Investment showdown -- beyond the Roth, SDP, & TSP

[Springer]

.

My 3 stocks are split between solar, tech, and airline (specifically SPWR, MU, and DAL).

If you purchased MU options a year ago you would be a millionaire now.

Sold my DAL today.

[Pajaro]

I prefer the "set it and forget it" method.

Checking and Savings (emergency fund cash): 63K

TSP: 127K

My Roth IRA: 64K

Wife's Roth IRA: 33K

Mutual Fund account: 24K

Total net worth (assets minus liabilities) = roughly 327K.

Good work. That's actually pretty close to what I had at that age 4 years ago (the market has had 4 great years in a row). How many years do you have in the USAF?

I am a Boglehead, subscribe to the thought of long term, diversified, low expense ratio index funds are the key to success.

Absolutely. This is great advice.

[BattleRattle]

Has anyone worked with a financial advisor/planner in the NCR that they would recommend?

[Homestar]

How many years do you have in the USAF?

I'll be at 11 this spring.

[TarHeelPilot]

Cool discussion. I enjoy learning from you guys. I've contributed to the TSP and maxed my IRA since paycheck #1 in the AF. I'm 33 with $200,000 in IRA, TSP, and cash. It would have been about double that, but I got divorced and split all assets including $84,000 in cash and sold my house 18 months ago for $100,000 less than it's worth now. Bummer.

[Smokin]

Checking and Savings (emergency fund cash): 63K

Holy hell! What kind of emergency would take $63K that you need immediately? That's more than seven months of pre-tax income for most of us. If anyone in our type of income bracket needs $63K for an emergency, items from the Gun thread would likely be of more use. I understand longer term emergencies (like getting caught using products from the above post, getting the boot from the AF, and searching for a job), but then you would also have six months to make that money liquid. Seems like you're running a huge opportunity cost to have that much money in an account that probably has a negative post-inflation yield.

[Homestar]

Holy hell! What kind of emergency would take $63K that you need immediately? That's more than seven months of pre-tax income for most of us. If anyone in our type of income bracket needs $63K for an emergency, items from the Gun thread would likely be of more use. I understand longer term emergencies (like getting caught using products from the above post, getting the boot from the AF, and searching for a job), but then you would also have six months to make that money liquid. Seems like you're running a huge opportunity cost to have that much money in an account that probably has a negative post-inflation yield.

RIF for one. I've always had a goal of 1 year of liveable income as cash money in the bank since I can't reasonably stockpile food, water, and guns moving around all the time. Yeah, savings account isn't keeping pace with inflation.

[JS]

There's an Not that this is not related, but most of this stuff was discussed already if you read the last few pages of that thread. Just be careful about self-investing and thinking that you have a clue about diversification, financial analysis, balanced portfolios, etc. You don't.

[Pajaro]

RIF for one. I've always had a goal of 1 year of liveable income as cash money in the bank since I can't reasonably stockpile food, water, and guns moving around all the time. Yeah, savings account isn't keeping pace with inflation.

You could put it all into a Penfed CD (I haven't checked in a few days, but they have (had?) a 5-year 3.04% CD. If you need the money, you can break the CD and you pay 1 or 2 years of interest (I forget which). However, per PenFed's policy, the penalty will not eat into the principal. Your $63k would be $73,328 in 5 years at that rate. The worst case is that you break the CD and walk away with $63k.

If you go this route, I recommend several $5k CDs. That way, if you need $20k, you could break 4 CDs and keep the rest earning interest.

[skosh]

May I recommend mint.com (also available as an app) to track all your finances/investments real-time, see where your money is going, and calculate your "net worth."

Here's what it tells me (5.5 year captain pilot, single without kids or a house or debt/loans):

Cash: $21k

Stocks: $46k

Roth IRA: $43k

TSP: $22k

Other investments: $34k

My car: $28k (paid cash)

Total value: $194k

[Van1]

I'm one of the 157 Majors that was not continued in 2011. Currently a Lt Col going on over 2 years of AD orders in the Guard. 2 to go until AD retirement. Figure my wife and I (DINKs) have about $550k+ between stocks, mutual funds, IRAs (both Roth and traditional), 401ks, checking, home equity, and paid off cars (the invol sep pay helped there). My biggest problem is that I have $100k in checking. Need to figure out what to do with it. Cause its not doing me any good there.

[TarHeelPilot]

I'm one of the 157 Majors that was not continued in 2011. Currently a Lt Col going on over 2 years of AD orders in the Guard. 2 to go until AD retirement. Figure my wife and I (DINKs) have about $550k+ between stocks, mutual funds, IRAs (both Roth and traditional), 401ks, checking, home equity, and paid off cars (the invol sep pay helped there). My biggest problem is that I have $100k in checking. Need to figure out what to do with it. Cause its not doing me any good there.

Glad that worked out for you!

[xaarman]

My biggest problem is that I have $100k in checking. Need to figure out what to do with it. Cause its not doing me any good there.

CDs have already been discussed. If you want a completely hands off approach, consider your non emergency funds in the Vanguard 2040 fund here: https://personal.vanguard.com/us/funds/snapshot?FundId=0696&FundIntExt=INT It is diversified, and will reallocate the percentages between domestic, international and bonds to be less risky as 2040 nears. It also has a very low expense ratio, but you will have to pay capital gain taxes on any profits if you set it up in a normal brokerage account.

Finally, Morningstar did a study and found that expense ratios are the single biggest predictor of mutual fund performance, even better then their own Star rating system: https://personal.vanguard.com/pdf/morningstar.pdf - while I do agree with their findings, they only studied 2005-2008, so you can't use this one single study to validate a 50 year retirement plan. You can however, use the Four Pillars of Investing book which comes to the same conclusion.

--

On a second note, here's a good comparison between Mutual Funds and ETFs: https://www.fool.com/investing/etf/mutual-funds-v-etfs.aspx

It's key to note that ETFs are a huge advantage when dealing with mutual funds that have high expense ratios or actively managed funds that buy/sell a lot. However, Vanguard index funds have such low expense ratios that it makes that point moot. To buy/sell ETFs, you incur normal stock brokerage fees, and the dividends pay cash into your brokerage account which will require more fees to reinvest. Mutual funds are designed to auto-reinvest their dividends, saving you the fees that could add up over 40+ years of reinvestment.

[HU&W]

I'm one of the 157 Majors that was not continued in 2011. Currently a Lt Col going on over 2 years of AD orders in the Guard. 2 to go until AD retirement. Figure my wife and I (DINKs) have about $550k+ between stocks, mutual funds, IRAs (both Roth and traditional), 401ks, checking, home equity, and paid off cars (the invol sep pay helped there). My biggest problem is that I have $100k in checking. Need to figure out what to do with it. Cause its not doing me any good there.

Sounds like about the right time to hire a good FM or CFP.

[Day Man]

CDs have already been discussed.

Look into ladder CDs...

edit: directed at Van1, not xaarman.

Edited January 5, 2014 by day man

[Clark Griswold]

On the subject of looking for greater rates of return on cash savings, I've thought about trying foreign currency CDs with Everbank

Higher rates of return and diversification beyond the dollar but haven't pulled the trigger yet. Some currencies like the Indian Rupee can yield 6.25% for a 3 month CD but that yield come with a just a bit of risk.

[Lumbergh]

Van1,

Have you ever thought about a rental property? You could probably find a nice property (single family or multi-family) for $50k down that could net you a nice return. And then you'd still have a good chunk of money to stick somewhere else.

Edited January 5, 2014 by Lumbergh

[ChkHandleDn]

Has anyone worked with a financial advisor/planner in the NCR that they would recommend?

Just to pile on: any of you guys use a financial advisor, and if so, any recommendations? Edited January 5, 2014 by ChkHandleDn

[JeremiahWeed]

Some currencies like the Indian Rupee can yield 6.25% for a 3 month CD but that yield come with a just a bit of risk.

Clark,

Is that really "just a bit" of risk or is it Bob Uecker in Major League - "KY ball, juuust a bit outside" risk?

[xaarman]

Just to pile on: any of you guys use a financial advisor, and if so, any recommendations?

Keith Tatlock (ANG MX Officer) was in my SOS class and an all around stand up guy. I picked his mind every chance I got.

https://www.nefgllc.com/ecard.cfm?ID=84274

[ClearedHot]

I'm late 40's, planning to hit the eject button in 2015 which will give me about $75K per year in retirement just for being alive, not bad for a mouth breathing neanderthal .

Married (wife 1.0), 1 kid (1st Grade), transferred GI bill four years ago (fully vested), 529 currently has $138,000, will hit the $235K limit well before 18.

No debt other than one mortgage (30 year 3.5%, with $275,000 to go) and a car payment (1.4% on a remaining balance of $25,000)

Owned first house since 1991, bought another in 1997, and current one since 2006. Never carried any credit card debt, have a libor loan pledged from my porfolio for large purchases that is basically a large line of credit @ 1%.

Net worth = Doing ok

1.6M in taxable brokerage account (Current distro = .01% cash, 9.83% in MMF and BDP, 72% in Stocks/Options ,18.16% in Mutual Funds)

180,000 TSP

360,000 Roth IRA

300,000 Wife's Roth

187,000 Traditional IRA

120,000 Wife's Traditional IRA

138,000 529 college savings plan

50,000 Cash Savings Checking, Savings, MM, and a CD)

250,000 equity in Rental Property #1 (No mortgage) - Generates $1500 @ month in income.

175,000 equity in Rental Property #2 (No mortgage) - Generates $1300 @ month in income.

75,000 equity in Rental Property #3 (30 year 3.5%, with $275,000 to go) break even each month, win overall based on tax deductions.

50,000 equity in land (No mortgage) - Sitting idle and have to pay Prop tax and HOA fee, want to sell it.

500,000 equity in another piece of land (Inherited from grandparents - No mortgage - lease to a farmer for agricultural tax exemption)

I max out my Roth IRAs and TSP every year.

As a Capt who flew mostly at night, I spent some time as a daytrader...did very well AND very bad, lost $35K one day, made $40K on another. Got very nervous at one point when I realized I had over $100K on margin, so I quit. Luckily on the advice of a friend I got in early on SanDisk and held it long through a couple splits, made a LOT of $ when I sold it, paid off two houses, paid a metric shit ton in taxes (my tax liability that year was more than my entire AF salary), and gave the rest to a professional wealth manger who has since tripled what I gave him.

[Danny Noonin]

I never liked you.

[moosepileit]

Screen shots of balance sheets and 1.0 or it never happened.

Edited January 5, 2014 by moosepileit

[duece123]

I'm late 40's, planning to hit the eject button in 2015 which will give me about $75K per year in retirement just for being alive, not bad for a mouth breathing neanderthal .

Married (wife 1.0), 1 kid (1st Grade), transferred GI bill four years ago (fully vested), 529 currently has $138,000, will hit the $235K limit well before 18.

No debt other than one mortgage (30 year 3.5%, with $275,000 to go) and a car payment (1.4% on a remaining balance of $25,000)

Owned first house since 1991, bought another in 1997, and current one since 2006. Never carried any credit card debt, have a libor loan pledged from my porfolio for large purchases that is basically a large line of credit @ 1%.

Net worth = Doing ok

1.6M in taxable brokerage account (Current distro = .01% cash, 9.83% in MMF and BDP, 72% in Stocks/Options ,18.16% in Mutual Funds)

180,000 TSP

360,000 Roth IRA

300,000 Wife's Roth

187,000 Traditional IRA

120,000 Wife's Traditional IRA

138,000 529 college savings plan

50,000 Cash Savings Checking, Savings, MM, and a CD)

250,000 equity in Rental Property #1 (No mortgage) - Generates $1500 @ month in income.

175,000 equity in Rental Property #2 (No mortgage) - Generates $1300 @ month in income.

75,000 equity in Rental Property #3 (30 year 3.5%, with $275,000 to go) break even each month, win overall based on tax deductions.

50,000 equity in land (No mortgage) - Sitting idle and have to pay Prop tax and HOA fee, want to sell it.

500,000 equity in another piece of land (Inherited from grandparents - No mortgage - lease to a farmer for agricultural tax exemption)

I max out my Roth IRAs and TSP every year.

As a Capt who flew mostly at night, I spent some time as a daytrader...did very well AND very bad, lost $35K one day, made $40K on another. Got very nervous at one point when I realized I had over $100K on margin, so I quit. Luckily on the advice of a friend I got in early on SanDisk and held it long through a couple splits, made a LOT of $ when I sold it, paid off two houses, paid a metric shit ton in taxes (my tax liability that year was more than my entire AF salary), and gave the rest to a professional wealth manger who has since tripled what I gave him.

Damn dude, good for you! It will be nice to go I to retirement financially stress free.

[Clark Griswold]

Clark,

Is that really "just a bit" of risk or is it Bob Uecker in Major League - "KY ball, juuust a bit outside" risk?

There's a good bit of risk but some of their CD products are FDIC insured. The main worry I see is the exchange rate, that is these countries like to inflate their currencies when they get into trouble; the high yield on the CD would be minus the inflation rate of the currency + change (+ or -) in value against the dollar + transaction fees. Looking into this, it seems longer term than I thought, people seem to keep the CDs for several rollovers and cash out when the time is right (currency strong against the dollar or at least stronger).

Seems reasonable enough but I've just been thinking about it, looking for higher yield is great but the loss in potential return for keeping cash liquid is an insurance premium until things stabilize.