@christianpessimist I need some clarification here, I'm pretty new to investing outside of my TSP and I ended up with FirstCommand. I've tried to find what you were referencing in the sidebar on r/personalfinance but there's a lot there and nothing said "Click this to find out why not to go to FirstCommand". Why is it such a bad thing? And the whole life insurance thing seems like the smarter decision, what am I missing there? I have an IRA each for myself and my wife, mutual fund for my son and life insurance for the three of us. Am I getting fucked somehow?
Military Personal Finance Flowchart
- Thread starter abidingpatri0t
- Start date
christianpessimist
New member
@annec1975
Not necessarily. It's like paying the guy at Jiffy Lube to replace your air filter; You're paying for an agreed upon service. They perform the agreed upon service. But with a little knowledge, you could easily perform that service yourself. In my opinion, it isn't worth the cost, but there may be someone out there who is willing to pay that cost for (in the air filter case) a 2 minute task (it'll probably take longer to wash your hands than replace the filter).
Everyone's financial situation is different, and I am not a professional and this is not professional advice, just my story. As to the sidebar, basically if I had spent a few hours reading up on those things, I would have been prepared enough to take care of my finances vs going through First Command. The point is a few hours saved me 3% Sales Load Fees on everything I was saving in my Roth IRAs and taxable accounts (EDIT: TO clarify, saved me the fees because I left First Command's set-up accounts after doing my research). And these First Command set-up accounts under performed compared to index funds and (in the taxable account's case) made taxes hell because they were actively managed and bought and sold a lot. It also saved me life insurance premiums for coverage I didn't need (and won't need in the future). My view comes down to the purpose of life insurance. Car insurance is to replace damaged property and cover medical bills. IMO, life insurance is to replace future income earnings of the deceased. That informs my view on life insurance in general (get it for individuals that have an income stream we would need to insure).
There's arguments to be made for whole life insurance as a product; some long threads in personal finance have popped up, IIRC. Most come down to exorbitant commissions, but it's been a while since I read through those.
Not necessarily. It's like paying the guy at Jiffy Lube to replace your air filter; You're paying for an agreed upon service. They perform the agreed upon service. But with a little knowledge, you could easily perform that service yourself. In my opinion, it isn't worth the cost, but there may be someone out there who is willing to pay that cost for (in the air filter case) a 2 minute task (it'll probably take longer to wash your hands than replace the filter).
Everyone's financial situation is different, and I am not a professional and this is not professional advice, just my story. As to the sidebar, basically if I had spent a few hours reading up on those things, I would have been prepared enough to take care of my finances vs going through First Command. The point is a few hours saved me 3% Sales Load Fees on everything I was saving in my Roth IRAs and taxable accounts (EDIT: TO clarify, saved me the fees because I left First Command's set-up accounts after doing my research). And these First Command set-up accounts under performed compared to index funds and (in the taxable account's case) made taxes hell because they were actively managed and bought and sold a lot. It also saved me life insurance premiums for coverage I didn't need (and won't need in the future). My view comes down to the purpose of life insurance. Car insurance is to replace damaged property and cover medical bills. IMO, life insurance is to replace future income earnings of the deceased. That informs my view on life insurance in general (get it for individuals that have an income stream we would need to insure).
There's arguments to be made for whole life insurance as a product; some long threads in personal finance have popped up, IIRC. Most come down to exorbitant commissions, but it's been a while since I read through those.
@christianpessimist Where would I go to see the load fees that I am paying? Is that something that comes from the summary prospectus? If that's what it is, I looked up the national avg (1.54 iirc) and the fund we're in (MFEGX or some arrangement of those letters) was at .94 last year (lower aka better than the national avg.)
Even still, when I go to my account statements for the checking account that it all pulls from, I see $XXX going to the investment account, then I go to the investment account statement and match the same number to the same date for the same $XXX. I don't see where this 3% load fee would be coming from.
My advisor was very adamant that he doesn't charge fees for active duty clients. I asked him how he got paid and he said he gets paid by "funds under management"(which I don't fully understand).
I have spoken to the wife and after comparing a term life from usaa, we're dropping the whole life on Tuesday and moving those contributions to our Roths. So definitely thanks to this sub for that, but if anyone has any input on these load fees, I'm interested to hear it. I'm not opposed to pulling everything out and going to Vanguard, but I'm not going to do it without evidence because some guys on the internet said my investment manager was bad.
Even still, when I go to my account statements for the checking account that it all pulls from, I see $XXX going to the investment account, then I go to the investment account statement and match the same number to the same date for the same $XXX. I don't see where this 3% load fee would be coming from.
My advisor was very adamant that he doesn't charge fees for active duty clients. I asked him how he got paid and he said he gets paid by "funds under management"(which I don't fully understand).
I have spoken to the wife and after comparing a term life from usaa, we're dropping the whole life on Tuesday and moving those contributions to our Roths. So definitely thanks to this sub for that, but if anyone has any input on these load fees, I'm interested to hear it. I'm not opposed to pulling everything out and going to Vanguard, but I'm not going to do it without evidence because some guys on the internet said my investment manager was bad.
christianpessimist
New member
@annec1975 You'll have annual account fees or expense ratios (VTSAX is 0.04%) and then sales loads. Sales Loads can be found on your most recent statement. Mine was listed right under my contribution as "SALES CHRGE PERCENT 3.50". If you can't find it, hopefully that means you don't have sales loads, which would be gravy. If you do see it, there are different types of Sales Loads, front-end, back-end, and a lot of details outside my wheelhouse. These fees help pay for actively managed accounts (and maybe how the FA makes some money; not sure).
As far as your advisor, yes, they don't charge fees. They'll get a commission from life insurance policies, and (possibly, but I'm not sure) sales loads. I think there are other posts that talk this in more detail.
I wouldn't necessarily assume your FA is bad, or put you in bad funds. Also, some people really believe Whole Life Insurance is best for them, or for their very young children. A lot of people have bad experience with First Command, but my general guidance would be to read through the items on the Personal Finance wiki, some Boggleheads stuff, and then use that to inform your decision making. Whether you stay in the funds you're in, or move to other funds, you'll feel more comfortable knowing you've done research on it.
Last thing I'll emphasize is that moving any non-IRA funds will be a taxable event, and you'll need to consider that too, if you do decide to move funds.
Finally, remember that by saving like you have, your ahead of the majority of people in our country. Good on you.
As far as your advisor, yes, they don't charge fees. They'll get a commission from life insurance policies, and (possibly, but I'm not sure) sales loads. I think there are other posts that talk this in more detail.
I wouldn't necessarily assume your FA is bad, or put you in bad funds. Also, some people really believe Whole Life Insurance is best for them, or for their very young children. A lot of people have bad experience with First Command, but my general guidance would be to read through the items on the Personal Finance wiki, some Boggleheads stuff, and then use that to inform your decision making. Whether you stay in the funds you're in, or move to other funds, you'll feel more comfortable knowing you've done research on it.
Last thing I'll emphasize is that moving any non-IRA funds will be a taxable event, and you'll need to consider that too, if you do decide to move funds.
Finally, remember that by saving like you have, your ahead of the majority of people in our country. Good on you.
sharklordy
New member
@abidingpatri0t A budget should be first in my opinion.
sharklordy
New member
@abidingpatri0t A budget should be first in my opinion.
@sharklordy The problem is, a lot of people see the word "budget" and think of it like the word "diet" is mostly used nowadays - a short spurt of eating healthy (being frugal with money) to lose a few pounds (save X amount of dollars), only to go back to the bad eating (spending) habits that got them in trouble in the first place. I agree that a budget you review every so often and stick with for years is the best way forward for many people, but it's such a dirty word for most people that they won't listen after you've uttered the word.
abidingpatri0t
New member
@ds909002 Yeah... creating healthy financial habits is very similar to creating healthy eating and fitness habits.
This is part of the reason I'm resistant to adding the word "budget" to the image. I don't really care how they manage their money, just as long as they aren't living beyond their means. I want to cultivate a healthy financial lifestyle, not a budget.
This is part of the reason I'm resistant to adding the word "budget" to the image. I don't really care how they manage their money, just as long as they aren't living beyond their means. I want to cultivate a healthy financial lifestyle, not a budget.
abidingpatri0t
New member
@sharklordy Adding that. But I don't want people to get stuck on that. Especially without getting to $1000 emergency fund and 5% BRS TSP match.
@abidingpatri0t Eh. That’s how you figure out how to save enough money for that emergency fund. Should be #1 i think.
@abidingpatri0t Here's one. Not sure if it needs to be updated though
Source:
Source:
abidingpatri0t
New member
h%C3%A5ndflade
New member
@abidingpatri0t Awesome!
I have 4 proposed edits:
I have 4 proposed edits:
- you already got. “10% monthly” SDP
- SGLI is enough until you have kids
- “Pay Down Debt” because “high interest” sounds like avalanche method.
- The bottom left box. “Roth is probably right for you”. I would add “vs. Traditional”. To make it more clear.
4a. And higher ranks ( all enlisted and probably O-4 and even O-5) should probably do Roth if they are sole bread winners.
(Edit: Unless they are thinking backdoor conversion. Read in madfi)
abidingpatri0t
New member
@abidingpatri0t I think the life insurance could have a branch. If single,... if married,...
I have a family and no way is SGLI enough.
I have a family and no way is SGLI enough.
abidingpatri0t
New member
@lilfoxkit Can you elaborate? As an E-2 or O-1, $400k wouldn't be enough?
@abidingpatri0t To me, life insurance covers my future earnings and the money those future earnings would make as well.
If I die I also want my wife and children to be taken care. Home, college, wife not to work and take care of our young kids. $400,000 just isn't getting there.
Now, 20 yo me... $400k is more than enough for my parents to have a good funeral and use the rest of the money for whatever.
If I die I also want my wife and children to be taken care. Home, college, wife not to work and take care of our young kids. $400,000 just isn't getting there.
Now, 20 yo me... $400k is more than enough for my parents to have a good funeral and use the rest of the money for whatever.
@lilfoxkit Plus the fact that if you get a private term life insurance policy now, you'll be getting that rate for a while. Vs post military SGLI which is a rip off.
I got a $500k term life insurance policy for $44 a month. If I die, they get that and SGLI. That covers our houses and college for my children as well as all the other debt we have and then some.
I got a $500k term life insurance policy for $44 a month. If I die, they get that and SGLI. That covers our houses and college for my children as well as all the other debt we have and then some.