Comments for jlcollinsnh Money - Life - Business Tue, 26 May 2015 20:21:02 +0000 hourly 1 Comment on Stocks — Part XXIII: Selecting your asset allocation by Rob Tue, 26 May 2015 20:21:02 +0000 Thanks for your fast reply Jim and all the info you make available on your blog. I am glad I found your blog at such a young age. Hopefully everything turns out well in a few decades. Guess I’m a bit scared of bonds with the current low interest rates. And a bit scared of stocks with its relatively high valuations :). But none of that should matter in 15-20 years time I guess.

Comment on Ask jlcollinsnh by Frank Tue, 26 May 2015 17:59:22 +0000 I’ve been thinking about this more and just finished reading your post about withdrawing 4% during retirement. Thanks for advice to me about using earned income first, to fund my 403(b). In my situation though, I can’t max it out using earned income only and still pay my bills so I’ve turned to my taxable investments with Vanguard to draw on for another ‘paycheck’ to make ends meet. Back to the 4% rule you blogged about, I noticed that my yearly draw on my taxable investment account is about 3.2% of my total assets (held in cash, 403(b), Trad IRA, Roth IRA, HSA and taxable investments). After reading your post I feel like I’m doing something very financially sustainable- using a retirement strategy in my wealth building years! This still seems like a good strategy and I understand it would be better, as you say, if all my 403(b) and HSA (I had forgotten about that little account till now) contributions came from earned income.
But, I still feel uneasy about taking money out of an account for which I already paid taxes on the contributions (the non retirement investment account) and putting it into the 403(b) and HSA accounts, but especially the 403(b).
Am I just setting myself up to pay tax on the same money again when I start withdrawing money in retirement from the 403(b)? Perhaps I am over thinking it and I have read your post about the Roth conversion ladder, but still I wonder.
I can see (in a bit of a financial fog) how the benefit may outweigh the cost but would love to hear your take on it.
Also, I am doing a monthly contribution to my Roth IRA to max it out yearly. I’m leaning towards switching my future contributions over to my existing Traditional IRA after reading your blog. When I started funding the Roth, many years ago, I was at a lower income and maybe I should be utilizing the tax advantages of the Traditional IRA now. Any advice is very appreciated.

By the way, I also read with GREAT interest your post about HSAs, I had no idea I could sandbag medical bills and pull them out years down the road to pull money out of the HSA tax free- wow! I’m going to straighten out my filing system for those medical bills pronto.

Comment on Stocks — Part XXVIII: Debt – The Unacceptable Burden by jlcollinsnh Tue, 26 May 2015 02:28:56 +0000 Welcome Sensim….

Very interesting. I thought education was free in Sweden. ;)

If you check our Addendum 1 above, you’ll see even at the highest interest rate of 2.5% in ’09, it falls comfortable within the range I would pay off slowly. This is especially true in your case given the other factors you mentioned.

I share your feeling of wanting to be 100% debt free. But in this case, keeping this debt and paying it as slowly as possible while leaving your money invested will very likely make you wealthier.

If for some reason the interest rate should spike sharply higher, you can always pay it off then.

Good luck!

Comment on Stocks — Part XXIII: Selecting your asset allocation by jlcollinsnh Tue, 26 May 2015 02:19:53 +0000 My pleasure, AG…

BTW, here’s my post on Betterment:

As you’ll see, I think they have a roll to play in some cases and for those I like them just fine.

Comment on Stocks — Part XXIII: Selecting your asset allocation by AG Tue, 26 May 2015 02:08:22 +0000 Thanks, Jim! I wish I saw your blog before I went with Betterment or Wealthfront but it is never too late to re-think my strategy :-)


Comment on Stocks — Part XXVIII: Debt – The Unacceptable Burden by Sensim Mon, 25 May 2015 22:57:21 +0000 Hi, thanks for your website with so many clever answers! I have a question about what the best thing is to do with my student loans.

Living in Sweden, we have a system with state loans through CSN for financial aid for studies. Each year, you repay four (4) percent of your income from two years earlier (for loans taken until 2001, after that the terms got less favourable). The Swedish Tax Agency reports your income to CSN. The interest rate is determined and set by the government each year and calculated on the average of the Swedish government’s cost of borrowing over the past three years. The interest rate is 1 perent during 2015. You repay the loans until the debt is zero or (if you are still in debt) the loan will be written off when you turn 65. If your health turns really bad or you suddenly get substantially lower income, you can apply to have the annual payments reduced.

Interest rates:
2015 1,0
2014 1,2
2013 1,3
2012 1,5
2011 1,9
2010 2,4
2009 2,5
2008 2,1
2007 2,1

I really love the idea of being 100% debt free. And I *could* pay the loan off if I sold mutual funds, but does it really make mathematical sense to pay it off faster than the plan in this low interest scenario we are in?! I invest a healthy portion of my monthly income in mutual funds and stocks and I have no other debt.

Comment on Ask jlcollinsnh by jlcollinsnh Mon, 25 May 2015 22:03:12 +0000 Hi Mike…

Yes an allocation of 100% stocks is aggressive, but it is also what I recommend. The only drawback is the volitility and since you’re in the Wealth Building Stage your continuing investments from earned income would take advantage of that and smooth the ride.

But this only works if you can stay the course when the market plunges. And it will. It is part of the process. Reading the complete Stock Series will help you understand how this works and will prepare you to decide if it can work for you.

The 1% ER on your 457 isn’t great, but its not terrible. The tax advantages out weigh it and I’d fund it to the max.

You can read my rant on high fees here:

But be sure to read Addendum I. That’s what you should do.

Hope this helps!

Comment on Stocks — Part XXIII: Selecting your asset allocation by jlcollinsnh Mon, 25 May 2015 21:50:10 +0000 Hi Rob…

My guess is the better results come from periodic rebalancing that results in selling high and buying low as you make the shifts. I do rebalance myself but I don’t think of it as critical. Jack Bogle is on record saying he doesn’t bother at all. He points to research suggesting that the rebalancing advantage is >.5%, just so much noise.

If I were 25 I’d go 100% stocks. The only drawback is the volitility and since I’d be in the Wealth Building Stage my continuing investments from my earned income would take advantage of that and smooth the ride.

When I no longer had that income to invest, I’d turn to bonds to smooth the ride instead.

So, yes, I think your thinking is correct.

Comment on Stocks — Part XXIII: Selecting your asset allocation by jlcollinsnh Mon, 25 May 2015 21:43:40 +0000 Thanks AG…

..and welcome.

Yes, I think you’ve put together a sound stratgey and are thinking about it correctly.

My only suggestion is that if you are going all stocks in Betterment and Wealthfront, why bother using them?

The main advantage to them is the automatic rebalancing of stocks/bonds. So if you are not going to hold bonds with them, you’ll be rebalancing from various stock funds.

Since VTSAX holds virtually every publicly traded stock in the US, you’d only need this if you intend to hold international stock funds. I don’t feel the need for reasons I describe here:

But if you do, it would be cheaper to hold them in a Vanguard fund. You are already willing to rebalance with your stock/bonds. If you can do that, rebalancing US/International should be no problem for you and you’d save a bit on fees.

Also, see my reply to Rob below.

Comment on Stocks — Part XXIII: Selecting your asset allocation by Rob Mon, 25 May 2015 21:06:57 +0000 One thing I’m wondering though: how can an 80/20 mix outperform a 100% equity mix when equities produce better results over long periods?

I’m a bit in doubt if I should get a stock/bond mix. But I’m only 25 years old so if I look at a 10-20 year time frame until retirement I guess 100% stocks should theoretically outperform an 80/20 stock/bond mix. Plus, stocks are more tax efficient here in Belgium (no capital gains tax/no tax on non distributed dividends vs a 25% tax on interest). Is this a correct assumption?