time. Even since 2007 the market has grown very significantly because it is, in essence, the best reflection of the strength of America and the resiliency and productivity of it’s people. Good luck!
I’d follow your “go Amish” advice, but I like my girls with some make up — understated, but some. G-d help me.
My advice is to live like you are an E-5. Use the overage to pay any debts first.
Then start a Roth IRA index fund. Then buy physical metals every month, a little at a time. Keep about 2-3 months salary in savings for emergencies.
Then, when you get O-3, start spending a little on yourself.
Having been there, done that..
1. Find a financial advisor you can trust.
2. Educate yourself on investing. Learn how to evaluate potential investments and their suitability for you
3. Determine your level of comfort with risk.
4. Determine how much time you’re willing to dedicate. Mutual funds may be better if you aren’t inclined/able to evaluate/monitor the investments.
5. Open an IRA (Traditional or Roth).
6. Take advantage of the TSP option (pre-tax deductions lowers the gross income subject to taxes). Didn’t have this when I was at that point in my Active career, but did pretty well with it in my Reserve career.
7. Diversify, diversify, diversify.
8. Focus on hitting singles and doubles rather than swinging for the fences. Boring is good.
9. Avoid myRA’s like the plague. You are obviously capable of determining and selecting investments suitable to your goals.
And thank you for your service!
When I was young, I didn’t participate in company offered stock options, after all I was going to live forever. When I was young I didn’t contribute to my 401K, because, after all I was going to live forever.
Now that I’m old ... what the hell was I thinking!!
You're best bet for retirement is to stay in long enough to become a general in charge of a future force of freedom fighters thereby earning not only a nice monthly subsistence allowance, but respect and acclaim as well.
Btw, I wouldn't wait too long before tying the knot with some little sweet thang so you can start repopulating Michigan. ;)
TSP and VWINX
I’m almost there. Glad I was raised in farm country, it makes it easier to get into the lifestyle.
Buy GUNS ! ! !
All you can afford for as long as you can afford to and hoard them as long as you can them dump ‘em on the yuppies for loads of cash.
For example, a target 2020 fund would now hold lots of bonds. And even more bonds at year 2020 and beyond. But a target 2030 fund would now hold mostly stocks. As you get closer and closer to the year 2030, the fund manager will be automatically selling off the riskier stocks and buying the more conservative bonds.
But as others have said, diversify! Put some money into precious metals, and some money into quality real estate.
But a Roth IRA has enormous tax benefits, especially for a young (under 40) person. Ignore the Roth IRA only if you think that the sky is probably going to fall between now and 2030.
And who knows, maybe the sky just might fall! That's what diversification is all about. But those folks who invested in bomb shelters, and not stocks, in 1970 are kind of hurting financially now.
As your nest egg grows you want to be actively monitoring it, asking questions, asking for advice...One day you will do it all yourself.
As to metals...some advisers think that 10-15% should be in precious metals, gold, silver, platinum. I have always avoided them because they take a lot of time to gain value and not very much time to lose it. I'll leave that up to you, but you can't eat it or spend it and it costs money to store. I personally like the exchange traded ETFs...
The biggest hurdle you have to jump is to get started. The sooner you do that the better and the rest will become evident as you progress..It's not rocket science.
That has some merit to it. I paid for culinary school by selling a lot of my collection.
Some of them had appreciated quite a bit.
Thank you all. Great insight and entertaining too! Freepers are the best. I’m a lurker and use FR as a sanity check while I’m stuck at work spending the government’s money.
My only retirement goal is to own 40 acres of good midwest soil in a quiet corner of the world and enjoy friends, family and freedom - if it still exists.
Many good insights, thank you all.
Pay yourself 1st. Every month make sure you put money away for tomorrow. Do NOT expect that you will receive one dime for retirement from anywhere except your own investments. Do not count on the government for retirement or healthcare.
Today’s Congress thinks less of you than Kissinger thought of us Vets. They prove that with their vote. “Military men are dumb, stupid animals to be used as pawns for foreign policy.” — Henry Kissinger
Think about what you want to do when you finish military service. Get all the education you can stand. Learn skills in different fields that are valuable in the civilian world. Look over the horizon for tomorrow’s sunrise and you’ll never be surprised at what happens.
Trust in Jesus to protect you and guide you through life.
Thanks for your service.
If you can fund both retirement plan types within your overall diversification strategy, all the better. But remember, part of your strategy should be to spend some of your money on yourself, today.
I've seen folks save too much money. They traded their youth for dollars. Not so good. I've seen others not worry about tomorrow. They are now 70-year-old janitors. Also not so good. Find the right balance, my FRiend.
Bingo.. I'm sad to say it should have happened in 2008-9, it would have recovered in 2 years in much better shape than anything that is about to descend on us now, with all of this extra debt, and devalued currency..
We were a much stronger nation back in '08, stronger attitude, more robust economy, no Obamacare, even the Democrats wouldn't have been able to suggest it, and had a stronger workforce..
The national psyche is horrible, and don't laugh, it matters in a crises, especially one with the global dimensions that this one will have.. ugh
What you are doing is almost completely correct, just keep socking it away.
If you can achieve an employer match for an IRA contribution, you should do that.
My belief is that people get very, very convinced that the USD is "steadily being devalued." My warning to you is that this is a popular meme and is largely untrue.
I myself like silver, but as one who has held and holds now and has traded it for many, many years (longer than you've been alive) IMHO it goes utterly nowhere for 2-3 years. Maybe 5 years. I could not be more neutral on PMs.
Your cash is not being devalued as per the popular chant.
I would be gathering cash and waiting for a swoon in the stock market and looking to pick away at very nice div paying stocks. I appreciate that the market has come a massive way since 3/9/2009. There are giant stocks that pay great dividends...certainly not without risk, but at your age, the risk is greater that you do not keep up with the market. INTC pays > 4%. You can buy Conoco COP and get > 4% yield. And there are plenty more, you don't have to look under rocks for undiscovered jewels. When you buy such stocks, you're not just buying stocks, you are buying the management that those companies have, which is world class, and you cannot argue otherwise in most cases. if you don't like indiv issues, you can buy SPYders. Do not fear cash on the basis of it "begin devalued". That is factually wrong. You have cash, there will come a day when you should be able to buy distressed assets at 20 cents on the dollar. Keep your eye out for opportunities of that flavor that appeal to you. And do not shun the notion of say, going into >>manageable<< debt to purchase a duplex or triplex where you can live in one unit and rent the other(s) to offset your living expenses. Just check your property taxes and realize that in the grossest of gross terms, what you take home from a rental is typically 45% of what the tenant pays. But if you are interested in such, you'll study RE much more closely.
Your age is absolutely magnificent to get into cashflowing real estate, especially if you can both buy something reasonable so it can attract a reasonable class of tenant, and if you can fix a thing or two on your own w/o calling in external help for everything.
You may wish, if the RE aspect appeals to you, to take a loan broker to lunch and to investigate what price of property you could buy if you wanted to. How much down payment would be req'd, and how much you could finance on your income. Other factors of course come into play, such as how long you wish to stay in your current area, but if you think it is stable and plan to stay there for 7-10 years, the future being a thing nobody can predict, a duplex or triplex could be a neat thing for you.
I know. It’s amazing how much we’ve went to hell in just 5 short years. It’s like we just chase our tails anymore.
Just an FYI on land prices: I know of 160 acres of Central KS “good Midwest soil” being sold for just under $2k/acre this past fall. Even better land in corn country is going for more than that so structure your savings plan accordingly.
Consider purchasing a duplex for rental income. If a tenant bails you still have the other tenant paying the mortgage. Put these in a corporate name and the expenses will be tax deductible and the income will be deferred, Years down the road these will be paid off and will be pure income or sell for a large chunk of cash.
If the SHTF really happens, you can live in one half and let the other half pay your mortgage,
I wish I owned a dozen of them now!
Some recommended real estate - — it can be good or a total disaster.
In your situation, you may consider a house or rental in the area you live, after much research. Highly recommend against buying in areas you are not familiar with. I know people who bought land 30-40 years ago and it is still not worth anything and also people who bought real estate in cities, which appreciated a great deal. The saying in real estate: “location, location, location” is absolutely true.
Don’t ever buy in areas you aren’t personally familiar with — land, house or rental property.
I personally know people who actually started out with a decent amount of money and went totally, I mean totally broke by buying the wrong kind of real estate, believing the rosy future pictures that never materialized.
Well worth repeating:
“Best advice I can give anyone is to ‘live well below your income level’ and ‘have a plan’, for everything”......
It doesn’t get any better for sound financial advice then that!
Land and planted trees, like Dick Lugar’s black walnuts, would be a good, long-term investment.
If coal stocks can survive I think they are an opportunity.
I read an article on 24Jun2013 about what 0bama was going to do to the coal industry and it made me angry to I bought 175 shares of ACI at 3.639.
Probably not the best way to buy stocks but I’m up 16%.
The last two chapters provide the information you are looking for.
Code Red: How to Protect Your Savings From the Coming Crisis by John Mauldin and Jonathan Tepper (Oct 28, 2013)
Then, subscribe to John Maudlin's weekly news letter and read it. Sometimes it is hard but over time the picture he wants to convey will emerge.
Then, subscribe to Forbes and read it from cover to cove every two weeks.
Doing this will provide you with lots of information that will gel into a course of action
Put every pay raise you get into savings. TSP is an excellent plan. Time is your best ally. Compounding is very powerful over time. Look at the 100-year history of stock prices and it will be obvious that blue hip stocks are a great way to amass wealth. Be frugal. Hang in there, Lieutenant—tough times are ahead for the military.
Investing with pre-tax dollars today lowers your taxable income and so the amount of federal and in most states, state income tax you pay today and throughout your working years when you are in a higher tax bracket and you only pay tax on the withdrawals during your retirement years when you are probably going to be in a much lower tax bracket. And of course if you retire to a state with no state income taxes, you win again because your withdrawals will not be subject to state income tax.
And if you are eligible to receive a matching contribution, you are somewhat foolish not to take full advantage of that especially if you are young, single and debt free.
While some people do well investing on their own with post tax dollars in individual stocks, metals, futures, short term high risk investments, etc. it is not for the faint of heart and you have to be willing to lose your shirt. Taking advantage of a long term defined contribution pre-tax plan with a wide range of investment options and with employer matching contributions is rarely a mistake. Dont sweat the ups and downs of the market however because you are investing over the long haul, not the short term.
Put every pay raise you get into savings. TSP is an excellent plan. Time is your best ally. Compounding is very powerful over time. Look at the 100-year history of stock prices and it will be obvious that blue hip stocks are a great way to amass wealth.
Yes, what he said.
With proper budgeting and planning, a borrower can reduce the term of a 15 year mortgage and pay off debt early. One extra monthly payment per year on a 15 year mortgage reduces the term by 2 years. Two extra monthly payments per year reduces the term by another full year. Early mortgage payoff can add up to significant interest savings over the life of the mortgage and a quicker route to added home equity.
Read more: http://www.ehow.com/how_6464508_pay-year-mortgage-off-early.html#ixzz2s4yafG3y
Buy a good safe and accumulate certain material items that will hold their value and will be valuable to you the rest of your life.
Pentagon Leatherneck is absolutely right...compounding is the key. You will never retire on the money you invest; you retire on the dollars that money earns over time. Living below your means enables you to truly take advantage of compounding as well as provides a financial moat during adversity. I am always amazed to watch the flock just hand over the benefits of compounding to the finance companies.
And - Always live on your last pay raise.
“...pay an extra payment every year.”
Yep, and making an additional principal-only payment to the required monthly helps knock it down really fast. Even $25 or $50 (more as your pay increases) helps over time. We put a 30-yr to bed in <18 that way.