rdlaner wrote:Ideally, I would like to conservatively invest the $15k towards a down payment on a house in the intermediate future, likely 4-6 years.
ofcmetz wrote:1. Figure out how much you need in cash for your emergency fund and start saving towards that goal. Keep it in something safe like a money market at your local credit union or maybe an online bank like Ally Bank or something similar.
ieee488 wrote:For something you need in 4-6 years, "investing" is the wrong word to use.
Put in short-term CDs and be done with it.
Twins Fan wrote:You have a bunch of Vanguard funds listed there in your 401k. Do you have the target date retirement funds from Vanguard available in your 401k? If so, I say pick one of those and start putting all your contributions into that.
ofcmetz wrote:I would use the Total Bond Market and Total Stock Market index funds in the 401K. I don't think the European Stock Index is a good international substitute as it's too concentrated. Instead, I would open up a ROTH IRA at Vanguard and use the Total International Stock Index there.
rdlaner wrote:One more question I have is regarding my remaining student loan debt. Is it advisable to use some or most or all of the $15k I have available to paying that off? Since it has been advised not to invest that in a taxable account, it's not likely that I can make a greater return on that money than the interest I am paying on my loans.
What suggestions would be made with this?
First question: given this scenario, is it still to wise to invest in stocks within a 401(k)?
Given that I am 28 years old, I would like to have stocks make up a larger portion of my early portfolio. Given the limited selection of funds in my employers 401(k), this is the allocation I am considering:
Vanguard Inflation-Protected Securities: 5%
Vanguard Total Bond MarketIndex: 20%
Vanguard REIT Index: 10%
Vanguard Total Stock Market Index: 45%
Vanguard European Stock Index: 20%
From what I have researched, most of these funds seem fairly worthwhile. The one I am most unsure about, however, is the Vanguard European Stock Index. It, however, is the only low cost international stock fund that I can choose with this 401(k).
Second question: Does this asset allocation look reasonable and is VEURX a worthwhile component for international diversification?
Last question, give my the information that I have briefly outlined, are there any suggestions on a wiser plan for investing?
rdlaner wrote:Thanks xram, Twins Fan, and Taylor.
I think all your advice resounds very well with me. I think I will adopt a mixed approach with the $15k: pay down some of the high interest student loans, throw a little into the emergency fund, and then put the rest into a Roth IRA.
Taylor, since you suggested opening the the Roth IRA's, what sort of asset allocation would you recommend? Would it be a straight forward 3 fund portfolio:
Total Stock Market
Total International Stock?
Or, would you suggest something different for this specific situation. Since I suspect that I may end up using some of these funds for a house down payment in the undetermined future, I am more inclined to weigh this account towards bonds and securities. What do you think?
Thanks again! This has been most helpful.
rdlaner wrote:It states that I can withdraw earnings from the Roth prior to 5 years and avoid the 10% penalty, however, I will have to pay taxes on the withdrawn earnings.
Can someone verify this? I haven't been able to confirm this in the IRS documentation, so I'm hoping to get as many sets of eyes on this as possible.
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