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[TangoAlphaLima]

I brown bag daily. I'm the only one in my office that does so, which amazes me, as many in my office make considerably less money than I do. Eating out for lunch just seems like such a waste, as well as being less healthy; it's an easy way for me to save money.

 

[Wellington]

Not to belabor the point but what part of the country are you guys in? I work in NYC and while there are many delicious options, lunch usually ranges from $7 (Subway and McDonald's if you're into that) to $15 (Delis and more niche'd down spots). Figure $11 a day.

 

[anonymous_abc]

I go to the canteen at work (in Munich) and have lunch for 4€.
My lunch is a huge plate of various veggies et al.

 

[TangoAlphaLima]

Not to belabor the point but what part of the country are you guys in? I work in NYC and while there are many delicious options, lunch usually ranges from $7 (Subway and McDonald's if you're into that) to $15 (Delis and more niche'd down spots). Figure $11 a day.

KC. Average here is probably around $7 or $8, obviously more or less depending on where you go and what you order. My brown bag lunch costs me around $2 to $3 daily.

 

[percephone]

What about, "How to save for a big purchase?" If my goal is to have $25,000 at the end of ten years (roughly $200 a month for 120 months), where do I most effectively put the money? Savings or index funds or some other choice?

What's your tolerance to risk?

 

[Ovid]

Not to belabor the point but what part of the country are you guys in? I work in NYC and while there are many delicious options, lunch usually ranges from $7 (Subway and McDonald's if you're into that) to $15 (Delis and more niche'd down spots). Figure $11 a day.

You can get a decent chicken wrap for about $6 in the city at local deli. That's what I spend on a daily basis.

I really need to cut back on that though.

Who spends $11? That's practically robbery.

BTW, I read this thread daily it keeps me motivated to continue contributing to my retirement. I just want to say thank you guys.

 

[GhaleonEB]

Not to belabor the point but what part of the country are you guys in? I work in NYC and while there are many delicious options, lunch usually ranges from $7 (Subway and McDonald's if you're into that) to $15 (Delis and more niche'd down spots). Figure $11 a day.

Oregon. Our local Mexican chain has good tacos for ~$2 each, and food from the cafes on my work campus ranges from $4-$8; those tend to be where I eat out at.

 

[ferr]

Honestly if that meal makes you happy go for it 100% MMM wouldn't disagree. It's all about figuring out what is important to you and now what society things is the norm.
I eat at the canteen with colleagues almost every day of the year, and I don't feel bad about it. I budget for it and know it might be potentially cheaper to cook at home and bring it in, but it's not worth the hassle as the canteen here at work is reasonably priced and serves decent food.
I cook on weekends because I enjoy it, I bake my own bread because I enjoy it and it tastes fantastic.

There's an old saying, "Why work for a living when you kill yourself working?"

Saving for retirement is important, but not at the expense of having a terrible life pre-retirement. It's important to travel / enjoy life, etc while in your prime instead of waiting for your unhealthier retirement years.

 

[Randolph Freelander]

Not to belabor the point but what part of the country are you guys in? I work in NYC and while there are many delicious options, lunch usually ranges from $7 (Subway and McDonald's if you're into that) to $15 (Delis and more niche'd down spots). Figure $11 a day.

I live in Charlotte, NC. I work at the office 2 days per week, from home 3 days. I never cook, I'll sometimes have a Healthy Choice dinner at home, but mostly always get take-out from somewhere (when home) or at the office cafeteria. I'll spend $20 per day on food, coffee, snacks, whatever, on my in-office days, less than that on my home days (brewing coffee saves about $5).

 

[Ovid]

There's an old saying, "Why work for a living when you kill yourself working?"

Saving for retirement is important, but not at the expense of having a terrible life pre-retirement. It's important to travel / enjoy life, etc while in your prime instead of waiting for your unhealthier retirement years.

I agree.

 

[Husker86]

There's an old saying, "Why work for a living when you kill yourself working?"

Saving for retirement is important, but not at the expense of having a terrible life pre-retirement. It's important to travel / enjoy life, etc while in your prime instead of waiting for your unhealthier retirement years.

Every time I think of cutting my frivolous spending by a large amount, I think of this. My retirement savings are enough that I'm not worried about retirement, though I probably won't retire "early". But if I make my young life boring for the sake of my older life...I'm not sure that's a trade I want to make.

 

[fierce1289]

Hey everyone!

I have ready through the OP and some pages of this thread. I am 26 and want to start investing for my future. I read about the low cost index funds and IRAs now I want to know how can I get started in these? It is a lot to take in and get started all at once.

 

[TangoAlphaLima]

Hey everyone!

I have ready through the OP and some pages of this thread. I am 26 and want to start investing for my future. I read about the low cost index funds and IRAs now I want to know how can I get started in these? It is a lot to take in and get started all at once.

https://investor.vanguard.com/ira/how-to-open-an-ira

 

[GaimeGuy]

I wish the company matching contribution didn't go into company stock. I haven't re-allocated balances in my 401K funds in quite a while now, (about 2 years... been working almost 5 years) and the company stock is up to 28% of my overall savings plan.


Of course, I'm contributing 17%, and the match is 50% of the first 8% of your salary (so 4%), so you can see just how well the company is doing. (looks like it's more htan doubled since February 2013)

 

[Cyan]

I actually like MMM, as far as personal finance bloggers go. He falls prey to the usual stuff though--basically assuming that the extreme budgeting that works for him will work for everyone else rather than scaring them off from even bothering. He's probably the kind of guy who'd make fun of the "snowball method" of debt repayment because it's not mathematically optimal.

I sort of figure that personal finance bloggers are the type of people who would play freemium mobile games that try to force you into buying IAPs to win, and get their enjoyment out of beating the designers by never needing to buy them. Where most people would say fuck it and just buy a more expensive premium game that's actually fun.

 

[crashnburn]

Hey investmentGAF, anyone have any experience or recommendations on general obligation muni bonds? I live in CA and the early order period for some CA GO muni bonds is today. Looks like the following weeks will open additional bond sales for various purposes:

http://www.buycaliforniabonds.com/bcb/offering.asp

https://www.fidelity.com/fixed-income-bonds/new-issue-ca

I had a co-worker hyping up CA bonds a couple months ago - tax exemptions and such - but I am a complete dullard when it comes to understanding muni bonds, and not sure if they make sense for me to buy into relative to other investment options. Anyone invest in muni bonds and have any advice?

I guess my retirement/investment background, if it helps:

-My wife and I are 29 (been retirement contributing since maybe 24 or 25 y.o.)
-Currently maxing my company 401k which also has company match
-Wife has company 401k which is only contributed to in order to get maximum company match
-Have a Roth IRA on the side I put a minimum of $3600/yr into, and try to throw in extra as budget permits
-401ks are mostly "LifePath" type investments (though I am eager to disperse those into index and bond funds with lower expense ratios and just manually curate the distribution of stocks to bonds as we age)
-Roth IRA is 80% S&P index mutual fund and 20% intermediate treasury bond fund index
-No debt (just mortgage payments)

Thanks in advance for any help.

 

[Akira]

He's probably the kind of guy who'd make fun of the "snowball method" of debt repayment because it's not mathematically optimal.

But everyone makes fun of the snowball method.

 

[Cyan]

But everyone makes fun of the snowball method.

Not me!

 

[PflargBlarg]

MMM always makes me consider cutting stuff but I really don't know what I could.

I look at my transactions for February and I see

Strata and mortgage on my condo which are covered by my rental income
Dinner at the place we go weekly for trivia which is a great experience with friends * 4
Phone bill (this is probably the one thing that I can lower, but I'm stuck on contract for a little longer)
Purchased gymnastic rings to benefit my health
Gasoline which I buy less than once a month as I barely ever drive, but it is a necessity when it happens

There's not a whole lot to cut there.
The other stuff that would be cuttable are my shared expenses with my fiancée and I don't think she would be much into me cutting those out completely.

She likes to keep a somewhat stocked selection of liquor and wine which probably averages 100 a month?
Our biggest expense is rent which we could definitely shave down if we moved but she's in love with our place.
Various other eating out situations, internet, groceries, and sub $100 monthly average entertainment costs



In other news, got around to making my buys on VXC and VCN. I really feel like my progress has started now and I've got $10,000 set into those as my initial investment. I really hope I can keep up a good pace on the investments.

 

[Wellington]

You can get a decent chicken wrap for about $6 in the city at local deli. That's what I spend on a daily basis.

I really need to cut back on that though.

Who spends $11? That's practically robbery.

BTW, I read this thread daily it keeps me motivated to continue contributing to my retirement. I just want to say thank you guys.

Where in the city is this even possible? I work in the East Village and have not found anything cheap and healthy. To your credit tho I was going to stop by the grocery story today to pick up materials to make a chicken wrap for tomorrow, get out of my head.

MMM always makes me consider cutting stuff but I really don't know what I could.

I look at my transactions for February and I see

Strata and mortgage on my condo which are covered by my rental income
Dinner at the place we go weekly for trivia which is a great experience with friends * 4
Phone bill (this is probably the one thing that I can lower, but I'm stuck on contract for a little longer)
Purchased gymnastic rings to benefit my health
Gasoline which I buy less than once a month as I barely ever drive, but it is a necessity when it happens

There's not a whole lot to cut there.
The other stuff that would be cuttable are my shared expenses with my fiancée and I don't think she would be much into me cutting those out completely.

She likes to keep a somewhat stocked selection of liquor and wine which probably averages 100 a month?
Our biggest expense is rent which we could definitely shave down if we moved but she's in love with our place.
Various other eating out situations, internet, groceries, and sub $100 monthly average entertainment costs



In other news, got around to making my buys on VXC and VCN. I really feel like my progress has started now and I've got $10,000 set into those as my initial investment. I really hope I can keep up a good pace on the investments.

Sort of related, but it reminds me of a story - One of my best friends started a pretty successful car dealership. He now has a number of employees, all commission based, and one of them was telling him how he has cut down his spending as low as it can go - he will be forced to move in with his mom in order to further save towards his goal. My friend paused for a second, looked him dead in the eye and replied with:

Spoiler

"MAKE MORE MONEY, ASSHOLE!"

Not saying it's you, worm, but I feel like people sometimes ignore that side of the equation. Doesn't even have to be from your job, there is a lot of room for side gigs out there.

Yes, I laughed so fucking hard for so long after hearing that my abs hurt the next day.

 

[Piecake]

Hey everyone!

I have ready through the OP and some pages of this thread. I am 26 and want to start investing for my future. I read about the low cost index funds and IRAs now I want to know how can I get started in these? It is a lot to take in and get started all at once.

Do you have any specific questions? Its kinda hard to help you beyond pointing to the OP or any other resource if we don't know what you are confused about.

Hey investmentGAF, anyone have any experience or recommendations on general obligation muni bonds? I live in CA and the early order period for some CA GO muni bonds is today. Looks like the following weeks will open additional bond sales for various purposes:

http://www.buycaliforniabonds.com/bcb/offering.asp

https://www.fidelity.com/fixed-income-bonds/new-issue-ca

I had a co-worker hyping up CA bonds a couple months ago - tax exemptions and such - but I am a complete dullard when it comes to understanding muni bonds, and not sure if they make sense for me to buy into relative to other investment options. Anyone invest in muni bonds and have any advice?

I guess my retirement/investment background, if it helps:

-My wife and I are 29 (been retirement contributing since maybe 24 or 25 y.o.)
-Currently maxing my company 401k which also has company match
-Wife has company 401k which is only contributed to in order to get maximum company match
-Have a Roth IRA on the side I put a minimum of $3600/yr into, and try to throw in extra as budget permits
-401ks are mostly "LifePath" type investments (though I am eager to disperse those into index and bond funds with lower expense ratios and just manually curate the distribution of stocks to bonds as we age)
-Roth IRA is 80% S&P index mutual fund and 20% intermediate treasury bond fund index
-No debt (just mortgage payments)

Thanks in advance for any help.

I honestly don't know much about munis or specific bonds since I don't invest in them. Are these bonds going to go in your IRA or something? If so, the tax-exempt seems like it would largely be pointless.

I think the only real point of bonds is to lower portfolio risk by holding a non-correlated asset (meaning stocks go up, bonds go down - bonds go up, stocks go down). That is a very simplified way of looking at it though because I really doubt stocks and bond movements perfectly work like that or are always non-correlated. Could be wrong though.

Also, why do you want to purchase bonds? If you want something that will give you a good return, bonds are almost always a terrible choice. If you want safety, then it is likely a pretty good choice. If these are for retirement, do you feel like you need to hold more bonds? Holding more bonds 'generally' reduces risk, but it also lowers return (theoretical estimates, obviously).

 

[Darren870]

Not to belabor the point but what part of the country are you guys in? I work in NYC and while there are many delicious options, lunch usually ranges from $7 (Subway and McDonald's if you're into that) to $15 (Delis and more niche'd down spots). Figure $11 a day.

I'm in Australia. I'd say average meal (no drinks or sides) is about $9 ($7 USD). However, a foot long from subway is $12 ($9.25 USD). You can find cheap sandwiches for about $6 from an Asian Deli. But yea, that's the cheapest in the area I've seen. Soda & Bottled Water is extremely expensive here. About $2-4 a can.

I brown bag about 4-5 days a week. The only time I don't is if I don't have any left overs from the night before. Usually isn't the case as we try and make loads of extras or have something to defrost in the freezer. But yea, it does add up eating out everyday!

At my old job I used to eat in the canteen everyday, but that was because it was like $3-4 for a chicken breast and veggies on the side. It be hard to get that low just buying the food for yourself and cooking it.

There's an old saying, "Why work for a living when you kill yourself working?"

Saving for retirement is important, but not at the expense of having a terrible life pre-retirement. It's important to travel / enjoy life, etc while in your prime instead of waiting for your unhealthier retirement years.

I agree 100% with this. Its finding that perfect balance. I've read blogs/articles that debate contributing to retirement at all and say to work till you die. Enjoy that money while you have it! To the other extremes where you should be maxing everything out as much as you can and count your pennies.

I mix and match from everything and do what suits me best. I get my companies match, I put some extra aside, pay extra into my mortgage and travel as much as I can. I also invest in stocks and funds outside retirement accounts that I can access whenever I please.

Its just finding the balance that best suits you and your goals.

 

[Ovid]

Where in the city is this even possible? I work in the East Village and have not found anything cheap and healthy. To your credit tho I was going to stop by the grocery story today to pick up materials to make a chicken wrap for tomorrow, get out of my head.

Lucky Deli on 37th between 5th & Madison.

I get a grilled Chicken wrap with olive oil lettuce and tomatoes.

Delicious and healthy.

 

[Piecake]

The best way to eat healthy and save money during lunch hour is to simply not eat. It is actually quite easy once you get used to it. You simply stop getting hungry after a while. I honestly didnt do it to safe money though. I just got sick of making my lunch and hated using my lunch hour (I liked going home earlier). Apparently laziness is a powerful motivating factor for me.

 

[AntoneM]

The best way to eat healthy and save money during lunch hour is to simply not eat. It is actually quite easy once you get used to it. You simply stop getting hungry after a while. I honestly didnt do it to safe money though. I just got sick of making my lunch and hated using my lunch hour (I liked going home earlier). Apparently laziness is a powerful motivating factor for me.

I loled

 

[Makai]

I've noticed myself treating retirement planning like a F2P game and I could get addicted if I'm not careful. I grind through work so I can get a paycheck and get to the next level - just one more month and I can reach Admiral. A safety net of cash is probably more valuable to me right now, and I am resisting the urge to dump all of it into my 2015 Roth IRA. The IAP button on the Vanguard website tempts me every time I login to check the performance.

 

[Chris R]

What is Admiral? Is it automatic or do I need to convert something for it to kick in (assuming it's worth it)?

 

[Makai]

What is Admiral? Is it automatic or do I need to convert something for it to kick in (assuming it's worth it)?

As far as I know from reading Vanguard materials, you are automatically upgraded after you have $10k in a single fund. The differences are lower expense ratios and fees: Compare these sister funds:

Swabbie
Admiral

 

[RumblingRosco]

-

 

[Randolph Freelander]

I've noticed myself treating retirement planning like a F2P game and I could get addicted if I'm not careful. I grind through work so I can get a paycheck and get to the next level - just one more month and I can reach Admiral. A safety net of cash is probably more valuable to me right now, and I am resisting the urge to dump all of it into my 2015 Roth IRA. The IAP button on the Vanguard website tempts me every time I login to check the performance.

Barring some disaster, I'll top my Roth off next Friday. I am giddy.

And again barring disaster, I'll go all in on day one next year. Also giddy.

 

[Smiley90]

What's your guys' opinion on borrowing to invest? I currently have a 25k loan on 4% that I use as BtI and I'm faring quite well with it. Basically profit from money that I wouldn't have anyway. and 4% is a reasonable enough rate that I think I'll always top it out in the long run. What do you guys think?

 

[Piecake]

http://www.nytimes.com/2015/03/04/b...n-region&region=top-news&WT.nav=top-news&_r=0

Good article. Not a whole lot new for anyone here, but the estimates on how many people running out of money, the impact of turnover on fees, and financial advisers was interesting

Using a different, more complex model, the Employment Benefit Research Institute calculates that 83 percent of baby boomers and Generation Xers in the bottom fourth of the income distribution will eventually run short of money. Higher up on the income scale, people also face challenges: More than a quarter of those with incomes between the middle of the income distribution and the 75th percentile will probably run short

First, there is the expense ratio — about 1.12 percent of assets for the average large capitalization blend fund. Then there are transaction costs and distribution costs. Active funds also pay a penalty for keeping a share of their assets in low-yielding cash. Altogether, costs add up to 2.27 percent per year, Mr. Bogle estimates.

Sendhil Mullainathan of Harvard and colleagues from M.I.T. and the University of Hamburg sent “mystery shoppers” to visit financial advisers. They found that advisers mostly recommended investment strategies that fit their own financial interests. They reinforced their clients’ misguided biases, encouraging them to chase returns and advising against low-cost options like low-fee index funds.

Another study, by Susan Christoffersen of the University of Toronto and colleagues from the University of Virginia and the University of Pennsylvania, found that investment advisers directed more of their clients’ money to funds that shared the upfront fees with them. Returns of these funds were poor, compared with alternatives.

“It is superslimy,” noted Kent Smetters, an expert on finance at the University of Pennsylvania’s Wharton School.

President Obama has tried to take a crack at one corner of the problem: questionable advice provided by managers of I.R.A.s.

For all their flaws, 401(k) plans have a fiduciary responsibility to act in participants’ best interest. Managers of I.R.A.s, by contrast, are not legally bound to put their clients’ interests first. They must offer “suitable” products — a much squishier standard.

“They can’t put your grandma in a heavy tech fund,” Mr. Smetters said. “But they could put her in a more expensive bond fund that pays them a huge commission.”

It should be no surprise which of these Wall Street prefers. In a 2011 report, the Government Accountability Office of Congress said it found advisers who were paid $6,000 to $9,000 if clients rolled over savings from 401(k) plans to I.R.A.s.

I.R.A.s are a huge source of profit for Wall Street. Workers roll some $300 billion worth of 401(k) balances into I.R.A.s when they leave their jobs every year.

The White House’s Council of Economic Advisers argues that “conflicted advice” by advisers who get payments from the funds they recommend reduces the annual returns to investment by 1 percentage point, a more modest penalty than Mr. Bogle’s analysis might suggest. Still, this could cost savers up to $33 billion a year out of $3.3 trillion invested by I.R.A.s subject to potentially conflicted advice.

 

[Randolph Freelander]

What's your guys' opinion on borrowing to invest? I currently have a 25k loan on 4% that I use as BtI and I'm faring quite well with it. Basically profit from money that I wouldn't have anyway. and 4% is a reasonable enough rate that I think I'll always top it out in the long run. What do you guys think?

Well, in theory, it's not much different than holding a car loan at the same time that you have investments, except that you don't have the physical asset of the car. For that matter, your mortgage (while bigger) is also the same idea.

Also in theory, over the long term, the market will certainly outperform that 4% interest you're paying.

In the short term, you're vulnerable to market swings that will tip you over into losses instead of profits. The downturn in the S&P in 2000 is something that wasn't recouped until 2007, just in time for the financial crisis, and those losses then lasted into 2013. Even going further back to the market crash of 1987, it took a couple of years to recover. If any of these kind of events happen, the interest you're paying is only adding to your market losses.

I have no strong opinion other than to say I probably wouldn't do it for fear of the short term swing. On the other hand, the long term math is sound, which is also why I'm aggressively investing in my 401K and Roth while letting my low interest car loan stick around (though it's days are numbered).

 

[anonymous_abc]

There's an old saying, "Why work for a living when you kill yourself working?"

Saving for retirement is important, but not at the expense of having a terrible life pre-retirement. It's important to travel / enjoy life, etc while in your prime instead of waiting for your unhealthier retirement years.

Everyone in this thread is probably doing more for their retirement than the average person. So we are all way ahead.
I don't feel like I am missing out on anything or chastising myself by saving 52% of my net income. If I really want and need something I'll get it.

 

[TangoAlphaLima]

Everyone in this thread is probably doing more for their retirement than the average person. So we are all way ahead.
I don't feel like I am missing out on anything or chastising myself by saving 52% of my net income. If I really want and need something I'll get it.

Yes, but average ain't so good...

On average, a typical working family in the anteroom of retirement — headed by somebody 55 to 64 years old — has only about $104,000 in retirement savings, according to the Federal Reserve's Survey of Consumer Finances.

http://www.cnbc.com/id/102476160

 

[anonymous_abc]

Yes, but average ain't so good...

Oh I know.
Still you know what I mean.

 

[jesalr]

Yes, but average ain't so good...



http://www.cnbc.com/id/102476160

I'd love to see more detailed statistics on that average, see how much it's hurt by the many people who probably put $0 away. $100,000 is crazy though, I get that very few people are in a position to put a decent amount away per year, but that's less than I'll put away in 10 years, not accounting for any gains.

 

[PflargBlarg]

Where in the city is this even possible? I work in the East Village and have not found anything cheap and healthy. To your credit tho I was going to stop by the grocery story today to pick up materials to make a chicken wrap for tomorrow, get out of my head.



Sort of related, but it reminds me of a story - One of my best friends started a pretty successful car dealership. He now has a number of employees, all commission based, and one of them was telling him how he has cut down his spending as low as it can go - he will be forced to move in with his mom in order to further save towards his goal. My friend paused for a second, looked him dead in the eye and replied with:

Spoiler

"MAKE MORE MONEY, ASSHOLE!"

Not saying it's you, worm, but I feel like people sometimes ignore that side of the equation. Doesn't even have to be from your job, there is a lot of room for side gigs out there.

Yes, I laughed so fucking hard for so long after hearing that my abs hurt the next day.

Yeah, I'd say my issue right now is probably the income side and not so much the spending side. I plan on looking at my job options later this year and make a move. I think there's potential to get 15-20k increase in pay if I switch jobs.

 

[Icefire1424]

Curious of the collective input of retirement GAF regarding my current situation. Any opinions or feedback would be extremely welcome, as I'm an absolute rookie when it comes to investing, but want to learn more.

I'm currently fully vested in a 401K set up through my employer with Fidelity, of which my company matches 100% if I contribute a certain percentage of my paycheck per pay period (which I do). Knowing practically nothing about investing, I selected an investment strategy based on the year I intend to retire, and opted for a Fidelity Portfolio Advisory service, essentially letting Fidelity adjust my investments. At the moment, I have 10% of my paycheck (pre-tax) going to the 401K.

Additionally, I have a 529 set up for my (11 month old) daughter which I contribute to regularly, also through Fidelity (the NH plan specifically). The rest of my paycheck goes into a Bank of America Checking and Savings account, with the Savings set up as a (mostly useless) Money Market account. The theory here was to use the checking for monthly expenses (mortgage, utilities, car payments, etc.) with Savings holding the emergency fund and to save up for anything major.

My primary concern is if I'm doing enough with my money, or if I should be doing more. The Money Market account really doesn't generate any significant interest, but it's good knowing the money in it isn't going anywhere. Specifically, I've debated if I should be contributing more to the 401K knowing that whatever I contribute will be matched by my employer, or if I should open up a new account for investment purposes. I think I'm hesitant about putting too much into the 401K knowing that I can't get anything out of it until I retire, or if I take a loan out on it (which I wouldn't do unless was absolutely necessary).

Anyways, that's my story. Any glaring errors in my strategy detailed above, or is this a good place to start? Really appreciate the advice, still trying to learn.

 

[GhaleonEB]

Curious of the collective input of retirement GAF regarding my current situation. Any opinions or feedback would be extremely welcome, as I'm an absolute rookie when it comes to investing, but want to learn more.

I'm currently fully vested in a 401K set up through my employer with Fidelity, of which my company matches 100% if I contribute a certain percentage of my paycheck per pay period (which I do). Knowing practically nothing about investing, I selected an investment strategy based on the year I intend to retire, and opted for a Fidelity Portfolio Advisory service, essentially letting Fidelity adjust my investments. At the moment, I have 10% of my paycheck (pre-tax) going to the 401K.

Additionally, I have a 529 set up for my (11 month old) daughter which I contribute to regularly, also through Fidelity (the NH plan specifically). The rest of my paycheck goes into a Bank of America Checking and Savings account, with the Savings set up as a (mostly useless) Money Market account. The theory here was to use the checking for monthly expenses (mortgage, utilities, car payments, etc.) with Savings holding the emergency fund and to save up for anything major.

My primary concern is if I'm doing enough with my money, or if I should be doing more. The Money Market account really doesn't generate any significant interest, but it's good knowing the money in it isn't going anywhere. Specifically, I've debated if I should be contributing more to the 401K knowing that whatever I contribute will be matched by my employer, or if I should open up a new account for investment purposes. I think I'm hesitant about putting too much into the 401K knowing that I can't get anything out of it until I retire, or if I take a loan out on it (which I wouldn't do unless was absolutely necessary).

Anyways, that's my story. Any glaring errors in my strategy detailed above, or is this a good place to start? Really appreciate the advice, still trying to learn.

You definitely have a good approach, in particular with taking the full 401k match from your employer. Depending on how much additional free cash flow you have, I would open up a Roth IRA. From it you can make withdrawals on the principal without penalty, so it's not as locked down as a 401k is. You will also likely find lower cost (expense ratio, fees) funds in an IRA than a 401k, along with more options. A common strategy is to contribute to the 401k up to the employer match limit, then to the IRA, and if you max the IRA resume 401k contributions for the year.

If you don't want to put more into retirement, but do want to keep idle cash working more productively, you can look into just using a mutual fund or other investment vehicle. I'm in a similar situation as you, with the 401k and 529 contributions; we also have what I call our savings funds, which is money we've set aside for unforeseen large expenses (car purchases, new roof on the house, etc.). Those are in a basket of index funds, not in a retirement or tax sheltered vehicle. So we keep ~6 months cash on hand, and keep the rest working in the funds. There are lots of ways to do it, not sure if that kind of approach is what you had in mind.

 

[Akira]

Question about expense ratios. I have only had my IRA for a year and I know that getting index funds with very low expense ratios is the way to go and why I went with Vanguard. One thing I don't understand is how the expense ratios manifests itself in my IRA. Is there an annual amount subtracted from my IRA (the opposite of the quarterly dividends)? Or is the expense ratio tied into when I buy into my IRA and the expense ratio is automatically subtracted from my purchase?

 

[Husker86]

Question about expense ratios. I have only had my IRA for a year and I know that getting index funds with very low expense ratios is the way to go and why I went with Vanguard. One thing I don't understand is how the expense ratios manifests itself in my IRA. Is there an annual amount subtracted from my IRA (the opposite of the quarterly dividends)? Or is the expense ratio tied into when I buy into my IRA and the expense ratio is automatically subtracted from my purchase?

It's not something you'll see as an additional charge or anything, it is bundled in with the performance of the fund. It doesn't get taken out all at once, it is essentially invisible to you. It might show up itemized on a summary report or something, but I've never looked.

 

[Piecake]

Curious of the collective input of retirement GAF regarding my current situation. Any opinions or feedback would be extremely welcome, as I'm an absolute rookie when it comes to investing, but want to learn more.

I'm currently fully vested in a 401K set up through my employer with Fidelity, of which my company matches 100% if I contribute a certain percentage of my paycheck per pay period (which I do). Knowing practically nothing about investing, I selected an investment strategy based on the year I intend to retire, and opted for a Fidelity Portfolio Advisory service, essentially letting Fidelity adjust my investments. At the moment, I have 10% of my paycheck (pre-tax) going to the 401K.

Additionally, I have a 529 set up for my (11 month old) daughter which I contribute to regularly, also through Fidelity (the NH plan specifically). The rest of my paycheck goes into a Bank of America Checking and Savings account, with the Savings set up as a (mostly useless) Money Market account. The theory here was to use the checking for monthly expenses (mortgage, utilities, car payments, etc.) with Savings holding the emergency fund and to save up for anything major.

My primary concern is if I'm doing enough with my money, or if I should be doing more. The Money Market account really doesn't generate any significant interest, but it's good knowing the money in it isn't going anywhere. Specifically, I've debated if I should be contributing more to the 401K knowing that whatever I contribute will be matched by my employer, or if I should open up a new account for investment purposes. I think I'm hesitant about putting too much into the 401K knowing that I can't get anything out of it until I retire, or if I take a loan out on it (which I wouldn't do unless was absolutely necessary).

Anyways, that's my story. Any glaring errors in my strategy detailed above, or is this a good place to start? Really appreciate the advice, still trying to learn.

Do you know what funds that Advisory service has you invested in? Or is this a Target Date Fund? If it is the former, you could be doing well or less well depending on the nature of those funds. Let us know, and make sure to include the expense ratio of the funds as well.

I think it is important to do what you are comfortable with and fits with your situation. If you are comfortable with your strategy and wary about doing anything more aggressive, then stick with your strategy. I am a firm believer that learning about retirement and index investing can change your views on risk and whether you are comfortable with being more or less aggressive though. So if you feel like you 'should' be more aggressive, read up on this stuff more and find out your feelings on it.

 

[Makai]

Question for EconGAF: What happens if every investor exclusively invests in the same index fund? Would the stock market still function?

 

[Walter White Walker]

I'm pretty sure that in order for the markets to function you need active investors buying and selling individual stocks. If everyone just did passive index investing then I don't think the system would work. I guess we're all lucky there's people out there willing to do that.

 

[Piecake]

Question for EconGAF: What happens if every investor exclusively invests in the same index fund? Would the stock market still function?

I'm pretty sure that in order for the markets to function you need active investors buying and selling individual stocks. If everyone just did passive index investing then I don't think the system would work. I guess we're all lucky there's people out there willing to do that.

I think that would simply create a stock market with more opportunities for active investors to make money. I think investors displaying skill and reaping profits from that skill in untapped markets makes sense. If index investing becomes so dominant, then the whole market would probably function as an 'untapped' market. Of at least a market that has a few seats on the bus left, and not one where the whole terminal is filled to capacity.

 

[Cyan]

I'm pretty sure that in order for the markets to function you need active investors buying and selling individual stocks. If everyone just did passive index investing then I don't think the system would work. I guess we're all lucky there's people out there willing to do that.

This is a self-correcting problem. It's not a matter of being lucky.

 

[Walter White Walker]

I took it the hypothetical of "What happens if every investor exclusively invests in the same index fund?" as meaning, "No more active investing - every single investor can only put money in VTSMX (or whatever) and that's it".

 

[Cyan]

I took it the hypothetical of "What happens if every investor exclusively invests in the same index fund?" as meaning, "No more active investing - every single investor can only put money in VTSMX (or whatever) and that's it".

I guess I'd just say then that it's like the "problem" of effective altruism where if every donor actually followed through and decided to only give to the top effective charity, only one charity would get any money.

It's a toy problem that has no bearing on reality and isn't something worth worrying about.

Spoiler

I know you were just responding to the question, not trying to jump on you here.

 

[Original Famous Ray]

I already have a Roth IRA with Vanguard and thought about buying ETF's there as well. I'm interested in their VTSAX (Total Stock Market Admiral) and can cover the minimum but I'm wondering if I would run into issues making that 10k purchase. Meaning would there be a "red flag" when I make a one time purchase of that size? Probably more of a question for the bank my money is in (Schwab) but I figure I'll ask if anyone here had any problems making such a large purchase.