Stock Market & Retirement Planning

[Acesteve]

Another option for funding retirement accounts for your kids, especially if they are not yet out of college and have a decent income, is to gift them stocks that you have held for a long time that have a low cost basis. You avoid paying the 20% Federal capital gains plus whatever state income taxes(9.85% in MN). Our children inherit the cost basis of the stock but the first $44,625 of income is exempt from capital gains so they can sell the stock and convert it into an index fund and not pay any taxes vs our tax rate of about 30%.

The maximum gift until you have to pay taxes is $18k each/$36k per married couple.

about 5 years ago I decided my retirement savings was suffecient so I shared with my childern that I would fund there ROTH IRA to the amount they made in a given year. I was not thinking wealth transfer rather teaching and the joy of savings. If I drop 6k into an account, I invest 500/month into an index fund and I have them look at the account balance that mindless emotionless investing has on them once a year. I want them to think this vs chasing hype cycles like they can beat the market long term. No, you can't beat markets long term but you can squander your money and you don't need to do any of this. I don't need to hit a driver on a 124y par 3 either even if it will go further

as I've continued to work, now I look at these funds a a portion of wealth transfer. I'd rather them grow into managing money then just inherit it then blow it on things that don't matter.

ps. and the stock transfer thing is great for those that own stock vs mutual funds! another great teaching tool in that they simply need to hold it even if they take the dividends as income

 

[tahoebum]

about 5 years ago I decided my retirement savings was suffecient so I shared with my childern that I would fund there ROTH IRA to the amount they made in a given year. I was not thinking wealth transfer rather teaching and the joy of savings. If I drop 6k into an account, I invest 500/month into an index fund and I have them look at the account balance that mindless emotionless investing has on them once a year. I want them to think this vs chasing hype cycles like they can beat the market long term. No, you can't beat markets long term but you can squander your money and you don't need to do any of this. I don't need to hit a driver on a 124y par 3 either even if it will go further

as I've continued to work, now I look at these funds a a portion of wealth transfer. I'd rather them grow into managing money then just inherit it then blow it on things that don't matter.

ps. and the stock transfer thing is great for those that own stock vs mutual funds! another great teaching tool in that they simply need to hold it even if they take the dividends as income

Yes, all three of our children have taken an interest in investing now that they have retirement accounts. Our youngest is a freshman in college and is now considering a career in finance. It was fun to help my oldest daughter set up her 401k and Roth contributions when she got her first job post college graduation. I made her save 13% and she also gets a 50% match on the first 6%. She was shocked to find out what compound interest can do over a 40 year time frame at 9.4%. $45k turns into $6MM saving 16% of a $66k salary.

 

[jbb2388]

Roth, Roth, Roth, Roth, Roth, Roth. Can't say it enough

 

[Acesteve]

Roth, Roth, Roth, Roth, Roth, Roth. Can't say it enough

please clarify, did you mean Roth !

Clearly a great retirement vehicle and the flexibility is what makes it so to me.

 

[Paddy1Putt]

Just a heads up, I am hear to learn not to teach. 48 years old with a net worth sub 1 mil. I'll sit back and listen.......

I've been in on crypto for ~5 years so I know a lot more about that asset class than all the others combined. (kind of weird).

 

[Paddy1Putt]

So guru's question (Remember I am here to learn).

I have ~250 k sitting in a money market spaxx account. My reasoning is 2 fold. I like the ~5% return but I also like the freedom of having that money in there. I refer to it as corporate risk insurance. AKA if my company starts messing with me etc. It helps me take the emotion out and doesn't give them any kind of leverage over me. This is different than my savings account, I have ~45 k in that for additional risk, etc... Note I am dumping about 4 K a month in that money market account.... Along with any bonus I recieve etc....

Not sure if this is mental illness or normal practice. While I do invest in a 401k match (index funds S&P), wife does as well, I am hyper focused trying to get my cash reserves (aka corporate risk insurance) is what I call it, to remove any leverage over me.

Clear as mud?

 

[CTRosarian]

If you are doing really well it never hurts to think about what happens to the money after you go.
We donated property to charity so we wouldn't have to deal with it. Better they get it now than later!

 

[Paddy1Putt]

If you are doing really well it never hurts to think about what happens to the money after you go.
We donated property to charity so we wouldn't have to deal with it. Better they get it now than later!

That's nice you are in the situation. Making the place better, not worse. Pretty cool. I love to donate just not at that scale, haha.

 

[Acesteve]

So guru's question (Remember I am here to learn).

I have ~250 k sitting in a money market spaxx account. My reasoning is 2 fold. I like the ~5% return but I also like the freedom of having that money in there. I refer to it as corporate risk insurance. AKA if my company starts messing with me etc. It helps me take the emotion out and doesn't give them any kind of leverage over me. This is different than my savings account, I have ~45 k in that for additional risk, etc... Note I am dumping about 4 K a month in that money market account.... Along with any bonus I recieve etc....

Not sure if this is mental illness or normal practice. While I do invest in a 401k match (index funds S&P), wife does as well, I am hyper focused trying to get my cash reserves (aka corporate risk insurance) is what I call it, to remove any leverage over me.

Clear as mud?

No teaching just sharing my path. When I was just out of college, I started maxing out my retirement vehicles (e.g. IRA, 401k). Money flowed into index funds monthly regardless of what was happening in the market. Never did I take this money out of the market. As I passed 40, a small portion of of the money went into more stable investmens such as bonds. As I passed 50, I started taking my MMA balances up from just 6 months living expense towards years of living expense. At this point, I am about 25% MMA /Bonds and 75% equitities and I will retire this year. The equities are almost all in retirement protected vehicles so I am not seeing my taxes impacted by mutual fund distributions. My approach is very continual and generally not looking at what markets are doing.

If I could share a single best practice it would be slow and steady.

 

[Paddy1Putt]

No teaching just sharing my path. When I was just out of college, I started maxing out my retirement vehicles (e.g. IRA, 401k). Money flowed into index funds monthly regardless of what was happening in the market. Never did I take this money out of the market. As I passed 40, a small portion of of the money went into more stable investmens such as bonds. As I passed 50, I started taking my MMA balances up from just 6 months living expense towards years of living expense. At this point, I am about 25% MMA /Bonds and 75% equitities and I will retire this year. The equities are almost all in retirement protected vehicles so I am not seeing my taxes impacted by mutual fund distributions. My approach is very continual and generally not looking at what markets are doing.

If I could share a single best practice it would be slow and steady.

I am playing catch up for the squandered 20's like all of them 20 - 29...... But I get what you are saying and I like slow and steady. Doesn't incur emotion or anxiety and it's a proven method. Thanks for sharing.

 

[Acesteve]

I am playing catch up for the squandered 20's like all of them 20 - 29...... But I get what you are saying and I like slow and steady. Doesn't incur emotion or anxiety and it's a proven method. Thanks for sharing.

Don't let that deter you. I chased trendy things like today's crypto in my 20's and lost much of the money in my IRA's. the good thing is it taught me that i did not need to try and beat markets. Market returns were good enough for me to meet my goals. The 401k options never had trendy investment options so I could not mess that up.

 

[Browndog]

I’ve been asked to give a talk to a group at the end of the week on what I have learned from my 30 years of being involved in the financial services industry. 10 years as a financial advisor, 10 years as a general partner and now 10 years of retirement while still being a limited partner in the firm I worked for.

Been thinking about what to say and have taken all kinds of notes in order to distill my thoughts down to a digestible presentation. In very general terms I’ll be covering the reality of wealth, how to retire wealthy, stocks and bonds made easy and how to create a basic financial plan.

Wanted to share a few things for people to think about:

A few statistics:
US Population at end of 2023 = 335 million people
Number of Millionaires in US = 22 million people = 6.57%
Number of Billionaires in US = 735 = 0.00022%

Average return of S&P 500 from 1957 - 2023 = 10.26%

$200 saved per month and earning 10% per year from 35-65 years old = $395,000
$200 saved per month and earning 10% per year from 25-65 years old = $1,062,222

A person today starting at 25 years old earning $40,000 a year at a company that matches their retirement plan contributions would only have to save $100/mo of their own money or just 3% of their income to become a millionaire by the time they are 65.

So why are only 6.5% of all Americans millionaires?

Because most Americans aren’t saving much or any of their income. They are spending it now. Spending first and saving what’s left over doesn’t really work, because usually there ain’t much of anything left.

According to the Federal Reserve only 64% of Americans had enough cash money on hand to cover a $400 emergency expense.

60% of all adult Americans currently live Paycheck to Paycheck.

The point I’m trying to make is that you got to pay yourself first. Put aside a little bit out of your paycheck before you ever get it and you won’t miss it. If you work somewhere that matches your savings and you’re not taking advantage of it, you are just throwing away free money. What you save won’t even reduce your paycheck by the full amount becasue you will avoid paying taxes on the amount you save.

It is hard to get rich quick. It is relatively easy to get rich slow. Pay yourself first!!

Compound interest combined with time is your friend. The last few years of saving and compounding makes the biggest difference.

Make a commitment in 2024 to do something to improve your current and future financial situation!

Best wishes for financial success.

 

[Paddy1Putt]

I’ve been asked to give a talk to a group at the end of the week on what I have learned from my 30 years of being involved in the financial services industry. 10 years as a financial advisor, 10 years as a general partner and now 10 years of retirement while still being a limited partner in the firm I worked for.

Been thinking about what to say and have taken all kinds of notes in order to distill my thoughts down to a digestible presentation. In very general terms I’ll be covering the reality of wealth, how to retire wealthy, stocks and bonds made easy and how to create a basic financial plan.

Wanted to share a few things for people to think about:

A few statistics:
US Population at end of 2023 = 335 million people
Number of Millionaires in US = 22 million people = 6.57%
Number of Billionaires in US = 735 = 0.00022%

Average return of S&P 500 from 1957 - 2023 = 10.26%

$200 saved per month and earning 10% per year from 35-65 years old = $395,000
$200 saved per month and earning 10% per year from 25-65 years old = $1,062,222

A person today starting at 25 years old earning $40,000 a year at a company that matches their retirement plan contributions would only have to save $100/mo of their own money or just 3% of their income to become a millionaire by the time they are 65.

So why are only 6.5% of all Americans millionaires?

Because most Americans aren’t saving much or any of their income. They are spending it now. Spending first and saving what’s left over doesn’t really work, because usually there ain’t much of anything left.

According to the Federal Reserve only 64% of Americans had enough cash money on hand to cover a $400 emergency expense.

60% of all adult Americans currently live Paycheck to Paycheck.

The point I’m trying to make is that you got to pay yourself first. Put aside a little bit out of your paycheck before you ever get it and you won’t miss it. If you work somewhere that matches your savings and you’re not taking advantage of it, you are just throwing away free money. What you save won’t even reduce your paycheck by the full amount becasue you will avoid paying taxes on the amount you save.

It is hard to get rich quick. It is relatively easy to get rich slow. Pay yourself first!!

Compound interest combined with time is your friend. The last few years of saving and compounding makes the biggest difference.

Make a commitment in 2024 to do something to improve your current and future financial situation!

Best wishes for financial success.

Your word is gold. Thanks for putting this together.

 

[tahoebum]

I’ve been asked to give a talk to a group at the end of the week on what I have learned from my 30 years of being involved in the financial services industry. 10 years as a financial advisor, 10 years as a general partner and now 10 years of retirement while still being a limited partner in the firm I worked for.

Been thinking about what to say and have taken all kinds of notes in order to distill my thoughts down to a digestible presentation. In very general terms I’ll be covering the reality of wealth, how to retire wealthy, stocks and bonds made easy and how to create a basic financial plan.

Wanted to share a few things for people to think about:

A few statistics:
US Population at end of 2023 = 335 million people
Number of Millionaires in US = 22 million people = 6.57%
Number of Billionaires in US = 735 = 0.00022%

Average return of S&P 500 from 1957 - 2023 = 10.26%

$200 saved per month and earning 10% per year from 35-65 years old = $395,000
$200 saved per month and earning 10% per year from 25-65 years old = $1,062,222

A person today starting at 25 years old earning $40,000 a year at a company that matches their retirement plan contributions would only have to save $100/mo of their own money or just 3% of their income to become a millionaire by the time they are 65.

So why are only 6.5% of all Americans millionaires?

Because most Americans aren’t saving much or any of their income. They are spending it now. Spending first and saving what’s left over doesn’t really work, because usually there ain’t much of anything left.

According to the Federal Reserve only 64% of Americans had enough cash money on hand to cover a $400 emergency expense.

60% of all adult Americans currently live Paycheck to Paycheck.

The point I’m trying to make is that you got to pay yourself first. Put aside a little bit out of your paycheck before you ever get it and you won’t miss it. If you work somewhere that matches your savings and you’re not taking advantage of it, you are just throwing away free money. What you save won’t even reduce your paycheck by the full amount becasue you will avoid paying taxes on the amount you save.

It is hard to get rich quick. It is relatively easy to get rich slow. Pay yourself first!!

Compound interest combined with time is your friend. The last few years of saving and compounding makes the biggest difference.

Make a commitment in 2024 to do something to improve your current and future financial situation!

Best wishes for financial success.

I love this, and I'll emphasize that it's all about compound and time. Most millionaires in the US didn't inherit their wealth and most did not average $100k in household income annually. One third of millionaires never had a 6 figure income. Here's a link to a simple investment calculator that makes compounding over time easy to understand. https://www.ramseysolutions.com/retirement/investment-calculator

My wife and I are doing our best to pass on a savings mentality to our children, ages 26, 24, and 18. My two older ones are working after graduating from college, and I sat them down and made them contribute more than 10% of their salary to a retirement account. Many companies have a 401k company match; in my daughter's case, 50% of the first 6%. She started at $65k/year, so saving just 10% becomes 13%, or $704 monthly with the match.

If we plug that into the calculator at a 9.4% return, the results shocked my daughter when we did this exercise when she started her first job 18 months ago. This doesn't consider inflation, but we also assume she will never get a raise from the $65k starting salary, which has already happened.

 

[leftshot]

I’ve been asked to give a talk to a group at the end of the week on what I have learned from my 30 years of being involved in the financial services industry. 10 years as a financial advisor, 10 years as a general partner and now 10 years of retirement while still being a limited partner in the firm I worked for.

Been thinking about what to say and have taken all kinds of notes in order to distill my thoughts down to a digestible presentation. In very general terms I’ll be covering the reality of wealth, how to retire wealthy, stocks and bonds made easy and how to create a basic financial plan.

Wanted to share a few things for people to think about:

A few statistics:
US Population at end of 2023 = 335 million people
Number of Millionaires in US = 22 million people = 6.57%
Number of Billionaires in US = 735 = 0.00022%

Average return of S&P 500 from 1957 - 2023 = 10.26%

$200 saved per month and earning 10% per year from 35-65 years old = $395,000
$200 saved per month and earning 10% per year from 25-65 years old = $1,062,222

A person today starting at 25 years old earning $40,000 a year at a company that matches their retirement plan contributions would only have to save $100/mo of their own money or just 3% of their income to become a millionaire by the time they are 65.

So why are only 6.5% of all Americans millionaires?

Because most Americans aren’t saving much or any of their income. They are spending it now. Spending first and saving what’s left over doesn’t really work, because usually there ain’t much of anything left.

According to the Federal Reserve only 64% of Americans had enough cash money on hand to cover a $400 emergency expense.

60% of all adult Americans currently live Paycheck to Paycheck.

The point I’m trying to make is that you got to pay yourself first. Put aside a little bit out of your paycheck before you ever get it and you won’t miss it. If you work somewhere that matches your savings and you’re not taking advantage of it, you are just throwing away free money. What you save won’t even reduce your paycheck by the full amount becasue you will avoid paying taxes on the amount you save.

It is hard to get rich quick. It is relatively easy to get rich slow. Pay yourself first!!

Compound interest combined with time is your friend. The last few years of saving and compounding makes the biggest difference.

Make a commitment in 2024 to do something to improve your current and future financial situation!

Best wishes for financial success.

@Browndog Excellent post with many important points. May I build on it with one additional thought?

Unfortunately, it is not just that most people spend as much as they take in—as problematic as that is. They do a lot of that spending on credit. When you buy stuff on credit each item costs you a lot more than if you paid for it up front. 40% more is a pretty conservative estimate for talking purposes. It’s likely much more for most people.

That same compounding interest that works for you when saving and investing for your retirement works against you when borrowing.

For the person who exercises a little delayed gratification at the beginning of their adulthood they will quickly find themselves in the position where their spending on goods and services AND savings for retirement far exceed what they could do if they were paying for less stuff on credit.

For the person/family that is currently on the credit path, it’s never too late to turn that around, though admittedly there will be more time and effort required to get there.

 

[tahoebum]

One more compound interest over time example. Our youngest is a freshman in college and, through summer jobs and graduation money, has $1,700 in savings. She loves to go to Starbucks several times weekly and spends $5-7 of her money each time. She also recently asked us if she could go on a college spring break trip to Mexico with one of her friend's families, which would have depleted her savings of about $1000. We said no to the trip(she is coming to visit us at our Florida condo with two other friends) and showed her by skipping the Mexico trip and going to Starbucks once a week instead of twice; this was what the difference would be when she was retirement age. The result is crazy - $26 bucks a month over time with an extra $1000 in her account today turns into a lot of money. She was also amazed that the $700 saved at her young age became $75k with no additional contributions over time.

We all have trouble seeing the real opportunity cost of something as simple as a Starbucks once a week. Saving is simple but not easy, and I'm not sure she has cut back on her Starbucks. It's hard to monitor when she is 1,000 miles away at college.

 

[jbb2388]

I think there should be some clarification between using the term "compound interest" in place of capital appreciation. The days of compound interest being significant again will be short lived once the fed starts cutting interest rates in the latter half of this year. Compound interest is not a term to be used with financial assets like stocks, bonds, bitcoin etc. Personally I hate the term.

 

[Acesteve]

One more compound interest over time example. Our youngest is a freshman in college and, through summer jobs and graduation money, has $1,700 in savings. She loves to go to Starbucks several times weekly and spends $5-7 of her money each time. She also recently asked us if she could go on a college spring break trip to Mexico with one of her friend's families, which would have depleted her savings of about $1000. We said no to the trip(she is coming to visit us at our Florida condo with two other friends) and showed her by skipping the Mexico trip and going to Starbucks once a week instead of twice; this was what the difference would be when she was retirement age. The result is crazy - $26 bucks a month over time with an extra $1000 in her account today turns into a lot of money. She was also amazed that the $700 saved at her young age became $75k with no additional contributions over time.

We all have trouble seeing the real opportunity cost of something as simple as a Starbucks once a week. Saving is simple but not easy, and I'm not sure she has cut back on her Starbucks. It's hard to monitor when she is 1,000 miles away at college.

I'm pretty sure our daughters are in line now I did a calculation for mine that said she could afford to get a new to her car with what she spent on $7 drinks that she ownly drinks 80% of.

Saying no to my childern or forcing them to work for something is one of the harder things I have to do as a parent. I feel giving in would be easy on me but would strip them of the skills and judgements needed to become financially independent.

 

[Acesteve]

I will share a lesson I learned long ago early in my career that I think is still true in my life. I've never paid a day of interest to a credit card company but I have charged things for points for years. About 30 years ago I took all my statements and did analysis. The results were as follows.

1- Charges less then $20 were a minor part of my spend in total.
2- Things above $200 (recall this is 30 years) were few and generally lasting item or something I really cared about. Brought me some level of joy/benefit.
3- The vast majority of my spend was on items $20 to $150 that I could not remember, generally did not last. Big enough to add up fast but not memorable. So I worked to reduce these spends and it allowed me to find a few hundred a month to save.

If you have ever looked at a credit statement and say how does that add up to the balance then you likely have experienced what I'm describing above.

These figures were for a working professional years ago so they were relative to my income. I expect for many people they could be scaled up or down to your income and teh pattern would exist.

 

[Luchnia]

According to the Federal Reserve only 64% of Americans had enough cash money on hand to cover a $400 emergency expense.

60% of all adult Americans currently live Paycheck to Paycheck.

>>>>If this is true then this is a sad state that this country is in. When 64% of Americans don't have $400 dollars to spare for an emergency you have to think of how bad things actually are.

 

[tahoebum]

Wow, not having $400 for an emergency sounds bleak but there were days in my early 20's when that was my reality. Here's a recent article on average household net worth in the USA.

https://www.fool.com/research/average-net-worth-americans/#:~:text=In 2022, the median net,high school diploma was $107,000.

Key findings​

• The median net worth of Americans in 2022 was $192,700.
• In 2022, the median net worth of Americans younger than 35 was $39,040. The median net worth of Americans between 65 and 74 was about 11 times higher at $410,000.
• In 2022, the median net worth of Americans with a college degree was $464,400. The median net worth of Americans with a high school diploma was $107,000.
• In 2022, the median net worth of white Americans was $284,310. The median net worth of Black Americans was $44,100, and the median net worth of Hispanic Americans was $62,120. Asian families -- which the Federal Reserve reported on for the first time -- had the highest median net worth at $535,400.

 

[leftshot]

According to the Federal Reserve only 64% of Americans had enough cash money on hand to cover a $400 emergency expense.

I have two takeaways from this:
1. Many Americans don't keep cash on hand or have any emergency fund.
2. What many do in an emergency is borrow more money.

Neither is good. But it is noteworthy that the Federal Reserve said "cash money on hand" as opposed to other ways to fund a $400 emergency expense.

 

[jnordwell]

I have 2 pensions that will help me retire in 10.years at the age of 56. I also have 28-30k in savings. My house will be paid for in 8 years and I am planning for my golden years I just won't be golden.yet..

 

[jnordwell]

Wow, not having $400 for an emergency sounds bleak but there were days in my early 20's when that was my reality. Here's a recent article on average household net worth in the USA.

https://www.fool.com/research/average-net-worth-americans/#:~:text=In 2022, the median net,high school diploma was $107,000.

Key findings​

• The median net worth of Americans in 2022 was $192,700.
• In 2022, the median net worth of Americans younger than 35 was $39,040. The median net worth of Americans between 65 and 74 was about 11 times higher at $410,000.
• In 2022, the median net worth of Americans with a college degree was $464,400. The median net worth of Americans with a high school diploma was $107,000.
• In 2022, the median net worth of white Americans was $284,310. The median net worth of Black Americans was $44,100, and the median net worth of Hispanic Americans was $62,120. Asian families -- which the Federal Reserve reported on for the first time -- had the highest median net worth at $535,400.

Not saying bs but kind of I have a high school diploma and make 112k a year bought a house at age 24 and no student loan debit. A high school diploma can make you money just need to not do drugs do what your told and not be afraid to work hard.
Plumbing , electrical,HVAC, fire sprinkler fitters, pipe fitters all have apprentice programs all you need is diploma or GED and pass drug tests. That is the hard part pass drug test and be willing to work

 

[Carolina Golfer]

Switched to a more stock driven portfolio after 4 years in mostly bonds, which held it's principal. As a senior, I would like to perserve the principal. My new advisor recommended we get more aggressive with stocks. In one week, I lost 7K. Did everyone take a hit this week? It makes me nervous.