discussing investments

You: Hi Travis! Someone told me about using life insurance to save for retirement. I want to know more. Do u know anything about it? 5:04 AM
Me: It's a horrible investment. The returns are really bad because the insurance companies keep so much profit. Don't ever invest through life insurance. :-) no load mutuals will beat insurance always. 5:10 AM
You: Oh, I see. But I like the tax-deferred part, and guarantee interest. In a book that I read, it even say I can withdraw money after 10 years for the rest of my life. Tax free! 5:39 AM
Me: That's all correct. The tradeoff is that the returns will be really low. 5:41 AM
You: Humph :( what should I do then? I don't like the idea that my retirement has to depends on the stock market 5:44 AM
Me: You can invest in life insurance, but I'd keep that investment small, because I predict you won't be happy with the returns. 5:45 AM
Me: Most retirement is invested in stocks for people who are far away from retirement, since that's the only way to get the higher returns. 5:46 AM
You: Higher returns, higher tax. Right? 5:46 AM
Me: Yep, that's the consequence of making money :) but it should be worth it. 5:47 AM
You: I see. What about annuity? 5:48 AM
Me: An annuity is basically the same as a whole life insurance policy. Same features, same returns. The prob. is you invest $1,000 and they take half in fees. 5:48 AM
You: For stocks, Do we go w mutual funds or individual accounts through a brokerage account? 5:49 AM
Me: Life insurance is really good if you have kids, but as a pure investment vehicle the returns are just lousy. 5:49 AM
Me: For stocks, you invest in mutual funds through a brokerage account. Never individual stocks. 5:49 AM
You: What!? Half in fee?! 5:49 AM
Me: And only no-load mutual funds - never pay a fee... ever. 5:50 AM
You: What is a no-load mutual funds? 5:50 AM
Me: Each brokerage (T Rowe Price, Fidelity etc) has a list of their no-load mutual funds. Most of the index funds are no-load. But check with the brokerage. 5:53 AM
Me: Buying a stock is fine if you have a reason to. But blindly investing $ in individual companies is more risky because there's more volatility vs. a mutual fund 5:54 AM
You: I appreciate your responses. I just realized how misleading those books can be. In this book particular, it even shows me that life insurance outperforms mutual funds in long run 5:56 AM
Me: It depends on the mutual fund, insurance could outperform SOME mutuals. But never an index fund. Insurance companies will use funny math in sales pitches. 5:57 AM
You: No load? Is it the same thing as expense ratio? I thought Vanguard has one of the lowest among all mutual funds company. 5:58 AM
Me: no, the load is an annual fee they charge for investing in SOME mutuals. Most mutuals are no-load, just confirm before you invest. 5:59 AM
Me: And yes, expense ratio is another thing to look at to confirm it is less than 1.0%. Never invest in one above 1.0%. 5:59 AM
You: I see. Thanks 6:04 AM
You: How about 401k? 6:04 AM
You: Should I put money in it? 6:04 AM
Me: Absolutely. At least enough to get whatever match the company provides. Preferably put in as much as you can afford. 6:05 AM
You: But I also have 403b. Is it a separate one? Which one is only limited to $17k a year? 6:08 AM
Me: a 403b is a type of 401k. 403b is for gvmt and non-profit employees (hospitals included). They are the same thing. both are limited to 17k for 2012, 17.5k 2013 6:12 AM
Me: I'm not sure you can invest 17k in both, for a total of 34k. I think you're limited to 17k total. 6:13 AM
You: If I make 100k a year, for example, i got 13k from my retirement, and I need to put in 4k more. Right? 6:14 AM
You: I also need to buy a place soon. :( 6:14 AM
You: To invest in real estate :) 6:14 AM
Me: You can put in 4k more to max it out. But don't do that if you want to save for a house. If u want a house, put enough in the 403b/401k to get the match 6:15 AM
Me: since the match is free money. Then put the rest somewhere else to save for real estate. Once you buy the real estate, bump up your 401k investment. 6:15 AM
You: Yes! But I don't think I can afford a house in CA. Too expensive! 6:16 AM
Me: You def. can't afford it if you don't save for it. So start there. :o) And if you want it as an investment, it doesn't have to be in CA. 6:17 AM
You: I want to apply for the FSA loan, for first time home buyer. I heard u can put down as little as 3% down payment 6:17 AM
Me: Yes, the FSA loan is great, for a home you live in. For an investmnt home outside CA i'm just saying it's an option :) 6:19 AM
You: Yes, I will live in one room and rent out the other. 6:20 AM
You: How much do u think I need to save for a 2 BR house/apartment 6:21 AM
You: Is it hard to get the FSA loan? Im targeting about 300k 6:22 AM
Me: The FSA loan isn't hard to get. I'd save up 5% to put down, just to have cushion. 6:24 AM
Me: You can't find a home for 300k in the south bay. I'd aim for 500k x 5% = $25k as the down payment. That's very doable. 6:24 AM
You: 500k!? 6:26 AM
Me: There's not much available for 300k here that is decent. I think you need to be realistic and be in the 400-500k range. 6:28 AM
You: True. I can easily take out 30k. Next step, find a place! 6:32 AM

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