How the hell are we supposed to retire?

[Patrick]

My w1f3 watches the past due numbers very carefully because of work. The numbers are starting to trend upward (aka bad direction).

This is a sign of over-extension, and that companies that have booked "sales" will be booking higher bad debt in the near future.
invest in collection agencies?

https://www.businessinsider.com/auto-loan-delinquency-number-record-new-york-fed-2019-2

maybe skewed because cars not credit card.

 

[Santapez]

My w1f3 watches the past due numbers very carefully because of work. The numbers are starting to trend upward (aka bad direction).

This is a sign of over-extension, and that companies that have booked "sales" will be booking higher bad debt in the near future.
invest in collection agencies?

ihttps://www.businessinsider.com/auto-loan-delinquency-number-record-new-york-fed-2019-2

Due for a downturn, maybe we're slowly going into it? The above makes little sense to me (I do believe it to be true) as if the economy is good, and it seems it does, why are people not paying?

If the government shutdown showed, it only takes a minor crisis to throw people into financial ruin. People are paycheck to paycheck with a high amount of debt, much of it student debt.

Interesting thing I was reading the other day, something Elizabeth Warren wrote a book about, a two income family is more likely to face financial hardship. The theory is a single income family household will subsist on one income and the chances of losing that income is X and if it happens either one can find a new job. In a dual income family that's just getting by (with higher expenses) a loss of income is 2X and it's almost half as likely to replace that income. Thought it was interesting.

Maybe this is the time and place to ask, anyone have thoughts on VTWAX? I thought it would be good for tax loss harvesting, which worked out well for me well enough last year.

 

[Patrick]

i never thought about total world fund vs splitting into us/non-us. not sure why, perhaps re-balancing?

interesting idea to move in/out as needed for taxes, rebalancing on the way out.

 

[Santapez]

i never thought about total world fund vs splitting into us/non-us. not sure why, perhaps re-balancing?

interesting idea to move in/out as needed for taxes, rebalancing on the way out.

Well it's common to have both US/International. This allows to easily do both easily or to avoid wash sales. I'm not jumping into it but may to avoid wash sales.

Btw, if anyone here is concerned about wash sales, turn off automatic investments. That late Dec dividend will get you...

 

[Patrick]

Well it's common to have both US/International. This allows to easily do both easily or to avoid wash sales. I'm not jumping into it but may to avoid wash sales.

Btw, if anyone here is concerned about wash sales, turn off automatic investments. That late Dec dividend will get you...

i got hit this year when i moved money into a dividend fund. some LT gains, and the first 4 months are ordinary income!!! oh well.
i'm glad i'm paying taxed on earnings, cause they don't give it back at the same rate if you lose.

 

[Fire Lord Jim]

I have read lots on this, but I think this author nails it. Forbes article
We don't empathize with our future selves. In choosing who spends the money: me or future me, a youth-focused culture is bound to choose the younger me.
High schools teach trig but not finance. Okay maybe one semester. We need as much finance training as English education. People are literate (barely) but innumerate! Maybe three high schoolers will need trig, but everyone needs finance.
If people don't understand finance, how can we expect them to execute on it?
One last idea. Savings is inconspicuous. Culturally, we love conspicuous consumption. I can put $500 a month into savings, or lease a BMW.
So how to retire? Talk to that old lady playing cashier at the grocery store, using technology she thinks is magic. Ask her if that 1950 DeSoto was worth having to work as cashier at age 74. Fall in Love with your future self and start buying him a comfortable life. Let your present self have a little less comfort, he's tougher and can handle it. Good luck.

 

[Fire Lord Jim]

Well it's common to have both US/International. This allows to easily do both easily or to avoid wash sales. I'm not jumping into it but may to avoid wash sales.

Btw, if anyone here is concerned about wash sales, turn off automatic investments. That late Dec dividend will get you...

Of course wash sales are only a problem in after-tax accounts, not in IRAs.

 

[thegock]

I have read lots on this, but I think this author nails it. Forbes article
We don't empathize with our future selves. In choosing who spends the money: me or future me, a youth-focused culture is bound to choose the younger me...

We need as much finance training as English education. People are literate (barely) but innumerate!...

So how to retire? Talk to that old lady playing cashier at the grocery store, using technology she thinks is magic. Ask her if that 1950 DeSoto was worth having to work as cashier at age 74. Fall in Love with your future self and start buying him a comfortable life. Let your present self have a little less comfort, he's tougher and can handle it. Good luck.

So, defer gratification.

 

[Fire Lord Jim]

So, defer gratification.

More institutionalize caring for your future self. A Dieter defers gratification. Defer has no time limit.

 

[THATmanMANNY]

I am patting myself on the back. My daughter is 4. Over the weekend we walked into the bank together with her wad of cash from CNY red envelopes and she fed it into the ATM. I told her that they keep your money safe for a time when you need it and they will give you a ***little*** money back for letting them do that. What kid doesn’t want more or something? Every once in a while I let her spend her own dolla at the dolla store. She also thought this is best bank ever because it also has a gas station ??‍♂️ (drive-thru lol).

On the other hand, when we play supermarket she swipes that credit card for everything she buys ? so she is fucked lol

 

[Santapez]

Of course wash sales are only a problem in after-tax accounts, not in IRAs.

Isn't it an issue when you hold the same funds in both tax & non-tax? I do, so it's a concern. Made less so by the fact that the non-tax doesn't really change much and only at the beginning of the year when putting money in. I don't have a work retirement plan so everything is in one brokerage as little as it is.

 

[Santapez]

i got hit this year when i moved money into a dividend fund. some LT gains, and the first 4 months are ordinary income!!! oh well.
i'm glad i'm paying taxed on earnings, cause they don't give it back at the same rate if you lose.

Not sure what you mean. Did you move into a fund and they immediately had a distribution?

That's one nice thing about the Vanguard funds with their patented method, no capital gains distributions only dividends. Makes even more of a difference in those down markets where money leaves funds, they have to sell assets so they incur capital gains which gets distributed to holders that have seen a huge drop in the fund value.

 

[Santapez]

One last idea. Savings is inconspicuous. Culturally, we love conspicuous consumption. I can put $500 a month into savings, or lease a BMW.
So how to retire? Talk to that old lady playing cashier at the grocery store, using technology she thinks is magic. Ask her if that 1950 DeSoto was worth having to work as cashier at age 74. Fall in Love with your future self and start buying him a comfortable life. Let your present self have a little less comfort, he's tougher and can handle it. Good luck.

I'm going to go out and say cars are probably the #1 killer for people's personal finances. Huge amount of capital gone and some of it not easily seen. That $500 BMW isn't just $250 more than the car that's $250 a month. Gas mileage, higher costs of insurance, tires, maintenance, etc plus the time-value of the money that could have been spent paying off other loans with interest or possibly gaining interest if invested.

Plus the high continual fixed expense over a long # of months makes it hard to deal with loss of jobs or unexpected costs.

 

[Fire Lord Jim]

Isn't it an issue when you hold the same funds in both tax & non-tax? I do, so it's a concern. Made less so by the fact that the non-tax doesn't really change much and only at the beginning of the year when putting money in. I don't have a work retirement plan so everything is in one brokerage as little as it is.

Yes, taking an after-tax loss on a security being bought within 61 days in a pre-tax account is a wash sale. This could be unknown to you! I harvest some capital loss on XOM and unbeknownst to me my mutual fund is buying XOM.

 

[Patrick]

Not sure what you mean. Did you move into a fund and they immediately had a distribution?

That's one nice thing about the Vanguard funds with their patented method, no capital gains distributions only dividends. Makes even more of a difference in those down markets where money leaves funds, they have to sell assets so they incur capital gains which gets distributed to holders that have seen a huge drop in the fund value.

moved from us total/intl total mkt funds into a dividend fund - it was mid-last year, so there was some gain. about 10%.
it is in a trust, so it has its own accounting rules, which push the gains out to the beneficiaries over the incremental costs of the trust
(how i understand it, which might not be right - assets in a trust, that generate income for the beneficiaries, or support the non
incremental cost of the trust are taxed as income - incremental being legal and accounting fees) - even the dividends will be taxed as income, but needed a regular flow of cash
to support the property in the trust, then the cost to the beneficiaries is just tax

then when buying the dividend fund, the first couple months were ordinary, the rest are qualified, because of the holding period.
and probably matters not since in the trust.

 

[thegock]

I'm going to go out and say cars are probably the #1 killer for people's personal finances. Huge amount of capital gone and some of it not easily seen. That $500 BMW isn't just $250 more than the car that's $250 a month.

The worst habit is leasing cars, where the driver victim is continually buying the most expensive part of a vehicle's life and rollin' swole, but stupid. Your car salesman thanks u, doe.

 

[rick81721]

I'm going to go out and say cars are probably the #1 killer for people's personal finances. Huge amount of capital gone and some of it not easily seen. That $500 BMW isn't just $250 more than the car that's $250 a month. Gas mileage, higher costs of insurance, tires, maintenance, etc plus the time-value of the money that could have been spent paying off other loans with interest or possibly gaining interest if invested.

Plus the high continual fixed expense over a long # of months makes it hard to deal with loss of jobs or unexpected costs.

Agree cars can def be a drag on long-term savings. I knew people at work that got new cars every 2-3 years. We have always been on the 10 year plan - buy a car and usually lasts 10 yrs, ditch and repeat. Helps that wifey has no interest in "fancy" cars, just wants basic transportation.

 

[mfennell]

My wife has driven the same 1991 BMW 318is for almost 20 years. It's gone from the-last-gen to cheap-beater to people-chase-her-down-to-ask-about-it in that time. She's finally ready to let it go. I can't imagine how much she's saved over the years. Cheap parts. Cheap insurance. Cheap labor (me).

I buy cheap cars and run them cheaply too but I funnel the savings into MOAR CARS.

 

[one piece crank]

...Cheap labor (me)... but I funnel the savings into MOAR CARS.

Hmmm. I resemble that remark!

 

[Monkey Soup]

I think that many people have been leveraging themselves up to their eyeballs forever, but since 2008 we are tracking it and raising awareness of it more. I think it happens whether the economy is good or bad, its just the awareness and impact is higher during a down turn. Its a behavior thing, if you're the type of person who likes to run up debt, you're going to do it whether your current situation provides you with the means to pay it off or not.