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[The Lamp]

This is just too intimidating. Even with the advice in the OP the finance world has the awful characteristic of having too many obscure words for everything. I don't know what capital gain means, for example. And even if I followed the advice in the op I wouldn't know where to start. Yeah you say invest in stocks, but I don't know how to even do that. I don't understand what is meant by matching in your IRA section. I don't understand how to get started with mutual funds either. I wish high school had taught some basic fucking personal finance.

I'm going to have a high paying job out of college, probably over 60k with 6 figures possible within a couple of years, but I don't know what to do with all that money responsibly. I'll be 24.

 

[Piecake]

What a great post. Thank you, Piecake. One thing I don't understand with the Vanguard fund you linked to is that the initial investment minimum is $3,000. Let's say I do that. From that point on am I just dropping my $100 here and there into the fund and it compounds away, or does it work some other way? Is there a transaction fee every time I add to the fund?

Nope, so long as you buy vanguard funds in a vanguard account you won't pay for any transaction fees. And as long as you sign up for paperless communication you won't pay any account maintenance fees.

I personally like funds more, but Vanguard ETFs have no minimum, so there is also that option.

https://personal.vanguard.com/us/funds/snapshot?FundId=0970&FundIntExt=INT#tab=0

the same 'stuff' is inside that is in the fund I recommended, you just have to buy it in a different manner. Instead of buying it in a lump sum of 3k and then at least a miniumum of 100 bucks for each transaction after that, you will need to set up a brokerage account at Vanguard (you can set up a brokerage Roth IRA account) and then buy shares of that etf. So the minimum of the etf I listed above is 95.83 right now because that is the stock price.

I personally don't like them because the numbers get messy and I'd rather not bother with the whole stock buying thing. I prefer to simply buy X amount and have that happen at the end of the day. Plus, you can dollar cost average with funds.

But yea, once you buy into the fund or etf it will start compounding away. It compounds yearly btw

 

[demosthenes]

This is just too intimidating. Even with the advice in the OP the finance world has the awful characteristic of having too many obscure words for everything. I don't know what capital gain means, for example. And even if I followed the advice in the op I wouldn't know where to start. Yeah you say invest in stocks, but I don't know how to even do that. I don't understand what is meant by matching in your IRA section. I don't understand how to get started with mutual funds either. I wish high school had taught some basic fucking personal finance.

My high school did, but it was optional.

I'm not trying to sound snide when I say this but you have to correct this. This isn't something to be willfully ignorant on when, it's something that won't be handed to you, you have to go out of your way to learn this. You don't need a degree but learning what capital gains are, what mutual funds are, etc.

 

[The Lamp]

My high school did, but it was optional.

I'm not trying to sound snide when I say this but you have to correct this. This isn't something to be willfully ignorant on when, it's something that won't be handed to you, you have to go out of your way to learn this. You don't need a degree but learning what capital gains are, what mutual funds are, etc.

I know I have to correct this I just don't really know where to start since I'm at the very bottom rung of understanding. Maybe a For Dummies book would help but I honestly wouldn't be able to read through something like that. I wish there was a video or something.

I mean, this is some of the most confusing language I've read in a while, and I'm an engineer. I don't understand finance terms or taxes at all lol.

The reason they dont is because IRS requires they main records that segregate post and pre tax matchings.. This becomes time and cost consuming so they don't make the match into Roth 401. I f they don't match into Roth 401k, dump all your money into said Roth ,401k. You'll end up with both traditional 401 and Roth 401 which is fine. You'll never know when you'll need a tax deduction. I knew someone who recharacterized his trad 401 into Roth and wound up moving here in TX where we have no state taxes. Tax diversification is important.

 

[FreeMufasa]

I'm not going to invest and expect my children to take care of me. I'm currently taking care of my mom and I feel it's my duty. IMO

 

[Neo C.]

I have the feeling that only gaffers from NA are participating in this thread, or am I wrong?

 

[GhaleonEB]

We transitioned to all index funds over the course of the past year, finishing with my annual re-balance this month. We're 50/50 US and international total index funds, in our Roth IRA's and college funds. The college funds will transition to incorporate increasing amounts of an inflation protected bond fund as they move through high school.

I feel foolish for not learning about index funds until the past year - a decade of investing in suboptimal and expensive actively managed funds - but I'd rather have learned now, 20+ years before retirement, than not.

Excellent, OP, BTW.

 

[demosthenes]

I know I have to correct this I just don't really know where to start since I'm at the very bottom rung of understanding. Maybe a For Dummies book would help but I honestly wouldn't be able to read through something like that. I wish there was a video or something.

I mean, this is some of the most confusing language I've read in a while, and I'm an engineer. I don't understand finance terms or taxes at all lol.

I imagine something like this would be good and they're not expensive:
http://www.amazon.com/s/ref=nb_sb_n...ginner+financ,aps&rh=i:aps,k:beginner finance

Or you can start reading this guy or listening to his radio show, a guy at work I know loves him. He went from 120k total debt down to 5k debt (mostly school, but a lot of credit card too) in about 4 years. He preaches that and then on how to save for retirement:
http://www.daveramsey.com/home/

I'm not going to invest and expect my children to take care of me. I'm currently taking care of my mom and I feel it's my duty. IMO

What if your child grows up to resent you for this?

 

[NinjaMouse]

A bunch of good stuff here...this book is a quick read and well worth it:

http://www.amazon.com/dp/0399535993/?tag=neogaf0e-20

 

[ScottSullivan]

Question: Right now I'm finally in a position where I've got a legitimate job, and I've been doing the 401k matching because that seems like free money the company is contributing.

I only make 40-45k and my wife doesn't work, so saving is tough, is there something more I can do with that 401k money to invest it in a certan type of fund that's the equivalent to the low cost index funds?

 

[demosthenes]

Question: Right now I'm finally in a position where I've got a legitimate job, and I've been doing the 401k matching because that seems like free money the company is contributing.

I only make 40-45k and my wife doesn't work, so saving is tough, is there something more I can do with that 401k money to invest it in a certan type of fund that's the equivalent to the low cost index funds?

It really depends on what your firm has secured for you to invest in. My firm goes with NationWide. The way I choose my funds was to look for the oldest that have decent returns (7%+) since inception.

 

[Piecake]

This is just too intimidating. Even with the advice in the OP the finance world has the awful characteristic of having too many obscure words for everything. I don't know what capital gain means, for example. And even if I followed the advice in the op I wouldn't know where to start. Yeah you say invest in stocks, but I don't know how to even do that. I don't understand what is meant by matching in your IRA section. I don't understand how to get started with mutual funds either. I wish high school had taught some basic fucking personal finance.

I'm going to have a high paying job out of college, probably over 60k with 6 figures possible within a couple of years, but I don't know what to do with all that money responsibly. I'll be 24.

Capital gains means your profit on the money you invested. So, say you invested 100 bucks and sold it for 110. Your capital gains would be 10 bucks. That would be taxed at a rate of either 0-15%. If that investment was inside of a 401k or an IRA you don't have to pay that tax because the above are tax advantaged accounts

Matching - Pretty sure you are talking about the 401k match here. Basically, if your company offers this, they can match how much you contribute. So say you invest 10,000 into your 401k for the year, if the company has a match they will contribute something like 5% of your contribution (just an example, company matching policies vary widely to awesome to none at all)

How to buy stocks is fairly easy. It just sounds like you are intimidated by the whole process because it seems complex and scary. It really isnt.

I am going to show you what to do for Vanguard, a brokerage site.

https://investor.vanguard.com/home/

Go there and open up an account. You might have to give out your bank information so that you can transfer funds to a money market account. What that is, is basically a no-risk fund that gives pathetic interest where you can then buy funds and stocks. Then once you got that done, your account open, go to your account screen and buy the fund you want to buy using the funds in your money market account. Done.

You can also go one step further and set up a Roth IRA (tax advantage retirement account) and then put the funds that you buy in there so you can avoid capital gains.

I think you can avoid the MM account by directly purchasing it from funds in your bank, but I dont do that so I am not quire sure. And I think other places will allow you to put funds in your 'account' - not a fund - where you purchase funds and stocks from.

http://www.bogleheads.org/wiki/Video:Bogleheads®_investment_philosophy

These are some good introductory videos. They don't explain how to invest, they just explain why you investing the way you are. That is the most important thing. If you don't agree with my method in the OP or understand why its a good idea, then don't do it. Make sure you understand first because if you don't you are probably a lot more likely to panic and sell low during a crash or do something else really stupid.

If you come across a term you don't know just look it up on

http://www.investopedia.com/

 

[NinjaMouse]

Question: Right now I'm finally in a position where I've got a legitimate job, and I've been doing the 401k matching because that seems like free money the company is contributing.

I only make 40-45k and my wife doesn't work, so saving is tough, is there something more I can do with that 401k money to invest it in a certan type of fund that's the equivalent to the low cost index funds?

Chances are, your 401k company has funds that you can allocate the money to which track particular index funds or target retirement funds. They probably just have a different name, so you'll have to dig into the prospectus of each one to see what they really do.

 

[ScottSullivan]

Chances are, your 401k company has funds that you can allocate the money to which track particular index funds or target retirement funds. They probably just have a different name, so you'll have to dig into the prospectus of each one to see what they really do.

I was reading the descriptions of the different funds, but there was a lot of investment lingo that I wasn't too familiar with. It basicly seems to break down to a balance between, Risk/Growth/Dividends and a mix of emerging market and US stocks. Hard to decide where I want to go with it

 

[Piecake]

I was reading the descriptions of the different funds, but there was a lot of investment lingo that I wasn't too familiar with. It basicly seems to break down to a balance between, Risk/Growth/Dividends and a mix of emerging market and US stocks. Hard to decide where I want to go with it

The most important thing is the expense ratio. Look for funds with the lowest expense ratio you can find, basically the bottom 3. Post those on here, and hopefully I or someone else can tell you whats good or not. (lowest are likely to be index funds)

Expense ratio is the fees. So if a fund had an expense ratio of 1%, instead of making 7% return you would make 6%. I gave an example in the OP, but long story short, its a huge fucking deal.

 

[demosthenes]

The most important thing is the expense ratio. Look for funds with the lowest expense ratio you can find, basically the bottom 3. Post those on here, and hopefully I or someone else can tell you whats good or not. (lowest are likely to be index funds)

Expense ratio is the fees. So if a fund had an expense ratio of 1%, instead of making 7% return you would make 6%. I gave an example in the OP, but long story short, its a huge fucking deal.

The ones you posted in the OP are incredibly low.

edit: As I just opened my Roth, it's really annoying that so many of these funds have a minimum of $3,000 when the 2013 contribution amount was $5,500.

 

[Piecake]

The ones you posted in the OP are incredibly low.

edit: As I just opened my Roth, it's really annoying that so many of these funds have a minimum of $3,000 when the 2013 contribution amount was $5,500.

Like I said to a poster above, you can avoid that by opening up a Roth IRA brokerage account (assuming at Vanguard) so you can buy the ETF versions of those funds. The funds I linked to will have a link to their ETF version at the top of the page.

Basically, you buy it like a stock, so the minimum is the stock price, which is usually around 50-120 bucks or something.

Personally, I like funds more, but if you can't afford or don't want to put that much money into the fund, then ETF is probably the best choice

If you just don't like that you can buy 2 funds at once. I would probably just buy the US Total stock market this year and the International Stock next year.

 

[demosthenes]

Like I said to a poster above, you can avoid that by opening up a Roth IRA brokerage account (assuming at Vanguard) so you can buy the ETF versions of those funds. The funds I linked to will have a link to their ETF version at the top of the page.

Basically, you buy it like a stock, so the minimum is the stock price, which is usually around 50-120 bucks or something.

Personally, I like funds more, but if you can't afford or don't want to put that much money into the fund, then ETF is probably the best choice

If you just don't like that you can buy 2 funds at once. I would probably just buy the US Total stock market this year and the International Stock next year.

I opened my Roth up with Scottrade as that's where I've had a general investment account opened for a while now. My dad got into investing when I was in college and put a little money aside for me in really safe things so I've just grown off of that. So yea the minimums on say a Vanguard or other are usually $3k through ST.

 

[Deleted member 1235]

I do a managed fund

34% bonds (my age)
66% stocks

I've heard this is a good way to manage risk. true?

I'm comfortable with it. I'm in a world wide indexed fund for the 66 percent. I put in 10% of my net income to this for saving for retirement. With dutch tax advantages I get roughly half of that back from the tax man every year. It make no sense NOT to do it.

 

[Ether_Snake]

Try saving money when all of it is going into your mortgage and renovations, electricity, food, education debt, healthcare, and transport!

One question I have: once your retire, let's say you have a million by then, I'm guessing there are different venues to receive payment? Are you transferring everything to a savings account and living off the interest, or are there other alternatives? Can you stay somewhat in the stock market?

 

[Piecake]

I do a managed fund

34% bonds (my age)
66% stocks

I've heard this is a good way to manage risk. true?

I'm comfortable with it. I'm in a world wide indexed fund for the 66 percent. I put in 10% of my net income to this for saving for retirement. With dutch tax advantages I get roughly half of that back from the tax man every year. It make no sense NOT to do it.

Yup, the most important thing is to have an asset allocation that you are comfortable with because there is nothing worse than panicking during a market crash and selling low.

I personally believe that Time is a perfectly sufficient way to manage risk so I don't invest any money into bonds. What I mean by that is that I don't think it really matters if the market crashes in 10 years because it will eventually bounce back, so why invest in something that will likely give you less return?

Of course, when time stops being such a good hedge against risk, that is when I will start investing, perhaps very heavily, into bonds. Say like 10 years before retirement (as the market dictates since I am not going to do this during a market crash)

Try saving money when all of it is going into your mortgage and renovations, electricity, food, education debt, healthcare, and transport!

One question I have: once your retire, let's say you have a million by then, I'm guessing there are different venues to receive payment? Are you transferring everything to a savings account and living off the interest, or are there other alternatives? Can you stay somewhat in the stock market?

You could definitely cash out if you think you have more than enough for retirement and quit the game altogether. That is probably the 'safest' bet, but one that I probably won't do. I would rather have my money invested so that I keep earning money in case something unexpectedly expensive happens to me. Basically you need to decide for yourself what is more likely or more risky, the bond and stock market crashing or you getting an unexpectedly expensive bill or bills that drains your retirement funds.

Hopefully I will have enough money once I get to retirement where I can transfer most of my money into bonds, like 80-90%. I'll probably leave some in stocks no matter what, because I want some growth. My income will probably come from a combination of dividends and bond selling, hopefully all dividends, but that might be wishful thinking.

So yea, my plan is to keep it in the market and sell it off piecemeal when i need to. Mostly the bond market though. Thats hopefully, because if I actually need more money for retirement, I will probably be forced to invest more in stocks

 

[NysGAF]

Nope, so long as you buy vanguard funds in a vanguard account you won't pay for any transaction fees. And as long as you sign up for paperless communication you won't pay any account maintenance fees.

I personally like funds more, but Vanguard ETFs have no minimum, so there is also that option.

https://personal.vanguard.com/us/funds/snapshot?FundId=0970&FundIntExt=INT#tab=0

the same 'stuff' is inside that is in the fund I recommended, you just have to buy it in a different manner. Instead of buying it in a lump sum of 3k and then at least a miniumum of 100 bucks for each transaction after that, you will need to set up a brokerage account at Vanguard (you can set up a brokerage Roth IRA account) and then buy shares of that etf. So the minimum of the etf I listed above is 95.83 right now because that is the stock price.

I personally don't like them because the numbers get messy and I'd rather not bother with the whole stock buying thing. I prefer to simply buy X amount and have that happen at the end of the day. Plus, you can dollar cost average with funds.

But yea, once you buy into the fund or etf it will start compounding away. It compounds yearly btw

So each transaction after the initial $3,000 is buying ETF shares and adding it to the pot? Or is it called something else?

I keep asking for clarification because spending $7 a trade at ShareBuilder to buy ETF's seems like a bad idea if I can get the same result transaction fee free with Vanguard. Am I missing something?

 

[Piecake]

So each transaction after the initial $3,000 is buying ETF shares and adding it to the pot? Or is it called something else?

I keep asking for clarification because spending $7 a trade at ShareBuilder to buy ETF's seems like a bad idea if I can get the same result transaction fee free with Vanguard. Am I missing something?

Sorry about the confusion, but there are two ways to buy an index fund: a mutual fund and an etf. So there is a Total Stock Market Mutual fund and a Total Stock Market ETF. The same 'stuff' is inside both of these, you just buy them differently. This will be at Vanguard because I dont have experience with other online brokers

A Mutual Fund will usually have a minimum of 3k. Once you have invested 3k into that mutual fund, you can purchase more of that mutual fund, but the minimum amount you can do that is 100 dollars. You don't buy shares, you buy in dollars, and the amount can be anywhere above 100

Exchange Traded Funds (ETFs) have no minimums besides the stock price. That means that if you set up a brokerage account at Vanguard you can purchase 1 stock, 2 stock, 3 stock, or however much you want at the current stock price. After you buy your X stock, you can go back and buy more of that stock, it just has to be whole numbers of that stock - 1, 2 ,3 etc

The two don't mix. Its either a mutual fund or an ETF. So most people pick the one that they prefer and go with that. I mean, I guess you could have both, but I dont think that would make much sense

And yea, all Vanguard mutual funds and ETFs can be purchased without transaction fees so long as you purchase them from a vanguard account. Meaning if you plan to consistently purchase either a mutual fund or an etf it would probably be better to set up an account at Vanguard or another place that offers no transaction fee to purchase their index funds.

 

[Piecake]

I found a pretty good video that explains the case for passive intvesting

Passive Investing: The Evidence

I made another thread about this video, but I'll post it again because its simply excellent. It deals with the looming retirement crisis and what we can do as investors to not be a statistic (hint, go passive)

Frontline: The Retirement Gamble

And the following videos go into a bit more about the logic behind passive investing and how to go about it

The Bogleheads Philosophy

 

[Javaman]

Question: Right now I'm finally in a position where I've got a legitimate job, and I've been doing the 401k matching because that seems like free money the company is contributing.

I only make 40-45k and my wife doesn't work, so saving is tough, is there something more I can do with that 401k money to invest it in a certan type of fund that's the equivalent to the low cost index funds?

Make sure you fill out the 8880 form when you file your taxes. Based on your income you'll qualify for a $200 credit or more.

The most important thing is the expense ratio. Look for funds with the lowest expense ratio you can find, basically the bottom 3. Post those on here, and hopefully I or someone else can tell you whats good or not. (lowest are likely to be index funds)

Expense ratio is the fees. So if a fund had an expense ratio of 1%, instead of making 7% return you would make 6%. I gave an example in the OP, but long story short, its a huge fucking deal.

While I agree that fee awareness is important I think the most important thing is starting saving early. Compound interest is huge. Starting 8 years earlier can make the difference in DOUBLING your amount in retirement over a lifetime (40 year)of saving.

 

[RustyNails]

Since Tax season is approaching, I wanted to ask how taxes apply to dividends. Should I pay taxes even if I didn't sell my mutual fund? Or should I pay them only after selling it and transferring money in bank?

 

[chaosblade]

Since Tax season is approaching, I wanted to ask how taxes apply to dividends. Should I pay taxes even if I didn't sell my mutual fund? Or should I pay them only after selling it and transferring money in bank?

I was told in the past it's only after you sell it, but a second opinion wouldn't hurt.

 

[Piecake]

Since Tax season is approaching, I wanted to ask how taxes apply to dividends. Should I pay taxes even if I didn't sell my mutual fund? Or should I pay them only after selling it and transferring money in bank?

Dividends are considered income and thus taxable if the fund is in a taxable account. If the fund is in an IRA or 401k then you don't have to worry about taxes on dividends. Basically, you'll be committing tax fraud if you don't pay taxes on dividends that arent in a tax-advantaged account

Your broker is required to give you a 1099 form that breaks down your dividend, capital gains, loses, etc for the year. I already got mine from Vanguard (electronic) so you should be getting yours, if you actually need one, in the upcoming weeks/months.

 

[andrerobot]

I'm relocating to the US soon and in the company I'm going to work the 401(k) is administrated by Vanguard, so this thread has been really useful for me.

Thanks for the advise, Piecake.

 

[Laekon]

I think one of the hardest things for people in their 20's and 30's is saving for both retirement and a home. Any advice here? While returns are low I've been putting extra cash into I-bonds since they are liquid after a year and always have a return greater than inflation. This after my 491k and IRA.

 

[Piecake]

I think one of the hardest things for people in their 20's and 30's is saving for both retirement and a home. Any advice here? While returns are low I've been putting extra cash into I-bonds since they are liquid after a year and always have a return greater than inflation. This after my 491k and IRA.

Yea, thats a tough one, and one that I really havent thought too deeply on considering that I favor renting over ownership. I think the first thing you need to figure out is how much you need for a home, how much time you have to invest, and how flexible you can be on that time table.

If you are going to get your down payment just through your I-bonds investments then I don't think you really have to worry about it. If its not enough, you might need to invest in more riskier investments like stocks. There is a definite risk, a lot more risk than investing for retirement, because of the far shorter time-frame. That is why, if you need to invest, you need to be flexible when you actually buy it because you could get luckily and get the money quickly, or get unlucky at hit a 4 year long market slump that puts you back a few more years on top of that as well.

Like retirement investing, when you are 5-10 years from the finish line, investing for a home really depends on your circumstances because you'll need to pursue different strategies depending on how much money you have, how much money you need, how much time you have, and whether or not you have the ability to adapt/survive adverse situations.

I'm relocating to the US soon and in the company I'm going to work the 401(k) is administrated by Vanguard, so this thread has been really useful for me.

Thanks for the advise, Piecake.

Glad I could help!

 

[RustyNails]

Is it better to buy one big fund over a bunch of smaller ones?

For example, say I had $10,000 to spare (I dont). Should I be buying Vanguard 500 Index Admiral Shares (VFIAX) which has a minimum of $10K, or should I get one 500 Index (VFINX), one Small-Cap Growth Index (VISGX) and one Mid-Cap Value Index (VMVIX), where each of them have a $3,000 minimum?

 

[Jarmel]

I have a TD Ameritrade account, how do Igo about investing in Index funds?

 

[zero shift]

No.

The market will gradually go up but that's about it. Republicans were pushing for an end to traditional social security and giving people the "option" to stick their funds in the stock market instead, which would basically have been the same thing on a larger scale, as well as a massive giveaway to wall street.

This may sound silly but then why not replace social security with index funds or something similar to it?

 

[Camwi]

Thanks for the thread, just subbed. I'm already investing the 6% that my employer matches (plus they add 1% for free), but I'm 31 years old and definitely need to get serious on investing more.

 

[WARCOCK]

Pie you ripped frontline so hard. jkjk Good thread dude.

 

[KingGondo]

Useful thread, thanks for posting.

This is something I really need to take more seriously. I just turned 30 and have no retirement savings to speak of. It's tough to balance all of my obligations (house, cars, student loans, bills) and save for retirement too.

My goal is to make a full $5k contribution to an IRA by April 15th. I still have a bit of saving to do, but I should be able to do it.

Thankfully my wife has a 401k, but I've been self-employed since getting out of school and managing my own financial destiny has taken some adjustment.

 

[verbum]

Thanks for the thread, just subbed. I'm already investing the 6% that my employer matches (plus they add 1% for free), but I'm 31 years old and definitely need to get serious on investing more.

Are you putting it in mutual funds, company stock, or regular stocks?

 

[Piecake]

Is it better to buy one big fund over a bunch of smaller ones?

For example, say I had $10,000 to spare (I dont). Should I be buying Vanguard 500 Index Admiral Shares (VFIAX) which has a minimum of $10K, or should I get one 500 Index (VFINX), one Small-Cap Growth Index (VISGX) and one Mid-Cap Value Index (VMVIX), where each of them have a $3,000 minimum?

Why not go with Total US Stock Market? That way you invest in all of US stocks (large, mid, small, micro) in the simplicity of one fund.

I have a TD Ameritrade account, how do Igo about investing in Index funds?

You should be able to buy vanguard, fidelity or ishares index funds or etfs through TD ameritrade. I usually recommend going through vanguard (or fidelity) if you want to go the index route because if you have an account at vanguard and buy vanguard funds you dont pay a commission fee

This may sound silly but then why not replace social security with index funds or something similar to it?

Humans are terrible at long-term planning and investing for their own retirement. If there was no social security poverty among the elderly would be astronomical. The average 55-65 year old American has only saved 12,000 dollars for his retirement. I don't think taking away his social security would mean that that person would have invested all of that money into an index fund

Pie you ripped frontline so hard. jkjk Good thread dude.

They copied me! course I am basically regurgitating the thoughts Jack Bogle, boggleheads, etc, but we don't need to tell anyone that. Though my view on bonds is rather different from the norm.

 

[Rubenov]

Useful thread, thanks for posting.

It's tough to balance all of my obligations (house, cars, student loans, bills) and save for retirement too.

You say cars, plural? One source of the problem if true.

 

[Deleted member 17706]

Thanks for posting this. As I approach 30 and recently had my first child, I've been starting to think a lot more about my expenses, credit, and future savings.

 

[KingGondo]

You say cars, plural? One source of the problem if true.

Not really an option, unfortunately. Both of our previous cars were aging so we replaced them, and we both have to drive to work. The cars we got were reasonable, FWIW.

I know that there's room in our budget for retirement savings, but I definitely need to treat it like a bill each month instead of an "if there's money left over at the end of the month" type of thing.

 

[zero shift]

Humans are terrible at long-term planning and investing for their own retirement. If there was no social security poverty among the elderly would be astronomical. The average 55-65 year old American has only saved 12,000 dollars for his retirement. I don't think taking away his social security would mean that that person would have invested all of that money into an index fund.

Why doesn't the government just take out money from people's paychecks and put it into an index fund account instead of a social security account then?

 

[Camwi]

Are you putting it in mutual funds, company stock, or regular stocks?

Honestly, I'm not exactly sure. I know that's bad, but I'm very ignorant when it comes to this stuff, so when I had to choose something when I started working here, I chose to put half of it in "Conservative" and half in "Moderate."

When looking at the description for Conservative, it says:

"Mixed-Asset Target Alloc Consv Funds
Funds that, by portfolio practice, maintain a mix of between 20%-40% equity securities, with the remainder invested in bonds, cash, cash equivalents, and/or inflation hedging vehicles."

 

[Piecake]

Why doesn't the government just take out money from people's paychecks and put it into an index fund account instead of a social security account then?

Well, it would be politically impossible, and think the government sticking it in an index fund would be a waste of the advantages you gain from the huge collective power and long-term nature of a government fund. You invest in the market for your retirement because you don't have any choice but to do so. What we should do is create a sovereign wealth fund that provides everyone with a livable retirement income. So basicall a supped up social security. There is too much risk, variance, and uncertainty in retirement investment for every individual to come out on top. Better to eliminate all of that completely by having the government invest in stocks, bonds, etc and give each citizen a livable retirement income.

Honestly, I'm not exactly sure. I know that's bad, but I'm very ignorant when it comes to this stuff, so when I had to choose something when I started working here, I chose to put half of it in "Conservative" and half in "Moderate."

When looking at the description for Conservative, it says:

"Mixed-Asset Target Alloc Consv Funds
Funds that, by portfolio practice, maintain a mix of between 20%-40% equity securities, with the remainder invested in bonds, cash, cash equivalents, and/or inflation hedging vehicles."

Yea, I would definitely spend some time researching this a bit more. I don't know your situation so I might be totally wrong, but it looks like you have a very high percentage of bonds. Now, its important to do what you feel comfortable with, but I worry having that much in bonds means that you won't get enough growth to have a decent retirement egg in 30-40 years. If you spend some more time familiarizing yourself with investing, you might become more comfortable investing more in stocks.

 

[CrankyJay]

How much retirement money should the average 35 year old already have saved up?

 

[Piecake]

How much retirement money should the average 35 year old already have saved up?

50-100k?

Whats important to remember is that due to the magic of compound interest is that if you start saving and investing early you will actually have to save and invest LESS than if you started later. So that 100k is a pretty decent number if you want to get to 1 million and not put a ton of money towards retirement annually. If you have more than that, obviously that is better.

Honestly though, you need to figure that number out for yourself. Determine how much money you will need yearly in retirement, guess how long you will live (id go pretty high) and then fool around with investment calculators to see how much money you will need to invest and what rate of return you will need. Guessing rate of return is basically a bunch of BS, but I think you can draw some general conclusions from it. If you are aggressive (all or mostly stocks) go 7%, middle 4-5%, conservative like 3%. Thats important because you don't want to delude yourself into thinking your conservative investment is going to get an annual rate of return of 8%. These calculators vastly simplify the process as well, so just keep that in mind. Its simply a guestimate.

 

[Deleted member 17706]

Is there a generally agreed upon book that can be used a primer for just figuring out what all of these things are? Like, what is an index fund?

Seems like some very sound advice being thrown around in here, but it's very hard to parse when you really don't know the terminology.

 

[~Kinggi~]

50-100k?

I almost spit out my drink. Lol.

 

[Foffy]

What would the advice be to someone who has zero intent on investing in retirement?