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Rookie Advice

2,125 Views | 17 Replies | Last: 6 yr ago by Lot Y Tailgate
BB675
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AG
Looking to start doing some investing. I am a young professional without a lot of assets. Wanting to do something with some money in savings. This would be very small scale, maybe $10,000-$15,000. Thinking about mutual funds but would like some advice from veterans. Thanks!
Ragoo
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AG
Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?


TwoMarksHand
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AG
Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?
Agree with background needed.
My order of retirement/saving/investment planning:
Meet company 401k match
Max Roth IRA
Money into HSA
Contribute more to 401k (hopefully one day Max)
Anything post tax goes to Vanguard account
BB675
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AG
This is just $10-$15k sitting in a low interest savings account.

I am currently meeting company's 401k match
No Roth IRA
No HSA
Ragoo
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AG
without a stated goal, I would take $5,500 of it and open a ROTH. Then buy a mutual fund. My ROTH is with Fidelity and I buy strictly FCNTX and have been since 2011.

With the remaining 10K, I would wait until January 1 and then make your 2018 ROTH contribution buying the same mutual fund. Finally with your last 5K I would keep it in savings.
BB675
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AG
As for a stated goal I guess it would just be to build wealth.
Ragoo
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cloeren13 said:

As for a stated goal I guess it would just be to build wealth.
building wealth is a long term endeavor. If you have no intentions of touching this money until you retire see my note above about opening a ROTH IRA. If this money has a purpose in 3-5 years then put it in a taxable account. if you intend to use it to purchase a home then keep it in cash.

If your goal is to honestly build wealth then this is what I would do:

Open brokerage account - triggers a taxable account to be open
Open ROTH IRA
put all 15K in taxable account cash holding
From taxable account fund your ROTH IRA with the full 2017 amount - $5,500
Let the balance cash sit until 1/1/2018
January 1, 2018 - Fund your ROTH from the taxable account to the 2018 limit $5,500
With the remaining cash left over buy mutual fund.
the remainder of 2018 I would auto fund/purchase more shares of the same mutual fund in your taxable account. If your budget can afford it I would aim for an amount per month greater than or equal to $5,500/12 = $458.33
January 1, 2019 - Redirect $458.33 of your auto funding from the taxable account into the ROTH to meet end of year contribution limit over the span of the year.
Continue funding the taxable account with whatever extra money you can spare.
At this point you can set it an forget it, you are accumulating wealth.
permabull
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AG
The Wonderer
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TwoMarksHand said:

Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?
Agree with background needed.
My order of retirement/saving/investment planning:
Meet company 401k match
Max Roth IRA
Money into HSA
Contribute more to 401k (hopefully one day Max)
Anything post tax goes to Vanguard account
This is my standard advice, except I put the HSA before the Roth IRA. HSA is a triple tax benefit if you use it as a pure investment vehicle and not to actually pay your medical needs as they are incurred.
GE
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AG
The Wonderer said:

TwoMarksHand said:

Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?
Agree with background needed.
My order of retirement/saving/investment planning:
Meet company 401k match
Max Roth IRA
Money into HSA
Contribute more to 401k (hopefully one day Max)
Anything post tax goes to Vanguard account
This is my standard advice, except I put the HSA before the Roth IRA. HSA is a triple tax benefit if you use it as a pure investment vehicle and not to actually pay your medical needs as they are incurred.
Plus I don't think you get income limited out of the HSA like you do the Roth. Please correct me if I'm wrong here.
The Wonderer
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AG
GE said:

The Wonderer said:

TwoMarksHand said:

Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?
Agree with background needed.
My order of retirement/saving/investment planning:
Meet company 401k match
Max Roth IRA
Money into HSA
Contribute more to 401k (hopefully one day Max)
Anything post tax goes to Vanguard account
This is my standard advice, except I put the HSA before the Roth IRA. HSA is a triple tax benefit if you use it as a pure investment vehicle and not to actually pay your medical needs as they are incurred.
Plus I don't think you get income limited out of the HSA like you do the Roth. Please correct me if I'm wrong here.
Correct. It is flat capped based on single/family status regardless of income. Plus, your HSA contributions are pre-tax, so your AGI should drop which can help you if you are on the bubble of the Roth IRA threshold.
GE
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AG
The Wonderer said:

GE said:

The Wonderer said:

TwoMarksHand said:

Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?
Agree with background needed.
My order of retirement/saving/investment planning:
Meet company 401k match
Max Roth IRA
Money into HSA
Contribute more to 401k (hopefully one day Max)
Anything post tax goes to Vanguard account
This is my standard advice, except I put the HSA before the Roth IRA. HSA is a triple tax benefit if you use it as a pure investment vehicle and not to actually pay your medical needs as they are incurred.
Plus I don't think you get income limited out of the HSA like you do the Roth. Please correct me if I'm wrong here.
Correct. It is flat capped based on single/family status regardless of income. Plus, your HSA contributions are pre-tax, so your AGI should drop which can help you if you are on the bubble of the Roth IRA threshold.
We passed the Roth income limit last year and going forward such that a job loss would be the only thing that would put us back under. Changed my Roth contributions to pre-tax contributions just because I wasn't sure which to do and didn't have time to compare the two options. Would it be better to make post-tax contributions? I figured the growth of the extra amount contributed now that would otherwise go to the government would more than make up for having to pay more tax later.
bjork
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Traditional Roth to Roth IRA conversion, i.e. the "Backdoor Roth".
The Wonderer
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AG
GE said:

The Wonderer said:

GE said:

The Wonderer said:

TwoMarksHand said:

Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?
Agree with background needed.
My order of retirement/saving/investment planning:
Meet company 401k match
Max Roth IRA
Money into HSA
Contribute more to 401k (hopefully one day Max)
Anything post tax goes to Vanguard account
This is my standard advice, except I put the HSA before the Roth IRA. HSA is a triple tax benefit if you use it as a pure investment vehicle and not to actually pay your medical needs as they are incurred.
Plus I don't think you get income limited out of the HSA like you do the Roth. Please correct me if I'm wrong here.
Correct. It is flat capped based on single/family status regardless of income. Plus, your HSA contributions are pre-tax, so your AGI should drop which can help you if you are on the bubble of the Roth IRA threshold.
We passed the Roth income limit last year and going forward such that a job loss would be the only thing that would put us back under. Changed my Roth contributions to pre-tax contributions just because I wasn't sure which to do and didn't have time to compare the two options. Would it be better to make post-tax contributions? I figured the growth of the extra amount contributed now that would otherwise go to the government would more than make up for having to pay more tax later.
Ramp up the 401k withholdings to bring your AGI down or open a Trad IRA and do backdoor conversions.

Or both.

/not a CPA or CFA
b0ridi
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Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?



Roth is someone's name, not an acronym. No need to capitalize all of it.
Ragoo
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AG
boridi said:

Ragoo said:

Before anyone jumps in to offer advice, first give us some background on your current finances and what your goal ultimately is for this 10-15K.

emergency savings?
company 401(k) - match?
ROTH IRA?
HSA?



Roth is someone's name, not an acronym. No need to capitalize all of it.
you showed me. Someone call the fire department I am burning.
Scott95
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AG
They were going to call it a "Johnny Lips" IRA but decided Roth IRA was a better name.
TwoMarksHand
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Scott95 said:

They were going to call it a "Johnny Lips" IRA but decided Roth IRA was a better name.


Plus a "Backdoor Johnny Lips" IRA is just too much
Lot Y Tailgate
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AG
Fund your 2017 roth, there is no downside, you can take out the contribution tax and penalty free at anytime.

You can take out up to $10k to buy a house.
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