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Well guys, I just took my first big step in saving for my retirement and opened up a Roth IRA through Vanguard. I placed $5,000 into the 2050 fund for 2010, I'm assuming I can place more money into the fund when tax season is over? Also, is there a way I can see how my fund is doing on the go like through my phone? I know a lot of sites have a "mobile" version, but I hate looking though a gutted site like that. Maybe an iPhone app?
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Mar 15, 2011 22:55
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gp2k posted:Good point in general. In my case I'm at Vanguard buying Vanguard ETFs, so no commission. But yeah, otherwise that'd kill you. The differences I can think of (I'm sure there are more): There can be a premium/discount for the ETF You probably want to use limit orders for an ETF (more attention required) Fund allows fractional purchases Fund allows automatic purchases (I think? I don't have Vanguard) Fund has higher expenses Fund probably has a minimum investment taqueso fucked around with this message at 00:22 on Mar 16, 2011 |
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Mar 15, 2011 23:07
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obi_ant posted:Well guys, I just took my first big step in saving for my retirement and opened up a Roth IRA through Vanguard. I placed $5,000 into the 2050 fund for 2010, I'm assuming I can place more money into the fund when tax season is over? You can contribute for 2011 any time from jan 1 2011 through april 15, 2012. quote:Also, is there a way I can see how my fund is doing on the go like through my phone? I know a lot of sites have a "mobile" version, but I hate looking though a gutted site like that. Maybe an iPhone app? I'm not sure, but, don't do this. Don't watch your retirement daily. Fluctuations in price over the space of days (or weeks or even months) can make you nervous when you shouldn't be. Retirement investing tracks changes over decades. If you check your balance and rebalance as necessary once or twice a year, you'll be fine, and you'll stress a lot less over drops in value that last a few days or weeks or months. And remember: if the long-term (decades) trend of your investments is upward overall, then temporary price drops are merely opportunities to buy shares at a discount.
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Mar 15, 2011 23:21
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Realjones posted:The student loan interest deduction starts to cut off at 60K/120K, so no one in the 28%+ bracket is going to be able to take the deduction. Basically DINKs and single people (especially in high cost areas) get shafted. Let me back up. To answer his question, given a fixed amount of money that would be enough to 'attack the loan' or max his ROTH and then put the rest into the loan on a fixed 10 or more year window. The problem here is the hypothetical contribution. Few of us are disciplined enough to adjust our contributions in such a way. You are right that the cutoff starts there, but there's a two prong component to this formula. You have the student interest tax break (which you don't get, but drops off quickly after the first few years anyway) and then there's the withdrawal rate. The biggest benefit is that by taking the deduction earlier, you are getting a larger and sooner start on a tax free start for retirement. Assume a ~60K AGI, full student loan interest, 25% marginal rate. If you had a $40,000 student loan, with 6.8% interest vs a 5% Moderate Market rate and a historical 3.5% inflation. You took 8129.24/year (inflation adjusted @30Y=$419,653.13) to make payments against your loan/retirement invest you could do one of the following. A: Make maximum payments against the loan and pay it off as fast as possible (5+ years) and then save the max in ROTH and the remainder in non-tax advantaged accounts for the remainder of the 30 years. B: Make minimum payments on a 10 year loan schedule and then contribute the rest to your ROTH and non-tax accounts for the remainder of the 30 year period. C: Make minimum payments on a 20 year loan schedule and then contribute the rest to your ROTH and non-tax accounts for the remainder of the 30 year period. D: Make minimum payments on a 30 year loan schedule and then contribute the rest to your ROTH and non-tax accounts for the remainder of the 30 year period. I made a pretty picture for you:  Basically, under this scenario, you're beset off with a 20 year loan. As I said above it does have risks, namely income loss with debt outstanding. You would have the option to withdraw ROTH principle as well as a federal student loan (6.8 is a recent loan rate, it's what mine is) you can go into forebearance or other contingency statuses. Clearly, the chart shows that MAX gives you ~684K (vs 680K) and paying the least to the loan company, however because of tax advantages and the fact that most people will need to withdraw enough that along with social security (HAHA), they will find that they likely hit the 25% rate. Even with management of distributions to get to the 10% rate, there's still a 10K difference. KennyG fucked around with this message at 00:20 on Mar 16, 2011 |
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Mar 16, 2011 00:13
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Great analysis. The best option is really only dependent on the first couple of years after you graduate. Option A can be a great option if the Dow tanks within the first 5 years. Someone who graduated in 2004/2005 on the five year payoff plan is going to crush whoever went with option D. Likewise, if you graduated in 2009/2010, option C/D (at least so far) has been the way to go. It seems that you agree that slightly overpaying some is better than either of the extremes.
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Mar 16, 2011 02:00
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Personally I highly weight psychological impact of debt. I want to be debt free ASAP even if it costs me a little bit, mainly because I don't like have to still pay in the present for things I got in the past. I'm very focused on being debt free though, because I've seen how the rest of my family lives outside their means and I don't want to be like that.
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Mar 16, 2011 14:43
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I agree that many people are too comfortable with debt and live outside their means. The biggest problem I have with this model is that few people would be disciplined enough to realisticly see it through. The tradeoff of both positions have been mentioned but while A has the advantage of lower debt sooner, D has the benefit of having more financal flexibilty with less financial penalty in the first few years. if you lose your job in year 1 or 2 your payments are lower and you actually have available savings without major penalties.
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Mar 16, 2011 15:03
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Investments: Roth IRA of Vanguard 2050 Retirement fund, maxed for 2010 Vanguard Individual brokerage account with: - Vanguard Total Stock Market (VTI), initial investment of $6848 - Vanguard Intermediate Term Corp Bond ETF, initial investment of $2098 Other things in case you need to know: - ING direct (formerly high interest  ) savings account with about $7k, this is my emergency fund/longterm savings for stuff like vacations or major purchases. I send $100 a month here, which I should increase but haven't yet.- I am a grad student and I make about $24k a year at the moment. I know I am not saving enough. - I don't have any debt except some deferred, subsidized federal direct student loans of $18k. I won't have to pay those till 2013 or 2014. The Roth IRA I'm leaving alone except to put money in it. I need to max it for 2011 but I will probably do that over the year. I'm an uber newbie and don't really have any interest in learning the ins & outs; I just want to be doing something with the money my parents saved for me that used to be sitting in an mediocre high expense ratio mutual fund. My question is simply, on the brokerage ones, should I be reinvesting the dividends or have them put in my bank account, or in something else? I have them reinvesting in the funds at the moment. The bonds one is only like $1.50 a month, but the VTI is closer to $40. You guys have held my hand and told me what to do before and I'm quite pleased with the results, so thank you.
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Mar 16, 2011 16:53
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Question regarding RRSPs. I know that as a first time home buyer I can borrow up to 25k "interest free" from my RRSP meaning I don't pay interest on the money I remove but I also lose any possible gains while the money is out. I know this isn't a great idea, but I am examining all possible options at the moment. Suppose I take 25k out to purchase a house and I contribute about 10k a year to my RRSP. Do those contributions go towards paying back what I borrowed from myself or is the payback separate from contributions? I am thinking the latter but wouldn't mind some confirmation.
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Mar 16, 2011 19:12
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Eggplant Wizard posted:Investments: Since it's a taxed distribution regardless (it's not in a tax advantaged account) the decision is up to you. If you re-invest remember that your basis will increase (important when you sell), and you will be increasing what you will be receiving (and thus your tax liability). The gains (and losses) are passed through to you as if you had done only the small fraction of the underlying transaction that you benefitted from (regardless of how long you held the fund). This means you can be hit with short term capital gains on shares that you own for 1+ years or long term cap gains on shares you owned for <1 year. Short term is generally treated less favorably than long term but neither is a major concern in your position as ~500 on $24k/yr will worst case scenario amount to about $75 in tax.
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Mar 16, 2011 20:53
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After maxing out my Roth IRA in a target date fund this year, and contributing a steady 10-15% of my income to my company's 401k (10% bond fund, 30% growth fund, 60% S&P index fund), I'm thinking about opening non-tax advantaged Vanguard brokerage account to buy and hold some of their ETFs by dumping a few thousand dollars of idle savings into it. I don't anticipate needing to touch this money for some time, and would still have additional savings plus an emergency fund of about $8,000 at my disposal should I need it. Other than the possibility of a market cataclysm, is there any reason I shouldn't do this? Would it make more sense to sky-rocket my 401k deferrals instead, since at my current levels I'm not maxing it out (though I will definitely be passing the limit of company matching)? To me, the Japan jitters looks like an opportunity to substantially increase my holdings in index funds at January prices today, and I'd like to take advantage of it, but wary of opening a taxable account.
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Mar 17, 2011 00:32
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well, I finally took the plunge and invested $10K into an RRSP. I split it between 2 core-type mutual funds that seem to do fairly well consistently, and had great reviews. The only problem? My timing. I bought them the day before the earthquake, and I've already lost half a percent. Not the best way to begin my lifelong investment! But I think I'll just not look at it for a while, and hope it goes back up - I'm in it for the long-haul, after all! I may take my tax refund and just re-invest it while the prices are a little lower. But oh, if only I had waited a week!
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Mar 17, 2011 04:23
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Guitarchitect posted:well, I finally took the plunge and invested $10K into an RRSP. I split it between 2 core-type mutual funds that seem to do fairly well consistently, and had great reviews. That happens even to the best of managers. Just think about someone who decided to put $10 million into a Japanese hedge fund. Nobody can accurately predict outlier events and their effect on the markets 100% of the time. If you are in for the long haul just keep dollar cost averaging and it will work itself out.
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Mar 17, 2011 06:24
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bam thwok posted:After maxing out my Roth IRA in a target date fund this year, and contributing a steady 10-15% of my income to my company's 401k (10% bond fund, 30% growth fund, 60% S&P index fund), I'm thinking about opening non-tax advantaged Vanguard brokerage account to buy and hold some of their ETFs by dumping a few thousand dollars of idle savings into it. I don't anticipate needing to touch this money for some time, and would still have additional savings plus an emergency fund of about $8,000 at my disposal should I need it. It all depends on who your 401(K) provider is and your tax situation. Many 401(K) plans are designed more for the benefit of the employer than the employee (after all they pick who manages the plan). This can lead to some pretty crappy expense ratios and even worse selections. These ratios are a huge influence on true return. The reason 401(K) plans are good are for the match, after that, the ROTH is best because of the tax benefits. Most 401(K) plans limit you to some basic funds and don't offer the funds you are looking for. I would likely chose the IRA simply because it gives you the flexibility and if you are smart about it you won't have too many tax problems to worry about but that depends a lot on your situation.
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Mar 17, 2011 17:41
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Quick (and probably easy) question. I'm a graduate student with ~10k in savings and I'd like to open a Roth IRA. I already completed my tax return and I want to make sure I'm not doing anything stupid. If I contribute before April 15th (this would count for last year) I won't have to redo my taxes or anything, correct? I'm assuming since anything put in the Roth IRA is already taxed (and I already paid/received money based on this) I should be able to do whatever with the money. Furthermore, since that contribution is for last year, after April 15th I should be able to do an additional contribution for this year, right?
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Mar 17, 2011 20:15
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defmacro posted:Quick (and probably easy) question. I'm a graduate student with ~10k in savings and I'd like to open a Roth IRA. I already completed my tax return and I want to make sure I'm not doing anything stupid. Yes, roths are already taxed so it won't affect your taxes. You can contribute for 2010 from Jan 1 2010-April 15 2011. You an contribute for 2011 from Jan 1 2011-April 15 2012. So you can do them both now, you don't have to wait until after April 15th.
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Mar 17, 2011 20:25
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|Ziggy| posted:Yes, roths are already taxed so it won't affect your taxes. You can contribute for 2010 from Jan 1 2010-April 15 2011. You an contribute for 2011 from Jan 1 2011-April 15 2012. So you can do them both now, you don't have to wait until after April 15th. Glad everything I read sunk in. Thanks!
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Mar 17, 2011 20:27
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defmacro posted:Quick (and probably easy) question. I'm a graduate student with ~10k in savings and I'd like to open a Roth IRA. I already completed my tax return and I want to make sure I'm not doing anything stupid. One thing just in case, from one grad student to another. If you are/were on a fellowship or scholarship in 2011 or 2010, that does not count as earned income. You may not contribute more than each year's earned income to a Roth IRA, so if last year you TA'd or RA'd but only made $3000, even if you had a $20k fellowship, you can only contribute up to $3000.
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Mar 17, 2011 21:07
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Eggplant Wizard posted:One thing just in case, from one grad student to another. If you are/were on a fellowship or scholarship in 2011 or 2010, that does not count as earned income. You may not contribute more than each year's earned income to a Roth IRA, so if last year you TA'd or RA'd but only made $3000, even if you had a $20k fellowship, you can only contribute up to $3000. Thanks for the heads up. I should be in the clear though.
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Mar 18, 2011 02:18
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I have a new job paying 33k a year, I'm currently putting 10% towards my 403b and 3% is matched. It's managed by Fidelity and I have no clue where to put my contributions. They have this handy chartquote:Investment I was thinking, SPTN 500 INDEX INV 30%, SPTN EXT MKT IDX INV 40%, FID DIVERSIFD INTL 10%, FID REAL ESTATE INVS 15%, FID US BD INDEX 5%. Basically I'm wondering if this is an ok contribution setup? Horrible? Going to leave me penniless? I don't really know what I'm doing and I picked my percentages mostly on "That average annual return seems good". Suggestions would be appreciated, I can probably look up additional information if it's needed. Someone mentioned fees before, for the ones I listed to invest in they're: quote:Fees
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Mar 22, 2011 23:39
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Does anyone here have opinions about market-linked investments? We recently switched to Merrill Lynch at work, and the advisors brought it up as one possibility to keep my expense ratio lower. My understanding of it is that you buy X units of it and hold it for 2-5 years depending on which one you buy. At maturity, if the index it was following goes up, say 6%, you get a 3:1 return on that, so principle plus 18%. There's usually an upside cap, so if the cap were 60% and the markets went up 30%, you would get principle plus 60%. There is also a downside limit, so if the markets went down, you would get back no less than 90% of the principle at maturity. I can't find a lot about these outside of the Merrill Lynch site and was wondering if people here had opinions about them.
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Mar 23, 2011 13:19
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Frohike999 posted:Does anyone here have opinions about market-linked investments? We recently switched to Merrill Lynch at work, and the advisors brought it up as one possibility to keep my expense ratio lower. My understanding of it is that you buy X units of it and hold it for 2-5 years depending on which one you buy. At maturity, if the index it was following goes up, say 6%, you get a 3:1 return on that, so principle plus 18%. There's usually an upside cap, so if the cap were 60% and the markets went up 30%, you would get principle plus 60%. There is also a downside limit, so if the markets went down, you would get back no less than 90% of the principle at maturity. It's a derivative product. Derivative doesn't have to be a four letter word, but you are getting into an area of structured finance that created CDO's and the other wonderful vehicles that almost crashed the global financial system (and is still loving it big time.) Without reading and understanding each prospectus it's hard to say what would be good or what could be way too risky. You could make great returns, but I wouldn't say that it aligns well with a 'keep your expense ratio down' for reliable and steady returns philosophy. It could return well, it could return poorly, but it's not as clear as a traditional bond, index fund, or even a well researched stock or mutual fund. Remember bets like these are a zero sum game, if you make 40%, someone's paying 40%. Why would someone take the other side of this bet if it looks so good for you? For Quid, how old are you? When do you want to retire? What is your risk appetite. You have selected 70% US Equity, 10% international, 15% Real Estate and 5% bonds. (Higher risk, significant dependence on the US) It all depends on your age and risk appetite. It will not leave you penniless if you can ride the ups and downs without trying to time the market or losing your lunch when you lose 10% in a month. If you can ride it, you should do fine (if you have 20-30 years to retirement like most goons).
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Mar 24, 2011 01:43
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Quid posted:I was thinking, SPTN 500 INDEX INV 30%, SPTN EXT MKT IDX INV 40%, FID DIVERSIFD INTL 10%, FID REAL ESTATE INVS 15%, FID US BD INDEX 5%. Basically I'm wondering if this is an ok contribution setup? Horrible? Going to leave me penniless? I don't really know what I'm doing and I picked my percentages mostly on "That average annual return seems good".
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Mar 24, 2011 02:04
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Frohike999 posted:Does anyone here have opinions about market-linked investments? We recently switched to Merrill Lynch at work, and the advisors brought it up as one possibility to keep my expense ratio lower. My understanding of it is that you buy X units of it and hold it for 2-5 years depending on which one you buy. At maturity, if the index it was following goes up, say 6%, you get a 3:1 return on that, so principle plus 18%. There's usually an upside cap, so if the cap were 60% and the markets went up 30%, you would get principle plus 60%. There is also a downside limit, so if the markets went down, you would get back no less than 90% of the principle at maturity. I'm not sure how it keeps your expense ratio lower, as I think the additions of derivatives to a financial structure makes it more expensive, not less. I'm not sure how much you know about derivatives, but it seems to me that limiting your downside while multiplying your upside (presumably through the judicious use of options) requires you to pay money to the person who is taking the downside risk and sacrificing their upside for your sake. That money most definitely comes out of your pocket one way or another, even if the fund doesn't describe it as an "expense." In order for you to "win" with this investment, not only would the index have to go up, but it would have to go up far enough that you make back all of the money you're spending on these options, within the maturity of the deal. I'm not sure what your take is on the future course of the indexes (hint: the general view is that no one can predict them accurately), but if you want something you can buy and forget for a long period, pick something else. And as a general rule, whenever you by something more complicated than a Treasury bond or an index fund, someone on Wall Street is laughing at you. Also, Merrill Lynch is the firm that bankrupted Orange County.
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Mar 24, 2011 02:47
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Thanks for the input. I guess I should have mentioned regarding the expense, but previous to these advisors we only had a few Oppenheimer funds to choose from. The Main Street fund had an expense of 1.76%, but most of the funds were over 2%. The market linked offerings the advisor mentioned had an expense anywhere between 1.25%-2% depending on what type you purchase (there are some linked to Dow Jones, some to the energy sector, some linked to global funds). Anyway, I think I'm going to be staying away from these, at least for now. I just wanted to check to see if this was something more common than I was finding. Here is a link for anyone interested in reading up on these. I figure it's always something I can switch to if I'm more comfortable with it later, but without being really sure what the catch is, I'd rather stick to something more familiar.
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Mar 24, 2011 04:36
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Frohike, if you would like more insight into (why) derivatives (can be terrible for average people), read The Big Short by Michael Lewis (yes, the guy who wrote the Blind Side). It basically outlines how the subprime lending market was driven (at least towards the end) primarily to fuel the derivatives market and the fees it generated. Wall Street was full of Idiots drinking their own Kool Aid because these things were so complicated and opaque that the companies that made these things to trick the regulators and raters to make them appear better than they were, forgot that they rigged it and started buying the toxic crap themselves. In 2011, 1.25% Exp ratio is off the charts high. Look at some of the index funds people are talking about in here. Most are talking about expense ratios between .1 and .3%. In addition to Hobologist's comment about complexity my favorite comes from Jack Boggle (the founder of Vanguard). "Never buy anything you couldn't explain to an average 13 year old." Edit: Also, what I missed and it doesn't seem anyone here has commented on, why in the gently caress would an advisor recommend this to you to keep your expenses low. If it's as you are explaining it, this guy is just ripping you off. This smells like Mortgage Backed CDO's II: Bail Us Out Again Please. KennyG fucked around with this message at 13:52 on Mar 24, 2011 |
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Mar 24, 2011 13:10
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Reading that ML page, I would personally keep them out of your retirement portfolio. It exposes you to a lot of risk not inherent with traditional mutual funds, and like many derivatives, may not perform as one might expect long term. The first type you were talking about is a leveraged investment. If the market goes up 10% you may go up 30% but if the market goes down 10% the fund value goes down 30% or worse may face a margin call. If the fund cannot pay you lose everything. The second type is basically like buying insurance on the stock market or specific asset classes. Insurance isn't free and will cut into your returns during a bull market. Typically since retirement funds have a long investment horizon this isn't considered necessary, but if you are risk averse and willing to give up some of the upside it might not be a terrible strategy. Again thats how these things typically work and personally i would not feel comfortable investing in one unless I could see a detailed spreadsheet on how the fund would perform in various circumstances.
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Mar 24, 2011 13:38
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Thanks again for the input guys. It's been several years, but I read a book by John Boggle on Mutual Funds that really made a lot of sense at the time. Sounds like it's time to pull that one off the shelf again.
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Mar 24, 2011 14:37
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Frohike999 posted:Thanks again for the input guys. It's been several years, but I read a book by John Boggle on Mutual Funds that really made a lot of sense at the time. Sounds like it's time to pull that one off the shelf again.
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Mar 24, 2011 15:28
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I am going to be opening up a Roth 401(k) next month (with some pretty sweet matching), and I was hoping for some feedback on the investment options I have available. For background, I'm 25, have no debt, and have a decent amount of investments from a previous job. I have no major financial obligations in the near future, but I may be interested in looking at FHA financing for a house in the next year or so if conditions are favorable enough and my situation calls for it. Current investments 8.0% cash 9.7% large-cap domestic index 7.9% large-cap domestic individual stocks 12.5% small-cap domestic value index 25.2% small-cap domestic individual stocks 12.7% international developed markets equities (indexed) 12.6% emerging markets equities (indexed) 11.4% specific sector equities (materals and energy, indexed, both domestic and international) This is obviously rather risky, but I'm mostly comfortable enough financially that I feel I can take a few bets at this age. I do want to use the 401(k) to balance out some of overweightedness in the existing portfolio though. Here are the available options, and their expense ratios: DFINX Transamerica Partners Money Market, 0.50% Stable Pooled Fund (short-term, high quality bond fun), 0.40% LSBDX Loomis Sayles Bond, 0.67% PTRAX Pimco Total Return, 0.77% MADVX BlackRock Equity Dividend, 0.75% DNVYX Davis NY Venture, 0.59% DISFX Transamerica Partners Stock Index Fund (S&P 500 index), 0.30% RGAEX American Funds Growth Fund of America, 0.64% NAMAX Columbia Mid Cap Value, 0.87% CHTTX Aston/Optimum Mid Cap, 1.16% ACRNX Columbia Acorn (small/mid-cap), 0.75% CSCZX Columbia Small Cap Value, 1.05% SMEIX AIM Small Cap Equity, 0.83% PSGIX BlackRock Small Cap Growth Equity, 0.81% IARIX AIM Real Estate, 0.83% RWIEX American Funds Capital World, 0.78% GIEIX International Equity Inv, 0.57% ODVYX Oppenheimer Developing Markets, 0.95% OAKBX Oakmark Equity & Income, 0.83% TRRIX T Rowe Price Retirement Income, 0.55% ...and a whole bunch of T Rowe Price target retirement date funds, with expenses ranging from 0.70-0.75% I'm not thrilled about the lack of index funds and the fees on the managed ones, but at least there are a lot of options. The allocation I was considering is: 50% PTRAX 50% DISFX This ignores international and small-cap stocks because of the options available, I would be using maxed Roth IRA funding (which is with Vanguard) for those, for a final allocation of any new funds that would look similar to: 26.8% PTRAX Pimco Total Return 26.8% DISFX Transamerica S&P500 Index 31.5% VFWIX Vanguard FTSE ex-US Index 07.5% VEIEX Vanguard Emerging Markets Index 07.5% VGSIX Vanguard REIT Index Thoughts, suggestions?
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Mar 24, 2011 16:25
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AreWeDrunkYet posted:
Mix sounds good to me. As far as the Roth 401(k), yes it is nice to get after tax dollars in there, but a Traditional may still be better: http://thefinancebuff.com/case-against-roth-401k.html
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Mar 24, 2011 16:34
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AreWeDrunkYet posted:26.8% PTRAX Pimco Total Return VFWIX includes emerging markets, so you don't need VEIEX unless you specifically want to be overweight toward them.
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Mar 24, 2011 16:47
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I'm rather new to this, so please bear with me. I couldn't figure out where to ask this question and everyone here seems to give good advice. If this is the wrong thread, I apologize. Bit of background: Currently 23 years old with a fiancee. Neither of us have debt, and we were lucky enough to live in a house that her aunt purchased but is not using, so no rent either. Combined we pull in 85k/year pre-tax (60k for me and 25k for her). Currently I'm contributing 6% of my income to the company 401k (company only matches the first 2k). Also, we have saved up 10k in liquid funds stashed away for emergencies. We are looking to use our additional income for investments (currently have about 1k disposable income while being able to live rather comfortably). I have heard different tidbits of advice where people advocate maxing out a Roth IRA next, or to go with high-risk stock due to my age. I'm kind of a chicken when it comes to money so I'm trying to make a good decision. Any tips? Also, are there any good books that you guys would recommend that is rather easy to read? I picked up intelligent investor but that was really, really dense with information, and I had a hard time understanding all of his examples. Are the fundamental books listed in the OP considered good beginner picks?
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Mar 24, 2011 19:30
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skystream92 posted:I have heard different tidbits of advice where people advocate maxing out a Roth IRA next, or to go with high-risk stock due to my age.  What timeline are you looking at for investing? How many years before you will want to touch this money again? Also, if you have different options to choose from in your 401k, you can post them here to get feedback (I know that's not your question, but sometimes people have their 401ks in really crappy funds or weird allocations). The main thing is to get started soon, so if you don't want to do a lot of research or be very involved in your investment selection, just starting a Roth IRA is good - most companies offer "target retirement" funds where you just pick the year you want to retire in and they do all the allocation for you. You can always change your investments later once you read up on things, but just by starting to invest this young, you're in a good position.
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Mar 24, 2011 19:56
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^ Thanks for the info, especially with the book recommendations  .Our 401k is through Charles Schwab, and like you said it's basically a targetted year (I have Vanguard 2050). In the ideal world, we were hoping to be able to be able to generate some passive cash flow in the near term to help fund a new car (we currently only have one car and I just drive her to work in the mornings). In the near future (probably 5 years out or so), it would be nice to be able to have a down payment for a house. We are hoping to do all of this without compromising our long term stability. I'm guessing going with a pure Roth IRA means I won't be able to touch that money before retirement (without heavy penalties that is).
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Mar 24, 2011 20:05
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No, you can take out money from a Roth since the money you put in is after tax, but it's not really necessary to put the money into an IRA if you're not saving for the long term - I don't think you're allowed to withdraw any gains you make, just how much you put in initially (like if you put in $1k and it goes up, you would still only be able to take out $1k). Also, if you're saving for the near future, you don't want to be investing in things with much risk at all. There are some "income funds" at Vanguard you could look at, or if you want to stay conservative just put the cash into a savings account like SmartyPig where your return is guaranteed (right now at 1.35%). There aren't a lot of good short-term options these days for passive cash flow since interest rates are so low. moana fucked around with this message at 20:22 on Mar 24, 2011 |
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Mar 24, 2011 20:16
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skystream92 posted:I'm rather new to this, so please bear with me. I couldn't figure out where to ask this question and everyone here seems to give good advice. If this is the wrong thread, I apologize. (how are you spending close to ~5k/mo with no mortgage/rent payment?) The general theory on tax advantaged retirement investments are take enough to get your match and then max your ROTH, then lookup and figure out what is the best option. This strategy would work for you, 2k/26 paychecks= ~$76.93. Do that first, it's like starting with a 100% return. After that, open a ROTH (do so before April 18th and you can contribute $5,000 for 2010, and then also $5,000 for 2011. Big benefit. You could then either decide to put more into your 401(K) and take the tax break this tax year or put it in a standard post-tax investment account and pay tax only on the dividends/gains. Personally, unless your 401K was absolute poo poo, I would save the worry and tax headache and just up your 401K contribution. You and your fiancée can both make the same IRA contributions individually. It is wise to max out your ROTH contribution every year because you can't easily catch up those contributions beyond the annual window. I would recommend the Personal Investing book from the Missing Manual Series. It's very straight forward, and doesn't concern itself with as much of the complicated formulas or denser concepts. If you are a bit skittish, you may want to look into a lifestyle fund or an allocation strategy that would match your risk aversion. STAY THE HELL AWAY FROM INDIVIDUAL STOCKS IF YOU ARE 'CHICKEN'! At 23, if you are investing for retirement you are able to be VERY aggressive as you will likely have 40+ years before you can retire. However, the surest way to lose money is to be overly aggressive and then sell when you can't take the rollercoaster at the bottom. Imagine selling in early March '09 and getting back in around late January '11. You would have just missed the rise back to the top and are sitting down about 50-60%. Learn about low cost, index based investing. If you don't want to learn about the details, it can be the best way to invest. Fake Edit: A 401K investment is like sending money to your 59.5 year old self. It doesn't matter what you invest in, you can't touch it till then. A ROTH account will let you pull out the principal for qualified purchases or after 5 years. A car does not qualify. If you absolutly want to do it that way, invest in a regular taxable account and you can pull the dividends off to buy a car. However, to have enough dividends to buy even a lovely car, you are going to need to invest a LOT of money. Even if you got 5% return, a $2,000 down payment would require 40k. KennyG fucked around with this message at 20:23 on Mar 24, 2011 |
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Mar 24, 2011 20:19
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KennyG posted:(how are you spending close to ~5k/mo with no mortgage/rent payment?) We probably spend more like 3k-3.5k a month, since our disposable is in addition to our saving amount, and for the most part, we don't really spend the disposable in full, so our checking account is still on the rise as well. I just call it "disposable" because it is not included in the mandatory 25% we move to savings for my paycheck. Also her little brother lives with us so we actually have three people to feed . I won't deny that we splurge on frivolous crap on occasion :P.Bummer on the car, doesn't look like I have many other options than putting down a down payment and finance like usual. Or find a cheap used and pay cash.
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Mar 24, 2011 20:36
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I'm not trying to go all Suze Orman on you, but now should be the time you save the most of any other. You have the great benefit that you have next to no expenses. You should take advantage of the fact that you aren't spending $1500 or more of your income a month in rent/student loan/consumer debt/car payments. The point is: the best way to have a lot invested, is to not spend it. If you think it's hard saving now, try saving if you have a mortgage/rent payment or even worse if you start a family. Living rent free can be one of the worst things you can do to/for someone. Let them get used to having 4-10x the disposable income than their job really provides. Then when they move out and start living like a normal person, many end up in massive amounts of credit card/consumer debt because they are used to living so well, that is now beyond their means. If you have no rent, in addition to trying to save your normal amount, you should also try to save what a low to moderate housing payment would be. (I guess I'm just jealous, but trust me you'll be happy you did later.) Do you use Mint.com?
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Mar 25, 2011 12:15
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skystream92 posted:We probably spend more like 3k-3.5k a month, since our disposable is in addition to our saving amount, and for the most part, we don't really spend the disposable in full, so our checking account is still on the rise as well. I just call it "disposable" because it is not included in the mandatory 25% we move to savings for my paycheck. Also her little brother lives with us so we actually have three people to feed 3k a month for two people and feeding a third is still a holy fuckload when you have no debt and no rent. If you can't find it in yourselves to budget enough for a car without financing it with the giant amounts you have available now, you are going to have issues down the line when faced with real poo poo.
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Mar 25, 2011 13:05
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