Non-traditional so many ways.

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Re: Non-traditional so many ways.

Post by jetb2 » Fri Feb 21, 2014 12:14 pm

Laura wrote:Your spouse may do better with an all in one type fund that includes all asset classes inside. Also, if you start with something very conservative it will never drop significantly. Consider something like 30% equity and 70% fixed income. If he becomes more comfortable overtime you might be able to edge that up toward 50/50. I can understand the concern if you have been burned once.

Can you recommend one as a 'fer instance' ? I'm (naturally) taking all responsibility but it would be helpful if you could share an example.

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Re: Non-traditional so many ways.

Post by beardsworth » Fri Feb 21, 2014 1:13 pm

jetb2 wrote:Can you recommend one as a 'fer instance' ?
Laura can, of course, answer for herself, but her mention of a multi-asset fund with about 30% stocks and 70% bonds immediately made me think of Vanguard Target Retirement Income (VTINX), which has exactly that composition: domestic stocks, foreign stocks, domestic bonds, foreign bonds (currency-hedged), and a dose of short-term TIPS. And these components are mainly in the form of index funds. (When viewing any of the Target Retirement Funds, ignore what the fund calls itself, e.g., Target Retirement 2030, and just focus on which fund has the asset allocation you want.)

For an even smaller stock component (20%) you could look at Vanguard LifeStrategy Income; and for a slightly higher stock component (40%), LifeStrategy Conservative Growth. Unlike VTINX, however, the LifeStrategy funds don't contain any TIPS, if that's important.

Vanguard Wellesley (VWINX) has an excellent track record. It's typically about 38% dividend-paying stocks, but they're almost all giant U.S. companies; and its bond portfolio is mostly corporate with very little in the way of government issues. So, it is IMO much less diversified than the Target Retirement or LifeStrategy funds, and it's actively managed.

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Re: Non-traditional so many ways.

Post by pingo » Fri Feb 21, 2014 1:38 pm

Or if spouse behlgins contributing to an employer plan, which especially important if there is an employer match to be had, pretty much any plan sponsored target retirement option with "retirement income" in the name will likely have 20% to 40% in stocks, with the exception of T. Rowe Price, which tends to use heavier stock allocations in their target retirement series.

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Re: Non-traditional so many ways.

Post by RadAudit » Fri Feb 21, 2014 1:54 pm

You are in a little bit of a bind.

Considering your spouse's quite legitimate objections to investing in some types of corporations, index funds are going to be a problem. A broad based domestic stock index fund has stock in 3000+ different corporations. At least one of those corporations may be involved in something your spouse objects to. Ditto international stock index funds. Since governments and corporations usually borrow money, ditto domestic and international bond funds. And if he chose to look a little further, I'd be willing to bet even the bonds of the US government might help fund some program he objects to; and, the CDs and checking accounts at the local bank might underwrite to some extent a company whose policies your spouse may object to.

Because money is fungible (?), there's very little you can invest in - and not too many places where you can put your cash equivalents - that has an iron clad assurance against your money ending up some place you don't want it to go.

If you want to avoid meltdowns, you'll just have to do the best with what you have to work with. Good luck.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The Calvary isn't coming, kids. You are on your own.

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Re: Non-traditional so many ways.

Post by Pyrite » Fri Feb 21, 2014 10:54 pm

I've been waiting for someone else to bring up this point, so I've finally delurked to say it myself:

What if the paid up mortgage, garden, and pile of money really are enough for him?

For the sake of argument, consider his retirement as financially separate from yours. It sounds like his spending is very low (and I take it both of you are in agreement on your relative contributions to living expenses?) and his savings rate is high. If his spending won't increase upon retirement and he's not planning to retire early, that pile of cash plus social security might be enough to meet his needs, even if it just goes into CDs for the next 25 years. If that is the case, you can focus on saving and investing to meet your own retirement needs, and the two of you will be set. I know as a Boglehead it is frustrating to see money sitting around doing nothing, but it's better than potentially damaging your relationship over this issue.

To determine if his approach might really be enough for him, consider these questions:

1. How much will he spend in retirement? Same as now, less (loss of work-related expenses, moving somewhere cheaper), or a little or a lot more (more travel or expensive hobbies, moving somewhere more expensive)?

2. At what age does he want to retire?

3. What is his projected SS full benefit? What will it be if he delays it to age 70?

For instance, if he wants to work until age 67 and his age 70 SS benefit will pay for all of his expenses (you did say he doesn't spend a dime!), he might only need to accumulate enough money to cover 3 years of his fairly low living expenses, and maybe pay for some long term care insurance.

If you can't persuade him to consider putting some of his money in a socially responsible equity fund, here are some things you might persuade him to do with his savings that are within his comfort level:

Max out his 401k for the tax benefit (and match if he gets one), but put that money in a stable value fund or short term bond fund. Look into I bonds and EE bonds for some of the rest of his money. Build a ladder of 5 year CDs with the highest interest rates you can find. Pay off that HELOC with his savings. All of these at least give you a slightly higher return than money sitting around in a checking account, and are very low risk.

Depending on where he draws the line for risk, he might also consider an intermediate bond fund—treasuries, if corporate bonds bother him. You could also investigate deferred income annuities for his situation. Also, as someone already suggested, see if he's interested in buying a rental property for income.

Oh, and he should also put some of his savings toward adequate disability insurance, if he doesn't already have it. Likewise, so should you.

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Re: Non-traditional so many ways.

Post by jetb2 » Sat Feb 22, 2014 4:39 pm

Thank you! We actually (sort of) came to this same consensus on a hike this afternoon (it actually reached 46º here in the Berkshires!).

Maybe by paying off the mortgage and saving and living frugally he's preparing for retirement in his own way. I'm doing it mine (the Boglehead way) - hopefully we can meet somewhere in the middle.

I'm going to go through your suggestions later and see what we can accomplish. Tonight we have a burlesque show to go to! (yes...two gay men at a burlesque show....)

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Re: Non-traditional so many ways.

Post by deikel » Sun Mar 02, 2014 5:23 pm

lazyday wrote:Companies like TD Ameritrade, Fidelity, and Schwab can make sense for some people. But they want to make money from you, so may do what they can to put you in expensive products, charge fees, or encourage trading. Trading can cost much more than just the fees. They know more than we do about their products and services, even the simple ones, so may be able to do sneaky things to make money from you.

In Unconventional Success, David Swensen talks about conflict of vs confluence of interests, and suggests Vanguard partly for this reason.

I understand that we are in boglehead country here, but the blind touting of Vanguard by some of the posters here is pretty misguided. Yes, Bogle did great contributions to the field with index funds and peoples attention to the true cost of fees to their portfolio - but the Vanguard reality is no different than any other companies offering out there. Some of there funds have evenly rediculous fees...or dismal performance.

Vanguard is not a non-profit organization either, CEOs, Managers and the like want to get payed and do so competetively - guess where that money is coming from ? Neither do you have any shareholder right in the company simply buy bying their funds...which makes the different ownership structure rather meaningless IMO

Especially Fidelity has now offerings that equal Vanguards - thanks to the market pressure and education provided by Bogle.

+1 Fidelity has never tried me to upsell into anything I did not want (neither has Vanguard)
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Re: Non-traditional so many ways.

Post by pingo » Sun Mar 02, 2014 7:49 pm

deikel wrote:I understand that we are in boglehead country here, but the blind touting of Vanguard by some of the posters here is pretty misguided.
You are right that this forum tends to be pro-Vanguard (and I do believe the tendency exists with good reason), but there are many, many members that are in also in the camp where they are grateful for what John Bogle has done (and the impact that Vanguard has had on the investment industry), but in their situation they see no advantage to investing at Vanguard. Also, it has been made quite clear in this forum and in countless threads that Vanguard isn't the best at a lot of things. Perhaps not even most things.

But you had asked a question:
deikel wrote:This must be the 20th post from Laura I come across where she gives the advice to switch accounts to Vanguard - or OK it as a good idea. Although I understand that people on this forum are connected to Bogle and hence Vanguard at least in spirit - it would be good to specify what makes this account better than what the OP currently has.
Emphasis mine.

You've seen Laura's posts. There were a couple responses. Did you not see mine?
pingo wrote:Great question. Fidelity, TD Ameritrade, Schwab, etc., etc. can all be great places to invest depending on one's objectives and circumstances. For example, I have a friend who has a TD Ameritrade account. Even though a target fund would probably be in his best interest (and he agrees), he really likes TD's platform and he's comfortable with their user interface so he simply does not want to change accounts. As a result, he will be using their commission-free ETFs to have an awesome 3 fund portfolio.

In jetb2's case, He is moving to a plan of passive investing under the following circumstances:

1. No taxable account, which opens up the possibility of using target date/lifecycle/balanced funds for greater simplicity and passivity without compromising tax-efficiency.
2. Acceptable target/lifecycle options in His 401k, which makes using target date funds more compelling.
3. Most new contributions will be outside the 401k, which makes the use of the 401k target funds more acceptable because of their minimal impact on His weighted costs of investing.
4. Vanguard offers the most desirable target funds for indexing-oriented, retail investors.
5. Most non-Vanguard brokerages charge an arm and leg in transaction fees for each new purchase into Vanguard target funds.
I think I addressed the specific reasons why Vanguard was the preferred option in jetb2's case and in support of Laura's recommendations.

Your original question was a good one, but let me ask you this: do you have a suggestion for jetb2 that also meets or competes with the criteria? I respect your desire to not blindly promote Vanguard at every opportunity, but the recommendations here have to do with obtaining the greatest simplicity, the greatest passivity and reasonably low costs to achieve that goal. Would you prefer jetb2 use Fidelity's retail Freedom Funds instead? I doubt it. Schwab's lifecycle funds? Unlikely. I can imagine scenarios where costs could dictate excluding target/lifecycle funds, in which case TD Ameritrade would be as good as many other firms. I don't see that as being the case here.

Or, if OP agrees with you that 100% stocks is appropriate due to hubby's stockpile of cash, then I wouldn't see any reason to move from TD Ameritrade, either.

I'll say again that TD Ameritrade can be a great place to invest, just like Fidelity, Schwab and perhaps others that don't come to mind at the moment. I personally use Vanguard, Schwab and employer sponsored options because that is what my situation warrants. I recommended that my sister use Fidelity for her IRA because of the specifics of her situation. Last week I spent hours and hours and hours searching through TD Ameritrade's platform to see what the most appropriate options would be for a friend of mine. It came down to using expensive (but otherwise acceptable) NTF index funds, paying $50 transaction fees each time he wants to purchase into a not-so-low cost lifecycle fund, accepting expensive lifecycle funds, or using their commission-free ETFs. Commission-free ETFs was the answer because my friends criteria mandated staying at TD Ameritrade.

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Re: Non-traditional so many ways.

Post by englishgirl » Mon Mar 03, 2014 9:42 am

Has anyone mentioned I-bonds other than just in passing? I did just re-read the whole thread, but maybe I missed it - I'd strongly recommend you look into I bonds for him. It would be a way for him to save $10k a year in a cash-like form, but to also retain the purchasing power of that cash. That could be a good first step.

I would also start looking for a house with a big garden now. I'm not married, so it's not the same situation, buy my boyfriend's retirement plan is remarkably like your husbands, jetb2. If we stay together, then I'm looking at similar issues. But I like living in a (smallish) city, and want to continue doing so - if we end up having a frugal retirement, I'd rather be somewhere where there are lots of free activities, interesting places to stroll, and people watching, than try to be out in the country on 5 acres. So we have been spending some time on Zillow slowly combing through areas of our city where the properties have bigger yards. It's weird, it might even be one single street in a neighborhood where suddenly you'll see lots of green on the satellite image and realize that that street was built with bigger lots. There also seem to be lots of older houses tucked away in less desirable locations which have good sized yards. I am willing to put up with being closer to the train noise or having a smaller house inside if we can get the right lot. I figure if we buy somewhere together and try to gain experience with a reasonably sized vegetable garden while still working, it might be enough as is (provided that there's room to expand the garden when we retire and have more time to tend it) and he won't want to go totally self sufficient. Or it might convince him that life in a town home with easy access to a green market really is easier, lol. Gardening is a lot of work! Or maybe he'll still keep itching for his mini farm out in the boonies, in which case I've got my work cut out for me trying to convince him that that is not my dream. Sustainability includes not being reliant on the car for every little trip.

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Re: Non-traditional so many ways.

Post by lazyday » Mon Mar 03, 2014 11:32 am

deikel wrote:but the Vanguard reality is no different than any other companies offering out there. Some of there funds have evenly rediculous fees...or dismal performance.

Vanguard is not a non-profit organization either, CEOs, Managers and the like want to get payed and do so competetively - guess where that money is coming from
When I've compared the prospecus of a Vanguard fund to the prospectus of a similar fund from Fidelity for example, I've found significant differences in favor of VG.

The Vanguard funds with high fees are expensive to run. Fidelity and Schwab probably take losses on some funds. We might try to take advantage, but I'd be careful, since they have the advantage on us. We are outsiders with limited knowledge and resources.

VG is not perfect, and neither is the aggreement of our interests and the organization's. VG managers might like to make the company larger. They may like greater compensation. However, the alignment of interests is still much better than with a company that is seeking net profits. Vanguard is owned by the funds, unlike Fideilty, TD Ameritrade, etc.

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