Just wondering how you all are preparing for the days after your teaching careers.
Have you bought real estate, invested in index funds, simply saved, paid into pension plans, or something else?
Just wondering what the pros and cons of these different strategies are, and which ones make most sense.
So far we have done nothing more than saved a nice little sum, but investing it in some way is probably smarter.
Any advice would be greatly appreciated.
How are you preparing for retirement financially?
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Heliotrope
- Posts: 1167
- Joined: Sun May 13, 2018 1:48 am
Response
Ill beat @Sid to this one, but have you searched the forums as this has been discussed extensively.
I consider myself well prepared, I have a domestic pension that Im vested into, a private retirement investment account (offshore) and have a second government plan Im currently contributing too. I also own property but I no longer rent it out.
I say well prepared, because many ITs have little to nothing, which is why the advice you need to be settled wherever your going to retire out of in your early 50s, preferably in the EU so that you can have a long enough contribution plan to contribute significantly and have something when you retire. There are more and more ITs that are realizing they will likely have to teach until they drop.
I consider myself well prepared, I have a domestic pension that Im vested into, a private retirement investment account (offshore) and have a second government plan Im currently contributing too. I also own property but I no longer rent it out.
I say well prepared, because many ITs have little to nothing, which is why the advice you need to be settled wherever your going to retire out of in your early 50s, preferably in the EU so that you can have a long enough contribution plan to contribute significantly and have something when you retire. There are more and more ITs that are realizing they will likely have to teach until they drop.
Re: How are you preparing for retirement financially?
Touch wood also fine, military super, properties being rented out. Be aware of the banking industrial complex which profits from your fear. You do not need a million dollars to retire, but you do need to have a plan in line with your income and expectaions.
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eion_padraig
- Posts: 408
- Joined: Sat Dec 11, 2010 8:18 pm
Re: How are you preparing for retirement financially?
You may want to look at either poor Teacher or The Global Expariate's Guide to Investing by Andrew Hallam. Bonus points for you if you check it out from a library. He's a former economics IT who wrote about some of the issues facing expats, but he started off with teachers specifically.
The Global Expariate's Guide is more useful if you're not American as it goes into some more detail if you're from other English speaking countries. But they cover some of the same issues. He basically advises people to live within their means, have a plan for retirement, and avoid expensive/predatorial investment companies trying to sucker people like international teachers out of their money.
Andrew Hallam recommends index funds that are not actively managed and are sufficiently diversified for most people because it doesn't take too much thought.
He does a good job of breaking down the issues into something that's easy for a non-expert to understand.
Eion
The Global Expariate's Guide is more useful if you're not American as it goes into some more detail if you're from other English speaking countries. But they cover some of the same issues. He basically advises people to live within their means, have a plan for retirement, and avoid expensive/predatorial investment companies trying to sucker people like international teachers out of their money.
Andrew Hallam recommends index funds that are not actively managed and are sufficiently diversified for most people because it doesn't take too much thought.
He does a good job of breaking down the issues into something that's easy for a non-expert to understand.
Eion
Re: How are you preparing for retirement financially?
Andrew Hallam is a great place to start.
Me personally, first I committed several humdingers that I don’t like to think back on. High fee pension instruments and stocks that were certain to explode, that sort of thing. If only, if only.
Today I’m much more focused and simple. Low cost index funds, and save as much as possible. Hoping for early retirement, and working hard to make that real. There is also property but I don’t rely on it for my retirement.
Me personally, first I committed several humdingers that I don’t like to think back on. High fee pension instruments and stocks that were certain to explode, that sort of thing. If only, if only.
Today I’m much more focused and simple. Low cost index funds, and save as much as possible. Hoping for early retirement, and working hard to make that real. There is also property but I don’t rely on it for my retirement.
Re: How are you preparing for retirement financially?
If you are American, then the first thing you should know is that you cannot contribute into an IRA (either Roth or Traditional) if you don't have earned income for that year that actually counts towards your AGI (which means not on your form 2555, which is how you avoid paying taxes on income earned abroad). So if you do put all of your earned income on a 2555 (personally I choose not to for the above reason), then I would suggest just opening a regular individual brokerage account (Robinhood would be good for a beginner since it has no minimum and no commissions - you can open the account and fund it online in about 3 minutes). Then just choose a couple ETF's (I would suggest VT and QQQ) and buy. Then keep buying more and more as you can. Once you have over $10,000 invested, then you can try to get a little more advanced by choosing individual stocks if you want, or just stick with a couple ETF's if you prefer. I think this is far easier than most other ways to invest for retirement, and certainly has one of the highest rates of return over a long period of time.
Please feel free to PM me if you have any questions about the tax stuff. I am used to being the "tax guy" at my school for all the American teachers (I prepare all their returns and never accept any payment) and don't mind helping others with this since it is very easy for me.
Please feel free to PM me if you have any questions about the tax stuff. I am used to being the "tax guy" at my school for all the American teachers (I prepare all their returns and never accept any payment) and don't mind helping others with this since it is very easy for me.
Discussion
I strongly disagree with @gzmike.
Yes, you can not contribute to a IRA (either Roth or Traditional) without earned income, but thats not an issue. You simply claim X amount of income (summer work consulting, etc.) as self employment income and direct it up to your limits into the IRA. The best option being a traditional IRA which allows you too contribute up too $5500 or $6500 if over 50, plus the 15% for SS tax which to maximize the IRA contributions (under 50) you would need to budget USD$6325/yr as your self employment income. $825 becomes your annual SS tax, which will also buy you 4 credits (the maximum number you can earn in a year). The remaining $5500 can be directed to the Traditional IRA, and you will pay no taxes on it both because of the IRA and because the income will be below your standard deductions.
I would strongly advise against opening a traditional brokerage account and definitely not with Robinhood. First, the plan @gzmike is suggesting makes you a stock trader, not a retirement investor. Two of the biggest problems with Robinhood are that first, they only have stocks (and to that end ETFs), they have no access to bonds, or instruments. All three of those, stocks, bonds, and instruments are what make up a healthy retirement portfolio. Second, they only have brokerage accounts, that provide zero tax benefits.
You are much better off, finding an actual retirement to date pension or retirement plan offered outside the US that provides actual tax benefits. You can find these throughout the WE (with Luxembourg and Ireland strong locations) and in major financial centers (such as HK) in Asia.
If you them want to pursue trading, and supplement your retirement portfolio with outside stock trading great, but thats a job in of itself.
Trading is much harder and more labor intensive than retirement planing. Highest rates of return is snake oil. Stocks average a return of 4%, bonds 2%, instruments 1%. Stocks are riskiest, instruments have the least risk.
Yes, you can not contribute to a IRA (either Roth or Traditional) without earned income, but thats not an issue. You simply claim X amount of income (summer work consulting, etc.) as self employment income and direct it up to your limits into the IRA. The best option being a traditional IRA which allows you too contribute up too $5500 or $6500 if over 50, plus the 15% for SS tax which to maximize the IRA contributions (under 50) you would need to budget USD$6325/yr as your self employment income. $825 becomes your annual SS tax, which will also buy you 4 credits (the maximum number you can earn in a year). The remaining $5500 can be directed to the Traditional IRA, and you will pay no taxes on it both because of the IRA and because the income will be below your standard deductions.
I would strongly advise against opening a traditional brokerage account and definitely not with Robinhood. First, the plan @gzmike is suggesting makes you a stock trader, not a retirement investor. Two of the biggest problems with Robinhood are that first, they only have stocks (and to that end ETFs), they have no access to bonds, or instruments. All three of those, stocks, bonds, and instruments are what make up a healthy retirement portfolio. Second, they only have brokerage accounts, that provide zero tax benefits.
You are much better off, finding an actual retirement to date pension or retirement plan offered outside the US that provides actual tax benefits. You can find these throughout the WE (with Luxembourg and Ireland strong locations) and in major financial centers (such as HK) in Asia.
If you them want to pursue trading, and supplement your retirement portfolio with outside stock trading great, but thats a job in of itself.
Trading is much harder and more labor intensive than retirement planing. Highest rates of return is snake oil. Stocks average a return of 4%, bonds 2%, instruments 1%. Stocks are riskiest, instruments have the least risk.
Re: How are you preparing for retirement financially?
I would advise against the previous poster's recommendation to commit felony tax fraud. ETFs are functionally almost identical to mutual funds and there are countless bond ETFs. In regards to "instruments" it seems this person has a fundamental misunderstanding of the term and it's not clear what is meant here. In any case I would avoid this advice in the same way I would avoid an audit and criminal charges from the Internal Revenue Service.
Be aware of some of the rules for expats around IRA contributions and the like, then get some general investing advice from bogleheads.org.
I can recommend Interactive Brokers. Most U.S. brokerages don't take expats as customers, they do. I forget exactly why I did not choose to use Robinhood.
Be aware of some of the rules for expats around IRA contributions and the like, then get some general investing advice from bogleheads.org.
I can recommend Interactive Brokers. Most U.S. brokerages don't take expats as customers, they do. I forget exactly why I did not choose to use Robinhood.
Discussion
Not tax fraud of any type but if you really want it to be squeaky clean and you absolutely have to do be a "US" investor, spend USD$100 to incorporate a company and then pay yourself. Even if you didnt even if you were really dirty about it the IRS does not care about a few thousand USD.
The rules arent that hard. There is no difference between an IS forming a corporation (non-profit) in the US and paying an IT overseas to allow for SS and IRAs and you doing it yourself. Again, though theres no reason to stay with US based retirement programs they are a common global product found everywhere. There is nothing special about a US traditional or ROTH or SEP IRA you cant find the equivalent throughout the world.
ETFs are not functionally identical to bonds, ETFs are functionally stocks that can be comprised of many more types of investment types including stocks, bonds, commodities, currency, etc. They trade throughout the day like stocks and they settle like stocks. ETFs that are comprised of bonds trade throughout the day as stocks do unlike bonds that settle at the end of the day. This difference is irrelevant to a retirement planing investor. The purpose of a retirement portfolio is to diversify it with investment products and then leave it alone, its not something you "need" to trade or settle during the day. You look at a retirement portfolio annually, quarterly, or maybe at most monthly. Again this is the difference between retirement planing and being a stock trader, and thats all EFTs are.
Bond based ETF's dont pay dividends, you just sell them and thats how you realize your return. Strong bond funds pay dividends that compound without having to manage them. There are no tax benefits to ETFs, regardless of what they are they are taxable capital gains.
"Instruments" are various investment products that while not negotiable are products such as CODs (Certificates of Deposit), Treasury bonds, etc. and their equivalents, that mature and extremely safe. They are the investment equivalent of depositing coin in a savings account and letting it collect interest.
As long as you have a passport and a US address you can open a brokerage account at just about any US brokerage house.
Bogleheads is a waste.
The rules arent that hard. There is no difference between an IS forming a corporation (non-profit) in the US and paying an IT overseas to allow for SS and IRAs and you doing it yourself. Again, though theres no reason to stay with US based retirement programs they are a common global product found everywhere. There is nothing special about a US traditional or ROTH or SEP IRA you cant find the equivalent throughout the world.
ETFs are not functionally identical to bonds, ETFs are functionally stocks that can be comprised of many more types of investment types including stocks, bonds, commodities, currency, etc. They trade throughout the day like stocks and they settle like stocks. ETFs that are comprised of bonds trade throughout the day as stocks do unlike bonds that settle at the end of the day. This difference is irrelevant to a retirement planing investor. The purpose of a retirement portfolio is to diversify it with investment products and then leave it alone, its not something you "need" to trade or settle during the day. You look at a retirement portfolio annually, quarterly, or maybe at most monthly. Again this is the difference between retirement planing and being a stock trader, and thats all EFTs are.
Bond based ETF's dont pay dividends, you just sell them and thats how you realize your return. Strong bond funds pay dividends that compound without having to manage them. There are no tax benefits to ETFs, regardless of what they are they are taxable capital gains.
"Instruments" are various investment products that while not negotiable are products such as CODs (Certificates of Deposit), Treasury bonds, etc. and their equivalents, that mature and extremely safe. They are the investment equivalent of depositing coin in a savings account and letting it collect interest.
As long as you have a passport and a US address you can open a brokerage account at just about any US brokerage house.
Bogleheads is a waste.
Re: How are you preparing for retirement financially?
So much if not most of what you said was just plain factually wrong I'll let anyone making the mistake of listening to your advice figure it out on their own, because they would in short time.
Comment
@cms989
You dont know what facts are, which is why I originally responded to your grossly inaccurate post to begin with, which was essentially the IT/IE version of one of those "E-Trade" commercials showing some high school kid partying on a boat with a bunch of models, which was open a brokerage account, trade stocks, get rich, retire. Which is only slightly better than the cash scam buy tax foreclosed property at government auction and flip it advice.
You dont know what facts are, which is why I originally responded to your grossly inaccurate post to begin with, which was essentially the IT/IE version of one of those "E-Trade" commercials showing some high school kid partying on a boat with a bunch of models, which was open a brokerage account, trade stocks, get rich, retire. Which is only slightly better than the cash scam buy tax foreclosed property at government auction and flip it advice.
Re: How are you preparing for retirement financially?
I agree broadly with cms, though not in every detail. Always best to be simple and honest re retirement planning and taxes, and there is a huge difference between “legal” and “unlikely to get caught”. Bogleheads are awesome. ETFs are awesome. Diversify your investments, park your money in low-fee investments, and leave it there to grow. Avoid the ridiculous high-fee offshore “pensions” and “insurance” options. They are designed to milk you for as much as possible, with the added risk that if you don’t report your accounts and pay required taxes, you’re liable for massive penalties. And yes, people get caught. Normal people. International educators. Some of my friends.
And now I’m leaving the discussion, because experience tells me that arguing with certain posters is futile. Funny how some people will never back down.
And now I’m leaving the discussion, because experience tells me that arguing with certain posters is futile. Funny how some people will never back down.
Reply
@Sid
Yeah we disagree, find a nice no fee retirement to date account, diversify your coin based on your risk and return profile. Dont pay for high priced actively managed investments or insurance annuities. Dont confuse being a day stock trader with retirement planing. Dont get caught when theres nothing to get caught at.
Funny how some people consider their position strong enough to withstand debate, especially when theyre right.
Yeah we disagree, find a nice no fee retirement to date account, diversify your coin based on your risk and return profile. Dont pay for high priced actively managed investments or insurance annuities. Dont confuse being a day stock trader with retirement planing. Dont get caught when theres nothing to get caught at.
Funny how some people consider their position strong enough to withstand debate, especially when theyre right.
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snowphantom
- Posts: 19
- Joined: Wed Feb 01, 2017 4:42 am
Re: How are you preparing for retirement financially?
@psyguy There are many inaccuracies about your posts but I'll address this one: "Bond-based ETFs don't pay dividends, you just sell them and that's how you realize your return" You are plain wrong here. They do. I've owned them for years and I get a dividend payment each month for the last 10 years through my brokerage account which I manage. You can look up any bond fund (including ETFs) on Morningstar, Vanguard or Yahoo for example and see their "distributions" which for bond funds are paid monthly. Stock ETFS are usually paid out quarterly. The difference between bond ETFs and bonds is that yes bond prices fluctuate and long-term bond prices can go down if interest rates go up but as long as you hold the bond fund to it's yield to maturity, your investments do not lose money. They will at the very least, hold up to inflation rates.
The other inaccuracy of your post is suggesting that @cms989 is that just because you open a brokerage account, you are careless and reckless (akin to Wolf of Wallstreet). DIY investors are a very large and growing community of responsible and frugal investors that are fed up with the financial industry taking advantage of people with high fees or bad investment advice. I pay less than 0.25 fees (MER) on all my investments and spend less than 30 minutes a year making any transactions. I do not buy and sell at the end of the market day. I buy and hold and rebalance a couple times a year ensuring I have an percentage of fixed income to roughly by age (bond ETFs) and stocks ETFs. DIY takes a bit of research initially but I believe, pays off in the long run.
My wife and I hold no physical real-estate (aside from a small portion of real estate funds in our portfolio) maintain a DIY investment fund, contribute regularly and should be able to retire in our early 50s. You can pay someone a small amount to manage your portfolio if you are not comfortable doing the DIY approach but ensure they are not financial managers and accept fee-based amounts. Also, Vanguard has tons of low-cost funds that they will do for you.
The other inaccuracy of your post is suggesting that @cms989 is that just because you open a brokerage account, you are careless and reckless (akin to Wolf of Wallstreet). DIY investors are a very large and growing community of responsible and frugal investors that are fed up with the financial industry taking advantage of people with high fees or bad investment advice. I pay less than 0.25 fees (MER) on all my investments and spend less than 30 minutes a year making any transactions. I do not buy and sell at the end of the market day. I buy and hold and rebalance a couple times a year ensuring I have an percentage of fixed income to roughly by age (bond ETFs) and stocks ETFs. DIY takes a bit of research initially but I believe, pays off in the long run.
My wife and I hold no physical real-estate (aside from a small portion of real estate funds in our portfolio) maintain a DIY investment fund, contribute regularly and should be able to retire in our early 50s. You can pay someone a small amount to manage your portfolio if you are not comfortable doing the DIY approach but ensure they are not financial managers and accept fee-based amounts. Also, Vanguard has tons of low-cost funds that they will do for you.
Reply
@snowphantom
No its not inaccurate. Your not getting paid a dividend, just because your bond has been wrapped up to look like a stock, doesnt mean its a stock. You have a bond your getting paid interest, because thats whats bonds are, loans, that you own that pay interest. You are getting interest.
EFTs comprised of bonds never mature, thus you have no protection from changes in interest rate that effect the value of your EFT, unlike an actual bond that if you hold to maturity you redeem the bond at value and thus are protected from changes in interest rate. Having a bond EFT removes all the security of a bond and exchanges it for all the risk and volatility of a stock without providing the increase in return a company stock would.
I didnt suggest anything, I make statements and claims and thats the extent of it. My statement is that being a trader is NOT a substitute for retirement planing.
I too am fed up with high fees and bad investment advice by professionals who were nothing more than sales people who owed me no fiduciary responsibility and whose interests were entirely about increasing their commissions. There are PLENTY of low AND NO fee investment products that are the global equivalent of IRA (retire to date accounts) that belong in a retirement portfolio that are managed essentially by computer. Retirement planing should provide tax saving benefits, little if any fees, and be robust, diversified, and stable with consistent average returns. Thats the kind of retirement portfolio thats suitable for retirement.
I did not claim that DIY investing in general is reckless, careless or scammy nor did I cite your movie reference (which I have not seen), what I stated is the way that the way @cms989 pitched it;
"..."Then just choose a couple ETF's and buy. Then keep buying more and more as you can. Once you have over $10,000 invested, then you can try to get a little more advanced by choosing individual stocks if you want, or just stick with a couple ETF's if you prefer..."
Sounds exactly like those scammy financial planers thats reps the process of investing is so easy pick what you want to invest your coin in because you like the name, or the sector and just keep buying because no one ever "loses" coin investing, 'IS' careless, reckless, and more descriptive of a day trader than anything remotely resembling sound investment advice for retirement planing.
Too direct to YOU, who absorbs the cost of that EFT investment 'learning curve'? There is no practice in DIY investment, just like DIY surgery can have devastating results. Dont pay for snake oil, but why DIY the foundation of a retirement portfolio when there are PLENTY of no fee, good return products that provide tax saving benefits that are globally available. Unless your advice is (which would be VERY bad advice) is to ignore the benefits of an equivalent IRA and substitute that with becoming a stock EFT trader? (Which again is HORRIBLY bad advice) and what @cms989 was advising.
No its not inaccurate. Your not getting paid a dividend, just because your bond has been wrapped up to look like a stock, doesnt mean its a stock. You have a bond your getting paid interest, because thats whats bonds are, loans, that you own that pay interest. You are getting interest.
EFTs comprised of bonds never mature, thus you have no protection from changes in interest rate that effect the value of your EFT, unlike an actual bond that if you hold to maturity you redeem the bond at value and thus are protected from changes in interest rate. Having a bond EFT removes all the security of a bond and exchanges it for all the risk and volatility of a stock without providing the increase in return a company stock would.
I didnt suggest anything, I make statements and claims and thats the extent of it. My statement is that being a trader is NOT a substitute for retirement planing.
I too am fed up with high fees and bad investment advice by professionals who were nothing more than sales people who owed me no fiduciary responsibility and whose interests were entirely about increasing their commissions. There are PLENTY of low AND NO fee investment products that are the global equivalent of IRA (retire to date accounts) that belong in a retirement portfolio that are managed essentially by computer. Retirement planing should provide tax saving benefits, little if any fees, and be robust, diversified, and stable with consistent average returns. Thats the kind of retirement portfolio thats suitable for retirement.
I did not claim that DIY investing in general is reckless, careless or scammy nor did I cite your movie reference (which I have not seen), what I stated is the way that the way @cms989 pitched it;
"..."Then just choose a couple ETF's and buy. Then keep buying more and more as you can. Once you have over $10,000 invested, then you can try to get a little more advanced by choosing individual stocks if you want, or just stick with a couple ETF's if you prefer..."
Sounds exactly like those scammy financial planers thats reps the process of investing is so easy pick what you want to invest your coin in because you like the name, or the sector and just keep buying because no one ever "loses" coin investing, 'IS' careless, reckless, and more descriptive of a day trader than anything remotely resembling sound investment advice for retirement planing.
Too direct to YOU, who absorbs the cost of that EFT investment 'learning curve'? There is no practice in DIY investment, just like DIY surgery can have devastating results. Dont pay for snake oil, but why DIY the foundation of a retirement portfolio when there are PLENTY of no fee, good return products that provide tax saving benefits that are globally available. Unless your advice is (which would be VERY bad advice) is to ignore the benefits of an equivalent IRA and substitute that with becoming a stock EFT trader? (Which again is HORRIBLY bad advice) and what @cms989 was advising.