<p>We live in California and DH also wants to retire in Hawaii. I looked around for condos for 1BR is about $600K-$700K. Not sure he will get island fever after a few weeks or not, so I’m not buying. However, I did say we can rent long term like a month. I wonder if that is possible.</p>
<p>Agree with Dr. G and BD regarding high appreciation instruments in Roths.
Regarding IRAs, I was asleep at the wheel, at least till several years ago and maybe even now, regarding some of these subtle issues. I wouldn’t have been able to afford a backdoor Roth conversion unless I had sucked the bulk of the capital gains into a reverse 401k rollover, so I never did get a Roth.</p>
<p>It was only after putting together a spreadsheet similar to what CM described above, with different tax rates for retirement and non-retirement accounts, and cost basis, that I got a better picture of the numbers than what you see in a statement that just gives raw balances. Given the type of stock investments I prefer - low turnover index ETFs/funds, putting money in an IRA which is non-tax deductible for us, is worse than keeping it in a non-retirement account because of the regular income tax rates vs capital gains rate difference at the time of withdrawal. </p>
<p>Yes, housing prices in HI are quite high. I would recommend renting for a time to be sure you like it before you sell your home and buy here (or any other dramatic move). Some folks love a new place, others not much. </p>
<p>I’m sure you can rent for varying lengths of time if you look around. The Hawaii Kai retirement center allows rentals by the month and you can rent furnished with meals provided. I’m sure there are subleases of students over the summer, like everywhere else too. </p>
<p>One neighbor always had their relatives rent a condo on the beach for a month every year. </p>
<p>HImom, we were not thinking of selling our home, but as a second home. I did see an add for 2 months in Maui for $99K, it sounds similar to a time share as in you don’t own the whole thing, but It’s not like a home that you can leave your stuff there, which is what my husband wants. I think I rather he spends the money and rent his surfing equipment.</p>
<p>Lots of good info on this thread.</p>
<p>I am approaching this from a different angle: Altering our lifestyle to fit the available anticipated budget. </p>
<p>My job is high pay but also high stress/emotionally challenging and after 20+ years, I need (not simply want) to step back. Just graduated a kid from a private U and have a daughter 2 years from college. No pension, too young for SS or access IRA (not that large anyway). Planning to terminate my day job, then cobble together a variety of work in my field (per diem type) to pay the mortgage and expenses for a reasonable lifestyle but not plush. Health Insurance comes with one of these jobs thankfully. So we will frugalize and make do. We will then plan to transition to retirement in a similarly downsized manner in 5-10 years.</p>
<p>Someone told me a long time ago “Be careful how you raise your standard of living. It’s really hard to go back.” True that but not impossible. </p>
<p>DDs college? Ah, we will have to work on that when we get there :D.</p>
<p>ihs76, before you quit your job, make sure you get a home equity line in case you need it, also don’t sell your home until second kid is done with college, you might get some aid from colleges that don’t count home equity. We did frugalize when both husband and wife lost our jobs in high tech. We were happy without stress, we never thought we would be working again after that, but we glad we did.</p>
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<p>Interesting! Boglehead recommends high tax income in Roth, so bonds. I am going back and forth in my mind.</p>
<p>^^ @iglooo, that’s debated even among Bogleheads. It was definitely true when bond interest was much higher than it is today. Others feel that the different tax treatments (capital gains vs dividends) still make it worthwhile. My personal view is that it’s close enough that the tax tail shouldn’t wag the investment dog; I have essentially identical asset allocations in taxable, tax-deferred, and tax-free. </p>
<p>What’s the rationale for the recommendation, what kind of return do bond funds have nowadays? I’ve heard money is flowing out of Pimco’s Total return fund and he is the bond guy. I don’t read Boglehead, but I read other people mentioned that it suggests index fund for mutual fund. I don’t like Index investing so I picked specific fund, which is another non-Boglehead’s recommendation.</p>
<p>@DrGoogle , I’m not being difficult, but what is a “specific fund?”</p>
<p>PIMCO’s Bill Gross might be “the bond guy,” and money might be flowing out of his fund, but that doesn’t necessarily reflect on bond funds in general. </p>
<p>Non- index fund where stocks picking from skilled manager. There is slightly higher fees.</p>
<p>Bob, I am thinking ahead. We will be cashing out our 401k in a few years. I am guessing the rates will go up by then. My calculation shows if the interest rate is 4% or higher and equity return 7% or lower, at 30% tax rate, you are better off to keep bonds in Roth.That is assuming you realize your long term capital gains every year. Oxy moron, I know, let’s say just for the sake of comparison. Since you don’t realize capital gains as often keeping stocks in Roth and paying taxes on interest income on bonds kept in taxable account doesn’t really help you .</p>
<p>@DrGoogle , that’s what I thought you meant but I didn’t want to assume. Fwiw, you’ll probably avoid confusion if you refer to those as “actively managed” funds. It might be a surprise to many, but Vanguard actually has some high performing actively managed funds (Wellington, Wellesley, Primecap, etc.). I’m not sure if they’re open to new investors. </p>
<p>Of course investing depends on interest rate. For 2013, bonds had negative returns like -2% and stocks had 30+%, so it depends on what year we are talking about. Who knows what’s going to happen in a few years because it depends on the interest rate then.
<a href=“Bond funds give investors a lump of coal in 2013”>http://www.usatoday.com/story/money/markets/2013/12/30/bond-funds-drop-in-2013/4240359/</a></p>
<p>@iglooo, I’m not disagreeing, I just think it’s a close call today, whereas in the past it was more clearcut. IMHO, there are bigger things to worry about than location (like asset allocation). </p>
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Yes, I forgot what they are called specifically on top of my head. I do have those funds. Some funds are too popular that Vanguard only allows existing customer a limit per year.</p>
<p>As one commented about the stock market high, a few months ago, we shifted some money into the 401K bond choice, to ‘soften’ the downswing with the stock funds.</p>
<p>When I can afford on taxes during a year, I shift money from IRA to Roth. If I can contribute to Roth, I do. When we are back to two incomes, we can maximize and put some money aside to do home improvements so when we retire we can sell this house and have less tied up in housing at a different location. Have to see where the kids land.</p>
<p>It troubles me to see so many houses on the market, yet new building is still going on. The student loan crisis is causing less to qualify for getting into homes. I want to make sure we do not get ‘stung’ with this home sale. We can wait out selling if needed.</p>
<p>It is great to be thinking about this for quite a while. You do not want to make significant decisions without being careful. As we live longer, we want our nest egg to handle us comfortably.</p>
<p>I don’t know about closed funds. I have two of them and they did better right before they closed to new investors.
Asset allocation is taken care of. I don’t consider thinking about what to put in Roth is tail wagging dog case. People whose opinion I respect in Boglehaed seem to think bonds in Roth. It’s a bit tricky now since the interest rate is so low. I will decide when the time comes.</p>
<p>Are people actually making much money in bonds now? Maybe a bit if you have long term bonds and hold them to maturity, but I thought they were very low yield. And since interest rates can’t go anywhere but up, I’m not sure how bonds can be considered as having potential for a higher appreciation rate than in stocks. Unless you’re bad at picking stocks (and in that case I’d just do an index fund).</p>
<p>What’s the best interest rate someone can get in a bond fund (that’s not going to crash when interest rates go up)?</p>
<p>A bond fund, you buy and sell shares just like stock funds.</p>
<p>This discussion prompted me to look at our 401K funds. Company has it with Prudential, so we are ‘limited’ to what investment choices they offer. Still happy with allocations and diversification. All are climbed to a high. The PIMCO Fixed Income Intermediate Bond, which is where I put money in, is Morningstar 5 star, performing above avg (2009 did 13.5%; 2012 did 10.04%; last 5 years always outperformed benchmark). I have a sizable portion in large cap stock blend, and then a split with mid cap stock value and international stock blend.</p>
<p>There is going to be a ‘stock market adjustment’ at some future point. The last really big one we didn’t make adjustments in investments and ‘paid’ a price for that. Our acct has really built up nicely and we don’t want to slide back. The other way we protected our nest egg was with the diversification our investment advisor was able to do with our other funds (not as sizable as this 401k, but still a nice chunk of our nest egg).</p>
<p>Single stock investments are more risky than a stock fund. Years ago many company pensions were so heavily their own stock that gov’t put in regulation to prevent people in private industry having a company going bankrupt and losing their pension as a result.</p>