What's your ROI on your IRA?

[EMW14]

I have an IRA which is the aggregate of all the various 401k's from different jobs that I've rolled over into this fund, along with similar from my wife. We just had our annual review with the guy managing it for us.

Meanwhile, I also have a 401k at work, which is allocated by the same dude. That money is "passively invested", meaning I made the allocations recommended by my financial advisor and haven't changed anything.

The 401k has a rate of return for the last 12 months of 6%. The "actuvely managed" IRA has a rate of return for tje last 12 months of about 1.8%.

Needless to say, I'm totally unimpressed with his active management. So much so that I'm giving some thought to giving somebody else a crack at managing it. He says over a 5 year period it should average out to 6 to 8% per year growth. We've been with this guy for 2 years, now. Last year was flat also. I should say that my parents have been with the guy who owns this firm - and it's a small, privately held, independent firm, no life insurance sales or any other bullshit, strictly wealth management - for well over 30 years. The owner has done quite well by them. Their money is now actively managed by the same guy managing ours. They, of course, are in a totally different position than my wife and I are, they both being retired and drawing a little on their earnings.

Those of you who have similar investments, what has been your return on investment this past year? Are your investments actively managed or passive?

 

[Muscle mechanic]

Living check to check right now. Be grateful. Our insurance at work went up alot this year effective January 1. Company not putting but 25% of normal benifit says things been too bad, only working 35 hours a week at this time. Have nothing extra at all. Side jobs paying Christmas gifts. Hoping this year picks up in oil field industry.

 

[The Survivor]

My 401 is worth about $4.01!

 

[yellow snow]

Same thing happened to me. The actively managed fund looks impressive until you look at the fees then add the ROI rate and mine totally underperformed the S&P 500. Now I just put everything that is stock based in an unimpressive S&P 500 ETF or mutal fund ( managment rates are .3% to as low at .05%). I gave my activly managaged fund 18 months and then tested it against the S&P for the same time. I would have made 3.5% more ROI in the S&P fund and my fee would have been .1% verses 3.5%).

No brainer in my opinion if you are look at your 401K/ IRA for the long haul 10-20+ years. I would recommend ( if you can afford the tax hit) to turn your old 401k's from IRA's into Roth IRA. I am not a big fan on getting taxed when I am 65 on my compounded interest.

Now once you are retired and start looking at annuities and all the tax implications..................I may change my tune a little with the activly managed account managers.

 

[EMW14]

My 401 is worth about $4.01!

Yeah, but if it was worth $3.07 last year, and you didn't add any $ to it, then you had over a 25% gain.............

 

[EMW14]

Same thing happened to me. The actively managed fund looks impressive until you look at the fees then add the ROI rate and mine totally underperformed the S&P 500. Now I just put everything that is stock based in an unimpressive S&P 500 ETF or mutal fund ( managment rates are .3% to as low at .05%). I gave my activly managaged fund 18 months and then tested it against the S&P for the same time. I would have made 3.5% more ROI in the S&P fund and my fee would have been .1% verses 3.5%).

No brainer in my opinion if you are look at your 401K/ IRA for the long haul 10-20+ years. I would recommend ( if you can afford the tax hit) to turn your old 401k's from IRA's into Roth IRA. I am not a big fan on getting taxed when I am 65 on my compounded interest.

Now once you are retired and start looking at annuities and all the tax implications..................I may change my tune a little with the activly managed account managers.

I can't see taking the tax hit to move 401k and IRA tax deferred $ into a roth. Wouldn't the 20% wirhdrawl penalty apply as well? I will never pay as mych income tax as I do currently - well, I'll never be in a higher tax bracket, at least. So, I'd rather save the tax $ now and pay a lower rate when I withdraw in retirement.

I might do a similar test, I never thought of that. I could put some $ in a similar fund as you talked about and see how its ROI looks compared to the actively managed fund and decide whether or not to move it in a year.

The guy definitely got the message that I we were not happy with the performance at all. I understand that the market was turbulent and so on. But if my 401k had a tolerable return, then that proves that it's possible to make $ in the market. I hope to retire on 10 years. If that's going to happen, my $ needs to make $, not coast along at 1.8%. I'm not paying these people for 1.8%.

 

[yellow snow]

I can't see taking the tax hit to move 401k and IRA tax deferred $ into a roth. Wouldn't the 20% wirhdrawl penalty apply as well? I will never pay as mych income tax as I do currently - well, I'll never be in a higher tax bracket, at least. So, I'd rather save the tax $ now and pay a lower rate when I withdraw in retirement.
.

It is my understanding that the 20% penalty is if you were to use the money in your everyday life. If you move a IRA/401k to a roth it will be counted as income and may move you to a high tax bracket, but other than that you get taxed on the money transfered to a Roth just like income. Example you are in a 15% tax rate and have 100k in a 401k that you want move to a roth IRA. It would cost you 100,000x 15% or $15,000 this year ( assuming the added $100k of income doesn't move you into a higher bracket). The thought is that the compound interst assosiated with 100k will be say 1 million in 10-15 years ( I didn't do a ROI 10-12% calculation, just guessing here). You would pay the governement 1 million x tax rate of 25-33% ( the highest tax bracket of the day, doubt it is going to be lower) or 250,000 or 300,000.

Would you rather pay the governement 15k upfront or 300k on the back side ?

 

[EMW14]

It is my understanding that the 20% penalty is if you were to use the money in your everyday life. If you move a IRA/401k to a roth it will be counted as income and may move you to a high tax bracket, but other than that you get taxed on the money transfered to a Roth just like income. Example you are in a 15% tax rate and have 100k in a 401k that you want move to a roth IRA. It would cost you 100,000x 15% or $15,000 this year ( assuming the added $100k of income doesn't move you into a higher bracket). The thought is that the compound interst assosiated with 100k will be say 1 million in 10-15 years ( I didn't do a ROI 10-12% calculation, just guessing here). You would pay the governement 1 million x tax rate of 25-33% ( the highest tax bracket of the day, doubt it is going to be lower) or 250,000 or 300,000.

Would you rather pay the governement 15k upfront or 300k on the back side ?

Interesting. I understand where you're coming from, I think. The amount of money we're talking about would absolutely change my tax bracket for a given year. But I am catching on to your concept.

Maybe you know something I don't about Roths, or maybe there's some other type of Roth that I'm unaware of (for example, I just learned that there is such a thing as a Roth 401k, a relatively new thing that started around 2006). My understanding of Roth IRA's is that there is a $5,000 max allowed annual contribution. In fact, my wife and I each have a Roth, which have been largely inactive until this year. We just this year decided to fully fund one of them, which meant setting up a monthly contribution to equal $5k over 12 months. Is there some other Roth that ould allow a substantial contribution? Or are rollovers exempt from the max contribution limit?

 

[EMW14]

Not only that, but I can't imagine that someone in the 15% federal income tax bracket wouldn't move up at least one tax bracket with an additional 100k in income!

I was just reading up on Roth 401k's and what I read made sense. The jist of it was, if you're young, not a high wage earner, and in a lower tax bracket, then a Roth 401k makes sense, because you're likely paying less income taxes now than you will be in retirement. But for someone like me, who's probably at or near the peak of his earning potential - and therefore tax exposure - it makes more sense to defer taxes until retitement, at which time income, and therefore tax exposure, is lower. It's not like you pay taxes on a million bucks because you start drawing on it. You pay taxes on what you draw as income. Assuming no mortgage in retirement, no commuting for work, expenses go waybdown and thus income requirements. Theoretically, the principal doesn't get touched anyway, one only draws $ from the income generated by the principal's earnings. Say you have a million in an IRA (sounds like a lofty number, but I'm told that a 7% ROI results in doubling your money every 7 years, so over time the million bucks is actually an achievable number) and it's time to retire. You move this money into low risk investments and earn 3 or 4 % on it. Without a mortgage, provided you live in an area where property taxes don't smother you, youbcan comfortably live on the interest earned by the investment, $30-40k. There's not much tax exposure to a retiree taking a $30-40k income from his investments.

Hopefully, you don't use up tje million bucks before you're dead, and you can split it between your kids in your will.....

But anyway, getting back to the main point, this is why I'm pissed about the lackluster performance of my managed account. None of the above works without a million bucks. And my IRA ain't gonna get close to that with a 1.8% ROI. I need to male at least an average of 7% a year for 10 years. Since my 401k made 6% last year as a passive account, I expect a managed account to do better. That's why I am paying for a managed account. Otherwise, I'd roll all of it into my 401k, pick the aggressive investmemt profile, and let it sit there for 10 years.

 

[yellow snow]

Interesting. I understand where you're coming from, I think. The amount of money we're talking about would absolutely change my tax bracket for a given year. But I am catching on to your concept.

Maybe you know something I don't about Roths, or maybe there's some other type of Roth that I'm unaware of (for example, I just learned that there is such a thing as a Roth 401k, a relatively new thing that started around 2006). My understanding of Roth IRA's is that there is a $5,000 max allowed annual contribution. In fact, my wife and I each have a Roth, which have been largely inactive until this year. We just this year decided to fully fund one of them, which meant setting up a monthly contribution to equal $5k over 12 months. Is there some other Roth that ould allow a substantial contribution? Or are rollovers exempt from the max contribution limit?

I am not an accountant or an investment guru, but my company has allowed Roth 401k's for almost 5 years. It is a no brainer if your company offers it; I also don't think that their is the traditional $5k limit like it is on the roth IRA.

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Not only that, but I can't imagine that someone in the 15% federal income tax bracket wouldn't move up at least one tax bracket with an additional 100k in income!

I was just reading up on Roth 401k's and what I read made sense. The jist of it was, if you're young, not a high wage earner, and in a lower tax bracket, then a Roth 401k makes sense, because you're likely paying less income taxes now than you will be in retirement. But for someone like me, who's probably at or near the peak of his earning potential - and therefore tax exposure - it makes more sense to defer taxes until retitement, at which time income, and therefore tax exposure, is lower. It's not like you pay taxes on a million bucks because you start drawing on it. You pay taxes on what you draw as income. Assuming no mortgage in retirement, no commuting for work, expenses go waybdown and thus income requirements. Theoretically, the principal doesn't get touched anyway, one only draws $ from the income generated by the principal's earnings. Say you have a million in an IRA (sounds like a lofty number, but I'm told that a 7% ROI results in doubling your money every 7 years, so over time the million bucks is actually an achievable number) and it's time to retire. You move this money into low risk investments and earn 3 or 4 % on it. Without a mortgage, provided you live in an area where property taxes don't smother you, youbcan comfortably live on the interest earned by the investment, $30-40k. There's not much tax exposure to a retiree taking a $30-40k income from his investments.

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I get deferring, just now realize that there is a risk of the tax brackets going even higher than they are today( thanks socialist).

 

[EMW14]

I am not an accountant or an investment guru, but my company has allowed Roth 401k's for almost 5 years. It is a no brainer if your company offers it; I also don't think that their is the traditional $5k limit like it is on the roth IRA.

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I get deferring, just now realize that there is a risk of the tax brackets going even higher than they are today( thanks socialist).

Tax brackets: I hear you, especially with the definition of interest income as "unearned income" - as if saving isn't work! That's a socialist crock of shit right there. Not counting on this, but with luck, the incoming Trump administration will set back the socialist movement in this country a good ways.

That's getting off topic, though... There's another thread for that.

I spoke with a good friend of mine a while ago who is very market savvy and has serious investments. After listening to me and hearing my portfolio allocation (which includes over 60% stocks), his remark was, "If you haven't made more than 2% a year for 2 years, I think you've got the wrong guy."

When I asked him what he thought about increasing the aggressiveness of the portfolio he repeated his wrong guy statement. I have a call in to the owner of the firm and also an appointment with another. My buddy also agrees with my assessment that 6% (which my 401k realized) is a good, but very modest gain. We'll see what comes out of my phone call when that is returned, and the upcoming appointment.

 

[The Dude]

Most of my money is in IBM stock options and mutual funds that my Mom had access to through her various employers. It helps that she's a big shot Regional Director for IBM and developed most of the systems that Franklin Templeton now uses. I probably average 8% over the last 2 years. Some years I am over 12%. Honestly I don't really even look any more. I'm investing in my future getting my PharmD. In addition I'm going to graduate Magna Cum Laude... at least that is my true goal for the next 4 years. I've got a 4.0 and I can't let it go below a 3.7 overall.
I've already received an offer from a large Pharmacy that they will pay my tuition costs (65k a year for 4 years and 120k a year for 4 years) I need to weigh my options. I could make ALOT more than 120k if I land a decent research position after graduating with honors... I've gone through some BIG money this year... but I am very pleased with how things are going..
This is my home in FL where I will stay until I graduate and possibly 4 years if I accept that offer. We also have our place in TN.
I have taken on a lot though... I work quite a bit at the pharmacy and I'm taking 15 hours a semester and another 9 during the summer.. I don't do much more than school, study, and work. It's an investment and the rate of return is completely up to me...

 

[yellow snow]

Dude, Sounds like you have your shit together, just remember the biggest priciple no matter how much you make. Spend less than you earn...............so simple, but it seems like no one does it anymore.