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This 4×6 index card has all the financial advice you’ll ever need

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Re: This 4×6 index card has all the financial advice you’ll ever need

#111

Post by carsongross »

Afforess wrote: post #97
timr wrote: post #88

Earlier quoted context omitted.

"a 4% rate of return, on average from the S&P 500 index is reasonable." Not if you're depending on using that money in the next ten years. Or if you believe in inflation. A 4% rate of return from an index fund is long-term average behavior, not instantaneous yield. Historically, depending on when you entered the market, a ten-year outlook could have led to anything from a huge gain to a huge loss. If you're the unluc…

4% return is conservative. 7% is actually the historical average. So my 4% left plenty of room for bad years. RETIRING in San Francisco would be a massive mistake. If you are retired why the hell are you living in a uber-expensive city. Location matters less when you don't have a job. Move up to Oregon. Also if you decide to have children, that is a conscious decision you made to dump your millions down the toilet. I…

"I guess some people like kids enough to work an extra 30 years. I sure don't."

http://www.youtube.com/watch?v=icmRCixQrx8

Re: This 4×6 index card has all the financial advice you’ll ever need

#112

Post by derekp7 »

steve-howard wrote: post #92
kintamanimatt wrote: post #31

Earlier quoted context omitted.

Edit: Misinterpreted what a 401(k) is. I thought it was a tax-free savings account that you can borrow against, rather than a form of pension plan. The UK does have something somewhat similar: a personal pension scheme. The rest of this comment is wrong, but I'll leave it here for giggles. -- They don't really always exist. As far as I'm aware there isn't really the British equivalent of a 401k, for example. Brits ha…

You're not too wrong; you can borrow against a 401(k) (<50% of the balance, no more than $50k total). Most financial advice says to stay away, though.

That is one thing I don't understand, is the advice to not borrow against your 401k. Lets say you have a 3-year auto loan, that is 7% interest. If you convert that to a 401k loan at 4%, that is a savings right there.

Oh, but that money you borrowed isn't getting any investment returns in our 401k (I hear people say). But it is -- it is getting a 4% return (what you are paying back in interest). And considering that a well balanced fund is going to have some amount in a lower fixed-interest investment, that isn't much of a problem (just rebalance the fund when you take your loan out, then rebalance again as it gets paid off).

The ONLY downside I see, is that you have to pay it back all at once if you lose your job, or face a 10% penalty (plus tax) on the loan balance.

Re: This 4×6 index card has all the financial advice you’ll ever need

#113

Post by tptacek »

jellicle wrote: post #80

There are a couple of good parts about this post. The first is the HN comments, which are an unintentional fountain of hilarity. But the second is the assumptions. 50% of the US population can't afford to put even a dollar into any sort of investment security. Of the 50% of the public that does own some sort of security, most of them are in the three-figures range. This index card, without realizing it at all, has ta…

The top 10th percentile of earners in US are barely even eligible to use Roth IRAs, which have gross income participation limits.

Re: This 4×6 index card has all the financial advice you’ll ever need

#114

Post by bunkat »

chris_mahan wrote: post #108
chris_mahan wrote: post #29

I trade in individual securities, but I put in the time to learn about the companies, the industry, and so on. Also, having taking econ, accounting, finance, and statistics in college helps.

I should add that these college courses weren't just some courses I took, but were part of a BA.

It literally doesn't matter. I know you've convinced yourself that you are in some way better or smarter than everyone else, but you will not beat the averages unless you happen to get lucky. Your biggest mistake is assuming the market is a numbers game that you can win if you calculate things carefully enough. If that were true, all of the quants and hedge fund managers would be making there fortunes off of stocks instead of salaries and fees.

Re: This 4×6 index card has all the financial advice you’ll ever need

#115

Post by jcdavis »

tptacek wrote: post #113
jellicle wrote: post #80

There are a couple of good parts about this post. The first is the HN comments, which are an unintentional fountain of hilarity. But the second is the assumptions. 50% of the US population can't afford to put even a dollar into any sort of investment security. Of the 50% of the public that does own some sort of security, most of them are in the three-figures range. This index card, without realizing it at all, has ta…

The top 10th percentile of earners in US are barely even eligible to use Roth IRAs, which have gross income participation limits.

One can do a backdoor Roth conversion to get around that limit. (but you need to have no money in regular pretax IRAs to do so)

Re: This 4×6 index card has all the financial advice you’ll ever need

#116

Post by Dylan16807 »

timr wrote: post #110
tosseraccount wrote: post #106

Earlier quoted context omitted.

A 4% rate of return from an index fund is long-term average behavior. Average return for S&P 500 from 1928 to 2012 is 11.3% [ source : http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/... ] Inflation rate averages about 3.2% [ source : http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_... ] 11.26 - 3.2 = 8.1 % real return. Long term investment in a diversified set of equities is a very good inves…

You missed the point: "Average return" != "real return in any arbitrarily chosen 10-year period" It's scary how many of you don't seem to know this. Did you all read the same book on investing and skip everything after the preface, or something?

When you're talking about being retired for fifty years, it's the average that matters.

Re: This 4×6 index card has all the financial advice you’ll ever need

#117

Post by timr »

Dylan16807 wrote: post #116
timr wrote: post #110

Earlier quoted context omitted.

You missed the point: "Average return" != "real return in any arbitrarily chosen 10-year period" It's scary how many of you don't seem to know this. Did you all read the same book on investing and skip everything after the preface, or something?

When you're talking about being retired for fifty years, it's the average that matters.

"When you're talking about being retired for fifty years"

Yeah. We aren't. This whole thread spawned because the claim was that you can retire in 10 years if you save 66% of your income.

Re: This 4×6 index card has all the financial advice you’ll ever need

#118

Post by Dylan16807 »

timr wrote: post #105
nilkn wrote: post #98

Earlier quoted context omitted.

I agree that his definition of "king" is pushing it, but it's equally silly to ignore the possibility of retiring in any of the cities in the US that are cheaper than San Francisco, i.e., in any of the cities in the US that are not San Francisco and NYC. Honestly, in a middle-of-the-road city like Houston and with full ownership of a car and home, $25k net per year would actually give you a pretty comfortable life--r…

I don't disregard the possibility of retiring in cities other than San Francisco -- I just dispute the notion that a $25k/year "retirement" is anything but silly dreaming by 20-somethings who don't understand what choices life is going to bring their way. Want to have a family? Want to send your kid to college? Want to be ready for the day when you're old and paying for medical problems? You're not living "like a kin…

>Want to have a family? Want to send your kid to college?

Marry someone with their own $25k/year and you'll be able to pay for plenty of college.

>Want to be ready for the day when you're old and paying for medical problems?

Insurance?

Re: This 4×6 index card has all the financial advice you’ll ever need

#119

Post by Retric »

dionidium wrote: post #85
JoshTriplett wrote: post #38

Earlier quoted context omitted.

The idea that >20% savings rates are not "realistic" is a serious mindset problem. Almost anyone on Hacker News with a paying job (i.e. not an early-stage no-funding startup) should easily be able to save much more than that. Sure, saving two-thirds of your income might be out of reach, and even the 20% advice is better than most sites that often say 5-10%, but consider carefully whether you can increase it and retir…

The idea that your retirement years are a better time to live than your 20s and 30s is a serious mindset problem.

It's not about assuming that your 60's are better than your 20's. It's assuming that having 7 dollars inflation adjusted tomorrow is worth not having 1 dollar today. Clearly, the higher your savings rate the sooner you can retire but the lower that multiple becomes.

More importantly when something bad happens you both have a cushion and a cheap lifestyle so it can last.

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