One Man Rodeo wrote:
- quote -

research is at many levels.

1) savings plan is probably most basic level of research. Percentage
of income, amount of income, why save and the decision to save.
1a) would be understanding idea of compounding and effect of time on
investing in stock market. Basic Math skills would be a plus.

2) would be how much to invest
2a) would be which vehicles- 401k, Roth IRA, other
2b) would be how much is needed at end of investment

3) would be assett allocation- why invest in stocks, bonds, money
markets, real estate, and other assetts. Why to mix, how to mix, when
to change mix, effect of changing mix.

4) specific investments (mutual funds, which type of mutual funds-large
cap, small cap, foreign, indexed, managed)
4a) would be costs associated with this step

If someone needs help at step 1, help will be expensive and person
could be taken advantage of. Having good math skills or good business
sense reduces this risk.

help at step 2 is more of a lifestyle and family influence- are both
spouses on same page, and the risk is one spouse could undo the other's
work. An advisor could help with 2a and 2b, for minimal fees. To
maintain this the fees would accumulate.

help at step 3 would have a minimal fee. This fee would not "recur
much", maybe a checkup every 3-7 years.

help at step 4 would have a minimal fee for some products and a higher
fee for other products. Depending on product chosen this fee may recur
every year, not recur at all, or recur at minimal cost every 3-7 years.

BreadWithSpam[at]fractious.net wrote:
- quote -


The 11% return I use is before inflation. Most of my investments are
in tax deferred accounts (401k and Roth IRA). I am sure 125k in 6
years and 250k in 10 years will not buy what is does today...

my point was to use intermediate goals for retirement (certain amounts
by certain ages) to use as "mid term check points". More than just
"set aside 10% and forget about it". More than just "invest into 401k
to get company match". There needs to be statuses/check points along
the way to see if the plan is working.

"Elle" <honda.lioness[at]nospam.earthlink.net> wrote in message
news:STyOg.7979$v%4.200[at]newsread1.news.pas.earthlink.net...
- quote -

I have no discomfort in number cruching as it's done on a daily basis, it's
learning how to crunch numbers and in particular financial formulas that I
need to educate myself on. Research is entralling I find and I end up doing
too much of it!!

Once I get a handle on financial formulas and once I build enough equity
I'll have a better idea when to turn a portion of my assets over to the
pros.

"One Man Rodeo" wrote
- quote -

Yes, this absolutely makes sense. In the best case, you
could end up always managing your own assets, and so save
money and feel more in control of your own destiny. In the
worst case, you might find you want someone who does this
for a living, but when you come to this point, because of
your previous study via the tools you're seeking with this
thread, you'll better understand what s/he tells you. This
topic comes up a lot here. ISTM it's only when a poster
expresses extreme discomfort with numbers or research that
s/he should be sent to a for fee financial advisor.

"DFIGTREE" <david.Feigenbaum[at]verizon.net> wrote in message
news:1158208803.322234.31300[at]d34g2000cwd.googlegroups.com...
- quote -

I didn't think it would be easy and once I have more equity than I have now
I will seek the advice of a professionally trained advisor. But does it
not make sense to try and learn on my own what goals are realistic and what
are not? Or should I remain blind to my own financial future and not waste
the effort in learning and becoming comfortable with setting goals.

- quote -

See the detailed reply to the guy who said he is planning to
save 16 annual incomes. (i.e. $1.6 million if he makes $100K).

- quote -

NY Times published a graph last month suggesting 12 incomes saved at
retirement age. Given the effect of compounding, it would be about 8
incomes
five years out (typical age 60) 4 incomes fifteen years out, 2 incomes
twenty
five years out (age 40) and so on. You can probably achieve saving
and
investing 0.15 incomes a year (15%).

Another way to analyze this is too look at necessary replacement
income.
Say your income has averaged 2x national medium income, which has been
the top social security tax base for the past 23 years. Social
security then
pays you a pension of 0.25 income. If you have been saving the
recommend
amount of 0.15 income, then you need to replace 0.52 income assume no
more
social security tax .08 income. If you assume you can safely withdraw
5% a year,
you should have 10.4 incomes saved to generate .52 incomes. Fidelity
recommends
4% and Merryl Lynch 3.5% (but I think they are too conservative).
If you make average national median income, social security pension is
more generous at
.40 income, but its probably harder to save .15 each year. Even so,
formula suggests
saving about 6 incomes at that level.
For 2006 national median income is $46K.

The monkey-wrench is the medicare premium. The social security
premium is
really .23 and .36 income (median and double median income)
when you factor in the automatiic deduction of the $1120 annual
medicare premium.
But the this premium is growing rapidly and will be means-tested for
"well-off" seniors.
Only 5% of current seniors in are currently in the well-off category,
but by 2018
50% of new retirees will be defined as well-off. So expect social
security to relatively
shrink, even if no further changes are made.

"jIM" <noreplysoccer[at]hotmail.com> writes:

- quote -

Not to rain on your parade, but 11% *real* return for a portfolio
of 100% stocks - (because everything is measured in "todays dollers")
is more than a little optimistic.

As we discussed here recently, and as pointed out by Prof. Siegel
here:
http://finance.yahoo.com/columnist/a...ureinvest/2881

During the past 204 years (through 2005) stock investors have
earned an average 6.8 percent per year after inflation and that
return has been remarkably stable over long periods. Over the past
80 years, real stock returns averaged 6.7 percent per year, and
since the end of the Second World War, the annual return has been
6.8 percent.

Add in inflation and the long-run real return becomes a nominal
return pretty close to that 11% you are using, but you need
to make sure you are using the right returns for the context.

11% real returns would be, basically, astoundingly huge.
It'd be something like 15-16% nominal returns. A quick
screen of US Stock funds finds 10 - count them - 10 funds
which have beaten that in the last 5 years - all of them
fairly volatile sector funds. (real estate, precious metals
and energy).



--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

One Man Rodeo wrote:
- quote -

Try a fee based financial planner? If it were easy anybody could do it.

joetaxpayer wrote:
- quote -

This does sound like much work to me... but if explained better I may
understand and change my stance.

I started with "how much current savings will grow under X
assumptions", and "how much income will a principle amount of $Y
generate... then have several different X scenarios to generate $Y.

The X scenarios depend on rates of return (6% vs 12% for example, with
increments in between) and ages I retire (61 vs 68 for example). And I
assume I will need $2,000,000 in retirement because most reading
suggests $1,000,000 as "rule of thumb" and I want to be as conservative
as possible.

Part of seeing how savings grows is giving checkpoints-

I am under an assumption now, for example, that at age 33 my 401k of
100% stocks generates an 11% return. Once I hit a magic number
($125k), by a certain age (38), I can reduce the assumption to a 9%
return (much more realistic). Further goals ($250k) by other ages
(42-44) allow the 9% to reduce even further. And because everything is
measured in "todays dollars" with 4-8 year time increments, the numbers
do not look too daunting.

Other steps taken include trying to make the portfolio generate income
equal to my current salary as soon as possible thru dividends. Then
seeing how easy it is to maintain this same "dividend" stream every
year. This is measured by dividends/current salary every year to see
the ratio improving.

"One Man Rodeo" wrote
- quote -

Not sure how much you want all in one package, but I
personally want to be able to see much of the "guts" of the
computations, or at least be able to eyeball their validity.
So mostly I use a lot of the free online tools that
typically do indeed take into account assumptions on
inflation, taxes, returns, etc. I often take the output of
these and use it in my own spreadsheets for choosing between
options.

For a start, see the free online asset allocation tools
linked at http://home.earthlink.net/~elle_navorski/id8.html
. Typically these sites have pointers to similar tools. I
think it's worth a weekend or so of surfing.

"rick++" <rick303[at]hotmail.com> wrote in message
news:1158187310.881779.110680[at]e63g2000cwd.googlegroups.com...
- quote -

For my five year plan I used real dollar amounts because it's somewhat easy
to predict income and taxes and returns on investments and savings amounts,
to within reason, excluding emergencies etc.

Can you elaborate on your normalizing idea? I don't quite get it? until
now I have been using percentages. So If I were to adopt your plan let's
say my income is 100% now then a renormalized equity amount in 10 years
would be say 800% of my current pre-tax income and 15 years would be say
1200% of current income? IE a 40000 dollar income NOW would be 320000 net
worth in 10 years and 480000 in 15 years.... Adjust every year for tax
changes and inflation??

rick++ wrote:

- quote -

I think that given effects of compounding, the 'normalizing' (to me,
anyway) would actually create more confusion than the large numbers. To
your .4 / 8, I'm shooting for .8/ 16 (i.e. 16 times my desired income at
retirement). I'm not quire sure how I'd handle a spreadsheet to grow my
savings but then reduce the absolute numbers to normalize back to now.
I need to give this approach more thought.
JOE

This doesnt exactly answer your question,
but I find working "normalized income" easier to
grasp than absolute dollar amounts.
Manly because when you project dollar numbers 20
or 40 years in the future at 3% or 11% increases,
the numbers are so large that they they are difficult
to grasp in my mind.

You call a normalized income 1.0. Of this you
save so much, spend so much, and pay so much in taxes.
Then you figure out how much you'll need for retirement,
say .4 a year. Then you figure maybe I'll need to save
to 8 generate this, have 3 in home equity, 3 saved up so
far and so on. Then renormalize each year to
gauge progress.

<po.ning[at]gmail.com> wrote in message
news:1158173883.986435.70890[at]e63g2000cwd.googlegroups.com...
- quote -

I don't know the formulas but maybe I'll buy a used financial textbook and
start from there. Computers are slower too. Faster to play around with
numbers on a calculator then put you" final" equations on computer.

One Man Rodeo wrote:
- quote -

use:

I have a retirement spreadsheet which I add and remove worksheets from
each year.

It includes:
current 401k balances and projected amounts
current IRA balances and projected amounts

checkpoints for where 401k is each year (is it increasing).

how to calculate income taxes (based on information I learned recently
from this newsgroup)

how much income a given principle amount can generate (interest only)

a table of how 11% returns look vs 10 returns vs 9% returns vs 8%
etc...

a different sheet/table for how to achieve the 11%, 9% and 7% returns
(ideas for how to do this...)

I also have my Roth IRA contribution calander (which months have
contributions, how much- in 2008 the amount per year increases to $5000
and a few years back it increased to $4000, this sheet helped me budget
for the increases).

this used to have the house budget in it, but I moved that to it's own
workbook because it was getting too large to manage as well.

One Man Rodeo wrote:
- quote -

Can't you make your own using Excel?

I'm trying to put together a 5, 10 year and 15 year financial plan/goal
worksheet.

I'd like to be able to get a calculator or spreadsheet or software
(freeware) that will allow me to easily adjust numbers for inflation, taxes,
returns, yields, savings, compounding interest, cost of margin accounts etc.
I can't seem to find a good one from Google or yahoo. And The local
business supply shop has only scientific calculators.

Would be great if the calculator has columns like a mortgage calculator does
so you can compare results.. I want to be able to have a good but not
concrete idea of what my savings level should be and what my risk tolerance
should be inorder to see how I might be able to achieve my goals...

Any ideas??