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Everything posted by EdLaFave

  1. I could easily get side tracked arguing that there are free ways to improve/change yourself, that there are free ways to de-stress, and that promotions often beget vacations rather than the other way around. But my point is that owning a house for less than a decade is often an inferior financial decision relative to renting. Even when you own a home long enough to beat the alternative of renting, you're most likely still going to have a net loss, just not as big of a loss as renting would produce. The collective wisdom that buying a home is an "investment" and is obviously superior because you gain equity and you avoid wasting money on rent...well it is a superficial analysis that ignores math and ignores the reality that a huge percentage of people don't live in their house long enough to offset the large cost of front loaded interest and the costs associated with the purchase and subsequent sale of a home. ...my secondary point is simply that if somebody understands the finances and wants to buy a house for whatever quality of life reasons they may have, fine. However, I bet most people completely misunderstand the financial aspect; I certainly did when I bought my first house.
  2. Keep in mind a dollar 30 years ago is now worth approximately $2.11. The expenses associated with investments are smaller and the gains are larger. There are many valid non-financial reasons to buy a house, but we shouldn’t trick ourselves. Taking a vacation makes no financial sense, but it doesn’t mean we shouldn’t do it, but we should be aware of the price we’re paying and not just assume we’re coming out ahead. You should all forgive yourself for lacking the ability to time the market. It’s like kicking yourself for not successfully going all in on each day’s winningest stock. You’re comparing your actions against an impossible standard with 20/20 hindsight.
  3. Sure I’d love to be able to predict when a crash is coming, followed by another crash just a few years later. Since market timing is a loser’s game, I’ll plan based on the expected 30 year returns of stocks compared to the known 30 year cost of a mortgage. I just think it is important to be clear about this issue, if you’re going to own your home for decades (and probably even a single decade), especially if your interest rate is near inflation, then paying off the mortgage is very likely an inferior choice. The argument for that path is based on emotion, which may be reason enough to do it, but people should be clear about that. People should also be clear that you’re most likely going to lose money on your house even if the price rises. Interest, property tax, HOA, maintenance, real estate agent fees, government fees for selling/buying, and so forth kill you. Maybe you’ll break even when compared to renting after ten years or so. Most people don’t understand this.
  4. Quick thoughts on carrying a mortgage: Mortgage rates over the last few years have been only a bit higher than inflation. Obviously stocks over a 30 year window do much better than that. People seem to like paying off their mortgage because it gives them the feeling of not having expenses. However, property taxes, insurance, HOA, etc are still significant. It’s a wealth tax that never disappears, mortgage or not. Unless you’re going to be buying and selling houses every few years, then it is hard to financially justify paying off the mortgage instead of investing. ...the best justification I’ve read is that emotions aren’t logical and people are paying to rid themselves of the emotional weight a mortgage places on them.
  5. A teacher here in Orlando might make 40k. Let’s tabulate some rough expenses: Housing- 13.2k Rough Tax Estimate- 6k Transportation- 3.6k Food- 3.6k Basic Utilities- 2.7k That leaves us with 10.9k and we haven’t even budgeted anything for kids, pets, healthcare, clothes, vacations, entertainment, mundane expenses like toilet paper, mandatory pension contributions, and so forth. So I don’t see how this 40k hypothetical teacher could possibly max out their 403b. My wife can max her 403b because I pay the majority share of our shared expenses. Plus she is an assistant principal.
  6. I control spending without a budget. I just naturally make reasonable choices and the areas where I spend money, I’m not willing to stop because it brings me happiness. I advocate tracking expenses closely because in order to know how much you need to retire, you must know how much you spend. I advocate tracking spending closely in retirement, especially early retirement, because overspending by a small amount can significantly impact your odds of running out of money. I personally don’t view a budget as a way to force myself to act responsibly.
  7. ...I thought this video was particularly interesting regarding wealth in America.
  8. I'm always interested in these types of things, but I wish the article had better defined their terms. Is the top 1% measured by wealth? Is it measured by income? If so, is it measured by ordinary income, investment income, or both? Is a savings account used literally to refer to a savings account? Does it refer to any taxable account? Does it refer to any account where you have assets?
  9. People who retire, whether it is early or not, need to accurately project their spending. I suspect most folks working towards FIRE are closely tracking expenditures. I think FIRE folks should have a plan in place for growing expenditures: 1) Closely track spending, particularly in the first few years of retirement. If spending grows, then go back to work until you can build up a portfolio to support your higher spending. 2) Before you retire, develop a fallback plan. Maybe that means you'll pick up part time work when you're up for it. Maybe it means getting a roommate. Maybe it means moving to a cheaper house/location. I like the idea of having a fallback plan that can reduce spending by roughly 10k without pushing you into a lifestyle you don't want. When I estimate my yearly spending, I account for everything I can imagine. I amortize the irregular expenses (roof, appliances, cabinets, sinks, lawn equipment, car repairs, etc) and I merely account for the regular expenses (lawn maintenance, property taxes, insurance, electricity, pool chemicals, etc). So the majority of years I come in a good bit under budget, but when I come in over budget it is usually significant. In the end, if I didn't forget potential expenses, it ought to even out. ...additionally, not only would I use a low withdrawal rate (say 3%), but I would also add a buffer to my estimated expenses (say $500/month) for things I'm probably forgetting (mundane expenses like toothbrush heads, sprinkler nozzles, bicycle chain, paper towels, etc are easy to forget in your budget). Can you expand on that? The FIRE folks I know or have read, are just trying to maximize their happiness or reduce their unhppiness depending on your perspective. Morals or right vs wrong don't even enter into the equation. In fact, the only "puritanical moralizing" I've seemed to encounter is that working hard at a career somehow makes you a "good" person and the person who wants to retire to sit at home and relax for decades is somehow "bad".
  10. I enjoyed the read. I keep reading on the topic and I’m becoming more convinced that I’m well suited to FIRE. This subculture is so interesting to me. Just my two cents on the author’s five points (reasonable people will disagree): 1) You will suffer an identity crisis for an unknown period of time. As the author says, this varies based on how much you identify with your job title, which thankfully is 0% for me. I’m always puzzled by people who attach identity to a job that they want to leave. 2) You will be stuck in your head. The author talks a lot about being upset that you’re not “productive,” I never did understand why people derived happiness from productivity and I’ve always enjoyed being “stuck” in thought. 3) People will treat you like a weird misfit. I’ve always felt like an alien in this world where I’ve had to study the behavior of normal people because they frequently behaved in ways that were unexpected. My wife, having worked with autistic kids in school, is now convinced I’m autistic, but very highly functioning. I believe she is correct. Either way, I’ve always embraced the misfit title. 4) You’ll be disappointed that you aren’t much happier. I don’t think it is reasonable to expect retirement to generate happiness. It is reasonable to think retirement will remove a source of unhappiness from your life and then you’ll be left with whatever else you have. 5) You constantly wonder whether this is all there is to life. There is no point to life except for maximizing enjoyment. I’ve never understood the angst around searching for life’s purpose beyond that simple statement; there is no purpose. I’ve also never understood being fulfilled by earning a salary and by making your boss wealthy through your labor. I don’t get it.
  11. One thing I’d like everybody to know about index fund investing (target date or otherwise)... You’ll hear people preach about simplicity. If you’re anything like me, you’ll think they’re saying that you should accept lower/mediocre performance because you can’t handle the complexity. However, it is the low costs associated with this type of investing that will deliver superior performance and it is just a happy perk that it is also incredibly simple! This initial argument of simplicity turned me off to the idea almost immediately and caused my conversion to index funds to be delayed by multiple years while I searched for superior performance. Learn from my mistake.
  12. Can you make the case as to why I personally should not FIRE? I truly want to hear the argument. I won’t take exception to anything you might say, but it may take time to fully set aside my bias and truly hear you. I’m quite looking forward to seeing the documentary. Based on the math I’ve seen, my concern for FIRE folks is that they don’t understand just how aggressive their portfolio needs to be and just how low their withdrawal rate needs to be in order to be “safe” (i.e. not get into a race between a dwindling portfolio and a dwindling, or not so dwindling lifespan). I’ve frequently read some FIRE comments talking about a 4% withdrawal rate from a portfolio with 30-70% bonds...and I worry. In a lot of ways the conventional wisdom of “safe” investing is very dangerous to FIRE folks.
  13. I believe the most useful way to analyze fees is to calculate (after adjusting for inflation) what percentage of your real profits were lost due to the fees. My Investing 101 page has a link to a spreadsheet (could be more user friendly, sorry) that will let you do just that for a variety of parameters (number of investing years, inflation rate, nominal return rate, investment per year, expense ratio, management fee, and sales load). Let's assume a 3% annual real return and a 30 year investing time frame: 5.75% sales load and a 1.25% expense ratio = losing 60.97% of real returns. 5.75% sales load and a 1% expense ratio = losing 52.64% of real returns. 0% sales load and a 0.07% expense ratio = losing 3.08% of real returns. Let's switch the real return to a more aggressive 5%: 5.75% sales load and a 1.25% expense ratio = losing 43.14% of real returns. 5.75% sales load and a 1% expense ratio = losing 37.19% of real returns. 0% sales load and a 0.07% expense ratio = losing 2.21% of real returns. Let's keep the 5% real return and switch the time frame to a shorter 10 year window: 5.75% sales load and a 1.25% expense ratio = losing 49.95% of real returns. 5.75% sales load and a 1% expense ratio = losing 44.85% of real returns. 0% sales load and a 0.07% expense ratio = losing 1.62% of real returns. So the fees you're describing will absolutely devastate a portfolio. I've found that it is easier to get people to understand the impact of fees like this: A 1.5% yearly expense sounds like nothing right? Well lets say you get a typical return of 6% on the year. Guess what? A typical 3% inflation just took away half your return, now you're at a 3% real return. Now the 1.5% yearly expense took away half of your real return. So the 1.5% of your portfolio fee just took way 50% of your returns....it is a big deal!
  14. The idea of getting Fidelity to pay you money to hold your account while you invest in their ZERO expense ratio index funds is attractive. People do similar things with savings accounts and credit cards. In my younger days I would have been all over it, but I’m old and lazy now ??‍♂️
  15. Ask and you shall receive. It wouldn’t surprise me if Vanguard would refuse such a request, but I’d like to hear the results if somebody gives it a go.
  16. For anybody stumbling across this thread, here is where the full discussion took place.
  17. I appreciate the gratitude and I’m really happy you seem to have this sorted out. Please pay it forward by educating your coworkers because they’re likely being exploíted. If you’re ever feeling up for a project then work to reform the plans in your district! Come back and ask as many questions as you need.
  18. There are an incredibly excessive amount of options. I argue that a major reason, arguably THE reason, that financial institutions do this is to overwhelm investors and drive them into the arms of expensive advisers. The good news for you is that it really is simple once you cut through the noise and we will answer as many questions as you can conceive of. Check out my Fidelity page to drastically reduce your list of choices. You need to build a fully diversified portfolio and you basically have two easy ways to do that... #1 is called the three fund portfolio. You own a domestic stock fund that covers every US stock, an international stock fund that covers the rest of the world, and a bond fund. #2 is called an “all-in-one” fund or a “fund-of-funds”. This is a single fund that essentially holds the three funds mentioned above, but hides those details from you. One variant of these “all-in-one” funds are called target date funds and they increase your bond holdings automatically as you approach the target date. Another variant of these “all-in-one” fund is a fixed allocation where the bond holdings do not increase over time. Option #1 has the lowest cost, but it is your responsibility to make sure the three funds stay in the correct proportion to each other because the three funds will not increase/decrease in lock step with each other. For instance, just about every paycheck this year I’ve had to buy international stocks because domestic stocks have done so much better. Having to do this manually opens people up to behavioral errors because it requires you to buy the worst performing asset. Option #2 has a slightly higher cost, but you don’t have to do anything. Just keeping dumping money into that one fund every paycheck, over and over again. You can almost think of this fund as a nearly free adviser/manager doing the work for you! I have option #1, but I think Option #2 is appropriate for most people. The biggest decision you’ll have to make is what percentage of your portfolio should be allocated to bonds. Nobody can make this call for you because it is based on who you are as a person. Bonds will decrease expected returns, but nothing decreases expected returns like stocks dropping by half, freaking out, selling stocks at the bottom, and not reentering the market until the recovery is over. Or driving yourself into an early grave because you can’t sleep during the inevitable crashes you’ll experience. So ask yourself how much of your portfolio you can emotionally and financially afford to lose, think of it in absolute dollars and a percentage, know that stocks can drop by 50%, and pick a bond allocation that won’t cause you to lose too much. For the record I have an old emergency fund in bonds and everything else in stocks. Others on this board have something like 70% in bonds I think. This is a personal choice, but it is critical it is true to who you are as a person/investor.
  19. In case anybody stumbles on this monologue thread, my initial analysis seems to indicate that with a stock heavy portfolio: A normal retiree can be safe by withdrawing 4% of their portfolio per year. This is widely known and conventional wisdom that the data/math supports. An early retire can most likely be safe withdrawing 3.5% of their portfolio per year, but it seems to me 3% is really where you want to be if you can force yourself to work a bit longer. ...I’ve read folks argue that 4% is still safe for early retirees, but for a variety of reasons I won’t get into, I disagree. I agree that 4% is likely to be successful but a hypothetical 51% chance of success is both likely and unacceptably risky. So from a safety perspective, I personally wouldn’t feel comfortable at 4% as an early retiree. ...a final note from my initial analysis, even small differences in the withdrawal rate have a big difference. So if you retire, especially if you’re young, and safety is important to you...then you need to watch your budget closely, much more closely than you may have in your working years.
  20. You absolutely do not want National Life Group. You want a vendor that lets you build a fully diversified portfolio at rock bottom costs. You don’t want an insurance company that is going to sell you some complicated, high cost, mix between insurance and investment that you’ll never be able to understand. @whyme has setup a Fidelity account so they can probably answer some of your practical questions about enrolling. My guess is you can do it all online or you can call in for help. Side note: anything with an adviser is going to be high cost and not in your best interest to invest in. You don’t need an adviser for any plan that I’ve rated highly.
  21. Congrats, you’ve got some excellent choices on that list! As Krow noted, Fidelity Investments is the way to go. There is a similarly named “Fidelity Security Life Insurance” company which I’ve never heard of, but based on their name they’re bad news. So don’t confuse the two. A word of caution about Fidelity is that they give some of their funds very similar names where one fund is great and the other is rather expensive (this has been discussed previously on this board). I can only assume they’ve done this to trick the investor into paying higher fees than is necessary and this has even caused confusion for those well versed on the matter. So be careful and you may want to double check with the board about the funds you use. Also, I’m not sure how advanced your knowledge is, but I wrote up an Investing 101 page that might be helpful to you.
  22. Can you list both the 403b and 457b vendors that are on your district’s approved list? Also, some states have state sponsored 457b plans...not sure if Texas does, but I’m sure that is google-able I documented the 5 best plans available in Florida here. All 5 are also available throughout the nation and hopefully in your district!
  23. lol, you had to look up cockblocker and I had to google pollyannaish. We’re all learning across generational divides in this post.
  24. The censorship on this board drives me nuts. I have to type exploít with an accent mark or it to will be blocked. Plenty of other innocuous words are banned as well. ...but hey, we’ve got cockblocking to help us express our thoughts ??‍♂️
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