I Hit 110k today. Thank you for all the knowledge and nuggets you had thrown my way over the last months. Started last month 2024. Financial education is indeed required for more than 70% of the society in the country as very few are literate on the subject. thanks to Kimberly Ann Doran for helping me achieve this.
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, I'm in my fifth trade with her and it has been super.
I finally read your book after having it sit for 1 year. I did the money audit. Cancelled my sling account and found 570 dollars to add to a roth IRA account. I really enjoyed the book. It was very easy to read with great points about saving. Thanks, Joe
I like how this channel is useful to all sorts of people, and each video is segmented so anyone can go directly to their preferred question and answer.
Small Value is 10 PE and International is around 15 PE, so if you're worried about valuations, maybe diversify out of the S&P500. The dividends are also around 3% which many of your viewers might appreciate.
Great point on diversifying beyond the S&P 500! With the lower PE ratios in Small Value and International stocks and the attractive dividends, it’s definitely worth considering. How do you balance the potential for higher returns with the need for diversification in your own investment strategy?
Fidelity will not autoliquidate anything other than a Fidelity money market fund. They say not all money markets are autoliquidation eligible. But in my experience almost all money market funds autoliquidate. If you have more than one Fidelity money market funds, Fidelity will autoliquidate the fund with larger balance first. FYI If you switch on money management feature Fidelity can automatically borrow money on margin. You can sell your investment to pay the margin balance. But you need to do it manually.
Interesting insight on Fidelity’s autoliquidation policies! It’s good to know they prioritize funds with larger balances. How do you manage the balance between auto-liquidation and manual margin borrowing to optimize your portfolio’s liquidity?
@@StressLessFinancial There is a feature in Fidelity cash management account called “cash management”. If you go to the tool, you can switch on “self overdraft protection”. If there is a debit on your cash management account, for example some bill payment, with self overdraft protection on, Fidelity will liquidate money market funds held in any other Fidelity account to pay the debit. If you decide a priority list of which account should be accessed first. You can also tell “cash management” to borrow money in margin to pay the bill if there is no money market funds in any of your accounts. This means that you can keep very little in money market funds and you can potentially can keep 100% of money invested.
@Rob Berger thanks for answering my question at 55:50. Based on your answer, I think it would be safe to be 100% S&P 500 at age 47. When I’m 5 to 10 years before retirement, then I’ll add some bonds or maybe find an index target date fund.
Fidelity will never sell an ETF like SGOV to satisfy payments in your CMA. However, you can hold any of the Fidelity Money Market Mutual funds in the account and Fidelity will automatically redeem funds in any of those funds if there is not enough money in unsettled cash or the default sweep position.
Hey Rob, thanks for all the great content. Appreciate it. Interesting discussion regarding P/E ratios. One consideration also is that E part of the equation can grow, whether through actual earnings growth or share buybacks. If you look at where we are in the interest rate cycle, with fed rate cuts imminent and the theoretical technology benefits (like AI), and couple that with the large buyback programs the largest S&P companies have, we could have stable or modest price growth and a reduction in P/E in the coming years because the E grows. Doesn’t just have to be the P coming down and correcting. Wishful thinking possibly. But I didn’t take your P/E chart and overlay it with the S&P but there are probably periods where P/E was coming down but the market was still going up. Interested to your thoughts. Thank you again
Great overview of key retirement planning topics! I noticed the discussion on adjusting the 4% rule to 3% and incorporating bonds into your portfolio. With all these elements in play, how are you approaching the balance between growth and stability in your own strategy? Any insights on how you're adjusting your asset allocation?
According to FICalc, you would not have improved your likelihood of success by increasing your bond allocation in 1966. In fact you would run out of money a year or two earlier than having a portfolio heavily weighted towards bonds. I interpret that to mean that asset allocation is not the answer to the problem.
@Rob this is the key "gamble" I'm facing as it stands. IF (and that's a big if), I understand the way the capital gains tax rate works, I've got this dilemma, knowing that at "some point" the market will do a big valuation correction. I'm about 5-7 years from retirement. A lot of my taxable stocks have a lot of unrealized capital gains at present. If I were to sell some now, to convert that part over to more bonds, to begin "hardening my nest egg", then I'd be paying 15% capital gains tax on a lot of that money. However, if I risk it (the gamble) and wait UNTIL I retire in 5-7 years, then that first year post retirement, my taxable income will be way less, under the $47k-is level, and the capital gains rate drops to 0% for me. So at that point I could convert much/most/all (state and local taxes aside for the purpose of this discussion) to lock in those gains without paying additional taxes. So that is saving 15% tax on some 90% of a big chunk of the nest egg... hoping the 'correction' doesn't happen in the next 5-7 years. What to do, what to do.
How to value a pension: If it is inflation adjusted, as social security, it is simply the number of years between the start and age of 82 (85 for women) times the annual amount of the pension Not adjusted for inflation it is: The first decade equals close to 90%, and the second decade is close to 70% (actually 89.4% & 69.5%) So $30,000 yr pension starting at age 63 for a man, if adjusted for inflation, is simply $30,000 times the 19 years (82-63) thus $570,000. If not adjusted for inflation it is roughly 10 years times $30,000 at 90% or $270,000 plus 9/10th of $30,000 at 70% or $170,100 thus the total value is $270,000 + $170,100 equals $440,100
Of course 1982 was a dip. Interest rates were in the mid double digits. It would be interesting to see the PE and the interest rates in the same graph.
@rob Berger I think the standard dev is low on the high yield floating rate fund because it doesn’t fluctuate with interest rates since all the debt is floating so value should only go down to the extent there’s credit risk
@rob thoughts on a 30/70 allocation? How does a person determine a withdrawal rate for this allocation? Reducing volatility in retirement seems like a great 8dea if withdrawal rate supports expenses.
you make a very interesting point. and could very well be right. however as usual i have doubts. specifically here with the idea that downturns must follow high p/e. what about the idea i've seen some express that we are in kind of a new normal of higher pe's? I think there are a couple objective reasons to think this, 1, the widespread advent of internet brokerage investing over the last couple decades, making investing far more available easily to far more people. 2, the fact I think we have seen in the last 15 yrs or so a large influx of cash from around the world into US markets for whatever reason (IIRC the US market is something like 60% of the worlds invested capitol, while the US is only
Your point about foreign cash going into U.S. markets is well-taken & something not often noted, along with ease of investing on-line as you point out. Perhaps this is why international funds have been nothing but a small drain on my portfolio for over 2 decades & I finally got out of those funds altogether earlier this year. Some would say I'm missing the hedge/protection, but that theoretical "hedge" has been nothing but a drain for too long.
For an upcoming live session, I'd like to see your logic and math behind the ubiquitous "ACA subsidy or Roth conversion" dillema for early retirees. (2 years before age 65) It should just be math, right?? Here's my logic: If (your assumptions on the growth of the $s you would otherwise live off of before Medicare) are > than your ACA costs, then don't artificially lower your income to qualify for rhe ACA subsidy (aka live off cash + Roth). In other words, if you think the market will give you a better return on your Roth OR a Roth conversion before age 65, then skip trying to get the subsidy (by consuming Roth $s for income or skipping a Roth conversion and ruining the growth). Btw: I am trying to maximize Roth $s in my estate to heirs and plan on taking SS at 70 sine the family lifespan history is great. Therfore will use the window from 65 to 70 to do the Roth conversions) Thoughts????? I also posted this on New Retirement and I'm trying to model this in NR.
I am really confused with the term international stock. May be it was true before globalization. Now every company is international. I would think that investing in S&P500 you invest in US companies that are truly global. Wonder what others think?
He’s talked about this before. IIRC, he is still a fan of international as a hedge against a downturn to the US economy but some argue that S&P are international so you already get international exposure due to that.
Just took a payment out of a defined benefit that I had to roll into an IRA. They withheld taxes. But my annual income is very low. How do I address this come tax season?
VMFXX is better in a rising interest rate environment. BND is better in a falling interest rate environment. Which way will interest rates go from here? Some people will claim to know but no one really knows for sure. And don’t let the recent poor performance of BND scare you too much. It’s about as diversified of a bond fund as you can get, and that’s just what bonds did recently.
Bonds are always hit hard when interest rates rise, so yes BND is down 11% from five years ago. However, because of all of that, BND now holds a lot of bonds that are paying much higher interest rates that it was before. So you definitely can lose money if you have to sell a bond index fund at the wrong time. But, the idea is that if you hold on the higher interest payments will eventually make up for it. How long it takes to make up for it depends on a lot of things but especially on the duration of the bonds (longer term bond index funds can take longer to recover, and are considered riskier for example). That’s my rough understanding anyways, definitely always make sure you understand a fund before investing.
Yes that’s correct. Investors who held the last five years have probably about broken even (-11% in capital gains/losses, but also they separately received +2 or +3% interest per year). And yes BND’s interest payments are taxable.
Hi Rob -- this 72 yr old just wonders about the buckets. Suppose we have 4...one with 35% stocks, another at 15% bonds, another at 28% in 2 MYGA's, and a final at 22% in commodity futures book. Each successfully averages between 7-15% per year... my question is WWWBD (what would Warren Buffett do) since the DJI seems on a cliff. thanks !!!!
I know you can have another MM, FDLXX (treasury) for the state tax savings has worked for me. Additionally, their account transfer locking availability and VIP 2FA make it more secure.
