Search found 19 matches

by smalldata
Tue Feb 11, 2014 1:30 pm
Forum: Personal Investments
Topic: Math with Wine is Hard: Traditional 401k vs Roth 401k
Replies: 35
Views: 3635

Re: Math with Wine is Hard: Traditional 401k vs Roth 401k

TFB has an excellent set of posts on this:
http://thefinancebuff.com/case-against-roth-401k.html
http://thefinancebuff.com/roth-401k-for ... e-max.html
Even if you're in the same tax bracket now as in retirement, the traditional 401k may still be advantageous.
by smalldata
Fri Jan 10, 2014 7:54 am
Forum: Personal Investments
Topic: After Tax 401K / Roth Conversion in Place of 529 Acct
Replies: 3
Views: 486

Re: After Tax 401K / Roth Conversion in Place of 529 Acct

It sounds like this really boils down to two questions: 1. How difficult is it to do in-service withdrawals from the after-tax 401k into a Roth? 2. Should the Roth be used in place of a 529 account? My wife makes after-tax contributions to her 401k which we convert to a Roth. It's incredibly easy (one phone call to Fidelity), and as long as it's done periodically the taxes should be minimal (typically only the gains are taxed). You'll definitely want to read the fine print in the 401k plan and make sure the in-service withdrawals of the after tax portion is allowed, and that only the earnings are taxed. There are also some existing threads in the forum on this process. In terms of whether the Roth should be used instead of a 529, you may wa...
by smalldata
Sun Jul 21, 2013 5:04 pm
Forum: Investing - Theory, News & General
Topic: New in wiki - Bond Yield, Looking for feedback
Replies: 12
Views: 2934

Re: New in wiki - Bond Yield, Looking for feedback

Ah, I understand. It's good to know the convention (and that YTM for a bond is not quite the IRR).

LadyGeek, Magician, thanks again for your detailed explanations.
by smalldata
Sun Jul 21, 2013 10:12 am
Forum: Investing - Theory, News & General
Topic: New in wiki - Bond Yield, Looking for feedback
Replies: 12
Views: 2934

Re: New in wiki - Bond Yield, Looking for feedback

When I find myself questioning a standard reference text, it's probably a bad sign... :)

The first two YTM calculators that come up on google here and here give a YTM for the 15 year zero coupon bond as 8.99%. Interestingly, tweaking a few numbers for Fidelity's calculator here gives 8.81% for a semi-annual coupon frequency, and 8.99% for an annual coupon frequency (even though the coupon rate is 0%). Seems that there's some confusion on this point, and perhaps it's nothing to worry too much about. Thanks!
by smalldata
Sun Jul 21, 2013 7:03 am
Forum: Investing - Theory, News & General
Topic: New in wiki - Bond Yield, Looking for feedback
Replies: 12
Views: 2934

Re: New in wiki - Bond Yield, Looking for feedback

My wife is taking a finance course, and has been suffering through my "help". (I've got a good math background, but not much in the way of finance.) We were working through the most recent problem set, and stumbled across the Bond Yield wiki page. We found it to be wonderfully clear and accessible. Thanks! In the calculation for a zero coupon bond, the YTM of a 15 year bond with a purchase price of $274 and a maturity of $1,000 is calculated by: RATE(2*15,0,-274.78,1000,0)*2. This calculates the semiannual rate as 4.40%, and then doubles it for a yearly value. It seems like the correct way to convert the semiannual rate to a YTM is through the (1+R)^2-1 formula rather than the bond equivalent yield method of multiplying by 2. That...
by smalldata
Sat Jun 01, 2013 9:32 am
Forum: Personal Consumer Issues
Topic: Training for a 5K
Replies: 67
Views: 5027

Re: Training for a 5K

Pacing is vital in a race. Nearly everyone starts out much too fast, and it's tempting to at least keep up with them. Ignore that feeling. Ignore those other runners. Run your own race. Many will pass you at the beginning because of this. Don't worry. But try to remember them, because you'll see most of them again around mile 2.5, when you whiz by with a smile on your face. :P Good luck! In general, this is great advice (especially for longer races). However, I had to rethink this a few years ago when I saw this runner's world article: http://www.runnersworld.com/race-training/go-out-fast-your-next-5k . I suppose it depends a lot on your goals as well. For a first race, or a "fun" run, going out slow can allow you to finish with ...
by smalldata
Tue Mar 12, 2013 1:59 pm
Forum: Personal Investments
Topic: 529 which state?
Replies: 25
Views: 3677

Re: 529 which state?

As usual, it looks like the excellent bogleheads wiki has this covered: http://www.bogleheads.org/wiki/529_Cost_Comparisons

Apparently, NY recently lowered their expenses, becoming the cheapest plan: http://www.bogleheads.org/forum/viewtop ... 10&t=96256
by smalldata
Tue Mar 12, 2013 1:29 pm
Forum: Personal Consumer Issues
Topic: tiny cheap server [Raspberry Pi]
Replies: 24
Views: 5312

Re: tiny cheap server [Raspberry Pi]

Default User BR wrote:
Mudpuppy wrote:Has anyone tried using a Raspberry Pi as a streaming video server?
Mentioned in this thread: http://www.bogleheads.org/forum/viewtop ... 1&t=110322
Brian
I use this to play videos stored on my windows computer (using samba). It has good hardware support for videos, so it has no problem with 1080p video in H.264 and will handle MPEG-2 videos just fine if you pay a few bucks for the hardware support (see http://www.raspberrypi.org/archives/1839).

I also stream TV shows from online using the "free cable" plugin for raspbmc.
by smalldata
Sun Feb 10, 2013 9:07 am
Forum: Personal Consumer Issues
Topic: Cheapest way to go from laptop to TV.
Replies: 23
Views: 4925

Re: Cheapest way to go from laptop to TV.

If you really want the cheapest, try a raspberry pi loaded with raspbmc for $35, perhaps a few extra $ for cables, etc. I use this for streaming video from my main computer, or from the internet using the free cable plugin.
by smalldata
Fri Dec 28, 2012 11:43 am
Forum: Personal Investments
Topic: estimating average annual return from annual data
Replies: 9
Views: 1601

Re: estimating average annual return from annual data

Thanks! That concrete example explained to me exactly how a fund calculates its return rate, and I was able to duplicate your calculation. If what the OP wanted is to calculate the rate at which a dollar invested in their portfolio 26 years ago would have grown, it seems like the geometric average of the yearly return rates should be used. That would at least be an apples to apples comparison of the return rate provided by a mutual fund. If you just take the current balance minus the total of your contributions you'll have the gain. If you divide that by the ending balance and divide by your 26 years won't that give you an average annual return? That's more of a question than an answer because I'm interested in knowing how to do this. I don...
by smalldata
Fri Dec 28, 2012 6:45 am
Forum: Personal Investments
Topic: estimating average annual return from annual data
Replies: 9
Views: 1601

Re: estimating average annual return from annual data

You can get an approximation using Excel's IRR function. Here is an example of how you could do it. I've simplified your layout to cover just five years with $100 added each year and a $10 gain each year. (1) Col: A B C D E F (2) G Row Year Start Add End $ Gain % Gain Date --- ---- ----- --- --- ------ ------ --------- 2 1 0 [ 100 ] 110 10 20.00% [ 7/01/2000 ] 3 2 110 [ 100 ] 220 10 6.25% [ 7/01/2001 ] 4 3 220 [ 100 ] 330 10 3.70% [ 7/01/2002 ] 5 4 330 [ 100 ] 440 10 2.63% [ 7/01/2003 ] 6 5 440 [ 100 ] 550 10 2.04% [ 7/01/2004 ] 7 [-550 ] [12/31/2004 ] 8 IRR: 3.19% Arithmetic Avg: 6.93% (3) 9 XIRR: 3.82% Geometric Avg: 6.73% (4) I copied the negation of the final ending balance to just below the last Add amount. Below that I entered the fo...
by smalldata
Wed Dec 19, 2012 8:19 pm
Forum: Personal Finance (Not Investing)
Topic: 401(k) or student loan (more importantly: a math question)
Replies: 16
Views: 1937

Re: 401(k) or student loan (more importantly: a math questio

Also, do remember, you deduct 401K contributions at your marginal rate, but upon withdrawal, you fill up lower tax brackets first, making the average rate much lower. This is one of the greatest tax arbitrage opportunities few understand very well outside this website. grap The finance buff has a good demonstration of this in his "Case Against a Roth" article: http://thefinancebuff.com/case-against-roth-401k.html I think a lot of that applies here. Still, it's a gamble based on the future tax rates. The OP stated that the 31% is under the assumption that the tax cuts expire, and given that the OP is presumably young and newly hired, it's entirely possible that the tax rate will be higher later on. Paying off the loan is a sure th...
by smalldata
Wed Dec 19, 2012 5:27 pm
Forum: Personal Finance (Not Investing)
Topic: 401(k) or student loan (more importantly: a math question)
Replies: 16
Views: 1937

Re: 401(k) or student loan (more importantly: a math questio

The math here doesn't seem too difficult if you assume your tax rate now is the same as your tax rate later. (It seems quite similar to the question of whether to use a roth 401k). Suppose you have $100 of income and you want to decide whether to put it in your 401k or use it to pay off your loans. Scenario #1: You contribute $100 to your 401k. It grows at a rate of R% for N years, and then you pay 40% taxes on it: 100 * (1+R)^N * .60 Scenario #2: You pay taxes on your $100. This gets you 8.5% a year for N years: 100 * .60 * 1.085^N Just like a Roth vs regular 401k, if your tax rate is the same at retirement as it is now then it doesn't make a difference if you pay taxes now or later. Taking the "guaranteed" 8.5% return from payin...
by smalldata
Wed Dec 05, 2012 4:25 pm
Forum: Personal Investments
Topic: Harvest Long Term Capital Gains By Year-end...or Not?
Replies: 2
Views: 804

Re: Harvest Long Term Capital Gains By Year-end...or Not?

Dave, Most people here (myself included) view owning individual stocks as uncompensated risk. See the philosophy for an overview: http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy Moving on to your question... There have been a few threads on tax gain harvesting: http://www.bogleheads.org/forum/viewtopic.php?f=1&t=103902 http://www.bogleheads.org/forum/viewtopic.php?f=10&t=103139 Unless you can take advantage of 0% long term capital gains now, it's generally better for the buy-and-hold investor to just let things sit. If I worked out the math correctly, the break-even point is where: (1+R)^N = FTR/(CTR – FTR*CTR) Here R is the expected rate of return (discounting dividends), N is the number of years, FTR is the f...
by smalldata
Fri Aug 17, 2012 4:14 pm
Forum: Investing - Theory, News & General
Topic: Total Bond Market vs TIPS
Replies: 34
Views: 11505

Re: Total Bond Market vs TIPS

Yes, I see I was confusing duration and maturity. Thanks for the link, I'm continually impressed with the wiki.
by smalldata
Fri Aug 17, 2012 9:35 am
Forum: Investing - Theory, News & General
Topic: Total Bond Market vs TIPS
Replies: 34
Views: 11505

Re: Total Bond Market vs TIPS

The final factor, of course, is that the total return to the investor is the sum of the interest paid and the change in value of the bonds. Bonds can lose value but the investor might more than cover the loss in interest paid or might not. The concept of duration serves to quantify that in that it tells you how long it will take to attain the same total value as you would have had with bond value and interest accrued taken into account (more or less). The statement that the duration measures how much to multiply an interest rate change to determine the change in NAV of a bond in response to that interest rate change is also true, but the above concept of being made whole is probably more relevant to the fate of the investor. As a mathemati...
by smalldata
Thu Apr 12, 2012 1:38 pm
Forum: Investing - Theory, News & General
Topic: Maybe NOT Bonds into Roth IRA
Replies: 13
Views: 1866

Re: Maybe NOT Bonds into Roth IRA

Here's a concrete example (hopefully I got the math right). Suppose your asset allocation calls for $1,000 in bonds. You can either: 1. Put $1,000 in bonds in the Roth. This means you have $1,000 more in stocks in your taxable account. 2. Put $1,000 in bonds in the taxable account. This means you have $1,000 more in stocks in your Roth. Let's assume historical averages where the stocks earn 10%, and the bonds earn 7%. After one year: Option 1: Roth grows to $1,070. Taxable grows to $1,100. Net gain: $70 from the Roth, $85 from long term capital gains (assuming 15%). Option 2: Roth grows to $1,100. Taxable grows to $1,070. Net gain: $100 from Roth, $70 - taxes on taxable income. If you're in the 25% tax bracket, option 1 gains $155 and optio...
by smalldata
Wed Mar 28, 2012 10:27 am
Forum: Investing - Theory, News & General
Topic: Taxable/Municipal Bond Allocation
Replies: 8
Views: 1826

Re: Taxable/Municipal Bond Allocation

Since the risks are not the same between different bond categories, I am concerned that these risks should be diversified. Or is it just a matter of going after the highest yield for ones desired duration and desired credit quality? I guess it depends on what risks you're trying to diversify. From Swedroe's "Only Guide to a Winning Bond Strategy", the main risks are interest rate risk and credit risk. Assuming you pick bonds of the highest credit quality the credit risk should be low in both cases (historically municipal bonds would be slightly safer). However, the interest rate risk is probably the same between a municipal bond and a taxable bond of the same duration. So it seems like you might as well pick the one that gives yo...
by smalldata
Mon Mar 26, 2012 3:51 pm
Forum: Personal Investments
Topic: Tax advantaged Lazy man portfolio
Replies: 17
Views: 2482

Re: Tax advantaged Lazy man portfolio

Your desired withdrawal rate is low enough that you could come close with bonds. Yes but would 100% bond portfolio provide greater 40yr survival rate after inflation than a portfolio that has a mixture of stock & bonds? Keep in mind that the $250K/yr withdrawal will go up each year with inflation so to maintain the ~2.5% withdrawal rate the value of the portfolio has to be increasing at least as much. While the #1 goal is long term providing cash flow requirement once that is achieved long term appreciation comes next. Thanks for the suggestions so far. I recently stumbled across the following two wiki pages that seem relevant: http://www.bogleheads.org/wiki/Safe_Withdrawal_Rates http://www.bogleheads.org/wiki/Trinity_study_update They...