33 yr old Fed wants to be a boglehead

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EStrader44
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33 yr old Fed wants to be a boglehead

Post by EStrader44 » Sat Apr 08, 2017 8:27 am

Hi guys. New to the forums. Need a little bit of advice on my situation. I'm afraid I fell a little behind in the finances department. Need some help on my current situation. I am a 33 yr old law enforcement officer working for department of justice. Have pension, retirement will be at 50 yrs old. Wife works clerical at a hospital.

My salary: $73,000
overtime: at least 1 shift every 2 weeks @ $400 extra per shift. Usually clear at least $10,000 in overtime a year.

her salary: $36,000 (she just started working)

TSP: only $42,000 (just started contributing 10%......Took out a $4,000 loan 4 months ago, trying to pay it off quickly....never do this again)
Cash: $5,000
physical gold / silver: $15,000
Futures account: $4,000 (i daytrade the ES emini futures.....been studying/learning for 8 years.......have a system that just started generating me $....Fully expect this to make more than my salary in a year or so but am not counting on this.

Just paid off a 5 figure balance on our 2013 lexus due to my wifes $700 a month balance.
have a 2016 nissan sentra. $288 / month 0% interest 5 yrs. $16k left. Just bought it.

Her entire salary goes into our savings account.....roughly $1,000 every 2 weeks. Every overtime i do goes into our savings as well ($250 each)
We are currently renting gov't housing for dirt cheap, no utilities, $1300 a month.

Here's the thing. I know my finances are well below what you bogleheads have. And I am extremely well versed I've just done dumb stuff as I've expected my daytrading to make money for the past few years. Now, i can say with 99% certainty I can make $ every day. But I dont want to count this unless you all want me to.

Wife and I want to buy a house when we can afford it and have the $. We are in Connecticut, and in laws will be living with us so not going to find a decent house for under $350,000.

What should I do ?

rkhusky
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Re: 33 yr old Fed wants to be a boglehead

Post by rkhusky » Sat Apr 08, 2017 8:35 am

EStrader44 wrote: And I am extremely well versed I've just done dumb stuff as I've expected my daytrading to make money for the past few years. Now, i can say with 99% certainty I can make $ every day. But I dont want to count this unless you all want me to.
Bogleheads don't daytrade unless it is just play money, say 1% or less of your total retirement savings.

Otherwise, have a 3-6 month emergency fund, max out your TSP, max out Roth IRA's for you and your wife. Then invest in index funds in a taxable account.

TX_Man
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Re: 33 yr old Fed wants to be a boglehead

Post by TX_Man » Sat Apr 08, 2017 8:45 am

Curiously, why so much precious metal? $15,000/($42,000+$15,000+$4,000) = ~24.5%. You also got the pension so the percentage is actually lower.

gclancer
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Re: 33 yr old Fed wants to be a boglehead

Post by gclancer » Sat Apr 08, 2017 8:48 am

You can kill two birds with one stone by putting $18k into your TSP every year and planning on taking a residential TSP loan of up to $50k when the time comes to buy a house. If you end up not needing the TSP loan that would be great, but it's definitely a more efficient means of saving for a down payment (TSP loans are more attractive than typical 401(k) loans due to job security/the fact that most Feds don't job-hop/favorable borrowing terms/etc).

Snowjob
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Re: 33 yr old Fed wants to be a boglehead

Post by Snowjob » Sat Apr 08, 2017 8:50 am

1.) How much do you expect from your pension / I assume its COLA?
2.) How much do you expect in retirement?

My gut tells me that the pension + SS etc will cover the vast majority of your needs, so don't feel bad about having a smaller portfolio. you have 17 years to retirement and I would suggest focusing most of your resources into pay down your future house. Still invest some in the TSP of course, good tax break etc but if your pension and SS cover most of your retirement needs the portfolio requirements themselves will be small. Also cheap out on the cars next time to save extra $$ to put towards the house.

Topic Author
EStrader44
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Re: 33 yr old Fed wants to be a boglehead

Post by EStrader44 » Sat Apr 08, 2017 9:24 am

Pension is fers and will be 40% of salary. If i take no more promotions that will be about $40,000 a year. Supplemental social security until age 62 will be about $750 a month.

My gold/silver was a bad decision. I'm in at $1100 per oz in gold and $16 am oz I'm silver eagles. Waiting for price to go up enough that I can make my money back and then some and start dumping all of it into roths.

Love the tsp residential loan idea. I can easily max out my tsp and take out the loan if I need to.

rkhusky
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Re: 33 yr old Fed wants to be a boglehead

Post by rkhusky » Sat Apr 08, 2017 10:21 am

EStrader44 wrote:Pension is fers and will be 40% of salary.
I thought FERS pension was 1% per year served. How do you get 40% retiring at 50?

Edit: Google tells me that law enforcement + some others get more than 1% per year. Appears that 26 years will get you 40%.

autopeep
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Re: 33 yr old Fed wants to be a boglehead

Post by autopeep » Sat Apr 08, 2017 10:52 am

EStrader44 wrote: My gold/silver was a bad decision. I'm in at $1100 per oz in gold and $16 am oz I'm silver eagles. Waiting for price to go up enough that I can make my money back and then some and start dumping all of it into roths.
This is a common behavioral mistake called "anchoring". The money you spent is both a sunk cost and irrelevant. You should not continue to hold a bad investment to make your money back.

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EStrader44
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Re: 33 yr old Fed wants to be a boglehead

Post by EStrader44 » Sat Apr 08, 2017 11:45 am

It was a bad investment, but I'm not losing money. I'm almost near breakeven and I still fully expect my investment to go up. You say I should get rid of it no matter what even if my time horizon for my investment is still in line ?

Also, yes, my Fers retirement, i will have 26 years in at 50 years old and be retirement eligible.

delamer
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Re: 33 yr old Fed wants to be a boglehead

Post by delamer » Sat Apr 08, 2017 11:47 am

Unless your in-laws are contributing, you'll probably need about $80,000 for downpayment/closing to buy a house for $350,000.

A TSP loan isn't a bad idea, ut I'd really think through where the $80,000 will come from and whether your pension and supplement will be enough at 50. Or are you planning to get another job?

You didn't mention kids. Any expected expenses there?

abracadabra11
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Re: 33 yr old Fed wants to be a boglehead

Post by abracadabra11 » Sat Apr 08, 2017 11:56 am

autopeep wrote:
EStrader44 wrote: My gold/silver was a bad decision. I'm in at $1100 per oz in gold and $16 am oz I'm silver eagles. Waiting for price to go up enough that I can make my money back and then some and start dumping all of it into roths.
This is a common behavioral mistake called "anchoring". The money you spent is both a sunk cost and irrelevant. You should not continue to hold a bad investment to make your money back.
1. ^^^ This.

2. Stop day-trading. You're deluding yourself if you believe it's going to generate more income than your salary.

3. You've got far too much capital tied up in vehicles (mostly a commentary on the Lexus; but both cars are relatively new). You can opt to sell the Lexus and purchase something cheaper (while investing the difference) or take a mental note to stop the behavior in the future.

A common boglehead refrain you'll hear is "I make twice your salary and own half as much car as you do". The point isn't too belabor any differences in salary, but to highlight the stark differences in choices when viewed through the lens of a boglehead.

4. Send every excess dollar to TSP. It may be wise to bump up your cash position so that you have a more robust emergency fund (3-6 months is generally recommended).

MotoTrojan
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Re: 33 yr old Fed wants to be a boglehead

Post by MotoTrojan » Sat Apr 08, 2017 11:58 am

EStrader44 wrote: I'm almost near breakeven and I still fully expect my investment to go up.
Between this and your 99% confidence on your futures strategy, why don't you write a book and make millions? :moneybag

What is your AA in the TSP?

futboljim
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Re: 33 yr old Fed wants to be a boglehead

Post by futboljim » Sat Apr 08, 2017 12:15 pm

Are you an ATC? That would explain the early retirement and higher percentage for FERS.

*** just re-read, you are law enforcement - similar to ATC, so I will leave what I wrote alone. bad reading skills this morning!***

At age 52, I am still very much a lurker and learning/potential boglehead, but will still share my thoughts - do with them what you will. FWIW, I am also an ATC, getting a little OT, but am eligible to retire (likely in next year or so) and reaping the benefit of being decent at saving before stumbling into this world. My wife is also an ATC, just under three years from retirement eligibility.

Make sure your emergency funds are solid - I like three months. More than that seems too much, given the stable nature of our jobs.

Establish your preferred asset allocation.

Max out TSP, put it in Roth TSP - just an educated guess based upon your likely tax bracket.

Max out Roth IRA if possible each year.

Taxable investments after that.

Attend to each account for overall AA.

Daytrade if you like it as a hobby - if it works out for you, fantastic! However, you are in a very good career position to guarantee a nice and lengthy retirement WITHOUT speculating.

Even though I have only recently stumbled upon this site, learning basic AA and saving/investing strategies early in my career put me in a good position as I approach retirement - even after a divorce four years ago. My only regret is that I could've figured out a way to save a little more, and get some money into a Roth sooner.

(edited to remove privatization info - I got wrong career field for OP, apologies to all)
Last edited by futboljim on Sat Apr 08, 2017 1:38 pm, edited 2 times in total.

gouverneur
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Re: 33 yr old Fed wants to be a boglehead

Post by gouverneur » Sat Apr 08, 2017 12:17 pm

Fellow Fed here, although not in law enforcement. The TSP really is a huge benefit and puts you in a great starting position.

The main red flags from a Boglehead perspective are the day trading and the expensive car, as others have mentioned.

Re the day trading, even assuming you have hit upon a winning strategy (a big if), how long will the strategy remain successful? Any advantage in the markets tends to get discovered, widely implemented, and thus neutralized over time. I wouldn't count on that to keep making money in the long term (and most here will point out it's not worth counting on in the short or medium term as well).

There's no real shortcuts in the Bogleheads method. It requires consistent high savings, moderately frugal living (or at least living below your means), and the long term value of compounding on market returns. Thus, Boglehead advice is mostly going to cause short term pain in service of long term gain.

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knpstr
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Re: 33 yr old Fed wants to be a boglehead

Post by knpstr » Sat Apr 08, 2017 12:25 pm

EStrader44 wrote:It was a bad investment, but I'm not losing money. I'm almost near breakeven and I still fully expect my investment to go up. You say I should get rid of it no matter what even if my time horizon for my investment is still in line ?
There is a clear opportunity cost, of having that money tied up and not invested in something better, while you are "waiting for profits".
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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ERMD
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Re: 33 yr old Fed wants to be a boglehead

Post by ERMD » Sat Apr 08, 2017 7:46 pm

EStrader44 wrote: i daytrade the ES emini futures.....been studying/learning for 8 years.......have a system that just started generating me $....Fully expect this to make more than my salary in a year or so but am not counting on this.
has anyone in the history of human civilization ever uttered the phrase "i have a system" and not ended up bankrupt in 5 years?
between scotch and nothing, i'll take scotch. -- faulkner

finite_difference
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Re: 33 yr old Fed wants to be a boglehead

Post by finite_difference » Sat Apr 08, 2017 8:46 pm

EStrader44 wrote:Futures account: $4,000 (i daytrade the ES emini futures.....been studying/learning for 8 years.......have a system that just started generating me $....Fully expect this to make more than my salary in a year or so but am not counting on this.

Here's the thing. I know my finances are well below what you bogleheads have. And I am extremely well versed I've just done dumb stuff as I've expected my daytrading to make money for the past few years. Now, i can say with 99% certainty I can make $ every day. But I dont want to count this unless you all want me to.
Honestly, it sounds like you just wasted 8 years of your life. I mean it's not wasted in that I'm sure you learned some stuff and had fun but I wouldn't believe you even if you were a hedgefund manager with a full staff of PhDs wielding supercomputers.

Cut your losses and don't look back. You are lucky you are doing well, awesome job, and that you found this place.
Wife and I want to buy a house when we can afford it and have the $. We are in Connecticut, and in laws will be living with us so not going to find a decent house for under $350,000.

What should I do ?
Are you able to keep renting at $1300/month? If so I would keep that for as long as possible.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

Artisan
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Re: 33 yr old Fed wants to be a boglehead

Post by Artisan » Sat Apr 08, 2017 9:57 pm

Here is some tough love:

Stop day trading, It is very much more likely you will lose then win.

Start living below your means. You need to save more.

RKHusky stated it well.

It really is that simple.

Save more, spend less, live below your means. Invest as much as you can in a small selection of stock and bond index funds. Use the excellent and low expense ratio options you have as a government employee.

Comments like this tell me you haven't totally embraced the boglehead philosophy:

"Now, i can say with 99% certainty I can make $ every day. But I dont want to count this unless you all want me to."

Read the wiki, read the getting started guide. Read a good book on investing like the "Bogleheads Guide to Investing" and another on asset allocation like Rick Ferri's "All About Asset Allocation".

Good luck and Thanks for your service. :)

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Re: 33 yr old Fed wants to be a boglehead

Post by Grt2bOutdoors » Sat Apr 08, 2017 10:08 pm

I'm going to play devil's advocate - keep day trading! When your account is wiped out either by margin call or losses, then you're done. No more day trading after that, deal? You've got to get it out of your system, and clearly you haven't since you are insisting you will not liquidate or reduce position in silver and gold because it's going to go up, you refuse to accept losses. If you haven't heard this one before, let me clue you in on an old Wall Street quote "Bulls and bears make money, hogs get slaughtered". The basic gist is greed will lead you to certain death in the markets because the person on the other side of the trade is going to take it from you.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Taylor Larimore
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Day Trading ?

Post by Taylor Larimore » Sat Apr 08, 2017 10:16 pm

And I am extremely well versed I've just done dumb stuff as I've expected my daytrading to make money for the past few years. Now, i can say with 99% certainty I can make $ every day
.
EStrader44:

Welcome to the Bogleheads Forum!

I wonder where you got the idea that day-trading is a successful investment strategy? If it worked, mutual fund managers would be doing it. To my knowledge, none do.

What experts say:
Barber Odean Study: "Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that trade most earn an annual return of 11.4 percent, while the market returns 17.9 percent. Our central message is that trading is hazardous to your health."
Bogleheads Guide to Investing: "Wall Street can't stand buy-and-hold strategies because brokers need trading activity to make money."
Morgan Housel, financial columnist: "Do nothing" are the two most powerful -- and underused -- words in investing. The urge to act has transferred an inconceivable amount of wealth from investors to brokers."
Bill Schultheis, author of The Coffeehouse Investor: "42% of millionaires of this country make less than one transaction per year in their investments."
Eric Tyson, author of Mutual Funds for Dummies: "Don't trade in and out of funds. Stay invested. Not only does buy-and-hold investing offer better returns, but it's also less work."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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EStrader44
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Re: 33 yr old Fed wants to be a boglehead

Post by EStrader44 » Sat Apr 08, 2017 10:22 pm

Forget it. Don't think this forum is for me. Best wishes to everyone and thanks for the advice

greatwhite24
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Re: 33 yr old Fed wants to be a boglehead

Post by greatwhite24 » Sat Apr 08, 2017 11:04 pm

Just because everyone is giving you there opinion doesn't mean you run away. It's tough to hear the truth. It is what it is.

Artisan
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Re: 33 yr old Fed wants to be a boglehead

Post by Artisan » Sun Apr 09, 2017 6:15 am

I'm sorry you feel it isn't for you.

Perhaps instead of changing anything at the moment just read a book or two to get the alternate perspective.

A Random Walk Down Wall Street by Burton Makiel is a good read.

In any event I wish you the best of luck and sincerely hope you succeed whatever you may decide.

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Taylor Larimore
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Re: 33 yr old Fed wants to be a boglehead

Post by Taylor Larimore » Sun Apr 09, 2017 8:43 am

EStrader44 wrote:Forget it. Don't think this forum is for me. Best wishes to everyone and thanks for the advice
EStrader44:

This forum is for all investors. We learn from each other.

Perhaps you would be kind enough to tell us about your strategy that gives "99% certainty I can make $ every day." It sounds fantastic. Any books or websites you recommend?

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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