Support NeoGAF

[GhaleonEB]

Thanks for everone's suggestion. I would like to sell my company stock when the trade window opens but just a question about taxes. I've never sold stocks before but I know that I was charged income tax already when my RSUs vested. In terms of capital gains tax, how would they charge for that? Would they sell my current shares at market close price then take out the taxes for capital gains? How would they know which one is eligible for long term capital gains tax rate vs which one is income tax rate. Ill give them a call later but just want to be prepared if I need some more follow up questions.

I caution first that I'm speaking in general terms, because I've never cashed in company stock option of any flavor.

But generally, that's not going to be withheld upfront. When you file your taxes, you'll fill out an additional form (or your tax preparation software will do it) covering your stock sales. You'll just need to provide the relevant info regarding the stock purchase and sale, and this will impact your total tax liability. Tax preparation software makes this simple. If you were going through a standard broker (which I don't think is the case for you here), software could often just import the information it needs and you would then review it for accuracy.

If the capital gain is substantial and might impact you to such an extent that you would owe taxes at the deadline instead of getting a refund, and the amount you owe would be significant, you might want to look at info regarding avoiding tax underpayment penalties.

Where I work, the taxes on RSU's are withheld in the form of shares, and the withholding show up on my W-2. My understanding is that's the common treatment for them. Worth looking into, the employer should have some documentation about it.

 

[Randolph Freelander]

Where I work, the taxes on RSU's are withheld in the form of shares, and the withholding show up on my W-2. My understanding is that's the common treatment for them. Worth looking into, the employer should have some documentation about it.

Yeah, he said he has already had income tax withheld regarding the income the shares created as a matter of vesting, but he's now asking about the capital gains. From your experience, is that just standard fare at that point? A capital gain like any other, up to you to cover?

 

[GhaleonEB]

Yeah, he said he has already had income tax withheld regarding the income the shares created as a matter of vesting, but he's now asking about the capital gains. From your experience, is that just standard fare at that point? A capital gain like any other, up to you to cover?

Oh, my misunderstanding, sorry. Yes, he'll have to cover that. The brokerage will send a 1099 listing the value at the time he received them, and the value at sale. Nothing to calculate, you just copy that into the tax submission. But it's something to be aware of when selling.

As an aside, the 1-year holding period to go from income taxes to capital gains taxes starts once the shares vest and you have them in your account. They're not capital gains just because they took 2 years to vest - it's when you get them. I think that was covered earlier but thought I'm mention it to be sure.

 

[Cyan]

Where I work, the taxes on RSU's are withheld in the form of shares, and the withholding show up on my W-2. My understanding is that's the common treatment for them. Worth looking into, the employer should have some documentation about it.

Yes, this is the most common way of doing them.

Yeah, he said he has already had income tax withheld regarding the income the shares created as a matter of vesting, but he's now asking about the capital gains. From your experience, is that just standard fare at that point? A capital gain like any other, up to you to cover?

Yes, cost basis would correspond with the value used to calculate the initial taxes, and it would be treated normally after that.

 

[KooPaL]

Thanks for the info everyone!

 

[RumblingRosco]

-

 

[Randolph Freelander]

Speaking of...

Remember, kids, the expectation is that the market will always be achieving new all-time highs. With an upwards trajectory, you're more often than not going to be buying near the top, except it's only the top until the next new top (which is likely to be tomorrow).

For giggles, I pulled in the historical S&P closes going back to 1950. Over 16680 trading days, the market has been:

At all time high (as of that day): 1176 trading days (7.1% of days)
> 97% of high: 5760 (34.5%)
> 95% of high: 7624 (45.7%)
> 93% of high: 8910 (53.4%)
> 90% of high: 10303 (61.8%)

In fact, the average market close over all of these trading days is at 90% of whatever the current all-time high happens to be.

 

[JeStaH]

I have a 401K with a company I've been at for 13 years. I have not even really touched it since forever. I'm now 45 years old and thinking more about my money for retirement. When I look at my vanguard account I see that all of my money is in the Vanguard Wellington Admiral Shares which has a 60% stock and 40% bond allocation. My personal 10 year rate of return is 8.2%.

I also see an option for the Vanguard Target Retirement 2035 Fund which has an 85% stock and 15% bond allocation. Looking at the 2035 fund the underlying allocation is this:

Vanguard Total Stock Market Index Fund Investor Shares 48.8%
Vanguard Total International Stock Index Fund Investor Shares 32.5%
Vanguard Total Bond Market II Index Fund Investor Shares† 13.2%
Vanguard Total International Bond Index Fund Investor Shares 5.5

This seems like a better idea than the Wellington managed fund. If I wanted to move my money from the wellington to the Target Retirement Fund 2035 are there tax and fees I would have to pay? Any reason not to move it to the Target Fund 2035?

 

[tokkun]

If I wanted to move my money from the wellington to the Target Retirement Fund 2035 are there tax and fees I would have to pay?

No, you can move money between mutual funds for free in a 401K.

Any reason not to move it to the Target Fund 2035?

Are you aware that Target Funds gradually shift their allocation toward more bonds over time? If so, then go ahead. If you would prefer for the allocation to not change, Vanguard's LifeStrategy Growth fund has a nearly identical allocation and does not change over time.

 

[LordGorchnik]

Sorry for all the newbie questions, still learning the ropes but the Fidelity help center isn't telling me much.

My RothIRA is setup and I have my cash in there (its maxed out at $5500 for the year). However it's position is currently set at "CORE - Unfunded Core Position." I want to change this so I can start investing in some mutual funds but the only thing it will allow me to change the position to is "SPAXX - Fidelity Government Market." Do I have to change my position to this before I can start allocating funds to other mutual ones? They don't have anything in their help center/getting started guide that talks about this step.

 

[Yaboosh]

Sorry for all the newbie questions, still learning the ropes but the Fidelity help center isn't telling me much.

My RothIRA is setup and I have my cash in there (its maxed out at $5500 for the year). However it's position is currently set at "CORE - Unfunded Core Position." I want to change this so I can start investing in some mutual funds but the only thing it will allow me to change the position to is "SPAXX - Fidelity Government Market." Do I have to change my position to this before I can start allocating funds to other mutual ones? They don't have anything in their help center/getting started guide that talks about this step.

Just go to trade, choose your Roth account, enter the symbol of what you want to buy, enter amount to buy, and hit go.

 

[LordGorchnik]

Just go to trade, choose your Roth account, enter the symbol of what you want to buy, enter amount to buy, and hit go.

Thank you good sir/madam. Unfortuantely don't have the $10K available to start investing in the index funds so going to have to find something else to hit up with the $5.5K. Appreciate the support.

 

[Oxn]

Just a hypothetical question from a newb here, since I was arguing with a friend over this.

Say you know the market will tank, and it does. Say it drops 20% in 1 day, and you know it does and move your money 2 days prior. Do you move the money in your 401k account from stock heavy mutual funds to a bond heavy or Money Market? Not that I really know the difference.

 

[Randolph Freelander]

Thank you good sir/madam. Unfortuantely don't have the $10K available to start investing in the index funds so going to have to find something else to hit up with the $5.5K. Appreciate the support.

You can still get into the "investor class" index funds, those have lower buy-in requirements. The "advantage class" have the higher.

So you would look at something like FSTMX versus FSTVX, for example. The difference is that the former has a slightly higher expense ratio, but it is still really low. When you contribute for the next year, assuming you put the money into the same fund, Fidelity would convert you over to the advantage class automatically.

Alternately, you could look at their ETFs, which come with the lower "advantage" expense ratios without the buy-in minimum. You might look at VTI, which is Vanguard's total stock market fund as an ETF.

 

[Randolph Freelander]

Just a hypothetical question from a newb here, since I was arguing with a friend over this.

Say you know the market will tank, and it does. Say it drops 20% in 1 day, and you know it does and move your money 2 days prior. Do you move the money in your 401k account from stock heavy mutual funds to a bond heavy or Money Market? Not that I really know the difference.

You're arguing the wrong question. If you know the market is going to tank, you take a short position and profit on the downturn, and then profit again by going long at the bottom.

I mean, if we have an all-seeing, all-knowing stock market crystal ball, let's use the dern thing correctly!

 

[Oxn]

You're arguing the wrong question. If you know the market is going to tank, you take a short position and profit on the downturn, and then profit again by going long at the bottom.

I mean, if we have an all-seeing, all-knowing stock market crystal ball, let's use the dern thing correctly!

Isnt that exactly what im arguing? Moving to bond/MM before the crash, and then moving it back right after?

 

[ColdPizza]

Isnt that exactly what im arguing? Moving to bond/MM before the crash, and then moving it back right after?

You're just better off leaving it be and dollar cost averaging when the market does take a downturn, unless you really can time the market.

 

[chaosblade]

Isnt that exactly what im arguing? Moving to bond/MM before the crash, and then moving it back right after?

Shorting would actually earn you money on the dip instead of leaving you as-is. You would "sell" for today's high price and "buy" at tomorrow's tanked price.

 

[ColdPizza]

Shorting would actually earn you money on the dip instead of leaving you as-is. You would "sell" for today's high price and "buy" at tomorrow's tanked price.

Which 401ks let you short?

 

[Randolph Freelander]

Isnt that exactly what im arguing? Moving to bond/MM before the crash, and then moving it back right after?

Much to learn, you still have.

Essentially, a short position is when you sell stock you don't have. You're borrowing it, basically, and then you cover the position, which means you buy the same number of shares and give it back. The idea (you hope!) is that you're borrowing and selling at a higher price than when you buy it and repay. That's the short position, selling before you buy. Going long is what you traditionally do, which is buy and sell stock in that order.

So basically, in your scenario, say the index is sitting at 10 and you know it's going to 8. You short at 10, cover at 8, pocket the difference as profit. You're asking about selling at 10, parking the money somewhere safe, and then buying back in at the bottom, which means you don't pocket the downturn as a profit, you only hope to profit from the rebound.

 

[chaosblade]

Which 401ks let you short?

I have no idea, we're talking unrealistic fairy tale theories anyway.

 

[Randolph Freelander]

I have no idea, we're talking unrealistic fairy tale theories anyway.

Correct. We're busting out of the 401K constraint since we live in a realm with magic.

 

[ColdPizza]

Right, so if we want to stay in 401k land, I'd still dollar cost average and just take the L. Assuming you researched your allocations and have a long investment horizon.

 

[GhaleonEB]

Right, so if we want to stay in 401k land, I'd still dollar cost average and just take the L. Assuming you researched your allocations and have a long investment horizon.

Pretty much, though I'd say maintain periodic investments rather than dollar cost average. (The former is regular investing, the latter is sitting on a lump of money and parceling it into the market gradually.)

 

[Oxn]

Much to learn, you still have.

Essentially, a short position is when you sell stock you don't have. You're borrowing it, basically, and then you cover the position, which means you buy the same number of shares and give it back. The idea (you hope!) is that you're borrowing and selling at a higher price than when you buy it and repay. That's the short position, selling before you buy. Going long is what you traditionally do, which is buy and sell stock in that order.

So basically, in your scenario, say the index is sitting at 10 and you know it's going to 8. You short at 10, cover at 8, pocket the difference as profit. You're asking about selling at 10, parking the money somewhere safe, and then buying back in at the bottom, which means you don't pocket the downturn as a profit, you only hope to profit from the rebound.

Ok then, say you are not sure, but you really feel it would. wouldnt my scenario be safer? if it doesnt drop, then no big fuss, just move it back. Sure maybe you dont profit as much if it does drop.

But just back to my scenario, is it a wise thing to do (though maybe not the wisest according to you guys) to move to MM/bond right before the downturn and buy back after? Is there a negative to this?

 

[Cyan]

Ok then, say you are not sure, but you really feel it would. wouldnt my scenario be safer? if it doesnt drop, then no big fuss, just move it back. Sure maybe you dont profit as much if it does drop.

But just back to my scenario, is it a wise thing to do (though maybe not the wisest according to you guys) to move to MM/bond right before the downturn and buy back after? Is there a negative to this?

No. Because you don't know. Your feelings are as likely to be wrong as right, and by pulling your money out you might miss a downturn or you might miss the market spiking up. Since on average the market goes up, you lose money by doing this. This is why people tell you not to try to time the market.

Especially with a 401k, which are not conducive to market timing.

 

[Randolph Freelander]

Ok then, say you are not sure, but you really feel it would. wouldnt my scenario be safer? if it doesnt drop, then no big fuss, just move it back. Sure maybe you dont profit as much if it does drop.

But just back to my scenario, is it a wise thing to do (though maybe not the wisest according to you guys) to move to MM/bond right before the downturn and buy back after? Is there a negative to this?

OK, so we've moved away from total certainty. No more magic.

The negative is that you're trying to time the market, which as a rule does not work very well. You're just as likely to be wrong, the market continues heading up, and you end up buying in at a higher price (meaning you've lost ground, relatively speaking).

Do not time the market.

Though if you are dead certain that the market is going to go down, then yes, you would move the funds into safer instruments. But you will never be dead certain. And if you are, you will be wrong.

Edit: What Les Miles said.

 

[Oxn]

OK, so we've moved away from total certainty. No more magic.

The negative is that you're trying to time the market, which as a rule does not work very well. You're just as likely to be wrong, the market continues heading up, and you end up buying in at a higher price (meaning you've lost ground, relatively speaking).

Do not time the market.

Though if you are dead certain that the market is going to go down, then yes, you would move the funds into safer instruments. But you will never be dead certain. And if you are, you will be wrong.

Edit: What Les Miles said.

So MM or bond?

 

[chaosblade]

So MM or bond?

It's pretty much impossible to say. You might go bonds, but bonds could dip too. You might go MM, and bonds may get a bump. Whatever magic foresight you are using to see that stocks are going to tank would also need to be applied to bonds to see if they are the better idea.

 

[Randolph Freelander]

So MM or bond?

Money market, inclusive of US Treasury Bills. It's basically putting your money in the mattress, which I think is what you're trying to do.

 

[LordGorchnik]

You can still get into the "investor class" index funds, those have lower buy-in requirements. The "advantage class" have the higher.

So you would look at something like FSTMX versus FSTVX, for example. The difference is that the former has a slightly higher expense ratio, but it is still really low. When you contribute for the next year, assuming you put the money into the same fund, Fidelity would convert you over to the advantage class automatically.

Alternately, you could look at their ETFs, which come with the lower "advantage" expense ratios without the buy-in minimum. You might look at VTI, which is Vanguard's total stock market fund as an ETF.

Thanks sir. Appreciate all the help. While nobody knows the market everyone is apparently "claiming" we are at our peak point so now is a terrible time to start investing as they "foresee" everything tanking the next couple of years. But surely it's never bad to start early right even if the market does come down from a high point.

Unless the next 4 years are going to really suck ass in which case sure I might be better off holding out but we don't know so in a sense I don't have a lot too lose.

I think I've been reading too many articles. Head is hurting. Time for some Jameson.

 

[Randolph Freelander]

Thanks sir. Appreciate all the help. While nobody knows the market everyone is apparently "claiming" we are at our peak point so now is a terrible time to start investing as they "foresee" everything tanking the next couple of years. But surely it's never bad to start early right even if the market does come down from a high point.

Unless the next 4 years are going to really suck ass in which case sure I might be better off holding out but we don't know so in a sense I don't have a lot too lose.

I think I've been reading too many articles. Head is hurting. Time for some Jameson.

There has never been a point in time when someone hasn't been claiming we're about to go into a slump. Eventually, one or more of those people are correct, if only due to the adage about broken clocks. We slumped last year and early this year, and technically haven't recovered yet to the last all-time high (S&P, 5/21/2015, closed at 2130.82, today's close is at 2099.62). Will this market break past that high and continue heading up? Will it turn downward again? Who knows, and who cares.

I don't know about you, but my retirement is 30 years out, give or take. 30 years ago today, the S&P was at 242.38. 30 years from now, the market might very well be at 18177. What do I care if it slumps next week, or a year from now? I don't, and if your time frame is as long or longer, then you shouldn't either.

Just trying to reinforce your peace of mind.

 

[GhaleonEB]

Thanks sir. Appreciate all the help. While nobody knows the market everyone is apparently "claiming" we are at our peak point so now is a terrible time to start investing as they "foresee" everything tanking the next couple of years. But surely it's never bad to start early right even if the market does come down from a high point.

Unless the next 4 years are going to really suck ass in which case sure I might be better off holding out but we don't know so in a sense I don't have a lot too lose.

I think I've been reading too many articles. Head is hurting. Time for some Jameson.

I read this and went to check on what happened in the markets today, and the CNBC top story headline is "Stocks seen getting ready to 'break higher'". The article cites a lot of analysts taking guesses at things, about which they cannot predict.

Just like every other analyst out there. Ignore them all. Pick a long term strategy you are comfortable with, and stick to it.

 

[JeStaH]

No, you can move money between mutual funds for free in a 401K.



Are you aware that Target Funds gradually shift their allocation toward more bonds over time? If so, then go ahead. If you would prefer for the allocation to not change, Vanguard's LifeStrategy Growth fund has a nearly identical allocation and does not change over time.

Yes I'm aware of gradually shifting allocation which is what I want. Thanks for the info!

 

[LordGorchnik]

There has never been a point in time when someone hasn't been claiming we're about to go into a slump. Eventually, one or more of those people are correct, if only due to the adage about broken clocks. We slumped last year and early this year, and technically haven't recovered yet to the last all-time high (S&P, 5/21/2015, closed at 2130.82, today's close is at 2099.62). Will this market break past that high and continue heading up? Will it turn downward again? Who knows, and who cares.

I don't know about you, but my retirement is 30 years out, give or take. 30 years ago today, the S&P was at 242.38. 30 years from now, the market might very well be at 18177. What do I care if it slumps next week, or a year from now? I don't, and if your time frame is as long or longer, then you shouldn't either.

Just trying to reinforce your peace of mind.

I read this and went to check on what happened in the markets today, and the CNBC top story headline is "Stocks seen getting ready to 'break higher'". The article cites a lot of analysts taking guesses at things, about which they cannot predict.

Just like every other analyst out there. Ignore them all. Pick a long term strategy you are comfortable with, and stick to it.

Powerful words. Yes I have around 37 years left to go so I think I am okay. As all other things it just seems massive and I am trying to digest as much as I can at once instead of taking one bite at a time.

It's exciting as hell though if nothing else.

 

[FiggyCal]

I have like 1200 dollars from my minimum wage job that I want to invest. I'm not really sure what to do.

 

[chaosblade]

I have like 1200 dollars from my minimum wage job that I want to invest. I'm not really sure what to do.

Which part are you unsure about? If minimums are the problem you can go with ETFs instead of mutual funds, since the only minimum then is the share price.

 

[FiggyCal]

Which part are you unsure about? If minimums are the problem you can go with ETFs instead of mutual funds, since the only minimum then is the share price.

I was maybe looking at Scotttrade for commission free etf's. Idk. Is using Robinhood for this kind of thing a bad idea if I'm not at all interested in investing in individual stocks but just going for etf's?

 

[Makai]

I have like 1200 dollars from my minimum wage job that I want to invest. I'm not really sure what to do.

https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=1691

90% stocks. 10% bonds. Mix of domestic and international. Very diversified and from a reliable company that most people here would recommend.

 

[Emerson]

Question: If I'm already investing in a Vanguard targeted retirement fund through my 401k, what are the differences between that and the TSM index fund? Does it make more sense to invest in the latter as well or put more money into the targeted fund?

 

[Randolph Freelander]

Question: If I'm already investing in a Vanguard targeted retirement fund through my 401k, what are the differences between that and the TSM index fund? Does it make more sense to invest in the latter as well or put more money into the targeted fund?

I assume when you say TSM, that's total stock market. If that's an obvious acronym for something else and I'm just missing it, I apologize in advance.

Vanguard's total stock market index fund is comprised of basically 100% domestic stock, split roughly 8 parts large cap, 2 parts mid cap, and 1 part small cap, or 73/18/9 percents, respectively.

Vanguard's target date funds are going to include both US and international stock and US and international bonds, with the US components being larger than international, and stocks initially being larger than bonds but progressively shifting towards bonds over time. Vanguard's 2050 fund is 54% domestic stock, 36% international stock, 7% domestic bonds, and 3% international bonds. The 2020 fund, being closer, is 35% US stock, 28% US bonds, 23% international stock, and 12% international bonds, with another 1% in short term, inflation protected securities. The Target Income Fund, geared towards those already retired, goes even heavier on bonds (55% total) and inflation protected securites (17%), with the remaining 28% in stocks.

So to get to your question of whether you want to invest in it, that will be based on whether you want to be a bit more aggressive than the target date fund. By going total stock, you're increasing risk, but also increasing potential rewards. On the target date side, they're going to ease down your risk factor over the course of time, but the bond component will be a drag on growth when the market is heading up. For me, I don't see the value in being in bonds 30+ years out from retirement, which makes funds such as the target 2050 unpalatable. Your thoughts may differ, and certainly as you get closer to retirement, the relative security of bonds will want to be part of your strategy, and the target funds will manage the transition for you.

 

[Emerson]

I assume when you say TSM, that's total stock market. If that's an obvious acronym for something else and I'm just missing it, I apologize in advance.

Vanguard's total stock market index fund is comprised of basically 100% domestic stock, split roughly 8 parts large cap, 2 parts mid cap, and 1 part small cap, or 73/18/9 percents, respectively.

Vanguard's target date funds are going to include both US and international stock and US and international bonds, with the US components being larger than international, and stocks initially being larger than bonds but progressively shifting towards bonds over time. Vanguard's 2050 fund is 54% domestic stock, 36% international stock, 7% domestic bonds, and 3% international bonds. The 2020 fund, being closer, is 35% US stock, 28% US bonds, 23% international stock, and 12% international bonds, with another 1% in short term, inflation protected securities. The Target Income Fund, geared towards those already retired, goes even heavier on bonds (55% total) and inflation protected securites (17%), with the remaining 28% in stocks.

So to get to your question of whether you want to invest in it, that will be based on whether you want to be a bit more aggressive than the target date fund. By going total stock, you're increasing risk, but also increasing potential rewards. On the target date side, they're going to ease down your risk factor over the course of time, but the bond component will be a drag on growth when the market is heading up. For me, I don't see the value in being in bonds 30+ years out from retirement, which makes funds such as the target 2050 unpalatable. Your thoughts may differ, and certainly as you get closer to retirement, the relative security of bonds will want to be part of your strategy, and the target funds will manage the transition for you.

Thanks for the response.

So if I'm understanding correctly it would be advisable to contribute the max matched percentage to the Vanguard retirement 401k (already doing this at 5%), and probably putting any further investments into other index funds such as total stock market or total international.

 

[Randolph Freelander]

Thanks for the response.

So if I'm understanding correctly it would be advisable to contribute the max matched percentage to the Vanguard retirement 401k (already doing this at 5%), and probably putting any further investments into other index funds such as total stock market or total international.

The way you're phrasing the question is confusing to me.

I can't tell if you only have target date fund options in your 401K, or if you're talking about investing inside or outside the 401K for the other index funds.

Regardless, our general advice in this thread is to leverage tax-advantaged accounts to the maximum, be that the 401K or IRAs and only then do outside investing. Many will say do the 401K up to the full employer match, then switch over and fund an IRA, then come back to the 401K until you reach the full maximum established by the IRS. Others (such as me) would say if your 401K has excellent offerings, you might consider going all-in on it before doing an additional IRA. Whichever route you go, you can elect to do target date funds (if available), a blend of other index funds, or both.

We can't totally recommend the right approach for you, because that depends on you and what's available. A lot of people do target date funds because they don't have to worry about shifting allocations or what they should be in, and that brings them peace of mind. If that's you, then cool. Others want to take a slightly more active approach and go for their own blend (increasing their risk along the way). Go for what works for you. The less sure you are, though, would suggest a good idea would be to park your money in the target date fund, as you can always change your approach down the line.

 

[willow ve]

From a job almost a decade ago I still have an HSA with a small balance remaining. I assume it makes financial sense to contribute to this account each year as it would essentially be a tax free health savings account?

I'm maxed on my IRA contributions and buy my insurance on the market (current employer doesn't offer health care benefits).

I know I don't want to get carried away (unless I'm predicting 10K in medical out of pocket, there's no reason to have 10K in the account, etc.), but it would probably be prudent to have 3-5K in the account.

Thoughts?

 

[Randolph Freelander]

From a job almost a decade ago I still have an HSA with a small balance remaining. I assume it makes financial sense to contribute to this account each year as it would essentially be a tax free health savings account?

I'm maxed on my IRA contributions and buy my insurance on the market (current employer doesn't offer health care benefits).

I know I don't want to get carried away (unless I'm predicting 10K in medical out of pocket, there's no reason to have 10K in the account, etc.), but it would probably be prudent to have 3-5K in the account.

Thoughts?

If you are covered on a high deductible healthcare plan, you can continue to contribute to the old HSA up to yearly IRS limits ($3,350 for individuals, $6,750 if covered under a family HDHP). If your health plan is low deductible, you cannot make further contributions.

Beyond that, the HSA is a good tool, particularly if you're already maxing out an IRA and your 401K. I wouldn't put a cap on what you want in there, particularly considering that you may run into a long-term health issue that can become a continual drain on those funds. If you do not run into any health issues, that's awesome. In the interim, and assuming your HSA has an investment option, you can put those funds to work. At age 65, you can begin drawing down the account for non-health needs like a regular IRA (paying ordinary tax on non-health withdrawals).

 

[Soroc]

OK Gaf finally at a point that I'm looking for some investment advice.

I currently have a 401k with my employer through Fidelity. I contribute 10% and my employer contributes a 5% match. Right now I am investing 100% into EQUITY INDEX FUND (Which I believe is just the S&P Index?). Should I drop that 100% and go with an additional fund to invest into?

Also I have close to about 15k that I want to open a Vanguard account with and put money into a ROTH but also put money into an account I will be able to invest with but liquidate if needed. Any advice on a plan of action for this? I'm currently 35 and started investing really late, like 1.5 yrs ago due to some debt and really bad investments in my 20s.

 

[Randolph Freelander]

OK Gaf finally at a point that I'm looking for some investment advice.

I currently have a 401k with my employer through Fidelity. I contribute 10% and my employer contributes a 5% match. Right now I am investing 100% into EQUITY INDEX FUND (Which I believe is just the S&P Index?). Should I drop that 100% and go with an additional fund to invest into?

Can't say, given that we don't know what your other options are. Also, Equity Index Fund is unfortunately a little generic to search on, so more information would be helpful. But generally, I would say read your plan's information on the available funds, and see which ones are indexed, which are managed, what their strategies happen to be. If you need help afterwards, put together a simple list with at least enough detail to either be obvious, or to be searchable, and I'm sure we'll be happy to help.

Also I have close to about 15k that I want to open a Vanguard account with and put money into a ROTH but also put money into an account I will be able to invest with but liquidate if needed. Any advice on a plan of action for this? I'm currently 35 and started investing really late, like 1.5 yrs ago due to some debt and really bad investments in my 20s.

You'll be able to put $5500 of that into a Roth this year. The remaining amount can be invested independently, or left in savings, or a combination of both.

You might also consider ramping up your 401K contribution to something north of what you might routinely be able to afford and draw down your savings a bit to cover your expenses (assuming your personal 401K contributions aren't already hitting the yearly maximum of $18,000). As you approach the floor of where you'll be comfortable, reduce the 401K contribution rate to what you can sustain.

 

[Soroc]

Can't say, given that we don't know what your other options are. Also, Equity Index Fund is unfortunately a little generic to search on, so more information would be helpful. But generally, I would say read your plan's information on the available funds, and see which ones are indexed, which are managed, what their strategies happen to be. If you need help afterwards, put together a simple list with at least enough detail to either be obvious, or to be searchable, and I'm sure we'll be happy to help.



You'll be able to put $5500 of that into a Roth this year. The remaining amount can be invested independently, or left in savings, or a combination of both.

You might also consider ramping up your 401K contribution to something north of what you might routinely be able to afford and draw down your savings a bit to cover your expenses (assuming your personal 401K contributions aren't already hitting the yearly maximum of $18,000). As you approach the floor of where you'll be comfortable, reduce the 401K contribution rate to what you can sustain.

Thank you! I do plan to contribute 20% in a month or 2 as I have a sizeable promotion in the works. That should put me right up against the max.

So the Equity Index Fund from Fidelity with my Employer is a Large Blend domestic Fund inception date: 6/28/1996, Turnover rate 4.61% (Top 10 Holdings Apple, MSFT, Exxon, Johnson & Johnson, GE, Berkshire Hathaway, Facebook, AT&T, Amazon, Wells Fargo. These holdings are 17.63% of the fund) Its states Large Blend S&P 500. Expense Ratio .025%

I took a picture of all the funds available from my employer through Fidelity. Not sure if this will help but here is the link


Is there any suggestions on where best to put the money in vanguards ROTH? Is the OP since valued as the best options to invest with? For the remaining money should I open a regular account but still invest in these same funds? I don't know much about diversification and not looking to play buy/sell, just more a set it and forget it but with a good expense ratio.

 

[The Wraith]

By the time I retire in 20 years or so Im looking at a 4k a month pension and I put 5% of my check towards a 401(k) plan that my employer matches so essentially 10%. Add that all up with me eventually getting social security and I think my retirement should be doing ok.

 

[Randolph Freelander]

I took a picture of all the funds available from my employer through Fidelity. Not sure if this will help but here is the link

OK, it looks like you have some good choices available. Unfortunately, the target date funds are bit on the expensive side, but you have good index fund options that can cover your bases.

Equity Index Fund should be your largest component no matter what you do with the rest.

You'll want to decide if you want to go for a total market approach, which would invite you to also invest in the SM Midcap Core Index fund. The rough split usually present is 3:1 Large:Mid/Small. So of your 100%, that could be 75/25.

You'll also want to decide if you want to hold international or bonds, and you can use the International Index and Bond Index funds. A target date fund might hold 30% international and, for one your age, 10% bonds. You can decide if you like those percentages or would like to go higher or lower. If you use these funds, obviously scale back your domestic but keep the 3:1 ratio on them for the large and mid-cap split.

See this recent post of mine to see how splits might look under various strategies, replacing the fund names you see mentioned with your own.

As for the Roth, Vanguard has inexpensive target date funds that allow you to truly set it and forget it, so if that's appealing to you, then investigate that option. If you want to be more aggressive than that, you can manage your own allocations to reduce bonds and do whatever with international. I'd say with the first $5500, either do the target date or go into VTSMX (total stock market, a domestic equity fund), and then reevaluate your allocation next year when you make more contributions, and I'd generally recommend keeping the same general strategy for simplicity if you invest additional funds outside of retirement accounts.