• Posts Tagged ‘retirement’

    3 Financial Management Tactics You Can Start Using Today

    by  • June 28, 2016 • Tagged: , , ,  • Comments

    Financial management is about more than just balancing your checkbook and making sure you don’t spend more than you make. Let’s take a look at some of the financial management tactics you can start using today that can help you achieve your long-range goals.

    Before we do, let’s make an important distinction between tactics and strategy. A strategy represents a goal or big picture plan of action; tactics are actions you are going to take to achieve the goal described by a strategy. For instance, one strategy might be to own your own home. The tactics you might use to achieve the strategy could entail cutting expenses, making more money, saving up, exploring financing options, borrowing from family or friends, liquidating assets, etc. In turn, some of these tactics become strategies that entail tactics of their own (such as those you would use to make more money).

    You will need to take this type of tactical approach if you want to move from simplistic to a level of complexity in order to achieve the strategies described below. Here are three financial management strategies to consider.

    1. Reducing Your Debt-to-Income Ratio

    Your debt-to-income ratio is the total amount of money that goes out each month for mortgage, auto loan, student loans, credit cards, personal loans, business loans (for sole proprietors), etc., compared to the income you earn during the same month. As a formula, it’s expressed like this: Total Monthly Debt Payments / Gross Monthly Income. Here’s an example of how to calculate your debt-to-income ratio:

    $10,000 Monthly personal income from all sources
    $3,200 Mortgage
    $500 Car payment
    $200 Student loan payment
    $200 Business loan payment

    Debt-to-Income Ratio: 41 percent ($4,100 / $10,000)

    It’s important for you to know your debt-to-income ratio, since this ratio is often a key contributor to your credit score and impacts decisions lenders make about whether to extend credit to you personally. If you’re a business owner, your personal debt-to-income ratio can also affect your company’s credit rating and ability to obtain working capital. Bankrate.com’s debt-to-income ratio calculator can help you calculate your own score.

    The 36 percent rule suggests that your debt-to-income ratio should never surpass 36 percent. A high debt-to-income ratio (43 percent or above) might even automatically disqualify you from financing while a lower ratio makes you more attractive to financial institutions. Plus, the more you can reduce your debt-to-income ratio, the more you become less susceptible to financial problems. For instance, if your debt-to-income ratio is low, you have more ability to take a cut in pay or weather temporary job loss.

    2. Improving Your Credit Score

    Most credit score rating systems have a scale that ranges from 300 to 850, broken down into five results:

    • 750+ – Excellent Credit

    • 700-759 – Good Credit

    • 650-699 – Fair Credit

    • 600-649 – Poor Credit

    • Below 600 – Bad Credit

    Your credit score impacts your ability to obtain personal financing such as a home loan (mortgage), credit card, retail store financing, auto loan, etc. In addition, your credit score can also impact your cost of financing; for instance, a low credit score might mean financing companies offer you money at a higher rate of interest than they would offer if you had a high credit score.

    Reducing your debt-to-income ratio is one obvious tactic you can execute in order to improve your credit score. However, simply making your payments on time (or early) and making payments on debt in excess of minimum monthly payments required can also help you improve your credit score, especially over time.

    Given the number of financial data breaches where hackers have obtained personal identification information from retail and financial institutions during recent years, it’s important to check your credit score periodically. Monitoring your credit can help ensure that no one has “stolen” your identity and used it to rack up debt which can not only hurt your credit score, but even result in creditors pursuing you for repayment.

    There are several credit score monitoring services that offer the ability to check your credit scores; however, many offer “free” credit score results only after you agree to another fee or subscription. Your bank or another financial institution may also provide both credit reporting and monitoring services at no cost.

    3. Planning for Retirement

    Just because you have enough money now doesn’t mean you will always have enough money to live the lifestyle you want. Planning for retirement – those years when you are not likely to have any income except for social security – is important for everyone. You can use tools like CNN’s retirement planning estimator to see how much money you should put away into savings or investments at the age you are now, in order to retire by a specific age and maintain your lifestyle (live in the same type of home, spend the same amount on discretionary items, etc.)

    Make sure your financial management strategy goes beyond the basics. The more you understand how to optimize your financial position and avail yourself of tools that can help you find out where you are right now, the better you will be able to plan a strategy that gets you to where you want to be in the long run.

    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?

    How We’ve Been Doing Financially

    by  • October 10, 2011 • Tagged: , , , , ,  • Comments

    In the past two years, we haven’t been good with keeping this blog updated. As we’ve said before, finances weren’t a primary concern for us; we treat it more like a chore. Sure money is important, but for us it remains a tool that we use in order to achieve our other goals. However, like all chores, unless we keep up with it or we’ll end up with a mess. Here are some highlights as to what we’ve been up to financially:

    • Employment: We’re still at the same jobs, and consider ourselves incredibly lucky to have them in this economy. A few friends of ours have been unemployed for quite some time now and I can only imagine the stress that they’re under while they try and make ends meet.
    • Salaries: We’ve made a pittance by sticking ads on this blog. Her’s salary has remained stagnant in the last few years, and she’s still not feeling good about it. Mine, however, has continued to increase. In fact, I have increased my salary by 100% since entering the workforce. The extra cash has made it easier to get by.
    • Retirement savings: We have both increased our employer retirement plan contributions. Her is now saving 10% of her paycheck, of which the first 6% is matched 40%. For those bad at math, the match bumps up the total contribution to 12.4% per year. I’ve increased my contribution to 7% with a 3% match, for a total contribution of 10%. After the new year I’ll probably increase mine to 10%.
    • Savings: Did you know babies are expensive? In addition to buying all sorts of baby stuff, we’ve also taken a few vacations in the last 2 years. Some of them have been “paid” for by my work, some were to lands down under. We’re on track right now to replenish our savings to 3 months of our take home salary. We thought that would be an easier target because our expenses always seem variable. We assume that we could live off of that amount of money for at least 6 months.
    • Spending: In our not making finances a priority, I’m sure that we’ve spent a little more money than we’ve wanted to. Surprise surprise, daycare is our #1 expense, at 30% of our take home pay. At a distant 2nd is rent, which is 15% of our take home pay.
    • Debt: Student loans remain. We’re still not carrying balances on our credit cards – we  pay off the credit cards every month. Still making love, not debt. Oh yeah.
    I would say that we’re been doing ok with our finances. How has the last year or two been for you?

    Financial Goals for 2009

    by  • January 19, 2009 • Tagged: , , , , ,  • Comments

    While we are already pretty well into 2009, it isn’t too late for us to officially declare our 2009 financial goals. We’re now married, so our financial priorities have changed accordingly…and they happen to be house and baby, not necessarily in that order and probably not for at least a year from now. That said, 2009 is going to be a year of heavy financial preparation. Here’s what we’re setting out to accomplish:

    Pay off student loans that have been transferred to 0% balance transfer (BT) cards

    In late 2008 both Her and I opened 0% BT credit cards for the purpose of paying off the remainder of the private student loans. The total amount was a little over $13,000, and we started making payments in December 2008. The cards’ BT rate expiration dates are this year in September and December. Therefore, we’re going to pay off the cards in order of BT rate expiration. We’re allocating $1,000 per month towards paying off those cards. That way, we should be making our last payment in December 2009.

    While we’re paying these off we’re paying the minimums, about $400 total, towards the other student loans that aren’t at 0%.

    That brings us to a total of ~$1,400 per month for student loan payments. Ouch.

    Stretch goal: pay off half of the student loan on the 1.9% BT, about $4,000

    Save $15,000 for a down payment for a house

    We’ve written a lot of posts on our ideas on housing. Summary: we want to buy, but haven’t had any money so we’ve rented and get a great deal, now we’re saving, but have no idea where or when we’re buying, but no suburbs, please.

    Of the above summary, the most tangible thing we can do to move forward with our housing decision is to save, save, and save. We’re socking away $300 per paycheck into savings with automatic deposits.

    Stretch goal: Save $20,000. This is entirely possible, but with the way the economy is going we’re not going to get our hopes up.

    Contribute the maximum to our Roth IRAs, $10,000 total

    …this of course assumes that we will be able to contribute to Roth IRAs. We’re actually going to start this in April when our taxes have been all sorted out, and contribute until April of 2010. Our monthly contributions to our Roth IRAs will amount to $833.33.

    Stretch goal: Be comfortable with our cash flow so that we can increase our 401(k)/SIMPLE IRA contributions at work by at least 1%. Alternatively, we can also put money into a Self-Employed 401(k), starting out with 5% of our business income.

    I’ll check in with these goals every quarter to see how we’re doing. How are your goals shaping up for this year?

    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.

    How I Got Comfortable Sharing Money With My Husband

    by  • September 19, 2008 • Tagged: , , ,  • Comments

    Hannah blogs about money and marriage at Monogamoney.com. Topics include saving, budgeting, investing, travel, and The Dark Knight.

    In honor of the nuptials of Him & Her, I thought I would harken back to, lo, those many months ago (October, 2007) when Jon and I tied the knot.

    After our wedding and honeymoon, we immediately hunkered down and cut back on spending, so we could pay off our credit card bill. And we started discussing how we would max out our Individual Retirement Accounts for 2007, and contribute the full $4,000 each. That’s when Jon said, “If, at the end of the year, I still need an extra $2,000, you can give it to me.” Wait a minute, I thought. You want me to GIVE you $2,000? Just GIVE it to you? And you won’t even pay me back?

    You see, Jon’s parents have always completely shared their finances. My parents, by contrast, don’t even have a joint checking account. That’s partly because Jon’s father was always the primary breadwinner, so a joint account was necessary. My parents, by contrast, have always made roughly the same amount of money, so there was no need to combine everything into one account. But the funny thing is, I grew up on a commune. You’d think I’d be the one advocating that we share money.

    Of course, I knew I should give him the $2,000. I had made more progress putting money into my own IRA, thanks in part to a generous gift from my grandmother. And in the long run, it’s obviously better for me if we’ve saved as much as possible in BOTH of our retirement accounts. I just had a little trouble, the first month or so after the wedding, adjusting to this new mindset, in which “we” replaced “me” when it came to financial decisions. Unlike Him & Her, who have clearly been a financial team for a while, Jon and I didn’t start thinking about these issues until after our wedding. (That’s when I started our blog, Monogamoney.)

    A few weeks after our initial discussion about the IRAs, the thought finally occurred to me: “You’re either in it for the long term, or you’re not. And if you’re in it for the long term, give him the money.” And since I’m in it for the long term, I gave him the money. We use our joint account to pay rent, but everything else is paid for out of our individual accounts. And we no longer keep track of every dollar we spend.

    Do you share and your partner share all your finances? Why or why not?

    Credit Cards In The Cold, Weekly Roundup

    by  • January 10, 2008 • Tagged: , , ,  • Comments

    The weather in Chicago has been pretty crazy. Last week, we went from temperatures in the single digits (with biting wind chills) to 60F+ days. Of course, I chose one of the super cold ass days to leave my credit card at a bar, necessitating a frosty trip back to get it.

    Here’s what I’ve found to interesting reads this week…

    Jonathan at My Money Blog revamping his asset allocation. See how he’s allocating his funds according to which account. His style of asset allocation and number of accounts closely resembles ours.

    Clever Dude reveals how he monetizes his site. As you can tell we’re not exactly ad-free either. We should put up a post detailing our strategies as well.

    Million Dollar Journey
    is considering building a home gym. We have well-used memberships to the health club.

    Making money as a blogger? You may want to check out these 46 tax deductions that bloggers often overlook. (via BeanCounter)

    It’s Your Money tells what he did with his website income in the year of 2007. His isn’t quite the enviable position to be in, is it?

    Are SMART goals really smart? Millionaire Nuemes loudly opposes the prevailing trend towards SMART based goal setting, and challenges you to make and accomplish some Real Goals.

    The Honest Dollar writes a post in defense of personal finance bloggers who write mostly about retirement. Yes, the PFblogosphere is inundated with posts about retirement, frugality, and saving. Here’s a little secret: we try and write about the fun stuff about finances. Read the archives if you don’t believe us!

    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.

    Our 2007 Goals Status, Part 1: Contribute 50% to Roth IRAs

    by  • December 5, 2007 • Tagged: , ,  • Comments

    About a year ago we made some financial goals for ourselves. Since 2007 is coming to a rapid close, I thought we’d look at those goals and see how we did, and how we made it happen. I’m going to tackle them out of order just because that’s how I feel like writing about them.

    The first goal I’m going to examine is contributing 50% of the maximum allowed amount to our Roth IRAs. As the 2007 Roth IRA maximum contribution amount is $4,000, that amount is also equal to 50% of total contributions for both of our accounts. When we first came up with this goal, Her’s Roth IRA had a paltry $1,695.85 in it, so we decided to allocate all of our contributions to her Roth IRA account to bring it up to about where mine is.

    Last year, Her moved her Roth IRA holdings from Merrill Lynch to Vanguard. At the beginning of the year, she requested automatic deductions twice a month to total $4,000. Since I am paid twice a month, we had it coincide with my paydays, so it was like an automatic payroll deduction in that we never even saw that money. Easy as pie. (Except that I’ve never baked one [but Her has]).

    Status: Will be completed this month.

    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?

    Help A Reader Out – 60 Years Old, No Retirement Funds

    by  • March 6, 2007 • Tagged:   • Comments

    Reader Danny left this comment and emailed us (3 times, no less) with this question (edited for clarity):

    I wonder if any news magazines or newspapers have reported on another trend: older people who have no retirement funds, no big income coming in after they retire, because they worked all their lives at odd jobs and occasional jobs, and lived okay, but now at age 60 or so, like me, they have no retirement fund, no pension, no company benefits, nothing, nada. I am debt free, never been in debt, but I am basically in big doodoo for the future. If I live that long, from 60 to 80, I will have no income to speak of. What to do? Are others in this situation in the USA? Email me (ed: or leave a comment) and tell me what to do. I led a charmed life by the way, no regrets.

    Anyone have any suggestions?

    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:

    //include charts.php to access the InsertChart function
    include "/home/makelove/makelovenotdebt.com/html/apps/php_swf_charts/charts.php";

    echo InsertChart ( "http://www.makelovenotdebt.com/apps/php_swf_charts/charts.swf", "http://www.makelovenotdebt.com/apps/php_swf_charts/charts_library", "http://www.makelovenotdebt.com/charts/stocksbonds.php", 450, 400, "ffffff", true);


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

    Our Peers Aren’t Doing So Bad

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

    I have a ton of websites that are currently in my feedreader, but only a few that I visit daily. Of them, the Chicago-based Gaper’s Block (origin of the name) is surely one of my favorites. The site is well-designed, contains articles about lesser known Chicago happenings around town, and even has a calendar of (often free) events that we usually end up going to.

    One of the sections on the site is called “Fuel,” a feature that asks a question and asks the general community to share their answer. The questions range from where to eat breakfast to whether or not you believe in UFOs to what your favorite zoo animal is. Of particular interest to those in the personal finance blog community were two questions that were asked recently: How much do you earn annually? and especially Are you saving for the future? How?

    After reading all of the responses, I was quite surprised – the audience that Gaper’s Block attracts is usually anti-corporate, anti-mainstream, art-loving hipsters and hipster wannabes. Despite that generality, many of them were well aware that they need to be saving for the future. Many had accounts with ING Direct and contributed to their retirement plan at work. Sure, their answers weren’t highly polished replies that meandered over the benefits of asset allocation. That’s okay though, as for them, money is just a means to an end.

    Much of the has been said in the pfblogosphere about how much we think our peers aren’t saving. It is nice to see, that at least for this particular instance, my original assumptions were very wrong.

    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.