Investment question/advice

already maxing out 401k, doesn't that negate the traditional ira contribution option?

 

Warren Buffett told Bogle, who founded Vanguard: “A low-cost index fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and every thing I have seen since convinces me of its truth."

Bogle started the First Index Investment Trust on December 31, 1975. Graham died September 1976. It’s possible Graham had already bought into the idea of index funds.

However, it’s probably more likely Buffett was referring to Graham’s old idea to buy all of the stocks in the Dow Jones Industrial Average in equal amounts and hold onto them.

Edit: add link for Buffett quote
Benjamin Graham: Passive advocate?

 

my best guess is that it was a quoting error somewhere along the line. Elsewhere I’ve seen this as the quote which makes more sense

5. Ben Graham on indexing
"A low-cost fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth." (To John Bogle, in The Little Book of Common Sense Investing)

 

This excerpt from Graham provides some clarity. He was clearly knowledgeable about the concept of indexing and endorsed it

A Conversation With Benjamin Graham

 

I have both Schwab and fidelity and both are very good. Vanguard is known for their once index funds and you can tell from their website, it sucks. As for the annuity, a guaranteed 8% is better than what you can get from any other “guaranteed “ vehicle like CDs and T-bills. But, I suspect there’s lots of fine print there and factoring in the cost, the real rate is probably much lower. Think about it, guaranteeing that rate, where are they going to make money since I’m guessing they are not a non-profit. I would go with index funds and then some CDs or money market. With a pension, you can be a little more aggressive in your investing.

 

Bingo.

I don’t know much about annuities since I’ve never considered one, but I do know anything ”guaranteeing” above market returns must either have ridiculous fine print rules OR be a straight up scam.

If it’s issued by a legit insurer, then definitely comb through that fine print. My guess is OP would be locking that money up for decades if not permanently, this actually might be ok for some in the annuity space, but 8% is still dubious considering the insurers would need to have interest margin to make those products profitable to pitch. To make it profitable, it could be charging you exorbitant fees as others pointed out. If it’s from some lesser known company or upstart, then I’d run far far away, it may even be a pyramid scheme (which often market themselves with miraculous “guaranteed” market beating returns).

 

I just opened a Schwab individual brokerage account and invested in a series of ETFs. I'm in my high 60's and its my first foray into stocks. It seems to be going well and I am VERY conservative with my $$.

 

Yes, we have what we call a "Simple Plan". Works like a 401K but they don't call it that, I think it's through Merrill Lynch. And I'm maxing that out already at about 16K a year. I think I'll do some more research on those EFT's that @NavyGator93 was talking about. Seems like a good balance to the Annuities that I already have.

 

nice start, now just dont keep checking your balance since stocks will go up and down

 

Ditto on this. Schwab has a S&P 500 index fund with no fees. Morningstar rates it very highly - either a 4 or 5 star (can’t remember which). I have a set amount deducted from my checking each month and put in this fund. The deducted money goes into a pool that requires me to go to the Schwab website and hit the buy button. Otherwise, very little maintenance needed

 

I didn't see if anyone else answered this. It negates your ability to make a deductible contribution to a trad IRA. You can still make a non deductible contribution and convert to Roth.

 

So if my Roth was maxed out at $3k last year by income, could I do more by putting into IRA and then convert?

 

Assuming you don’t have any other traditional IRAs / rollover IRA’s, you would open a traditional / non deductible IRA for the balance of your IRA limit, then convert the traditional / non deductible IRA to a Roth.

You do have to file form 8606 IRA basis tracking if you do this.

 

Nothing wrong with your decision. There is no right or wrong. I am not an annuity fan. Too many fees but that can be worth it for peace of mind for some.

I find big boy dividend stocks and ETFs and buy them. I loaded up on MO while it was in the low 40s yielding 9.5%. My more risky dividend REIT is OXLC. I was buying at 5 but may go ahead and start buying again at $5.40 as they increased their dividend and are yielding 19.25% at $5.60.

QQQ and SPY are the go to etf for other stuff.

 

Or do a regular low cost brokerage account and buy index funds with low costs.
Give you flexibility, if there are particular stocks you want to buy and hold you can do that too.

 

Do you know what the income tax ramifications are on the ETF? If it makes money during the year does that count as capital gains and is taxed?
Thanks for all the info.

 

As a passive ETF, they're generally considered to be very tax efficient. SPY, for example, currently spins off a little over 1% in dividends each quarter. If you're holding these shares in a taxable account, that's treated as ordinary income. If you're selling the underlying ETF, you'll pay capital gains - short or long term depending on how long you held the shares. If you're holding in a tax advantaged trad IRA or 401k, you won't pay any taxes until you go to take money out of the account.

 

Same as mutual funds I believe. If you sell for a cap gain, taxable. If they are giving you dividends, taxable.

 

If you have a little mad money and want to make a political bet I recommend waiting till mid-August and then bet on Trump to win. Trump is a very heavy favorite to win at this point. His favorability and approval ratings are better than Kamala's. Her support is soft. The polls are misleading because Kamala is benefitting from.a "response bias that most pollsters are not filtering out. Dems are giddy and more likely to want to talk to pollsters presently, IOW.

Trump lost in 2020a very close electoral college race even though Biden won the popular vote by 4%. Trump is now beating Kamala by 1% in the popular vote when response bias is filtered out. Trump is a solid 85^ favorite per Robert Barnes using data from Rich Baris @peoples_pundit who he feels is the most accurate pollster. Another great pollster is Patrick Cahaly @Trafalgar_Group on Twitter

Best odds for placing a bet on Trump should be in around 10 to 15 days or so.. I get my political bets from Robert Barnes_Law. Betting with Barnes is not gambling, it's investing imo.