23 year old, need financial advisement

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ks1773
Posts: 18
Joined: Sun Aug 19, 2012 7:17 am

23 year old, need financial advisement

Post by ks1773 »

Hello, I have been working for about a year now and have decided to become serious with my finances. I have read several posts in this forum and also The Boglehead’s Guide to Investing, but I definitely still feel like a “newb” to the investing world. I have listed the details of my current state below, any suggestions/recommendations would be greatly appreciated!

Salary: $80,000 - $95,000 (depending on the amount of OT I do)
Emergency Fund: 3 months

Saving: 32k in Ally 5 year CD with 1.69% (I am planning to withdraw the money before it matures)

Debt: none

Tax Filing Status: Single

Tax Rate: 25 or 28% Federal
9.30% California

Age: 23

Desired Asset Allocation: 70/30

Current portfolio -

TSP: low 5 figures
5% (with employer matching 5%)

Currently doing the Last Month Strategy for TSP and for the month of August, I am putting 100% in the C fund.

I am planning to buy a Condo (~$200,000 – 250,000) in the next 12 months to rent out for profit.


Questions:
1. Should I invest in I-bond ($10,000)/year to make sure I am in the 25% Federal bracket (I don’t know if I can make the 15% bracket) or should I increase % for my TSP?
2. Should I start a Roth IRA with vanguard? Or just increase the contribution in my TSP (traditional)?
a. if I do start a Roth IRA, which funds should I be looking at?
Last edited by ks1773 on Sun Aug 19, 2012 9:02 am, edited 1 time in total.
Johm221122
Posts: 6372
Joined: Fri May 13, 2011 6:27 pm

Re: 23 year old, need financial advisement

Post by Johm221122 »

Welcome to forum, Here is BOGLEHEAD philosophy
http://www.bogleheads.org/wiki/Boglehea ... Philosophy
This will get you started
Good luck
John
Johm221122
Posts: 6372
Joined: Fri May 13, 2011 6:27 pm

Re: 23 year old, need financial advisement

Post by Johm221122 »

I Bonds will not lower your taxable income
I would definitely increase TSP
Your investments should be something like this
http://www.bogleheads.org/wiki/Three-fund_portfolio
NYBoglehead
Posts: 1588
Joined: Fri May 25, 2012 9:38 am

Re: 23 year old, need financial advisement

Post by NYBoglehead »

Definately increase TSP contributions to lower taxable income. Low ERs, C fund is excellent.
User avatar
hoppy08520
Posts: 2193
Joined: Sat Feb 18, 2012 10:36 am

Re: 23 year old, need financial advisement

Post by hoppy08520 »

If you can max your TSP at $17k, then you might be able to do a deductible Traditional IRA rather than Roth to lower your taxes further. You'd need to get your MAGI below $58000 for a full deduction. That might be pushing it, but you should look into it if you're on the lower end of that salary scale, anything you can do to lower that high marginal tax rate. The phaseout for deductions ends at $68000 so you might be able to do some Roth and some deductible Traditional. If you're not sure what your income will be in 2012, then wait to 2013 before filing 2012 taxes to make your IRA contribution after all the numbers are in. Or, do one or the other now and recharacterize to the optimal amounts in 2013 before filing 2012 taxes.

Explains deductible IRA info:
http://iracontributionlimits2010.com/ir ... heet-2012/

What is MAGI:
http://www.fivecentnickel.com/2006/11/1 ... ncome-agi/

Explains how to compute traditional IRA deductibility phaseout. Uses 2011 tax brackets in example but you can adapt this to 2012 brackets:

http://www.investopedia.com/university/ ... a/ira2.asp
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