You're able to make IRA contributions on a tax year basis, meaning until April 15th 2014 you can still make a 2013 contribution. Pick which year it will be for. If you put in $3,000 for 2013 you still, have your full 2014 contribution that you can make.
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How to Invest for Retirement
- Thread starter Piecake
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You're able to make IRA contributions on a tax year basis, meaning until April 15th 2014 you can still make a 2013 contribution. Pick which year it will be for. If you put in $3,000 for 2013 you still, have your full 2014 contribution that you can make.
The 3000 dollars is that fund's minimum investment. If you want to invest less, you can always use that fund's etf equivalent.
You need a minimum $3000 investment to invest in Vanguard funds.
IRAs have a maximum contribution you're allowed to make each year, currently $5500 IIRC. At the moment, since it's before April 15th, you can still do contributions that are counted towards the 2013 limit. Which means you could contribute up to $5500 for 2103 and up to $5500 for 2014.
Assuming this is a Roth IRA, the year won't really matter on your taxes, so you should put everything into last year. This will allow you to contribute more later in the year if you are able to, up to the 2014 limit.
It might be worth asking if Vanguard allows you into a fund with less than the minimum if you set up automatic contributions. The Fidelity funds I'm in have a minimum of $2000, but I was able to go in with just $200 starting, and $200 monthly contributions which puts it over the minimum within 12 months. It wasn't spelled out on their site, but when I called a rep and asked, that was offered.
Not sure if Vanguard allows something similar, but it's worth asking.
Not sure if Vanguard allows something similar, but it's worth asking.
In the interests of simplifying my IRA (and diverting funds off some target date funds that I had initially invested in) I put in an order to sell off all my target date funds and put it all in SWTSX
Considering I'm on Schwab and not Vanguard, what's the recommended allocation? Bogleheads has a page listing the equivalent index funds that Schwab offers. I'm young enough that I don't really care about putting anything into any bond funds, but I'm not sure if I should be going for some of the other funds or if I should just put a % of the total into the International fund and leave the rest in the total stock market fund.
Considering I'm on Schwab and not Vanguard, what's the recommended allocation? Bogleheads has a page listing the equivalent index funds that Schwab offers. I'm young enough that I don't really care about putting anything into any bond funds, but I'm not sure if I should be going for some of the other funds or if I should just put a % of the total into the International fund and leave the rest in the total stock market fund.
Interesting. They should definitely advertise that more if true. I would imagine that that high a minimum impedes a significant number of investors from investing, or at least delays than for a while.
I go 60% US, 40% international. Thats it. I don't think you really need anymore since with those two funds you have invested in everything
Icelandic_Jazz
Member
I was about to sign up with TD Ameritrade to get into index funds, but after some research it seems like it's better to go straight through Vanguard? Are there any distinct advantages to Ameritrade over Vanguard (my checking is with TD if that makes any difference)?
I don't have very much extra cash to throw around, but I still want to invest for the future. I have an employer matching 401k, but I'm not putting very much into it so far. Their match percentage is pretty low, as I'm new there. Would it be more wise to fund that up to my employer match or jump into index funds? I also don't have a Roth IRA yet. Just the 401k.
Sorry if these are basic questions. I'm still very new to this, but I'm beginning to wrap my head around it fairly quickly.
I don't have very much extra cash to throw around, but I still want to invest for the future. I have an employer matching 401k, but I'm not putting very much into it so far. Their match percentage is pretty low, as I'm new there. Would it be more wise to fund that up to my employer match or jump into index funds? I also don't have a Roth IRA yet. Just the 401k.
Sorry if these are basic questions. I'm still very new to this, but I'm beginning to wrap my head around it fairly quickly.
RoninChaos
Member
I haven't been able to save because I've been taking care if my mom. Is there a good way to start while being in this situation?
Hmmm. I'll look into mid cap exposure for my Roth. The mid cap options in my employer account are not very good at all, which is actually the bigger reason I avoided them.
Thanks!
NotMyRealName
Banned
Thanks guys
My mom has fidelity and I'm trying to figure out if and how I can transfer some of (all of?) her funds into index funds. She currently has a 401k and a 403b setup through her employer. I don't think she puts anything more into her 403b due to differences between her employer and the state she works in. Any tips?
My mom has fidelity and I'm trying to figure out if and how I can transfer some of (all of?) her funds into index funds. She currently has a 401k and a 403b setup through her employer. I don't think she puts anything more into her 403b due to differences between her employer and the state she works in. Any tips?
Is she still working for the same employer that has her 403b? If so, it's up to the plan. She'll need to call her personnel department at work and ask. Many times when companies stop one plan and move to another plan and close the former plan, they allow you to roll over the old plan into an IRA. Also, how old is she? Sometimes if she's of a certain age she can rollover both the 403b and 401k as an "in-service distrobution". Have her make a call and they'll be able to tell her in a few minutes.
For anybody still reading this:
http://www.nytimes.com/2014/03/02/your-money/give-fees-an-inch-and-theyll-take-a-mile.html?_r=1
Fees kill you. This includes paying fees to an advisor or to a mutual fund. Mutual funds are shit. The managers are index huggers so you might as well buy the index.
Also, Warren Buffett was on Squawk this morning and says that when he dies he'll recommend that his wife purchases a Vanguard S&P 500 ETF at 90% and a US tres. ETF for 10% and that's it. His wife will be done.
http://www.nytimes.com/2014/03/02/your-money/give-fees-an-inch-and-theyll-take-a-mile.html?_r=1
Fees kill you. This includes paying fees to an advisor or to a mutual fund. Mutual funds are shit. The managers are index huggers so you might as well buy the index.
Also, Warren Buffett was on Squawk this morning and says that when he dies he'll recommend that his wife purchases a Vanguard S&P 500 ETF at 90% and a US tres. ETF for 10% and that's it. His wife will be done.
I just reinvested all my dividends that have been accruing for the past few months into a total stock market fund (ITOT) as I had a whole in my portfolio for small and mid caps.
I am also starting to rebalance my accounts to where all my dividend paying assets will go into my roth, and all the cap gains heavy stuff stays out. That's a useful piece of advice for anyone starting out with a roth or other tax exempt or deferred retirement account in addition to a standard investment account, make sure you buy all your dividend paying assets in the tax free account, otherwise you get stuck paying taxes on dividends and it becomes difficult to sell the assets to move things around because of the hit you will take on the realized cap gains.
I am also starting to rebalance my accounts to where all my dividend paying assets will go into my roth, and all the cap gains heavy stuff stays out. That's a useful piece of advice for anyone starting out with a roth or other tax exempt or deferred retirement account in addition to a standard investment account, make sure you buy all your dividend paying assets in the tax free account, otherwise you get stuck paying taxes on dividends and it becomes difficult to sell the assets to move things around because of the hit you will take on the realized cap gains.
Pagusas
Elden Member
Maybe one of you can help me. In a few months I will be leaving my current job for a new one, though there will likely be a 1 month break inbetween the transition.
I'm 28, I currently have 9k in my 401k (that is offered by the current company I work for). How do I manage the transition to my new employer? What's the normal procedure once I leave? Can I roll that into a new 401 k, or move it to a different type of retirement, without penalty?
I'm 28, I currently have 9k in my 401k (that is offered by the current company I work for). How do I manage the transition to my new employer? What's the normal procedure once I leave? Can I roll that into a new 401 k, or move it to a different type of retirement, without penalty?
Pagusas
Elden Member
Can you do that without penalty or fees usually? If my next employer offers 401k match is that a better option than the cheaper IRA?
I really don't know the specifics of TM ameritrade, but if that place also offers you no account fees and no transaction costs on their funds/etfs then you'll get no benefit from moving to Vanguard.
As for the 401k, definitely fund up to your employer match. Thats free money, and you cant beat that. Try to see if your 401k has index fund options, but if not, go with the least shitty one possible.
After that, if you want to invest more, you can always open an IRA
Probably the best way is to create a budget and mark a portion of your monthly earnings for retirement. You can either do it by yourself or have it automated from your bank account to the fund.
That way, you have a manageable plan to follow. If you make a budget, you can see what things you can cut so you are able to contribute towards your retirement
Yes, a 401k rolls into a traditional IRA without tax or penalty.
Yes, a match is almost always better than the IRA because its free money. The only way it would be worse if the fees and funds in the 401k are absolutely terrible
Two things: Doing a direct rollover from your 401k to an IRA isn't taxable. You call up your 401k company and have them make the check payable to the IRA company for the benefit of you. Every investment company that offers IRAs will help you do this.
You do not get a match on your 401k balance but on your contributions. If you roll your old 401k into your new 401k it doesn't increase your match. The match will be based on your contributions. My company matches 50% of my contributions up to 6% of my income. So for me, that's a guaranteed 50% return. Usually, you don't want to put into your 401k more than the match unless you are also going to max out your IRA contribution. If you're able to contribute to a Roth IRA and able to max it out and you're able to still save more, it's fine to put more into your work's 401k. It will lower your taxable income. But, if your company matches up to a certain % and the more you want to contribute isn't going to max out your IRA contribution, use the difference between what the company matches to and the amount you want to contribute and put it in an IRA and preferably a Roth IRA. If your company offers a Roth 401k try to contribute to that. It doesn't lower your taxable income but you get the money tax free when you retire.
NotMyRealName
Banned
Do Index Funds usually have expense ratios and management fees? The fund I'm looking at now has a management fee of .05%, is that alot?
That's cheap.
good ETF's will have an expense ratio of < 0.2%. Compare that to mutual funds with commonly have >2%.
0.05 is good.
NotMyRealName
Banned
Ok, the expense ratio is .1% with a management fee of .05%. Thanks for the heads up.
Yes, any fund has to have a certain amount of fees to cover transaction costs, etc.
.05% is a very good expense ratio. .05-.10 are good expense ratios for a large stable index like a total stock market index. Some of the indexes that include a larger percentage of small caps may have higher ratios because they are more volatile and require more trading to keep the allocation balanced(ie. compare a Russell 3000 total stock market fund vs. a S&P composite 1500 fund, the russell index includes 98% of US equity instead of 89%, but you will pay at least twice the amount of fees), but if you see an broad index fund with an expense ratio much above .25, you should ask yourself WTF is going on over there.
For a sector index or a targetted index like dividend achievers, etc. look for something like .30-.50 as those funds will have higher turnover. Smaller rapidly changing sectors like technology and biotech will likely be closer to .75% or even higher. If the expense ratio is over 1% say no thank you and walk away.
yeah I have money in FBT with an expense ratio of 0.6% and it's a Biotech ETF. Given that it's outperforming anything else by more than the 0.5% difference in expense ratio it's worth it though. I have faith in the sector so I'll take on that risk for higher payoff.
Probably so. Unless your 401k has no fees and offers very low cost index funds, you're better off picking your own via an IRA. If you max that in any given year, then turn to the 401k.
I'm 25 and looking to finally start up a Roth IRA. I have around 9k saved up and I'm trying to figure out where I should open the account. It's between my bank, BBVA compass and Fidelity. I'm leaning towards my bank just because it would be easier. Does it matter much where you open it?
Depends on what funds they offer for no commission trading.
I really like Fidelity. I eventually moved my checking account to them, but even when I was contributing through my local bank it was easy. You can trade on contributions instantly, you don't have to wait for the 3 days for the transfer to clear. They have a lot of commission-free funds to trade.
Why did you pick these places?
I'm a fan of Schwab. They have great low cost etfs and a great screening tool.
My brother uses Fidelity and likes them and my bank because it would be the easiest for me to do. I'm checking out Schwab right now, I don't plan on making a decision until the end of the week.
Stay away from banks. Stick with a brokerage account.
You can enough to max out your 2013 contribution and get started on 2014.
RumblingRosco
Member
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Schwab has lower cost etfs than Vanguard.
http://www.schwab.com/public/schwab...stment/etfs/schwab_etfs/market_cap_index_etfs
Vanguard just has the bogleheads that worship at the Vanguard alter. If you're looking for low-cost then Schwab is a great place. They also have some fantastic tools if you want to be more sophisticated and start investing in individual securities.
Also stay away from actively managed mutual funds. They are shit. Index huggers all.
RumblingRosco
Member
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Schawb offers transaction free ETF index funds that have lower expenses than Vanguard. Check the link I gave you. With most discount broker's they'll give you free trades outside of the built in free trades. So, at Schwab or Vanguard you'll get to purchase their ETFs for free. They all usually partner with mutual fund companies for the funds as well because that's a big profit driver for them. If your goal is to buy index ETFs then Schwab offers you a product that is lower cost than Vanguard.
The reason I like Schwab better than Vanguard is that their tools are better.
chaosblade
Unconfirmed Member
Looked into that Edward Jones fund my grandparents set up, I have a bit over $4000 and it looks like the fees amount to either .8 or 1.2%. Either way, really bad.
Need to decide where I'm going to move it to. And I guess you can do that without fees or taxes, even though the account is just an investment account and not a retirement account. Need to figure out how to do that, maybe tomorrow.
Need to decide where I'm going to move it to. And I guess you can do that without fees or taxes, even though the account is just an investment account and not a retirement account. Need to figure out how to do that, maybe tomorrow.
Without fees maybe, without taxes no. If the fund has gone up in value, you will owe capital gains taxes.
chaosblade
Unconfirmed Member
So you can't roll an normal investment account into a retirement account?
I guess that makes things easy then, I just need to sell it and then reinvest the money in an IRA.
I guess that makes things easy then, I just need to sell it and then reinvest the money in an IRA.
Right, you can only put cash into an IRA. I took some capital gains hits this year and last moving stuff into 401k's and 529's, but the long term tax benefits will be worth it.
Well...you can* but you still take the capital gain hit. How long ago did they put the money into Ed Jones? Most likely, it will be a long term capital gain and you won't have a huge tax bill because of it. But, if you're young, it's better to take the tax hit now when you're not paying anything in taxes than later when you actually are at your peak earnings/tax bill. Tax deferral or tax free withdrawals are awesome. Also, Ed Jones is a really shitty firm and you want to get your money away from them anyway.
*with mutual funds you're priced at the end of the market. They are not actively traded. So if you're holding an American Fund (and at Ed Jones you are) you can sell the fund within the taxable account and buy the fund within the IRA on the same day. The settlement is later but most firms will allow you to sell and buy in cash as long as you have the cash to pay for it when the trade settles. So, in effect you're getting the same pricing between the two accounts.
How do you guys track dividends? Google finance just adds it back to cash which I'm not really happy with, because I reinvest it and it should count as a gains made from the fund/stock it came from. What do you guys use for that? Or portfolio tracking in general?
n00bsauce87
Member
Is there a rule of thumb for ratio of IRA used for investing?
Let's just say I end up with 16,500 saved in the next 3 years, do you leave half of the IRA untouched and the rest for investment, put it all towards investment?
Also gradually as your IRA increases in value, do you buy more of the same stock, ETF's, mutual funds? Or do you diversify even more (if possible)?
I'm just curious because I bought 5 shares of VOO in the beginning of February (this is all still new to me) after doing a lot of research here and financial websites. I like where it's going, but I wanna know how deep is too deep when it comes to your IRA.
Let's just say I end up with 16,500 saved in the next 3 years, do you leave half of the IRA untouched and the rest for investment, put it all towards investment?
Also gradually as your IRA increases in value, do you buy more of the same stock, ETF's, mutual funds? Or do you diversify even more (if possible)?
I'm just curious because I bought 5 shares of VOO in the beginning of February (this is all still new to me) after doing a lot of research here and financial websites. I like where it's going, but I wanna know how deep is too deep when it comes to your IRA.
I have an Excel model I punch stuff into each month for all my finance tracking, and one of the tabs is for dividend tracking. I have a tab that tracks YTD performance broken out by reinvested dividends, contributions, transfers, contributions and growth. But that's probably the hard way; I just like to use Excel.
Do you mean you're leaving it in cash? The entirety of your IRA should be invested. If you're feeling conservative, increase your allocation to bond funds.
n00bsauce87
Member
That's more or less the answer I've been trying to get. I'm 26, I'm not there to worry about bonds. Index Funds is just plenty fine for me
More power to the people who are confident enough to micro manage their funds, I just dump everything into the target 2050 fund (two different companies since my workplace matching only works with TRowe) and call it good
Index funds seem smarter and don't really require any more micromanagement than a target date fund.
Randolph Freelander
Member
More power to the people who are confident enough to micro manage their funds, I just dump everything into the target 2050 fund (two different companies since my workplace matching only works with TRowe) and call it good
Your fund option may differ, but in my 401K, the target date funds have some fairly high expenses and fees, which is somewhat alarming since you'd think those funds should only have to gradually alter their holdings. They should have more turnover than a straight index fund, but you'd think expenses would still be quite low.
I'm more aggressive in my Roth IRA, but only because the small-cap funds in my 403(b) have stupid high fees.