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Hi! I'm 26 and I just got my first permanent job, looking for some advice. I make about $36K a year at my current salary, but I'll be eligible for a step increase in about a year or so, that'll bump it up to 40K. I'll be looking to get a promotion that'll hopefully get me to about $65K/year within the next five years or so. I have about $6000 in federal student loans at 6%. My employer offers a "deferred compensation" plan (457(b)) where I can contribute up to $17500 a year in a tax-deferred account. I've got some peculiar living arrangements which make it possible for me to only have to pay $300 a month in living expenses/rent. So I can save about $2500 a month at the moment. No kids, no other expenses. My goal is to save as much as I possibly can and I want my savings to grow as fast as possible. I'm pretty much a novice at all this finance stuff. What options can you suggest? I was thinking about paying off my loans as soon as possible, about $1000 a month over the next 6 months, since I don't like that debt hanging over me. Is that a good idea?
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Sep 14, 2014 20:22
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Considering that paying off your loans is like getting 6% return on investments, I would say yes. Plus it is psychologically beneficial for many people!
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Sep 14, 2014 20:39
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You can get rid of that debt in three months. Do it! Enjoy the feeling! Three months is nothing. Or six months, if you prefer. It doesn't matter. The real question is what you're going to do with the extra money once the loans are gone. Tax deferred stuff like the 457 and a Roth IRA are really good bets -that's about $23000/year. Are you comfortable locking that much up for 40 years? If so, do it. If not, okay, but why? And what do you want instead?
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Sep 14, 2014 22:42
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Well, what I'd really like is to minimize, as much as possible, the part of my life that I spend actually working, so I can spend most of my prime years doing the creative things that I like to do most -- drawing, writing, and learning. In short, I'd like to save and invest very aggressively so that I can retire early. I'm a bit at a loss as to where to put my money so I can do that, since the retirement accounts are for people intending to retire in their 50s and 60s, and there's all those penalties for taking them out early.
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Sep 14, 2014 23:07
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So I currently have about $16,000 in a Roth IRA made up of a 2040 Schwab target fund that I was hoping to transfer over to a variety of Vanguard funds. I moved the account over to Vanguard, but I noticed when I tried to use the exchange option that only funds from the same fund family and share class are available to exchange into. So since this is a Schwab fund, I can only exchange shares for other Schwab funds, which would kind of defeat the purpose of why I moved over to Vanguard in the first place. If I just essentially liquidate all the shares of the Schwab fund, will I incur capital gains, or am I protected from that since it's a Roth IRA and therefore non-taxable? I've always been a little unclear on how that all works.
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Sep 14, 2014 23:56
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No capital gains or income tax in a Roth IRA.
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Sep 15, 2014 00:21
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DrSunshine posted:Well, what I'd really like is to minimize, as much as possible, the part of my life that I spend actually working, so I can spend most of my prime years doing the creative things that I like to do most -- drawing, writing, and learning. In short, I'd like to save and invest very aggressively so that I can retire early. I'm a bit at a loss as to where to put my money so I can do that, since the retirement accounts are for people intending to retire in their 50s and 60s, and there's all those penalties for taking them out early. If you retire at 40 you will still need money from 60+, and in my opinion if you save enough money to actually retire at 40 you will have a lot of investments that you can't cram into a tax-advantaged account. You can also take out a series of equal payments (basically about 4% a year) from an IRA without paying a penalty, so even if you have low expenses, and end up with $1m in your 401k by age 40, you can quit your job, roll the 401k to an IRA and then take about 40 grand a year from it penalty-free.
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Sep 15, 2014 02:10
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Droo posted:You can also take out a series of equal payments (basically about 4% a year) from an IRA without paying a penalty, so even if you have low expenses, and end up with $1m in your 401k by age 40, you can quit your job, roll the 401k to an IRA and then take about 40 grand a year from it penalty-free. Yeah, combining the SEPP rule with the fact that you can withdraw principal / converstions (after 5 years) from Roth IRAs pretty much allows for early retirement at any age without penalties. I would not not recommend taxable accounts for early retirement unless you can max out all tax-advantages options first.
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Sep 15, 2014 03:10
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DrSunshine posted:I'm a bit at a loss as to where to put my money so I can do that, since the retirement accounts are for people intending to retire in their 50s and 60s, and there's all those penalties for taking them out early. If it's governmental 457b, there are no early withdrawal penalties.
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Sep 15, 2014 04:30
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DrSunshine posted:Well, what I'd really like is to minimize, as much as possible, the part of my life that I spend actually working, so I can spend most of my prime years doing the creative things that I like to do most -- drawing, writing, and learning. In short, I'd like to save and invest very aggressively so that I can retire early. I'm a bit at a loss as to where to put my money so I can do that, since the retirement accounts are for people intending to retire in their 50s and 60s, and there's all those penalties for taking them out early. It's also a earlier the better sort of deal the sooner you get rid of debt and also start feeding your Roth/SEPP accounts the better due to the math of compounding.
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Sep 15, 2014 05:08
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Just make sure you do your research into the SEPP rules and 401k -> Roth IRA conversion ladders because they're a little complicated. But if you're in a public plan 457(b) (vs a private plan), you don't need to bother with all that since the 10% early withdrawal penalty doesn't apply as mentioned above.
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Sep 15, 2014 13:30
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Huh! I see, I didn't know that. Yeah, I'm a public employee working for the county -- that's a pretty nice perk, actually! Thanks for all the input. I've decided that for now I'll use the money left over from payroll deductions to quickly pay off my student loans. Once that's done, I'll funnel them into a Roth IRA.
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Sep 15, 2014 15:07
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Where does a flexible spending account fit into retirement savings? I think I've read good things about maxing HSA's but I'm not sure what the difference is with FSA.
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Sep 15, 2014 20:51
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FSAs expire at the end of the year so you lose what you don't use. Unless you have predictable recurring medical expenses, they're more of a pain then they're worth IMO.
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Sep 15, 2014 20:53
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Unless you have known, recurring medical costs FSAs seem like a pain in the rear end for little benefit. If you do have known, recurring medical costs then you should only put that known cost into an FSA. The use-it-or-lose-it nature of them makes them really unappealing for most people and makes them crappy vehicles for saving for unexpected medical costs. HSAs, on the other hand, are awesome. Given our current hosed up healthcare system, HDHPs are pretty great, too, if you're reasonably healthy. I'm 100% in favor of single-payer universal healthcare, but until that day comes we live in the lovely world of health insurance and HDHPs are much more of an actual insurance plan than more traditional comprehensive "insurance" plans, hence why they are so much cheaper. They insure against actual medical disaster, under the assumption that you can pay for your more mundane medical costs. The accompanying HSA is the icing on the cake. But really I wish we would get rid of this whole notion of health "insurance" because it's a flawed model. Unlike car insurance or home insurance, eventually every single person is going to have significant medical costs, but not every car is going to be wrecked and not every home is going to burn down. Guinness fucked around with this message at 21:11 on Sep 15, 2014 |
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Sep 15, 2014 21:02
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Is it stupid to leave/invest money in a mutual fund if I haven't maxed out my Roth IRA for the year? I assume the answer is yes. Specifically, I have a Roth IRA and admiral mutual funds through vanguard. Last year I maxed out the IRA and had extra money to invest, so I put it in the admiral mutual fund. This year my finances are quite different and I don't feel comfortable dropping 5,500 if my cash on hand into retirement. However, I have more than that in the regular mutual fund. I should definitely sell the regular mutual funds to buy tax advantaged IRA funds, rather than letting them sit and the year pass without maxing my IRA, right? Edit: followup question. Say that my finances look better than I thought they would after doing what I described. Would it be smarter to replenish the mutual fund I drew from or just dump more in my 401k (I'm currently contributing up to 5% match; I didn't have a 401k last year when I went with the mutual fund). Thesaurus fucked around with this message at 22:43 on Sep 15, 2014 |
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Sep 15, 2014 22:26
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Thesaurus posted:Specifically, I have a Roth IRA and admiral mutual funds through vanguard. Last year I maxed out the IRA and had extra money to invest, so I put it in the admiral mutual fund. This year my finances are quite different and I don't feel comfortable dropping 5,500 if my cash on hand into retirement. However, I have more than that in the regular mutual fund. Wait until 366 days have passed from when you purchased them last year, then move 5500 worth over to your IRA. You'll pay some capital gains but you'll have to pay that someday anyway.
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Sep 15, 2014 23:37
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I'm matched on my 403b, I make 65k plus a year and I have over 20 grand in savings I want to open a vanguard target Ira but it's a 3k minimum I've never spent more than 1k on anything at once, so I'm a bit gun shy in doing so, can anyone kick me in the pants and tell me what I need to hear so I'll sign up for it? I'm also 28, what target date should I pick? How does the money xfer into the ira? Directly from my employer? I'm thinking about 200/month sounds good right now
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Sep 16, 2014 11:30
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smushroomed posted:I'm matched on my 403b, I make 65k plus a year and I have over 20 grand in savings The target date funds should have a 1k minimum if you are nervous about investing more. I do better with small automatic regular investments than lump sums from a psychological standpoint personally and it helps me keep making regular contributions. The allocations are all the same until ~25 years out from retirement so it doesn't really matter at the moment if you pick 2040 or later. I set mine up a a direct deposit that comes directly from my paycheck. Basically just pick 2050 or something and start tossing money at it. Try to increase your contributions over time and you can reevaluate your selection in 5 years. SmuglyDismissed fucked around with this message at 12:53 on Sep 16, 2014 |
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Sep 16, 2014 12:46
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SmuglyDismissed posted:Basically just pick 2050 or something and start tossing money at it. Try to increase your contributions over time and you can reevaluate your selection in 5 years. Perfect plan. The only thing you could do right now to really gently caress up is fail to put money away for retirement  Also you're not spending it. You're saving it for later.
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Sep 16, 2014 16:05
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I'm debating mixing thins up in my 401k which has been treating me well with around an 8% return. I am thinking about putting 75% in the 2025 target fund and 25% into VPCCX. My wife is 12 years younger than I am and we are trying to find a balance that works for us both. I have about 550k, a pension without health benefits. Car is almost paid for and we expect to move at least two more times before retirement. I expect to retire in the next 6-12 years depending on the politics and drama at work. Choices I have and their expense ratios are below. VANGUARD TARGET 2015 0.0825% VANGUARD TARGET 2025 0.0825% VANGUARD TARGET 2035 0.0825% VANGUARD TARGET 2045 0.0825% VANGUARD TARGET 2055 0.0825% VANGUARD TARGET RET 0.0825% BTC RUSSELL 3000 M 0.04% BTC S&P 500 INDEX T 0.03% BTC ACWI EX US IMI M 0.11% BTC US DEBT INDEX W 0.05% MANAGED INCOME FUND 0.3277% JPM US GOVT MM CAP (OGVXX) 0.01% LG GRWTH FUND BY TRP 0.3331% VANG PRIMECAP CORE (VPCCX) 0.5% CB VAL EQ CIF R1 0.55% EQUITY INCOME BY TRP 0.5039% ROYCE PC TRUST R IS 0.87% SMIDGRWTH BY DELAWAR 0.7698% FID LOW PR STK POOL 0.48 THORNBURG INTL EQTY 0.6% C&S US REALTY 0.65% PIMCO DIVRSD RL AST 0.65% FISHER EMERGING MKTS 0.95% PIMCO TOTAL RET BOND 0.2747% EV FLTNG RT&HI INC I (EIFHX) 0.82% Please forgive the grammar and lack of details I am typing on my phone.
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Sep 16, 2014 22:24
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Ropes4u posted:I am thinking about putting 75% in the 2025 target fund and 25% into VPCCX. Why?
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Sep 16, 2014 22:39
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If I am honest because I am greedy and like the % it has generated for us the last few years. The 1.5% i give up going to only the index fund is another month of retirement.
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Sep 16, 2014 23:48
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Ropes4u posted:If I am honest because I am greedy and like the % it has generated for us the last few years. That's a managed fund with a very high expense ratio. Furthermore, last years winners tend to be this years losers, as in the longest run all funds tend to mirror the market at best. Why not just keep the expense ratio as low and you can and not worry about it? If you really want to take a high risk / high return approach, I'd take some portion of your portfolio and try your hand at individual stock picking before I put it in a fund with an expense ratio as crazy high as .5%.
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Sep 17, 2014 00:01
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Ropes4u posted:If I am honest because I am greedy and like the % it has generated for us the last few years. Past performance is not a guarantee of future returns.
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Sep 17, 2014 00:46
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Ropes4u posted:The 1.5% i give up going to only the index fund is another month of retirement. You have that 1.5% in writing then?
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Sep 17, 2014 00:59
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I concede - one managed fund. Because my wife is much younger should I split the cash between the target 2025 and 2035 funds?
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Sep 17, 2014 01:48
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My fiancee has given me her blessing to manage her retirement portfolio. Currently her Roth IRA is with TD Ameritrade. I'd like to shift her over to Vanguard at some point in the near future. In the meantime, I'm confused about what I'm even looking at with TD Ameritrade. All her holdings are in Vanguard ETFs. Presumably, holding a Vanguard ETF through TD Ameritrade is going to be more expensive then holding it through Vanguard. But when I click on, e.g., the VBK profile on both sites, I see an ER of 0.09%. Where can I find what she's paying on top of that to TD Ameritrade?
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Sep 17, 2014 01:50
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Ropes4u posted:If I am honest because I am greedy and like the % it has generated for us the last few years. 0.5% is not actually an insane expense ratio, but for 550k it's $thousands per year vs 0.08% and there's no reason to pay it in your 401k when you have access to those other things. Especially considering the overall poor history of managed funds in general. pig slut lisa posted:My fiancee has given me her blessing to manage her retirement portfolio. Currently her Roth IRA is with TD Ameritrade. I'd like to shift her over to Vanguard at some point in the near future. In the meantime, I'm confused about what I'm even looking at with TD Ameritrade. All her holdings are in Vanguard ETFs. Presumably, holding a Vanguard ETF through TD Ameritrade is going to be more expensive then holding it through Vanguard. But when I click on, e.g., the VBK profile on both sites, I see an ER of 0.09%. Where can I find what she's paying on top of that to TD Ameritrade? TD Ameritrade typically charges $10/trade but don't they do free trades for Vanguard ETFs? Which would put this in the "why bother" category as far as moving it around.
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Sep 17, 2014 02:12
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I took the YLLS approach to retirement savings ("do whatever"), and as a result I currently have most of it in Vanguard Target 2050. I do not qualify for any tax-advantaged accounts, my 401k setup is rather useless (the fund selection is pure poo poo) and I already maxed it out, and I never expect to see a single dime back from the government pension program I pay into right now. Then there are some stocks I have in my old company. So my situation is sorta non-standard. So given that I cannot take advantage of IRAs and the like, what would you suggest I get into? I heard that the Target funds are not good for non tax-advantaged usage. So what is better (preferably something through Vanguard)? Currently I contribute about $30k a year.
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Sep 17, 2014 02:32
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Did you flip through that stuff on the Boglehead page? It has a lot of at least the first-pass info http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement Edit: Hmm, sticking that in the OP too. slap me silly fucked around with this message at 02:44 on Sep 17, 2014 |
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Sep 17, 2014 02:40
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Ropes4u posted:The 1.5% i give up going to only the index fund is another month of retirement. A fee difference of 1.5%, given the same performance, using actual S&P 500 returns, investing $15,000 annually from 1981 through 2010: 0% expense ratio ending balance: $2.022 million 1.5% expense ratio ending balance: $1.498 million Quite the lavish lifestyle you are going to have in retirement if $524,000 is one month.
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Sep 17, 2014 04:06
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Droo posted:A fee difference of 1.5%, given the same performance, using actual S&P 500 returns, investing $15,000 annually from 1981 through 2010: I conceded that my reasoning and math were wrong. But 524,000 a month would make for a nice vacation.. Still wondering if I should split the cash between our two target groups or not?
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Sep 17, 2014 12:18
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Ropes4u posted:I conceded that my reasoning and math were wrong. But 524,000 a month would make for a nice vacation.. Just figure out how aggressive you want to be and choose the fund or mix of funds that closely matches the equities/bonds ratio that you want. There is nothing wrong with going with 2 target date funds if that gets you the asset allocation that you want. It does make sense for you to be a little more aggressive if your wife is going to be working after you retire.
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Sep 17, 2014 12:41
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I've got a weird one, I'm in my early 30's and have no debt, and I own two paid-off apartments worth $100k each. I live in one and rent the other. Just got a new job for nearly double my salary, making 80k a year now. I have no current savings, just the full equity on the two apartments, and have no retirement account. I spend about $1000 a month for condo fees and all other expenses. I'm sort of miserly. My end game is to retire from working 9-5 jobs around age 40, and go to inventing thingies for Kickstarter, making indie videogames, and possibly some stay-at-home dad stuff. I'm sure people would be shouting at me to start investing in an IRA but I don't want to tie up money until I'm 60, and mentally I just can't see it working out. I feel like I'll be dead or hit by a truck or by the time I make it to 60, the retirement age will be 80. It might not be logical but I can't get rid of that anxiety, so I'd rather not touch tax-deferred accounts. What I want to do is invest in mostly rental properties and keep any extra in index funds. Would it be incredibly foolhardy to think I can live beneath my means from the income of all the rental properties and stocks I amass in the next decade? So far it has been practically working out for me on autopilot.
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Sep 18, 2014 18:18
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Zero VGS posted:I'm sure people would be shouting at me to start investing in an IRA but I don't want to tie up money until I'm 60
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Sep 18, 2014 18:32
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First off, have an emergency fund, regardless of your situation, specifically for 6-12 months if something horrible happens. The thing is with an Roth IRA, you can always withdraw your basis if you ever feel like you need to pull out prematurely. It would probably be the best fit for you over just having taxable accounts. As for retiring at age 40, I guess you don't consider landlording as much of a burden? Regardless, you need to save a stupid amount of money in taxable accounts to achieve your goal and sustain it for the rest of your life. The Mr. Moneyman thread or whatever it's called may be a better audience for your goal.
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Sep 18, 2014 18:33
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Zero VGS posted:What I want to do is invest in mostly rental properties and keep any extra in index funds. Would it be incredibly foolhardy to think I can live beneath my means from the income of all the rental properties and stocks I amass in the next decade? So far it has been practically working out for me on autopilot. Since you've acknowledged that you're not being very logical by dumping everything you have into this one fragile bucket... The answer is yes, you could live solely on rental income by 40 given your numbers. You're going to have to manage and pay for all of the upkeep, and you could go bankrupt if local economic conditions kill your fledgling rental business, but you could pull it off, sure.
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Sep 18, 2014 18:35
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Cicero posted:You can take out the money earlier using SEPP or by doing Roth conversions. That sounds interesting, but also complicated. If there were a way that I could have an employer match my contribution, wait for the match to vest (I think 4 years here?), then be able to pull it out if I need it and at least mostly-break-even after penalties, I'd feel better about it. I'd just hate having to commit the money and be reamed if I want to use it towards a better opportunity. I think there's a way to get it penalty free if it's for buying a house, but I'd imagine that won't work for something that looks like rental property. ETB posted:First off, have an emergency fund, regardless of your situation, specifically for 6-12 months if something horrible happens. My emergency funds are my HELOCs, they're zeroed out right now but I can write checks off them so that's something nice. baquerd posted:Since you've acknowledged that you're not being very logical by dumping everything you have into this one fragile bucket... Okay, I'm not one to put all my eggs in one basket but it's all cheap condos in the vicinity of Boston. I figure someone's always going to need to work here and want a roof over their head so short of a nuke it seems solid enough to stake my livelihood on. Probably a discussion for a different thread but I'm trying to figure out if I'm doing anything particularly inefficient for a short to midterm outlook.
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Sep 18, 2014 19:06
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If the company you work for has a match, shouldn't you take it even if you are planning to withdraw the money early? The penalty is only 10% compared to the 100% gain from the match.
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Sep 18, 2014 19:51
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