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by Kevin M
Sun Jun 11, 2017 4:37 pm
Forum: Personal Consumer Issues
Topic: Tesla Model 3 or Chevy Bolt?
Replies: 330
Views: 50258

Re: Tesla Model 3 or Chevy Bolt?

How does a charging cycle count in a Tesla? Does it like to the charged and plugged in every day even if it is not driven? I am thinking about older people like me who do not commute owning a Tesla 3 and charging it after going to the store for 3 miles and then doing that every day. Does that use up the charge cycles? I thought Li-ion batteries were only good for 2000 cycles (or so) which makes me wonder how they count those cycles. Or is the recommended process like a ICE car where you only charge it if it is down to 1/4 full? Anyone know? Also what are the home charging rules if the car is not driven much. Do you keep it plugged in? How about not driving it for 2-3 months? Just thinking.. Tesla generally recommends keeping the car plugge...
by Kevin M
Sun Jun 11, 2017 1:10 pm
Forum: Investing - Theory, News & General
Topic: Using Funded Ratio to drive retirement investment plan - Part 1 of Funded Ratio series
Replies: 121
Views: 25271

Re: Using Funded Ratio to drive retirement investment plan-Part 1 FR

Speaking of volatility, an objection raised by Nisiprius in an earlier reply has not been fully addressed, which is that the volatility of the FR is the same as the volatility of the portfolio, to the extent that one's portfolio does not consist of safe fixed income (i.e., no credit risk) that matches the duration of retirement liabilities . That’s not true. Yes, of course you're right. I originally had written the sentence as something like, "volatility of FR will be proportional to portfolio volatility to the extent the portfolio consists of stocks", but then I realized there will be some FR volatility to the extent that fixed income in the portfolio is not duration matched to one's retirement liabilities (or the duration used ...
by Kevin M
Sat Jun 10, 2017 2:51 pm
Forum: Investing - Theory, News & General
Topic: Using Funded Ratio to drive retirement investment plan - Part 1 of Funded Ratio series
Replies: 121
Views: 25271

Re: Using Funded Ratio to drive retirement investment plan-Part 1 FR

When the goal is income, risk is not expressed as the volatility of the portfolio. If you define volatility correctly, then it is a decent measure of risk, even if income is the goal. A volatility measure requires a specification of the relevant holding period. In one of Merton's examples, the relevant holding period is one year, and he correctly specifies a 1-year government-backed security as the risk-free asset for this holding period. He goes on to point out that a short-term government security is not the risk-free asset for providing retirement income, with the obvious implication that retirement income is for more than a one-year period. A 1-year government security would indeed be the risk-free asset for providing retirement income...
by Kevin M
Sat Jun 10, 2017 1:53 pm
Forum: Personal Investments
Topic: Ally Bank - Is this a safe/best place to stash some cash?
Replies: 108
Views: 43542

Re: Ally Bank - Is this a safe/best place to stash some cash?

VictoriaF wrote: Do you know if Ally would allow me to close a part of a CD, or it's all or nothing? I am wondering if I should open 2 x $25k CDs.
I guess you didn't catch this in my earlier post:
Kevin M wrote:<snip>
I started just now with one at $25K, to get the maximum rate but retain flexibility to do an early withdrawal (Ally does not allow partial withdrawals from CDs). I'll probably open another one for $25K--maybe more--once past the 6-day lockup period for the first CD.
:wink:

Kevin
by Kevin M
Sat Jun 10, 2017 12:24 pm
Forum: Personal Investments
Topic: Ally Bank - Is this a safe/best place to stash some cash?
Replies: 108
Views: 43542

Re: Ally Bank - Is this a safe/best place to stash some cash?

Based on this thread, I opened a savings account at ally last night (1.05%). While I was checking out their website, I noticed a "No Penalty CD" which returns 1.35% for a $25k+ account. Thanks for the heads up! Apparently they just bumped up the rate on the no-penalty CD yesterday. I have an unusually large amount of cash at Ally, because I'm raising cash related to an upcoming real estate transaction, so I decided to move some of it into one or more of these CDs. I started just now with one at $25K, to get the maximum rate but retain flexibility to do an early withdrawal (Ally does not allow partial withdrawals from CDs). I'll probably open another one for $25K--maybe more--once past the 6-day lockup period for the first CD. Her...
by Kevin M
Fri Jun 09, 2017 7:05 pm
Forum: Investing - Theory, News & General
Topic: Mountain America Credit Union 5-Year IRA CD
Replies: 59
Views: 11523

Re: Mountain America Credit Union 5-Year IRA CD

I understand that the current 5 year CD at MACU is 2.5%. Depositaccounts.com also shows as the top 5-year CD currently available. Note that this is resurrecting a thread from 2013. Yes, DepositAccounts shows that MACU currently has the highest yield for nationally available 5-year CDs. Unfortunately, they have raised their early withdrawal penalty (EWP) from 180 days of interest to 360 days of interest, but that has been the general trend with EWPs. Five-year Treasury yield is 1.77%, so the CD has a yield premium of 73 basis points, which is pretty good, but lower than my average of about 115 bps over the last 6-7 years. When I bought the CD in 2013 at 2%, the 5-year Treasury yield was 0.85%, so the yield premium was right at my average (s...
by Kevin M
Fri Jun 09, 2017 12:57 pm
Forum: Investing - Theory, News & General
Topic: Are CD investors more likely (than bond investors) to have sustainable withdrawals?
Replies: 13
Views: 2626

Re: Are CD investors more likely (than bond investors) to have sustainable withdrawals?

Our Simba backtest spreadsheet shows the following cumulative real returns for Treasuries of various maturities for the 15-year period 1967-1981 (inclusive): -53% - long-term -34% - intermediate-term -12% - short term -03% - t-bill So although there is nothing magical, shorter duration definitely helped mitigate the dual whammy of rising rates and high inflation during the 1970s. It is true that they had different cumulative real returns but the mitigation is extremely minimal. Going from intermediate-term to short-term only increases sustainable withdrawals by 5% (i.e. instead of being able to withdraw $40,000 a year you can withdraw $42,000) in most plausible portfolios during that time frame. So even though returns are nearly 3x better,...
by Kevin M
Thu Jun 08, 2017 11:44 am
Forum: Personal Investments
Topic: Work Roth 401k, check my math
Replies: 14
Views: 1778

Re: Work Roth 410k, check my math

Marjimmy wrote:Can you explain your thought process for why you suggested a traditional might be better?
The Case Against Roth 401(k).

Kevin
by Kevin M
Wed Jun 07, 2017 8:50 pm
Forum: Personal Investments
Topic: 401k Fund options
Replies: 3
Views: 595

Re: 401k Fund options

No, you don't have what we'd call a stable value fund, just a crappy money market fund earning 0%. So scratch that idea. With no employer match, your first $5,500/year should go into an IRA--traditional IRA if you are eligible for the full tax deduction and will likely be in a lower tax bracket in retirement, otherwise Roth IRA. After that, 401k should come before taxable. Look at all of your retirement accounts as one portfolio, and use the best or least-bad funds in the 401k first (e.g., the S&P 500 Index fund for large-cap US stocks), and use your IRA (Roth or traditional) for either bonds or international stocks, depending on which you think you have worse choices for in your 401k. Once you've filled out whatever asset class you cho...
by Kevin M
Wed Jun 07, 2017 8:26 pm
Forum: Personal Investments
Topic: 401k Fund options
Replies: 3
Views: 595

Re: 401k Fund options

Yeah, I'd go with EuroPacific Growth for international. It has done a good job of tracking a total international index fund, and has even outperformed it in recent years. We don't want too much outperformance, since that indicates extra risks that could show up on the downside. It's the international fund we've been using in one of my daughters' 401k plan for some years. PIMCO Total Return is a common choice for a bond fund in a 401k when no low-cost index alternatives are available. You're sure you don't have access to a stable value fund? Is the 401k your only investment? Do you get an employer match on 401k contributions? A typical approach is to do enough 401k contributions to get the full employer match, then contribute to an IRA (Roth...
by Kevin M
Wed Jun 07, 2017 8:14 pm
Forum: Personal Investments
Topic: Work Roth 401k, check my math
Replies: 14
Views: 1778

Re: Work Roth 410k, check my math

I think you will be better off contributing to the 401k, but probably traditional rather than Roth. Either way, the ER of the target date fund in your plan is not horrible--we've seen much worse, and the tax-advantaged account growth is almost certain to overcome the somewhat higher ER.

Here's a good blog post for you to read: Alternatives to a High Cost 401k Or 403b Plan. If you plug your numbers into the linked spreadsheet, you'll see that a taxable account is significantly disadvantaged compared to the 401k.

Kevin
by Kevin M
Wed Jun 07, 2017 3:58 pm
Forum: Personal Finance (Not Investing)
Topic: 7 yr ARM vs 30 Yr for new construction Condo
Replies: 22
Views: 3218

Re: 7 yr ARM vs 30 Yr for new construction Condo

So it sounds like your recommendation is to consider the 7 year arm and pay more each month. The arm caps at 2% increase year-to-year and 5% lifetime year. I'm curious if there is a calculator that will allow me to compare a 7 year arm with increased payments vs a 30 year arm so I can see some hard numbers This is straightforward if you fully specify the parameters. For example ... The payment on a 30-year loan of $460,000 (80% * 575K) at 3.625% is $2,098 =PMT(3.625%/12,360,-460000). If you make that payment for 7 years at the 7-tyear ARM rate of 2.875%, your remaining balance is 367,453 =FV(2.875%/12,7*12,2098,-460000). For the 30-year fixed loan at 3.625% your remaining balance after 7 years is 392,377 =FV(3.625%/12,7*12,2098,-460000), s...
by Kevin M
Wed Jun 07, 2017 2:44 pm
Forum: Investing - Theory, News & General
Topic: Why is mid-cap "the sweet spot"?
Replies: 26
Views: 7511

Re: Why is mid-cap "the sweet spot"?

nisiprius wrote: If someone can show me a quotation from a finance article before SSgA's ads that called mid-caps "the sweet spot of the market" I will be enlightened and stand corrected.
I don't know about a "finance article", but I believe Mel has been using the sweet spot terminology to characterize mid-caps since long before 2006. Here's a link to a 2004 M* forum thread in which he uses the term: Mel's Unloved Mid-Caps Update - indexes, newsletter, Mid Cap, mid-cap, large cap blend.

Of course as the post title indicates, "Mel's unloved mid-caps" is the terminology more frequently associated with Mel and midcaps.

Kevin
by Kevin M
Wed Jun 07, 2017 11:15 am
Forum: Investing - Theory, News & General
Topic: Why is mid-cap "the sweet spot"?
Replies: 26
Views: 7511

Re: Why is mid-cap "the sweet spot"?

OK, so conclusions: looks like in the dot com era, these midcap funds basically had small, value, and quality characteristics that helped them dodge the dot com bust. Since then they are more just what you would expect, meaning mildly small funds, maybe with just a little quality screening too. Lots more analysis on the "why", but basically the same conclusion about the "what" that I found long ago, have posted about numerous times in other threads on this topic, and summarized in an earlier reply in this thread : Also, although the mid-cap fund has outperformed the small-cap fund over the entire period from Jan 1999 through July 2016, this kind of thing is highly dependent on start and end points. If you shift the star...
by Kevin M
Wed Jun 07, 2017 10:58 am
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Here's another look

It's interesting to me to see how two guys who seem very knowledgeable and well educated on this subject provide different answers on how to approach finances, or in particular, my financial situation. Which to me isn't a bad thing, as I'm the one at the end of the day who has to decide what I do with my money. This website is just an amazing resource, The difference is in the assumption about what you do with the cashflows freed up by paying off the loan(s). jimb_fromATL and I are using the exact same time value of money (TVM) formulas (specifically, the same spreadsheet functions, like NPER, PMT and FV), and we both gave you the same answer for the question, "how much does $5,500 grow to over 33 years at 4%?". Implicit in jimb_...
by Kevin M
Tue Jun 06, 2017 5:56 pm
Forum: Personal Investments
Topic: Financially independent and then market crashes?
Replies: 54
Views: 9367

Re: Financially independent and then market crashes?

You can last 25 years at a 4% real withdrawal rate with even a 0% real return. With the 30-year TIPS yield at a little less than 1%, and the 5-year at 0%, you can do better than 0% real with a 30-year TIPS ladder, but at a 4% withdrawal rate that still only gets you to about 27 years at say a 0.5% real return. Reducing your withdrawal rate to 3% (33X) gets you to about 37 years at 0.5% real, and with a WR of 2% (50X) you get to about 58 years (but of course you can only build a TIPS ladder out to 30 years). So you can retire in your 30s or 40s without taking much risk at all if you can keep your spending to 2% or less, and not have to worry about stock market declines. Of course my impression is that the vast majority of forum participants ...
by Kevin M
Tue Jun 06, 2017 3:03 pm
Forum: Investing - Theory, News & General
Topic: Are CD investors more likely (than bond investors) to have sustainable withdrawals?
Replies: 13
Views: 2626

Re: Are CD investors more likely (than bond investors) to have sustainable withdrawals?

It is true that they had different cumulative real returns but the mitigation is extremely minimal. Going from intermediate-term to short-term only increases sustainable withdrawals by 5% (i.e. instead of being able to withdraw $40,000 a year you can withdraw $42,000) in most plausible portfolios during that time frame. So even though returns are nearly 3x better, it doesn't translate into a significant improvement in withdrawals. It's for the same reason that risk-parity advocates always talk about: the impact of equities dwarfs the impact of bonds in portfolios during retirement under most circumstances. So optimising your fixed income to be ever so slightly more efficient isn't enough to counterbalance the effect equities. It is the sam...
by Kevin M
Tue Jun 06, 2017 1:37 pm
Forum: Investing - Theory, News & General
Topic: Are CD investors more likely (than bond investors) to have sustainable withdrawals?
Replies: 13
Views: 2626

Re: Are CD investors more likely (than bond investors) to have sustainable withdrawals?

Would the fact that 5-year CD's are paying 2.2% and 5-year treasuries are only paying 1.7% make a difference in the comparison analysis? No, half a percentage point on something that is at best 50% of your portfolio doesn't save portfolios. While it may not "save portfolios", looking at the percentage-point difference minimizes the perception of the impact. Looking at the percentage (not percentage point) difference in yields is more representative of the relative difference in cumulative earnings. The percentage difference in the yields is 29% (2.2/1.7-1). Compounding for 5 years results in a relative profit benefit of 31% for the CD. This may not save the portfolio, but it certainly will help. Next, 50 basis points is not repre...
by Kevin M
Tue Jun 06, 2017 12:53 pm
Forum: Investing - Theory, News & General
Topic: Are CD investors more likely (than bond investors) to have sustainable withdrawals?
Replies: 13
Views: 2626

Re: Are CD investors more likely (than bond investors) to have sustainable withdrawals?

Does having a shorter maturity on your bond side of things help? No, it doesn't. SWRs are defined by the portfolio behaviour during a late 1960s retirement that was decimated by the 1970 bear market (as bad as the 2008 crash but without the quick recovery) followed by massive inflation. Here's the difference between 10-year Treasuries (which is what most retirement research uses) and 1-year Treasuries & 5-year Treasuries: https://fred.stlouisfed.org/graph/fredgraph.png?g=dZJ0 The picture should indicate you're not going to see some magical improvement by going with shorter duration. The problem with this picture is that you're only looking at yields, and not considering the impact of duration on price. The same yield increase has a muc...
by Kevin M
Mon Jun 05, 2017 7:29 pm
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?

I plugged in the numbers doing the avalanche method of paying off the debt. Along with the minimum payments, I put in that I could add an extra $400 per month to pay down the loans. Based upon this it says I would be debt free in August, 2019. Are you suggesting that I make no Roth contributions until that point in time? I know you said the lower loans might be worth holding off, but in a general sense I think that's what you are advocating. I am making the 401K contributions up to the match of 4%. Can I really afford to wait over two years to not make any more Roth contributions? Would love to hear your thoughts on this. Thank you!!! Yeah, other than maybe the lower-rate loans, you should come out ahead by paying off the higher-rate loans...
by Kevin M
Mon Jun 05, 2017 11:54 am
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?

If I paid off the two higher interest rate loans, that would free up $171 per month, not too far off the $220 per month. That sounds like the best option at this point, and would free up more money to fund the Roth and start paying down the other loans. I've contributed $650 to my Roth this year so far, so with a few payouts I get from my work I could max this out before April 15th, 2018. This is certainly better than paying off the car loan first (not sure how you came away from my last reply still thinking paying off the car loan was the top priority). Paying down the higher rate loans gets you a higher return than contributing to an investment with similar risk in a tax-advantaged account (Roth, traditional IRA, or 401k). Since your con...
by Kevin M
Sun Jun 04, 2017 9:17 pm
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?

His salary: 87K (and side note, I have a VERY secure job) Her salary: Stay at home mom, some side jobs equally around 5K a year Mortgage payment :$1,595 No credit card debt Remaining Student Loans $2,896 6.8% $2,759 2.875% $2,037 2.875% $4,380 4.75% $2,657 6.55% $7,455 3.55% variable $4,888 6.375% Total student loan payments per month: $582 Car Loans $4,859 3.44% Monthly Payment of $220 SO.....My plan is to contribute fully to my Roth (FFNOX) this year. Why??? I already shared a model that demonstrates that you come out ahead by paying down a 3.24% loan and investing the freed-up cash flows in a tax advantaged account. It will look even better to pay off a 6%+ loan. As grabiner points out, since you are not maxing out your tax-advantaged a...
by Kevin M
Sun Jun 04, 2017 4:10 pm
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?

As already mentioned, it's not entirely clear what JB2013 is asking, but we can make some assumptions to answer various questions that JB2013 and others might be interested in answering. I'm having a difficult time trying to understand purely the math <snip> So it appears that it's the financial math that's of interest. So maybe JB doesn't know the basic time value of money (TVM) formulas--we can definitely help with that, and much has already been posted with help in this area. <snip> of how much I lose out on long term if I chose to pay off my car that has a balance of $6,100 rather than maxing out the Roth this year. OK, so what does "not maxing out the Roth" mean? Making no Roth contributions, or some contributions, but less t...
by Kevin M
Sun Jun 04, 2017 1:07 pm
Forum: Personal Investments
Topic: IRA rollover, *erroneous* 1099 (for full balance)
Replies: 36
Views: 3281

Re: IRA rollover, *erroneous* 1099 (for full balance)

Friend tells me he did not do a rollover for many years prior to this. However Friend moved this same money from Bank Investment Services / Pershing, LLC to Andrews FCU in Jan 2017. So the concern is that friend could get another 1099 for that. Also, Friend has other IRAs that are/were planned to be moved this year. OK, but how was the money "moved" to Andrews FCU? If done using a trustee-to-trustee transfer, which is the typical way to do it, and what I always do, then it does not count against your one rollover per year limit, and no 1099-R will/should be issued. Any subsequent IRA "moves" should be done as trustee-to-trustee transfers, and no 1099-Rs will/should be issued for those either. I've done many IRA transfer...
by Kevin M
Sun Jun 04, 2017 12:11 pm
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?

Assuming a 2.8% return over 30 years for someone's Roth should be considered an exaggerated example. I was using his numbers (4%). I also provided numbers using the 4% figure. You are making an assumption that by paying off the loan, he can divert 100% of the $220 payment to the Roth without knowing his full financial situation. Maybe he can't pay it in full right now, but would be paying extra every month over the course of this year? Therefore it'd really be either one or the other. We don't know. Sure, which is why I said we'd need to know details about the projected cashflows in the two scenarios to provide a good answer. Not having seen that, I made some assumptions to at least counter the exaggerated benefits of the Roth contribution...
by Kevin M
Sat Jun 03, 2017 2:17 pm
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?

To counter the examples in which posters are saying that you'll lose out on tens of thousands of dollars of investment return by foregoing the Roth contribution in favor of paying off the loan, consider the following simplified example. I'm not going to even factor in the interest rate on the loan, because the main impact over the long term is the loss of the tax free space. I'll just assume that you'll be able to max out your Roth in subsequent years, and that you could invest whatever you lose in 2017 taxable space in a taxable account in 2018, so we can focus just on the impact of the loss in tax free space for 2017. I'll assume you could apply the monthly payment of $220 toward Roth contributions from June 2016 through April 2017, so th...
by Kevin M
Sat Jun 03, 2017 1:04 pm
Forum: Personal Investments
Topic: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?
Replies: 44
Views: 5076

Re: Help with how much I lose out on if I pay off car instead of maxing out $5,500 for Roth this year?

Some of the replies here vastly exaggerate the financial benefit of contributing to a Roth instead of paying off the loan, since they ignore the return on investment of investing the monthly amount that would otherwise go toward the loan payment in a combination of Roth and taxable accounts. The monthly payment amount could go into a Roth through April 15 of next year, and then into a taxable account after that (assuming you will have enough to max out your Roth next year, which seems implied in your OP). In other words, you're not losing the investment return on $5,500 for 20 or 30 years; you're just losing the tax-free space equal to $5,500 minus whatever you're able to contribute to the Roth by 4/15/2018. To model this, you need to speci...
by Kevin M
Fri Jun 02, 2017 8:40 pm
Forum: Personal Investments
Topic: Time to Move Away from 3-Fund Portfolio?
Replies: 36
Views: 6075

Re: Time to Move Away from 3-Fund Portfolio?

Assuming you are comfortable with only stock and bond funds (as opposed to say, adding CDs into the mix), I'd strongly consider putting everything in all accounts into the same Target Retirement fund. If in the 25% federal tax bracket, the taxable bond funds probably are about the same as a muni fund on a risk-adjusted basis, so really no big deal. If you (or your spouse) will be in a higher tax bracket, then the tax inefficiency probably will cost you less than the PAS service.

Kevin
by Kevin M
Fri Jun 02, 2017 2:12 pm
Forum: Investing - Theory, News & General
Topic: Synchrony Bank raised HY Savings to 1.15%
Replies: 19
Views: 3608

Re: Synchrony Bank raised HY Savings to 1.15%

...high transfer limits Kevin Could you elaborate on the transfer rate limitations you've found at Synchrony? Not saying that this is a deficiency at Synchrony, just that Ally has everything I'm looking for in an online bank, and many other banks and credit unions have limitations that Ally doesn't have (low transfer limits being one example). The lack of checking accounts at SB is really all I need know to know that SB does not meet my needs for a primary/hub bank. At Ally I can do an instant transfer between savings and checking, while it would take 1-2 business days to transfer from savings at SB to checking at AB, and the small amount of extra interest I could earn isn't worth it to me. Kevin I think you may have this backwards. Ally i...
by Kevin M
Fri Jun 02, 2017 12:53 pm
Forum: Personal Investments
Topic: IRA rollover, *erroneous* 1099 (for full balance)
Replies: 36
Views: 3281

Re: IRA rollover, *erroneous* 1099 (for full balance)

What is the distribution code if box 7 of the 1099-R? Kevin The 1099 is currently at the accountant, who is on vacation. I haven't been able to get an answer to this yet. Can you tell me where you're going with this? The code will help you understand whether or not you need to do anything about it, and if so, how to approach it. For example, if the code is 1 (Early distribution, no known exception) or 7 (normal distribution), then you'll probably have to go the rollover route. I don't understand your concern about that option. Based on your further clarifications, I'm guessing that the code will be one of these. As another example, I see a code 6 that applies to tax-free exchange of an annuity, and since you mentioned annuity in your OP, i...
by Kevin M
Fri Jun 02, 2017 12:36 pm
Forum: Personal Finance (Not Investing)
Topic: Academic Question on a real world situation
Replies: 34
Views: 4193

Re: Academic Question on a real world situation

Not saying I disagree with your main point, but this statement does not appear to be true: The current interest rate environment is, literally, unprecedented. Interest rates have never been this low for this long, ever in history. Using Shiller data, yield on the "long government bond" has been below 3% since 2012. Since Shiller uses the January average value for the 10-year bond since 1953, we can say this is 5 or 6 years. The long government bond yield also was below 3% from 1935-1956, so a 20+ year period of sub-3% yields. Kevin Thanks. Fair point. I was thinking of the UK Base Rate, to be honest (short term rate). The Fed Funds rate has, I think, never been this low for this long? FFR data at FRED only goes back to 1954, but ...
by Kevin M
Fri Jun 02, 2017 11:42 am
Forum: Investing - Theory, News & General
Topic: Synchrony Bank raised HY Savings to 1.15%
Replies: 19
Views: 3608

Re: Synchrony Bank raised HY Savings to 1.15%

Tamales wrote:
Kevin M wrote:...high transfer limits
Kevin
Could you elaborate on the transfer rate limitations you've found at Synchrony?
Not saying that this is a deficiency at Synchrony, just that Ally has everything I'm looking for in an online bank, and many other banks and credit unions have limitations that Ally doesn't have (low transfer limits being one example). The lack of checking accounts at SB is really all I need know to know that SB does not meet my needs for a primary/hub bank.

At Ally I can do an instant transfer between savings and checking, while it would take 1-2 business days to transfer from savings at SB to checking at AB, and the small amount of extra interest I could earn isn't worth it to me.

Kevin
by Kevin M
Fri Jun 02, 2017 11:31 am
Forum: Investing - Theory, News & General
Topic: What do you hold while waiting for a good CD?
Replies: 20
Views: 2748

Re: What do you hold while waiting for a good CD?

Otherwise, I can't think of anything much better than just hanging out in a 1+% savings account, assuming you don't want to take credit risk or term risk (which you probably don't if you're waiting for a really good CD). I was thinking a 5 year Treasury would make sense if I wanted to buy a 5 year CD. Just switch when the yield spread is at least 100bps or 125bps, based on some of your earlier posts about the best CD deals over time. The problem with this is that a 5-year Treasury has significant term risk, which could result in either a loss or a gain when you decided to swap into the CD. As a fairly recent example of the risk showing up, the 5-year Treasury yield increased from 1.24% on 11/4/2016 to 2.10% on 12/15/2016 (so about 1.3 mont...
by Kevin M
Thu Jun 01, 2017 7:45 pm
Forum: Investing - Theory, News & General
Topic: What do you hold while waiting for a good CD?
Replies: 20
Views: 2748

Re: What do you hold while waiting for a good CD?

Does anyone know of a free site that shows a detailed yield curve with one dot for each Treasury cusip? I don't think this will give you much useful information beyond what you can get here: Daily Treasury Yield Curve Rates . However, if you have basic spreadsheet skills, you can create it yourself by pulling WSJ Treasury quotes into a Google Sheet. I did this quite some time ago, and hadn't looked at it in a long time, but it still works. Here's the chart it creates for 1-10 years, which probably is the range of interest: https://s7.postimg.org/qckimwbaj/WSJ_Treasury_Yield_Curve.png This is for quotes from today. Here is the formula that does the import: =importhtml(B1,"table",3) And here is the URL in cell B1: http://online.wsj...
by Kevin M
Thu Jun 01, 2017 6:05 pm
Forum: Investing - Theory, News & General
Topic: Synchrony Bank raised HY Savings to 1.15%
Replies: 19
Views: 3608

Re: Synchrony Bank raised HY Savings to 1.15%

I've been with Synchrony now for a while. I'm always confused why it doesn't get as much love on the forums as Ally given that it's rate has always been the same or just a smidgen higher for a good while. Perhaps because it doesn't offer the breadth of products, for example, checking accounts. I have accounts at both, but since Ally has all the banking products I need, high transfer limits, high limit on number of externally linked accounts, etc., I use it as my hub bank. I've been too lazy to transfer savings from Ally to Synchrony, since the extra 5-10 basis points of yield doesn't add up to much for what I keep in savings. Synchrony has had more competitive CD offerings than Ally in recent years, but still not competitive with the best ...
by Kevin M
Thu Jun 01, 2017 5:51 pm
Forum: Investing - Theory, News & General
Topic: What do you hold while waiting for a good CD?
Replies: 20
Views: 2748

Re: What do you hold while waiting for a good CD?

i did that with Ally when they had a 5 year 2.4% CD with a 60 day EWP. About a year later I moved to 5 year paying 3%. I wish I could find a 3% one. The best I have seen around at this moment are 2.25%. :( Mountain America Credit Union 5-year CD APY is 2.5%, but the early withdrawal penalty (EWP) is one year of interest. Rates seem to be going up almost weekly right now. Although CD rates in general seem to be creeping up, I haven't seen any really good deals in a few weeks if not months. Patelco CU was offering 2.75% on a 5-year CD with EWP of six months of interest until recently, but that rate is now 2%, and membership is limited anyway. Of course the Northwest FCU 7-year CD at 3% with EWP of six months of interest was a very good deal ...
by Kevin M
Thu Jun 01, 2017 3:13 pm
Forum: Personal Investments
Topic: Should i do a backdoor Roth
Replies: 3
Views: 746

Re: Should i do a backdoor Roth

What is the dollar amount of the traditional IRA? If small enough, you could just convert it along with the after-tax contributions and pay the prorated tax. You might want to end up converting it after you retire anyway.

Kevin
by Kevin M
Thu Jun 01, 2017 12:19 pm
Forum: Personal Finance (Not Investing)
Topic: Academic Question on a real world situation
Replies: 34
Views: 4193

Re: Academic Question on a real world situation

OP's question is about using a probability-based approach to retirement planning, and all responses except the following are focused on that approach:
grok87 wrote: Why not build a tips ladder
viewtopic.php?f=10&t=218634
The TIPS ladder approach is in the safety-first category, as opposed to the probability-based category. Here's an article that provides an overview of the two approaches: Current Thinking on Retirement Investing. If you find it interesting, you may want to follow up by reading some of the books and articles that are referenced in this article.

Kevin
by Kevin M
Thu Jun 01, 2017 12:13 pm
Forum: Personal Finance (Not Investing)
Topic: Academic Question on a real world situation
Replies: 34
Views: 4193

Re: Academic Question on a real world situation

Not saying I disagree with your main point, but this statement does not appear to be true:
Valuethinker wrote: The current interest rate environment is, literally, unprecedented. Interest rates have never been this low for this long, ever in history.
Using Shiller data, yield on the "long government bond" has been below 3% since 2012. Since Shiller uses the January average value for the 10-year bond since 1953, we can say this is 5 or 6 years. The long government bond yield also was below 3% from 1935-1956, so a 20+ year period of sub-3% yields.

Kevin
by Kevin M
Wed May 31, 2017 7:54 pm
Forum: Personal Finance (Not Investing)
Topic: 7 yr ARM vs 30 Yr for new construction Condo
Replies: 22
Views: 3218

Re: 7 yr ARM vs 30 Yr for new construction Condo

I would go with one of the ARMs if I planned to pay off the loan in 7 or 10 years, but otherwise probably would go with the 30-year fixed. With the ARMs, your rate could reset to a significantly higher rate at the end of the fixed-rate period, and the APR of the 30-year fixed is not that much higher than the ARMs.

Kevin
by Kevin M
Wed May 31, 2017 10:46 am
Forum: Personal Investments
Topic: IRA rollover, *erroneous* 1099 (for full balance)
Replies: 36
Views: 3281

Re: IRA rollover, *erroneous* 1099 (for full balance)

What is the distribution code if box 7 of the 1099-R?

Kevin
by Kevin M
Tue May 30, 2017 12:58 pm
Forum: Personal Investments
Topic: EE and I Bonds
Replies: 44
Views: 7025

Re: EE and I Bonds

So if you are holding stocks in an IRA, you could switch into TIPS in the IRA, and hold stocks in taxable (instead of I Bonds). That is a good point. However then I do have the loss of liquidity in that I cannot start pulling those funds before 59.5 without a penalty. Though I admit that isn't a huge deal breaker for me. I could just buy TIPS with maturity dates at age 60, 61, and so on.. It would have some implication to my Roth conversion plan too during those years though. You could pull from stocks in taxable, and use maturing TIPS to replace the stocks in the IRA at the same time. You could also hold some of your nominal bond allocation in taxable if concerned that stocks might have dropped too much when you need the money. Anyway, ho...
by Kevin M
Tue May 30, 2017 12:03 pm
Forum: Investing - Theory, News & General
Topic: DFA Retirement Income Strategies
Replies: 89
Views: 15709

Re: DFA Retirement Income Strategies

grok87 wrote: Looks like there is some decent spread at the 5 year level, say 5 year CD at 2.40% vs 5 year treasury at 1.79%
Yeah, 5-year CD at Mountain America CU at 2.5% with EWP of one year of interest. Until very recently, I had access to a 5-year at 2.75% with EWP of six months of interest, but that CU has limited membership, and the rate now has dropped to 2%.

Kevin
by Kevin M
Mon May 29, 2017 5:18 pm
Forum: Investing - Theory, News & General
Topic: DFA Retirement Income Strategies
Replies: 89
Views: 15709

Re: DFA Retirement Income Strategies

Thanks. It's an interesting point about the CDs. My sense is that a few years ago one could perhaps make the argument that FDIC insured CDs were attractive relative to TIPS. But i think it is a different story now. 10 year CDs seem to be earning about 2.20% less than treasuries. Plus there are all those early withdrawal penalties which seem to have gotten a lot nastier over the years. Interestingly, my yield premium over (nominal) Treasuries of same maturity (mostly 5-year and 7-year) for CDs bought within the last 1.5 years or so is more than 150 basis points, compared to about 115 basis points for CDs bought over last 6.5 years or so. And that's with early withdrawal penalties (EWPs) of six months! You do have to wait for the deals, thou...
by Kevin M
Mon May 29, 2017 4:00 pm
Forum: Personal Investments
Topic: Do Target Retirement Funds add a layer of fees on top of fees?
Replies: 5
Views: 1358

Re: Do Target Retirement Funds add a layer of fees on top of fees?

Also, I think they may discuss this in the prospectus or annual report. From the prospectus: According to an agreement applicable to the Target Retirement Funds and Vanguard, the Funds’ direct expenses will be offset by Vanguard for (1) the Funds’ contributions to the costs of operating the underlying Vanguard funds in which the Target Retirement Funds invest and (2) certain savings in administrative and marketing costs that Vanguard expects to derive from the Funds’ operation. The Funds’ trustees believe that the offsets should be sufficient to cover most, if not all, of the direct expenses incurred by the Funds. As a result, each Fund is expected to operate at a very low or zero direct expense ratio. Since their inceptions, the Funds, in...
by Kevin M
Mon May 29, 2017 3:52 pm
Forum: Personal Investments
Topic: Do Target Retirement Funds add a layer of fees on top of fees?
Replies: 5
Views: 1358

Re: Do Target Retirement Funds add a layer of fees on top of fees?

I just checked TR2050, with ER of 0.15% 0.16%. ERs of VTSMX, VBMFX and VTIBX are 0.15%, and ER of VGTSX is 0.18%, so it appears you're actually getting a bit of a break with the TR fund, but this could be due to rounding error, and the weighted sum is 0.16%. Also, the TR fund actually uses an institutional version of total bond fund (VTBNX), with an ER of 0.09%, but according to my calcs, the small amount of VTBNX in the TR2050 fund (7.1%) isn't enough to swing the weighted ER down to 0.15% (I get 0.16%).

EDIT: I mis-read the ER of the TR2050 fund, and it actually is equal to the weighted sum of the underlying fund ERs. Again, your costs would be lower with the individual funds to the extent you were able to use Admiral shares.

Kevin
by Kevin M
Mon May 29, 2017 3:40 pm
Forum: Personal Investments
Topic: Do Target Retirement Funds add a layer of fees on top of fees?
Replies: 5
Views: 1358

Re: Do Target Retirement Funds add a layer of fees on top of fees?

I don't think so, but it should be pretty easy to check. Do a weighted sum of the underlying fund ERs, and check against the TR fund ER. Also, I think they may discuss this in the prospectus or annual report.

One thing though is that with the underlying funds you can get Admiral shares for $10K or more in any one fund, which lowers your cost. The TR funds use the higher cost investor shares.

Kevin
by Kevin M
Mon May 29, 2017 3:36 pm
Forum: Personal Investments
Topic: tax exempt bond funds
Replies: 25
Views: 3338

Re: tax exempt bond funds

If you still have the loss "banked" if you sell something at a gain now, I believe you will be forced to use your carryover loss to offset gains next tax filing time. That sort of defeats the purpose of the TLH. Not really. The gain is $4k, not $10k. My mistake. I harvested losses that were about $10k late last year. Assuming no other realized gains or losses, the $4K gain would offset $4K of the $10K loss, leaving a net loss of $6K. That's $3K deduction against ordinary income for 2017, and 3K for 2018 (again, assuming no other gains or losses). Since we don't really know if another TLH opportunity will present itself for the limited-term fund, I think I'd just take the $6K loss, and get myself into the term-risk exposure I want...
by Kevin M
Mon May 29, 2017 11:38 am
Forum: Personal Investments
Topic: EE and I Bonds
Replies: 44
Views: 7025

Re: EE and I Bonds

Why would you plan on holding I Bonds at 0% real for 20 years with the 20-year TIPS yield at 0.77%? Daily Treasury Real Yield Curve Rates . Kevin That's why I'm not buying iBonds ... I'm spoiled by the ones I have that are paying from about 1 to 3 percent fixed + adjustment.... Of course, those have less than 20 years to go... OK, but 20-year or 30-year TIPS also had even better yields when I Bond rates were in the 1%+ ballpark. However, I Bonds in the 3%+ ballpark were generally a great deal compared to TIPS yields at the time. I Bond fixed rates were in the 1%+ ballpark from May 2003 - May 2008. Individual - Series I Savings Bonds Rates & Terms During that period the yield on the TIPS maturing 4/15/2028 ranged from about 1.8% to 2.8%...
by Kevin M
Mon May 29, 2017 10:37 am
Forum: Personal Investments
Topic: tax exempt bond funds
Replies: 25
Views: 3338

Re: tax exempt bond funds

Gain is about $10k OK, so what was the size of the loss you harvested? Looking just at monthly returns, the cumulative return from the low at the end of November to now is a little less than 2%, so it seems that you're talking about somewhat more than $500K invested in the fund. Incidentally, the return of the intermediate-term fund has been a little over 3% over this same time period. Of course the big monthly loss for VWIUX was in November 2016, at -3.4%. But there also were smaller losses in September and October, for a cumulative 3-month drawdown of -4.55%. So it looks like maybe you've gained back somewhat less than half of the loss you might have harvested, assuming you bought VWIUX near its peak. I think I'd be thinking about what k...