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How to Invest for Retirement

We both have traditional pensions. My Employer offers a 401(k) but there's no match.

What's the tax rate of the top $11,000 of your income?

(I'd probably recommend a Roth unless you're in an extremely high tax bracket, Randolph will probably recommend contributing to the 401(k) unless you're in an extremely low tax bracket.)
 

trilobyte

Member
Hey GAF, I need some advice

My recent employer sold the company and now I have a new employer. My old employer matched my contribution to my 401k; however the new one does not.

I'm also not entirely sure if I'll be with my new employer long term. I could easily get laid-off or decide to bail within a year.

- Would it be better if I just roll over my existing 401k into a traditional IRA instead of my new employer's 401k?

- Can I make contributions to my IRA even though the company offers a 401k and I don't elect it?

- If I do elect the 401k, can I still contribute to an IRA?
 

Cyan

Banned
Hey GAF, I need some advice

My recent employer sold the company and now I have a new employer. My old employer matched my contribution to my 401k; however the new one does not.

I'm also not entirely sure if I'll be with my new employer long term. I could easily get laid-off or decide to bail within a year.

- Would it be better if I just roll over my existing 401k into a traditional IRA instead of my new employer's 401k?

- Can I make contributions to my IRA even though the company offers a 401k and I don't elect it?

On the first question, it depends on the specifics of the new 401k plan: what kind of fees there are, etc. Generally an IRA will give you more freedom in your investment choices and may well be cheaper.

On the second question, yes, IRA contributions are independent of 401k contributions. You can absolutely contribute to an IRA even if you don't contribute to a 401k. You may have seen people on here saying to contribute to the 401k up to the max employer match before making IRA contributions. This is likely to be good advice, but is not a legal requirement. :)
 

trilobyte

Member
On the first question, it depends on the specifics of the new 401k plan: what kind of fees there are, etc. Generally an IRA will give you more freedom in your investment choices and may well be cheaper.

On the second question, yes, IRA contributions are independent of 401k contributions. You can absolutely contribute to an IRA even if you don't contribute to a 401k. You may have seen people on here saying to contribute to the 401k up to the max employer match before making IRA contributions. This is likely to be good advice, but is not a legal requirement. :)

Thanks Cyan. I opened an IRA (Wells Fargo Brokerage) a long time ago when my parents suggested it, however I've never used it (always stuck with my 401k). I've been lucky enough to be with the same employer...so this is the first time I'm now looking into what to do.

I'm hearing bad advice at work (folks saying I can't contribute to an IRA if a 401k is available)...it's very confusing.

If I'm contributing to both, how does the IRA get the pre-tax benefit?
 

Husker86

Member
Thanks Cyan. I opened an IRA (Wells Fargo Brokerage) a long time ago when my parents suggested it, however I've never used it (always stuck with my 401k). I've been lucky enough to be with the same employer...so this is the first time I'm now looking into what to do.

I'm hearing bad advice at work (folks saying I can't contribute to an IRA if a 401k is available)...it's very confusing.

If I'm contributing to both, how does the IRA get the pre-tax benefit?

You have to deduct the amount you contributed (if it's a Traditional IRA, and you're eligible for tax deductions based on your income level) when filing your taxes.

But yeah, the people telling you that you can't contribute to your IRA if you have a 401k available are lying. The "grain" of truth in that is, if you are eligible for a work retirement plan, then the cutoff for being able to deduct your Traditional IRA contributions is lower. Amount you can deduct starts to go down somewhere aroung $61k MAGI, and you can't deduct anything if you're at $71k MAGI or above, and eligible for an employer plan.

Here is IRS link: http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits
 

trilobyte

Member
Thanks... I think I got a lot of reading to do :) The IRA contribution limits pretty much tell me I should sign up for the 401k of my new employer even if I'm only there for 6months-1year. Now I need to decide if I should roll over my current 401k to the IRA or not

I think I read that if I rolled over my 401k to my IRA, I can't take a deduction to my contributions after? That seems weird, since wouldn't I technically be taxed twice when I finally take money out?
 

SummitAve

Banned
Another question...I can’t allocate to the recommended Index funds in the OP, but I can invest in these Vanguard funds:

US Large Cap Equity
Vanguard Institutional Index Fund Plus – VIIIX

Mid Cap
Vanguard Mid Cap Index – VMCPX

International Equity
Vanguard Total Internation Stock Index Fund - VTPSX

Balanced
Vanguard Balanced Index Fund - VBAIX (This has bonds, so I'm pretty sure for the time being I don't want to allocate to it at this point)

It’s my understanding that the recommended ones are a mixture of small, mid, and large equity funds so what kind of mixture should I aim for to match the total market blends? Also, why is the price of the blends so much less than ones of the above?
 

Makai

Member
Another question...I can’t allocate to the recommended Index funds in the OP, but I can invest in these Vanguard funds:

US Large Cap Equity
Vanguard Institutional Index Fund Plus – VIIIX

Mid Cap
Vanguard Mid Cap Index – VMCPX

International Equity
Vanguard Total Internation Stock Index Fund - VTPSX

Balanced
Vanguard Balanced Index Fund - VBAIX (This has bonds, so I'm pretty sure for the time being I don't want to allocate to it at this point)

It’s my understanding that the recommended ones are a mixture of small, mid, and large equity funds so what kind of mixture should I aim for to match the total market blends? Also, why is the price of the blends so much less than ones of the above?
Large - 64%
Medium - 28%
Small - 8%

I imagine it fluctuates month to month, but this is the breakdown as of 3/31/15
 
It’s my understanding that the recommended ones are a mixture of small, mid, and large equity funds so what kind of mixture should I aim for to match the total market blends? Also, why is the price of the blends so much less than ones of the above?

When you say "price," do mean fees or do you mean unit price? If the unit price, ignore it, it's irrelevant. If fees, then (all things being equal) you want to avoid the higher fees when you have a comparable investment with lower fee options.

As for your options, do you have non-Vanguard funds you can also select? Specifically, do you have a small cap index fund (something like the Russell 2000)?

Let's say you go for a 80/20 split between domestic and international. If your only options are those above, you might go

59% VIIIX
21% VMCPX
20% VTPSX

If you have a small cap index fund, you might do something like

59% VIIIX
14% VMCPX
7% Small Cap Index Fund*
20% VTPSX

These are just starting allocations you might consider, but you need to decide for yourself what exposure you want to international, if you want bonds (and you say you don't), etc. The goal of the percentages above (for domestic) is to simply follow the ~73/18/9 split between large / mid / small that a number of "total market" strategies follow, within a percentage or two.
 

SummitAve

Banned
Yup I meant the unit fee. I have other funds to choose from including smallI so I will adjust accordingly. Thank you for the help! Much appreciated.
 

joelseph

Member
Is there an easy way to access the "fine print" on an investment through Chase? I would like to review the fees associated with a Class C MMF I have through Chase. Logged in I don't see anything that would take me to the info I want. Not sure this is the right place to ask but I would like to avoid the pony show that comes with asking Chase for anything.

Thanks
 
Is there an easy way to access the "fine print" on an investment through Chase? I would like to review the fees associated with a Class C MMF I have through Chase. Logged in I don't see anything that would take me to the info I want. Not sure this is the right place to ask but I would like to avoid the pony show that comes with asking Chase for anything.

Thanks

Is that a mutual fund? If so look up the ticker symbol at morningstar.com. Although that wouldn't show if Chase is charging fees on top of what the fund charges.
 

Piecake

Member
Thank you. I just figured out to get at some of the documents I had to elect for paperless delivery under my preferences.

I would also look at the turnover rate. That is a major factor in a fund's expense that often gets overlooked

http://web.premierfinancial.com/blo...or-What-s-the-Cost-of-High-Portfolio-Turnover

There have been some studies and estimates that suggest that a high turnover rate can add another 1 to 2 percent onto your already existing expense ratio rate
 

Krejlooc

Banned
My CPA advised me that, if I could stash away 250k in an 8% IRA by age 30, I would realistically have enough money saved up by 65 that I'd never have to pay into my retirement again (Something like $4 million).

So I did just that. Did I do wrong?
 

greyshark

Member
My CPA advised me that, if I could stash away 250k in an 8% IRA by age 30, I would realistically have enough money saved up by 65 that I'd never have to pay into my retirement again (Something like $4 million).

So I did just that. Did I do wrong?

With no additional contributions and an 8% average annual rate of return, your 250k would be worth about $3.7 million after 35 years.
 

Cyan

Banned
My CPA advised me that, if I could stash away 250k in an 8% IRA by age 30, I would realistically have enough money saved up by 65 that I'd never have to pay into my retirement again (Something like $4 million).

So I did just that. Did I do wrong?

I have no idea how you'd get 250k in an IRA that quickly, barring stock options or something. But yeah, that'd probably be a decent nest egg.
 

Krejlooc

Banned
I have no idea how you'd get 250k in an IRA that quickly, barring stock options or something. But yeah, that'd probably be a decent nest egg.

Would you like to hear the truth? Its not a big secret, ive been saying it all over the boards - I have been riding the vr boom to financial success for the last 2 years now. It has completely changed my life.
 

Darren870

Member
Thanks... I think I got a lot of reading to do :) The IRA contribution limits pretty much tell me I should sign up for the 401k of my new employer even if I'm only there for 6months-1year. Now I need to decide if I should roll over my current 401k to the IRA or not

I think I read that if I rolled over my 401k to my IRA, I can't take a deduction to my contributions after? That seems weird, since wouldn't I technically be taxed twice when I finally take money out?

Why would you get taxed twice? You will need to pay tax on your 401k money. Same as IRA. It's both "pre tax money".

As mentioned IRA have better fund choices and often cheaper. I would roll over to the IRA (with vanguard). Then for this year look what you can actually contribute. Maybe a Roth? How much can you actually put away for retirement this year?


Would you like to hear the truth? Its not a big secret, ive been saying it all over the boards - I have been riding the vr boom to financial success for the last 2 years now. It has completely changed my life.

What do you mean vr boom? Investing in a certain stock?

The other question is how did you get 250k into your IRA before 30 when there are limits each year.....
 

Cyan

Banned
Would you like to hear the truth? Its not a big secret, ive been saying it all over the boards - I have been riding the vr boom to financial success for the last 2 years now. It has completely changed my life.

That's fine and all, but I don't think I'd necessarily refer to that as "stashing away." Nor would I advise anyone else to do it. YMMV. :p
 

Halvie

Banned
I have no idea how you'd get 250k in an IRA that quickly, barring stock options or something. But yeah, that'd probably be a decent nest egg.

On a phone so I can't really calculate it now, but if you max contributions starting at 18 and had excellent fund choicrs, I think k it could be done. Something like vghcx or prhsx has to be close.
 

Piecake

Member
Would you like to hear the truth? Its not a big secret, ive been saying it all over the boards - I have been riding the vr boom to financial success for the last 2 years now. It has completely changed my life.

Glad it worked out for you. This might be difficult, but I would seriously consider moving your money into the index funds recommended in this thread. You only need to average about a 6-8% return to have a VERY comfortable retirement. That is perfectly doable with just investing in index funds. Why take the risk of investing in individual stocks that could go bust or dramatically lower in value when you have already won the game?

I realize it will be psychologically difficult to not invest in your cash cow or try to pick other winners, but just because stocks did well in the past does not mean that they will do well in the future, and just because you picked a huge winner once does not mean that you will be able pick one again. You won. Congratulations. I think the best thing that you can do is recognize that you won, stop playing, and invest in something far safer that should net you about 6-8% returns over 35 years, and that would be index funds.

Plus, I think it would be more emotionally satisfying as well. You can completely stop worrying about money and retirement. If you kept on investing with individual stocks, money and stock prices will still be constnatly on your mind and you will still be worried about it, especially if they start to do poorly
 

Cyan

Banned
On a phone so I can't really calculate it now, but if you max contributions starting at 18 and had excellent fund choicrs, I think k it could be done. Something like vghcx or prhsx has to be close.

Maxing contributions and given twelve years you'd need a 15.5% annual return.
 

Krejlooc

Banned
That's fine and all, but I don't think I'd necessarily refer to that as "stashing away." Nor would I advise anyone else to do it. YMMV. :p

Its not in vr. I rode vr all the way to the point where I could put it into cancer r&d. Figured that was something safe. You hit the nail on the head when you guessed about stock options. I work in vr medicine.
 

Halvie

Banned
I would strongly recommend not counting on a sector fund to maintain 17%+ performance indefinitely.

X2. Definitly agree. Would have been nice to have been in it since 84 though . Ridiculous if you compare that to index funds over a long period of time on Morningstar.
 

simplayer

Member
Its not in vr. I rode vr all the way to the point where I could put it into cancer r&d. Figured that was something safe. You hit the nail on the head when you guessed about stock options. I work in vr medicine.

Do you have a higher contribution limit with stock options, or you put your options into an IRA and it grew to that much?
 

Darren870

Member
Do you have a higher contribution limit with stock options, or you put your options into an IRA and it grew to that much?

It's just the cash he would have contributed. You can't transfer stock options over. He would have bought them within his IRA.


Edit:
I just did my book keeping for the month and I finally hit my goal of having over 100k in my retirement accounts. It's been a goal of mine when I first started saving at 22-23 and wanted to hit it by 30. I turn 30 in a 2 months so just in time! There was about a year where I couldn't/didn't contribute as well, which I am still a bit salty about.

I have about 5 accounts (all at different firms) which I want to consolidate into 3, so hopefully that can be done as well in the near future.

On to the next financial goal!
 

Wellington

BAAAALLLINNN'
It's just the cash he would have contributed. You can't transfer stock options over. He would have bought them within his IRA.


Edit:
I just did my book keeping for the month and I finally hit my goal of having over 100k in my retirement accounts. It's been a goal of mine when I first started saving at 22-23 and wanted to hit it by 30. I turn 30 in a 2 months so just in time! There was about a year where I couldn't/didn't contribute as well, which I am still a bit salty about.

I have about 5 accounts (all at different firms) which I want to consolidate into 3, so hopefully that can be done as well in the near future.

On to the next financial goal!
Congratulations!

I actually had the same goal. Just to show how quickly things snowball, I am almost at $200k just 2.5 years later, should easily make it by my birthday. There are some variables (Mainly pay increases) but it's always amazing to see the change just due to the market.
 

Darren870

Member
Congratulations!

I actually had the same goal. Just to show how quickly things snowball, I am almost at $200k just 2.5 years later, should easily make it by my birthday. There are some variables (Mainly pay increases) but it's always amazing to see the change just due to the market.

Cheers!

Yea, I'd like to hit 200k in about 4-5 years. Between work contributions and potentially adding my own money I should be able to hit about $16k a year extra. That is if I can contribute the roth/ira limit.

100k would be great, I'll just focus on making sure to get the 5.5k in my roth each year :(

Mate, it grows! The initial 5k I put into my roth back in 2009 is now over 10k! Wish I just could have contributed more over the years!
 
I'm glad it seems a few of you are ahead of the curve. I wish I was as smart in my 20s and really my early 30s. Oh well, such is life. I'm playing catch up now, but (knock on wood) I should make up the lost ground hopefully within the next 3 years or so and start to pull ahead.
 
Can someone help with me with my IRA Rollover account? Earlier this year I moved my 401k to Fidelity as I got a new job and wanted all my stuff consolidated into one log in. So the Rollover processed fine with Fidelity but I'm realizing it's just sitting in there now as cash as opposed to say a fund. So it's not growing or doing anything. Am I allowed to convert this into a fund or something? Can I invest it?
 

Darren870

Member
Can someone help with me with my IRA Rollover account? Earlier this year I moved my 401k to Fidelity as I got a new job and wanted all my stuff consolidated into one log in. So the Rollover processed fine with Fidelity but I'm realizing it's just sitting in there now as cash as opposed to say a fund. So it's not growing or doing anything. Am I allowed to convert this into a fund or something? Can I invest it?

Yes, you can put it into whatever you want. If you want certain funds check the op or look at target funds for your age group.
 

Wellington

BAAAALLLINNN'
My one temptation with all of the cash stuffed into my retirement account is to dip into it. I am currently saving up to buy an investment property (already own my dwelling) and I am really tempted to just say fuck it and dip into my 401k. My current house is a two family in which I have made many many mistakes so I am fairly confident that I could make things work when I begin to invest hardcore. Hopefully my will power remains strong. I need to stop listening to the Bigger Pockets podcast.

Can someone help with me with my IRA Rollover account? Earlier this year I moved my 401k to Fidelity as I got a new job and wanted all my stuff consolidated into one log in. So the Rollover processed fine with Fidelity but I'm realizing it's just sitting in there now as cash as opposed to say a fund. So it's not growing or doing anything. Am I allowed to convert this into a fund or something? Can I invest it?

I'm with Fidelity too, you might have to call them up but go through the log in process, then on the top of your company's plan it should have a tab for "Investments". Click that tab then on the following page right under the Investments tab should be three links. You want the last one "Change Investments".

Should be able to get you where you want to go.
 

Halvie

Banned
My one temptation with all of the cash stuffed into my retirement account is to dip into it. I am currently saving up to buy an investment property (already own my dwelling) and I am really tempted to just say fuck it and dip into my 401k. My current house is a two family in which I have made many many mistakes so I am fairly confident that I could make things work when I begin to invest hardcore. Hopefully my will power remains strong. I need to stop listening to the Bigger Pockets podcast.



I'm with Fidelity too, you might have to call them up but go through the log in process, then on the top of your company's plan it should have a tab for "Investments". Click that tab then on the following page right under the Investments tab should be three links. You want the last one "Change Investments".

Should be able to get you where you want to go.

Going to check out an episode now. Thanks!
 

Wellington

BAAAALLLINNN'
Going to check out an episode now. Thanks!

Don't do it, it's a black hole, you will never come out of it!

It's about real estate investing. It's actually pretty dry IMO but whatever, I am very interested in it. I am in construction so my friends always call me first to look at properties with them.

For retirement, the GOAT podcast episode is the Listen Money Matters episode with Mr. Money Mustache that I linked to earlier in the thread. I have probably listened to it like 10 times. http://www.listenmoneymatters.com/early-retirement-with-mr-money-mustache/

Nick Loper recently did an interview with a guy that followed a similar path. He's not as fun a listen but whatever: http://www.sidehustlenation.com/how-to-retire-in-your-30s/
 

Halvie

Banned
Don't do it, it's a black hole, you will never come out of it!

It's about real estate investing. It's actually pretty dry IMO but whatever, I am very interested in it. I am in construction so my friends always call me first to look at properties with them.

For retirement, the GOAT podcast episode is the Listen Money Matters episode with Mr. Money Mustache that I linked to earlier in the thread. I have probably listened to it like 10 times. http://www.listenmoneymatters.com/early-retirement-with-mr-money-mustache/

Nick Loper recently did an interview with a guy that followed a similar path. He's not as fun a listen but whatever: http://www.sidehustlenation.com/how-to-retire-in-your-30s/

I've always found MMM kind of as depressing as he is inspiring. I'm too materialistic, for now, for it to work. I have accumulated a lot more than most of my friends, but am no where close to being able to live off dividends
I'm at a little under half my salary.
. Even holding more aggressive funds like PIMIX. Probably another 10 years before I could even consider it.

Edit: Iced coffee. It is off to an excellent start :D
 

Makai

Member
I've always found MMM kind of as depressing as he is inspiring. I'm too materialistic, for now, for it to work. I have accumulated a lot more than most of my friends, but am no where close to being able to live off dividends
I'm at a little under half my salary.
. Even holding more aggressive funds like PIMIX. Probably another 10 years before I could even consider it.

Edit: Iced coffee. It is off to an excellent start :D
That was great. Weird how his tone is so different in his blog.
 

Darren870

Member
I find most books, blogs, pod casts just a rehash of the same material just redone by a new personality that can "sell it". Nothing has changed over the years. I've read so so so many financial books and it's all the same. I just enjoy reading them since it keeps me motivated.

If you want a book or two or three then read the following:

Bogleheads guide to investing - great for general knowledge and how to set yourself up from a young age. Pretty much the guide all money bloggers stick to...

The only investment guide you'll ever need - easy book to understand and apply principles to. Old but still relevant.

Your money or your life - this is pretty much the life style mmm promotes. Its essentially the same exact thing. Just mmm puts his spin on it.

Those are the only 3 books you need IMO. Read those three and adapt your lifestyle as you see fit through the three.
 

Piecake

Member
I find most books, blogs, pod casts just a rehash of the same material just redone by a new personality that can "sell it". Nothing has changed over the years. I've read so so so many financial books and it's all the same. I just enjoy reading them since it keeps me motivated.

If you want a book or two or three then read the following:

Bogleheads guide to investing - great for general knowledge and how to set yourself up from a young age. Pretty much the guide all money bloggers stick to...

The only investment guide you'll ever need - easy book to understand and apply principles to. Old but still relevant.

Your money or your life - this is pretty much the life style mmm promotes. Its essentially the same exact thing. Just mmm puts his spin on it.

Those are the only 3 books you need IMO. Read those three and adapt your lifestyle as you see fit through the three.

I feel the same way. I mean, index investing and saving are very simple concepts that you can understand quite easily without buying a 200+ page book. I have never bought any sort of investing or savings book and just found about it through my own research on the internet.

I don't think I will ever buy any books on the subject, but I do like to read articles on retirement investing and savings since I think the topics are interesting and it is good to have your ideas and mindset reinforced periodically.
 

UraMallas

Member
What is the best retirement book? My mom is going to retire in about 5 years and she turns 59 and a half in May so I was going to get us both an investment book so we could read it and go over things. I'm quite a bit more knowledgeable than her on the subject so maybe something simple or entry level so we can both read it.
 
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