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il serpente cosmico posted:Some quick questions now that I have my Roth IRA going. My mutual funds pay dividends. My bond fund pays monthly, and my target retirement fund pays annually. These dividends will be reinvested. Will I need to claim this dividends on my tax return as capital gains? Secondly, I hear dollar cost averaging is your friend when contributing to mutual funds. I'm a little fuzzy on the math--it seems to me it's good for mitigating risk, but I don't see any other benefits. You do not have to worry about dividends in an IRA. If you were getting them in a taxable account your mutual fund company would send you a 1099-DIV around tax time with some numbers to plug into your tax return. There is no special treatment of reinvesting dividends in a taxable account - you would still owe taxes on them as with normal dividends. Dollar cost averaging lessens both the upside and downside of an investment. Here's a page that compares lump sum and dollar cost averaging: http://www.bogleheads.org/wiki/Lump_sum_vs_DCA Bogleheads posted:For a completely rational investor, lump sum investing will always produce a higher expected return, because it immediately moves your funds from asset classes with lower expected returns to ones with higher expected returns. Note that higher expected returns do not guarantee that your actual returns will be higher.
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Aug 18, 2009 19:24
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il serpente cosmico posted:Some quick questions now that I have my Roth IRA going. My mutual funds pay dividends. My bond fund pays monthly, and my target retirement fund pays annually. These dividends will be reinvested. Will I need to claim this dividends on my tax return as capital gains? Secondly, I hear dollar cost averaging is your friend when contributing to mutual funds. I'm a little fuzzy on the math--it seems to me it's good for mitigating risk, but I don't see any other benefits. Nope. Dividends and capital gains are completely under the shelter of the Roth IRA, so you never need to claim or pay taxes on them. You can buy and sell and exchanges funds all you want within that shelter, and never have to worry about paperwork or taxes. Just invest in small increments throughout the year, whenever you have funds available. Regular small contributions is pretty much dollar cost averaging. The question of whether to DCA comes into play when you suddenly find yourself with a large lump sum of money and you want to choose whether to throw it all into your portfolio at once, or to DCA. But for most of us, who just have a little bit every paycheck to put into our retirement accounts, we are not faced with this choice.
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Aug 18, 2009 19:27
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I have 10 grand, and I want to start investing. Naturally, at first i was thinking Vegas, but I figured first I'd ask the internets' finest where I should put my money. I'm an undergraduate, I deliver pizza and thusly make a lot of money(relatively speaking) in unclaimed tips (drivers make minimum wage, so a lot of pizza shops don't make you claim.) In the short term, I'd like the ability to make deposits/investments of 500-1k (the aforementioned tips) a couple times a month, as well as the occasional (like once every 6 months) privilege of withdrawing a grand or two. I plan on traveling in the near future, so international access is key. In the long term, I'm trying to have saved 50+ thousand by 2016, and retire in 2035, I recognize that these goals are A: lofty, and B: contingent on my salary and career path and whatnot, but I want to get started early, and on the right track.
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Aug 20, 2009 16:47
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ZeldaLeft posted:I have 10 grand, and I want to start investing. Naturally, at first i was thinking Vegas, but I figured first I'd ask the internets' finest where I should put my money. I'd say put the majority in a Roth IRA, and then keep a small amount that you'd like to keep liquid (in order to withdraw) into something more accessable. This could be money market, short-term CD, I-bonds (which require 1 year before you withdraw), etc.
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Aug 20, 2009 17:01
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My 401k at my old employer (from a year and a half ago) is still sitting around with about $8000 in it right now. Was never sure what I should do with it, and since both my old and current employers are under Fidelity, I figured I'd just let it be. On reading this thread though, I guess it's a good idea to start up a Roth IRA and fiddle with my contributions some. My question is, I know there's a $5000 annual cap on the Roth IRA, but is that a cap on wage contributions, or a cap on contribution in general? In other words, can I roll in the entirety of my old 401k into it, or only $5000 of it (with the rest either sitting there or being rolled into my current 401k, I suppose)? Also, assuming my HR department will allow for it, is there any reason I wouldn't want to get this done now instead of waiting for the beginning of next year?
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Aug 21, 2009 16:56
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Ledneh posted:My 401k at my old employer (from a year and a half ago) is still sitting around with about $8000 in it right now. Was never sure what I should do with it, and since both my old and current employers are under Fidelity, I figured I'd just let it be. You can ROLL OVER your 401k to a Rollover IRA (which is essentially a Traditional IRA), with no tax consequences. You can then CONVERT the Rollover IRA to a Roth IRA, if you want. If you decide to CONVERT, then the conversion amount will be taxable income and you would need to consider whether it is worthwhile. The $5K contribution is a contribution from wages, which is separate from rollovers or conversions. So if you qualify for a Roth IRA based on your income, go ahead and go up to the max of $5K. I would rollover your old 401k to a Rollover IRA now. If you do it within Fidelity (i.e. your Fidelity 401k to a Fidelity IRA, this can be done over the phone and in one business day. I have done this and it was a piece of cake). And don't convert to Roth unless/until you have had a chance to review your tax situation. Best time to do it is during a year where you had an extended period of unemployment or otherwise low wages, where you can take advantage of your lower tax bracket. And you don't need to convert the entire balance. People generally convert small chunks at a time so as not to push them into the next tax bracket.
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Aug 21, 2009 17:06
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Ledneh posted:My 401k at my old employer (from a year and a half ago) is still sitting around with about $8000 in it right now. Was never sure what I should do with it, and since both my old and current employers are under Fidelity, I figured I'd just let it be. The 5k is a cap on wage contributions. You can roll over any amount, but since the 401k was pre-tax, you will owe taxes on the amount you roll over, and you can't just pay it out of the rollover amount. http://www.goodfinancialcents.com/roth-ira-rollover-rules-from-401k/
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Aug 21, 2009 17:08
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Thanks for the advice all, I'll call Fidelity later and get it turned into a traditional IRA at least. Trying to decide if converting that into a Roth is making my head hurt, though. Been trying to understand the advice in this Fool.com article. I guess in short converting my old 401k money through a rollover into a Roth is a good idea iff A) I can pay the resulting extra income tax from outside sources without withdrawing from the retirement account (likely I can, I have $5000 in another savings account), and B) I don't expect my income tax percent to drop from what it is right now when I retire, which is the part that's giving me trouble. I can't think that bloody far forward.  (for reference right now I'm 24 retiring at 65 probably, and solidly in the 25% bracket at US$58.5k/yr)
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Aug 21, 2009 19:13
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Hey everyone, any thoughts on this portfolio allocation and if / how it should be modified? RYOCX 15.731 % VWIGX 15.820 VTSMX 16.607 VGSTX 7.265 VBMFX 18.180 FIREX 13.198 FRIFX 13.198 I'm going to have some funds coming in that will allow me to either a) buy another fund or b) pretty significantly rebalance this as necessary.
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Aug 21, 2009 20:18
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jbaskin posted:Hey everyone, any thoughts on this portfolio allocation and if / how it should be modified? What is your time horizon? Ideally, your the risk in your portfolio should reflect this. If your time horizon is larger, the more risk you can take because you'll have more time to recover (ie more international/high growth funds/equities). As it looks, I would build up some more cash, and readjust according to your time horizon/risk tolerance. Also, I personally like to stay away from keep all my eggs under one house (seems like you have a bunch of Vanguard funds). Hope this helps!
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Aug 22, 2009 08:34
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ZeldaLeft posted:I have 10 grand, and I want to start investing. Naturally, at first i was thinking Vegas, but I figured first I'd ask the internets' finest where I should put my money. I agree with the Roth IRA idea here, although the idea behind the Roth is that it is after tax money and capped at ~5k per year (withdrawing the money at 59.5 is NOT taxed). Also, if you are receiving tips under the table, I would use that money for travel and your payroll for the Roth contributions. Putting in 5k but only making 4k on the books is going to raise some eyebrows from the IRS. Investing in a Roth at an early age is a great start. There are some funds that are retirement date specific (2035: TRRJX, LTKAX, and BTGAX for example). These funds are risk adjusted based on that predetermined retirement date so all the hard work is done by them, and all you have to do is sit back and watch. If you want money that is easily accessible, throw it in a savings account, or short term CD. NEVER put money in the market or in an investment account that you aren't willing to lose or have for a long period of time. Also, if your looking to travel while still a student. Here's a great site: statravel.com. It caters specifically to students traveling for cheap, should save you a few $. I just got my ticket to England (from DC) for ~$400.  I hope this helps, if not post with more questions!
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Aug 22, 2009 09:02
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dot smain posted:What is your time horizon? Ideally, your the risk in your portfolio should reflect this. If your time horizon is larger, the more risk you can take because you'll have more time to recover (ie more international/high growth funds/equities). As it looks, I would build up some more cash, and readjust according to your time horizon/risk tolerance. Definitely definitely helpful. We're talking at least 5y time horizon wise, if not much longer. I would say 5y is really the bare minimum. As far as building up cash goes, would I be doing so just for the sake of more liquid savings?
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Aug 22, 2009 16:30
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jbaskin posted:Definitely definitely helpful. We're talking at least 5y time horizon wise, if not much longer. I would say 5y is really the bare minimum. As far as building up cash goes, would I be doing so just for the sake of more liquid savings? Building cash lowers your overall portfolio risk, since there is almost no risk associated with savings accounts/money market funds. I wouldn't build this cash by selling current assets, but by portioning your incoming funds. There are several different ways of thinking when it comes to how much cash should be in your portfolio. Some suggest 5%, others 10%. I would say that it really depends on the individual and their current economic situation, so talking with someone who knows more than I would be the safest bet. That being said, you don't want to miss an opportunity to reap the benefits of a down market by putting too much cash aside. So again, talking with an adviser who knows your individual case would probably be the best bet for more specific allocation/investment strategies. Good luck!
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Aug 22, 2009 21:42
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Here's my current situation, I was hoping that someone experienced in the area could give me a few pointers about it. I started working not so long ago, and I haven't started depositing money into my 401k yet. As a foreign national if I lose my job, I will be sent back to my home country and as far as I understand there will be little I can do with my 401k. Correct me if I'm wrong, but I'll either have to wait until I'm almost 60 to cash it back, or I'll have to pay whatever needs to be paid and get the money out of there. Thus, assuming that I might be unable to continue investing in my 401k in an arbitrary number of years, does it still make sense for me to put money in there? My employer currently matches up to a certain amount. Would I ultimately lose more money than I personally put in (without counting the employer contribution) if I pulled it out of there all of a sudden, or would I still come out even or better?
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Aug 24, 2009 07:38
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DreadCthulhu posted:Here's my current situation, I was hoping that someone experienced in the area could give me a few pointers about it. If you pull the money out before you turn 59.5, then you will pay income taxes on the distribution plus 10% penalty. So no, you won't lose more than you put in. You can also leave the money here (either remaining in your employer's plan or roll it over to an IRA at a custodian that lets foreign nationals open an account) and remain invested and maintain a US-based retirement account, even if you go back to your home country. Also read up a bit on the tax treaty between your country and the US. If all of this gives you a headache, just forget about the 401k unless the company match is really good.
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Aug 24, 2009 17:35
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dot smain posted:Also, I personally like to stay away from keep all my eggs under one house (seems like you have a bunch of Vanguard funds). Would you be able to tell me what the reason for this is? All my investments are in Vanguard (have a checking and money market savings account at Bank of America, but that's it), and I'm not sure exactly why I should go to the hassle of setting up more elsewhere if I can be market-diversified within Vanguard. I tried to google for this info, but I'm not hitting the right searchwords if the accepted argument is somewhere out there. Thanks! edit: thanks for the explanations! onefish fucked around with this message at 19:20 on Aug 27, 2009 |
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Aug 24, 2009 22:44
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onefish posted:Would you be able to tell me what the reason for this is? All my investments are in Vanguard (have a checking and money market savings account at Bank of America, but that's it), and I'm not sure exactly why I should go to the hassle of setting up more elsewhere if I can be market-diversified within Vanguard. I tried to google for this info, but I'm not hitting the right searchwords if the accepted argument is somewhere out there. Thanks! I suppose fraud is always a possibility, although given the transparency of vanguard that seems unlikely. Basically, the risk is that Vanguard would do something really stupid that would somehow cause all their funds to significantly under-perform the index. Keep in mind that Vanguard going bankrupt/out-of-business actually isn't a risk, because the fund is essentially separate. The only thing that would change in that event is that management of the fund would likely go to another company. Of course, this doesn't apply if you're using ETNs, which are subject to the risk of default of the issuing company.
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Aug 25, 2009 00:16
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onefish posted:Would you be able to tell me what the reason for this is? All my investments are in Vanguard (have a checking and money market savings account at Bank of America, but that's it), and I'm not sure exactly why I should go to the hassle of setting up more elsewhere if I can be market-diversified within Vanguard. I tried to google for this info, but I'm not hitting the right searchwords if the accepted argument is somewhere out there. Thanks! It's merely personal preference. I like to do the leg work on my own investments, but if I were trusting someone else to do the thinking for me I would want it to be spread through a multitude of different companies. There's nothing wrong with having all your funds under one roof, I just like to keep things varied. dot smain fucked around with this message at 03:47 on Aug 25, 2009 |
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Aug 25, 2009 03:35
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80k posted:If you pull the money out before you turn 59.5, then you will pay income taxes on the distribution plus 10% penalty. So no, you won't lose more than you put in. You can also leave the money here (either remaining in your employer's plan or roll it over to an IRA at a custodian that lets foreign nationals open an account) and remain invested and maintain a US-based retirement account, even if you go back to your home country. Also read up a bit on the tax treaty between your country and the US. If all of this gives you a headache, just forget about the 401k unless the company match is really good. Thanks for the explanation. Would other forms of IRA, such as Roth IRA, make more sense for my situation though in your opinion? Or should I still try 401k?
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Aug 25, 2009 06:15
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DreadCthulhu posted:Thanks for the explanation. Would other forms of IRA, such as Roth IRA, make more sense for my situation though in your opinion? Or should I still try 401k? Oh shoot I guess not. I was looking at this: http://en.wikipedia.org/wiki/401%28k%29_IRA_matrix and it looks like an employer cannot make matching contributions with Roth IRA.. What do you think of Roth 401k?
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Aug 25, 2009 06:18
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SecretFire posted:"contango"
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Aug 26, 2009 11:25
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dot smain posted:Also, if you are receiving tips under the table, I would use that money for travel and your payroll for the Roth contributions. Putting in 5k but only making 4k on the books is going to raise some eyebrows from the IRS. I'm researching Roth IRA's and money market accounts. (its hard to find an honest place to learn about finance without being sold something, that's why I came here first.) The problem is that I make $6000-8000 a year in wages and $20k-$25k in tips. the 10k I have to invest is sitting around in cash. How do I invest unclaimed/international income? more questions edit: why can I only invest 5k per year in a Roth IRA? What do I do if I want to invest more? what is a good rate of interest for a money market account? when I graduate, get a job and a 401k (or whatever) how will that coincide with my Roth/MMA? ZeldaLeft fucked around with this message at 19:08 on Aug 26, 2009 |
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Aug 26, 2009 18:30
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ZeldaLeft posted:I'm researching Roth IRA's and money market accounts. (its hard to find an honest place to learn about finance without being sold something, that's why I came here first.) The problem is that I make $6000-8000 a year in wages and $20k-$25k in tips. the 10k I have to invest is sitting around in cash. IRA's are funded with after-tax dollars. Assuming your unclaimed income is from tips it sounds like you have significantly under reported your income.
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Aug 26, 2009 19:11
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ZeldaLeft posted:more questions edit: There is a limit partially because the government loves your tax money and does not want to give richer people a tax sheltered investment vehicle. Money market accounts will offer rate that vary substantially depending on the overall market. Google "high yield money market", there are a number of aggregators that track rates. Also check savings accounts, occasionally you can find some that offer even better rates than money markets. 401k limits are entirely separate to IRA limits is my understanding.
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Aug 26, 2009 19:18
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Can someone critique my investment elections in my 401k? I am 22 years old, currently putting in 6% of salary in to 401k(company matches 50% up to 6% of salary.) I will be upping the contribution to 10% starting next pay period. My company uses Fidelity NetBenefits for their 401k program. Here is my portfolio pre:Stock Investments LARGE CAP DAVIS NY VENTURE A 20%
Stock Investments LARGE CAP FID US EQ INDEX POOL 10%
Stock Investments MID-CAP BARON ASSET FUND 10%
Stock Investments MID-CAP H & W MID CAP VAL I 10%
Stock Investments SMALL CAP FID SMALL CAP STOCK 20%
Stock Investments INTERNATIONAL ARTIO GLOBAL EQ I 12%
Stock Investments INTERNATIONAL FID DIVERSIFD INTL K 12%
Stock Investments LM EMRG MARKETS INST 6%
Total: 100%
Thanks for your input. e: I did not know this, but my company's matching contributions are put in a separate, preset asset mix. 50% Eq, 35% Bonds, 10% Cash/other and 5% foreign. concerned parent of three fucked around with this message at 02:11 on Sep 2, 2009 |
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Sep 2, 2009 02:02
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I apologize if this has been addressed earlier in the thread but I feel as though my situation is a bit unique: I graduated in December 2008 but the job I had lined up decided to renege after the final interview due to a pending merger/looming economic downturn. Since that time I been unable to land a start to my career but worked at my father's small business to help him, stay busy, gain some skills. I was finally able to land an internship at a small investment consulting firm which has now turned into a 6-month contract offer. I do not get any benefits while being a contract employee however I want to start saving/investing for my retirement -- I'm already about a year behind. With that said I have very little expenses as I'm extremely lucky. What are my options for maximizing my savings and trying to gain some ground I've missed over the past year.
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Sep 2, 2009 21:48
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concerned parent of three posted:Can someone critique my investment elections in my 401k? I am 22 years old, currently putting in 6% of salary in to 401k(company matches 50% up to 6% of salary.) I will be upping the contribution to 10% starting next pay period. you're missing one extremely important thing - the expense ratios of each of those funds. You might have a broad-based index there mixed in with a lot of actively managed funds. In that case I'd take the index rather than eating a 1% fee or so on the other funds quote:Keep in mind that Vanguard going bankrupt/out-of-business actually isn't a risk, because the fund is essentially separate. The only thing that would change in that event is that management of the fund would likely go to another company. Of course, this doesn't apply if you're using ETNs, which are subject to the risk of default of the issuing company. each fund is a separate entity. There is no specific systemic risk tied to individual funds being under the vanguard framework. Happydayz fucked around with this message at 06:49 on Sep 13, 2009 |
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Sep 13, 2009 06:45
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Here's an overview of my investing strategy: The overall asset allocation I'm looking at is 65% equity and 35% bonds. This is heavy on bonds for someone my age, but the money is necessarily just for retirement, since there's a real possibility some or most of it could be used for a downpayment on property in the next 5-10 years. I'm also taking into account Graham's advice to stay within a 25-75 range for each section. At this point I'm not looking at other investment types; REITs don't really interest me and the Canadian equity portion gives me lots of exposure to general commodities. Cash isn't included as a percentage allocation, since I'll be holding a fixed amount with any excess used to purchase more assets at rebalancing times. Speaking of rebalancing, the general rebalancing strategy is to do so 1-2 times per year, with an additional rebalance triggered if an asset is over 50% overweight, although I may still change this. Specific Allocation (All Percentages of Total): General Equity - 60% 20% XIC - iShares CDN Composite Index Fund (I like the greater breadth of XIC, but XIU has much better volume/liquidity and a slightly lower MER, so I'm not sure) 20% VTI - Vanguard Total Stock Market ETF (Broad US market exposure and rock-bottom MER. I've been convinced that hedging the CAD/USD exchange rate isn't worthwhile over the long term) 20% VEA - Vanguard Europe Pacific ETF (Since the exchange rate exposure is to a basket of currencies, buying one of the funds hedged to USD doesn't make much sense) Specific Equity - 5% (My commissions are low enough relative to assets that they shouldn't drag even these small allocations too much) 2.5% - BHI Baker Hughes 2.5% - SII Smith International I decided to invest a small portion in oil field service companies. Originally I was planning on investing this portion in an oil commodity fund like USL, DBO, or USO, but the problems of contango/backwardation and possible rule changes in the futures market make them unsuitable for long-term investment. I found the integrated major producers either ethically (XOM, Chevron, etc.) or financially (ConocoPhilips) unappealing, but I found some good companies in the oil field service sector. BHI, BJS, and SII are all relatively solid value stocks with good long term potential; since BHI is buying BJS, likely by the end of this year, investing in both would be redundant. Bonds - 35% 25% XSB - iShares CDN Short Bond Index Fund (Short bonds have lower volatility than longer duration bonds, which is an important attribute for the bond portion of the portfolio) 10% XRB - iShares CDN Real Return Bond Index Fund (Having some inflation-indexed bonds seems like a good idea) The tax strategy is relatively simple. During 2008 I'll keep most of it in a taxable account and keep my TFSA with ING for their promotional rate, but in 2009 with new purchases and possibly movement of existing assets I'll put the foreign holdings in an RRSP and use the TFSA for holding the bonds. How much of the asset base will end up inside the RRSP I'm not sure, but I'll certainly use all the TFSA room I can. I've set up an account with questrade, since they offer by far the lower commissions: $5 on most of the trades I'll be making, up to a maximum of 10$. My signup bonus will supposedly rebate my first $50 in trades as well. Idle cash in my taxable account will likely be moved to a high-interest savings account between rebalancings.
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Sep 19, 2009 00:22
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I've been reading quite a bit, but I'm slightly confused by a few things. If anyone can shed some light, that would be great. - My wife and I pay gross ~100k per year - We currently pay 9% of our income into a 401k - We will be out of credit card debt in February I've looked at retirement calculators and I'm just not sure of a few things: 1) What should I assume the rate of return will be? 2) How much should I plan on having per year at retirement? They ask for a percentage, but I don't know if there's a good rule of thumb. We will have our house paid off in another 20 years, so we shouldn't have tons of bills or anything. 3) What ROTH should I use? I've heard Vanguard is great, I believe. Putting in 15% is sufficient? Sorry for all of the questions. I can put it in it's own thread (if I don't get any answers, I guess I will!). Thanks guys.
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Sep 23, 2009 19:52
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1) What should I assume the rate of return will be? Why not make it variable and allow for different scenarios? Have a conservative (4-5%), typical (7-8%), aggressive (10-11%)model. 2) How much should I plan on having per year at retirement? They ask for a percentage, but I don't know if there's a good rule of thumb. We will have our house paid off in another 20 years, so we shouldn't have tons of bills or anything. It is based on what you can afford and your current financial situation. Ramsey I think recommends 15% of your gross. If you can afford more, why not? 3) What ROTH should I use? I've heard Vanguard is great, I believe. Putting in 15% is sufficient? IRAs (Roth and traditional) both have a limit of $5,000. It is not tied to a percent of your income. A lot of people, myself included, recommend Vanguard because it has some of the lowest fees in the industry. You seem to be a little confused overall on retirement accounts. Here is a super quick overview. IRA - Individual retirement account. Anyone with income can open one of these. 401k - Employer sponsored retirement account. Sometimes your employer will match your contributions up to a certain percentage of your income (typically 5-6%) Both of these types of accounts can come in two flavors, Roth and traditional. Simply put the Roth you pay taxes up front, and traditional you can defer taxes until you withdraw. For most young people the Roth is the better choice as your tax obligation is lower now than it will be later. In general the best order to go is: 1) 401k up to employer match (if offered) 2) Max out IRA annual contribution 3) Max out the rest of 401k ($16,500 for 2009) 4) Retire rich if you do all of these three things. Daeus fucked around with this message at 12:25 on Sep 24, 2009 |
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Sep 24, 2009 01:16
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Daeus posted:The big advantage to these accounts is that the gains are not taxed. With the traditional you pay income taxes on qualified distributions (which includes gains). The Roth is the only one that has untaxed gains.
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Sep 24, 2009 05:49
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I base this off of my gross and not net, then, correct? If I make 100k, I put in 15k per year? Or do I put in 15% of the 60k (or whatever # it is) that we make? If I currently pay 9% into 401k, and I open a Roth, would we only need to put 6% in for the 15% goal, or is this in addition to that? I'm sorry for being so clueless. I need to buy a few books and learn what the heck I'm doing.
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Sep 24, 2009 15:01
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Solaron posted:I base this off of my gross and not net, then, correct? If I make 100k, I put in 15k per year? Or do I put in 15% of the 60k (or whatever # it is) that we make? Where are you getting this 15% goal from? Just go ahead and max out your Roth IRA.
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Sep 24, 2009 15:35
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theDoubleH posted:Where are you getting this 15% goal from? Just go ahead and max out your Roth IRA. He's getting it from the same place most of us are: we don't make enough to max both the Roth and the 401(k), so we're trying to figure out how much goes where every month so we can dollar cost average. Solaron, invest as much as you can afford. If you want the 15% figure that most people throw around, it's traditionally based on pretax income. BUT, it's also traditionally based on pretax investment vehicles, so that makes things more complicated when you're splitting it between pre- and post tax accounts. The way I'm doing it is by figuring out what 15% of my gross is, and then figuring out what my final tax rate is and seeing what the 5000/year Roth would equal pretax. First number minus second number equals annual 401(k) contribution. 100 grand gross example. I make 100,000 dollars, so I want to invest 15,000. My tax rate at that income is ~21.72 percent. The Roth is getting 5000 post tax, so if 5000 was 78.28%, then the impact would be 6387 pre tax. Therefore, the 401(k) gets 8613/year before taxes, the Roth gets 5000 after taxes, and I'm doing 15% of my gross. That's a fair amount of math and headache (especially figuring out the effective tax rate crap - I didn't calculate any savings/costs due to gains/losses, deductions etc. in my made up example), so if you wanted you could just say 5k in the Roth and 10k in the 401(k) - you'd be oversaving your target 15%, but if you can afford it then so much the better. T0MSERV0 fucked around with this message at 21:58 on Sep 24, 2009 |
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Sep 24, 2009 21:55
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Any advice for federal employees? I currently contribute 5% of my income into the government's 401k (Thrift Savings Plan or TSP) and my department matches up to 5%. I currently have 100% of my contribution going into the 2040 Life Cycle Fund (http://www.tsp.gov/rates/fundsheet-lfunds.pdf). I'm 24 and will thus likely retire after 2040. Should I just leave my 5% yearly contribution in the L2040 and forget it about it for the next few decades? Also, I would like to start making Roth IRA investments, but I don't have enough money saved up at this time to do the $3,000 minimum. Is it recommended that I begin as soon as I can afford a fund, or is it best to save until I can purchase multiple funds and thus diversify my portfolio? If I play the government game properly, I might near 90k in as little as 5/6 years. If that's the case, I would only have the next 5-6 years to contribute into IRA's?
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Oct 6, 2009 02:39
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Tortilla Maker posted:Also, I would like to start making Roth IRA investments, but I don't have enough money saved up at this time to do the $3,000 minimum. Is it recommended that I begin as soon as I can afford a fund, or is it best to save until I can purchase multiple funds and thus diversify my portfolio? Vanguard Star Fund has a $1000 minimum. You can open that first, then change it once you have more than $3000.
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Oct 9, 2009 00:36
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Tortilla Maker posted:Should I just leave my 5% yearly contribution in the L2040 and forget it about it for the next few decades? Your link didn't work, but I'm going to assume that fund is similar to any other target retirement fund. They are generally fine if you just want to deposit money and forget about it. They have allocation percentages that most people would not find optimal and would prefer to make their own portfolio. For example I first put my Roth IRA funds in Vanguard's 2050 fund which has 72%US/10%Bonds/18%International. For me the bond and international allocations are too low, but it's better than no diversity. If you do want to create your own portfolio, it's a good place to park your money until you decide how you want to allocate it. quote:Also, I would like to start making Roth IRA investments, but I don't have enough money saved up at this time to do the $3,000 minimum. Is it recommended that I begin as soon as I can afford a fund, or is it best to save until I can purchase multiple funds and thus diversify my portfolio? quote:If I play the government game properly, I might near 90k in as little as 5/6 years. If that's the case, I would only have the next 5-6 years to contribute into IRA's?
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Oct 9, 2009 03:04
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I know for a fact the Tradtional IRA to Roth IRA conversion is being extended to all income groups (those making over $100,000) in 2010, but are they really doing away with all income requirements of a Roth IRA?
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Oct 9, 2009 13:54
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ZeroAX posted:Your link didn't work, but I'm going to assume that fund is similar to any other target retirement fund. They are generally fine if you just want to deposit money and forget about it. They have allocation percentages that most people would not find optimal and would prefer to make their own portfolio. For example I first put my Roth IRA funds in Vanguard's 2050 fund which has 72%US/10%Bonds/18%International. The governments L2040 fund is broken down as: 40% - US Common Stock (S&P 500 serves as the benchmark) 24% - International (Morgan Stanley Capital International EAFE Index serves as the benchmark) 17% - Small Capitalization (Dow Jones serves as benchmark) 10% - Fixed Income (Barclays Capital US Aggregate as benchmark) 9% - US Government Securities (specially issued US Treasury Securities to be specific) To clarify, I guess I was trying to ask whether it was best to simply start with a $1,000 STAR fund and to grow from there, of if it was best to save up the $3,000 and just start with one of the other funds.
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Oct 10, 2009 00:17
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GOOCHY posted:I know for a fact the Tradtional IRA to Roth IRA conversion is being extended to all income groups (those making over $100,000) in 2010, but are they really doing away with all income requirements of a Roth IRA? The net effect is the same. You can contribute to a non-deductible traditional IRA and then immediately convert it to a Roth, effectively bypassing the income limitations on Roth contributions.
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Oct 10, 2009 00:32
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