Financial Independence Entrusting Personal Capital with our nest egg cost us years of retirement savings! |
- Entrusting Personal Capital with our nest egg cost us years of retirement savings!
- 96-Year-Old Secretary Quietly Amasses Fortune, Then Donates $8.2 Million
- Daily FI discussion thread - May 07, 2018
- At a major crossroads. Do I stay in an unfulfilling role for 5 years or do something else for 10.
- How One Woman Spends Her $95,000 Salary
- Living full time in an RV park?
- Weekly FI Monday Milestone thread - May 07, 2018
- RE at 50 - how to maximize an account to straddle from 50 to 60?
- Wife FIRE
- Pick One - Stay in California for High Salary Or Move For REI Opportunities
- Constant asset allocation outperforms glide path asset allocation in Monte Carlo simulation of retirement saving
- Recently salaried, need advice on managing new money.
- Sell rent property and invest in S&P 500 index? Or keep to diversify?
- NYC budget- 30F + 30M
- Newly on the FIRE path. How do you deal with overspending guilt?
- Throw money at Student Loan or Vanguard/401k?
- Successful side gigs for FIRE?
- Looking For Suggestions On How To Analyze ROI Of 5 Year Home Flip With Mortgage
| Entrusting Personal Capital with our nest egg cost us years of retirement savings! Posted: 07 May 2018 08:59 AM PDT You may say that it was our own fault not to catch Personal Capital's abysmal investment performance earlier. However, allow me to share our costly lessons to help prevent others from losing money with Personal Capital: · Over the last 3 years, Personal Capital's "smart portfolio management strategy" performed 60% worse than market. · Personal Capital's "tax optimization" produced higher returns on our taxed account and lower returns on our tax deferred IRA account. · Personal Capital's "lower fees" consumed 18% of the returns they delivered. During a turbulent time of job changes, founding our own company and multiple family health emergencies, we decided to entrust Personal Capital to manage our money. Personal Capital advertised a good story with a convincing webpage: "We act in your best financial interest and optimize risk & return on your behalf. We do this through our smart portfolio management strategy and Smart Weighting™ approach." Our experience was much different and cost us dearly. From 2015 until we canceled our accounts in 2018, the portfolio Personal Capital managed for us earned 4.9% annually. This is significantly lower than the risk adjusted "moderate historic" ROI target of 8.3% Personal Capital advertised and even worse in one of the best bull markets for a long time that easily returned more than 12% each year during the same period. When we confronted Personal Capital with this significant performance gap, they responded that our "claim was without merit: As written in our "Client Agreement" [..], it is explicitly stated that you understand that (a) investment results cannot be guaranteed, (b) past performance may not be indicative of future results, and (c) your investment decisions on my behalf may be different than I or other investment managers would have made under the circumstances". The objective observer may realize the irony of this response in one of the most bullish markets we had in years. In retrospect, we made another peculiar observation, the consequence of which we only now understand too well. Overall, Personal Capital has great analysis tools and a nice user interface. However, the key analysis tool that is standard with any other broker we worked with, is suspiciously missing on Personal Capital's webpage: The portfolio performance compared to generally accepted benchmarks. After Personal Capital unduly delayed the immediate liquidation of our accounts we had requested, we transferred our accounts to another institution. As a result, we had to liquidate nearly 100 micro-positions ourselves, a time consuming and costly affair. Noteworthy, but in line with our overall experience, Personal Capital refused to reimburse us for the related transaction fees. However, our losses with Personal Capital did not end there. Personal Capital claims: "Tax optimization – We do this by applying tax loss harvesting, reallocating assets to tax-deferred accounts, and helping you realize higher yields in your retirement account" When we liquidated our underperforming IRA and taxed investment accounts, we realized that in addition to the abysmal underperformance, the gains had actually accumulated mostly on our taxed accounts, while the performance on the tax deferred accounts was even worse. Hence, in addition to losing years of retirement savings, we now have to bear the cost of Personal Capital's failure to optimize and reduce tax. Adding insult to injury, we paid Personal Capital sizable fees for their abysmal investment performance. Personal Capital advertises: "We have much lower fees than traditional brokers". 18 Percent of the total return Personal Capital made for us was consumed by the fees Personal Capital charged us over the years. Bottom line, Personal Capital has a one-sided business model: They can invest their customer's money anyway they like. They do not hold themselves accountable for their advertising and for the results of their investment strategy. They refuse and obfuscate any comparison of their investment performance with generally accepted investment benchmarks. Independent of investment performance, Personal Capital claims sizable service fees. Good deal for Personal Capital, an abysmally bad deal, at least for us! Our recommendation: Check the performance of your holdings with Personal Capital against the relevant market benchmarks today! Otherwise, you may end up losing like us. [link] [comments]  |
| 96-Year-Old Secretary Quietly Amasses Fortune, Then Donates $8.2 Million Posted: 06 May 2018 04:44 PM PDT This is the other side of financial independence. A good number of people have FIRE dreams because they're working at a job they hate. As an alternative to retiring once you reach your SWR and pursing hobbies/passion projects, might I suggest looking for a different, more personally amenable career? We all want to help people in one form or another with the limited hours we have each day; rather than turning off the money spigot outright, why not continue working somewhere else with the aim of donating the earned income to charity? This has three benefits: the first is that you're working at place that you want to work, the second is that explicitly working with the intent of furthering a charitable cause generates warm fuzzies, and the third is that you always have the option of stepping away from employment because you're already FI. In fact, you could even go one step further and work directly for a charity that is close to your heart; many of the skills gained in the corporate world transfer over to the non-profit sector, where they are desperately needed. [link] [comments]  |
| Daily FI discussion thread - May 07, 2018 Posted: 07 May 2018 04:09 AM PDT Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| At a major crossroads. Do I stay in an unfulfilling role for 5 years or do something else for 10. Posted: 07 May 2018 08:15 AM PDT Hi all- Have been a lurker for the last 6 years and would love any insight from folks who are in a similar situation. A bit about my situation- My wife and I are 28 and have been incredibly fortunate to have both been successful in our sales careers. We are equally fortunate to have stumbled on this community at the same time we started making decent money. This combination has resulted in a networth of 720k with about 630k of that invested and the rest in cash. While this is great and retirement feels like it could be 5 years away, or less, we both don't know if we can survive our jobs for that long. Neither one of us feels particularly fulfilled by what we do and the high stress nature of the work/quota coupled with the ever increasing travel time has us convinced that something needs to change, at the very latest, by when we have kids (hoping to start trying in a year or two). The issue is neither one of us has the faintest clue what we would like to do and there is this nagging concern that we would be incredibly silly to give up high earnings when we don't have much longer to go. This combo of doubt has created an environment where we feel stuck in indecision. Should we keep on our current path for as long as we can mentally/physically muster it before transiting to something else (most likely entry level or at least a huge pay cut). Or do we prioritize our sanity and work for maybe 8-10 years in a job that could potentially be a better fit or more fulfilling (although no guarantee it would be). This is the only place I know where there are folks who could understand being in such an enviable situation but still feel so lost/uncertain. [link] [comments]  |
| How One Woman Spends Her $95,000 Salary Posted: 06 May 2018 11:20 PM PDT https://www.youtube.com/watch?v=KscNpXoIcsw Quick notes: This doesn't exactly add up to $5,000 but it's pretty close to accurate. Pretty interesting to see how reasonable the individual purchases are, but how quickly all of the small things can add up. [link] [comments]  |
| Living full time in an RV park? Posted: 07 May 2018 10:07 AM PDT I'm curious if anyone has experience living full time in an RV park as a means to minimize housing costs and become more mobile? Perhaps doing it for 1-2 years as a "mini retirement." I'm seeing, on the lower end, RV parks costing between $300-$500/month, utilities included. Am I understanding that right? I'm seeing large "campers" brand new for $20-$30k, I'm guessing much cheaper used. How quick do these depreciate? My current utility bills alone are usually over $300/month in my home. Would there be other "retirees" living in RV parks as well? Maybe giving it an additional social benefit. If you have experience living in an RV park, bonus if doing so with young kids, I would love to hear some more info! Thanks! [link] [comments]  |
| Weekly FI Monday Milestone thread - May 07, 2018 Posted: 07 May 2018 04:10 AM PDT Please use this thread to post your milestones, humblebrags and status updates which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| RE at 50 - how to maximize an account to straddle from 50 to 60? Posted: 07 May 2018 10:39 AM PDT I'm 36, married, decently well-placed in savings and net worth, and am planning on leaving industry at the age of 50 (if not before) to pursue other dreams (a writing career, in part). I'm currently a chemical engineer / materials scientist in the research & development field, and I net ~$105K with a company-performance-based bonus up to 40% once a year (on average this puts me ~$125K-$130K annual total, though I live on base salary and invest any bonus we get). However, I have a chronic disability, am already on FMLA, and can't see myself working in industry until old age simply due to the negative effects it has on my health, so I'm very focused on RE. Due to age differences between my husband and I, we have a very high level of confidence that I'll be taken care of during "traditional" retirement, as in 60+, or 65+, between his investments and mine. As of now we have separate investments and keep most of our money separate just out of habit, although everything we have is shared and accessible between the two of us. As I consider this straddle account, I'm trying to math out what makes the most sense without depending on any of his retirement income, mainly as a layer of protection against things that could go badly. I've been researching what kind of investment would make the most sense for me to help span the period from RE at age 50 to the 60-65 point where I can start withdrawals from my traditional 401k (or whatever i roll it into). From what I've read it looks like the IRA conversion ladder is the best bet, but I am confusing myself with regards to the tax advantages -- assuming I continue sit at this salary or higher, plus anything my husband might make, because I have a company-match 401K I'm already investing in, it looks like I would not be able to deduct any IRA contributions I made from my taxes (is this correct?). In addition, following a Traditional --> Roth IRA conversion ladder would mean I would need to start converting at age 45, to have money available at 50, but age 45 would be at a high salary and therefore high tax bracket. Plus whatever cost I would pay for an early deduction, which I'm not sure I understand, either. Or is this just complicating everything, and I should simply either take a lump from my 401K or roll a lump into something else at age 50? Can anyone help advise what makes the most sense in this particular case? I have a traditional IRA and a Roth IRA, both have minimal funds ATM (I opened them in the past and then paid v little attention to them, focusing mainly on dumping cash into my 401k), but both are available for me to begin investing heavily into and I plan to start funding one this year. In general, what's the best approach to straddling the period between an early retire and the ~magical~ age of withdrawal? [link] [comments]  |
| Posted: 07 May 2018 03:43 PM PDT I've been reading this subreddit and MMM for a while now, tracking and cutting my expenses, paying off school loans, and hoping my carefully selected stocks take off and give me a shortcut to FIRE even though I know I shouldn't. My wife (39), two young daughters (3 and 1), and I (39) live in a very HCOL area. I make about $120K and my wife $160K after bonuses. Our major expenses are rent for our 2-bedroom apt ($3,600) and childcare (~$2,850). Our cars are paid for, and only I have some school loans left ($7,000 at 2.875%). We have liquid savings of about $230,000 in mutual funds/my carefully selected dream stocks. We're considering moving to St. Louis, where we could probably buy a nice house for very little (no more than $350,000) in a great neighborhood with solid schools. The title of this piece comes in here. If we move to St. Louis, I won't need to work. My wife would keep her current job/pay (she works from home). My job is location specific, and I would probably take a massive pay cut if I worked a similar job in St. Louis. So, this frees me up to Wife FIRE, as I like to call it. I don't mind my job (great boss, co-workers, flexible hours), but I'm not fulfilled by it. At all. It's just a job. I would have to take on more house-husband roles: do all the kid drop off/pick up (instead of just half), continue doing the bulk of the shopping, perhaps cook more, clean more, etc… But in exchange, I would have time to do whatever I like. I would do some more Brazilian Jiu-Jitsu, write for a paper or any kind of publication that will let me write for them, and maybe work on a YA book I've been kicking around for a while. I don't really expect to generate a meaningful amount of money through writing. I have some concerns related to the risk of having just one income. My wife has insurance in case of disability or death, so the risk is mostly limited to layoffs. I also have some concerns about my ego because being a non-income-generating house husband feels a little funny. Also, I might feel some guilt or perhaps even feel like I have less of a say in household decisions since I'm not bringing in any money. My wife and I have a lot more to talk about, and I need to take a closer look at our total retirement savings so far. I haven't really tracked everything super closely because we were still rather far from FIRE if we stay where we currently live. What other things should I be considering? Is anyone here in a similar situation? [link] [comments]  |
| Pick One - Stay in California for High Salary Or Move For REI Opportunities Posted: 07 May 2018 01:57 PM PDT I'm a software engineer in California, currently making a 90k salary. I'm confident I could scale this to 120k-130k within a year by moving to a larger company in California. I currently have ~26k in cash/liquid investments, and 8.5k remaining student loan debt. I'm strongly interested in real estate investing, and would love to start house hacking ASAP. The question: would you continue scaling your career in California while foregoing the opportunity to get into REI (entrance costs are prohibitively high), or would you move to the Midwest/South where your salary would be more like 70-80k (with opportunities for some growth) and jump into the world of REI ASAP? All perspectives welcome, as long as you explain yourself. [link] [comments]  |
| Posted: 07 May 2018 01:49 PM PDT xpost from r/personalfinance. I think it's relevant here because this modeling is relevant to all FIRE practitioners and reduces the importance of investment horizon with respect to asset allocation. Thanks for the feedback. I decided to teach myself Python and create a program to simulate varying asset allocations during the runup to retirement. I modeled constant asset allocations (80% stock-20% bond, and other iterations covering the entire spectrum) and glide path asset allocations including those used by Vanguard and JP Morgans target date retirement funds. The performance of the stock (or bond segment) of the portfolio each year was randomly chosen from inflation-adjusted historic stock or bond market performance. I simulated between 20 and 40 years until retirement depending on the scenario, and then repeated the process 10,000 times to create a distribution of possible outcomes for each asset allocation scenario. Surprising to me, these models contradicted the conventional idea that reducing stock exposure in the runup to retirement will reduces risk. In assessing my results, I looked at the median value of the 10,000 iterations as the most likely outcome for a given scenario, and the 5th percentile result (95% of the 10,000 iterations performed better than this value) as my worst case scenario. With a constant set of initial conditions, the goal would be to maximize the value of a portfolio at retirement, and/or have the highest value for a worst case scenario (stock market crash right before retirement). Simulation supports the idea that a constant asset allocation of 60-65% stocks, 35-40% bonds yields the greatest median value at retirement, along with the greatest 5th percentile performace. Which leads to the conclusion that a glide path/target date approach lowers both the total available at retirement and the total available in a worst case scenario, and does not, as advertised, decrease risk. In trying to understand why this is the case, it seems that when stocks are overweighted relative to their long-term performance, the impact of a recession/crash are heavy. Conversely, with the glide path scenarios which overweight bonds relative to their performance in the years leading up to retirement, portfolio growth slows right when the value of the portfolio is greatest, reducing the value at retirement. When stocks and bonds are weighted in proportion to what the long-term geometric mean performance, portfolio performance is optimized. What I'm looking for here is criticism of my methods or assumptions. I haven't read many financial professionals touting the advantages of this type of strategy, but it seems simple, and robust. The big assumptions I'm making are that the variability of market performance in the past will be similar to what it will be in the future. This may or may not be correct, but it's the best I can do. If I could predict market performance, I wouldn't be posting on reddit. Below, I linked to my inputs, python script, and output summary graphs in excel. Thanks for the feedback/criticism/suggestions. [link] [comments]  |
| Recently salaried, need advice on managing new money. Posted: 07 May 2018 11:37 AM PDT Hey all, I recently got a pretty hefty pay bump in my salary, and (since I am still young, and new to managing my own finances) I wanted to ask for some advice. I am working as a Marketing Campaign Manager earning $55k + commission and bonuses (average is about $5k per employee per year but can be more). Basically I wanted to know your advice on debt repayment, new taxes, and saving/retirement
State: California/Los Angeles Bills: $1,390.46 monthly Student Loan Debt: $20,088.89 Car Debt: $9,325.00 Age: 18-35 (male)
Additional info: My job currently offers a 401k savings plan through TD Ameritrade. They do not match any savings as we are still quite a small company. I do not have an additional savings account, but am interested in opening my own IRA via Vanguard, as well as a college savings fund for my nephew. I am primarily interested in saving as much of my tax withholdings as possible (via retirement/college planning) while also not taking a beating the following year during tax season. I also want to pursue FIRE, so any advice towards that is greatly appreciated. I am a total novice so any advice is super helpful. Thanks!! [link] [comments]  |
| Sell rent property and invest in S&P 500 index? Or keep to diversify? Posted: 06 May 2018 08:35 PM PDT I am making a hefty profit from a condo I bought in SF Bay Area 6 years ago. If I sell it now, I will make about 650k after closing costs. Investing that in S&P 500 index over 10 years, assuming 8% compounding interest average, will bring me to about 1.4m. Over `13 years, 1.7M The condo is currently netting me 1k profit a month. If I paid it off in 3 years, it will net me 2k profit a month, or a little bit more. Paying it off will bring me to its current selling price on the market, which is about 1M. Bay Area property generally has kept climbing over the last 30 years. My property in Palo Alto has been gaining 100k a year since I bought it 6 years ago. Obviously, it can't keep that up forever, but given its proximity to top Silicon Valley companies and Stanford University, it is highly unlikely to crash dramatically. If I invested the 2k profit a month in the stock market, it will net 400k after 10 years, assuming 8% interest. Assuming property price start going more stagnant (hasn't happened yet), that will probably bring me to around 1.5m. Is it better to keep the property for diversification, or sell and put it all in low cost index funds (probably S&P 500 index)? I already have 200k invested in indexes between 401k, Roth, and personal accounts. I am 30 years old. I like the idea of having a paid off roof over my head if disaster were to hit (i.e. disability, lose my job. I have been disabled before.). I do not own another home and live with relatives to be rent free and save. One pro about holding onto the condo is my low property taxes every year (if I bought an equivalent property now, the property taxes would be more than doubled). If I sold, that 650k investing is going to snowball thanks to interest over time... then again, we could also hit periods of bad recession. I would love to retire early, as my disability has made it difficult to work sometimes, and I'm not sure how long I can keep up the rat race. I'm currently taking home about $6,200 a month, before yearly bonus (12k after taxes) and vesting RSUs (12k after taxes), but it is a high stress job. I'm currently maxing out my 401k every year + taking some company match. I'm not sure what to do... diversify and keep the rental property? or put it all in the market? [link] [comments]  |
| Posted: 07 May 2018 09:34 AM PDT Thought I'd share since I was nervous about living off one income when we moved to NYC. My spouse is attending grad school on scholarship. This budget is for both of us, no kids, living in Manhattan:
My paycheck includes pre tax $600/month 401k (max that company will match), $250/month commuter passes for MTA, and $300/month health insurance. We also like to travel quite a bit so we throw our tax refund into a shared travel fund. We have 700k in combined investment accounts, $300k equity in a rental property, and 20k in checking. Not in a rush to retire, since we enjoy our careers (or in SO's case, future career), but certainly hoping to not have to work after our 60s unless we want to. [link] [comments]  |
| Newly on the FIRE path. How do you deal with overspending guilt? Posted: 06 May 2018 09:32 PM PDT I've been on the official FIRE path for a year now and am struggling with "overspending" guilt on occasional, but necessary expenses (birthday dinners for friends and family, holidays, Mother's Day, graduations, weddings, wedding party expenses etc). For example - It's difficult to drop $100 on a friends birthday dinner when I normally spend $2 a day on meal prepped lunches for myself. I'm happy to participate in these events but the dichotomy is bugging me. I'm not a high earner unlike many people on this sub so I have to work extra hard to get to my 50% savings rate. I'm very frugal when it comes to all my expenses but I try to be a generous gift giver and go with the flow with restaurant choices for peoples events despite earning the least out of all my friends. How does everyone in the FIRE community handle these things? I'm not sure if I just need a better attitude or to start being more frugal with these types of expenses. I'm feeling a little burnt out - like being an adult is basically just paying for everyone all the time :p [link] [comments]  |
| Throw money at Student Loan or Vanguard/401k? Posted: 07 May 2018 09:09 AM PDT Hi All, Throwaway account. 34m. Married with one kid under 3. Yearly household income before taxes is $240k. Currently have $290k in Vanguard ETF's, $60k in 401k and $190k with a broker (old old old friend, not charging me and I won't entertain moving this money). I am currently maxing out my 401k after not having done that for a long while. Our goal is early retirement. Both my wife and I have professional degrees. My wife has maxed out her earning potential at her federal government job. I am at the beginning of my career so my earning potential has not hit its limit yet. I have $425k left on my mortgage (paying around 2400/month) in HCOL area. I also have $81k in student loans (7% interest rate) which I currently throw $1500/month at. We currently have no other debt. My question is: Should I be paying the minimum to my student loans and instead beef up my retirement savings or should I pay more towards my student loans and not worry about maxing my 401K until that is paid off? Thanks for the insight everyone. [link] [comments]  |
| Successful side gigs for FIRE? Posted: 07 May 2018 09:05 AM PDT Anyone mind sharing their experiences starting/running a side gig? I'm 27 and (depending on expenses) could retire in the next 5-7 years, just have to get the wife on board. I have a good job making six figures and am on track to do even better in the coming years, but it doesn't fulfill me. The benefits and pay are too good to pass up, however, and I have kiddos to take care of. My perfect scenario is work until I have to and let a side gig replace 100% of income needed (40k/year right now living expenses). Any thoughts on where to get started? Unfortunately, due to the nature of my work, I'm unable to provide consulting or professional services while still employed. Thanks and FIRE on! [link] [comments]  |
| Looking For Suggestions On How To Analyze ROI Of 5 Year Home Flip With Mortgage Posted: 07 May 2018 11:46 AM PDT I've mostly lurked here but I've really appreciated all of the insights and occasionally offered some of my own. I recently applied for (and got accepted into) a grant program in my state that offers a $7,500 grant towards your first home. I saw this is an economic opportunity since the grant money is tax-free so I went for it. The problem is that I'm learning now that interest is heavily weighted towards the outset of the mortgage. So I'm wondering whether it's really worth pursuing, or whether the opportunity cost of stocks would be better. What resources could I use to help me assess this? The home price I would be looking at would be around $100,000 (I live in an economically depressed area though there are nice suburbs). The housing market is stable at around 3% capital appreciation. I would be renting the home for 3 years, live there for 2 years to get the capital-gains free sale on the first home, and sell it after the total 5 years (the minimum required to secure the grant). I can back out at any time and get my deposit back I'm just confused about how to assess this situation financially. Really appreciate the advice from anyone with a bit more experience with residential mortgages. [link] [comments]  |
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