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retirement [2024/08/09 22:25] nyetretirement [2024/08/10 02:21] (current) nyet
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 disclaimer:  disclaimer: 
-This is written by a USA. The direct, specific advice is directed at my fellow yanks. Those are the numbers and nuances I know. There will be something here for other folks, mostly in the sections that cover mindset. I'm going to talk about things as they are, not as they should be. I am not an expert. I have read a few books, followed discussion forums on the topic for a few years, listened to podcasts, etc. I'm a layman, I know enough to provide a good introduction. +This is written by a USA. The direct, specific advice is directed at my fellow yanks. Those are the numbers and nuances I know. There will be something here for other folks, mostly in the sections that cover mindset. I'm going to talk about things as they are, not as they should be. I am not an expert. I have read a few books, followed discussion forums on the topic for a few years, listened to podcasts, etc. I'm a layman, I know enough to provide a good introduction
 + 
 +Why should you trust me?  
 + 
 +You shouldn't. There's a lot of grifters in this space. You shouldn't take any rule of thumb or piece of information without cross referencing it against more than one reputable source. Any data you can easily pull yourself from a primary source you should do so, which almost every number cited about markets you will be able to do this with
  
 0. How do you live?  0. How do you live? 
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 1d. How do taxes work? 1d. How do taxes work?
 1e. Investing 1e. Investing
-1g. Insurance 
-1h. Windfalls 
  
 Saving for retirement is important. Ensuring your finances are in good shape is more important. First part of saving for retirement is ensuring you have an okay understanding of personal finance, you're financially healthy, and you understand where money is going. We'll start with checking your financial health.  Saving for retirement is important. Ensuring your finances are in good shape is more important. First part of saving for retirement is ensuring you have an okay understanding of personal finance, you're financially healthy, and you understand where money is going. We'll start with checking your financial health. 
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 === Debt === === Debt ===
  
-If you have any high interest debt you should immediately pay it off. If it's a very high interest rate sacrifice as much as you can manage until it is gone. High interest debt is debt that has a higher interest rate than what the returns would be on low risk investments. For most yankees that'd be around 6%. A very high rate would be anything over 10% interest, like credit card debt, payday loans, and predatory vehicle loans. +If you have any high interest debt you should immediately pay it off. If it's a very high interest rate sacrifice as much as you can manage until it is gone. High interest debt is debt that has a higher interest rate than what the returns would be on low risk investments. For most yankees that'd be around 6%. A very high rate would be anything over 10% interest, like credit card debt, payday loans, and predatory vehicle loans. ((Mortgage interest rates that are within a point to half point what what the federal reserve has set interest rates are are not considered high interest debt, even if they're above 6%. The high interest rate is offset by the value of the property increasing, hence the exclusion. More on this later))
  
 === Emergency Funds === === Emergency Funds ===
  
-While paying off high interest debt you should start building an emergency fund. The only time you shouldn't be building an emergency fund is if you have very high interest loans you are repaying. Having money set aside is one of the biggest returns on investment in both terms of money and peace of mind. If your fridge breaksyour car breaks, you are hurt and can't work, your home burnsyou are covered. You won't have to go into (likely high interest) debt to dig yourself out. This can literally save you from becoming homeless+While paying off high interest debt you should start building an emergency fund. The only time you shouldn't be building an emergency fund is if you have very high interest debt or you've saved enough money. Having money set aside is one of the biggest returns on investment in both terms of money and peace of mind. If your fridge breaks or your car needs repairit is annoying instead of anxiety inducing. If you are hurt or your stuff burns you have months to figure out what to do. You won't have to go into (likely high interest) debt to dig yourself out of the random big expenses you'll experience being alive
  
-Your emergency fund should be somewhere between 3 times and 6 times your monthly expenses. If your income is volatile (freelancers, self employed) you should shoot for more. +Your emergency fund should be somewhere between 3 times and 6 times your monthly expenses. If your income is volatile (freelancers, self employed) you should shoot for more, up to a year set aside
  
 You should keep your emergency fund somewhere you can access it quickly. For most folks this will be a savings account. Preferably one with higher interest. Other options would include bonds and CD accounts. You can sell these for their entire value whenever, you'll only loose out on interest gains. A CD account at a bank, and you put money in and you're not allowed to touch it for some amount of time. If you don't touch it you get paid a higher interest rate than a normal savings account. If you do touch it you only loose out on the interest rate. Regardless of where you put your emergency fund you should make sure you can access almost all of it within a day or two.  You should keep your emergency fund somewhere you can access it quickly. For most folks this will be a savings account. Preferably one with higher interest. Other options would include bonds and CD accounts. You can sell these for their entire value whenever, you'll only loose out on interest gains. A CD account at a bank, and you put money in and you're not allowed to touch it for some amount of time. If you don't touch it you get paid a higher interest rate than a normal savings account. If you do touch it you only loose out on the interest rate. Regardless of where you put your emergency fund you should make sure you can access almost all of it within a day or two. 
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 The investment would have grown to $200,772.91. If this was simple interest and it didn't compound the value would only be $31,592.58 The investment would have grown to $200,772.91. If this was simple interest and it didn't compound the value would only be $31,592.58
  
-This is the power of compounding interest. This is how you retire. You put away money into investment accounts. You let that money accrue compound interest (or in the case of investment and we're being pendants, compounding returns) for as long as possible. Once there's enough money in the account to cover every dollar you'll spend for the rest of your life you retire. Simple as. +This is the power of compounding interest. This is how you retire. You put away money into investment accounts. You let that money accrue compound interest (or in the case of investment and we're being pendants, compounding returns) for as long as possible. Once there's enough money in the account to cover every dollar you'll spend for the rest of your life you retire. Simple as. I encourage you to play with a compound interest calculator to try to see how very small (or large amounts) grow with time. How much or little contributions over time change the final result, and how different interest rates change how fast or slow it grows. [[https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator|Investor.gov has a simple and decent calculator.]] 
  
 ==== 1c Taxes ==== ==== 1c Taxes ====
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 You are not charged capital gains if you simply by and hold an asset. You are only charged capital gains on the total profits you've made by selling held assets that year. If you sell assets and you loose money, that the loss from that sale reduces the tax burden on your profits.  You are not charged capital gains if you simply by and hold an asset. You are only charged capital gains on the total profits you've made by selling held assets that year. If you sell assets and you loose money, that the loss from that sale reduces the tax burden on your profits. 
- 
-You probably shouldn't raw dawg by and sell stocks outside of retirement accounts. You should buy mutual funds (discussed later) if you want exposure to the stock market, and you shouldn't think about touching any of those stocks/funds/instruments for many many many years. As a result, cap gains is not relevant to saving for retirement assuming you're using retirement accounts.  
  
 ==== 1e. Investing ==== ==== 1e. Investing ====
  
 +Once you've met your basic needs, have a small nest egg for emergencies, and have payed off credit high interest debt you ought to have some extra money in your budget. I'm going to keep this as simple and only explore less risky options. This space is //filled// with grifters, be careful where you source information. Picking individual stock is virtually always a bad idea. You are not smart or better at it than your average professional investor. They will eat your lunch. 
 +
 +The average inflation in the US over the last 50 years was 3.89% ((based on December end-of-year data from https://www.bls.gov/cpi/tables/supplemental-files/historical-cpi-u-202312.pdf)). You need to have compounding returns on investment that beats inflation by a few percent, on average throughout your life. The more you beat inflation, the greater the returns. In the United States (and other places with access to American Financial markets), this is fairly easy.  On average the American stock market grows in value by 11% per year. If you stick your money in a fund that tracks the American stock market you're golden. For almost everyone that will be a low fee index fund for the S&P500. This will be an option in virtually every retirement plan offered by an employer. 
 +
 +=== Dollar Cost Averaging, and Stock/Bond mixes ===
 +You should not care what the market is doing when investing into it. Your goal for it is for it to grow over the course of 20 to 40 years. If the market is down you buy the same amount of stock as when it's up. You, nor anyone else, is capable of predicting what the market is going to be doing in a few months. If the S&P 500 is down from today in 40 years you're going to have a lot more to worry about than retirement savings. 
 +
 +As you age, grey, become wise, wrinkle, and being to look distinguished you need to start shifting money out of the stock market. A market crash when you're 15 years away from retirement does not matter. The market will (more than) recover of the ensuing 15 years and it will have no impact on how much you make overall. If a the market crashes when you've retired, where your living expenses are covered your portfolio it's going to impact your quality of life as you'll be forced to sell at a loss to keep funding your life. 
 +
 +You should shift your stock/bond asset mix to more and more bonds as you age. The rule of thumb is 100 minus your age should be in stocks. A 30-year-old should have a 70/30 mix between stocks and bonds. If you can (or need to) tolerate more risk you can adjust this number upwards, following a 120 minus your age rule. This is more risky, but if you expect to live longer than average it will be worthwhile. The inverse is true if you expect to die at 60.
 +
 +=== Moral Investing ===
 +
 +Moral funds have vastly under preformed since they were developed a good 40 years ago or so. It is incredibly challenging to passively invest and make money. Unfortunately due to pensions being rare, social security not being enough, being alive costing money, and inflation existing it is hard to retire in this country without benefiting some real shitty people. Real Estate is an option here if you can fix up a house, you're willing to be landlord, and you have significant savings. This is a genuine and proven path to generational wealth that will remain open as long as common people can afford a house, due to housing being so massively tax advantaged and subsidized. Going into the details of real estate investing is out of scope, as it's a //lot// more involved (and work) than passive investment into the stock market. Being a landlord also suck ass so either way you benefit from harm imo. Back before I held a negative opinion of landlords and real estate people in general biggerpockets was a good source if it's something you want to explore. I don't know if that remains the case today, as it's been many years. 
 +
 +==== Retirement ====
  
 +How much money 
  
 ====== 2. The Dark Forest ====== ====== 2. The Dark Forest ======