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[Randolph Freelander]

So why would I be putting money into my 401k vs opening an account with let's say vanguard? Also, when opening an account with someone like vanguard, what kind of account so I open?

To expand on what Darren posted earlier, you want to give preference to an IRA and a 401K before going with traditional investing, and this is for tax purposes. You can do both a IRA and 401K simultaneously up to IRS contribution limits on each, one does not prevent you from doing the other. If you can swing it, do both.

To talk about the 401K further (and the same is true for an IRA, except the IRA is not through your employer), the 401K is a tax advantaged account. Many employers will allow you to contribute either pre-tax (traditional 401K) or after tax (Roth 401K). This means you will either lower your tax bill now (pre-tax) or later (Roth, no taxes upon withdrawal). Either way you go, your earnings will continue to accrue, dividends will be reinvested, without you incurring taxes. You can move funds around without worrying about taxable capital gains. All taxes are either paid as you withdraw in your retirement years at ordinary income tax rates if you go traditional, or you pay taxes before you ever contribute and pay no additional taxes later if you go Roth.

Compare that to independent investing. You have already been taxed on the income when you earned it, then you invest what's remaining. When you receive dividends, you are taxed. When you sell your investments (move funds around or selling to use the cash), you are taxed. You're basically taxed coming and going and everywhere in between. Tax-advantaged accounts such as the IRA and 401K cut parts of that out in ways that are very beneficial to you.

So yes, do the IRA (with a company like Vanguard), do the 401K with your employer, and then outside investing (also with a company like Vanguard).

 

[Uni on Everything!]

Hey guys,

I've recently come into some money from a family member passing away (not comfortable saying how much exactly but it's 7 figures). This is really a huge amount for me but I'm fortunate enough that I don't really have any use for it now so I was just planning to stash it away for a rainy day.

Would just diversifying it all through index funds be a good idea? Any specific recommendations that I should look into (I think most here are using Vanguard?) and a good percentage to split it?

I'm not a US citizen and don't live in the US so as I understand it there is a 30% withholding on dividends paid. Luckily I live in a country with no capital gains tax so I assume investing in an ETF is still worth it since capital gains will make up the majority of my profit?

Any advise you guys can give would be greatly appreciated.

 

[nhlducks35]

Goldman Sachs offers 1.05% on savings accounts

 

[chaosblade]

Hey guys,

I've recently come into some money from a family member passing away (not comfortable saying how much exactly but it's 7 figures). This is really a huge amount for me but I'm fortunate enough that I don't really have any use for it now so I was just planning to stash it away for a rainy day.

Would just diversifying it all through index funds be a good idea? Any specific recommendations that I should look into (I think most here are using Vanguard?) and a good percentage to split it?

I'm not a US citizen and don't live in the US so as I understand it there is a 30% withholding on dividends paid. Luckily I live in a country with no capital gains tax so I assume investing in an ETF is still worth it since capital gains will make up the majority of my profit?

Any advise you guys can give would be greatly appreciated.

With that kind of money I'd suggest seeking professional financial advice. What you should do will depend heavily on your specific goals, and you want to make sure whatever you do is as tax efficient as possible. And that could vary depending on the country you live in.


My own thoughts, if you are just stashing it, would be to put it in some fairly conservative index funds. Ideally a single fund for automatic rebalancing, with 66-75% bonds, and the rest US or total world stock. If you aren't touching it, the growth even from the 25% stock should be fairly substantial.

There are also CDs and high dollar savings accounts, which would offer less growth in theory, but carry less risk.

 

[Uni on Everything!]

With that kind of money I'd suggest seeking professional financial advice. What you should do will depend heavily on your specific goals, and you want to make sure whatever you do is as tax efficient as possible. And that could vary depending on the country you live in.


My own thoughts, if you are just stashing it, would be to put it in some fairly conservative index funds. Ideally a single fund for automatic rebalancing, with 66-75% bonds, and the rest US or total world stock. If you aren't touching it, the growth even from the 25% stock should be fairly substantial.

There are also CDs and high dollar savings accounts, which would offer less growth in theory, but carry less risk.

My parents have used professional investors in the past and I always felt like the fees were pretty insane for the service they provide... that's why I'd prefer to invest myself and avoid paying unnecessary fees if possible.

Do you have any specific recommendations for the fund types you suggested so I can do some more research on them? I guess I have a mental hurdle in investing so much money into each fund even if it is spread out and diversified...

 

[pigeon]

So I've actually got a problem that's appropriate for this thread.

Last year my wife and I started a retirement fund in the form of two Roth IRAs, as well as a Coverdell and 529 for my daughter. We've been making contributions to them all year.

There's just one problem -- it turns out we make too much money. Our combined salaries and bonuses are over the Roth IRA income limit of $184,000 a year, so technically we aren't eligible to make contributions this year at all. (We made significantly less last year.)

I believe that I can avoid penalties by withdrawing all the principal before the end of the year, but I'm not sure how to actually save the money! What is the appropriate savings vehicle for somebody who makes too much for a Roth IRA? A regular IRA?

 

[chaosblade]

My parents have used professional investors in the past and I always felt like the fees were pretty insane for the service they provide... that's why I'd prefer to invest myself and avoid paying unnecessary fees if possible.

Do you have any specific recommendations for the fund types you suggested so I can do some more research on them? I guess I have a mental hurdle in investing so much money into each fund even if it is spread out and diversified...

I don't know what options you have available, but Vanguard has the Lifestrategy Income (very conservative, 80% bonds) and a few others with different 60/40 bond/stock ratios (1, 2, 3).

A target date fund could also work. Their Target Income has a 70/30 bond/stock mix which is probably would I'd personally go with. But it's ultimately up to you. You might prefer more risk like the Balanced Index is 60/40 stock/bond, which means a bit more potential growth but also more risk. If you truly intend to let it sit long term and aren't going to explode if the market drops and your value goes down, that or a longer term target date fund (something around your planned retirement year) could be good. Or you might want less risk, check your banks and financial institutions and see what they offer for larger sums of money. It's unlikely that you would make nearly as much (you would probably do well to beat inflation) but you shouldn't have to worry about seeing your value drop.

Manual rebalancing and mixing and matching funds yourself may be an option since you said capital gains taxes aren't an issue, but I wouldn't recommend that unless you are absolutely sure it wouldn't have tax implications. Tax optimization is the kind of thing you would want professional advice for.

 

[Cyan]

So I've actually got a problem that's appropriate for this thread.

Last year my wife and I started a retirement fund in the form of two Roth IRAs, as well as a Coverdell and 529 for my daughter. We've been making contributions to them all year.

There's just one problem -- it turns out we make too much money. Our combined salaries and bonuses are over the Roth IRA income limit of $184,000 a year, so technically we aren't eligible to make contributions this year at all. (We made significantly less last year.)

I believe that I can avoid penalties by withdrawing all the principal before the end of the year, but I'm not sure how to actually save the money! What is the appropriate savings vehicle for somebody who makes too much for a Roth IRA? A regular IRA?

You'll want to do a backdoor Roth. Essentially how it works is you open a regular IRA and max your contribution--you can do this even at high income, though it won't be deductible--and then you do a Roth conversion, moving the funds to a Roth IRA. Ordinarily this would mean you now have to pay taxes on the amount converted, but since you weren't deducting it anyway, that won't be an issue.

I'm assuming here that you don't already have a regular IRA. If you do, it becomes a lot more complicated with prorating and whatnot. Also, while it's ok to invest the funds in the regular IRA and do the conversion later, you then have to a) sell whatever you invested in and b) figure out tax on the gain, and it's a lot easier to just leave it in cash.

You'll definitely want to do your own research here, there's some slightly fiddly stuff you have to do on your tax return, but you should be able to do it reasonably easily even if you don't have a tax person.

Edit: also if your company has a 401k plan you should def look into that. Though I'm guessing they don't or you would have mentioned it.

 

[ClosingADoor]

Any Europeans here? How do you split the markets you invest in? I am looking at contributing at least € 500 a month, possibly more where possible.

Thinking some S&P 500, World and Eurozone funds split evenly. Vanguard looks like the cheapest options for the first two. European ETFs seem to be a bit more expensive for some reason. And maybe that is overlapping a bit much considering that world fund would also have a lot of the other two already?

 

[NewFresh]

You should:
1. Put in your companies match into your 401k
2. Create an emergency fund
3. Max out your roth ira (open a vanguard account)
4. Contribute up to the max into your 401k
6. Open an investment account (within existing vanguard acct) and contribute your remaining cash into index funds

Thats the order and if you can do that you'll be set for retirement.
Maybe save some cash from #5 so you can max out your roth right away next year as well. Since before you know it we will be in 2017

To expand on what Darren posted earlier, you want to give preference to an IRA and a 401K before going with traditional investing, and this is for tax purposes. You can do both a IRA and 401K simultaneously up to IRS contribution limits on each, one does not prevent you from doing the other. If you can swing it, do both.

To talk about the 401K further (and the same is true for an IRA, except the IRA is not through your employer), the 401K is a tax advantaged account. Many employers will allow you to contribute either pre-tax (traditional 401K) or after tax (Roth 401K). This means you will either lower your tax bill now (pre-tax) or later (Roth, no taxes upon withdrawal). Either way you go, your earnings will continue to accrue, dividends will be reinvested, without you incurring taxes. You can move funds around without worrying about taxable capital gains. All taxes are either paid as you withdraw in your retirement years at ordinary income tax rates if you go traditional, or you pay taxes before you ever contribute and pay no additional taxes later if you go Roth.

Compare that to independent investing. You have already been taxed on the income when you earned it, then you invest what's remaining. When you receive dividends, you are taxed. When you sell your investments (move funds around or selling to use the cash), you are taxed. You're basically taxed coming and going and everywhere in between. Tax-advantaged accounts such as the IRA and 401K cut parts of that out in ways that are very beneficial to you.

So yes, do the IRA (with a company like Vanguard), do the 401K with your employer, and then outside investing (also with a company like Vanguard).

Thanks for all the advice everyone, I've gone ahead and started the process of opening accounts with Vanguard (Not sure why I can't open an account online and have to snail mail them my info).

My goal in all this is to make it something I feel confident in and enjoy looking at, much like I do right now with our budgets.

 

[pigeon]

You'll want to do a backdoor Roth. Essentially how it works is you open a regular IRA and max your contribution--you can do this even at high income, though it won't be deductible--and then you do a Roth conversion, moving the funds to a Roth IRA. Ordinarily this would mean you now have to pay taxes on the amount converted, but since you weren't deducting it anyway, that won't be an issue.

I'm assuming here that you don't already have a regular IRA. If you do, it becomes a lot more complicated with prorating and whatnot. Also, while it's ok to invest the funds in the regular IRA and do the conversion later, you then have to a) sell whatever you invested in and b) figure out tax on the gain, and it's a lot easier to just leave it in cash.

You'll definitely want to do your own research here, there's some slightly fiddly stuff you have to do on your tax return, but you should be able to do it reasonably easily even if you don't have a tax person.

Edit: also if your company has a 401k plan you should def look into that. Though I'm guessing they don't or you would have mentioned it.

Thanks, this is very helpful. I think backdooring is the right choice -- the only question is how much I expect to make next year. I have a plan to talk to a tax professional before the end of the year to make sure I know how to do what I need to do -- also, I guess, need to make sure they don't make backdooring illegal.

I do have a 401k but I'm already at max match and I preferred having an IRA for most of my savings. Possibly this is the wrong call -- when we set up the IRAs we did not have 401k accounts. Probably need to research this more.

 

[Piecake]

Any Europeans here? How do you split the markets you invest in? I am looking at contributing at least € 500 a month, possibly more where possible.

Thinking some S&P 500, World and Eurozone funds split evenly. Vanguard looks like the cheapest options for the first two. European ETFs seem to be a bit more expensive for some reason. And maybe that is overlapping a bit much considering that world fund would also have a lot of the other two already?

I am not a European, but just model your portfolio allocation on this

https://personal.vanguard.com/us/funds/snapshot?FundId=0628&FundIntExt=INT#tab=0

If you invest more in a sector or a nation than what the market indicates, then that is a sector/nation bet. You aren't completely following the market anymore. You are saying that this sector or this nation will do better than the market. I wouldn't recommend doing that since it defeats the purpose of index funds.

Of course, it is a bit more complicated than that thanks to international companies doing business basically everywhere, but it is a simple rule to follow that won't really steer you wrong.

From your allocation, I would guess that you would be under-investing in the US and Non-European nations, and over-investing in Europe. That essentially means that you are betting that Europe is going to do better than the rest of the world.

 

[embalm]

Vanguard Brokerage VS Betterment

I want to move a portion of my emergency savings to a brokerage account. I'm researching whether I should use Betterment or a Vanguard account. Does anyone have experience with Betterment that they would like to share?

Thanks in advance.

 

[anonymous_abc]

Vanguard Brokerage VS Betterment

I want to move a portion of my emergency savings to a brokerage account. I'm researching whether I should use Betterment or a Vanguard account. Does anyone have experience with Betterment that they would like to share?

Thanks in advance.

If you can invest (ha) a bare minimum of time and effort to get on top of things use vanguard. Betterment will be very costly in the long run for the luxury of an 'autopilot'.

 

[nhlducks35]

Which one of these funds is the best for my 401k? I looked at the target funds and they have really low expense ratios (.15%) but I think I heard someone say they take the fees out somewhere else

link

I have an Roth with Vanguard and use their 2060 retirement fund btw

 

[Mrbob]

I am not a European, but just model your portfolio allocation on this

https://personal.vanguard.com/us/funds/snapshot?FundId=0628&FundIntExt=INT#tab=0

If you invest more in a sector or a nation than what the market indicates, then that is a sector/nation bet. You aren't completely following the market anymore. You are saying that this sector or this nation will do better than the market. I wouldn't recommend doing that since it defeats the purpose of index funds.

Of course, it is a bit more complicated than that thanks to international companies doing business basically everywhere, but it is a simple rule to follow that won't really steer you wrong.

From your allocation, I would guess that you would be under-investing in the US and Non-European nations, and over-investing in Europe. That essentially means that you are betting that Europe is going to do better than the rest of the world.

Depending on how much non USA exposure someone wants this is a good choice. Personally I like this mix of 56% us/44% global. Some might think this is too high non us but I guess it depends if you think global stock markets will keep lagging in the future. Been picking up VT for non emergency fund savings and will continue to do so.

 

[PflargBlarg]

I think you know me well enough to know that this isn't exactly a market timing question. I'm going to have another round of $5000 available to invest a little before the election in November.

I've been trying to find historical data on whether presidential elections usually cause temporary market jumps or drops. For instance if it's well known that an election causes a temporary drop I might as well wait a couple days and then buy in. If it's even vaguely a "well, it depends" kind of thing I'll just do what I normally do.

Haven't been able to find anything on this though. Anybody have better luck? I'm hoping it might present an opportunity to capitalize sort of like the short-term Brexit drop.

 

[Piecake]

I think you know me well enough to know that this isn't exactly a market timing question. I'm going to have another round of $5000 available to invest a little before the election in November.

I've been trying to find historical data on whether presidential elections usually cause temporary market jumps or drops. For instance if it's well known that an election causes a temporary drop I might as well wait a couple days and then buy in. If it's even vaguely a "well, it depends" kind of thing I'll just do what I normally do.

Haven't been able to find anything on this though. Anybody have better luck? I'm hoping it might present an opportunity to capitalize sort of like the short-term Brexit drop.

A Clinton win is most likely already priced into the market, or at least mostly priced in. I doubt there is going to be much fluctuation because of that considering that the projection is that Clinton will win comfortably and is basically assured.

Therefore, any movement in the market won't be because of that.

 

[Randolph Freelander]

I think you know me well enough to know that this isn't exactly a market timing question. I'm going to have another round of $5000 available to invest a little before the election in November.

I've been trying to find historical data on whether presidential elections usually cause temporary market jumps or drops. For instance if it's well known that an election causes a temporary drop I might as well wait a couple days and then buy in. If it's even vaguely a "well, it depends" kind of thing I'll just do what I normally do.

Haven't been able to find anything on this though. Anybody have better luck? I'm hoping it might present an opportunity to capitalize sort of like the short-term Brexit drop.

I believe the historical data suggests that if we elect Donald Trump, NOTHING MATTERS IT'S THE APOCALYPSE FLEE FOR YOUR LIVES but if we elect Hillary Clinton then it should be business as usual in the market, with all the fluctuations thereof.

 

[Mrbob]

I think you know me well enough to know that this isn't exactly a market timing question. I'm going to have another round of $5000 available to invest a little before the election in November.

I've been trying to find historical data on whether presidential elections usually cause temporary market jumps or drops. For instance if it's well known that an election causes a temporary drop I might as well wait a couple days and then buy in. If it's even vaguely a "well, it depends" kind of thing I'll just do what I normally do.

Haven't been able to find anything on this though. Anybody have better luck? I'm hoping it might present an opportunity to capitalize sort of like the short-term Brexit drop.

Election years are typically good but this election is different because of Trump. If you are investing long term I would just dollar cost average in. Perhaps just under 1700 a month for 3 months. There is really no good reason right now to make a stand and say hey I'm investing it all. Do it in chunks.

Or if you follow the market you know earnings season is coming. This is more important to the market overall. Invest 1/3 now and adjust accordingly based off of how earnings season goes. Plus Fed Fischer speaks on Monday too and his comments will affect the market short term. Though this shouldn't be a big concern for passive investing.

Best option might be just to follow your normal gameplan. I make weekly investments of same amount on the same day and don't deviate whether the market is up or down.

 

[tokkun]

Gold will skyrocket if Trump wins. And if you believe the market has priced in a Clinton victory, then you have nothing to lose.

 

[pigeon]

Gold will skyrocket if Trump wins. And if you believe the market has priced in a Clinton victory, then you have nothing to lose.

Judging from PredictIt, I would expect a lot of election uncertainty (more than really exists) to be in that price right now.

 

[Sanojio]

Just turned 26 years old, working for Delta Air Lines. 39k in student loan debt, making around 1900-2400$ a month. I do have some side income and working on developing a business but for now this is where i am at. My job automatically contributes 2% to 401k and matches up to 6%. so giving 6% = 14 %. Give 2% to my Roth. I am young and willing to take risk. I do a payroll deduct of 50$ per check for common stock. As it is now:

55.61%
S&P 500 INDEX
Stock Investments
10.04%
EMRG MRKTS EQ IDX
Stock Investments
9.97%
LIFECYCLE 2055
Blended Fund Investments*
9.97%
INTL EQ IDX
Stock Investments
9.61%
SMALL/MID CAP INDEX
Stock Investments
4.79%
BOND INDEX
Bond Investments


expense ratios are as follows in descending order:
.01, .11, 06, .04, .03, .02

I have Financial Engines managing for me. Is this a decent allocation?

 

[Randolph Freelander]

Just turned 26 years old, working for Delta Air Lines. 39k in student loan debt, making around 1900-2400$ a month. I do have some side income and working on developing a business but for now this is where i am at. My job automatically contributes 2% to 401k and matches up to 6%. so giving 6% = 14 %. Give 2% to my Roth. I am young and willing to take risk. I do a payroll deduct of 50$ per check for common stock. As it is now:

55.61%
S&P 500 INDEX
Stock Investments
10.04%
EMRG MRKTS EQ IDX
Stock Investments
9.97%
LIFECYCLE 2055
Blended Fund Investments*
9.97%
INTL EQ IDX
Stock Investments
9.61%
SMALL/MID CAP INDEX
Stock Investments
4.79%
BOND INDEX
Bond Investments


expense ratios are as follows in descending order:
.01, .11, 06, .04, .03, .02

I have Financial Engines managing for me. Is this a decent allocation?

Your allocation is basically good, though I would recommend a couple of changes. One, get rid of the 2055 fund and move those holdings into the Small/Mid category. The reason is that the 2055 fund is out of place given your overall non-target approach, and if you were to follow Vanguard's split for large cap and small/mid, based on the 55.6% you have in the S&P 500, you would have almost 21% in the small/mid fund. The part you have in the out-of-place 2055 fund gets you roughly to that split. (Edit: removed extra commenatary on this, misread your percentages, no need to do additional shifting here.)

The second change I would recommend is adjusting your international holdings. Right now, you're over-exposed on emerging markets. Again looking to Vanguard, their total international stock fund is roughly 20% emerging markets, with the remaining 80% being developed. That would suggest a split in your fund of 16/4 instead of 10/10. However, double check that your international index fund doesn't already hold emerging markets in it. If it does, an extra allocation of your own in emerging is redundant, tilting your portfolio.

 

[PflargBlarg]

Election years are typically good but this election is different because of Trump. If you are investing long term I would just dollar cost average in. Perhaps just under 1700 a month for 3 months. There is really no good reason right now to make a stand and say hey I'm investing it all. Do it in chunks.

Or if you follow the market you know earnings season is coming. This is more important to the market overall. Invest 1/3 now and adjust accordingly based off of how earnings season goes. Plus Fed Fischer speaks on Monday too and his comments will affect the market short term. Though this shouldn't be a big concern for passive investing.

Best option might be just to follow your normal gameplan. I make weekly investments of same amount on the same day and don't deviate whether the market is up or down.

Well it's not really a stand, this is what I normally do. I just put $5000 in roughly every quarter. Keeps me spending less on transaction fees. It just happened to line up with the presidential election this time around.

In any case, seems unimportant really, so I'll just do my normal thing.

 

[Randolph Freelander]

I had a moment of panic as I received an email stating that Wells Fargo was replacing funds in the 401K plan, but fortunately none of my selected funds were impacted and, actually, these are largely positive changes.

They're replacing some of their bond funds and their emerging market fund with others, but the significant change is that they're swapping out their target date funds for new funds with far lower expenses. Expenses on the old funds were in the 0.37-0.40% range (net), and the new funds will be 0.12%. Assuming the strategies are comparable, this is a positive change. If you work for Wells Fargo and participate in the 401K plan, check your email, and the changes go in effect in December (your impacted allocations will automatically transfer).

My selected funds are unaffected.

 

[Piecake]

I had a moment of panic as I received an email stating that Wells Fargo was replacing funds in the 401K plan, but fortunately none of my selected funds were impacted and, actually, these are largely positive changes.

They're replacing some of their bond funds and their emerging market fund with others, but the significant change is that they're swapping out their target date funds for new funds with far lower expenses. Expenses on the old funds were in the 0.37-0.40% range (net), and the new funds will be 0.12%. Assuming the strategies are comparable, this is a positive change. If you work for Wells Fargo and participate in the 401K plan, check your email, and the changes go in effect in December (your impacted allocations will automatically transfer).

My selected funds are unaffected.

Bait and switch

They are giving you something good to hide the fact that they just opened up a new account for you that you don't know about and invested some of your money in super expensive funds.

 

[Randolph Freelander]

Bait and switch

They are giving you something good to hide the fact that they just opened up a new account for you that you don't know about and invested some of your money in super expensive funds.

Real talk, each time I log into my 401K (everyday), I get a click through notice about the account debacle, assuring me the 401K is not part of the issue.

 

[Piecake]

Real talk, each time I log into my 401K (everyday), I get a click through notice about the account debacle, assuring me the 401K is not part of the issue.

Doesn't surprise me at all that they are real worried that people are going to take their money and leave, or demand that their HR switch 401k firms.

What those improved funds are is likely a desperate bribe to their customers to try to win them back and convince them not to leave.

 

[PflargBlarg]

In other good news, starting November my employer will start paying 50% of my medical insurance premium. In BC you pay $75/month to our Medical Services Plan, so I'll get an extra $37.50 in my pocket each month.

Big money!

 

[tokkun]

Doesn't surprise me at all that they are real worried that people are going to take their money and leave, or demand that their HR switch 401k firms.

What those improved funds are is likely a desperate bribe to their customers to try to win them back and convince them not to leave.

They're probably just trying to avoid a lawsuit over their 401k fees. There have been a lot of those lately.
http://www.bloomberg.com/news/artic...es-are-attracting-more-attention-from-lawyers

In other good news, starting November my employer will start paying 50% of my medical insurance premium. In BC you pay $75/month to our Medical Services Plan, so I'll get an extra $37.50 in my pocket each month.

Big money!

That doesn't count as a taxable benefit?

 

[PflargBlarg]

That doesn't count as a taxable benefit?

You make a good point. Slightly less than 37.50 then.

 

[demosthenes]

Real talk, each time I log into my 401K (everyday), I get a click through notice about the account debacle, assuring me the 401K is not part of the issue.

Why do you login everyday to your 401k?

 

[Randolph Freelander]

Why do you login everyday to your 401k?

Because I'm insane.

I keep daily records of gains and losses strictly for my own amusement (graphs, y'all). I don't react to anything, and only allow rebalancing at the beginning of the year. The only intra-year shifts I do are immediately moving the company match to my preferred funds (it initially goes into company stock, I get it out of there and into index funds).

 

[tokkun]

Because I'm insane.

I keep daily records of gains and losses strictly for my own amusement (graphs, y'all). I don't react to anything, and only allow rebalancing at the beginning of the year. The only intra-year shifts I do are immediately moving the company match to my preferred funds (it initially goes into company stock, I get it out of there and into index funds).

I use Personal Capital to track that stuff for me. Just use a fake phone # if you sign up for it.

 

[hockeypuck]

You should:
1. Put in your companies match into your 401k
2. Create an emergency fund
3. Max out your roth ira (open a vanguard account)
4. Contribute up to the max into your 401k
6. Open an investment account (within existing vanguard acct) and contribute your remaining cash into index funds

Thats the order and if you can do that you'll be set for retirement.
Maybe save some cash from #5 so you can max out your roth right away next year as well. Since before you know it we will be in 2017

They're probably just trying to avoid a lawsuit over their 401k fees. There have been a lot of those lately.
http://www.bloomberg.com/news/artic...es-are-attracting-more-attention-from-lawyers

This is why I'm somewhat hesitant to maximize my 403(b). I still need to create an emergency fund (and pay off my student loans, almost there), so I'm still a ways off from maximizing my contributions to my 403(b), but in thinking ahead:

First, complete neophyte with saving for retirement. I currently contribute a small percent, which is the max my employer matches. After plugging in some numbers into bankrate's calculator, my retirement investment-after-fees to contribution ratio if I stuck to my default small percent is 3.7. If I contribute double and max it out, the ratio drops to 3. This makes sense because my employer wouldn't match the additional, but I can't help but think about the ratio. Should I even be caring about ratios anyways??

Before and after fees, using Fidelity target fund, which my 403(b) uses

Look at the bite they take out at the end! Is this to be expected? This sucks, lol. Do investing in index funds take a bigger bite?

 

[GhaleonEB]

This is why I'm somewhat hesitant to maximize my 403(b). I still need to create an emergency fund (and pay off my student loans, almost there), so I'm still a ways off from maximizing my contributions to my 403(b), but in thinking ahead:

First, complete neophyte with saving for retirement. I currently contribute a small percent, which is the max my employer matches. After plugging in some numbers into bankrate's calculator, my retirement investment-after-fees to contribution ratio if I stuck to my default small percent is 3.7. If I contribute double and max it out, the ratio drops to 3. This makes sense because my employer wouldn't match the additional, but I can't help but think about the ratio. Should I even be caring about ratios anyways??

Before and after fees, using Fidelity target fund, which my 403(b) uses

Look at the bite they take out at the end! Is this to be expected? This sucks, lol. Do investing in index funds take a bigger bite?

Index fund fees are typically much lower. For example the Vanguard S&P 500 fund in my 401k has a 0.02% expense ratio. Very low expenses are one of the main reasons index funds typically have better returns than managed funds over time.

 

[The_Inquisitor]

Gut check GAF. I am currently "maxing" out my 401k (mix of roth and traditional) including my 6% employer match. I am also maxing out my HSA (with 750 dollar employer contribution). In addition, I am putting 200 dollars a month into a 3 fund portfolio in Vanguard . The only thing I am not doing right now is putting the extra 5k into a Roth IRA for the additional deduction. The thing is I am currently saving up for a house payment in 2 years, so the 5k I would have put in the Roth is actually sitting in a high yield savings account (among some other money I would rather not disclose here).

I checked mint, and it told me I am already 5-6 years ahead of my target retirement date. Should I strongly consider also doing the Roth IRA contribution this year to further reduce my tax burden? Or keep my strategy as is. I also have ESPP from work that I immediately sell, then re-distribute to the personal vanguard portfolio. Thank you.

 

[hockeypuck]

Index fund fees are typically much lower. For example the Vanguard S&P 500 fund in my 401k has a 0.02% expense ratio. Very low expenses are one of the main reasons index funds typically have better returns than managed funds over time.

So instead of maximizing my 403(b) contribution, I should meet the employer match and put the leftover into index funds?

 

[Husker86]

So instead of maximizing my 403(b) contribution, I should meet the employer match and put the leftover into index funds?

Does your 403(b) not have any other options besides the Target Date fund? No FSTVX (Fidelity Total Market Index Fund)?

Anyway, if you mean investing in Index Funds in a taxable account instead of investing more in your 403(b), from a purely return-based standpoint, I don't think any fees would eliminate the tax benefits from investing in a tax-advantaged account.

 

[hockeypuck]

Does your 403(b) not have any other options besides the Target Date fund? No FSTVX (Fidelity Total Market Index Fund)?

Anyway, if you mean investing in Index Funds in a taxable account instead of investing more in your 403(b), from a purely return-based standpoint, I don't think any fees would eliminate the tax benefits from investing in a tax-advantaged account.

I think the closest option I have is Fidelity 500 Index Fund (FXSIX). Should I switch to that? Net expense ratios are much lower, more in line with GhaleonEB's example, but FXSIX has a small separate "management fee", which target fund doesn't have.

Ah, so max out the 403(b) because it's delayed taxation compared to a private account. Didn't know that, because I skimmed over that part in the OP. Time to re-read it.

 

[dc3k]

This might be a weird question, but are any of you in the US on a TN visa and investing in 401k/Roth IRA? My friend thinks it might give me issues when I go to renew my visa and they think I'm trying to set up in the US permanently.

Also looking into other forms of investment. Currently it's extremely confusing so I'm just going to start dumping money into Wealthfront and see what happens. I've read both good and not-so-good about robot investors, so I dunno if this is going to bite me or not.

edit:
From the OP:

So, which one should I choose? Well, the rule of thumb for most is:
- 401k up to the employer match (401ks usually have higher fees and shittier funds)
- Fully fund Roth or traditional IRA (5,500)
- Fully fund 401k (17,500, i think)

My employer doesn't match 401k, but within the next couple of months I'll be able to max out both a Roth IRA and a 401k without worrying about digging into my backup funds. I'm not sure where to go from there, or if that's where I should even start given my visa status.

 

[Randolph Freelander]

Gut check GAF. I am currently "maxing" out my 401k (mix of roth and traditional) including my 6% employer match. I am also maxing out my HSA (with 750 dollar employer contribution). In addition, I am putting 200 dollars a month into a 3 fund portfolio in Vanguard . The only thing I am not doing right now is putting the extra 5k into a Roth IRA for the additional deduction. The thing is I am currently saving up for a house payment in 2 years, so the 5k I would have put in the Roth is actually sitting in a high yield savings account (among some other money I would rather not disclose here).

I checked mint, and it told me I am already 5-6 years ahead of my target retirement date. Should I strongly consider also doing the Roth IRA contribution this year to further reduce my tax burden? Or keep my strategy as is. I also have ESPP from work that I immediately sell, then re-distribute to the personal vanguard portfolio. Thank you.

The Roth is the IRA without the deduction. It's an after-tax account, but all of its gains are non-taxable as you start withdrawing in your retirement years. The traditional IRA is the one where you might be able to take a deduction based on your income, but that deduction phases out rather quickly.

In reference to your 401K, you put maxing in quotes, so I don't know if you're contributing up to the full IRS limit (18,000 in 2016) or if you're just getting your full employer match and then cutting it off.

If your income is high enough to fully max the 401K, then that strongly suggests that a Roth IRA is the companion account to prefer, because the traditional IRA isn't going to give you a deduction in that case. If you're just hitting the employer match and that's it, maybe there's something in the traditional for you, but I would suggest that it's not likely and you might still prefer the Roth anyway in your retirement years.

 

[The_Inquisitor]

The Roth is the IRA without the deduction. It's an after-tax account, but all of its gains are non-taxable as you start withdrawing in your retirement years. The traditional IRA is the one where you might be able to take a deduction based on your income, but that deduction phases out rather quickly.

In reference to your 401K, you put maxing in quotes, so I don't know if you're contributing up to the full IRS limit (18,000 in 2016) or if you're just getting your full employer match and then cutting it off.

If your income is high enough to fully max the 401K, then that strongly suggests that a Roth IRA is the companion account to prefer, because the traditional IRA isn't going to give you a deduction in that case. If you're just hitting the employer match and that's it, maybe there's something in the traditional for you, but I would suggest that it's not likely and you might still prefer the Roth anyway in your retirement years.

I'm maxing + the employer contribution (so 18k personally then what the employer gives me). HSA end up being like 3500 to 4500 a year as well. I feel this is much better than dumping the 5k into Roth IRA because HSA is still triple tax benefited.

 

[Easystride]

Is it worth it to invest in small and mid cap funds in addition to large cap for my 401(k)? Right now, I have my stock investments split as follows:

401(K) - S&P 500 Index fund (FXSIX)

Roth IRA - Total Stock Market Index Fund (VTSAX), Total International Stock Index Fund (VTIAX). I believe VTSAX already has small and mid cap built in.

 

[tokkun]

Is it worth it to invest in small and mid cap funds in addition to large cap for my 401(k)? Right now, I have my stock investments split as follows:

401(K) - S&P 500 Index fund (FXSIX)

Roth IRA - Total Stock Market Index Fund (VTSAX), Total International Stock Index Fund (VTIAX). I believe VTSAX already has small and mid cap built in.

Historically, small cap stocks have a higher expected return than large cap. However, they also have higher volatility. Whether the risk-adjusted return of small cap stocks is better and whether it will continue to be in the future is a matter of some debate among data-driven investors. Consequently, you see some groups of smart investors advocating a tilt toward small cap value in your portfolio and others advocating the more orthodox cap-weighted approach used in funds like VTSAX.

The bottom line is that there is really no consensus on how much small cap you should hold, although I think most would agree that if you are young and risk tolerant that you should at least have the cap-weighted amount. If you don't have a Total Stock index in your 401k, you can get the equivalent by mixing Vanguard's S&P 500 and Extended Market funds in a 4:1 ratio.

 

[LaneDS]

I use Personal Capital to track that stuff for me. Just use a fake phone # if you sign up for it.

Are they pretty terrible with calling folks? Someone mentioned personalcapital to me recently and I've been starting to compare it against service like Mint to find out which I'd like to use, and for what, so any feedback on either would be great. Mostly interested in having a place to track total worth and tracking multiple 401ks and what not sounds pretty great.

 

[FrenchMovieTheme]

Should I max out my 2016 Roth ira contribution $5500 before or after the election?

 

[Bringer Of Bacon]

One word, JNUG

 

[Randolph Freelander]

Should I max out my 2016 Roth ira contribution $5500 before or after the election?

You should have maxed it in January.

The next best time to do it is right now.

The election is largely baked in. You have to think the markets expect Hillary to win, so there shouldn't be much movement beyond normal daily fluctuations if (when) she does. Buy now.