Investment showdown -- beyond the Roth, SDP, & TSP

[moosepileit]

Screen shots of balance sheets and 1.0 or it never happened.

Edited January 5, 2014 by moosepileit

[duece123]

I'm late 40's, planning to hit the eject button in 2015 which will give me about $75K per year in retirement just for being alive, not bad for a mouth breathing neanderthal .

Married (wife 1.0), 1 kid (1st Grade), transferred GI bill four years ago (fully vested), 529 currently has $138,000, will hit the $235K limit well before 18.

No debt other than one mortgage (30 year 3.5%, with $275,000 to go) and a car payment (1.4% on a remaining balance of $25,000)

Owned first house since 1991, bought another in 1997, and current one since 2006. Never carried any credit card debt, have a libor loan pledged from my porfolio for large purchases that is basically a large line of credit @ 1%.

Net worth = Doing ok

1.6M in taxable brokerage account (Current distro = .01% cash, 9.83% in MMF and BDP, 72% in Stocks/Options ,18.16% in Mutual Funds)

180,000 TSP

360,000 Roth IRA

300,000 Wife's Roth

187,000 Traditional IRA

120,000 Wife's Traditional IRA

138,000 529 college savings plan

50,000 Cash Savings Checking, Savings, MM, and a CD)

250,000 equity in Rental Property #1 (No mortgage) - Generates $1500 @ month in income.

175,000 equity in Rental Property #2 (No mortgage) - Generates $1300 @ month in income.

75,000 equity in Rental Property #3 (30 year 3.5%, with $275,000 to go) break even each month, win overall based on tax deductions.

50,000 equity in land (No mortgage) - Sitting idle and have to pay Prop tax and HOA fee, want to sell it.

500,000 equity in another piece of land (Inherited from grandparents - No mortgage - lease to a farmer for agricultural tax exemption)

I max out my Roth IRAs and TSP every year.

As a Capt who flew mostly at night, I spent some time as a daytrader...did very well AND very bad, lost $35K one day, made $40K on another. Got very nervous at one point when I realized I had over $100K on margin, so I quit. Luckily on the advice of a friend I got in early on SanDisk and held it long through a couple splits, made a LOT of $ when I sold it, paid off two houses, paid a metric shit ton in taxes (my tax liability that year was more than my entire AF salary), and gave the rest to a professional wealth manger who has since tripled what I gave him.

Damn dude, good for you! It will be nice to go I to retirement financially stress free.

[Clark Griswold]

Clark,

Is that really "just a bit" of risk or is it Bob Uecker in Major League - "KY ball, juuust a bit outside" risk?

There's a good bit of risk but some of their CD products are FDIC insured. The main worry I see is the exchange rate, that is these countries like to inflate their currencies when they get into trouble; the high yield on the CD would be minus the inflation rate of the currency + change (+ or -) in value against the dollar + transaction fees. Looking into this, it seems longer term than I thought, people seem to keep the CDs for several rollovers and cash out when the time is right (currency strong against the dollar or at least stronger).

Seems reasonable enough but I've just been thinking about it, looking for higher yield is great but the loss in potential return for keeping cash liquid is an insurance premium until things stabilize.

[Day Man]

As a Capt who flew mostly at night, I spent some time as a daytrader...did very well AND very bad, lost $35K one day, made $40K on another. Got very nervous at one point when I realized I had over $100K on margin, so I quit. Luckily on the advice of a friend I got in early on SanDisk and held it long through a couple splits, made a LOT of $ when I sold it, paid off two houses, paid a metric shit ton in taxes (my tax liability that year was more than my entire AF salary), and gave the rest to a professional wealth manger who has since tripled what I gave him.

Sounds shady...I want in.

[HU&W]

I'm late 40's, planning to hit the eject button in 2015 which will give me about $75K per year in retirement just for being alive, not bad for a mouth breathing neanderthal .

Married (wife 1.0), 1 kid (1st Grade), transferred GI bill four years ago (fully vested), 529 currently has $138,000, will hit the $235K limit well before 18.

No debt other than one mortgage (30 year 3.5%, with $275,000 to go) and a car payment (1.4% on a remaining balance of $25,000)

Owned first house since 1991, bought another in 1997, and current one since 2006. Never carried any credit card debt, have a libor loan pledged from my porfolio for large purchases that is basically a large line of credit @ 1%.

Net worth = Doing ok

1.6M in taxable brokerage account (Current distro = .01% cash, 9.83% in MMF and BDP, 72% in Stocks/Options ,18.16% in Mutual Funds)

180,000 TSP

360,000 Roth IRA

300,000 Wife's Roth

187,000 Traditional IRA

120,000 Wife's Traditional IRA

138,000 529 college savings plan

50,000 Cash Savings Checking, Savings, MM, and a CD)

250,000 equity in Rental Property #1 (No mortgage) - Generates $1500 @ month in income.

175,000 equity in Rental Property #2 (No mortgage) - Generates $1300 @ month in income.

75,000 equity in Rental Property #3 (30 year 3.5%, with $275,000 to go) break even each month, win overall based on tax deductions.

50,000 equity in land (No mortgage) - Sitting idle and have to pay Prop tax and HOA fee, want to sell it.

500,000 equity in another piece of land (Inherited from grandparents - No mortgage - lease to a farmer for agricultural tax exemption)

I max out my Roth IRAs and TSP every year.

As a Capt who flew mostly at night, I spent some time as a daytrader...did very well AND very bad, lost $35K one day, made $40K on another. Got very nervous at one point when I realized I had over $100K on margin, so I quit. Luckily on the advice of a friend I got in early on SanDisk and held it long through a couple splits, made a LOT of $ when I sold it, paid off two houses, paid a metric shit ton in taxes (my tax liability that year was more than my entire AF salary), and gave the rest to a professional wealth manger who has since tripled what I gave him.

[SocialD]

Lots of words and numbers....

When this would have sufficed!

[Disregard]

Retired USAF Col (with 3 graduate degrees) homeless

After a 30-year military career in which he earned three graduate degrees, rose to the rank of colonel, and served as an aide to Pentagon brass, Robert Freniere can guess what people might say when they learn he's unemployed and lives out of his van:

Why doesn't this guy get a job as a janitor?

[ClearedHot]

The guys story does not add up...a 30 Year O-6 makes a LOT more than $40K per year...a lot more.

A high thee O-6 retiring this year @ 24 years of service makes $72,000.

Understood the job front is difficult given current situation, but this is the first O-6 I've heard of that can't find a job.

[ThreeHoler]

Appears he is divorced from wife 1.0 and separated from wife 2.0. There goes at least half that retirement right away.

[ClearedHot]

Appears he is divorced from wife 1.0 and separated from wife 2.0. There goes at least half that retirement right away.

Could be but the article says he does not pay anything towards mortgage...still sound odd.

[flyjetz]

Just to pile on: any of you guys use a financial advisor, and if so, any recommendations?

I'm an active duty major, and I've passed all three levels of the CFA exam, and will be eligible for the CFA designation next month. I own a Registered Investment Advisory firm. I'm currently deployed, so I am not taking on any new clients until I return (June or July). I typically don't offer financial planning (that's more for the CFP types), but if you need help with portfolio management, feel free to PM me, and I'll send you my info.

[Dukeorions]

24 yr old, 1Lt Pilot:

8,500 in Roth TSP

10,000 in Vanguard Roth (SP500 Index)

4,000 Emergency Fund

No Debt/Payments

Renting a house with two friends

2K/month going towards investments of some kind

Thinking about waiting for the next market correction to get into stockpiling some good companies at good prices for the long term. Otherwise, I'm not really sure what the best investment vehicle is for me right now. Any suggestions if you were in my shoes?

[JTAC]

24 yr old, 1Lt Pilot:

8,500 in Roth TSP

10,000 in Vanguard Roth (SP500 Index)

4,000 Emergency Fund

No Debt/Payments

Renting a house with two friends

2K/month going towards investments of some kind

Thinking about waiting for the next market correction to get into stockpiling some good companies at good prices for the long term. Otherwise, I'm not really sure what the best investment vehicle is for me right now. Any suggestions if you were in my shoes?

Buy a house. Rent to friends. Profit.

Even if you don't rent to friends, you're not really maximizing your "2K/month going towards investments" if you have to throw away a couple hundred in rent every month.

Edited January 9, 2014 by JTAC

[Dukeorions]

Renting now because I'm in between assignments, AKA H models at LRF. Next assignment I will definitely be buying a house. In the mean time, I feel like I can be doing something better than the TSP and SP500 Index, but maybe I'm wrong.

[Day Man]

My $.01...build up your emergency fund first; $4k is barely 1 months pay. After that, max out your ROTH. Then, diversify with some low-cost ETFs...those are relatively liquid for when you're ready to purchase a house (unless you do a VA loan).

[mcbush]

2 on the above. I'm also a 24 year-old 1LT pilot, and my copilot buddy pays a good chunk of my mortgage every month. I'm a fan of the indexing strategy too, but if you're looking to do more, you can try to tilt your portfolio toward sectors that seem undervalued. Financials would be one current example, and there's a lot of talk about emerging markets right now, which have obviously lagged the developed world recently.

[xaarman]

24 yr old, 1Lt Pilot:

8,500 in Roth TSP

10,000 in Vanguard Roth (SP500 Index)

4,000 Emergency Fund

No Debt/Payments

Renting a house with two friends

2K/month going towards investments of some kind

Thinking about waiting for the next market correction to get into stockpiling some good companies at good prices for the long term. Otherwise, I'm not really sure what the best investment vehicle is for me right now. Any suggestions if you were in my shoes?

Renting is not throwing away money, especially if you're in a location for sub 4 years. To make up closing costs, taxes, and potentially new major expenses (roof, new furnace/water heater/AC etc) you need to stay longer term.

Secondly, at my first duty station, a lot of the new Lts bought new construction housing... which was cool, until it came time to sell. They paid a premium for new construction, except 4 years later, houses were still being built. They couldn't sell to the next person who wanted new construction, yet couldn't all make up the new construction premium. Most broke even or lost a little.

Third, build up an emergency fund. Your vehicle could need a new transmission, a family member needs help or whatever else may come your way. Common numbers are 3-6 months living expenses.

Fourth, open and max out a Roth IRA every year. Call Vanguard and until you get smart, dump everything into their Target Retirement Fund 2060 or whatever year is your flavor.

Finally, do the TSP or Vanguard account on your own. Day man recommends ETFs, I recommend Vanguard Index mutual funds due to the auto reinvest feature over the next 40 plus years. Each company and fund has their own benefits, see the Personal worth thread for reading recommendations. Good luck!

[scoobs]

Why not have a Roth IRA? Xaaraman why do you recommend doing a TSP on your on, I've heard that the fees were really low? If you don't know much about investing couldn't you loose money? And do you recommend target retirement fund over TSP?

Edited January 9, 2014 by scoobs

[Warrior]

Why not have a Roth IRA? Xaaraman why do you recommend doing a TSP on your on, I've heard that the fees were really low? If you don't know much about investing couldn't you loose money? And do you recommend target retirement fund over TSP?

I'm not sure you understand the questions you're asking.

1: Roth IRA is great if you think taxes will rise in the future (you pay taxes on the money now at whatever your income tax bracket rate is, then you withdraw principal and earnings tax free later)

2: you can't do TSP on your own. think of TSP like vanguard or usaa. The TSP has a handful of funds where you can park money. The fees associated with TSP funds are very low, but vanguard is also good. Here's the thing though-TSP is similar to a 401(k). You can put $17,500 in TSP (unless you're deployed, in which case the limit is higher). Money you put in traditional TSP is pre tax money (you don't pay taxes on it this year. But you pay taxes on the principal and earnings when you withdraw it at whatever rate applies to your tax bracket then). The Roth TSP is pretty new. It's the same TSP and the same funds are available, the only difference between Roth a d traditional tsp is when you pay taxes.

A Roth IRA is an entirely different animal, the limit is $5,500 for 2014. The only similarity to Roth tsp is the tax treatment-again, pay taxes this year, never pay taxes on the earnings. You can have a Roth IRA with vanguard, usaa, fidelity, etc. A Roth IRA is a type of account. Within that account you can own an S&P index fund, individual stocks, bonds, whatever is available from the bank yu open the account with.

3: Even if you know a ton about investing, you can lose money. I'll bet warren buffet lost a shit ton of money in 2007-8. And he knows more about it than we do.

4. Think of TSP Like vanguard. They both offer different funds you can buy. They both offer target retirement funds. So no one is recommending a target retirement fund over TSP-they're not mutually exclusive.

Make sense? Hopefully this helps some....

[17D_guy]

There's a max you can put in TSP. Hrm.. taxes might be interesting this year.

[Infamous]

Renting now because I'm in between assignments, AKA H models at LRF. Next assignment I will definitely be buying a house. In the mean time, I feel like I can be doing something better than the TSP and SP500 Index, but maybe I'm wrong.

Admiral shares?? I'm in the same thing at Vanguard. Took all of my money out of USAA... I'm also in their total stock market exchange admiral shares. Maxing out the ROTH TSP contributions each year and also maxing out a separate ROTH IRA as well.

For fun I'm picking individual stocks on the side. I'm probably up around 40%+ average on my personal picks compared to the boring index funds that are about 10% right now. That being said, the majority of my money is with the boring... Gotta keep up with the E's expectations that we're really looking at our stocks in Baseops and not actually preparing for the flight.... Plus it's kind of fun when you do your research and your stock goes up 100% in a span of 3-4 days.

Renting now because I'm in between assignments, AKA H models at LRF. Next assignment I will definitely be buying a house. In the mean time, I feel like I can be doing something better than the TSP and SP500 Index, but maybe I'm wrong.

Also...

http://money.msn.com/home-loans/rent-or-buy-calculator.aspx

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

It's not ALWAYS the best to buy, although many will tell you that it is.

Also if you're interested, I recommend this book. It was recommended several times on investing sites I frequent to get ideas on new companies and stock picks.

http://www.amazon.com/Neatest-Little-Guide-Market-Investing/dp/0452298628

Read it earlier this year during a deployment when I decided I wanted to learn more about investing and how I could do more with my money. The market is doing well right now, so I can't say that I'm some genius, I'm definitely going to have some losses sooner or later, but I'm outpacing the S&P500 right now so I can't complain. Good luck!

Edited January 10, 2014 by Infamous

[Dukeorions]

Admiral shares?? I'm in the same thing at Vanguard. Took all of my money out of USAA... I'm also in their total stock market exchange admiral shares.

For fun I'm picking individual stocks on the side. I'm probably up around 40%+ average on my personal picks compared to the boring index funds that are about 10% right now.

VFINX. USAA expense ratios are ridiculous compared to VG.

My $.01...build up your emergency fund first; $4k is barely 1 months pay. After that, max out your ROTH. Then, diversify with some low-cost ETFs...those are relatively liquid for when you're ready to purchase a house (unless you do a VA loan).

As a single 1Lt with no payments or debt, I can live like a homeless person for a couple months if I have too. I'm thinking if SHTF I can easily get by on 1000 bucks a month. Already maxing my Vanguard Roth. I guess the question now is do I try and max my TSP or do I try and do better with something a little more self-directed? I can put everything in index/mutual funds and be sealed in to 7-8% until retirement, but with a little extra effort I think I could double that. I want to be clearedhot rich.

[Day Man]

As a single 1Lt with no payments or debt, I can live like a homeless person for a couple months if I have too. I'm thinking if SHTF I can easily get by on 1000 bucks a month.

That depends on your definition of SHTF. $4k in a checking account would be worth less than $4k in ammo in some (extreme) scenarios. If you want to S some D under a bridge on month 5 after a RIF, have at it.

[Dukeorions]

I think I've got around 4k worth of 556 and 45 so I don't think I'll be S'ing anyone's D.

[mcbush]

I can put everything in index/mutual funds and be sealed in to 7-8% until retirement, but with a little extra effort I think I could double that. I want to be clearedhot rich.

Are you talking about doubling that 7-8% or doubling your resulting net worth? If it's the former, good luck earning 14-16% per year for the next 40 years. The latter might be doable. 10% year over year will roughly double what you'd have earned at 7.5%. (all numbers pre-inflation)