Building a Portfolio for Beginners

[Smurf Hunter]

okay, since I've had a Roth IRA for less than 24 hours please indulge another stupid question from me.

I just read there are income limits.

Income Limits Adjusted Up $1,000-2,000
Direct Roth IRA contributions are only allowed if your income (technically your Modified Adjusted Gross Income) is below a certain level (you can get around this limit by using a Backdoor Roth IRA). For single filers in 2017, that income threshold starts at $118,000 (up from $117,000) and ends at $133,000 (up from $132,000). In that range, your contribution is limited, eventually reaching zero. For married filing jointly filers (and qualifying widower(er)s in 2017, that income threshold starts at $186,000 (up from $184,000) and ends at $196,000 (up from $194,000).

For arguments sake, if I earn $150K, does that mean I'm completely disqualified from contributing to a Roth IRA? 
I'm not accountant (my wife is), but I can google.  MAGI would be AFTER income deductions (401K/classic IRA), so one could contribute to the pre-tax investments to bring down the income level.

Am I on track here?

So would high income earners like doctors and attorney's simply not use Roth's at all (assuming they can't bring their MAGI below the threshold)?

[FreeLancer]

So would high income earners like doctors and attorney's simply not use Roth's at all (assuming they can't bring their MAGI below the threshold)?

That's why my wife and I only were able to contribute to a Roth IRA for a couple years, once we got out of residency our income went over the limit.  The only way to do a Roth is if the employer's plan offers it as an option, but that's only been available fairly recently.

[David in MN]

Not to be a dick but it's one of the massive advantages to be in flyover country. Either your employer pays nationally competitive and you gain from the lower cost of living or you get the perks we don't allow "the rich".


True "high income" people don't play the same game. I've had the pleasure of knowing several people who take a quarter million dollar salary (even here). They frequently have the power to use other vehicles like hedge funds and asset managers (basically people like me) to run the money. High net worth people don't generally care about retirement savings. They like the ability to use the money to create cash flow. A lot of rules disappear if you have enough money.

Unfortunately we have a system that works <$100k-ish and >$200K-ish. But there's not much in the middle. (I'm in the middle too.)

[Smurf Hunter]

Not to be a dick but it's one of the massive advantages to be in flyover country. Either your employer pays nationally competitive and you gain from the lower cost of living or you get the perks we don't allow "the rich".


True "high income" people don't play the same game. I've had the pleasure of knowing several people who take a quarter million dollar salary (even here). They frequently have the power to use other vehicles like hedge funds and asset managers (basically people like me) to run the money. High net worth people don't generally care about retirement savings. They like the ability to use the money to create cash flow. A lot of rules disappear if you have enough money.

Unfortunately we have a system that works <$100k-ish and >$200K-ish. But there's not much in the middle. (I'm in the middle too.)

Be as much as a dick as you want.  You're sharing useful info.

Also, a friend of mine just spent bought a 40' yacht, and he needs crew to get him from Tacoma through the Ballard Locks. https://en.wikipedia.org/wiki/Ballard_Locks
You know how they say it's better to have a good friend with a boat than own it yourself...

Anyhow, I'll be getting sunburn on a boat before your ground thaws

[David in MN]

Of course we have a boat. Every Minnesotan family has a boat. It's the "Land of 10,000 Lakes". We even named our first basketball team the Lakers. And every goddam year I launch that boat into 34 degree water.

It was 7 degrees this morning. This is a "mild" winter. 

[Smurf Hunter]

This is disheartening.  WTH do they have a button on their webapp if this ain't legal?

- Contributions cannot be made to an IRA account in the form of securities such as stocks or mutual funds. Only cash is allowed for an IRA contribution per Internal Revenue Service (IRS) regulations. Please complete a new Internal Transfer Form with the cash amount you would like to internally transfer to your IRA as a contribution. We have attached an Internal Transfer Form to this email for your convenience. You can also access the form from our website by going to "Forms & Agreements" (under the Client Services menu).

[Smurf Hunter]

Some positive news.

Apparently my workplace Fidelity 401K has a little known feature "Brokerage Link".  It's buried deep under crap, a bit involved to setup, but it's like a mini Scottrade inside of the 401K.
So I can use it like a brokerage account, but it's still inside my 401K.

The only downside, even if I have 100% of my contribution go into this, I have to manually buy stocks, ETFs or funds.  I was really hoping I could buy $100 of DEO or something each paycheck.
Oh well, still a net positive.

[David in MN]

Some positive news.

Apparently my workplace Fidelity 401K has a little known feature "Brokerage Link".  It's buried deep under crap, a bit involved to setup, but it's like a mini Scottrade inside of the 401K.
So I can use it like a brokerage account, but it's still inside my 401K.

The only downside, even if I have 100% of my contribution go into this, I have to manually buy stocks, ETFs or funds.  I was really hoping I could buy $100 of DEO or something each paycheck.
Oh well, still a net positive.

That's actually how mine worked through Schwab. I used it to fund some ETFs that looked better than the bland portfolio options. I don't like trading in the 401. Put in my terms, it's clunky. But a lot of people have a lot more freedom than they think in the 401.

One of my big peeves is that "dividend funds" often yield ~1%. I can build a basket of companies that all average over 3%. I'm paying .2% for getting 1% when I can on my own top 3%? Over a lifetime this is massive.

[Smurf Hunter]

That's actually how mine worked through Schwab. I used it to fund some ETFs that looked better than the bland portfolio options. I don't like trading in the 401. Put in my terms, it's clunky. But a lot of people have a lot more freedom than they think in the 401.

One of my big peeves is that "dividend funds" often yield ~1%. I can build a basket of companies that all average over 3%. I'm paying .2% for getting 1% when I can on my own top 3%? Over a lifetime this is massive.

I don't plan to trade in the 401.  Normally I come up with some "basket" and dollar-cost-average that every paycheck.
Fully agree on the admin fees. 

If you like the ABC Large Cap fund, you can look at the prospectus and reverse engineer your own basket, without the fees.  It's amazing this is a radical idea to most people.

[bigbear]

Some positive news.

Apparently my workplace Fidelity 401K has a little known feature "Brokerage Link".  It's buried deep under crap, a bit involved to setup, but it's like a mini Scottrade inside of the 401K.
So I can use it like a brokerage account, but it's still inside my 401K.

The only downside, even if I have 100% of my contribution go into this, I have to manually buy stocks, ETFs or funds.  I was really hoping I could buy $100 of DEO or something each paycheck.
Oh well, still a net positive.

Most 401k plans don't have a brokerage window.  It's common to have the contribution just fund a cash/sweep account where you would have to actively invest.

The big things to consider are the brokerage link transaction/balance/account fees (compared to a low-cost online broker outside of the fund) vs. the convenience of having everything under one roof.  It's not uncommon for a 401k brokerage window to have higher fees than a separate online broker.

[Smurf Hunter]

It's not uncommon for a 401k brokerage window to have higher fees than a separate online broker.

Sure, but that's not the point at all.  I may not contribute to a traditional IRA while an employer 401K is available to me.  So if I want to take 5% of my pre-tax paycheck and buy AMZN, my only option is the 401K brokerage window.

[bigbear]

Sure, but that's not the point at all.  I may not contribute to a traditional IRA while an employer 401K is available to me.  So if I want to take 5% of my pre-tax paycheck and buy AMZN, my only option is the 401K brokerage window.

If the 5% you're talking about is getting the company match, then I completely agree.  The amount gained in the match will outweigh a potential higher brokerage fee.  But if the 5% doesn't get a company match, then it's in your interest to look at the fees.

[Smurf Hunter]

I think I found a potential buy opportunity for NWL (Newell Brands) https://finance.google.com/finance?q=NYSE%3ANWL&ei=fZc6WuCeFde4jAHjtIGQBQ
Today it's down around 2% from yesterday, and that puts the dividend around 3%.  Seems a fairly large and stable conglomerate near its 52 week low.

Seems appropriate for a retirement account.  Anyone see major concerns?

[David in MN]

I think I found a potential buy opportunity for NWL (Newell Brands) https://finance.google.com/finance?q=NYSE%3ANWL&ei=fZc6WuCeFde4jAHjtIGQBQ
Today it's down around 2% from yesterday, and that puts the dividend around 3%.  Seems a fairly large and stable conglomerate near its 52 week low.

Seems appropriate for a retirement account.  Anyone see major concerns?

Looks pretty good to me. Only risk is some long term debt that seems manageable. Looks like it's the victim of one bad quarter that caused a big sell-off. To be fair, a lot of "weird" conglomerates get crapped on by Wall Street because it's hard to analyze things spread across so many industries. What does Rubbermaid have to do with playing cards or fishing rods?

I'll have to throw it on my watch list.