Good bye savings

[jimh406]

The other day when I looked, the Dow Jones was still higher than the lowest during the "pandemic" which was just over 19K. Yes, the Dow is mostly lower, but not time to panic yet.

 

[JimmyJazz]

The Vanguard Admiral SP 500 index has returned 7.72% annually since its inception 11-13-2000. That is not a fabulous rate however when compounded over 21 years the magic happens. Patience is key. There are some old mutual funds whose worst 10 year return has been 4%. For those interested you can search for "rolling period reports". 5 and 10 year periods are common. Warren Buffett recommends not looking at it if the volatility bothers you.

 

[forky]

That buy and hold, paper money and other such scams do nothing but keep the investment company in a constant supply of income. Yes it is true, if your account shows a considerable loss this quarter you will have the same amount as the guy just getting in with that same amount proving that you did indeed lose that much. I was led around too many years with that BS only to watch the portfolio rise and fall way too much. I pulled the plug on the money grabbers and handle my own and make my own gains and mistakes, at least there isn't someone grabbing a percentage off the top. Had I just put everything from day one in an index fund, like a S & P 500, I would be way ahead of where I am now.
[Maybe that's true, but one learns by his mistakes. Take the knowledge and do something with it now. Everyone's tolerance for the market's volatility is different. I retired at 48 and have all the retirement in the market.... my average return in the last 10 years is 10% and the previous 10 years was 7%......I own zero index funds.....buy and hold works in my eyes.

 

[jabloomf1230]

Just a word of advice from someone who just got got out of "time out." Be careful making any disparaging remarks about certain individuals who may or may not be allegedly responsible for your current situation.

Putler has very few fans here.

 

[DustyRusty]

It isn't the number of dollars you have, but what that dollar will buy. The buying power of the US dollar keeps going down, and you will need more dollars to buy the same item next year than you needed this year. It is called inflation, and we are all affected by it. No getting around those numbers. If you have 100 in investments today, what will that investment buy you tomorrow? Someone on this thread commented that the value of his far has doubled. If no one has enough money to eat, then the value of the land is irrelevant. Some invest in gold, but you can't eat gold, so even if the value of gold goes up, it is only what that gold will purchase that is important.

 

[Biker1mike]

It isn't the number of dollars you have, but what that dollar will buy. The buying power of the US dollar keeps going down, and you will need more dollars to buy the same item next year than you needed this year. It is called inflation, and we are all affected by it. No getting around those numbers. If you have 100 in investments today, what will that investment buy you tomorrow? Someone on this thread commented that the value of his far has doubled. If no one has enough money to eat, then the value of the land is irrelevant. Some invest in gold, but you can't eat gold, so even if the value of gold goes up, it is only what that gold will purchase that is important.

True. A good investment advisor should put this in the plan.
My wife and I agreed to a 5 % raise in our 401K monthly payout this January. Less than what we earned so fund will still grow just a little slower.
If costs go down we will adjust back.
My plan is for both of us to be dead 2 days before the fund goes dry.

 

[Lil Foot]

My plan is for both of us to be dead 2 days before the fund goes dry.

 

[D2Cat]

My mother was always real conservative, saved and wanted to leave something for her children. There are four of us and she always felt, I think, somewhat guilty of not providing a better life as youngsters.

I always told her, "At your last moment on earth I hope you just spent your last penny and it wasn't in a hospital."

 

[top gnome]

Like Skeets, and maybe more so, I decided to be very conservative in investing for our retirement.

Twenty years ago I put our then savings into inflation protected I Bonds. Over that time the principal tripled, and there was as close to zero risk as possible. When I retired I put my 401K into a Vanguard inflation protected securities fund. This is where the majority of our retirement money resides.

Certainly lost opportunities for more growth, but in the I bonds, the accrued value never goes down. Either grows or holds steady, even if there would be deflation. AND at the time the fixed rate was very good (Average is 3.5 percent plus inflation). The Vanguard TIPS fund can vary, but has always grown over time.

I always believed, and still do, that the stock market value only holds true when one cashes out. In the interim, ups and downs feel good or bad, but really make no difference until you take your money out. Take it out on a high, great. Have to take it out on a low...not great.

My feeling is the new guy always rides on the performance of the previous guy(s), especially in the first year or two...BUT if anyone could control a complex economy to always provide the best performance consistently that would be a miracle. Just never seems to happen...the previous guy, and the guy previous to him, either got lucky or didn't. Mostly beyond their control...

Granted they can try...and I suppose they do.

Edit: For those that do not know, I Bonds and Inflation Protected Securities are instruments of the US Government. Fully backed by the US Government.

I could not agree more people do not realize there is always a delay in the economy at least a couple of years sometimes even more. It would be like blaming Bush 2 for the 2000 crash or Obama for 2008 (he was not even in office yet)

I read an article in 2000 and had my wife go the bank and buy I bonds She ended up spending a lot of time at the bank because the tellers did not know what an I bond was. It was a hassle at the time but now I just show her the balance.

 

[jyoutz]

True. A good investment advisor should put this in the plan.
My wife and I agreed to a 5 % raise in our 401K monthly payout this January. Less than what we earned so fund will still grow just a little slower.
If costs go down we will adjust back.
My plan is for both of us to be dead 2 days before the fund goes dry.

Our plan is to use about 75% of our investments to pay off the mortgage and all debts upon retirement. Between the wife and I we each have a pension and social security. The 4 incomes add up to one decent full time salary, even better with no debt.

 

[jimh406]

I could not agree more people do not realize there is always a delay in the economy at least a couple of years sometimes even more. It would be like blaming Bush 2 for the 2000 crash or Obama for 2008 (he was not even in office yet)

Sorry, but that doesn't make any sense to me. Of course, Presidents aren't responsible for when they aren't President.

I don't think there is a two year delay. However, I'm not seeing a thing the current President is doing to improve the economy for 2 years from now. Maybe you do. Frankly, all of his moves have been to do the opposite.

As far as paying off your mortgage goes . . . The biggest challenge as a retiree is cash flow. That's something easy to generate if you have investments, but nearly impossible if all of your money is in your house. Of course, if you are really, really bad at investing, then maybe it kind of works.

 

[GreensvilleJay]

I paid off the mortgage in 2 1/2 years( 1989ish..) Back then everyone said 'no, invest in mutual funds, the stock market'. Only ONE guy said ..pay off the bank.... His reasoning.. when the market tumbles, I'd lose the 'profit' AND what I'd put in. That's gone, can't pay the mortgage, bank takes house...and YES .banks DO take houses... Soon after that market went south, but I OWNED my house. As for retiree 'cash flow', you don't need as much cash ! NOT driving to work,saves a LOT, cheaper car insurance, free lunches, etc. LOTS of 'savings' from NOT having to go to work. Hopefully you have a company pension( I don't) to add to the basic guv pension.

 

[jimh406]

Obviously, people should do what they want regarding buying houses, and what level of risk you want to take.

For grins and giggles, compare what your house is worth now to compared to what the same amount of money would have made in the Dow. The average rate of return is actually 8.4 percent since 1989. https://financial-calculators.com/historical-investment-calculator.

A $50,000 investment would yield a profit of over $600,000 from the investment based on the Dow Jones average. Of course, not only would you gain the value of what you invested, you'd also gain the value of the house which allows you to leverage the money in two different ways. YMMV.

 

[GreensvilleJay]

hmm..
re: Of course, not only would you gain the value of what you invested, you'd also gain the value of the house

No, as you couldn't have bought the house back then.....the 50K went into the market ? Or am I missing 'something' ?

I ran the numbers for my house and came up about even, except I've owned my house and lived in it rent free for 35 years.

 

[jimh406]

hmm..
re: Of course, not only would you gain the value of what you invested, you'd also gain the value of the house

No, as you couldn't have bought the house back then.....the 50K went into the market ? Or am I missing 'something' ?

I ran the numbers for my house and came up about even, except I've owned my house and lived in it rent free for 35 years.

My point was you still buy the house, but don't pay off the mortgage early. Put what you would have used to pay off the mortgage early in the stock market. The house will go up in value no matter if it is paid off or not. The investments (assuming average returns) will also go up. Of course, it matters what your loan rate is on the mortgage to determine what the value increase will be compared to stock market or vice versa.

If you keep the house the rest of your life, it won't matter to you if it increases in value. It's the same for stock market investments as well. It only matters if you sell.

 

[Henro]

Obviously, people should do what they want regarding buying houses, and what level of risk you want to take.

For grins and giggles, compare what your house is worth now to compared to what the same amount of money would have made in the Dow. The average rate of return is actually 8.4 percent since 1989. https://financial-calculators.com/historical-investment-calculator.

A $50,000 investment would yield a profit of over $600,000 from the investment based on the Dow Jones average. Of course, not only would you gain the value of what you invested, you'd also gain the value of the house which allows you to leverage the money in two different ways. YMMV.

I never had a mortgage so I guess I am in the pay off early camp.

But using your figures, if a $50,000 house was paid off, then mortgage cost would be avoided. Back in 1989. I am pretty sure mortgage rates were pretty high. Perhaps enough that a $50K mortage might have cost $100K in interest over 30 years. NOT sure what the actual number is though.

So not having a mortgage gained whatever the interest paid over time would have been. AND the home itself appreciated, but it would have appreciated anyway, so whatever that amount is, it likely should be ignored, as it plays into both calculations.

Net result in general terms seems to be if the gain from the stock market exceeds what one would have lost paying mortgage interest, AFTER capital gains taxes are paid on the stocks when sold, playing the debt game may be the winner.

For me, it took 3/4s of a life time to realize that buying something like a tractor using debt probably makes good sense. You lose so much time saving to pay for something in cash, when you could be using that item immediately with a loan. Especially important since we all have limited years on the planet.

Still, having the security that my house was my own and protected, other than needing to keep the taxes paid up, was worth a lot to me. And still is.

 

[GreensvilleJay]

Back then my mortgage rate was 11.5%... I was paying $1500 a month, could toss in another $6800 throughout the year..... the market 'tumbled a bit' ( would have lost BIG time).. zero 'profit' and lost real money. It's the loss of 'real' money that hurts, especially if you lose your job, or 2nd income and can't make 'replacement' money, fast. There's also the taxes you have to pay on market profits..ouch...

....typically you'll pay 3+x the mortgage amount to pay back the principal( 50K mort = 150K debt). Nowadays you have online calculators for this....can be a real eye opener ! Everyone should 'run the numbers' just to SEE what happens.

At the very least READ a credit card statement for the 'if you pay the minimum......just how long it'll take, to pay off the current debt !!!