Financial Independence Daily FI discussion thread - October 27, 2020 |
- Daily FI discussion thread - October 27, 2020
- "But what if Vanguard goes bust?" A real case scenario.
- 72(t) questions
- How do you factor your Pension into the 4% rule
- When do you rely on past performance?
- Is there a FI/RE calculator that let's you enter brokerage AND IRA amounts to determine success?
- Rich Dad, Poor Dad is Eyeopening
| Daily FI discussion thread - October 27, 2020 Posted: 27 Oct 2020 01:08 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]  |
| "But what if Vanguard goes bust?" A real case scenario. Posted: 27 Oct 2020 02:24 AM PDT Many people put a significant portion of their investments in one company (e.g. Vanguard). It is often asked, "What if Vanguard goes bust?" The hypothetical answer to the hypothetical question is "your investments are still ok." For example: https://www.mymoneyblog.com/what-if-vanguard-or-fidelity-went-bankrupt.html This scenario is happening in Hong Kong. Basically, Vanguard will leave the Hong Kong market and relocate to Shanghai. It is reported that Vanguard's assets will either be acquired or simply terminated. In fact, Bank of Montreal ETFs are also reportedly leaving Hong Kong, and their funds may be acquired by China AMC. So I guess it's true that people's assests haven't turned into toilet paper or worse. But now that the funds may have different managers, the investment approach could become very different. Mangagement costs may increase. So the risk is there but more hidden. Sadly, the remaining global broad market ETFs in Hong Kong have very low volume and small in size. IMO that's a higher risk. You would feel sad that investors in the city have not much options for global broad market ETFs. Edit: Typo [link] [comments]  |
| Posted: 27 Oct 2020 03:01 PM PDT I discovered the 72t last night while dreaming/googling about early retirement. So, I'm 36, have over 700k in my current 401k. I've always wanted to retire early, say around 55 as long as nothing catastrophic happened obviously, and was going to use the rule of 55. Then I found out about this new option. In a perfect world, where things still progress normally, a 401k calculator tells me based off my average salary I put in and company match, plus my ability to usually max out my yearly contributions. Average of 7-8% growth as well. Is this in the realm of possibility? The number that it gave me last night for age 50 was a touch over 3 million in my 401k at that point. I understand the rule that I am set with the number I take out until age 59.5, unless some type of medical/disability were to happen. I make about 145-150k a year right now. Our home will be paid off in under 14 years now. Anyone out there done this? [link] [comments]  |
| How do you factor your Pension into the 4% rule Posted: 26 Oct 2020 05:06 PM PDT I live in the UK. I will be able to access my private pension from 55 (rising to 57/58) I plan to retire at 45 and live on 20k pa. To support this, I would need 500k going by the 4%rule However, if I have say 200k in savings accounts, and 300k in pensions, in theory that 300k is inaccessible for 13 years. As such for the first 13 years my funds are 200k, so the 4% rule would leave me just 8k per annum. How do I factor this in? Clearly if I was retiring 1 year before pension age, you'd say just group everything together. But clearly that changes at some point, as if I had 500k pension and 0k savings I wouldn't be able to retire early. How should I factor a temporarily inaccessible pension in to my retirement plans? [link] [comments]  |
| When do you rely on past performance? Posted: 27 Oct 2020 01:48 AM PDT Many people talk confidently about the 4% rule or the Trinity Study, confidently stating that this rule is based on data and science, but when you dig in to what their argument is, they are just taking past performance and extrapolating it into the future. If I were to argue that instead of investing in the Trinity Study's 60/40 stock-bond portfolio and instead suggest investing in a global tech ETF or bitcoin due to higher historical returns, they will argue that past performance does not guarantee future performance. However, didn't they just use past performance as an argument to justify the 4% rule and the Trinity Study? So basically when do you know when to rely on past performance? Why does past performance matter when looking at the Trinity Study but not matter when listening to the bitcoin maximalist or eg someone who invests all in tech stocks? [link] [comments]  |
| Is there a FI/RE calculator that let's you enter brokerage AND IRA amounts to determine success? Posted: 27 Oct 2020 12:47 PM PDT I know FIRECalc let's you can add pension and one-time lump sums, but if there is a way to add your current value for things that you "can't" touch until you are 59.5 as well as cash/brokerage totals, that would useful. For example, if you look at a blanket statement of $1M saved and $40k expenses, that looks doable. But if that $1M is $100,000 cash and $900,000 IRA and you're 40, then you've got a problem (or need to 72(t) or something.) Entering it as a lump-sum doesn't make sense, unless you manually calculate the expected value of your current age-dated funds to account for the growth in value between now and then. Is there another tool that has this baked in? If FIRECalc already has this and I'm just missing where to split things, you're assistance is appreciated. EDIT TO ADD: I know you can access IRA and 401k and stuff, that's why "can't" is in quotes. I'm just curious whether there is something that lets you see what the numbers are when you play on "easy." Think of it as asking if there is a calculator that would help non-FIRE spouses see what's going on, and when, without trying to explain 72(t) or laddering or the 5-year rule. [link] [comments]  |
| Rich Dad, Poor Dad is Eyeopening Posted: 27 Oct 2020 09:55 AM PDT Canadian here. Just started reading Rich Dad Poor Dad and it's been jarring. I thought of myself as doing pretty well. High paying job, house I can afford (20% down, <30% household in payments), maxed TFSA and well on the way to RRSP being the same, following mostly couch potato, term life insurance, will and enduring PoA done, no debt aside from mortgage... Arguably, I tick off all the boxes for standard financial education. Yet, if you subscribe to Kiyosaki's view, I am a "poor dad", running the Rat Race. I have an aunt who definitely falls into the "rich dad" category. She owns her own business, has properties around the world, and has the freedom to be away from the country for good chunk of the cold months. We don't talk very often, but when we do she sometimes encourages me to start my own thing and that's the only way to be independent. She says working a job is not a path to financial independence and freedom. I've suspected as much myself, but it never hit me quite as much as how Rich Data, Poor Dad puts it. This is not to say, I did anything wrong. I did precisely what the dominant path for people on this sub is: get paid well, save aggressively, diversify your portfolio. On paper, when I'm 50, I'll be able to retire and live off my investment portfolio. But I realize now that getting to FI will not solve the worry of money. It will not make me fully independent. Sure, when I hit $1.5M invested I'll feel good and secure to last for at least 20 years. But there will be a voice in the back of my head saying "what if something happens... what if there is a crash... and you can't work and make up for the income... may be you should work for another year..." This is not independence, just an ability to hit a pause button for longer than most. At least I see that for myself. Your milage may vary. All of this is to say is the book threw me into a different mindset. Unless I create something myself that people are willing to make money for, I will not be truly financially independent. The book renewed my eagerness to revisit some of the ventures I've started, but never followed through on. They got boring, to be frank. With this renewed vision, I can see myself following through on them and taking on more risk. I just wanted to share this to see if anyone else felt the same way and share some perspectives. P.S. Granted it's just a book and Kiyosaki's goal is to sell this book and have you buy more. One way to do that is to have radical ideas in the book that make you think... but the idea does resonate with me quite a bit. [link] [comments]  |
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