I was looking into Betterment for a while now and thought that, as far as automated investment services go, it was a good choice and the fees were low.
Gotten pretty good returns too to this point- 10.3%
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How to Invest for Retirement
- Thread starter Piecake
- Start date
I was looking into Betterment for a while now and thought that, as far as automated investment services go, it was a good choice and the fees were low.
Gotten pretty good returns too to this point- 10.3%
Next step is the mega-backdoor Roth IRA. That is where the true Dark Souls begins.
zswordsman
Member
Ok. So I'm totally lost and I want to start investing towards retirement. Just joined the military. Currently in AIT for aviation mechanic.
They have a thrift savings plan that I haven't played with yet. So I'm just trying to figure out what I can do to get started. How much should I invest a month?
Currently making about $740 every two weeks my ire or less. :'v but no other expenses.
I was looking at CDs but the rates don't seem too good.
Any help is appreciated
They have a thrift savings plan that I haven't played with yet. So I'm just trying to figure out what I can do to get started. How much should I invest a month?
Currently making about $740 every two weeks my ire or less. :'v but no other expenses.
I was looking at CDs but the rates don't seem too good.
Any help is appreciated
I'd start by reading the OP of the thread, which is still relevant and will give you a good primer on best practices for investing, and retirement account options.
From there, you'll want to choose a brokerage (Vanguard or Fidelity are good options), and a retirement account (IRA Roth or traditional). I'm not familiar with retirement savings options in the military - are there any benefits (401k type options, etc)?
As to what you should save, it's simple: save what you can. As your ability to save goes up, add more. I started with $50 a month.
zswordsman
Member
Thanks! I'll read up on the OP. Yeah they offer Roth in the TSP, it's for all government workers I think. I'm still new so I'll read up on it.
hockeypuck
Member
So I was reading about the mega backdoor Roth on Google, and the fientist's post about it mentions after-tax contributions to 401k/403b's, up to $53,000 total a year. Why is it that only certain 401k/403b offer this? I don't think mine offers it. Seems like an excellent way to have more tax-deferred compounding, assuming the funds are decent and I don't need the liquidity.
br0ken_shad0w
Member
Definitely what I'm going to do first.
As a fellow federal employee (though civilian),
Set the TSP from G Fund to L fund + your year of retirement (you could probably be more aggressive here but I like to be hands off and let it diversify itself)
Contribute at least 5% to get the matching
Max your Roth IRA first, then your Traditional
Wellington
BAAAALLLINNN'
Hey bud I recently heard a podcast that may be of interest to you, Paula Pant interviewed Doug Nordman with regards to becoming a millionaire on a military salary. Here is the link: http://podcast.affordanything.com/military-millionaire/
Nords also appears on the Mad Fientist Podcast for I think his own ep and also the really awesome Camp Mustache episode.
His website may be of interest to you as well: http://the-military-guide.com/
Good luck and thank you for serving our country.
Doesn't the backdoor Roth not really work if you already have money in a traditional IRA account? Here's what this one article said:
Thanks mate, this is very helpful. And yeah, it's the £1 cash ISA that Barclays offer. I just didn't want my savings sitting in my main debit account.
I'll see what I can do about seeing an advisor straight away.
It is an extra feature for the 401k provider to support, it probably costs them some money to support it, and a relatively small fraction of employees at most companies would utilize it, since few max out the pre-tax / Roth contributions to begin with. 401K providers make money by charging companies for their services, so I wouldn't be surprised if some charge an extra fee for that feature.
The IRS ruling that legitimized the mega-backdoor maneuver is also only 3 years old. Without it, it's not always clear that contributing to a non-Roth after-tax 401k or IRA is necessarily a good strategy. You are thinking that you get tax-deferred growth, which is true, but the flip-side is that when you withdraw you pay ordinary income tax on your gains rather than capital gains tax. Unlike pre-tax and Roth, non-Roth after-tax savings are not guaranteed to be more tax-efficient than a normal taxable account under every situation.
zswordsman
Member
Ok. When I set up my TSP I'll try this. So much to read up on, thanks.
Nice! I'll check them out, thanks for the info.
How do you max both? I thought the limit was $5,550 (+/- age/income adjustments) total across both?
br0ken_shad0w
Member
I might have misworded since the TSP =/= IRA (it's confusing since we do have a Roth TSP). Max for IRA is $5500 like you said, but for the TSP it's $17500.
You can do a backdoor with a traditional if you are willing to eat the taxes on your existing amount in your traditional. Otherwise it is a bad idea.
One alternative is if your 401k accepts rollovers from your traditional IRA. In that case you would want to first move your existing money in the traditional to your 401k then perform your backdoor roth as per usual.
zswordsman
Member
It seems the Roth TSP is better for me at this time due to my tax bracket. I think I'll try investing 10% in it throughout my contract. Start something up.
Unknown Soldier
Member
I keep this and the stock trading thread subbed and I have for awhile now. It's a great resource and I'm glad I read this gaming forum and get investment help on the side lol.
Jason's Ultimatum
Member
Seems like expense ratio is mentioned quite a few times in the op. I mean you really can't escape them. A lot of funds out there around .80% or lower.
You can't really escape them, right? As for maintainance fees, is $15 a year bad?
You can't really escape them, right? As for maintainance fees, is $15 a year bad?
chaosblade
Unconfirmed Member
Any fund is going to have some sort of expense ratio. They have to make their money somehow.
And any extra fees are bad, since you can use something like Vanguard or Fidelity and not have to deal with them. Vanguard waives the additional fees if you go paperless, Fidelity likely does something similar.
There are good index funds that have less than 0.1% expense ratio.
Only way to escape them is to not buy mutual funds, but there is a huge range of expense ratios and high ones can easily be avoided.
I'd only say maintenance fees of any type are bad because there are institutions that don't have them at all.
Jason's Ultimatum
Member
Yeah I just started working at Franklin Templeton investments a couple months ago, so it's interesting to view client accounts and the type of funds they're invested in.
I'm wondering if I should look into investing in their funds since i don't get assessed a sales charge.
For our IRA accounts, we charge $15 for cumulative balance under $50k. $10 for cumulative balance over $50k.
I'm wondering if I should look into investing in their funds since i don't get assessed a sales charge.
For our IRA accounts, we charge $15 for cumulative balance under $50k. $10 for cumulative balance over $50k.
Wellington
BAAAALLLINNN'
VTSMX is at .16% and VTSAX is at .05%. A very far cry from .80%
So I'll have only put around $7k in my 401k through payroll deduction in 2016. Can I put a few more grand in at the last minute and get a bigger tax refund? And is the deadline for that the end of the calendar year or when I file my 2016 taxes? I already maxed my Roth IRA for 2016.
FireAndBlood
Member
The IRA deadline is April 15th. The 401k deadline is calendar year.
Question- How soon can I add funds for my 2017 IRA? Is it at the beginning of the calendar year or April 15th?
Randolph Freelander
Member
My employer thinks a brief down period is 4 days.
There are spreadsheets to update, people.
There are spreadsheets to update, people.
Randolph Freelander
Member
Jan 1
Wellington
BAAAALLLINNN'
You're probably already too late to make the payroll deduction change (depending on your company/plan provider) but you could just increase the percentage contributed for whenever your last check hits.
With funds bought directly through Vanguard (with an account on Vanguard) you can get expense ratios as low as %0.05 - with no additional fees - which is one of the main reasons so many around here simply buy/use/keep funds like VTSAX as their retirement fund.
With a company sponsored 401K or SimpleIRA you might not have access to Vanguard or other low cost / low expense ratio funds. If that's the case you'll still want to meet with your account manager and make sure you're putting money into low cost funds (instead of whatever funds they picked on day 1).
I personally sat with our account manager and laid out the cost with my private accounts and asked how close he could get to that (I can't roll over for 24 months or I take a penalty due to the retirement account funding structure). It essentially boiled down to "if you can match VTSAX over that 24 month period I won't roll over my funds - if they can't match it I'll roll over on 24 months + 1 day."
Jason's Ultimatum
Member
Ok vanguard sounds good. We employees qualify for some very good discounts, so I'm wondering if I should take advantage to any FT funds to invest in. I believe we qualify under class Z which has no sales charge.
Also, they match 75 cents to the dollar for 401k.
Also, they match 75 cents to the dollar for 401k.
Vanguard does not charge a sales fee on their funds either, so I wouldn't focus too much on that perk.
401k matching is an important one, though, and one you should take advantage of.
In fairy tales and dreams.
GeekyDad
Member
Total newbie to the mechanics of 401k. Been with my company a little over two years, and just yesterday asked our administrative lady to start kicking back a few bucks every paycheck into the company stocks. But I like the idea of investment matching. However, when I inquired with Meryl Lynch (who evidently does that for our company) and asked the guy to send me some basic info, I literally received paperwork about the size of a phonebook. What a fucking waste of paper...there was no way I was gonna make time to sift through that shit -- my job tires me out enough.
I'm looking at another 20 years with my company (knock on wood), so I'm not looking to make a quick buck. I want the safest investment possible. What should I be telling the guy at ML when I call back?
I'm looking at another 20 years with my company (knock on wood), so I'm not looking to make a quick buck. I want the safest investment possible. What should I be telling the guy at ML when I call back?
No. If there was, everyone would be investing in it.
You should read the OP. That should help you give a pretty good understanding. If you have any further questions or concerns then feel free to ask.
Thus driving up the price and lowering the returns for new investors down to a rate of return similar to other investments with a similar amount of risk. The correlation between higher risk and higher returns, and also lower risk and lower returns, is no accident.
Although if someone is hesitant to take on market risk, they might consider the risk of not being able to have a secure retirement because they didn't invest in stuff that gave them good enough returns. So perhaps taking on more short term investment risk might decrease your long term risks. Maybe one way to think of finance is that it's about balancing all sorts of risks in your situation and trying to reduce your overall risk as much as possible. It's definitely not easy, but even being in this thread and saving for retirement is probably a really good first step. But don't save too hard because there's a risk you'll never actually get to enjoy your savings, but also don't spend all your money right away because there's a risk you might retire into poverty. There's a balance to be found.
I don't post enough in this thread, but a fairly critical question for investing in the new year: is the run-up in the financial sector expected to continue into the next year, or is this purely recovery from their late 2015-early 2016 lows?
Pick a safe stock in something like utilities with good dividend returns. Not exactly zero risk, though. Consult with your advisor, do some research, and you can find some in the 3-4% range easily.
Pick a safe stock in something like utilities with good dividend returns. Not exactly zero risk, though. Consult with your advisor, do some research, and you can find some in the 3-4% range easily.
ClosingADoor
Member
Not with zero risk. There are some companies with high dividends that people see as "safe". For example Coca-Cola is at 3%+ in dividends and has never lowered it, but there is always a risk they will. And the stock could go down, so your dividends over the years are lost that way.
If the interest rates go up, that is a positive for banking. But a negative for other sectors. So it events out again I guess. If you are investing in total market funds, just stick with your plan and don't let predictions of the market influence that too much.
mercenar1e
Member
just a quick question.. if i buy stocks in a Roth IRA and decide to completely sell or exchange it will i get penalized during the tax year when the money gets transferred into the federal money market fund? im not planning to withdraw it to my bank account.. would just like to invest in something else.
Haha. This post made my day.
If you figure out the answer let me know and we will be billionaires.
No. There is no tax on trades in IRAs, 401ks, or HSAs.
To add a little bit more than just saying NO.
With interest rates so low there are definitely no "safe" options for 5%+ a year. Once interest rates start going back up you might see "safer" options giving 5%+ or more but at the same time inflation would be higher and it's likely that the stock market would be giving proportionally even more.
terencecah
Member
I have two per diem jobs and I do 5% into a 403b and a 401k because that's what both jobs offer. I also max out a Roth. Is this okay?
Possibly, I mean it depends on so much, like how much you think you will need at retirement.
Honestly, I have always told people, if you can put away 20% of your income, do it. If you can do more, do it. Don't just put it all in one place. Don't buy individual stocks.
However, if all you can do is 5% right now, do it, and figure out a plan to increase it a little at a time.
But here is the other thing, you should be putting away cash. Real cash money in a money market or a savings account. First you need ~6 months of expenses in savings or more. Once you hit that goal, next should be working towards ~$10k that you can actually invest and reap immediate rewards from.
See it gets complex, and there are many steps and levels. Don't just think that putting money in to retirement is good enough. Sadly, I am not sure it will exist in 30years, so as crazy as that sounds, you should be preparing for the eventuality that the stock market may disappear in 20 years, or all retirement funds are wiped out etc. Yeah it sounds horrendous, but being prepared for nearly anything is smart.
What makes you think this other than the obvious answer: universal income. I assure you, the United States will be the very last government to have universal income and they will be dragged into it kicking and screaming.
Unknown Soldier
Member
Nobody made billions on 5% return unless they started out with trillions tho
jellies_two
Member
At least in Australia a guaranteed 5% (ok 4.5) with zero risk (after tax too) is to pay down any dollar of the gigantic mortgage most people take to get into the overpriced property market...