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Post by FD1000 on Apr 7, 2023 23:00:29 GMT
FD1000, Some people may need an emergency fund because they may not have access to low interest credit cards for emergencies. Another reason is in case of job loss it can save the day and prevent one from racking up credit card debt, until one is employed again. Not everyone is the same. I'm talking about responsible people who have good money habits such as: save regularly, and pay their credit cards in full every month. The ones who don't, I can always find cases where it's not working for them. I was laid off 3 times while working. We had several "emergencies" such as leaky roof, or replacing total loss vehicles, where we needed thousands of dollars and never needed an emergency fund. They were all solved by using credit cards that were paid in full in several weeks later and/or sold some of our mutual funds. The above was true when we had only $50K or a lot more.
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Post by fishingrod on Apr 7, 2023 23:26:19 GMT
FD1000 , Some people may need an emergency fund because they may not have access to low interest credit cards for emergencies. Another reason is in case of job loss it can save the day and prevent one from racking up credit card debt, until one is employed again. Not everyone is the same. I'm talking about responsible people who have good money habits such as: save regularly, and pay their credit cards in full every month. The ones who don't, I can always find cases where it's not working for them. I was laid off 3 times while working. We had several "emergencies" such as leaky roof, or replacing total loss vehicles, where we needed thousands of dollars and never needed an emergency fund. They were all solved by using credit cards that were paid in full in several weeks later and/or sold some of our mutual funds. The above was true when we had only $50K or a lot more. You just contradicted yourself. You said you saved regularly. THAT is an emergency fund. How did you pay off credit card with no job? Saved Money? Some younger folks don't have mutual funds. Not everyone is you. That doesn't mean they aren't responsible, just in a different situation. Why is that so hard to imagine for you? Do you know what the interest rate on credit cards are now?
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Post by FD1000 on Apr 7, 2023 23:46:40 GMT
I'm talking about responsible people who have good money habits such as: save regularly, and pay their credit cards in full every month. The ones who don't, I can always find cases where it's not working for them. I was laid off 3 times while working. We had several "emergencies" such as leaky roof, or replacing total loss vehicles, where we needed thousands of dollars and never needed an emergency fund. They were all solved by using credit cards that were paid in full in several weeks later and/or sold some of our mutual funds. The above was true when we had only $50K or a lot more. You just contradicted yourself. You said you saved regularly. THAT is an emergency fund. How did you pay off credit card with no job? Saved Money? Some younger folks don't have mutual funds. Not everyone is you. That doesn't mean they aren't responsible, just in a different situation. Why is that so hard to imagine for you? Do you know what the interest rate on credit cards are now? Save means use a portion of your salary to invest regularly in mutual funds every month. I don't know what is the interest on credit cards, because we were never late paying them, ever. I always believed in planning and executing the plan we had for 1-6-12 months and all the way to 10+ years. Along the way there were many calculated decisions that are based on common sense and very little emotions.
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Post by fishingrod on Apr 8, 2023 0:07:51 GMT
You just contradicted yourself. You said you saved regularly. THAT is an emergency fund. How did you pay off credit card with no job? Saved Money? Some younger folks don't have mutual funds. Not everyone is you. That doesn't mean they aren't responsible, just in a different situation. Why is that so hard to imagine for you? Do you know what the interest rate on credit cards are now? Save means use a portion of your salary to invest regularly in mutual funds every month. I don't know what is the interest on credit cards, because we were never late paying them, ever. I always believed in planning and executing the plan we had for 1-6-12 months and all the way to 10+ years. Along the way there were many calculated decisions that are based on common sense and very little emotions. I thought that you didn't invest in a taxable account. How could you access that money without penalties? If it Was a taxable account then that is your emergency fund. You sound like you think you are better than other people who choose to use an emergency fund. Some people do things different than you.
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Post by Mustang on Apr 8, 2023 0:11:52 GMT
FD1000 , Some people may need an emergency fund because they may not have access to low interest credit cards for emergencies. Another reason is in case of job loss it can save the day and prevent one from racking up credit card debt, until one is employed again. Not everyone is the same. When my wife and I first started out our emergency fund was for large car repairs. Having a little set aside beats refinancing the car to get it repaired. (I had to do that once.) Later it was for emergency house repairs as well. I had a rental house that the renter tore up. Without the emergency fund I would have had to take a second mortgage out to fix it before I sold it. When my brother died we had two unplanned cross country trips to make. One when he was hospitalized and one a couple months later for the funeral. Retiree emergency funds are usually used for unplanned health care and recovery in nursing homes.
I've always thought for larger, more long term emergencies a Roth IRA would be best. Having a 22% tax rate, a $40,000 withdrawal from a traditional IRA will get the investor $31,200 to pay the bills. From a Roth it a full $40,000.
When I divided our portfolio into retirement investments and emergency/heir investments I put our Roths on the emergency side.
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Post by steelpony10 on Apr 8, 2023 0:32:06 GMT
We hold a now 45 yr old muni fund on reinvestment as a slush/surprise fund in a taxable account. Dipped into and added to on many occasions. It was started about 1 year before any type of IRA. I called it a dedicated section with strict limits as far as usage. No real cap gains as far as taxes if it’s ever liquidated, it fluctuates in a range as most bond funds do and tax free income, currently 3%+.
I suppose if I used buckets or a standard withdrawal amount each month I could remove the reinvestment during market stress and put unused cash back in each year as I used to do.
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Post by FD1000 on Apr 8, 2023 4:23:03 GMT
Save means use a portion of your salary to invest regularly in mutual funds every month. I don't know what is the interest on credit cards, because we were never late paying them, ever. I always believed in planning and executing the plan we had for 1-6-12 months and all the way to 10+ years. Along the way there were many calculated decisions that are based on common sense and very little emotions. I thought that you didn't invest in a taxable account. How could you access that money without penalties? If it Was a taxable account then that is your emergency fund. You sound like you think you are better than other people who choose to use an emergency fund. Some people do things different than you. In previous posts I said "After our savings which were invested in stocks passed a certain amount (for us $50K+) we no longer have cash or emergency for over 3 decades and are now in retirement." When we immigrated to the US, we came with just $6K cash, in the first several years, it was all about saving for a house and 2 better cars. Then I learned more the US investing rules (Trad + Roth). My job didn't have an access to 401K so I split investing between taxable, and Roth. Then I got a job with 401K where I invested most of our savings. Over the years, I hardly ever touched our Trad+Roth because I came to a conclusion, we can buy everything with zero to very low interest rates supplied by the merchants, while my money was invested in stocks making a lot more. The only high interest was our mortgage, but over the years it went lower and lower. In my old country when I left, maybe it has changed: 1) If you want to take a mortgage, you must put down at least 50%. The monthly pay + the loan are attached to the inflation...pretty awful. 2) You can't buy anything with low refinancing from a merchant. Sure, you can take a very expensive private loan. 3) All credit cards have yearly fees + never cash backs. All banks are connected to one source to check your credit cards total possible credit. Max credit for of all is 150% your monthly salary. A smart idea to not let you fall behind. 4) All mutual funds + stocks carry a fee to buy and sell. Mutual funds have ER of at least 1.5%, forget ER=0.1% and below So, the US has great choices not found in many courtiers if you have a great credit score, the sky is the limit. The smart/responsible savers/investors get lots of goodies, the rest pay dearly for that. Examples. 1) We never paid our mortgage in advance. 2) We got a huge amount of credit card availability, but always used it frugally, because credit score is higher if used credit/unused is lower. It doesn't make sense but that's how it works. If I have $100K credit availability and I use only $3-5K, I'm a better customer than someone with only $10K credit availability...mmm...pretty stupid IMO. If I get crazy, I may spend $100K and may never pay it back. 3) Most major purchases have been taken with merchant zero-low interest rates for years, because I made sure our investments are much greater than the loan. Many shouldn't do it but the responsible ones can take advantage of it while our money is invested in stocks. Of course, I made sure to pay it all in time. It's pretty simple, we buy something, I setup a new merchant and the monthly pay until the loan is paid. It takes me 5 minutes and I'm done. 4) The highest "risk" loan we ever take was home equity line in 2012 for about 50% of our house equity. We took all the kids university loans at 4-5% interest for 10+ years + 50% more to invest in the market using Penfed home equity line for 5 years at 1.99% with no fees. We cut the finance fees by a lot, and finished in 5 years instead of 10+. The return in the market was a lot higher and I was ready to retire with zero debt about 1.5 years later. All this money was invested in PIMIX in 2012-2017. Why I did it? our savings were many times greater than the loan and beating 2% annually is pretty simple. Basically, all decisions are planned and executed based on common sense. These are all processes that were thought and vetted decade ago. Money for me is hardly emotional and a lot more mechanical. These are based on decades of working in IT. You learn how to assess things, look for the best reliable process and then rinse and repeat again.
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Post by Chahta on Apr 8, 2023 21:20:30 GMT
Chahta , How did my thread devolve into this crap? Lol. I just wanted to know how those other investing techniques are handled in these type of markets. Some acquaintances ask me and I was tired of saying I don’t know because markets only affect me in a positive way except the equity part, bad ones even more so. Using those other techniques, if your dependent on cap gains, what do you do now? I don’t see any discussion of a plan for poor markets of unknown lengths using those techniques. Maybe myself or others may benefit. I sent you a PM and probably said too much. LOL But for the masses I don't live from my IRAs now, only my taxable account + SS. I am still accumulating with reinvesting, until RMDs start. I will most likely keep a "traditional" 50/50 (the /50 part has a CEF) port that gets rebalanced if things get too far out of whack. Key to that is having some cash to tide you over for a couple of years or so. That is not so bad now with MM paying 4%. My main goal is not to leave a bunch of money to grandkids if I need it for the old folks home. So be it. Actually with your CEFs doing so well income wise, you could easily have a "stash in cash" that you don't need to risk with muni funds.
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Post by liftlock on Apr 9, 2023 5:26:53 GMT
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Post by oldskeet on Apr 9, 2023 10:44:37 GMT
I keep my spending in check with my means and usually below it. From my portfolio I generally take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time along with available distributions. Currently, my portfolio is generating excess cash above my needs with excess cash being reinvested somewhere back within the portfolio thus growing it's footprint. This is not rocket science and it has no fancy formula for it is formulated on common sense.
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Post by liftlock on Apr 10, 2023 17:58:20 GMT
I try to plan my annual income and income taxes in the 1st quarter of each year. This includes arriving at estimated portfolio withdrawals and T-IRA distributions for the year. I don't use the 4% rule but I do consider it. I use a spreadsheet to project my income and taxes 4-5 years ahead. I validate and correct the accuracy of my spreadsheet as I prepare and file my tax returns. My spreadsheet quantifies and projects the amount of income at each tax bracket - Federal, State and Medicare IRMAA. I update my spreadsheet based on changes to projected income throughout the year.
In my spreadsheet, I calculate a range of safe portfolio withdrawal rates using different methodologies I have identified from various sources through the years. I do this to better understand and become more comfortable with a range of potential portfolio distributions I might want to make. One of the base calculations I make is "portfolio spend down". It attempts to identify how much can I spend from my portfolio if I assume I will earn a zero real rate of return and my portfolio will need to last for X years. If I were to assume I am age 75 and will live to age 95, then my portfolio spend down would occur over 20 years and the safe withdrawal rate based on portfolio spend down would be 5% of my portfolio value at year end. Each year my calculations get redone based on the latest portfolio values at year end.
I have reached the age where I must take RMDs. I use these calculations to help me in planning and becoming comfortable with the size of Roth IRA conversions I might want to undertake beyond my RMD.
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