So long as you haven't filed yet, you can claim that on your 2016 tax filing, and should get a return/lower taxes as a result.
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How to Invest for Retirement
- Thread starter Piecake
- Start date
So long as you haven't filed yet, you can claim that on your 2016 tax filing, and should get a return/lower taxes as a result.
anonymous_abc
Member
PflargBlarg
Member
Lol, I got 5000 into the market the day before that March 1st madness. Nice to see I suppose but I'm hoping the market goes down a bit. I have an unfortunately large tax refund coming soon.
1. As much as you can while maintaining a lifestyle that you find acceptable. This is obviously different per person. Last year I saved 55% of post-tax income. So far this year I'm at about 43% because of some front-loaded expenses. A vaguely generic number is 15% in order to retire at standard retirement age comfortably.
Unfortunately can't help you out for #2 as I don't know enough about American retirement stuff.
1. As much as you can while maintaining a lifestyle that you find acceptable. This is obviously different per person. Last year I saved 55% of post-tax income. So far this year I'm at about 43% because of some front-loaded expenses. A vaguely generic number is 15% in order to retire at standard retirement age comfortably.
Unfortunately can't help you out for #2 as I don't know enough about American retirement stuff.
GodParticle
Member
I'm trying to add some money to my Vanguard Roth IRA, but get this message and have no idea what it means:
"This purchase exceeds the current funds available balance. Funds are due in your Federal Money Market Settlement Fund by the settlement date of the trade. Otherwise, securities in the account may be liquidated to pay for the purchase, and the account may be restricted."
I'm clicking on my retirement account, clicking buy, and putting in how much I want to add. It gives me 2 choices of where it should go, and I'm selecting the retirement account
1. Federal Money Market <--- only .59 cents there and no idea what it is
(Settlement fund)
2. My Target Retirement account <--- where I'm selecting for it to go
Am I doing it the wrong way?
"This purchase exceeds the current funds available balance. Funds are due in your Federal Money Market Settlement Fund by the settlement date of the trade. Otherwise, securities in the account may be liquidated to pay for the purchase, and the account may be restricted."
I'm clicking on my retirement account, clicking buy, and putting in how much I want to add. It gives me 2 choices of where it should go, and I'm selecting the retirement account
1. Federal Money Market <--- only .59 cents there and no idea what it is
(Settlement fund)
2. My Target Retirement account <--- where I'm selecting for it to go
Am I doing it the wrong way?
You contribute cash to your IRA, which is deposited into the Settlement Fund. That typically defaults to a money market account, which appears to be the case here.
Investing in the IRA is thus a two-step process:
1) Contribute funds to the IRA settlement fund.
2) Purchase investments with money in the settlement fund.
I'm with Fidelity, which lets you do them right after another, so you can set up the transfer/deposit of money to the settlement fund, then route that to your choice of investment back to back. I'm not sure if Vanguard is the same, but it needs to be in that order.
Investing in the IRA is thus a two-step process:
1) Contribute funds to the IRA settlement fund.
2) Purchase investments with money in the settlement fund.
I'm with Fidelity, which lets you do them right after another, so you can set up the transfer/deposit of money to the settlement fund, then route that to your choice of investment back to back. I'm not sure if Vanguard is the same, but it needs to be in that order.
RumblingRosco
Member
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GodParticle
Member
Thanks for that. Just seems like a really weird way to do things
I've never seen any reference to a Settlement fun when interacting with my Vanguard Roth IRA. I just have a recurring weekly contribution to maximize my contribution each year. It just looks, for all intents and purposes, like I'm directly buying fund shares. Weird.
RumblingRosco
Member
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My Fidelity account is similar. In this view it's called a "core position"; just a temp holding bucket as money moves from cash to investments. (The footnote is helpful.)
Vanguard has two types individual accounts. The brokerage type requires a settlement fund. The type that only allows you to buy mutual funds doesn't.
The settlement fund exists because of limitations of ETFs / individual stocks compared to mutual funds - you cannot do partial shares of ETFs, therefore it is not possible to completely reinvest dividends. They need a place to put the leftover dividend that cannot be reinvested, so it goes in the settlement fund.
I believe they plan to eventually convert everyone over to the brokerage-style accounts, but currently you have to do it manually. However if you are happy only investing in mutual funds, you may as well stick with the old account type as long as they offer it, as it is simpler.
ZackieChan
Member
So excited to put money in my new Self Employment 401(k) I'm setting up. I have a big chunk set aside in YNAB ready to be transferred as soon as I mail in these papers and it gets approved. 2017 is the year of kicking off my retirement savings big time (I did a lot of fucking around in the past and barely have anything). Business is good enough these days that I can put away $20-25k or more each year. Should allow for an early semi-retirement. My expenses are quite low with my nomadic lifestyle or living abroad here in Thailand.
Edit: Does anyone use QuickBooks Self-employed? I have no idea what to do about income that I move into the self employed 401(k) so that my tax forms are correct.
Edit: Does anyone use QuickBooks Self-employed? I have no idea what to do about income that I move into the self employed 401(k) so that my tax forms are correct.
Saving 55% post-tax is very impressive number. I've been trying to hit 30-40% myself and even that feels quite difficult at times. Especially since I'm back in school at the moment and only got a part time job. Though I make sure I have enough money travel abroad 1-2 times a year, give myself little monthly spending money, etc.
Care to share what your income is like? I myself still got a year of school left, but after that I will probably make little under 30k net/year at first. If I can save about 10k yearly I'll be satisfied.
Poltergust
Member
So I have a 401k plan through John Hancock, but none of the funds in the OP are available for me to invest in through my plan.
What should I do about that? I don't want to put my money into a moderate-/high-risk fund.
What should I do about that? I don't want to put my money into a moderate-/high-risk fund.
Ah, didn't realize that. I thought "brokerage" meant it was a non-retirement taxable account. I don't remember the sign-up process from years ago anyway. I just invest my Roth IRA into the Target Retirement 2040 anyway, though I have enough in there that I should probably look and see if moving over into an equivalent distribution out of Admiral shares of individual funds would be beneficial.
What funds do you have and how old are you?
Poltergust
Member
25. Currently all of my investments are put into an MFS Lifetime 2050 Fund.
It's been giving me a good return so far, but I've come to learn that it's a bit volatile.
Randolph Freelander
Member
It's no more volatile than any other target date fund. Vanguard's 2050 fund is allocated quite similarly, though your fund carries a little less international stock than Vanguard. You're 25, you don't need to worry about volatility, and as you age, this kind of fund will get more and more conservative. The only thing I don't like about it is the expenses are high (though I believe they're now mixing in lower cost components to help alleviate that), but I'm betting it's the only family of target date funds in your plan, so you don't have much choice. The only thing I would suggest that you do (if target-based investing is your preference) is move to the 2055 or 2060 fund if it's available to you, given your age.
If you would like other suggestions, list your fund options. Include (if you can) short descriptions and expense ratios just so we don't have to go look them up. (This could be available in a single page on your plan's website, so grabbing a screenshot might be enough.)
PflargBlarg
Member
Seems like pretty good numbers for someone who's in school with a part time job. I'm at 75k CAD which gets taxed down to somewhere in the high 50s, so you're clearly spending far less than I am. I think Europeans have a tougher time with early retirements as I hear the salaries are lower than North America and the taxes are higher.
Also, it's not all about min-maxing to get a higher savings %. I'm pretty content with how I'm living although I'm sure some people would think that I should spend more on entertainment or whatever. Do what makes you happy while still being responsible and you should be set.
You are right that early retirement is almost impossible here. Realistically in the next 5 years my salary will be about 50k/year max before taxes and other mandatory payments taken straight out of the salary. And this already an above average wage since the average for western European countries is about 30-40k year before taxes. Of course one of the things deducted from the salaries are mandatory pension fund payments so anything saved would be extra on top of that.
Good luck dude, most likely they aren't going to give a fuck. Index fund option on JH 401K at work is like 0.9% now and it seems to climb slowly every year. Went as far as asking the JH guy point blank when we had the yearly information meeting with them, they fumbled some bullshit answer and nothing changed. I just throw enough in for matching now. If you plan on leaving within the next few years it may make sense to add more.
demosthenes
Member
This happens in a lot of 401k plans. Do enough to get the match and invest separately.
It's a smaller company and everyone is pretty close so I'm hoping it at least gets looked into, but who knows.
It sucks, but it's still better than taxable investing in the long run so I'll probably do more than just the match. I won't be happy about it though!
br0ken_shad0w
Member
Goddamn, my 401k plan is currently at 0.038% and that was after a hike last year.
Walter White Walker
Member
Open up an IRA, either traditional or Roth. They're tax advantaged and you can contribute up to $5500 a year, and $6500 a year after age 50.
I already max my Roth every year, otherwise this would be an easier decision
.Yeah, this is the worst employer plan I've had so far.
ClosingADoor
Member
Maybe someone here can help me with some advise. I have figured out my own plan pretty well and was talking about it with my parents for a bit. They mentioned they have some investments also, but don't really know what is happening with it. Basically, they just dumped it at the bank, told them to manage it and didn't look at it again thinking "they know best". Well, browsing through the documents for a bit I noticed they are paying around 2% in managing fees, and then this managed fund just buys around 15-20 ETFs, mostly from their own bank again so they get double the fees (ranging from a extra 0.20% to 0.80%, which I found high for some also).
I told them to figure out the costs here and look at their returns over the past years, which they said were not good (last year 2% they said after the fees they said) which I found pretty terrible considering the rise in markets pretty much everywhere.
Normally I'd tell them to just pick their own ETFs (2 or 3) and follow the market with that. But considering they are in their early 50s and probably want to start using the money in 15 years or so, I'm not so sure.
For people who are 15 years out from retirement, what is the plan they should pick, and do they also need to hold a certain percentage of bonds in their plan?
Hopefully someone has a bit more experience with this then I have.
I told them to figure out the costs here and look at their returns over the past years, which they said were not good (last year 2% they said after the fees they said) which I found pretty terrible considering the rise in markets pretty much everywhere.
Normally I'd tell them to just pick their own ETFs (2 or 3) and follow the market with that. But considering they are in their early 50s and probably want to start using the money in 15 years or so, I'm not so sure.
For people who are 15 years out from retirement, what is the plan they should pick, and do they also need to hold a certain percentage of bonds in their plan?
Hopefully someone has a bit more experience with this then I have.
They should put it all in a Target Date fund from a company with low fees like Vanguard or Fidelity. If they are retiring in 15 years, it would go in a 2030 or 2035 target fund. The fund will automatically shift to a higher percentage of bonds as it gets closer to the target retirement date. They're designed to be completely hands off, so the fund will stay on track without your parents needing to take any additional action after putting the money in.
ClosingADoor
Member
Thanks! I'll look around what is available here in Europe. The Vanguard funds in the US seem to be at 0,08 - 0,15% expenses. Does that sound right or am I missing some additional costs? Over here most seem to be around 1% or so, but I'm looking around still.
Walter White Walker
Member
No, that's right. The Vanguard Target 2030 and 2035 funds both charge .15% here in the US.
ClosingADoor
Member
Hm, you guys are lucky with those low costs. Over here the bank expects their "service fee" first and then the fee for the fund. Cheapest I got for now on a target date 2035 is 0.83% overall. Difference is tens of thousands of dollars (well, euros then) over time.
bucknuticus
Member
I have somewhere between 5-10k to do something with. I already put money into my 401k up to company match. My bank has a rainy day fund that gets 2.5% as long as i add $25 a month to it. Is this my best bet?
Any other suggestions?
Any other suggestions?
ZackieChan
Member
Do you have an emergency fund of 3-6 months?
bucknuticus
Member
Yes and no debt
Vanguard VTSAX would be my move then. 2.5% is nice for a bank rate though. My savings rate is 0.1% lol
zswordsman
Member
I'm currently putting 15% into my TSP plan and 100% of that into 2050 L fund.
That's a good way to start right?
Also, any advice on what to do with extra income. Currently a single soldier with no debt so I can really save up a lot right now. I have like 6k disposable.
That's a good way to start right?
Also, any advice on what to do with extra income. Currently a single soldier with no debt so I can really save up a lot right now. I have like 6k disposable.
ZackieChan
Member
Should he put it in Roth IRA first? Max that out, then to IRA, then to regular investment account?
Depends I guess. If the money is for retirement then the Roth IRA would be the best bet up to the limit. If the money is just kinda kicking around and should be working instead of just sitting idle but should also be somewhat accessible then the Admiral shares would be the way to go.
demosthenes
Member
You can't do Roth -> (then) Traditional. The yearly contribution is shared between the two.
bucknuticus
Member
Yeah im pretty set retirement wise, I want something that will give me some return than I can maybe roll over or do something in the next 5-10 years.
ZackieChan
Member
Thanks for the input.
Yeah, I mean you find the Roth until it is maxed ($5500), then the remainder goes into a traditional up to that Max. No?
No. They share the same maximum of $5500.
Something doesn't seem right. Your 401k should not affect IRA eligibility. Are you sure the reason isn't that you make too much money?
dc3k
Member
yeah, roth ineligibility is due to my agi being too high, traditional tax deducability is due to my 401k. sorry that wasn't clear. is a traditional ira still worth it if it's not tax deductible? im contributing the max i can to my 401k without going over
Do you already have a large balance in your traditional IRA? If not, you can consider doing a backdoor Roth IRA to skirt the income limits.
Whether it is worthwhile to do a non-Roth after-tax IRA vs a normal taxable account is debatable, even for designated retirement money. The pro is that you don't pay taxes on dividends or on sales when rebalancing your account. The con is that your gains will end up getting taxed as normal income when you withdraw rather than as capital gains, and you have the limitations on withdrawals. Personally I probably would go with the normal taxable account.
dc3k
Member
I'll look into the backdoor Roth. Currently I have a 401k through my job, and a personal investment account with Wealthfront. Thanks for the tips!
ZackieChan
Member
Oops, you're right. I'm a moron! 🤥🤓