Investment Allocation

[GetMeOuttaThisMess]

1 hour ago, ShakaHoo said:

After-all how long can the fed prop up the economy?  How much higher can the US national deficit rise before it becomes concerning?  What happens when all of the mortgage and car loans are defaulted upon?

This is one of the reasons why I keep watching real estate pricing in desired locations and contemplate moving from my ~60/40 stock/bond mix to something more like Cid has since I'm at a point of not being able to afford to lose it over the next 4 years till pension/SSI kicks in.  I suspect that it will become a buyer's market in some of these areas, though I'm not seeing significant pricing changes in Maui condos for example, at least not as of yet.  If I were to move it would be a cash transaction with my adding up to an additional $100K.  All this being said, when you own your home, have no debt, and have chosen to live on a fixed income, it's hard to convince ones' self that you can beat what you already have if you can travel on your own to some of these other desired locations.  Best to be thankful for what you have (though I can still dream).

[Cideous]

2 hours ago, GetMeOuttaThisMess said:

This is one of the reasons why I keep watching real estate pricing in desired locations and contemplate moving from my ~60/40 stock/bond mix to something more like Cid has since I'm at a point of not being able to afford to lose it over the next 4 years till pension/SSI kicks in.  I suspect that it will become a buyer's market in some of these areas, though I'm not seeing significant pricing changes in Maui condos for example, at least not as of yet.  If I were to move it would be a cash transaction with my adding up to an additional $100K.  All this being said, when you own your home, have no debt, and have chosen to live on a fixed income, it's hard to convince ones' self that you can beat what you already have if you can travel on your own to some of these other desired locations.  Best to be thankful for what you have (though I can still dream).

Also remember the housing market did not crash right away after the bank collapses in 2007/2008.  It was a full year later before the bottom fell out....and we are only 3 months into Covid.  

[Cideous]

29 minutes ago, ShakaHoo said:

Overall I agree.  Have a plan, and stick to that plan.  Dollar cost averaging.  Overtime, this should be a successful recipe.

 

It is hard for me to fight the urge to "time the market."  When the market is 2-3% away from an all-time high, while 20% of the United States population is unemployed, companies are suffering a miserable first and second quarter secondary to COVID19, civil unrest in the United States, a presidential election incoming, a trade-war in the making with China.... it is hard not to feel like I should take the money, and await the next drop.

After-all how long can the fed prop up the economy?  How much higher can the US national deficit rise before it becomes concerning?  What happens when all of the mortgage and car loans are defaulted upon?

EXACTLY!

[cinntsp]

14 hours ago, ShakaHoo said:

Overall I agree.  Have a plan, and stick to that plan.  Dollar cost averaging.  Overtime, this should be a successful recipe.

 

It is hard for me to fight the urge to "time the market."  When the market is 2-3% away from an all-time high, while 20% of the United States population is unemployed, companies are suffering a miserable first and second quarter secondary to COVID19, civil unrest in the United States, a presidential election incoming, a trade-war in the making with China.... it is hard not to feel like I should take the money, and await the next drop.

After-all how long can the fed prop up the economy?  How much higher can the US national deficit rise before it becomes concerning?  What happens when all of the mortgage and car loans are defaulted upon?

The market's current success in no way reflects the state of the country and is being propped up solely by the trillions being dumped into the national economy by the government, so I think your thoughts are totally valid.  If I was within a few years of retirement and didn't have time for the market to tank(again) and then recover(again), I honestly would probably move all of my retirement out of the market, dump it into a CD at 1.x%, and wait a year to see what happens.  Fortunately I still have 30+ years until that time so I'll continue to steadily invest, watch the ups and downs, and buy more stock than usual when it's low.

[ShakaHoo]

One other question for the investors on here:

 

If offered, do you fund a traditional or a Roth 401k/403b plan. I have always done Traditional, and have been rethinking this. 
 

With USA tax rates very low compared to the rest of the world, why not pay taxes up front for future tax free gains?  The national debt and state debt is exploding, and ultimately our taxes will be raised to make up for some of this deficit. If you believe tax rates will be higher 20-30 years from now (I fail to see how they will not be) it makes sense to pay a little more now, to save in the future?

[GetMeOuttaThisMess]

I always funded my Roth first, and then employment related options, using Roth options if available over traditional. As an aside, I went 457b over 403b when I had the option. Cid has me rethinking my 60% stock involvement since I’ll be using accounts over the short term and not the long term.

 

 

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[ohiovolffemtp]

Don't forget fully funding your HSA - Health Savings Account if you have a high deductible medical insurance plan.  The money is contributed pre-tax, like an IRA.  You can remove it without tax to pay healthcare expenses.  At age 65, you can also remove it for any expenses.  However, if spent on non-healthcare expenses, it is taxable just like IRA withdrawals.  Essentially, it becomes a second IRA.  Just like IRA and 401K contributions, contributions to an HSA lower your adjusted gross income (taxable income).

[GetMeOuttaThisMess]

1 hour ago, ohiovolffemtp said:

Don't forget fully funding your HSA - Health Savings Account if you have a high deductible medical insurance plan.  The money is contributed pre-tax, like an IRA.  You can remove it without tax to pay healthcare expenses.  At age 65, you can also remove it for any expenses.  However, if spent on non-healthcare expenses, it is taxable just like IRA withdrawals.  Essentially, it becomes a second IRA.  Just like IRA and 401K contributions, contributions to an HSA lower your adjusted gross income (taxable income).

Funny that you bring this up.  I had a HDHP at my last position and maxed out my contributions for a year and a half that I chose to go that route.  Now that I'm on my wife's insurance I just took a look at their premium for FY21 and surprisingly there is only a $36 premium difference per month between the HDHP/traditional policies compared to prior policy differences of $150-200/mo.  That being said, the state does contribute a little over $1K a year toward the HSA contribution but that still doesn't make up for the extreme catastrophic OOP cost to the insured compared to my prior policy through Aetna.  I'd love to switch us both to her HDHP and avoid the pre-authorization crap but PCP still isn't on it.  In our case it still pays to have the traditional office co-pay cap with lower catastrophic OOP costs.  I've still got >$8K in my HSA so I'm paying for my WME visit in a month or so OOP since my PCP isn't on my wife's BCBSTX plan (essential an HMO).

I need a catastrophic major medical policy at lower premiums that doesn't require pre-authorizations and I'll pay the cash OV cost and cover my prescriptions with the premium savings.

Edited June 18, 2020 by GetMeOuttaThisMess

[ShakaHoo]

2 hours ago, ohiovolffemtp said:

Don't forget fully funding your HSA - Health Savings Account if you have a high deductible medical insurance plan.  The money is contributed pre-tax, like an IRA.  You can remove it without tax to pay healthcare expenses.  At age 65, you can also remove it for any expenses.  However, if spent on non-healthcare expenses, it is taxable just like IRA withdrawals.  Essentially, it becomes a second IRA.  Just like IRA and 401K contributions, contributions to an HSA lower your adjusted gross income (taxable income).

I wish our hospital system offered an HSA.  We only have access to an FSA, and if the funds aren't used with 1 year, bye bye to your money.  

[GetMeOuttaThisMess]

Just switched my Roth w/ Vanguard, as well as my wife's, to Vanguard Core Bond Admiral shares.  No option with her 457b for something similar, nor my 457b which will probably be emptied over the next 12 mos. since I'm drawing down on it.  Both will continue to utilize the Vanguard Wellington fund to allow for some equity exposure.

Edited June 18, 2020 by GetMeOuttaThisMess

[Cideous]

I've had a $15k HSA for 8 years that really provides some comfort with the massive deductibles out there.

[Boatswain2PA]

5 hours ago, Cideous said:

I've had a $15k HSA for 8 years that really provides some comfort with the massive deductibles out there.

An investment HSA I hope...

[Cideous]

2 hours ago, Boatswain2PA said:

An investment HSA I hope...

Yes.

[GetMeOuttaThisMess]

11 hours ago, Cideous said:

Yes.

Individual or employer provided?  If individual, care to share the provider?

[Cideous]

It was an HSA plan through Aetna that we bought years ago.  They don't even offer the plan anymore, it doesn't make a lot of interest but it's done ok over the years.

[GetMeOuttaThisMess]

Yep, Aetna was whom my employer provided HDHP was through.

[Boatswain2PA]

5 hours ago, GetMeOuttaThisMess said:

Individual or employer provided?  If individual, care to share the provider?

Optum bank has an investment HSA

[GetMeOuttaThisMess]

Optum bank has an investment HSA

I’m looking for the HDHP coverage to allow for feeding the HSA. Current upcoming option isn’t cost effective.


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[cinntsp]

On 6/18/2020 at 11:03 AM, ShakaHoo said:

I wish our hospital system offered an HSA.  We only have access to an FSA, and if the funds aren't used with 1 year, bye bye to your money.  

You can get an HSA account on your own if you have a HDHP.

[mgriffiths]

On 6/18/2020 at 1:03 PM, ShakaHoo said:

I wish our hospital system offered an HSA.  We only have access to an FSA, and if the funds aren't used with 1 year, bye bye to your money.  

Your employer doesn't have to offer an HSA for you to be eligible.  If you are on a HDHP you can do a third party HSA.  The key is knowing whether you have an HDHP or not.

[GetMeOuttaThisMess]

2 hours ago, mgriffiths said:

Your employer doesn't have to offer an HSA for you to be eligible.  If you are on a HDHP you can do a third party HSA.  The key is knowing whether you have an HDHP or not.

As noted above, there is only about a $40 difference in monthly premium between what amounts to an HMO plan and the HDHP, though the state does contribute I think it was $90/mo. (combined) total to our HSA's.  The worst case scenario OOP between the two is astronomical however.  The key take-home here is that to contribute to a HSA, you have to have a HDHP.  If you LOSE the HDHP (my case), you can still use the debit card for the HSA to cover other eligible expenses with other PPO/HMO plans, or even HC premiums.

Edited June 22, 2020 by GetMeOuttaThisMess

[mgriffiths]

On 6/22/2020 at 11:28 AM, GetMeOuttaThisMess said:

The key take-home here is that to contribute to a HSA, you have to have a HDHP.  If you LOSE the HDHP (my case), you can still use the debit card for the HSA to cover other eligible expenses with other PPO/HMO plans, or even HC premiums.

yes, exactly, money is an HSA is YOURS to use at ANY time in the future for eligible expenses.

[Cideous]

6 hours ago, mgriffiths said:

yes, exactly, money is an HSA is YOURS to use at ANY time in the future for eligible expenses.

Honestly, HSA's are a fantastic vehicle and the way most insurance should go.  It SUCKS to spend all that money just to watch it go bye bye at the end of each year.  At least with the HSA, if you stay healthy for a while you will have something to show for it.

[Boatswain2PA]

On 6/17/2020 at 8:16 AM, ShakaHoo said:

After-all how long can the fed prop up the economy?  How much higher can the US national deficit rise before it becomes concerning?  What happens when all of the mortgage and car loans are defaulted upon?

According to the modern monetary theory....forever.  I dont believe it.

National debt can go to in infinity as long as there is someone (the fed) to buy the debt.  The fed, of course, prints the money out if thin air.  So inflation...

Mortgages are going to go into default in July-Aug.  In Oct-Nov I think we will start seeing foreclosures.  First of next year is when I expect to pick up a couple more properties cheap.

[Boatswain2PA]

On 6/17/2020 at 9:47 AM, GetMeOuttaThisMess said:

This is one of the reasons why I keep watching real estate pricing in desired locations and contemplate moving from my ~60/40 stock/bond mix to something more like Cid has since I'm at a point of not being able to afford to lose it over the next 4 years till pension/SSI kicks in.

If you are going to spend the money in the next 5 years then historically its been dangerous to leave it in stocks.  We are in same boat saving to build our dream house in hopefully 2 years and have that cash sitting in savings earning 1.4(?)% instead of the market, but dont want to lose 40% on a big correction.  My additional fear is that inflation (see above) will hit hard before we can build.

 

I wouldnt completely rely on SS in 4 years, and I would look very carefully at how your pension is funded.