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If my new job doesn't have any employee match for 401k, should I just focus on my Roth first?
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Feb 3, 2021 19:49
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Raskolnikov2089 posted:If my new job doesn't have any employee match for 401k, should I just focus on my Roth first? This depends on your income level and the quality of funds available in your 401k. (And maybe also if you expect to move when you retire.) If the funds in the 401k are not great (or have high fees), then definitely Roth. Otherwise: If you are early in your career and you expect your income to go up, the Roth is probably advantageous to lock in the low tax rates now. On the other hand, if you are in the peak earning years of your career, the pre-tax 401k is probably more advantageous. Beyond this, if you expect you might move in retirement, consider the relative tax rates. For example, if you live in California (a very high tax state) but think you might retire to Nevada (a very low tax state), the pre-tax 401k is significantly advantageous.
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Feb 3, 2021 20:10
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Raskolnikov2089 posted:If my new job doesn't have any employee match for 401k, should I just focus on my Roth first? In addition to what the previous poster said, you may want to consider contribution limits. Roth is limited to $6,000 a year, whereas I believe 401ks have higher limits.
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Feb 3, 2021 20:44
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IRA total is limited to $6,000. 401(k) total is limited to $19,500 from the employee. I would max Roth IRA space first, but your 401(k) contributions still have value as they reduce your taxable income, assuming that your fund choices and administrative fees aren't brutal.
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Feb 3, 2021 21:18
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Small White Dragon posted:This depends on your income level and the quality of funds available in your 401k. (And maybe also if you expect to move when you retire.) I'd argue that, as long as you're maxing out your IRA space, it's almost always better to use a Roth rather than traditional account. The reason for this is that you can effectively put more money into a Roth account (because taxes are taken out before it goes in), and the benefit of the tax advantage on that additional money overcomes most of the losses from different tax rates after retirement. Add in the additional flexibility of a Roth (no RMDs) and the fact that you don't actually know what your tax situation is going to be after you retire, and most people are better off with a Roth IRA most of the time. So long as it's getting maxed out every year, at least. I personally keep my 401k traditional (which I don't max out), and my IRA Roth (which I do max out). It makes me feel diversified, like I'll be in good shape no matter what life's like when I retire.
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Feb 3, 2021 21:46
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I Like Jell-O posted:I personally keep my 401k traditional (which I don't max out), and my IRA Roth (which I do max out). It makes me feel diversified, like I'll be in good shape no matter what life's like when I retire. I try to diversify traditional vs Roth too, one additional thing to keep in mind is that employer contributions to your 401k are pre-tax regardless of whether you contributed to Roth or pre-tax. So if you're match was 100% up to 8% and you put in the full 8% to Roth you're really getting 50/50 traditional/Roth. It's a very small thing but good to keep in mind if you want to diversify
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Feb 3, 2021 21:59
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Usually IRA comes first on those flowcharts (after the free money from a 401k match) because you can shop around and maybe find a better deal than your employer's crappy 401k provider. If your available 401k options are fine then there isn't really much difference between funding one or the other first, aside from the advantages of a Roth as others have noted.
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Feb 3, 2021 22:04
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I'm thinking of opening a 529 to save for education that may be used by me or spouse and/or be passed to our 3 kids. I live in AZ, and already have accounts with Fidelity (work) and Vanguard (IRA) From what I understand, AZ allows state tax deductions to 529s, even if they are out of state, and regardless, you still get the tax free growth. The likely paths are: 1. Start contributing today, use it for one of us sometime in the next 3-10 years. Open accounts for the kids too. 2. Start contributing today, don't use it for an adult, change the beneficiary later to whichever kid we love most. Does that sound correct?
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Feb 3, 2021 22:08
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withak posted:Usually IRA comes first on those flowcharts (after the free money from a 401k match) because you can shop around and maybe find a better deal than your employer's crappy 401k provider. If your available 401k options are fine then there isn't really much difference between funding one or the other first, aside from the advantages of a Roth as others have noted. The other side is that if your employer is good your 401k may have access to funds with lower fees as well. I stick most of my 401k into a Vanguard target retirement fund because I'm lazy, but my plan has access to the "Trust" version which has a lower expense ratio (0.04%) than the version I could get in my IRA (0.15%)
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Feb 3, 2021 22:17
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Don't forget you can withdraw contributions to a Roth IRA at anytime with no penalties or tax. It's good to have as a last ditch emergency fund.
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Feb 3, 2021 22:36
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Just max it all. Do it. Do it now. 401k max it. IRA max it. HSA max it.
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Feb 3, 2021 23:28
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crimedog posted:Just max it all. Do it. Do it now. 401k max it. IRA max it. HSA max it. Yea BUT THEN WHAT
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Feb 3, 2021 23:55
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The Big Jesus posted:Yea BUT THEN WHAT fiveee twenty nineeeeeeees But for real if you can do all that throw some money in a college fund for someone's kid. Up to you whether it's your kid or not, ymmv. Untagged fucked around with this message at 00:10 on Feb 4, 2021 |
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Feb 4, 2021 00:08
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The Big Jesus posted:Yea BUT THEN WHAT Enjoy yourself
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Feb 4, 2021 01:12
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The Big Jesus posted:Yea BUT THEN WHAT you're in good problems to have territory, relax and enjoy, take a nice vacation then keep investing in a taxable brokerage according to your goals and time horizon
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Feb 4, 2021 01:15
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I now have a Roth IRA with Vanguard. I have a couple questions: - I want to make sure I have this right. Right now I only have a small bit of money invested in the IRA. This money is currently in a Federal Money Market or Settlement Fund. Once I have a minumum of $1000, there will be more options available to me, among which will be investing in a Target Date Fund. Is that correct? - At this point, I can invest money in either 2020 or 2021. Now I definitely don't intend on maxing either of this by late April this year. But let's assume it is possible I could invest more than $6000 this year... Is there anything wrong with the idea of investing in 2020 until its no longer possible, so that I have room to max out 2021 if I can later?
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Feb 4, 2021 03:14
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Heroic Yoshimitsu posted:I now have a Roth IRA with Vanguard. I have a couple questions: Yes and no. Most mutual funds have minimums for investments and I think $1000 is the lowest I can remember one having, but you can also invest in stocks or ETFs (Exchange Traded Funds), where the only effective minimum is the price of one share. Many ETFs represent portfolios like broad market index funds and are a good way to get started investing before you meet the minimums for those funds. For example, VTI is the ETF version of VTSAX, Vanguard's Total Stock Market Fund. You need to have $3000 to invest in VTSAX, but you can buy shares of VTI for $200ish. Heroic Yoshimitsu posted:- At this point, I can invest money in either 2020 or 2021. Now I definitely don't intend on maxing either of this by late April this year. But let's assume it is possible I could invest more than $6000 this year... Is there anything wrong with the idea of investing in 2020 until its no longer possible, so that I have room to max out 2021 if I can later? That is a great strategy. Invest in 2020 as long as you've got the cap space and the spare money.
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Feb 4, 2021 03:47
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Thinking out loud, because I keep picking at FUAMX as my bond index fund choice, yet whenever I compare it against alternatives it comes out on top. Am I missing anything here? Sometimes FXNAX looks better with its higher yield (1.08 vs 0.69 30-day) and barely-lower expense ratio (0.025 vs 0.03), but looking back at large dips, FUAMX distinctly rises while FXNAX mostly sits flat. Ordinarily, they perform nearly identically, which reconfirms how treasuries remain a safe harbor in times of uncertainty. My bond allocation is for counterbalance, and FUAMX seems to perform that function well. Then there are higher-return bond funds like FAGIX, which has a much higher yield (2.61) accompanied by higher expense ratio (0.67), but its performance is strongly correlated to the market (comparing with FSKAX bears this out). If I want market returns I should just buy more of a total stock index. In either case, does the higher yield compensate for shortcomings? FWIW I'm still decades out from depending on dividends for passive income and I currently pursue a fairly aggressive allocation strategy (tapering toward bonds as I approach retirement, of course). Bonus: every time I research this or that fund variation, stocks bonds or otherwise, Fidelity will recommend a handful of funds I've never seen before. The ones marked high return, low expense always grab my attention, only to inevitably charge a comparatively high expense ratio (usually in the 0.7 range) and consistently underperform the S&P 500. Why even bother, Fidelity? (To fool customers and make more money) Space Fish fucked around with this message at 04:25 on Feb 4, 2021 |
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Feb 4, 2021 04:13
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Tricky Ed posted:Yes and no. Most mutual funds have minimums for investments and I think $1000 is the lowest I can remember one having, but you can also invest in stocks or ETFs (Exchange Traded Funds), where the only effective minimum is the price of one share. Many ETFs represent portfolios like broad market index funds and are a good way to get started investing before you meet the minimums for those funds. For example, VTI is the ETF version of VTSAX, Vanguard's Total Stock Market Fund. You need to have $3000 to invest in VTSAX, but you can buy shares of VTI for $200ish. Huh... I wonder why the expense ratio for VTSAX (0.04%) is higher than VTI (0.03%)? It's similar for VBILX (0.07%) and BIV (0.05%) which is where I keep my medium term stuff. In that case is there any reason to use the mutual funds over the ETFs if you've got the option for both?
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Feb 4, 2021 04:29
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One reason to go with the mutual fund is if you want the option for automatic transfers. (USER WAS PUT ON PROBATION FOR THIS POST)
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Feb 4, 2021 04:54
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Jose Valasquez posted:Huh... I wonder why the expense ratio for VTSAX (0.04%) is higher than VTI (0.03%)? It's similar for VBILX (0.07%) and BIV (0.05%) which is where I keep my medium term stuff. In that case is there any reason to use the mutual funds over the ETFs if you've got the option for both? Off the top of my head certain types of funds require more frequent rebalances. For example, total stock market might not require as much activity as small caps, as small caps fall in and out of that category or disqualify (or aren’t worth it) based on small cap poo poo. Conversely there’s just not much to do if you’re running a large cap index fund. Mutual funds have their own expense ratios that are almost identical to the ETFs. It’s important to note, however, that you might be able to shove your 401(k) into a Vanguard mutual fund, while an ETF is probably preferable for a Roth/Trad, solely because you can find and invest immediately without having a schedule in place. Of course nowadays you can probably do the same with MFs.
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Feb 4, 2021 05:00
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Tricky Ed posted:Yes and no. Most mutual funds have minimums for investments and I think $1000 is the lowest I can remember one having, but you can also invest in stocks or ETFs (Exchange Traded Funds), where the only effective minimum is the price of one share. Many ETFs represent portfolios like broad market index funds and are a good way to get started investing before you meet the minimums for those funds. For example, VTI is the ETF version of VTSAX, Vanguard's Total Stock Market Fund. You need to have $3000 to invest in VTSAX, but you can buy shares of VTI for $200ish. If I can afford to buy into either one, are there any other pros and cons to ETF vs the fund itself?
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Feb 4, 2021 05:06
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Mostly just the manner by which you are going to invest in it. The differences otherwise are minor. You might see more dividends in an ETF versus a mutual fund or a target date fund, but Vanguard is just really good at matching indexes without spending a lot of money to do so. Be sure to read up on each one that strikes your fancy though, they’re all unique in some way. I personally am only invested in the ETFs because I’ve never been offered a 401(k) and haven’t found a compelling reason to do otherwise.
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Feb 4, 2021 05:11
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This is Vanguard's explanation of ETF vs. Mutual Funds. The biggest difference is how they're traded. ETFs are traded like stocks, so the transaction happens during the day (if you place it while the market is open) and the price can fluctuate as the day goes on. Mutual Fund transactions all happen at once, after the market has closed, so everyone who buys a mutual fund on a specific day pays the same price. This can be good or bad depending on the day. It's possible to buy fractional shares of a mutual fund, but not an ETF, e.g., I can buy exactly $3500 of VTSAX, but only a whole number of shares of VTI, which would be around $3400 as of today. Vanguard won't do automated buys/sells of ETFs but will do that for mutual funds. Expense ratios can differ. Often an ETF of a mutual fund will mimic the "admiral" version of a fund that has a high minimum investment, so you can get lower expense ratios for a smaller investment. This differs from fund to fund so read the fine print. As an example, Vanguard says they may charge a $20 annual fee for VTSAX if you have less than $10,000 in it. I don't know the details of it but that probably changes the math for which is cheaper based on how much you're investing. There aren't always direct correlations between an ETF and a fund. Sometimes an ETF will hit a sector you like that isn't served by a fund, or vice versa. I personally do most of my retirement investing in funds because they're easier to manage, but ETFs were a novelty when I started out. 
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Feb 4, 2021 05:34
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Hmm, OK then. Let me take a step back and see if I can understand all this. So when you have a Roth IRA, that basically just means you have an account with which you can invest money into, with the intention being you are investing this money for your retirement. Now within an IRA, that a multitude of ways in which you can actually use your money. These multiple "ways" could be called Funds. All(?) IRAs have a yearly limit of $6,000 , you can't put any more money into an IRA after that. But what you do WITH that money can change. By default (for Vanguard, at least), your money goes into a Money Market Fund, which is actually a settlement fund. This is basically a savings account, from what I understand. Money in this fund will slowly accrue interest, maybe, but you haven't really invested it into anything yet. ETFs and Mutual Funds seemingly are (some of?) the ways in which you can actually invest the money in your IRA. I guess this is where my understanding starts to get foggy... so having an IRA doesn't really mean anything at all unless your money is going one of these kinds of funds. There's this concept of a Target Date Fund too. From what I understand, Target Date Funds are investment portfolios where you basically say "I intend to retire on this date/year". The Target Date Fund automatically invests your money, starting with more higher risk investments and transitioning into lower risk as that target date this closer. This is what I'm interested in doing, are either ETFs or Mutual Funds actually Target Date Funds? Are they ALL Target Date Funds? Is saying "I want invest my IRA into a Target Date Fund" almost redundant? All of this is strictly related to retirement accounts, as in this is an account that you put money into with the intention of NEVER touching until retirement (IRAs do allow you to take out money you put in without penalty). So you can have an IRA, but also a more active stock portfolio with money you intend to use in the shorter term? I guess this is going beyond the topic of this thread, so I'll end this tangent here.
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Feb 4, 2021 06:15
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It’s like any other investment account. The thing that makes a retirement account special is that you don’t pay taxes on any transactions that happen in there after your money goes in. In a Roth IRA you pay taxes on the money that you put in, but not on the money that comes out when you are old.
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Feb 4, 2021 06:42
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Yeah you’re overthinking IRAs. They’re basically unrestricted brokerage accounts, with tax advantages. Note: you’ll pay taxes on them, but not as much as you would a normal account. Roth IRAs you pay taxes upfront and then never pay taxes again. Traditional IRAs you deduct your contributions from your income and pay taxes on it when you retire. Most people are fans of Roth over Trads, but in the event that taxes are lower when you withdraw than when you contribute, a Traditional IRA is preferred. No there is no way to know what taxes will be like in 30 years, if you’re really concerned you can just get a mix. In both cases if you withdraw early you have to pay a penalty. Roth IRAs and Trad IRAs share a cap, so you can only contribute up to that cap every tax year. Could be 100/0, 50/50, whatever. When you’ve funded an IRA you can do whatever, but because of the tax advantage you want to invest in low-risk vehicles like index funds. Why? Because if you lose $6,000 on GME in your Roth IRA you don’t just lose that money, you also lose the potential of 30 years of tax-free interest on that $6,000. There are many people who have lost money trying to day trade their IRA. You can, but don’t. In the OP there’s a nice flowchart but basically at the end of the day you want to save as much as possible and shove all of it into good index funds. Beyond the $6,000 IRA contribution limit. Some of us (idiots like me) enjoy trading stock and have a brokerage account to do so. While I usually make money I also often lose money, and ultimately it’s a bad idea financially. Something like 98% of actively managed hedge funds make less money than a passive index fund, I’m not gonna beat that lineup in my underwear buying AAPL calls or whatever. You aren’t either. If you’re able to consistently beat index funds (8% returns a year annualized), you should open a fund immediately. jokes fucked around with this message at 06:54 on Feb 4, 2021 |
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Feb 4, 2021 06:51
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Heroic Yoshimitsu posted:Hmm, OK then. Let me take a step back and see if I can understand all this. You've got things mostly right, with a few small misses. I'll go through it piece by piece. Heroic Yoshimitsu posted:So when you have a Roth IRA, that basically just means you have an account with which you can invest money into, with the intention being you are investing this money for your retirement. Now within an IRA, that a multitude of ways in which you can actually use your money. These multiple "ways" could be called Funds. All(?) IRAs have a yearly limit of $6,000 , you can't put any more money into an IRA after that. But what you do WITH that money can change. By default (for Vanguard, at least), your money goes into a Money Market Fund, which is actually a settlement fund. This is basically a savings account, from what I understand. Money in this fund will slowly accrue interest, maybe, but you haven't really invested it into anything yet. This is all basically correct. A couple of things worth noting: first off, there are different kinds of IRAs. "Traditional" means you get a discount on your income taxes right now - the IRS pretends that money doesn't exist when it comes time to do this year's taxes. Instead, you have to pay regular income taxes when it comes out. It grows tax-free - you don't need to pay any taxes on the dividends or capital gains until you withdraw the money in retirement. Roth IRAs are the opposite: the IRS collects taxes like normal this year, it still grows tax-free, but then you get to withdraw it without paying taxes. If everything stays equal between now and retirement, including tax rates and your total income (of ordinary earnings plus retirement withdrawals) they're mathematically equal. Also, there are income limits for contributing to IRAs. With traditional IRAs, you can put money in no matter how much you make in a year, but the tax benefits start to go away. With Roth IRAs, you're limited or locked out from contributing if you're over a certain income level. You can do what's called a "backdoor Roth conversion" by contributing to a traditional IRA (open at any income level) and converting it to Roth (also open at any income level) to get around this; it's been a common strategy for a while and the IRS is cool with it. If you don't have any money in traditional IRAs, it's pretty quick and easy. If you have money split between the two, it becomes a more expensive paperwork headache. If $125k/year filing singly or $198k/year filing jointly sound like they might be realistic incomes for you, then it's smart to avoid traditional contributions now to make backdoor Roth conversions easier later. Heroic Yoshimitsu posted:ETFs and Mutual Funds seemingly are (some of?) the ways in which you can actually invest the money in your IRA. I guess this is where my understanding starts to get foggy... so having an IRA doesn't really mean anything at all unless your money is going one of these kinds of funds. There's this concept of a Target Date Fund too. From what I understand, Target Date Funds are investment portfolios where you basically say "I intend to retire on this date/year". The Target Date Fund automatically invests your money, starting with more higher risk investments and transitioning into lower risk as that target date this closer. This is what I'm interested in doing, are either ETFs or Mutual Funds actually Target Date Funds? Are they ALL Target Date Funds? Is saying "I want invest my IRA into a Target Date Fund" almost redundant? Once your money is under the IRA umbrella, you can invest it in almost anything you want: individual stocks, bonds, mutual funds (which basically just means giving money to somebody else to invest in a big pool), or ETFs (from your perspective, basically mutual funds with a few minor differences - no minimum investment, but you have to buy full shares in chunks of maybe $20-500 instead of throwing in arbitrary dollar amounts). About the only investment you can't buy in an IRA is collectibles, because the US government would prefer you not put your retirement into comic books or vintage sports cars or whatever. There are a lot of different mutual funds out there, that follow just about any strategy you can dream up, from "we just try to spread our money out as much as possible and match the overall market" (index funds) to "we found a guy who we think is super smart and we pay him a bunch of the fund's money to tell us what to buy" (actively-managed funds). To the consternation of highly paid trading supergeniuses, boringly average, low-maintenance index funds have universally outperformed actively managed funds over the long term that's relevant to your retirement. Target date funds are one type of mutual fund, that work the way you describe. The good ones from companies like Fidelity and Vanguard are just a basket of index funds that are adjusted according to the time left until they hit the target retirement date. Since the key to investing in the modern stock market seems to be "for the love of god just set it, forget it, keep feeding it a bit every month, and don't gently caress with it," they're a great option. Heroic Yoshimitsu posted:All of this is strictly related to retirement accounts, as in this is an account that you put money into with the intention of NEVER touching until retirement (IRAs do allow you to take out money you put in without penalty). So you can have an IRA, but also a more active stock portfolio with money you intend to use in the shorter term? I guess this is going beyond the topic of this thread, so I'll end this tangent here. Roth IRAs allow you to take contributions out without penalty. Traditional IRAs don't. This is one advantage of Roth IRAs - breaking into your retirement piggy bank is never a good idea, but if you're in a desperate financial situation it might be the least-bad one, and the financial impact is a bit smaller if you ever have to do that. You can absolutely have a shorter-term stock portfolio in a taxable brokerage account if you want to. Generally speaking, though, the stock market is only slightly more likely to go up than down over the course of a day, a year, or even a couple years. Over a few decades, it's reasonable to expect it to average out and give you a good retirement nest egg. But, if you have something you're saving for in the near term like a house down payment, you'll want to stick to very low-risk investments like bonds, or even just a savings account.
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Feb 4, 2021 07:07
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Wow I was under the impression Roth IRA withdrawals had penalties but they definitively do not. Goddammit
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Feb 4, 2021 07:11
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Early withdrawals of Roth contributions don’t have penalties (i.e. the 6k/year that you put in), but taking out earnings does have a penalty. And if you did a backdoor Roth you can’t take the contributions back out until the money has been in there five years.
withak fucked around with this message at 07:31 on Feb 4, 2021 |
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Feb 4, 2021 07:28
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withak posted:Early withdrawals of Roth contributions don’t have penalties (i.e. the 6k/year that you put in), but taking out earnings does have a penalty. And if you did a backdoor Roth you can’t take the contributions back out until the money has been in there five years. On that note, If one were to cash out and sell assets in a Roth IRA in vanguard, does it treat it as a contribution withdrawal up to the total cost basis you put in, or do you always get a combinations of earnings and basis as you liquidate?
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Feb 4, 2021 07:39
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I would think it would do the smart thing but I haven’t tried it. Also possible that they don’t report that and you have to compare your withdrawal amount to your cost basis somewhere in your taxes.
withak fucked around with this message at 07:44 on Feb 4, 2021 |
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Feb 4, 2021 07:41
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The penalty is that you can't recontribute them. That contribution opportunity is lost.
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Feb 4, 2021 07:53
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I just put 15,000 that was languishing in a 'high yield' savings that kept dropping it's rates into VTSAX to grow with possible additions until I can either buy a small condo for cash or until I need it. I live with my parents and put 25% of my check into a IRA. Anything obviously wrong with this? Should I change to a roth? I've put money in it before, but thought it might be better to use the one that reduces current taxes due to thinking it might be more valuable now. Have a government retirement ( thrift savings plan), and have everything in c-fund, no plans to wirhdraw for at least 20-30 years. Edit: don't plan on needing anything for at least five years. Post is probably hard to read due to me having no sleep. Feel free to ask if you need anything further to make an evaluation (besides the fact that I should get more sleep, which I agree with already). thechosenone fucked around with this message at 12:48 on Feb 4, 2021 |
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Feb 4, 2021 12:03
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There's a chance my wife and I may be taking new jobs, and we'd have to figure out what to do with her non-governmental 457. Here are the options:quote:No later than 60 days following your separation from service, you may elect to: Her potential future employer doesn't have a 457 option, so we'd have to take distributions. Obviously the lump sum 60 days after is the wrong solution, but am I reading this correctly? Could just leave the funds invested for 30 years, and take distributions once a year? And could we potentially take the lump sum in 30 years when we'd presumably be in a lower tax bracket?
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Feb 4, 2021 14:37
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Heroic Yoshimitsu posted:Hmm, OK then. Let me take a step back and see if I can understand all this. Target date funds are basically doing the balance work for you of mixture of stock and bond funds. So, for those who want to be safe, or don’t want to think about it, a target date fund at .15% interest is honestly more than fine. My personal recommendation: mutual funds are way simpler and flexible to contribute to than ETFs, especially for something you want to just “sit there.” Save up to $1,000, get a vanguard target date fund. You can then set whatever monthly contribution to it you want. IF you then want to start diversifying , for instance VTSAX total stocks (which is a very good choice), once you hit $3,000, you can simple convert that target fund to VTSAX. Or, you could wait until you are at something like $9,000, and convert to a mixture of all US Stocks, all International, and small cap. Etc. Using target date does allow you to invest quicker (way more important than a 0.1% difference in expense ratio) and then do your research in the meantime. Getting started is absolutely the hardest part, so great work getting the ball rolling !
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Feb 4, 2021 14:59
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Now that I’ve built up a decent nest egg in my semi-retirement brokerage account (the post-tax LTCG-vulnerable stuff), I’m wondering if I can ease back and rely on just a maxed 401k+Roth ITA going forward, and use leftover money to improve my living situation (i.e. stop living in the slums). Based on my lovely calculations, if I keep working and earning at least as much as I do now, I should build up and grow to roughly as much as my semi-retirement account would. The concern I have though is that I work in tech and I’m predicting a tech bubble. I’ve internalized a “save as much as you can cause this might all fall apart next month” mentality, hence why I’ve saved up so much ahead of time, since I started working. This is more of a conceptual/strategy question, but from a long-term investment+retirement perspective, am I being unreasonable? Or should I feel comfortable ramping up on QOL? How "safe" should I play from here on out? Pollyanna fucked around with this message at 16:43 on Feb 4, 2021 |
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Feb 4, 2021 16:18
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Well, you should never anticipate bubbles on any specific timeline other than “eventually”. You should just always be prepared for them to burst. That being said, determine how long your savings would be able to handle zero change in your lifestyle and determine if that’s a long enough period for you. Like if you have liquid savings that would last 3 months, 6months, 2 years, 5 years, is that enough for you to get “resettled”? Alternatively, living like a pauper is really not a great situation so if you can improve your daily life instead of saving a lot you absolutely should. It’s not the dream of anyone to have a lovely life and a good retirement, it’s about a balance. You can’t do as much as you think during your retirement and it’s nice to live in a nice area/apartment when you’re younger since there’s more things to do (well, not right NOW). All that’s to say it’s a balance. Are you at least maxing out your IRA/401(k)? Are you saving or have saved an EMERGENCY FUND that will take care of you for x period? From then on, you can easily balance between improving your life today and saving additional bucks. There’s no limit on how much you should save, the only counterbalance is your lifestyle. If you’re not married/in a serious relationship, you should note that most people have an easier time financially when they have another working person in their home sharing the bills. A kid is expensive, but having a roommate you share bills with isn’t. Money is meant to be spent. When considering your retirement, also factor in social security and see what your retirement might look like, with a higher rate of inflation.
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Feb 4, 2021 16:45
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All my budgeting and financial calculations are dependent on a maxed 401k, Roth IRA, and a 6-month salary emergency fund (already filled). That’s the baseline, since my current income is enough to justify it. The rest goes into an HYSA for eventual contributions to long-term investment/retirement. Your point about money being meant to be spent is a good one. Just for the sake of my sanity + well-being, I should really live somewhere that doesn’t suck...and clearly I can afford it. Right now, anyway. I am expecting to potentially have to support one or another sibling depending on how well their lives go...working in medicine is tough. Plus I may need to help my parents too if they hosed up any of their retirement poo poo cause you know how doctors are  Maybe I’m too paranoid about the future. I mean...you can’t blame me, right?
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Feb 4, 2021 16:54
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most people who are worried about supporting their parents in retirement have parents who worked like, non-union blue collar jobs or waited tables or some poo poo. The best way to stop worrying about your parents' retirement prospects is to have an open discussion with them about what they have planned for retirement rather than just catastrophizing. you expect to support a sibling who is working in medicine? how does that compute, are they planning to be like a PTA or receptionist for the rest of their lives? I think you should improve your living situation. It sounds like you can without compromising any of your goals, and the reasons you are inventing to not do it are farfetched or not immediate.
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Feb 4, 2021 16:59
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