Enyar wrote: ...I already max my Roth IRA and 13% of each paycheck goes to my Roth 401K.
Why are all your tax-deferred savings going into Roths? You realize you pay tax upfront on those, right?
If you do a "normal" 401K or IRA you don't pay tax on the money going in. You are young and hopefully you have a long time for those funds to sit and earn compounding interest and you can put more in with pre-tax dollars.
SEADave wrote:Enyar wrote: ...I already max my Roth IRA and 13% of each paycheck goes to my Roth 401K.Why are all your tax-deferred savings going into Roths? You realize you pay tax upfront on those, right? If you do a "normal" 401K or IRA you don't pay tax on the money going in. You are young and hopefully you have a long time for those funds to sit and earn compounding interest and you can put more in with pre-tax dollars.
(I am not the OP, but I am young)
I expect the taxes only to go up. Also, I hope that my retirement income will have me in a greater tax bracket than what I am in now.
Driven5 wrote:Enyar wrote: Trust me, I really want to. I just haven't come up with an idea that sounds good enough to fully commit to yet.Granted, this is coming from somebody who isn't realistically any closer to achieving this goal than you are...But if you just wait for an idea to come to you, it probably never will. This could be a golden opportunity to pursue your passion(s) and actively seek out the idea(s). Speaking of commitment, I would argue that it's actually surprisingly similar to dating.
True, but as of now I don't see anyway that my passions could produce any type of real money. Still working on that though. In my opinion, I've had some pretty good ideas so far. They have either already been done or outside of my abilities to run on a small scale.
Also, I don't want to just up and quit my current career since I'm still getting started and it's also in a field that could potentially end up as that small business I eventually want to run.
mtn wrote:SEADave wrote: Why are all your tax-deferred savings going into Roths? You realize you pay tax upfront on those, right? If you do a "normal" 401K or IRA you don't pay tax on the money going in. You are young and hopefully you have a long time for those funds to sit and earn compounding interest and you can put more in with pre-tax dollars.(I am not the OP, but I am young) I expect the taxes only to go up. Also, I hope that my retirement income will have me in a greater tax bracket than what I am in now.
Same here, I'm hoping I'll be in a higher bracket later so I am paying taxes now.
Curmudgeon wrote: My stuff is in Admiral shares, .18% expense ratio. The regular shares are .25%, still very low. I've been happy with it, but keep in mind I'm taking a long range view of 15 years or so before I start tapping it. My long term plan is to pull it out over a few years starting at age 64, take the 401k tax hit, then put it back in an Admiral fund and take only the dividends.
Something tells me he does not quite have the free cash to go straight to Admiral. Though I love Vangaurd and the low cost funds, plus there are a few with lets say a higher risk threshold for people under 40 that I like.
Kendall_Jones wrote: you should buy a boat.
93EXCivic wrote: Blow and hookers.
…and then waste the rest.
Hi Enyar,
One of the most important characteristics of a good investment plan is to be consistent over time. Dropping a big chunk of money into anything at one time poses much more risk than accumulating small amounts at regular intervals over the long haul. A solid case can be made against any kind of investment (real estate, stocks, bonds, etc) at any time…if it couldn’t, everybody would rush into it driving up the price until it wasn’t a good investment anymore; basic capitalism doing it’s thing.
So, it isn’t so much about what specific investment you should drop your money into as it is how to get your money working for you quickly without being in too much violation of the investment rule referenced above. I don’t know how much you have in absolute terms or relative terms like months of gross income but I would recommend something like investing a quarter of it every three months for the next year….kinda’ like doubling down in reverse. It’s a tradeoff between missing the rally if it continues against protecting your principle should we be approaching a correction.
My favorite equity is Vanguard’s S&P 500 index fund (VFINX)…super low load and low turnover which reduces tax exposure.
Good luck
SEADave wrote:Enyar wrote: ...I already max my Roth IRA and 13% of each paycheck goes to my Roth 401K.Why are all your tax-deferred savings going into Roths? You realize you pay tax upfront on those, right? If you do a "normal" 401K or IRA you don't pay tax on the money going in. You are young and hopefully you have a long time for those funds to sit and earn compounding interest and you can put more in with pre-tax dollars.
It can work for you both ways. With a normal pre tax 401 when you are ready to retire you have a limited window of time to pull it out and you get hit with taxes at that time. If your income at retirement is high enough you'll be in a higher tax bracket and thus pay more tax. With a Roth you pay tax all along and don't have to pay taxes on the withdrawals. It probably comes out even overall. As I understand it, if you put those funds into another account or even leave it in the existing account and then withdraw only the interest you'll pay tax on those withdrawals also.
Enyar, I was in a Principal 401k. I was not enamored of it and moved it into my self directed IRA. Investing a lump sum is not necessarily a bad thing, you just need to research your intended fund. Hint: see if you can buy when the market is down.
Like this: If your chosen fund is at, say, $25 a share and it drops to $23 a share if you buy at that time you will get more bang for your buck. If you plan to roll your 401 over, then it's probably best to watch both your existing fund and target fund, see if you can time it so your rollover will be at the high point of the existing fund and the low point of the target fund. That's how I rolled my Principal fund over, it was at its historic high point, the Vanguard had dropped some but was on its way back up and I was able to buy at a decent per share price. As long as this all happens in the same calendar year and the rollover funds never touch any other account then you are in the clear with the IRS.
wearymicrobe wrote: Something tells me he does not quite have the free cash to go straight to Admiral. Though I love Vangaurd and the low cost funds, plus there are a few with lets say a higher risk threshold for people under 40 that I like.
$10k? If so, I'm good to go.
Enyar, VTSMX is an index fund, yes. Total market index, same as VTSAX but with a little higher cost load. VTSMX is 0.17% instead of the 0.05% that VTSAX carries. It doesn't make a huge difference but if you have enough to get admiral shares then you should do it. They don't cost any more, just a minimum investment amount.
wearymicrobe wrote: Something tells me he does not quite have the free cash to go straight to Admiral. Though I love Vangaurd and the low cost funds, plus there are a few with lets say a higher risk threshold for people under 40 that I like.
I would love to hear what you like!! I need something to put some money in and it's definitely a higher risk threshold and I am under 40. What is it? (If you don't mind sharing.)
I've been pretty pleased so far with VHCOX as my current 'high risk' fund. It's comprised primarily of tech and bio-tech stocks.
Don't you date? It's impossible to save if you date.
SEADave wrote:Enyar wrote: ...I already max my Roth IRA and 13% of each paycheck goes to my Roth 401K.Why are all your tax-deferred savings going into Roths? You realize you pay tax upfront on those, right? If you do a "normal" 401K or IRA you don't pay tax on the money going in. You are young and hopefully you have a long time for those funds to sit and earn compounding interest and you can put more in with pre-tax dollars.
that's exactly why you put the money in a Roth instead of a traditional IRA ... the interest earned should FAR surpass the money put in ...
with a Roth that interest is tax free... with a traditional IRA he would have to pay tax on that interest ..as opposed to getting what ever tax break each yr
I think you should invest in a race team. (read: you should give it to me so I can buy more race car parts.)
I'll throw out an oddball:
Start a small business (if you don't already have one) or join a group of private small business investors (I keep hearing about these types, hoping they'll throw me wads of cash one day.)
Just a 'different' suggestion. Not like I know what the berkeley I'm talking about (seriously.)
Coming out of left field with an investment question. Let's say you invest $20k in shares of VTSMX, 448 shares at today's price, and six months from now you'd like to pull out some of that cash for a purchase of some sort.
How easy is it to take out the money? If you drop the account below the $3,000 minimum investment do they just close the account?
This seems like a better option than having cash sitting in a savings account earning minimal interest albeit more risky. I assume you would be selling it in shares so if things go well six months down the road you'd sell your shares with a but of a return. If everything takes a dump you could be up a creek too.
RX Reven' wrote: My favorite equity is Vanguard’s S&P 500 index fund (VFINX)…super low load and low turnover which reduces tax exposure. Good luck
Thank you good sir!
Curmudgeon wrote: Enyar, I was in a Principal 401k. I was not enamored of it and moved it into my self directed IRA. Investing a lump sum is not necessarily a bad thing, you just need to research your intended fund. Hint: see if you can buy when the mar
Me either, but it's through my work and I don't think I can change it.
dculberson wrote: Enyar, VTSMX is an index fund, yes. Total market index, same as VTSAX but with a little higher cost load. VTSMX is 0.17% instead of the 0.05% that VTSAX carries. It doesn't make a huge difference but if you have enough to get admiral shares then you should do it. They don't cost any more, just a minimum investment amount.
I'll look into this one, seems promising.
Driven5 wrote: I've been pretty pleased so far with VHCOX as my current 'high risk' fund. It's comprised primarily of tech and bio-tech stocks.
Thank you good sir.
Sine_Qua_Non wrote: Don't you date? It's impossible to save if you date.
Sure do,
poopshovel wrote: I'll throw out an oddball: Start a small business (if you don't already have one) or join a group of private small business investors (I keep hearing about these types, hoping they'll throw me wads of cash one day.) Just a 'different' suggestion. Not like I know what the berkeley I'm talking about (seriously.)
I'll have to look into this private small business investors thing, could be interesting. Other wise, starting a business is high on my to do list, I just don't know of what.
bluesideup wrote: Coming out of left field with an investment question. Let's say you invest $20k in shares of VTSMX, 448 shares at today's price, and six months from now you'd like to pull out some of that cash for a purchase of some sort. How easy is it to take out the money? If you drop the account below the $3,000 minimum investment do they just close the account? This seems like a better option than having cash sitting in a savings account earning minimal interest albeit more risky. I assume you would be selling it in shares so if things go well six months down the road you'd sell your shares with a but of a return. If everything takes a dump you could be up a creek too.
I agree 100%. Hence these questions!
Best way to handle extra cash? Fold it over and put it back in your pocket!
Did a little research and I think I'll put $10k in VTSAX to start. So my game plan is:
Emergency fund
Max Roth 401k
Max Roth IRA
Max HSA
$10k in VTSAX
rest is in a capital 1 360 savings account except enough to cover a possible down payment on a house.
Anyone object?
Enyar wrote: Did a little research and I think I'll put $10k in VTSAX to start. So my game plan is: Emergency fund Max Roth 401k Max Roth IRA Max HSA $10k in VTSAX rest is in a capital 1 360 savings account except enough to cover a possible down payment on a house. Anyone object?
Yeah, I do. Nowhere in that list do you have sending me $2,014 for a challenge car next year.
I don't see a boat, pile of blow, or a race team in there......so yes, I object. 
NOT included but certainly bound to happen are 2 boats (already happened), charity, and race team (sailing). Not interested in blow yet, and mtn I'll keep you in mind if any unexpected lottery winnings come into play. Auto-x is on the back burner until I find time/a place to store a car.
The only thing you need to keep your head on straight about is the time horizon for the investment. If you think (or can imagine) that you might need the money in 1-3 years, be careful where you put it. Money is stocks tend to do great over the long term, but there are times (we just got out of one) where you don't have as much money as you used to very quickly. Not an issue for retirement if you're young, but a lot of people had their "house funds" shrink by a significant amount right at the time they should have had liquid money around to buy a house.
My general rule of thumb is that any money I plan to spend in the next two years, I keep liquid. It has worked out very well in the past decade.
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