First-Time Home buyers, IRA Withdrawals, and Penalties

Posted on November 14, 2006 // 16 Comments

The IRS allows first-time home buyers to take money out of IRAs before age 59½ without penalty. Although I don’t like the idea of taking money out of retirement accounts in order to pay for a house, I still would like to know what my options are. You know, just in case. Here’s a generalized summary of what I found.

What counts as a first-time home buyer? You may be surprised to know that it just means you haven’t owned a house in the previous two years. It has to be used to buy a person’s principal residence, but you could simply be a relative of that person and still qualify.

Traditional IRA Withdrawals
As a first-time home buyer, you can take out $10,000 from a Traditional IRA without the usual 10% early withdrawal penalty. It doesn’t matter if it is contributions or earnings. You’ll still have to pay any applicable income taxes, though.
[Read more…]

Filed Under: Real Estate, Retirement //

A Decade Of Net Worth History Revealed

Posted on November 12, 2006 // 19 Comments
Net Worth vs. Time

A voyeuristic blow-by-blow after the jump…
[Read more…]

Filed Under: Goals, Retirement //

Roth IRAs For Everyone!

Posted on November 9, 2006 // 15 Comments

Back in May, legislation was passed that allows Traditional IRAs to be converted to Roth IRAs without any income restrictions in 2010. Previously, this conversion was only available to taxpayers with adjusted gross incomes of $100,000 or less, no matter if you’re married or single. You even get two years to pay the taxes on the conversion. One of the more detailed articles I’ve seen written about this change is this USA Today article.

Another side effect of this new law is that it opens up a gaping loophole so that allows anyone to contribute to an Roth IRA, albeit indirectly:
[Read more…]

Filed Under: Investing, Retirement //

Am I Putting Too Much Away For Retirement?

Posted on November 9, 2006 // 37 Comments

credit to ??After reading my most recent net worth update, some of you must be wondering why I’m putting so much money into retirement accounts like 401k’s and IRAs, especially given my mid-term goal of buying a house in a year or so. I mean, I can’t touch this money until I’m almost 60 without penalty, right? And we’ll need some taxable funds to draw from if we want to retire earlier than that. What’s up?

My reasoning is that I’m looking ahead to the future where both my wife and I will most likely earn six-figure incomes. Because I want to keep our lifestyle simple and reach our long-term goal of an early retirement, we’ll easily be maxing out all the tax-advantaged accounts available to us then, so I want to stick as much into these accounts as possible now.
[Read more…]

Filed Under: Retirement //

October 2006 Investment Portfolio Snapshot

Posted on October 8, 2006 // 8 Comments

Here is another snapshot of my retirement portfolio as of market close 10/7. As indicated in my previous snapshot, I simultaneously sold ~$10,000 of iShares S&P 500 Index ETF (IVV) and contributed $10,000 to my Solo 401k, which I used to buy Fidelity Total Stock Market Index Fund (FSTMX).

[Read more…]

Filed Under: Investing, Retirement //

Estimating Future Investment Returns: 30-Year Forecast

Posted on August 24, 2006 // 9 Comments

It’s very hard to estimate exactly how much we’ll have to save for retirement, as that would require knowing how much our investments will grow in the future. Even if we try to do long-term trends, this can be difficult. But Richard Ferri, author of All About Asset Allocation and founder of Portfolio Solutions, LLC has done his best by layering risk premiums to estimate market returns. You can find the article for free online – ‘Portfolio Solutions 30-year Market Forecast’. An excerpt:

At the end of each year, we analyzed several economic and market risk factors including Federal Reserve forecasts, inflation forecasts derived from inflation protected securities, and the volatility of asset classes, styles, and categories. From that data, we developed estimates for longterm future returns.

Here are some of the results:
[Read more…]

Filed Under: Investing, Retirement //

FundAdvice.com and Portfolio Tweaking

Posted on August 20, 2006 // 8 Comments

Spent some time this weekend reading many of the articles at FundAdvice.com. The website is the educational arm of Merriman Capital Management, an investment management firm that is heavily into DFA funds. They promote no-load, asset-specific, low-cost funds (which often end up as index funds), and have a lot of interesting things to say on both active and passive investing.

I naturally gravitated towards the passive investing articles, and favorite article so far is ‘The ultimate buy-and-hold strategy’, which agrees with why I want to slice-and-dice my portfolio. I was also intrigued by their ideas for investors with small portfolios. Instead of picking an all-in-one fund or a cash fund until you have enough to invest, they advise you to pick the asset class with the most potential return but highest volatility (U.S. small-cap value to begin with) and build upwards.
[Read more…]

Filed Under: Investing, Retirement //

Work For A Big Company? Read a Review of Your 401(k) Plan

Posted on August 19, 2006 // 12 Comments

Do you work for a large government entity or corporation? Are you looking for an independent review of your company’s 401k plan or maybe some investment suggestions? I just ran across 401khelp.com, which does just that for a large list of companies, including for example Bank of America, Boeing, ChevronTexaco, Cingular Wireless, Cisco Systems, Citigroup, Costco, Dow Chemical, General Motors, Hewlett Packard, Home Depot, Honeywell, IBM, Microsoft, Nike, and the U.S. Government.

I wouldn’t follow their fund suggestions blindly, but it’s something to consider. They do seem to promote low-cost index funds overall, but also like some actively managed ones as well. This is part of a larger site, FundAdvice.com, which I’m still perusing. I am intrigued by their suggested portfolios, especially their Vanguard ones since it’s close to my portfolio, but I haven’t entirely figured out their philosophy behind them yet.

Filed Under: Retirement //

Finding a Good Self-Employed Solo 401k Administrator

Posted on August 17, 2006 // 143 Comments

As I’ve mentioned in my SEP IRA versus Solo 401(k) comparison, the problem with the additional paperwork involved with a 401(k) is that you have to find an administrator that is willing to do it for you at minimal cost. Compare that with the SEP-IRA, you can usually walk up to many brokers, open up an account, and start trading anything with no annual fees and just commissions.

For example, I opened up my SEP-IRA last year with Vanguard, but I can’t open up a Self-Employed 401(k) with them directly as they won’t be my administrator. The only option I found was to go through a third-party administrator like 401kBrokers, which charges an annual maintenance fee of 0.25% of the account balance. I think the fees are pretty fair considering there is no setup fee or other annual fees, but I still don’t want to pay them if I don’t have to.
[Read more…]

Filed Under: Entrepreneurial, Retirement //

Self-Employed Solo 401k vs. SEP-IRA Basics

Posted on August 16, 2006 // 32 Comments

If you have self-employment income, there are a variety of ways to save some taxes and put some away for retirement. As I have no employees, right now my top two choices are the SEP-IRA (Simplified Employee Pension), which I used for 2005, and the Self-Employed/Solo 401k. After a bunch of reading, here’s what it boils down to:

SEP-IRA: Allows tax-deductible contributions and tax-deferred growth. Easy to set up at basically any broker. Very minimal paperwork involved.

Self-Employed 401k: Similar tax advantages as SEP-IRA, but with more paperwork, a more limited number of administrators, and higher contribution limits.
[Read more…]

Filed Under: Entrepreneurial, Retirement //

Book Review: Yes, You Can Still Retire Comfortably!

Posted on August 15, 2006 // 4 Comments

After reading their investing book Yes, You Can Time The Market! and liking their writing style and slightly different view on things, I decided to read Ben Stein and Phil DeMuth’s book on retirement – Yes, You Can Still Retire Comfortably!

Even though this book is targetted at Baby Boomers worried about their impending retirement, and I’m still in my 20s, it was an interesting read. First, they scare you with (true) tales of underfunded pension plans, a shaky Social Security system, and rising healthcare costs. Obviously, you need to do something about it!
[Read more…]

Filed Under: Book Reviews, Retirement //

How Much Of Your Salary Should You Save For Retirement?

Posted on August 7, 2006 // 25 Comments

This is a difficult question to ask, but this paper I ran across entitled ‘Savings Rates and “Economic Security” in Retirement’ tries to take a stab at it. Here is the abstract:

Some simple number crunching using historical market return data for retirement planning. How much do we need to save to provide for a comfortable and secure retirement?

Here are some of his initial assumptions:
[Read more…]

Filed Under: Retirement //
« Previous Page
Next Page »