Need investment advice

[bhamerica]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

[steadyosmosis]

My savings rate (percent of my salary saved each year) was far and away my primary reason for success, and not the rate of return of my chosen investments.

[Taylor Larimore]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

bhamerica:

Welcome to the Bogleheads Forum!

May I suggest you read a good book about personal investing. John Bogle's Little Book of Common Sense Investing is my favorite.

Also, consider the many benefits of The Three-Fund Portfolio.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."

[BolderBoy]

Okay, you've outlined the problem. We need more info to tailor our recommendations to your situation.

Please post using this as your guide: viewtopic.php?t=6212

And welcome to the forum.

[BolderBoy]

My savings rate (percent of my salary saved each year) was far and away my primary reason for success, and not the rate of return of my chosen investments.

... and the research bears out this truth.

[brian91480]

Based on a quick Google search:

According to Yahoo Finance... only about 10% of people your age have $100k saved up. Your situation isn't ideal, but you are better off than 90% of your age-peers. So don't get too down on yourself.

Keep saving... S&P 500 Index Fund with low fees... you'll likely do OK over the course of time.

https://finance.yahoo.com/news/many-ame ... 8338.html

-- Brian

[retired@50]

I have no clue what to invest in that would yield 10%.

Neither does anyone else.

I've had success, but it doesn't come without some painful market downturns from time to time. The idea you're going to have to get used to is that you can't control the stock market. You have to resign yourself to accepting the returns that stock and bond markets provide. It's an uncertain proposition that typically works if you hold on for long enough. What you can control is your savings rate, your asset allocation, and, hopefully, your behavior. Bad behavior by investors is the biggest problem for most people. It's really hard to keep your cool, but that's what successful investing requires.

Consider doing some reading. Head down to your nearest public library and look for any of these books in the link below.
https://www.bogleheads.org/wiki/Book_re ... nd_reviews

Regards,

[Call_Me_Op]

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

You are not approaching this correctly. There is nothing that will guarantee you a 10% return per year. To get close to 10% in expected return, you would need to be 100% in stocks - which would be a very wild ride. You should take Taylor's (and retired@50's) advice and read a few good books before doing anything else.

[Nohbdy]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

My suggestion would be to look at what social security is likely to give you and think about what that might look like.

The posts above are all good.

I don’t think we can control what the market gives us, but we can control costs. We can focus on keeping costs down and staying diversified and consistent.

[Watty]

There is a getting started wiki which would be a good place to start.

https://www.bogleheads.org/wiki/Getting_started

I'm supposed to have 600k saved for retirement by the time I'm 50.

I don't have a clue where you got that number from but most people don't have that much saved up when they retire at 65.

[Doctor Rhythm]

I think the problem was that you didn’t have realistic expectations or an understanding about investment time. An annualized return of 10% is excellent, and might happen in the long-term with a stock-heavy portfolio, but it shouldn’t be an expectation or criteria for success. In contrast, short-term loss of portfolio value during your investing career is absolutely an expectation you should have. This doesn’t matter because you only care about the long term result.

All that said, in the 10 years ending on 12/31/22, the broad stock market would have provided your 10% annualized returns had you stuck with your plan. That’s what you would have gotten with no special knowledge or cleverness, just putting your savings into a boring as dirt S&P 500 fund and not selling. It’s easy to blame financial institutions for your situation, but I’m pretty certain none of them recommended spending more money and saving less during a bull market.

Choosing investments is probably step 3 for you. The first is to figure out how to maximize your savings. The second is to determine if you can stick with a plan or need someone to guide you. Note that this isn’t about creating a plan (that’s easy, and this forum can help with that). It’s about not selling when stocks fall, giving up on savings, or making moves based on emotions.

[bhamerica]

My savings rate (percent of my salary saved each year) was far and away my primary reason for success, and not the rate of return of my chosen investments.

Yes. I'm finding that to be the case. To be honest, I think all of the money accumulated in my financial savings account was hard earned money. That's why I say that compounding interest did not work for me. If you could achieve 10% returns, then, in theory, it could work. But if you do not achieve 10% returns, then it does not work. Financial institutions failed me by not stressing that point. They made it sound like everything would magically work out, and I'd magically have a million dollars when I was 60. Not even close to the case in reality, for me.

I also wonder if this "mistruth" that is touted by financial institutions was a way for companies to skirt the issue of having to pay pensions to employees.

[bhamerica]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

bhamerica:

Welcome to the Bogleheads Forum!

May I suggest you read a good book about personal investing. John Bogle's Little Book of Common Sense Investing is my favorite.

Also, consider the many benefits of The Three-Fund Portfolio.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."

Yes. I will check them out.

I did read The Little Blue Book that Beat the Market. I tried very hard to keep with that system, but in the end I gave up, after seeing my hard earned money lose year after year. It was very difficult. I'm not sure if I would have seen gains if I kept up with it. Maybe.

[bhamerica]

Okay, you've outlined the problem. We need more info to tailor our recommendations to your situation.

Please post using this as your guide: viewtopic.php?t=6212

And welcome to the forum.

Thanks @bolderBoy

Here is my current retirement situation:

Emergency funds: I currently have maybe 10k in emergency funds.

Debt: No Debt

Tax Filing Status: Single

Tax Rate: xx% Federal, xx% State <-- Hmm. Not sure. I make 130k at my current job

State of Residence: Massachusetts

Age: 42

Desired Asset allocation: Not sure

Roth IRA: 42,403.62 (17k in cash not invested)
DVN - 100 shares
HBM - 100 shares
OR - 100 shares
REK - 60 shares
TMQ - 2000 shares
VOOG - 21 shares

Rollover IRA: 27,244.53 (22k in cash not invested)
DRV: 4,878 (100 shares)

Roth in another account: 45,103.49 (30k in cash not invested)

[Raycpact]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

bhamerica:

Welcome to the Bogleheads Forum!

May I suggest you read a good book about personal investing. John Bogle's Little Book of Common Sense Investing is my favorite.

Also, consider the many benefits of The Three-Fund Portfolio.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."

Yes. I will check them out.

I did read The Little Blue Book that Beat the Market. I tried very hard to keep with that system, but in the end I gave up, after seeing my hard earned money lose year after year. It was very difficult. I'm not sure if I would have seen gains if I kept up with it. Maybe.

You repeat that you only see losses year after year and you can't stand that. Following BH investing is risky and it's not for someone who cannot stand multiple year losses. BH strategies assume losses will occur and plan accordingly. If you are so risk adverse as you indicate then you need guarantees that only an insurance company can provide. Such guaranteed strategies like annuities and permant life insurance are not the primary strategies used on this forum. You wont get the guaranteed 10% returns from insurance products but you won't lose year after year (-unless you try to surrender early).

By the way , I base my expected returns on 2.7% real returns. Nothing close to 10%. I wish there was a way to get 10% year after year with no losses. If there was I probably pass assuming it was too good to be true.

[bhamerica]

Based on a quick Google search:

According to Yahoo Finance... only about 10% of people your age have $100k saved up. Your situation isn't ideal, but you are better off than 90% of your age-peers. So don't get too down on yourself.

Keep saving... S&P 500 Index Fund with low fees... you'll likely do OK over the course of time.

https://finance.yahoo.com/news/many-ame ... 8338.html

-- Brian

Thanks for the encouragement Brian. Much appreciated! At first, when I read that quote, I was wondering if 90% of people had more than 100k saved up.

With that said, it's kind of scary that so many people do not have any retirement savings in our country. Yikes. That doesn't bode well for the future. hmm.

[bhamerica]

I have no clue what to invest in that would yield 10%.

Neither does anyone else.

I've had success, but it doesn't come without some painful market downturns from time to time. The idea you're going to have to get used to is that you can't control the stock market. You have to resign yourself to accepting the returns that stock and bond markets provide. It's an uncertain proposition that typically works if you hold on for long enough. What you can control is your savings rate, your asset allocation, and, hopefully, your behavior. Bad behavior by investors is the biggest problem for most people. It's really hard to keep your cool, but that's what successful investing requires.

Consider doing some reading. Head down to your nearest public library and look for any of these books in the link below.
https://www.bogleheads.org/wiki/Book_re ... nd_reviews

Regards,

I'm not going to lie. I have bad behavior when it comes to the stock market. I buy high and sell low. I have had a couple instances where I've made money, but I've probably lost more money than I've made. I view the stock market like playing craps in Vegas. To me it seems like gambling.

[DonIce]

Financial institutions failed me by not stressing that point. They made it sound like everything would magically work out, and I'd magically have a million dollars when I was 60. Not even close to the case in reality, for me.

"Financial institutions" are there to make money. They will get money out of you any way they can (within the law). The less educated you are about investing, the more they will be able to fleece you. Nothing is gonna magically work out. Plenty of people are still stuck paying 2-3% or even higher AUM fees and get put into dumb portfolios, essentially surrendering all or most of their gains to the financial institution and being left with a stagnant or decreasing investment account even as markets return >10% a year. It could be that your account did not grow because you were paying exorbitant fees. What financial institution were you with, what fees were they charging, and what did they have you invested in?

Over the past 10 years, if you had simply been invested in the stock market through a simple low cost passive ETF or mutual fund, you would have earned a very nice return on your money, close to that 10% per year you were hoping for. Of coure, there's no guarantee that that will continue in the future (in fact, it would be quite surprising if we had 2 decades one after another of such impressive returns).

Start by realizing the following:
- Expecting 10% returns is very unrealistic. You should not expect more than 6-7% as a long term average even from a stock heavy portfolio, and along the way, you should expect big crashes.
- Financial institutions don't owe you anything and aren't gonna look out for you. You alone are responsible for understanding your own finances and investments. You can pay an advisor to do it for you, but results will vary as many advisors are not good and they will charge you a fee that will eat a big chunk of your investment returns even if they invest your funds reasonably.
- Your risk tolerance, based on your prior experiences and description of your situation, is very low. You cannot and should not invest in a high stock allocation portfolio, because you will bail at the first sign of trouble. Your allocation should probably not be more than 30-40% stocks and even that may be hard for you to handle. With a 30% stocks / 70% bonds/cash portfolio, your expected returns will probably not exceed 3-4% in the long run. You will need to increase your savings rate so that you can achieve your retirement goals with a return assumption in the 3% range, not 10%.

[arcticpineapplecorp.]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

bhamerica:

Welcome to the Bogleheads Forum!

May I suggest you read a good book about personal investing. John Bogle's Little Book of Common Sense Investing is my favorite.

Also, consider the many benefits of The Three-Fund Portfolio.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."

Yes. I will check them out.

I did read The Little Blue Book that Beat the Market. I tried very hard to keep with that system, but in the end I gave up, after seeing my hard earned money lose year after year. It was very difficult. I'm not sure if I would have seen gains if I kept up with it. Maybe.

Details matter. let's start with the fact that Taylor recommended:

Jack Bogle's The Little Book of Commonsense Investing

and you said you read:

Joel Greenblatt's The Little Book That Beat The Market (also known as the "magic formula").

These are not the same books.
These are not the same authors.
There is a series of "The little books..." but these are two separate books.

And there is no magic formula to beat the market.

There is a magic formula to get the returns of the market.

You have to keep your costs low and use index funds that track the market.

If you do that you'll get the market's return minus costs. If you keep costs low, you'll get as close to the market's return as you can get.

But if you pay higher costs either in higher expense ratios (because costs are higher in your 401k than they need to be) or because you buy actively manged funds instead of index funds or because you hire a person to manage your investments and pay them an annual fee (a percentage of assets under management), you will wind up with less because even if you get the gross return of the market, the net return to you is after all expenses are paid. The more you pay the less you keep. Bogle said the less you pay the more you keep.



source: https://web.archive.org/web/20161110064 ... f-returns/

Bogle used to call it the tyranny of compounding costs.

[bhamerica]

There is a getting started wiki which would be a good place to start.

https://www.bogleheads.org/wiki/Getting_started

I'm supposed to have 600k saved for retirement by the time I'm 50.

I don't have a clue where you got that number from but most people don't have that much saved up when they retire at 65.

Really? How much do they have usually?

My dad had a mill saved up, so I was assuming that was the goal. I'm not following in his footsteps, that's for sure. He's lost a lot of that since he's retired. That's why I was assuming I'd need at least 600k saved up for retirement. Money goes fast, especially with inflation.

[bhamerica]

I think the problem was that you didn’t have realistic expectations or an understanding about investment time. An annualized return of 10% is excellent, and might happen in the long-term with a stock-heavy portfolio, but it shouldn’t be an expectation or criteria for success. In contrast, short-term loss of portfolio value during your investing career is absolutely an expectation you should have. This doesn’t matter because you only care about the long term result.

All that said, in the 10 years ending on 12/31/22, the broad stock market would have provided your 10% annualized returns had you stuck with your plan. That’s what you would have gotten with no special knowledge or cleverness, just putting your savings into a boring as dirt S&P 500 fund and not selling. It’s easy to blame financial institutions for your situation, but I’m pretty certain none of them recommended spending more money and saving less during a bull market.

Choosing investments is probably step 3 for you. The first is to figure out how to maximize your savings. The second is to determine if you can stick with a plan or need someone to guide you. Note that this isn’t about creating a plan (that’s easy, and this forum can help with that). It’s about not selling when stocks fall, giving up on savings, or making moves based on emotions.

Yes. I think the emotional selling is a problem for me. Especially when I see numbers go into the red, and I realize that my hard earned savings have been lost. But I need to remember that the stocks will go back up. That's the tough part.

[arcticpineapplecorp.]

Roth IRA: 42,403.62 (17k in cash not invested)
DVN - 100 shares
HBM - 100 shares
OR - 100 shares
REK - 60 shares
TMQ - 2000 shares
VOOG - 21 shares

Rollover IRA: 27,244.53 (22k in cash not invested)
DRV: 4,878 (100 shares)

Roth in another account: 45,103.49 (30k in cash not invested)

Part of this problem (besides your buying high and selling low) is that you're invested in individual stocks rather than owning the market. If the market had gone up by the 10% you state, there's no guarantee you'll earn that with those 7 individual stocks above. How did you come to pick those particular stocks?

Also you don't say how the other $15k in Roth in "another account" is invested.

You're also not getting 10% returns because you have $69k in cash in Rollover IRA and Roth in another account and Roth IRA. So that cash isn't going to earn 10%. So you're expecting your portfolio (whole thing) to earn 10% a year but you have 60% of your money ($69k out of $114,750 above) in cash. Why would you expect 100% of your portfolio to earn 10% when 60% of that is in cash (which doesn't earn 10%)??

[arcticpineapplecorp.]

I think the problem was that you didn’t have realistic expectations or an understanding about investment time. An annualized return of 10% is excellent, and might happen in the long-term with a stock-heavy portfolio, but it shouldn’t be an expectation or criteria for success. In contrast, short-term loss of portfolio value during your investing career is absolutely an expectation you should have. This doesn’t matter because you only care about the long term result.

All that said, in the 10 years ending on 12/31/22, the broad stock market would have provided your 10% annualized returns had you stuck with your plan. That’s what you would have gotten with no special knowledge or cleverness, just putting your savings into a boring as dirt S&P 500 fund and not selling. It’s easy to blame financial institutions for your situation, but I’m pretty certain none of them recommended spending more money and saving less during a bull market.

Choosing investments is probably step 3 for you. The first is to figure out how to maximize your savings. The second is to determine if you can stick with a plan or need someone to guide you. Note that this isn’t about creating a plan (that’s easy, and this forum can help with that). It’s about not selling when stocks fall, giving up on savings, or making moves based on emotions.

Yes. I think the emotional selling is a problem for me. Especially when I see numbers go into the red, and I realize that my hard earned savings have been lost. But I need to remember that the stocks will go back up. That's the tough part.

correction: the market has always gone back up. You're invested in individual stocks (7 to be exact by the count of what you posted above). There's nothing that says those 7 stocks can't go to $0. The market shouldn't go to $0, but individual stocks can.

you're portfolio is not properly diversified if you own 7 stocks and the rest in cash. Read this article about the 15 stock diversification myth: http://www.efficientfrontier.com/ef/900/15st.htm

own the whole world. VT contains 9570 companies.

[Silverado]

I have no clue what to invest in that would yield 10%.

Neither does anyone else.

I've had success, but it doesn't come without some painful market downturns from time to time. The idea you're going to have to get used to is that you can't control the stock market. You have to resign yourself to accepting the returns that stock and bond markets provide. It's an uncertain proposition that typically works if you hold on for long enough. What you can control is your savings rate, your asset allocation, and, hopefully, your behavior. Bad behavior by investors is the biggest problem for most people. It's really hard to keep your cool, but that's what successful investing requires.

Consider doing some reading. Head down to your nearest public library and look for any of these books in the link below.
https://www.bogleheads.org/wiki/Book_re ... nd_reviews

Regards,

I'm not going to lie. I have bad behavior when it comes to the stock market. I buy high and sell low. I have had a couple instances where I've made money, but I've probably lost more money than I've made. I view the stock market like playing craps in Vegas. To me it seems like gambling.

This group is (generally) about methods of investing that are very unlike gambling. I have one simple belief: the stock market will be higher when I retire than it is now. There’s a lot of history to support that belief. However, the past is the past, so there is still a little leap of faith.

Given that simple belief, I invest a couple times a month in a low cost Total Stock Index fund (VTSAX to be exact). I pay no attention to anything with it, it’s all automatic. I do check my account quite often, but I have been at for a couple decades, and I have experienced major downs and some really nice ups, so I can be trusted to ignore that and just let the system churn along.

Good luck, still plenty of time for you. Get a plan together you will stick to. This group will help. These folks are incredible.

[bhamerica]

Well, most compounding interest strategy discussions use a baseline of 10%. It looks like it has since been lowered to 7%. I think the idea behind that is related to the S&P 500 generally making 10% on average:
https://www.fidelity.com/learning-cente ... d-interest

That's why I was thinking about investing in a stock like VOOG. I have some of my Fidelity account invested in that now.

[arcticpineapplecorp.]

I have no clue what to invest in that would yield 10%.

Neither does anyone else.

I've had success, but it doesn't come without some painful market downturns from time to time. The idea you're going to have to get used to is that you can't control the stock market. You have to resign yourself to accepting the returns that stock and bond markets provide. It's an uncertain proposition that typically works if you hold on for long enough. What you can control is your savings rate, your asset allocation, and, hopefully, your behavior. Bad behavior by investors is the biggest problem for most people. It's really hard to keep your cool, but that's what successful investing requires.

Consider doing some reading. Head down to your nearest public library and look for any of these books in the link below.
https://www.bogleheads.org/wiki/Book_re ... nd_reviews

Regards,

I'm not going to lie. I have bad behavior when it comes to the stock market. I buy high and sell low. I have had a couple instances where I've made money, but I've probably lost more money than I've made. I view the stock market like playing craps in Vegas. To me it seems like gambling.

it's gambling because you've placed your bets on 7 companies rather than own the market which contains between 9570 companies. You're looking for needles in the haystack rather than owning the entire haystack. Doesn't mean the market doesn't go down (this is known as systemic risk). It does. In fact every year the market experiences what are known as intrayear declines. Look at the chart below:



source: https://am.jpmorgan.com/us/en/asset-man ... e-markets/

you see there were market declines 100% of the years since 1980. The average intrayear decline was 14%. But if you held on (as in buy "and hold") you would have recovered 75% of the years before the year was up. So even though the market goes down each year, it has recovered and has ended higher than the start of the year 75% of the time in the past. The future is unknown.

You accept the systemic risk (market risk) for the tradeoff which is market return. The reason you get the market return is because you have taken the market risk. If you don't want to take the risk you can't get the return.

Your problem is that you've taken on many other risks (stock risk, size risk, style risk, sector risk, country risk, manager risk) that you can easily diversify away (and only be left with the systemic/market risk described above) if you own the market instead.

read more here: https://www.bogleheads.org/wiki/Three-fund_portfolio

[arcticpineapplecorp.]

Well, most compounding interest strategy discussions use a baseline of 10%. It looks like it has since been lowered to 7%. I think the idea behind that is related to the S&P 500 generally making 10% on average:
https://www.fidelity.com/learning-cente ... d-interest

That's why I was thinking about investing in a stock like VOOG. I have some of my Fidelity account invested in that now.

that fund is not a diversified enough fund. For starters it's not the S&P500 index fund you might think it is. It's about half of the S&P500 because it's an S&P500 GROWTH fund which contains 234 stocks (source: https://investor.vanguard.com/investmen ... omposition) not the 500 some that the S&P500 contains because the S&P500 contains growth AND value stocks, not just growth which is what VOOG is.

So be careful what you're owning and go for more diversified TOTAL stock market index funds or a target date retirement fund which (with Vanguard anyway) will contain total stock and bond market index funds. Though with such a fund you'll need to look under the hood at the portfolio composition to understand what stock/bond allocation you want and why.

Read more here:
How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

[bhamerica]

Financial institutions failed me by not stressing that point. They made it sound like everything would magically work out, and I'd magically have a million dollars when I was 60. Not even close to the case in reality, for me.

"Financial institutions" are there to make money. They will get money out of you any way they can (within the law). The less educated you are about investing, the more they will be able to fleece you. Nothing is gonna magically work out. Plenty of people are still stuck paying 2-3% or even higher AUM fees and get put into dumb portfolios, essentially surrendering all or most of their gains to the financial institution and being left with a stagnant or decreasing investment account even as markets return >10% a year. It could be that your account did not grow because you were paying exorbitant fees. What financial institution were you with, what fees were they charging, and what did they have you invested in?

Over the past 10 years, if you had simply been invested in the stock market through a simple low cost passive ETF or mutual fund, you would have earned a very nice return on your money, close to that 10% per year you were hoping for. Of coure, there's no guarantee that that will continue in the future (in fact, it would be quite surprising if we had 2 decades one after another of such impressive returns).

Start by realizing the following:
- Expecting 10% returns is very unrealistic. You should not expect more than 6-7% as a long term average even from a stock heavy portfolio, and along the way, you should expect big crashes.
- Financial institutions don't owe you anything and aren't gonna look out for you. You alone are responsible for understanding your own finances and investments. You can pay an advisor to do it for you, but results will vary as many advisors are not good and they will charge you a fee that will eat a big chunk of your investment returns even if they invest your funds reasonably.
- Your risk tolerance, based on your prior experiences and description of your situation, is very low. You cannot and should not invest in a high stock allocation portfolio, because you will bail at the first sign of trouble. Your allocation should probably not be more than 30-40% stocks and even that may be hard for you to handle. With a 30% stocks / 70% bonds/cash portfolio, your expected returns will probably not exceed 3-4% in the long run. You will need to increase your savings rate so that you can achieve your retirement goals with a return assumption in the 3% range, not 10%.

Excellent. This is the real-world advice that I was seeking. Thanks so much. I love the honesty.

I just read an article about financial institutions charging annual maintenance fees. I felt quite naive to not realize that earlier. That is a real chunk out of your overall savings. If they charge 2-3% annually, and you make 2-3% from your stocks, then you are going nowhere. I use Fidelity. I believe their maintenance fees are reasonable, but they are still there. Also, I have money just sitting there, not invested, so I'm losing money year after year.

I also use LPL. I'm not sure what their maintenance fees are, but I also have money just sitting there, not invested.

Yes, so with an expectation of 3% return, then the charts that Fidelity puts forth of a 7% return for compounding interest are not really realistic. To some people they are. I'm sure some people were able to achieve those returns. But it's certainly not a guarantee.

So, really, I shouldn't expect much out of the stock market. I guess, what I'm taking from this, is that, really what you're going to have in retirement is the hard earned money that you stash away now. You can't expect 10% returns from the stock market. You might get it, but don't expect that to happen. What you put away, is what you will have. That has been the reality that I have seen so far.

It's tough though, because with inflation, your hard-earned savings is losing value year after year. So all that savings is losing value.

I read Robert Kiyosaki's book Rich Dad, Poor Dad, and he says that savers are losers. In a way, it is true. You are losing, if you're saving. You're losing from inflation. But, with that said, if I don't save, then I won't have anything for retirement. That's not a good thing either.

[DonIce]

It's tough though, because with inflation, your hard-earned savings is losing value year after year. So all that savings is losing value.

It's not as bad as all that. You can at least invest in TIPS, which right now have around 2% real (that is, above inflation) yields.

[Watty]

There is a getting started wiki which would be a good place to start.

https://www.bogleheads.org/wiki/Getting_started

I'm supposed to have 600k saved for retirement by the time I'm 50.

I don't have a clue where you got that number from but most people don't have that much saved up when they retire at 65.

Really? How much do they have usually?

My dad had a mill saved up, so I was assuming that was the goal. I'm not following in his footsteps, that's for sure. He's lost a lot of that since he's retired. That's why I was assuming I'd need at least 600k saved up for retirement. Money goes fast, especially with inflation.

You can google and find all sorts of statistics and it will vary a lot depending on if you live in a high or low cost of living area, count home equity in your number, married or single, have a pension, and lots of other factors.

You also need to distinguish the average from the median because a couple of billionaires can cause the averages to look unreasonably high.

I found this web site which says the median is only $164k but that might just be what people actually have, not what they should have.

https://www.nerdwallet.com/article/inve ... -need-more

[bhamerica]

I wonder if it's possible to decouple your 401k from a financial institution so you do not have to pay maintenance fees. I'm not sure how it would exist, if it was decoupled. You need the GUI (graphical user interface) to see the 401k, and see what stocks are invested through it. However, maybe you just need the # for the 401k, and you could just call up a broker, give them the number, and ask them to buy and sell stocks for a one time fee. I think that's how it used to be done in the old days, before the internet.

[dukeblue219]

I wonder if it's possible to decouple your 401k from a financial institution so you do not have to pay maintenance fees. I'm not sure how it would exist, if it was decoupled. You need the GUI (graphical user interface) to see the 401k, and see what stocks are invested through it. However, maybe you just need the # for the 401k, and you could just call up a broker, give them the number, and ask them to buy and sell stocks for a one time fee. I think that's how it used to be done in the old days, before the internet.

It would be called an IRA, and these are quite common. You can rollover money from a 401k to your own IRA when you leave your employment or, rarely, while still employed even.

Even while working and contributing to a 401k you can open your own IRA (the limits and tax deductability varies a bit) and contribute to that.

Even a poor 401k is usually still leaps and bounds better than doing nothing.

[DesertDiva]

.... You are losing, if you're saving. You're losing from inflation. But, with that said, if I don't save, then I won't have anything for retirement. That's not a good thing either.

You don't lose unless you sell out of fear, because at that point you have locked in your losses. Even people who stayed in the market during the Great Depression recovered, although it must have seemed painful at the time. When I see the market drop, I see if I can invest more because then I'm buying at a lower price. Even if the price continues to decline, I still own those shares and I believe that the share price will increase at some point in the future.

Concentrate on your goals instead of short-term results. It sounds like you want to have money available in retirement. Your investments will get you there. You might not become a zillionaire, but do you really need to be one? Maybe you live in a HCOL area right now. Would you consider retiring in a different community or state? Would you be willing to work an extra year? Can you postpone collecting Social Security for at least a year, maybe even until age 70? Even if these strategies don't make sense right now, you may figure out a plan that works for you.

The wiki has already been mentioned. One of the best things you can do for yourself is create an Investment Policy Statement (IPS). You will probably need to digest everything on the wiki first (along with the Bogleheads' recommended reading list). Just make sure you take the time to develop the IPS and you will have a roadmap to follow. This will help keep you focused. Be sure to stay current with this forum to learn and ask questions.

Link: https://www.bogleheads.org/wiki/Investm ... _statement

[little_star]

OP - It sounds like you would like to get your financial house in order. That is a good thing! You first need to decide on an appropriate asset allocation (AA) that takes into account your need, ability, and willingness to take risk. From your posted comments, it sounds like you have a low risk tolerance. Fortunately, it also sounds like you do not need to take a lot of risk (only 42 years old, already have 100k+ saved, currently have a good income, etc). With low risk also comes low returns (1-3% yields), so you will need to adjust your projections to reflect your choice of asset allocation too.

As others have noted, your current investments are quite risky due to a lack of diversification. Holding individual stocks is much riskier than holding the total stock market (without the corresponding possibility of reward). I recommend selling what you have and purchasing a total stock market fund (or ETF) and a bond fund (or ETF) in the ratio designated by your AA. For a slightly higher expense ratio (ER), you could purchase a single fund, such as a lifecycle or target date fund, that has the AA you desire. Be aware, though, that a target date fund will change its asset allocation over time (becoming more conservative closer to the date in the fund title). The advantage of the all-in-one funds is that it will obscure some of the volatility of your stock investments, perhaps helping you to stay the course.

I recommend consolidating your portfolio to a single financial institution to better track your progress. As you are already at Fidelity, that might be a good place for you to move your other accounts. As far as I know, they do not charge fees for an IRA (assuming that you do not enroll in their advisory services). You should also keep contributing to your 401k plan (at least to the level required for a company match, if there is one) unless the fees are exorbitant

To provide some context: my own personal story is that my monthly contributions to my 403b plan in 2007-9 were barely making up for the losses during that major market downturn. 15 years later, my account balance swings by multiples of my salary (not just my contributions!) each year. The average is upward, but the downturns are significant. The more I have, the more the dollar amount changes with each dip and rise (this is just a result of percentages!). If you cannot stomach large paper losses, you should not invest in the stock market.

Finally, you have plenty of time on your side. You have perhaps 20+ years of accumulation. You have perhaps 50+ years to use what you have saved and invested. With such a long time horizon, the most important thing is to make certain that you are saving a large percentage of your salary. If you were to save only that designated as retirement savings (401k and IRA contributions = $29k per year), with zero percent return you would have $580k in 20 years. Thus, even with a conservative asset allocation, you would be well on your way to the retirement portfolio you desire.

[Outer Marker]

Welcome to the forum. At age 42, you still have plenty of time to save for retirement, but your expectation of earning 10% on investments is wildly optimistic. Vanguard's market forecast expects U.S. equities to return 3.7%–5.7% over the next 10 years. https://advisors.vanguard.com/insights/ ... ed-returns

There are many excellent low cost firms and index funds with which to invest your money. Fidelity, Vanguard and Schwab are all good, and fidelity, where you have your money is just fine. If you're investing with Fideity and use only index funds, you're doing about as good as you can in controlling costs. I would get our of your individual stocks and use an "all in one" fund like a Fidelity Freedom Index Fund close to your desired retirement date.

[arcticpineapplecorp.]

Excellent. This is the real-world advice that I was seeking. Thanks so much. I love the honesty.

I just read an article about financial institutions charging annual maintenance fees. I felt quite naive to not realize that earlier. That is a real chunk out of your overall savings. If they charge 2-3% annually, and you make 2-3% from your stocks, then you are going nowhere. I use Fidelity. I believe their maintenance fees are reasonable, but they are still there. Also, I have money just sitting there, not invested, so I'm losing money year after year.

I also use LPL. I'm not sure what their maintenance fees are, but I also have money just sitting there, not invested.

Yes, so with an expectation of 3% return, then the charts that Fidelity puts forth of a 7% return for compounding interest are not really realistic. To some people they are. I'm sure some people were able to achieve those returns. But it's certainly not a guarantee.

So, really, I shouldn't expect much out of the stock market. I guess, what I'm taking from this, is that, really what you're going to have in retirement is the hard earned money that you stash away now. You can't expect 10% returns from the stock market. You might get it, but don't expect that to happen. What you put away, is what you will have. That has been the reality that I have seen so far.

It's tough though, because with inflation, your hard-earned savings is losing value year after year. So all that savings is losing value.

I read Robert Kiyosaki's book Rich Dad, Poor Dad, and he says that savers are losers. In a way, it is true. You are losing, if you're saving. You're losing from inflation. But, with that said, if I don't save, then I won't have anything for retirement. That's not a good thing either.

depends on what you put your money into. Stocks have provided a REAL return (that means AFTER inflation). Historically inflation has been (on average) around 3%-4% a year. If stocks provided 10% NOMINAL, then the REAL return would have been 6%-7%. Siegel's work bears this out:



The dollar was the loser over the past 100+ years. But stocks and bonds provided real returns. What other choice do you have?

People like Kyosaki favor real estate over stock investing because they want the control they feel they have over running their own business as opposed to the irrational decisions of millions of investors and how that can play out on one's portfolio from time to time. That doesn't mean he's right. And even if he was, so what? In that same book you read he talked about times when it WASN'T good to buy real estate because the rate of return on investment wasn't good (enough). So there are better and worse times to invest in real estate...just like for stocks (or anything else). When stocks fall that's a good time to invest because you're buying at lower prices which has a higher future expected return.

You say you "just have money there" (LPL) "not invested". It doesn't matter. If they're charging you a fee for assets under management, you're definitely losing to inflation after their fees. If you want to move in the right direction, you'd call LPL up today and ask them what fees you're paying rather than just assume you're not because you're "not invested". Ignorance may be bliss, but it's also very costly.

[BolderBoy]

You are getting lots of very good advice here.

How much 'hands on' do you want to be with your investing? Would you rather we simply tell you what to do (based on our own biases; Taylor Livermore gave you the best advice in that venue) or are you willing to spend some time learning the 'why' we do what we do so you can formulate your own plan?

If you want everything to be pretty much be on autopilot, then the suggestions of a target date fund or life strategy fund are your best bet; they are set-and-forget. If you are willing to twiddle the knobs then individually chosen stock mutual funds or ETFs and individually chosen bond mutual funds or ETFs are better. Notice I did not mention 'individual stocks' or 'individual bonds'. We lowly investors are better served by funds.

There are lots of fine-tuning nuances that can be applied to investing but aren't necessary to a very adequate success. Savings rate trumps detailed specificity.

So how much of a deep dive interests you?

[niagara_guy]

Did not read all the posts. You cannot 'make 10% every year.'

at 40 I had not saved a dime, got a job with a 401k with a match, put in enough first year to get the match, then got to 15% in the second year, stayed at 15%, invested in all stocks (did not have a stock index fund in my 401k choices then), went to stock index funds later. Some years the market went up, some years flat or down, i stayed the course. The dollars i put in in the first year are now worth 25x (10.38% compound annual growth rate). More than 30 years later I have a very nice nest egg, will not ever run out of money.

There were bad years (think dot com crash, 2009, 2020, ...), there is no guarantee that the market will continue to return 10% cagr, there was no guarantee when i started investing 30+ years ago. I do not necessarily advise to be 100% stocks but i was more aggressive than most.

[soccerrules]

I think you need to slow down and educate yourself through your own reading. Don't make any changes until you understand why you are making them and if you are willing to commit to a strategy.
I do fear you may miss the good advice provided here without the base of knowledge of personal finance. Once you understand Stocks, Bonds, Risk/Reward, Asset Allocation, Fees/Costs, Behavioral Finance, and what long term success looks like-etc-- THEN the advice will make much more sense.

I would read --
"The Little Book on Common Sense Investing"- Bogle
"A Simple Path to Wealth" - Collins

Then come back and reread the advice.

Best Wishes

[Fallible]

I think you need to slow down and educate yourself through your own reading. Don't make any changes until you understand why you are making them and if you are willing to commit to a strategy.
I do fear you may miss the good advice provided here without the base of knowledge of personal finance. Once you understand Stocks, Bonds, Risk/Reward, Asset Allocation, Fees/Costs, Behavioral Finance, and what long term success looks like-etc-- THEN the advice will make much more sense.

I would read --
"The Little Book on Common Sense Investing"- Bogle
"A Simple Path to Wealth" - Collins

Then come back and reread the advice.
Best Wishes

I think this is a fitting conclusion to the excellent advice on this thread and a good reason to advise that the OP now "slow down and educate" by reading these great books and then, with that educated viewpoint, go over that advice and decide what is right for his own unique needs.

[Outer Marker]

If you’ve got the time and motivation to learn about investing, the recommended reading list is great.

However, for the vast majority of people that don’t, a Target Date index retirement fund is a good default solution and is far better than what you’re doing.

[vxdx]

Your time frame is not long enough to see the impact of compounding.

Start with 100k and add 1k per month for 20 years and you’ll likely have a million if you stick with the simple BH portfolio and don’t outsmart yourself.

https://www.portfoliovisualizer.com/mon ... unt=100000

[chassis]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

At a 10% investment growth rate and starting with $100k you would need to contribute $35,000 per year in new money to achieve a $600,000 balance by age 50. These numbers help frame the goal.

Suggestions:
- save the max possible in the 401k (you knew this already)
- increase your salary (promotion, change companies, change occupations) so that you can increase the 401k contribution

[placeholder]

It would be called an IRA, and these are quite common. You can rollover money from a 401k to your own IRA when you leave your employment or, rarely, while still employed even.

The only way employee deferrals can be rolled out while still working is to reach age 59.5 which does not apply to the op.

[DonIce]

The only way employee deferrals can be rolled out while still working is to reach age 59.5 which does not apply to the op.

Some plans allow for in-service non-hardship withdrawals. These are pretty common at big tech companies as this feature (or a rarer feature - in plan Roth conversion of after-tax contributions) is needed to allow for the "mega backdoor" Roth, which is starting to become well known enough to be a benefit that some companies advertise in their recruitment efforts.

You can also convert old 401k's to IRAs any time you leave an employer and join a new company, at any age. The old 401k can be rolled into the new employer's 401k, rolled over into an IRA, cashed out (with associated taxes & penalties if cashing out), or drawn down using a SEPP arrangement (without penalties).

[placeholder]

The only way employee deferrals can be rolled out while still working is to reach age 59.5 which does not apply to the op.

Some plans allow for in-service non-hardship withdrawals. These are pretty common at big tech companies as this feature

For employee deferrals include designated roth the law prohibits in service rollovers before age 59.5 and no plan can override the law so no that is not a common feature or a feature at all.

[FIRWYW]

If you’ve got the time and motivation to learn about investing, the recommended reading list is great.

However, for the vast majority of people that don’t, a Target Date index retirement fund is a good default solution and is far better than what you’re doing.

I will second this comment of target date funds. Has been a month since I looked at returns in my accounts. However we are roughly the same age. I did not know a ton about investing other than target date funds are a good option until 3 years ago or so. Used target date funds except in my wife’s 401k where the only fund had an ER of >1. Personal annnualized rate of return in 4 different accounts using target date funds (and approximation in 1) was I believe 12.7%, 14.2%, 11.?% and 9.?% nominal. Only difference was the random timing of when funds were available and went into the account (and in the case of the lowest account that I forgot to actually purchase the mutual fund after doing the Backdoor Roth for > 1year two years in a row. Oops- but demonstrates time in the market is key factor)

Also as others have said, don’t try to pick the winners. Your list of picks is very narrow and if I looked them up correctly had a lot of precious metals which i don think evidence supports as a good long term investment. Hope that helps. Don’t look for the needle. Buy the haystack.

[dukeblue219]

The only way employee deferrals can be rolled out while still working is to reach age 59.5 which does not apply to the op.

Some plans allow for in-service non-hardship withdrawals. These are pretty common at big tech companies as this feature

For employee deferrals include designated roth the law prohibits in service rollovers before age 59.5 and no plan can override the law so no that is not a common feature or a feature at all.

The whole point of the mega backdoor Roth is that an employee makes significant after-tax contributions and then immediately pulls them out as a non-hardship in-service withdrawal into a traditional IRA where they are converted to a Roth IRA.

https://www.forbes.com/advisor/retireme ... door-roth/

[bhamerica]

Excellent. This is the real-world advice that I was seeking. Thanks so much. I love the honesty.

I just read an article about financial institutions charging annual maintenance fees. I felt quite naive to not realize that earlier. That is a real chunk out of your overall savings. If they charge 2-3% annually, and you make 2-3% from your stocks, then you are going nowhere. I use Fidelity. I believe their maintenance fees are reasonable, but they are still there. Also, I have money just sitting there, not invested, so I'm losing money year after year.

I also use LPL. I'm not sure what their maintenance fees are, but I also have money just sitting there, not invested.

Yes, so with an expectation of 3% return, then the charts that Fidelity puts forth of a 7% return for compounding interest are not really realistic. To some people they are. I'm sure some people were able to achieve those returns. But it's certainly not a guarantee.

So, really, I shouldn't expect much out of the stock market. I guess, what I'm taking from this, is that, really what you're going to have in retirement is the hard earned money that you stash away now. You can't expect 10% returns from the stock market. You might get it, but don't expect that to happen. What you put away, is what you will have. That has been the reality that I have seen so far.

It's tough though, because with inflation, your hard-earned savings is losing value year after year. So all that savings is losing value.

I read Robert Kiyosaki's book Rich Dad, Poor Dad, and he says that savers are losers. In a way, it is true. You are losing, if you're saving. You're losing from inflation. But, with that said, if I don't save, then I won't have anything for retirement. That's not a good thing either.

depends on what you put your money into. Stocks have provided a REAL return (that means AFTER inflation). Historically inflation has been (on average) around 3%-4% a year. If stocks provided 10% NOMINAL, then the REAL return would have been 6%-7%. Siegel's work bears this out:



The dollar was the loser over the past 100+ years. But stocks and bonds provided real returns. What other choice do you have?

People like Kyosaki favor real estate over stock investing because they want the control they feel they have over running their own business as opposed to the irrational decisions of millions of investors and how that can play out on one's portfolio from time to time. That doesn't mean he's right. And even if he was, so what? In that same book you read he talked about times when it WASN'T good to buy real estate because the rate of return on investment wasn't good (enough). So there are better and worse times to invest in real estate...just like for stocks (or anything else). When stocks fall that's a good time to invest because you're buying at lower prices which has a higher future expected return.

You say you "just have money there" (LPL) "not invested". It doesn't matter. If they're charging you a fee for assets under management, you're definitely losing to inflation after their fees. If you want to move in the right direction, you'd call LPL up today and ask them what fees you're paying rather than just assume you're not because you're "not invested". Ignorance may be bliss, but it's also very costly.

Wow. Interesting chart. So Stocks have done very well in returns over time. I guess that is the thing to invest in.

I looked into real estate after reading Kiyosaki's book, and I even took a class in investing in real estate. Although I do believe that you can make money in real estate (in fact, my friend bought a house in Denver, fixed it up over the course of 6 years, and sold it for a million dollar profit), the real estate market sounds like a lot of work. Especially when you get into renting out apartments and having to deal with all those headaches. I decided to not go down that road after I took that class. It seemed like more headache than it was worth.

With that said, I would LOVE to have a side income stream besides my day job. I could get laid off at any point, and completely lose all income streams. I've done some research on passive income streams, but I haven't found something that seemed like a good gig. Starting an online business might be good, but I haven't decided what kind of a niche business would be suitable. I took a couple classes in that as well. I attended a "mywifequitherjob" class. That was good, but it didn't ultimately result in a side hustle business.

I have gone through the process of creating an LLC. I know how to create one, but I didn't start a successful business from it.

Stocks might be a good way to go, given the chart that you presented. Using the buy-and-hold strategy.

[bhamerica]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

bhamerica:

Welcome to the Bogleheads Forum!

May I suggest you read a good book about personal investing. John Bogle's Little Book of Common Sense Investing is my favorite.

Also, consider the many benefits of The Three-Fund Portfolio.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."

Yes. I will check them out.

I did read The Little Blue Book that Beat the Market. I tried very hard to keep with that system, but in the end I gave up, after seeing my hard earned money lose year after year. It was very difficult. I'm not sure if I would have seen gains if I kept up with it. Maybe.

Details matter. let's start with the fact that Taylor recommended:

Jack Bogle's The Little Book of Commonsense Investing

and you said you read:

Joel Greenblatt's The Little Book That Beat The Market (also known as the "magic formula").

These are not the same books.
These are not the same authors.
There is a series of "The little books..." but these are two separate books.

And there is no magic formula to beat the market.

There is a magic formula to get the returns of the market.

You have to keep your costs low and use index funds that track the market.

If you do that you'll get the market's return minus costs. If you keep costs low, you'll get as close to the market's return as you can get.

But if you pay higher costs either in higher expense ratios (because costs are higher in your 401k than they need to be) or because you buy actively manged funds instead of index funds or because you hire a person to manage your investments and pay them an annual fee (a percentage of assets under management), you will wind up with less because even if you get the gross return of the market, the net return to you is after all expenses are paid. The more you pay the less you keep. Bogle said the less you pay the more you keep.



source: https://web.archive.org/web/20161110064 ... f-returns/

Bogle used to call it the tyranny of compounding costs.

Wow! That's crazy. Thanks for providing that chart. So these financial institutions are actually stealing people's retirement savings. No wonder I never made any gains keeping money in Fidelity.

Is there a way to "decouple" your 401k from a financial institution so you don't have to pay these fees? Can it exist independent from a financial firm?

(And I apologize if someone already answered this question, because I haven't read to the end of this thread.)

I'm going to purchase John Bogle's book now off of amazon and give it a read. Thanks for the advice!!!