Category Archive

… was super easy so far! I couldn’t complete the process 100% online (which is something I strive to do in every transaction of life), but it just took one easy phone call to Vanguard, who got Fidelity on the line, and the wheels are in motion!

Apparently Fidelity insists on sending a check (made out to Vanguard) to ME, and I forward it onto Vanguard. Seems weird, but I had done some Googling in advance and expected it. They said it will take 7-10 days, or I could pay $25 to get express mail. I’ll be waiting the 7-10 days.

The transaction was at the price of Wednesday’s closing markets, which i thought was great since we had over a 2% jump in all the major indices that day. That was pure luck of timing, something I forgot to even consider. A good portion of my money is out of the market for a total of about 2 weeks, so if the market is going to crash, I’d prefer it happens in that time period. I’d also appreciate any major rally’s to wait until my money gets back in (looking at how today is starting, I may be out of luck). I know “timing the market” is futile, but doesn’t it seem like it would be prudent to watch for these huge 2% jumps/drops when moving 60% of my retirement portfolio around? What if I miss a really great day because my money couldn’t be transfered online instantly? I don’t understand why the process is so manual, but what can I do?

If everything goes smoothly, I will add in my meager pension cash out money immediately after the 401k money is rolled over. I have to wait since the amount is below the 3k per fund minimum.

My last consideration is my Roth IRA. It is currently 100% invested in a fidelity target date fund, which is nothing to worry about. It would be nice to have it at Vanguard with my other money, but there is a $50 fee to transfer the account and I’m not entirely unhappy with the fund as is, so maybe I’ll just leave it. It just is harder to figure into an asset allocation plan, especially sine the Fidelity target date funds don’t have quite as straightforward holdings as the Vanguard ones.

Taking care of this has been on my “to do” list for months, so it feels nice to actually be doing it.

I was pretty excited because my economic stimulus check was to be direct deposited very early in the schedule. In fact, not to brag, but I was scheduled to be one of the first people in the country to get my share! I filed early and got my refund direct deposited, and managed to procure a SSN with the last 2 digits lower than most other people. I rule, I thought.

Then I came across this little tidbit of information on the (surprisingly helpful) IRS website:

I used Direct Deposit to split my refund betweeen several accounts when I filed my tax return. What will happen to my Stimulus Payment? Will it go to just one of the accounts?
A. If you elected to split your refund between several accounts, you will not receive your Stimulus Payment by Direct Deposit. Instead, you will receive a paper check.

Yes, it is true. I split my payment into two accounts to save myself having to transfer the appropriate portion to checking and savings. I am surprised that the government wouldn’t just put it in either account, but I suppose there is some logic to it. They aren’t sure where I want it, so they will send me a check and I can decide. Now I’m sad, I’ll have to wait an additional two weeks, and a few more days to get it into the appropriate accounts. I might as well have a SSN of 999-99-9999. I guess I don’t rule after all. (Also the three e’s in betweeen are copied from the website.)

In other financial news, my scarcely used Wells Fargo credit card (and by scarcely, I mean I might have used it once last year) tried to charge me $24 to be enrolled in their rewards program. I got the charge removed, but they warned me “all current rewards are forfeited”. I wasn’t too upset about that.

A packet came from my former company asking me what I wanted to do with my pension money that they were cashing out to me. I was not expecting this! I knew the company had a pension and they phased it out in 2006. I thought that the pension took five years to vest, and my vesting service was just 2.5 years. Perhaps I was partially vested? It is a fairly small sum of money: about $1000: what I earned as a co-op in 2004, 2005, and what I earned for the second half of 2006 as a full time employee. Still, this is great: money I didn’t know I was getting to be added to my retirement accounts!

I briefly considered cashing it out and adding it to my emergency fund. In addition to the 20% federal taxes that would be owed, there is another 10% penalty for withdrawing it early. I assume I’d have to pay state taxes as well. In this case, that 10% penalty really isn’t much, $100. However, I decided to be responsible and put it into an appropriate retirement account.

This leads me to recall my grand plan to move my old 401k and perhaps my Roth IRA over to Vanguard. I talked about this in February, yet there they sit over at my former institution. It is possible my new 401k would accept this pension money, but it seems best to get on with it and open a rollover IRA. I need to get on the phone and figure out exactly what paperwork I need to fill out to make all this happen. It isn’t as straightforward as I had hoped, but I should be able to figure it out by the end of the week. That is my goal for this week: Initiate a rollover from my old 401k to a Vanguard IRA, and direct pension cash value to new IRA as well.

I still am considering converting at least a portion of the 401k to a Roth IRA for better tax diversification. I’m not sure how many years I will be able to contribute to the Roth, especially if I get married in the next few years, so it might make some sense to get that money in there now. I probably could wait until I do my taxes for 2008 to see how this might affect my tax bill.

I still can’t sign up for my company’s 401k, but not because I’m ineligible. You are eligible immediately (and vested immediately too!), though they a pension plan too which takes a year to be eligible and 5 years to vest.

I can’t sign up because the website doesn’t recognize my userid. I’m not “in the system” despite already getting a huge packet of information from them. Since I’m not in the system, when I call them, they are totally helpless:
“I can’t take your password over the phone, you have to go through the system and punch it in”
“I did. But I wasn’t given any menu options, so I pressed zero for help.”
“Well. I can put you back through the system, and you can enter your password.”
“. . . But that obviously didn’t work.”

Gah! They did say it may take 7-10 days to become active. If they mean business days, it has been seven. If they mean actual days, it has been 11. I’ll give it until the end of the week….

But I’m really anxious to start contributing! I’m going to see if I can handle contributing 15% of my income. If I do that, I’ll be able to get about $10k in my 401k and 5k in my Roth, for a total of 15k of my money in retirement contributions for 2008, just over 21% of my gross income. There also should be roughly 4k from the company match. Barring an ever declining market, that should almost double my account value in 2008! However, with such a shaky market and all this recession talk, I specifically set my goals in dollars of contributions, not account value. Go long term investing!

I think 15% will be a stretch for me, at least while I’m growing the e-fund. I varied between 12% and 15% at my last job, and rent was much lower. We’ll have to see how it goes. My budget says I can do it, but I’m not much of a budgeter.

While I’m waiting, I’ve been putting a little extra in my Roth IRA to get the year started off on the right foot.

I get paid tomorrow (yes, on Thursdays) and finally was able to view my paycheck online. Though I only am being paid for 40 hrs instead of 80 this period, they did process my signing bonus in the first check (yes!) so I finally have some money to work with. They got all my direct deposit stuff set up in time (nice work!). I have it split between three different accounts, checking, short term savings (insurance, travel, car) and a long term savings (e-fund, maybe house/condo fund one day). I still may have to transfer between these, but this should minimize that. Make savings automatic!

I’m still not ready to finalize a budget, as I’m not certain what my take home pay will be. I tried to figure out exactly how much I’ll be paying in taxes each month by taking total taxes paid divided by total gross pay in this check. I came up with about a 39% tax rate! Yikes, that can’t be right! Google tells me that taxes on bonuses, while calculated as normal income, are withheld at a different rate, up to 40%. Well, that makes more sense! Good to know.

Is it logical to just use 25%, my marginal tax rate? Then again, what about FICA, Social Security, etc? If I do that, I come up with about $1700 after 401k and medical or $1500 if I go all the way up to 20% in my 401k. It isn’t likely I can live off the $3000/month, at least not if I want to grow my cash savings. Though the way some people dream about buying a house, I dream about maxing out my 401k….

My 401k still isn’t ready for me to enroll. I hate when systems are not automated enough. My last job I could enroll in my 401k on the first day (through Fidelity). It has been a full week and CitiStreet still isn’t recognizing my user ID. When I called the number to ask if this was normal, I was told “Please listen carefully as options have recently changed.” Then, there was a single ring, then silence. More silence. I was never given any options! I hung up and tried again, only to have it happen again. I pressed all the numbers and was directed to an operator who could not help me unless I “went through the system and entered my PIN” (which I did!). He suggested waiting another week, or trying the number again. Lame.

I was going to go hang out with the boyfriend tonight, but I think I’ll cancel. He has a lot of school work, and I have needed to do laundry for at least a week. This will give me time to start working on yesterdays to-do list. First up, taxes!

My boyfriend randomly started up a personal finance conversation with me last night. He isn’t that well informed (though he’s good with money), so it was fun for me to share what I’ve learned from this personal finance blogosphere. Not that I mentioned my blog–it’s private for now, though I wouldn’t be horrified to share it with him.

One thing he came up with was a goal that we should try to have 150k saved up for a house in the next 3.5 years. Not that I do “SMART” goals (specific, measurable… acheiveable… see, I don’t even know the acroynm), but I don’t to dumb goals either. In fact, I invented a new acronym: Daft, Unattainable, Meaningless and Bogus! I asked if there was any math involved in coming up with that number, and he said no. He just took the date when he’d be done with grad school, pulled another number out of a hat, and said it would be a good goal for our house downpayment.

I did some quick math. Assuming I had to come up with 1/2 of that, I would have to save about $1800 a month. I could maybe do it, if I stopped saving for retirement! Besides, I’m not really all that keen on property ownership at this point in my life. I don’t even know where I want to settle! I told him that we could discuss a goal like this if/when we are engaged, but for now, I’m sticking to my own goals. I’m willing to compromise, but not just on some whim of his!

Speaking of retirement, I would like to leave you with this depressing snapshot of my 401k. I’m sure glad I don’t need this money for years!

I took $1000 out of my high yeild savings account and directed it into my Roth IRA for 2008. Really, for true dollar cost averaging, I only contributed $585 above what I would normally contribute for a month. My Roth is fully invested in a 2050 target date retirement fund for now.

I could have funded the whole year with savings, but I don’t feel that I have the approrpriate cushion in my savings, especially with a cross country move coming up. Besides that, with markets being so shaky, I’m not sure I want to throw dollar cost averaging out the window this year. I wouldn’t be surprised if the market recovers nicely, but I also wouldn’t be surprised if it declines as well. I’m not an expert.

Since I’m leaving this job, I’m going to have the option of rolling my 401k (about 16k) into a regular IRA. Since my MAGI is less than $100k, I will also have the opportunity to convert it to a Roth IRA. I’ll have to look at whether or not I can take the tax hit in 2008, and the pro’s and cons of doing this.

Another thing I want to look at once I’m settled in Cali is moving a large chunk of my HYSA to a money market fund, specifically the tax exempt California one offered by Vanguard. My after tax return might be able to beat out my current high yeild savings accounts, especially since I’m not rate chasing. This article by The Finance Buff which suggests it may be so. It’ll make more of a difference if I itemize deductions (I usually take the standard), so I’ll have to do a little research on this. Or another option: TIPs? I have heard a lot about them, but my knowledge is limited. A high yield savings account is a great start, but I think I’m ready to see what else is out there and make sure I’m getting the best deal.

I was hoping to wait until 2008 to talk about my goals and plans for 2008. However, I’m a planner to the extreme and I can’t help myself from starting now.

There are a lot of unknowns in the first part of next year. I’m moving to a new city with expensive rent. While I have one job offer, I’m waiting on the one that I want more (tomorrow? Very soon!) so I’m not sure what my salary will be. Still, no matter what, there are some goals I can set right away, and adjust as needed.

First, I want to max out my Roth IRA again. That is about $415 a month of post tax money to be directed into savings immediately. In my first year and a half of working, I’ve already saved about $20k in retirement accounts. As my salary increases, I’ll be able to contribute more each year. I think I’m on track to have a comfortable retirement. I have a vague idea of retiring early, but still am not ready to make a plan for that goal.

In that same vein, I want to contribute at least 10% to my 401k. This is pretty painless and will get me a full match of (probably) 6% total from my company. Based on my first job offer, that will mean I’ll save about $15000 in 2008 for retirement. If I feel that I can afford it, this will be increased, with a stretch goal of 15% towards 401k.

I also want to pay a little extra to my student loan account. My goal is only going to be $1000 extra this year. I’m required to pay about $1500. In 2007 my goal was $4000 total. This is really cheap money so paying it off is more for the mental benefits. That means my month payment will increase to $215, though I’ll likely pay it in chunks rather than automatically every month. If any of my goals are faltering, this will be the first to go, as it is the least cost effective.

Next, I want to continue (but decrease) to auto-contributions to my emergency fund, and really turn it into an emergency fund. I have a general purpose high yield savings account which is my efund, but I don’t treat it as an efund. It’s just a savings account with a continually increasing balance. I think contributing $50/week to this account will be sufficient. I pretty much grew it to 10k from scratch this year, so it is a big decrease. I’m excited to have a base fund so I can focus on other goals.

Now… the “boring” goals are out of the way!

For my fun goals, I want to add $25/week to my “travel” fund. If I have extra money, I’ll increase this amount, but it is a start. I have a travel fund earmarked, but it has had really stagnant growth. I also want to start saving up for a newer car. My car has about 75k miles on it and will last another couple years… but I need to start building up some money to purchase my next one. I want to pay for my next car in cash, and I will be spending at least 10k, maybe more. If my budget works out, I’d like to save $100/week for this, giving me just over 5k by the end of the year.

So that is it! These goals will be tweaked once I’m settled into my new apartment, new city, and new job.

In unrelated news, they are announcing who replaces my current manager at work today. I hope they promote from within the group and that Bryan is it. I think that he would have the job if he wanted it, but I’m not sure he is interested in management.

Paints a horrible picture, doesn’t it? You may have known what this phrase means for a long time, and if not, you may have heard it today. On the radio on the way home, the newsman reported that stocks had a recovery today, “deaceased feline or otherwise.” It took me a minute to understand what he was talking about.

A dead cat bounce is when stock prices jump up after a significant decline, only to continue to fall again after the recovery. Supposedly it comes from the idea that even a dead cat will bounce, if it falls far enough down. Well that’s an unpleasant thought!

Why do these bounces occur? Wikipedia suggests that there are at least two factors coming into play. Some investors might have standing orders to buy certain stocks if they fall below a certain level. Other investors might speculate that it is the bottom of the market, so they buy hoping to make a profit.

The only way to tell the difference between a dead cat bounce and a recovery from the bottom is hindsight. So what do you think? I’d love to think that today represented a recovery, but in reality I think we haven’t seen the bottom yet.

I found a little note at the end of the Wikipedia entry amusing: “More recently, the term has been used colloquially during extended drinking binges to describe the apparent recovery of individuals previously thought “out-of-commission”, only for them to quickly return to sleep, vomit etc.” Ah, college.

By the way, thank me for not including an image with this post!

My 401k lost $100 dollars today, and my Roth about the same. However, my 401k has 3 times what my Roth does! Not that you are supposed to check your gains and losses daily, but NPR was all abuzz with news of the Dow Jones slipping, I couldn’t resist.

Still, I have been planning to reallocate my 401k for several days now, after realizing how little I knew when I made the choices I did. I still don’t know that much, but now I am ready to learn.

I am a big fan of buy and hold, of picking some asset classes and rebalancing about yearly. But buy and hold does assume that the original choices were well thought out! Were mine? No they were not. Over the next week r so, I’m going to investigate where my 401k money is going, and where it should be going, and figure out an approach on how to get it where I want it to be.

My Roth IRA is secondary for three reasons. First, it has less money by about 1/3. Second, it is in a target date fund for 2040, and I’m fairly comfortable with that. Third, the choices there are infinite (!), and it seems like a harder fish to fry! Though I heard a rumor that Vanguard’s target date funds had a much lower expense than Fidelity, my current broker. I must investigate switching in the future.

First things first, where is my 401k money invested? Last night I made a new tab in my finance spreadsheet for investments. Now that I’ve done it, I’m shocked that tab never existed before! There are some fees and expenses that I have never (not even once) glanced at, and honestly, I have no solid logic for picking the asset classes I did. I’m almost embarrassed to post them, actually, but here they are. I realized I had a whopping 5% in a stable value fund! I do not mean a bond, I mean stable value, with a goal to make $1 always worth $1. Oh my.

With 15% bonds and 5% stable, no wonder it held value better than my Roth. Still, i’m 24, I don’t think it is the wisest choice. And the Equity Income fund? It invests in large cap “income” funds. What does that even mean? As a young investor, is an income fund something I should be interested in? These are questions I need to answer.

The next step is research. Thus far, I’ve been looking into the “Lazy Portfolio” theory. Realistically, my 401k options are limited, so I can’t just pick what I want. I know i want to put a portion of my money into the index funds. I also will use some mutual funds to get my hands on some other asset classes. But I don’t know which asset classes I need.

I’m not ready to reallocate yet.