• Posts Tagged ‘investments’

    Judge Not

    by  • April 9, 2012 • Tagged: , , , ,  • Comments


    Time Enough for This AND Retirement Savings!

    Image: Kurman Communications, Inc.

    Despite reminding my husband constantly how amazing I am, and how lucky he is to have me, I do, in fact, have a number of flaws that I try to correct (when I can remember them). Besides an anal-retentive need to keep things organized at the expense of the sanity of others, a propensity for nagging, and something of a temper, my greatest flaw is how exceptionally judgmental I am. It’s not something I’m proud of (except for those rare moments when it translates into a useful form of sass that gets things done) – “let he who is without sin cast the first stone,” etc. But it’s a habit that’s hard to break, and it’s one I find largely directed at financial matters.

    When I started writing for “Make Love, Not Debt,” I purported that I wanted to disprove the stereotype of the financially inept millennial. And it’s true! And as a result, there are moments when I want to drop kick some of my 20-something counterparts for their nonsensical financial decisions. An example: a coworker and I were recently discussing a variety of financial things. I mentioned our company’s retirement plan, and their match. “It’s great to have a 403b with a match,” I said.

    “What?” he replied.

    “Our 403b – it’s nice that [COMPANY NAME] puts a match in.”

    “What’s a 403b?”

    Readers, this company sends tons of emails about our benefits. When you start working, at the MANDATORY ORIENTATION, they run through all of your retirement plan options, and discuss the basics of a retirement plan, how to contribute, what the company-specific options are, and how you can make investment decisions. You get gads of mail reiterating all of that information. Not only does this company match – it puts money into your account whether or not you’re contributing. It is FREE MONEY. And this co-worker, who is a few years older than I am, and has been at this company for about a year longer than I, had no idea what I was talking about. He had no idea that he could be contributing to a retirement fund – nay, he seemed to have no idea what a retirement fund is. He had no idea that he has free money sitting in an account, courtesy of our employer. At that moment, I was judging the heck out of him. You’re 28! You work for a company that goes out of its way to explain its retirement fund to you! Why do you have no idea what I’m talking about? Why are you not taking advantage of the pre-tax contribution options? What is wrong with you?!

    Granted, this is the same friend who has upwards of three-digit student loans, and still spends more money on clothing than I do. So I have lots of judgment to go around with him.

    Alas, this is a common theme among my acquaintances. A 29-year old graduate student I know (who has the same stipend as my graduate student husband, and lives in the same rent-free housing that we do) once told me, “Oh, one day I’ll have enough money to put in a retirement fund!” And within the next breath, described the $180 pair of jeans she had just purchased. I realize that this prevailing sentiment comes from a place of procrastination. People think that they’re young, and that there will be lots of time later on to sock money away from retirement, when they “have it.” For now, there are nice jeans and happy hours and trips to spend that money on. I get it! I understand the allure of cocktails and trips and jeans. I’m young, too, and I like having nice things. But how do we get my generation to realize that all of that money doesn’t just appear later on in life – you have to start early. How do I drill into the young minds of my peers that the power of compound interest is amazing, and if you do even a little bit right now, it will make a world of difference? How do I convey the simplicity of designating a pre-tax contribution to your retirement fund? And how can I avoid making my judgment face throughout it all?

    Roth IRA – My First Investment Account

    by  • March 27, 2012 • Tagged: ,  • Comments

    Source: goodfinancialcents.com via Jeff on Pinterest

    We’ve joined over 140 other bloggers to promote the Roth IRA Movement. Thank Illinois Certified Financial Planner Jeff Rose for this awesome idea!

    How We Found Out About Roth IRAs

    According to my statements, my Roth IRA was opened in 1996. I was in high school at the time and got into a good amount of trouble for a teenager, so I was grounded a lot. Some of those Friday nights were spent with my mom, aimlessly flipping through channels for something to watch. One night, we came across a show on finances, with a host being a fiery woman with the name that wounds like MOVIE DOORMAN. It was she who introduced our family to the Roth IRA.

    We completely bought into the numbers that the financial personality was throwing at us: if we contributed the maximum amount (which back then was $2,000) for a few years, then by the time I was to retire I’d have a GAJILLION DOLLARS for me to by a private island and retire. She didn’t say exactly how the money would multiply, but that didn’t matter to us. So my mom opened up an account for me and put in $2,000. She gave me free reign as to what I could do with it.

    I didn’t have a single clue as to what I should have done. So I did what any slacker teenager would do: Nothing.

    Getting Started With My Roth IRA

    Fast forward a few years and my mom had contributed an additional $500, while I did nothing. She called me one summer day when I was in college, and told me to pick some investments. I logged into the investment brokerage, and I stared at the screen. I. Knew. Nothing. So I did what any Generation Y/Millenial would do: I called the customer service hotline for help.

    When I was connected with the rep I told him the history of the account and that I had no idea what I was doing. The guy was nice enough to stay on the phone with me for about an hour while he explained the basics of mutual fund investing – large caps vs small caps, stocks vs bonds, mutual funds. I am supremely grateful that he spent so much time with clueless me. Honestly, I don’t know if what that guy did was even legal.

    When I got off the phone, armed with the very basic knowledge that I could obtain about investing, I went and made my first investments: ASCVX (which was originally owned by the bank I was with at the time) and FSLCX. Woo!

    My Roth IRA Today

    While those weren’t the brightest of investments, it got me started. The promise of a GAJILLION DOLLARS by the time I retired was again being pursued. Over the years in my Roth IRA I owned individual stocks of GE, CVS, and AMD, along with some other winners and losers.

    Today, my Roth IRA is a part of a comprehensive family retirement investment portfolio. While I haven’t updated our list of holdings in our Roth IRAs since 2007, they do still have the same investments in them – a REIT and a bond fund, both which round out our portfolio.

    Looking to the Future

    We’ve unfortunately not contributed to our Roth IRAs in a few years as we’ve increased the amounts we put in our employer-sponsored retirement plans. We would like to change this in the future as tax-free growth is something that we should be taking advantage of and we would like to remain tax-diversified.

    One future possibility for our Roth IRA is to help fund a first/investment home purchase. Current regulations allow us a lifetime withdraw limit of up to $10,000 for the purchase of a first time home. If we both did this, then we’d have $20,000 in real estate, or about 17% of our portfolio. It’s a fantastic benefit of having a Roth IRA, but we must weigh all the options to see if it is right for us.

    Do you have a Roth IRA? How have you used it in your life?

    The Best Investments In Myself

    by  • January 23, 2009 • Tagged: , ,  • Comments

    During these tough economic times, I have investments in something that has a high rate of return and little risk: ME. Fortunately, I started investing in myself before everything hit the fan; because of that I feel that I am in a good position to keep my job or even advance my career. Here’s two investments that I made in myself that has tangible financial rewards:

    Taking Classes

    I did not take advantage of our company’s tuition reimbursement benefit the first two years that I was employed. In hindsight, that was really dumb; I left $5,000 in educational expenses on the table.

    Eventually I decided to start using some of that benefit and enrolled in a certificate program that will put me in great position compared to my peers. I am almost finished with that and have started taking classes that are more broad in scope and will make me more versatile, like at http://financial.kaplan.co.uk.

    The total out-of-pocket cost of my classes comes out to less than $200 per year, or the amount that the tuition of the classes exceeds $2,500.

    These classes have had an immediate impact on my performance at my job. I have knowledge and skills that none of my peers have. I am able to work smarter and add value to my small company. I’m pretty sure that my 72.5% pay increase since I’ve started is due to my increased contributions to my workplace. If you are already working full time, it can be difficult to find the time to upgrade your education. After all, very few employers are going to want their employees missing time every week, even if it means they will be able to make a greater contribution in the future. There are options for these people, however, as online universities now offer a variety of different programs, so there is a good chance that you will be able to find yours somewhere. Just because you are unable to attend a university campus does not mean you have to give up on furthering your education.

    I just wish that they would reimburse me for the coffeehouse trips that I take when I study!

    Getting and staying healthy

    Since this blog began I’ve lost about 60 pounds. It all started when I had ACL knee reconstruction surgery. The events leading to that were directly related to me being overweight.

    The cost of losing and maintaining this weight and lifestyle is a little high. First, I had a gym membership for a while, but I recently quit the gym in favor of more home-friendly workouts. I am pretty active, but need goals like running a half-marathon or playing soccer to keep me motivated. My diet is now much healthier, but now without an initial hit to our wallet as I was working out the kinks.

    There have been numerous financial benefits to losing weight. First off, we didn’t have to buy a new bed to hold our fat asses. Last year, my doctor took me off high blood pressure medications and told me to see him once a year instead of twice. We’re currently in the process obtaining a life insurance policy and I’m sure that my new weight and lack of health problems will contribute to a more favorable rating, which will lead to a less expensive premium.

    Being healthy will also prevent future healthcare costs. I’m at a lower risk for diabetes and heart disease. I will also miss less days of work that I because of health problems.

    How are you investing in yourself? Are your investments going to benefit you financially?

    Taxes: I Just Can’t Get Them Right!

    by  • November 6, 2008 • Tagged: , , ,  • Comments

    Earlier this year I posted about our tax situation from 2007, and what we would be looking forward to in 2008. Since Her and I just got married, we needed to do the usual adjustments for our lives, including the exciting tax situation! Here’s what’s been going on.

    I grossly UNDERESTIMATED how much money Her and I would bring in from all income sources: Her’s job, my job, and blog income. When I ran the numbers last February I must have been under the influence of something really good because I was really optimistic about a refund. Plugging the numbers again reveals that we’re going to OWE ~$4,500!!!1!1!1!!

    After finding out how much we are going to owe, I went into super action mode to see what we could do to reduce our tax burden. They are as follows:

    • IRA – We’re at the point in our lives where we’re making too much money to take the deduction for contributing to a Traditional IRA. No luck there.
    • Adjust withholding – To cover our tax burden, we would have to increase our withholding by $450 per pay period. Since it is close to the holidays and we’ve already made travel plans, this doesn’t seem too feasible. Plus, what about the presents?!?
    • Spend money – A large part of our tax burden is due to the increase of blog income this year. We haven’t put too much money back into the business, but we could easily change that….
    • Increase 401(k)/SIMPLE IRA contribution – yeah we could do this as well, but we’d have to contribute $18,000 to erase the tax burden. Again, the travel, the presents, the humanity!
    • Open a SEP IRA and contribute to it – Again, we would have to contribute a LOT of money to substantially reduce our tax burden. The maximum amount that we’re allowed by law to contribute is not nearly what we’d need to offset our taxes.
    • Open a Solo 401(k) and contribute to it – Once again, we’re going to have to contribute MUCHO DINERO to lower our owed tax. The solo 401(k) has a substantially higher contribution limit which would allow us to put in what we would need to make a dent in the tax burden.
    • Gift tax – we’re going to see a tax guy to confirm whatever plan we have, and to PUT THIS TOPIC TO REST.

    So what action are we going to take? We’re going try and reduce our taxable business income. We’re going to open a solo 401(k) with Fidelity and will contribute a good amount of business cash there. We are also going to put some money into our business and expanding. The expenses incurred with that will further reduce our taxable business profit. After all this is said and done, we will owe ~$500.

    Looking ahead to 2009, we’re going to once again try and not owe or have a refund. We’re going to change our withholding to cover our expected 2009 salaries. For this, we’re going to assume that we have no other income. The taxes on our business income will be paid from those funds quarterly. We’ll contribute a small amount into the solo 401(k) to reduce our taxable income to be eligible to contribute to Roth IRAs, which we will max out.

    To make sure that our 2008 and 2009 plans were indeed feasible, we decided to see a tax guy. First things first: WE WILL NOT OWE ANYTHING FOR THE GENEROUS GIFT GIVEN TO US. Second, we had a good chat with our tax guy and he did confirm that our plan was sound and that we were taking advantage of all of the tax benefits available to us.

    Since we’ve returned from our honeymoon, I’ve spent many hours looking up tax topics and figuring everything out. I hope that the knowledge I gained will help us to make better tax decisions in the future.

    Two Styles, One System: Communication and Money

    by  • September 24, 2008 • Tagged: , , , , , ,  • Comments

    Laura is a twenty-something woman out of school and happily married. Eliminating credit card debt has energized her to knock out her car loan and student loans. She blogs at Green Panda Treehouse about reducing debt, building savings, and working with her husband on finances, as well as her successes and failures.

    Many people worry about discussing finances when they have different views. Avoiding financial talks can lead to disaster in relationships. It can build resentment and escalate into fights that tear down and could lead to divorce. Money isn’t the root of the problem, it’s lack of communication.

    If you share openly and honestly your thoughts and feelings with your fiancé or spouse, you are missing out on a great opportunity. Relationships are mutually defined and both need to share to make it work.

    Here are a few examples of how my husband and I handle money in our relationship. Is it perfect? No. Does it work? Yes, because we’re willingly to talk about our common thoughts and our differences.


    We keep a Google Spreadsheet to display and organize our monthly bills. This allows us to see what our joint bills are and gives a snapshot view of our individual accounts. I can see how much he puts in his 401(k) and he can see my Roth IRA deposits.

    He’s great at setting up the spreadsheets and I love playing around with them.


    Some of my personal goals are to pay off my car loan and my student loans. We also set aside money in our budget for saving. We’re working together: our ‘extra’ money goes to joint savings and to paying down the car loan.


    My husband puts aside money for retirement, but is only semi-interested in following his accounts. When he changed jobs and was rolling over his old 401(k) to an IRA, he asked me to look at investments to put them into.

    I get a kick out of learning new things about index funds, stocks, ETFs, etc. While I explained why and how I came up with my suggestions, he just agreed and made the changes. He’s more conservative with his money and his investments are a reflection of that. I tend to invest more in international funds than him, but the volatility is within what I can handle.

    Credit Cards

    I have two credit cards (I’m closing one) while my husband has no credit cards. After learning the hard way about high credit card interest rates, I’ve paid my debt. I generally pay it off each month.

    I use credit cards mainly for convenience and rewards. I normally keep it at home with me. If we go on trips, I use my credit card. He is very adverse to debt and has not found a credit card that ‘he likes yet’. He generally saves until he can buy it, like his car.


    I’m the paperwork queen. It basically falls to me to organize bill payments and documentation requests. Due to our basic system, it doesn’t take up to much time (5-10 minutes). If there are any issues we’ll discuss in the evening.

    I show him where I keep the files, in case something happens and he needs quick access.


    It’s an imperfect system to be sure, but we make it work. The best advice we received? Talk it out and figure out what’s right for you two.

    Talking it out can help you to understand your partner so much better and help you to build a stronger foundation on future communication, not just with money. Remember also that you’ll discuss these issues as your circumstances change. It’s not set in stone.

    Keeping each other in the loop is essential to a successful marriage. Two different viewpoints can lead to a stronger system.

    How different are the two of you? What do you two agree and disagree on?

    Our 2007 Goals Status, Part 4: Develop The Joint Retirement Portfolio

    by  • December 26, 2007 • Tagged: , ,  • Comments

    This is part 4 of our retrospective look at our 2007 goals. Here’s part 1 (Roth IRAs), part 2 (Student Loans), and part 3 (credit cards).

    This year we sought out to develop the foundation for our joint retirement portfolio. This was quite a daunting task, and we had to break it up into a few pieces to make it manageable. Even though it has been over a year since the first time we’ve first decided to tackle this task, we feel that there is much to learn and do.

    Here’s a recap of what we’ve done this year to get closer to develop our joint retirement portfolio:

    1. We determined how much money we’ll need to save up for in order to retire.

    2. We laid out what our portfolio looked like back in January 2007 and reviewed what was wrong with it.

    3. We then assessed our overall risk tolerance, and decided that a 90:10 stock:bond ratio was appropriate for our age.

    4. We then delved further into our asset allocation to specifically determine which investments we should be in to minimize risk while getting good returns.

    5. Finally, we looked to see our progress and assessed what steps to take next.

    Now, the plan is to learn more about investing in order to fine tune the numbers. We’re going to reassess our allocation semi-annually and readjust the allocations if necessary.

    Status: Mostly completed; needs tweaking.

    Planning the Joint Retirement Portfolio: December 2007 Update

    by  • December 21, 2007 • Tagged: ,  • Comments

    This is part 5 of our Planning the Joint Retirement Portfolio series. See what we went out to do here, how we got our magic number (part 1), assessed our portfolio back then (part 2), the big picture of our portfolio (part 3), and then a detailed plan allocation (part 4).

    It has been almost a year since we’ve started the joint retirement portfolio series, and almost 6 months since we’ve last looked at our joint retirement portfolio. Since then, we’ve done many changes to get it to our model portfolio. We’ve sold some, bought some, and cleaned things up a little. Our current asset allocation is depicted in the pie chart below.

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    Compared to our model portfolio, we’re still not quite there yet.

    When we first started this exercise, we showed you what was in our portfolio. Here are the detailed holdings in our portfolio as of today.

    FundTicker% of Portfolio
    Roth IRA (Vanguard)
    General MotorsGM0.6%
    Northern TrustNTRS1.3%
    Vanguard Total Bond Market IndexVBMFX13.7%
    Roth IRA (Fidelity)
    Fidelity Real Estate InvestmentFRESX7.7%
    Fidelity Small Cap ValueFCPVX8.5%
    AllianceBernstein International Value Fund (A)ABIAX11.7%
    Dreyfus Premier S&P STARS Opportunity Fund (R)DSORX7.1%
    Fidelity Advisor Small Cap Fund (T)FSCTX6.9%
    Neuberger Berman Socially Responsive Fund (Investor)NBSRX2.7%
    STI Classic Small Cap Value Equity ISCETX11.2%
    SIMPLE IRA (Vanguard)
    Vanguard Target Retirement 2045VTIVX26.1%

    The remaining 0.1% is cash that is floating around in some of the accounts.

    We made most of the changes to our portfolio last summer. We now plan on reassessing our target allocations every six months or so, and then adjusting if necessary. Much of the difficulty of getting a cohesive portfolio is balancing the available account in each of our brokerage accounts, namely Her’s 401(k). Another obstacle is the minimums required to invest in many mutual funds at Fidelity or Vanguard. In order to get around that, we’re currently looking at ETFs; that is not looking like an attractive option due to the high trading fees relative to our balances at Fidelity and Vanguard.

    We welcome your comments and suggestions on our current portfolio.

    Bad Time to Rebalance Our Retirement Portfolio?

    by  • August 16, 2007 • Tagged: ,  • Comments

    One of our goals this year was to “come up with a retirement action plan that includes correct asset allocation, periodic re-balancing, and a re-assessing how much we’re socking away.” We’ve gotten pretty far with that, as we’ve written a few articles that detail our progress. We’re pretty happy with the plan we drew up, but we haven’t done much (read: we’ve done nothing) to get our current asset allocation to what our target is.

    Since the social and work commitments are slowing down at the end of this month, we thought we’d finally sit down and coordinate our retirement accounts to get our target asset allocation. But with the stock market doing some kooky things as of late, we’re not so sure that’s a good idea.

    Should we rebalance our portfolio now, or should we wait out the current market volatility? If we wait it out, isn’t that a form of timing the market? When do you think it would be a good time to rebalance? Does this even matter considering we’re going to let these investments sit for 20+ years?

    Planning the Joint Retirement Portfolio: Slicing Up The Allocation Pie

    by  • June 1, 2007 • Tagged: ,  • Comments

    This is part 4 of our planning the joint portfolio series. To see how we got here, read this intro post, then read part 1: The Magic Number, part 2: Currently, It’s A Mess, and finally part 3: Large Scale Allocation.

    In the past four months since the last post in the series, we were mostly waiting for my SIMPLE IRA transfer from my old brokerage to Vanguard. Since that transaction is now complete, we have had some time to talk about the finer points of our retirement investment portfolio.

    In that timeframe we also read a few good investing books. Her read A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, and I read All About Asset Allocation. Both of these books provided us with a good foundation for investing.

    In order to come up with a diversified retirement portfolio, we had to know ourselves a little bit. We know that we don’t plan on retiring for another 30+ years, we are buyers and holders, and we can tolerate a lot of risk right now. If it were a perfect world and Her and I had one brokerage company that handled our accounts, the breakdown of our asset allocation would be as follows:

    We’re going to have a heavy investment in small-caps, leaning towards value stocks. I know, I know, past performance isn’t necessarily an indicator or future performance, but 50+ years of data is pretty compelling. The large- and mid-cap stocks will probably be covered by investing in total stock market index funds. In fact, we’re going to try and get most of our portfolio in low-expense index funds. Yes, REITS are still there, mostly because the companies in many REIT index funds manage commercial properties and not residential housing. And of course good ol’ bonds, just in case the market goes splat.

    There you have it. Now all we have to do is implement it. Your comments are welcome.

    SIMPLE IRA, Meet Vanguard

    by  • May 22, 2007 • Tagged: , ,  • Comments

    I’ve written in the past about my dissatisfaction with my SIMPLE IRA plan administrator. In the past few months I decided to move my hard earned dollars elsewhere. And by elsewhere I mean Vanguard.

    As I stated before, our plan administrator is also the guy who manages all of the money for the higher ups in our company…the same higher ups that I had to get sign the paperwork so that I can transfer my funds. Tricky.

    I’ve decided that I would approach this in the most professional way that I can think of: just be straightforward with everyone. Here’s how it all went down.

    1. Research new home for SIMPLE IRA. I would have loved to have moved to Fidelity since I already have a Roth IRA with them, but they don’t take “orphaned” accounts; I’d have to get everyone in my company to go along with. The other choices were T. Rowe Price, Schwab, and Vanguard. I ultimately chose Vanguard because I like the idea behind low cost index funds.

    2. Call broker. Notify him that I’ll be changing brokerages and to expect an asset transfer form. Ask him to close the account as soon as the asset transfer is completed. Of course he didn’t sound pleased when I told him. He asked why I was moving my funds, to which I replied, “I just like doing this stuff myself.” And by that I mean I don’t like getting whacked by your fees. Nothing personal, dude.

    3. Approached higher up who needs to sign paperwork. Explained that I’m moving SIMPLE IRA. Handed over paperwork. Smooth transaction.

    4. Wait.

    5. Account opened!

    6. Mail in asset transfer form. Wait.

    7. Assets are transfered! Woo!

    A few months ago I listed the contents of both of our investment portfolios. We’ve made some changes, but the biggest one is the liquidation of JCLGX and the acquisition of Vanguard Target Retirement 2045 Fund (VTIVX). I did have to take a 1% hit on the assets I had in JCLGX for less than a year; I minimized this by asking my old broker to stop putting money into that fund way back in February. Thus, about $4,000 was subject to that fee – I can live with a $40 hit now to save in fees and expenses down the line.

    The only thing that I don’t like about having my SIMPLE IRA with Vanguard is their $25 fee for each mutual fund you have. This fee can NOT be waived by signing up for the e-service package, but can be waived once I have more than $100,000 total in all Vanguard accounts. Fortunately, the minimum balance fees are waived for funds in a SIMPLE IRA.

    Now that this has all been completed, I’ll revisit our “Planning the Joint Retirement Portfolio” (Part 1 Part 2 Part 3) series. It’s only been on hold for the past 3.5 months.

    Should We Diversify Brokerages?

    by  • March 26, 2007 • Tagged: , ,  • Comments

    Our retirement holdings will soon be with three different brokerage companies. Her’s 401(k) is stuck with who manages it for her company, but the Roth IRAs can all be moved from one brokerage to another. The question is, why would we want to?

    I bring up this question because I’m in the process of moving my SIMPLE IRA (here’s why I’m doing this) to Vanguard. Her’s Roth IRA is at Vanguard, mine is at Fidelity. I originally wanted to move my SIMPLE IRA to Fidelity to have all of my accounts in once place, but they don’t allow “orphan” (just me, not my whole company) SIMPLE IRA accounts. After a little research, I found out that Vanguard, T. Rowe Price, and Schwab all allow orphaned accounts. Since Her’s Roth IRA is already with Vanguard, I decided to keep everything streamlined and go with them. I never even considered other places to move my SIMPLE IRA such as a discount broker.

    The main reasons I decided to move money over to Vanguard is that I wanted to take advantage of their low-cost index funds and simplify our financial lives. I can’t help but wonder, is the grass greener on the other side? Am I missing out on anything by keeping our retirement funds in only a few places? What reasons would I want to have multiple brokerages?

    Planning the Joint Retirement Portfolio: Large Scale Allocation

    by  • February 9, 2007 • Tagged: ,  • Comments

    This is part 3 of our planning the joint portfolio series. To see how we got here, read this intro post, then read part 1: The Magic Number and part 2: Currently, It’s A Mess.

    Lately we’ve both been pretty busy with our work and social lives, leaving little time to discuss the finer points of our joint retirement portfolio. What has been quite a boon to us are automatic deductions from our paychecks that continue to plow money into our retirement accounts.

    When we do have the time to talk about asset allocation, the conversation usually goes like this:

    Him: Hey, our investment portfolio is a little off our target allocation.

    Her: So what is our target allocation?

    Him: I dunno, 80% stocks, 20% bonds?

    Her: 20% bonds? What are you, 60-years-old and neutered? 100% socks!

    Him: Your face is a bond.

    …and we end up not doing anything.

    This really boils down to how much risk we’re willing to take. Here are the factors that we’re taking into consideration when determining our risk: we’re fairly young (mid 20′s), have 30+ years until we retire, we’re buyers and holders, and while not pleasant, we have weathered out the bad times that our (limited) portfolios have been through.

    Without further ado, here’s our large scale allocation at least for the next few years:

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    Yes, 90% stocks and 10% bonds. In the next post of this series, we’ll slice up the pie into more specific asset classes.

    SIMPLE IRA – Should I Stay Or Should I Go?

    by  • January 24, 2007 • Tagged: , ,  • Comments

    There have been numerous times on this blog that I have expressed dissatisfaction towards the investment options that are currently offered for my SIMPLE IRA plan. A few weeks ago I incorrectly stated that I could only invest in loaded fund of funds; on further review of all of the products, there was a mix of loaded mutual funds with pretty good expense ratios and loaded fund of funds with high expense ratios. Personally, I don’t like paying loads or excessive funds.

    SIMPLE IRA plans are different than 401(k) plans in that an employer can either require its employees to deposit their contributions at an employee selected financial institution (using Form 5305-SIMPLE [PDF]), or have its employees select to designate their own financial institutions for receiving contributions (using form Form 5304-SIMPLE [PDF]). My employer has chosen the latter, with us being able to choose our own financial institution for our contribution.

    Not everyone at my company understands this portability of our funds, with due reason. Our company brings in a guy from a brokerage firm to educate (sell?) new employees about the SIMPLE IRA. He’s brought in for one reason: he manages the money of our higher ups. Admittedly, when I started participating in the plan, I thought that this guy and his brokerage firm was the only way to go. I did notice that we were given the form to choose our own financial institution, but no one else in the office was able to help, so I signed up with the guy and his brokerage company (a downfall of working at a small company as we have no HR person).

    In the year and a half since I have had my SIMPLE IRA, I’ve learned that there are a few options with my plan:

    1. Pick up and move. There is no penalty for transferring SIMPLE IRA assets from one financial institution to another. So far I’ve looked at moving my SIMPLE IRA to either Vanguard, T. Rowe Price, or Schwab, on the basis of their reputations and investments. The problem? The 1% deferred sales charge on all contributions less than a year old, which would really only be a measly $60 or so. Also, I don’t want to burn any bridges with the high-ups by snubbing their guy of my business.

    2. After two years in the plan, transfer assets to a Traditional IRA. On a yearly basis, accumulate money in my SIMPLE IRA, then transfer funds (see how this works at Barry’s blog) The problem? The financial guy recommends class C shares with a deferred sales charge after that is waived after one year, of up to 1%. I don’t want to lose out on 1% of my assets every year. Alternatively, I could just let my contributions sit in a money market account and let it earn interest.

    3. Stay where I am. The problem? I don’t like paying for loaded funds. Also, it was never disclosed how much we’re paying this guy to “manage” our money. Fortunately, after looking over my statements it seems that it is a reasonable $35 a year.

    I am leaning towards option #1. I’d like to hear your thoughts.

    Planning the Joint Retirement Portfolio: Currently, It’s A Mess

    by  • January 16, 2007 • Tagged: ,  • Comments

    For those of you keeping track (and who isn’t?), this is the second step of our Planning the Joint Portfolio series. Here’s step 1 if you missed it.

    A few weekends ago we went through the process of writing down all of our retirement investments down in one place. As our net worth statement says, we currently have our retirement funds spread across four accounts: my SIMPLE IRA, my Roth IRA, Her 401(k), and Her Roth IRA. The investment holdings in all of our accounts are as follows:

    FundTicker% of Portfolio
    Roth IRA (Vanguard)
    General MotorsGM1.06%
    Northern TrustNTRS1.56%
    Vanguard Prime Money Market Fund (Cash)VMMXX1.05%
    Roth IRA (Fidelity)
    Advanced Micro DevicesAMD2.59%
    CVS CorporationCVS3.94%
    General ElectricGE7.11%
    Northern TrustNTRS2.59%
    Aston/TAMRO Small Cap NATASX7.52%
    Fidelity Cash Reserves (Cash)FDRXX1.54%
    AllianceBernstein International Value Fund (A)ABIAX16.74%
    Dreyfus Premier S&P STARS Opportunity Fund (R)DSORX9.84%
    Fidelity Advisor Small Cap Fund (T)FSCTX9.31%
    Neuberger Berman Socially Responsive Fund (Investor)NBSRX4.15%
    John Handcock Lifestyle Growth Fund (C)JCLGX21.19%
    Cash Reserves (Cash)-3.85%

    Running our total retirement investments into the Morningstar X-Ray tool yields this additional information about our overall portfolio:


    You can see here that as for our total investment we are pretty much all in stocks, with the only exposure to bonds being primarily in JCLGX. In our stock holdings, we are weighted very heavily in large cap stocks. A lot of that is due to our individual stock exposure. All of those stocks were bought when we were in college and didn’t know much about investing. While we knew little about Roth IRAs at the time, we did know that it was a relatively safe place to try and learn about investing.

    After looking at the damage we realize that we have much to work on. The next post in this series will tackle how much risk we want to take on to get where we want to go.

    Fund of Funds – Your Thoughts?

    by  • January 3, 2007 • Tagged: ,  • Comments

    Ah, the fund of funds. I was introduced to this gem of an investment when I was eligible for my SIMPLE IRA at my job.

    What is it? It is exactly what it says it is, a mutual fund that invests in…funds. (How about a Wikipedia definition? Or an Investopieda one?) Many funds that we already know and love are funds of funds. They include:

    Hedge Funds – Those get-rich-quick funds that don’t have to disclose a damn thing about what they’re invested in and only allow people with mondo cash invest in them.

    Target Funds – Those fancy investments that reallocate your holdings from more risky to less risky over time to your target retirement date.

    Lifestyle Funds – Attempt to achieve a specific asset allocation within the fund usually determined by whatever adjective describes the fund, and rebalances to remain at that allocation. Example: “Aggressive Growth” may invest in 100% stock funds, while “Balanced” may invest in a 50/50 stock/bond fund mix. Let me wax poetic about my experience with these kinds of funds.

    Currently, I am only invested in a “Growth” lifestyle fund in my SIMPLE IRA (one of the reasons why we’re tinkering with our retirement portfolio), which is invested in 80% equities and 20% fixed income. Over the past year, it has a total return of 12.57%. Not bad.

    When it comes to figuring out how this investment fits in with the rest of our retirement portfolio, I had to dig a little deeper. According to the prospectus, the fund can be invested in any number of funds that are listed in over 8 pages. How many are in my fund of funds? At the time of this writing, my glorious fund of funds is currently invested in 43 different mutual funds. They range from all asset classes, making it difficult to see what else in our portfolio may be lacking.

    Wait, 43 different funds? You know what that means?

    Oh yeah, I’m paying 43 different funds worth of expenses. Well, not really, but it is to the tune of 2.25%. Someone has to pay for all of those fund managers’ kids’ college tuitions. Not only that, but this fund is loaded! Class C shares baby, with a 1% deferred sales load if I sell before I’ve had them a year. Apparently, these funds of funds didn’t have to fully disclose all of their fees, but that should be changing. Not all funds of funds have expense ratios this high – target funds are usually on the low side.

    I know what you’re saying. “So, Him, if these loaded fund of funds suck so badly, why are you invested in it?”

    Because my SIMPLE IRA plan administrator only offers loaded funds of funds, that’s why. I’m currently plotting on how I can best change where I have my SIMPLE IRA. We’ll see how that goes.

    REIT ‘Em and Weep

    by  • December 18, 2006 • Tagged:   • Comments

    I purchased 6 shares of Prologis (PLD) Real Estate Investment Trust (REIT) on 10/15/2003 for $36.89 per share. Today it is worth $62.18 per share.


    This is an increase of over 68%!

    I first learned about REITs during a real estate class I took as an elective in college. A REIT representative came to our class and explained what a REIT is. A REIT is an investment company that manages a portfolio of real estate (usually large buildings like office and hotel towers, not single family homes) to earn profits for shareholders. He also hyped his company’s REIT as a “great investment!” This piqued my interest. Later I researched his company and discovered that it was probably not the money-maker he claimed it was. But during my research I found Prologis. It had very good projections and seemed to be managed responsibly, so I invested. I am very pleased with the performance of this investment. I am hoping that it will eventually split shares as it seems to be heading pretty high in price.

    Planning the Joint Retirement Portfolio

    by  • December 8, 2006 • Tagged: ,  • Comments

    A few months ago, Her posted about the idea we had of investing into our retirement accounts as if it were one retirement portfolio. Great idea, right? Let’s pool our retirement money and fix our allocation and goals as one. Super-duper. Yeah.

    Well, since then, we’ve done nothing to go forward with that plan. We have been investing into our own retirement accounts not taking into account the larger picture. But looking at our monthly net worth statements, we haven’t been doing too badly. That doesn’t mean that we couldn’t be doing better, or that our current allocation may set us up to do much worse.

    Over the next month or so, we’re going to be doing some research and taking action on a step-by-step basis on this whole retirement thing. I’m thinking it may look a little like this:

    (edit: I’ve linked to the corresponding posts where we dealt with these issues)

    1) Set up retirement goals, a la the magic retirement number.

    2) Put all of our retirement accounts on the table, and figure out how we’re doing, and what we’re invested in.

    3) Figure out the large scale allocation, i.e. how much to put into stocks and bonds. I guess this could also fall into the category of finding out our risk tolerance.

    4) Within our stocks/bonds aloocation, decide how we will allocate our stocks into different market caps and sectors, and the same for bonds.

    5) Educate ourselves about different investment vehicles. Sure we know the basics of mutual funds, index funds, and the like, but I personally don’t know much about bonds, or about the inner workings of funds, or why I’d want to pick an indexing ETF vs. an index fund. I have no idea what I just wrote.

    6) Select investments or rebalance holdings that we currently have.

    7) Sit back and let the market do its thing, and reassess every quarter or semi-annually.

    Steps 1-3 are pretty straightforward. Step 5 is the daunting one, but it will be good for us as it will allow us to expand our knowledge of investments so that future decisions will be much easier.

    Hopefully, by the end of the year we’ll have a rockin’ portfolio.

    Where NOT to Ask for Financial Advice

    by  • July 27, 2006 • Tagged: , ,  • Comments

    Recently on Slashdot, a reader asked this question:

    “I am a rising junior in college and decided to take out loans to cover all my costs so I could graduate with money in the bank. My tuition bill is minimal as I have a nearly full ride, but living is always expensive. With that said, I feel like my thousands sitting in the bank could be doing work for me instead of collecting dust till the day I graduate. I have been researching how I could best invest my money so I have immediate access to it if needed, but still do better than a mere savings account. There seems to be a lot of mixed advice and some obvious scams out there. So I ask Slashdot, what is the best plan for a college student to do with his money?”

    Of all places to ask a question like this, why on a tech oriented website? I don’t ask computer advice from a financial planner.

    Some of the comments surprised me with suggestions of frugality, as I assumed the audience was a tech-savvy gadget-hungry kind of people. There’s a lot of good advice, but then there’s also a lot of bad advice.

    What would your advice to this kid be?

    Investment Mystery Update

    by  • June 29, 2006 • Tagged:   • Comments

    Thanks to our readers, I have been able to solve (partly, anyway) the mystery of an investment my grandmother set up for me.

    Reader Claire (of Tired But Happy) commented,

    I can see how you would want to avoid approaching your grandmother. Another idea would be to just call the brokerage firm. You wouldn’t even necessarily need to speak to your g-ma’s broker.

    Great idea, Claire! I found the brokerage’s phone number online and called it. I got the automated system which prompted me for my social security number. I punched it in, figuring my gig was up. But it accepted it, and prompted me to set my new password. I punched that in and was immediately offered to “Push 1 for account information.” I did!

    Since I didn’t speak directly to a broker (I am trying to be as discreet as possible), I only got the basic information. The account is worth around $12,000 with the assets invested entirely in the Franklin Templeton Utilities Fund Class A (FKUTX). There have been no redemptions, transfers, exchanges or purchases. The system listed three recent distributions, each about $90, and said they were reinvested.

    So, some of my basic questions have been answered. I now know how much the account is worth, what sector it is invested in, and how actively it is being managed.

    Some questions are still unanswered. Most baffling is why it is invested in an income fund if my grandmother isn’t taking the distributions as income.

    Now what? There’s the old adage, “Don’t count your eggs before they hatch,” and I’m pretty sure this account counts as an unhatched egg. Since my grandmother has never spoken of the account I suppose she may be counting on it as an emergency fund for herself. This is all fine with me. The most important information I have gained from all this is that I now know I am (potentially) over-invested in energy utilities. Without counting on her money specifically, I can “work around” it in regards to my retirement investments. I hold an energy stock in my Roth IRA (Ameren Corp, AEE), and surely own stock in energy utilities in the mutual funds in my 401(k). I am also over-invested in income funds. In addition to the FKUTX fund I also have shares in MFS Research Bond Fund A (), another income fund. At my age my portfolio should be weighted more toward growth than income. So my plan now is to dump these kind of investments in my retirement accounts and purchase more large cap mutual fund shares instead. Him disagrees with my logic, believing I should pretend I don’t know about the possible windfall. What do you think?

    Identify This Investment

    by  • June 19, 2006 • Tagged:   • Comments

    I need help to identify a mystery investment.

    My grandmother is a wealthy woman who has always had access to professional financial advice. About twenty years ago she set up some sort of estate plan that involved her children and grandchildren, including me. An account was set up for each of us. She has never spoken of it to me, but I am aware of its existence because I have been paying taxes on it every year. Now that I am an adult, and would like to have an accurate understanding of my finances, I am trying to identify this investment.

    Here’s what I know:
    The investment is in her name, and I am also identified in some capacity. The investment earns around $300 a year in dividends and these are withdrawn by my grandmother. The dividends have been pretty constant, leading me to believe that the account value is also pretty stable. I pay the taxes on the dividends every year. I know that my grandmother had a good financial planner who may have helped her use some complicated or rare investment strategies or products. I have passed all the “milestone” adult birthdays, such as 18 and 21, without her mentioning the account to me, so I now believe it is meant to transfer to me after her death. However, she did transfer ownership of my parents account several years ago. My parents liquidated the account and paid off about $20,000 in debt. (My parents don’t know much about finance and don’t know what kind of account it was.)

    Here’s what I suspect:
    I know that you can use a “charitable remainder trust” to make a donation to a charity, whereby you get the tax deduction for the gift but you get to hold the assets and profit from the gains until your death. I suspect she may have set up something similar for us.

    Why not just ask grandma about it? Because I love her and respect her. If she wanted to discuss it with me, she would have. I think it would be in very poor taste to inquire about what I now believe is part of her will. On the other hand, I feel that I have a right to know why I am paying my grandmother’s taxes every year. So rather than ask her, I am asking all you educated personal finance bloggers to help me solve the mystery discreetly.

    I want to know…
    What kind of investment is this? How much might it be worth? How might this affect me (with taxes and other regulations) when I do become the owner of the account? Is this an investment I could hold and grow or something I would have to liquidate upon receipt?