$44,000 for 1st Time Investor

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Springbok
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$44,000 for 1st Time Investor

Post by Springbok » Sat Nov 29, 2014 6:36 pm

Hello,

I originally posted here a few years ago, but have started to get more serious about investing. I set up a Roth IRA. I am ordering The Bogleheads’ Guide to Investing book. While I'm waiting for it to arrive, would anyone be able to offer advice for what I should focus on in my research? My next goals are:

I am working with TIAA cref to see if I can contribute more to my 401K.
Learn about bonds (I know nothing)
Learn about stocks (I know the very basics)

I have updated my information:

State of Residence: MN
Age: 33
Salary: Wages from W2: $35,400. After taxes, social security, Medicare: $25,900
Debt: None Emergency funds: Yes -- 6 months of expenses I have health insurance, dental, and car insurance.
I have $100,000 in a money market
Tax Filing Status: Single (no children)
Tax Rate: 11% $3,900 Federal 5% $2,300 State

(I’ll probably understand these 2 below more after reading the book. Right now is a decision based on minimal research)
Desired Asset Allocation: 40 equity / 60 bonds
Desired international allocation: 25% stocks

Current Retirement Assets:
Roth IRA at Vanguard: $11,000 in Money Market with yield of .49%
403(b) (*edit: I had originally listed 401k) TIAA CREF Money Market R2 - Employer matches contribution
Units/Shares: 531
Price: $25
Balance: $13,600 (Employee contributes 50%, Employer contributes 50%)
Expense ratio: .38%

Thank you.

------------------------------------
Everything below was from the original post in 2014 and isn't relevant anymore:

Hello,

I know nothing about investing, and very little about personal finance. I recently was given $44,000 (My original post said $50,000, but I added some of this to my emergency fund) from a deceased family member. I am 31 years old, and make $32,000 a year (this is after taxes are taken out).

**EDIT**

Thank you everyone who has replied. I've read through all your posts, and will soon read the links you've sent in depth. I really appreciate you taking the time to share your expertise, and be so welcoming to someone who doesn't know much about this subject.

After reviewing the Investment Planning and Asking Portfolio Questions links from Laura, here is more thorough background information. This was very helpful for me.

I am very curious about investing yourself vs. hiring someone to do it.

Total available for investment = $44,000 (This is currently in a money market).
Emergency funds: Yes (6 months of expenses completely separate from the 44,000)
Debt: I have no debt.

Tax Filing Status: Single (no children)
Salary: $32,000 after taxes
Tax rate:
FWHS 9.92%
Wisconsin: 4.33%
Other % taken out of paycheck:
Medicare 1.4%
OSAD 94%
Retirement: 5% (TIAA-CREF through employer)
Dental: 1.07%
Health: 3.58%
Long-term disability: %.28

Life insurance: $50 through General America

I have car insurance.

State of Residence (Minnesota, but I work in Wisconsin)
Age: 31
Desired Asset allocation 80 equity / 20 bonds (I'm not really sure about this. I used a formula I found in the Investment link Laura sent.)
Desired international allocation: 50% of stocks
Last edited by Springbok on Wed Mar 22, 2017 10:57 am, edited 8 times in total.

Güero
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Re: 50,000 first time investor.

Post by Güero » Sat Nov 29, 2014 9:56 pm


clip651
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Re: 50,000 first time investor.

Post by clip651 » Sat Nov 29, 2014 10:21 pm

If you haven't already done so, deposit the money in a savings account at a bank with FDIC insurance (or a credit union with similar insurance guarantees) in an account in your name (not joint with others) where it will be safe while you figure out what to do with it. Do not buy or sign anything without fully understanding what you are doing, and giving yourself lots of time to think it through. There is no rush.

This may be helpful as well.
https://www.bogleheads.org/wiki/Managing_a_windfall

Best wishes!

cj

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Watty
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Re: 50,000 first time investor.

Post by Watty » Sun Nov 30, 2014 1:07 am

clip651 wrote:If you haven't already done so, deposit the money in a savings account at a bank with FDIC insurance (or a credit union with similar insurance guarantees) in an account in your name (not joint with others) where it will be safe while you figure out what to do with it. Do not buy or sign anything without fully understanding what you are doing, and giving yourself lots of time to think it through. There is no rush.

This may be helpful as well.
https://www.bogleheads.org/wiki/Managing_a_windfall

Best wishes!

cj
+1

Take at least six months to a year to learn more and to get comfortable with handling the money. You are only 31 and the money might be invested for 60+ years until you are in your 90's so letting it sit on the sidelines for that long will be insignificant.

The only exceptions this that I can think of would be to;

1) Pay off high interest credit card debt.
2) Get health insurance if you don't already have it
3) Review your car insurance and if you have a low amount of coverage then get that increased.

22twain
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Re: 50,000 first time investor.

Post by 22twain » Sun Nov 30, 2014 5:39 am

Do you have a retirement plan at work, a 401(k) or something similar, that you can contribute money to, taken out of your paycheck before paying taxes? You might consider increasing your contributions to that plan for a few years, while drawing some of your living expenses from your windfall. This would have the net effect of moving part of all of the windfall to tax-sheltered status, which would let it grow faster.

Or you could simply open an IRA if you don't already have one, and make contributions to it up to the maximum every year. Then you can invest the money any way you want, instead of being limited to whatever choices your plan at work offers.
My investing princiPLEs do not include absolutely preserving princiPAL.

Laura
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Re: 50,000 first time investor.

Post by Laura » Sun Nov 30, 2014 10:20 am

I am sorry to hear about your loss but hope that the windfall brings you some peace of mind. You need to be planning for your future with this money. I agree with making sure the money is safe in a savings account temporarily but don't talk to your bank about what to do with this money. Unfortunately they sell high priced investments and these are not the best for you.

To help us give you some additional recommendations specific to your situation please take a look at Investment Planning and Asking Portfolio Questions and share the requested information with us. We need to understand if you have any debt, if you have an emergency fund, or any other investments before we can make a recommendation for you. An emergency fund and debt are really critical to your long term financial success.

We can help you stay financially secure and independent and on a solid path with a bit more information.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

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backpacker
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Re: 50,000 first time investor.

Post by backpacker » Sun Nov 30, 2014 10:47 am

This is a great place to come for advice Springbok! Laura's suggestion is the way to go. Take a look at the template for asking personal financial questions and fill in some of the details. That will help everyone give better advice.

From what you've said so far, I bet you would be a good candidate for one of Vanguard's LifeStrategy funds. In particular, I would bet that the conservative growth fund would be a good fit. That's the only investment you need.

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Mon Dec 01, 2014 12:00 am

Thank you for your comments. I edited my first post with more in depth information based on your questions.

IPer
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Re: $44,000 for 1st Time Investor

Post by IPer » Mon Dec 01, 2014 12:10 am

Hi, sounds like this money can be more of a blessing, especially if you end up reading the Wiki for this website. Many good suggestions from
members as well. I suggest you find a target date fund (vanguard preferred) that rhymes with your asset allocation (after reading the Wiki
a couple times of course), put that money in there, and forget about it. Then you can use the newly gained knowledge to direct your
financial destiny more than you would have. At your age, you are ahead of the game. Make sure you are saving/investing at least 15% of gross
(I prefer 20% myself) and directing the first fruits to the tax-deferred (IRA) type accounts. You can invest a small amount of time now to
change your future radically, do it!
Read the Wiki Wiki !

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Mon Dec 01, 2014 12:29 am

Thanks IPer. I will read the wiki, and look into setting aside 15 to 20%

IPer
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Re: $44,000 for 1st Time Investor

Post by IPer » Mon Dec 01, 2014 12:34 am

Springbok nice to have a responsive OP! And welcome to Bogleheads!
Read the Wiki Wiki !

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Uncle Pennybags
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Re: $44,000 for 1st Time Investor

Post by Uncle Pennybags » Mon Dec 01, 2014 12:47 am

IMHO 50% foreign for stocks is 20% too high. There is no other country that comes close to the stability of the US of A. Vanguard agrees with me when they put together their all in one 80/20 fund.

Code: Select all

Vanguard LifeStrategy Growth Fund (VASGX)
1 	Vanguard Total Stock Market Index Fund Investor Shares 	56.6%
2 	Vanguard Total International Stock Index Fund Investor Shares 	23.8%
3 	Vanguard Total Bond Market II Index Fund Investor Shares** 	15.6%
4 	Vanguard Total International Bond Index Fund 	4.0%

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BL
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Re: $44,000 for 1st Time Investor

Post by BL » Mon Dec 01, 2014 1:24 am

Springbok wrote:

I am very curious about investing yourself vs. hiring someone to do it. Use a Vanguard Target Retirement or Life Strategy fund with the desired % of Bonds and you don't need to donate your retirement money to someone who may not have your best interests in mind, no matter what they say.

Total available for investment = $44,000 (This is currently in a money market).
Emergency funds: Yes (6 months of expenses completely separate from the 44,000)
Debt: I have no debt. Good for you!

Tax Filing Status: Single (no children)
Salary: $32,000 after taxes Try to figure out your taxable wage. It will be in Box 1 of your W-2 that you get in January.
Tax rate:
FWHS 9.92% Is this what you have withheld? If your Box 1 wages are under $47,000, you are probably in the 15% federal tax bracket.
Wisconsin: 4.33%
Other % taken out of paycheck:
Medicare 1.4%
OSAD 94% this doesn't seem possible.
Retirement: 5% (TIAA-CREF through employer) Is this what your employer will match? You could increase this amount and live off an equivalent amount of your windfall until it is gone.
Dental: 1.07%
Health: 3.58%
Long-term disability: %.28

Life insurance: $50 through General America Not sure that you need life insurance. How long have you held it and what kind of life insurance is it? See the contract title. (term, whole, etc.) Do you pay this each month?

I have car insurance.

State of Residence (Minnesota, but I work in Wisconsin)
Age: 31
Desired Asset allocation 80 equity / 20 bonds (I'm not really sure about this. I used a formula I found in the Investment link Laura sent.) This may be too aggressive for a beginner. 60/40 or even 40/60 might be a better start. You can put 5,500 into either a traditional or a Roth IRA for 2014 (You have until April 15, 2015) and also the same for 2015 after January 1, 2015. I especially like Roth if you increase your TIAA.
Desired international allocation: 50% of stocks
Here is a free 16-page online book for beginners written by a Boglehead:
http://www.etf.com/docs/IfYouCan.pdf
You might pick up some good ideas there as well as at this site. The 3 funds he mentions are the basis for the all-in-one funds suggested above.

I would be cautious about telling anyone about your having money as it will bring out all kinds of people that want to benefit from it: salesmen-insurance, brokers, bankers, etc., "friends" who have a dire need for some of your money, even charities. You are anonymous here so no one can gain from your money here. Listen carefully to advice and beware the occasional poster who tries to lead you on a wrong path.

Laura
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Re: $44,000 for 1st Time Investor

Post by Laura » Mon Dec 01, 2014 9:20 pm

Excellent edit of your first post. Congratulations. We just need a little more information. You mention Retirement: 5% (TIAA-CREF through employer). Is this a 401k or a pension plan? If you don't know that is okay. Now is the time to do a little digging. Look at the retirement options through your employer. It could be something called a 401k but there are many other names as well. See if you receive any matching funds from your employer if you make contributions from your own paycheck. Post what you find here and we can help explain this or tell you what to look for.

I do have one question. You say you are spending $50 on life insurance. Is there anyone who depends on money from you to cover their expenses? If the answer is no then you may not need any life insurance at all.

Regardless of what your employer may offer it seems that a roth IRA would be a good way for you to hold your money. This account uses money after you pay tax (your cash falls into this category) but then it grows tax free forever. You can withdraw the money you put in at anytime in an emergency but your earnings need to stay inside. You can withdraw money when you reach retirement age. The annual limit for people under 50 is $5.5k so you could put $5.5k into a roth for 2014 and another $5.5k for 2015. Think of a roth as a type of suitcase. Once you have the suitcase you can then choose what to put inside. This would be your actual investment. You don't need to worry about that right away. But I wouldn't take any action yet until we have a better understanding of options through your employer.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

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backpacker
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Re: $44,000 for 1st Time Investor

Post by backpacker » Tue Dec 02, 2014 12:35 pm

Uncle Pennybags wrote:IMHO 50% foreign for stocks is 20% too high. There is no other country that comes close to the stability of the US of A. Vanguard agrees with me when they put together their all in one 80/20 fund.

Code: Select all

Vanguard LifeStrategy Growth Fund (VASGX)
1 	Vanguard Total Stock Market Index Fund Investor Shares 	56.6%
2 	Vanguard Total International Stock Index Fund Investor Shares 	23.8%
3 	Vanguard Total Bond Market II Index Fund Investor Shares** 	15.6%
4 	Vanguard Total International Bond Index Fund 	4.0%
The only thing close to a consensus among Bogleheads is that investors should have somewhere between 20% and 50% of their stocks in international. Even then, there are a few renegades running around with 0% international and a few with 70%+ international.

How much international a particular investor should have depends on whether the investment will be in a tax-advantaged account. International stocks are at a disadvantage in tax advantaged accounts. So if most of your money is in taxable accounts, I would hold more like 20%-30% international. (FWIW I think this is why Vanguard has lower international allocation in their TD and LS funds. Those funds are most often held in tax-advantaged accounts, so it makes sense to hold less international.)

I split 50/50 because I have space to put all my international stocks my taxable account.

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Sun Dec 07, 2014 1:11 pm

Laura wrote:Look at the retirement options through your employer. It could be something called a 401k but there are many other names as well. See if you receive any matching funds from your employer if you make contributions from your own paycheck. Post what you find here and we can help explain this or tell you what to look for.
Thank you for your comments, Laura. Sorry for the delay in response. I do have a 401K. Currently my employer matches what I put in my paycheck.
I do have one question. You say you are spending $50 on life insurance. Is there anyone who depends on money from you to cover their expenses? If the answer is no then you may not need any life insurance at all.
No one depends on me. My parents had set me up with life insurance in the past, and I just continued with the plan not understanding it.
Regardless of what your employer may offer it seems that a roth IRA would be a good way for you to hold your money. This account uses money after you pay tax (your cash falls into this category) but then it grows tax free forever.
I read that I can contribute to an IRA even while I have my employer-sponsored retirement plan. Beyond this, I'm not sure kind of information or options I should be investigating from my employer. I am asking about how much my employer will match in retirement. Again, thank you everyone for your valuable time.
Last edited by Springbok on Sat Dec 13, 2014 6:49 pm, edited 3 times in total.

tibbitts
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Re: $44,000 for 1st Time Investor

Post by tibbitts » Sun Dec 07, 2014 1:26 pm

Springbok wrote: No one depends on me. My parents had set me up with health insurance in the past, and I just continued with the plan not understanding it.
I think the OP means life insurance.

fposte
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Re: $44,000 for 1st Time Investor

Post by fposte » Sun Dec 07, 2014 1:43 pm

Springbok wrote: I read that I can contribute to an IRA even while I have my employer-sponsored retirement plan. Beyond this, I'm not sure kind of information or options I should be investigating from my employer. Thank you again for your valuable time.
An IRA is something you can set up on your own; it doesn't need to involve your employer. You could open one just about anywhere--obviously Vanguard is popular around here. You have until April 15 of 2015 to put in a contribution for 2014, so you don't have to rush into it by the end of the year; while you might be a good candidate for a simple target-date fund, I think there's still some sorting out of your overall portfolio that might affect the decision about what you do in the IRA.

I'll also second Laura's suggestion to think about bumping up your contribution to your 401k and drawing on the windfall to compensate for your reduced salary. So for next year you could do the $18000 max contribution, for instance (though you could of course do less), while taking $18000 from the windfall to live off of; then put $11000 in a Roth IRA ($5500 for 2014 and $5500 for 2015). Then in 2016 you do $5500 in the Roth again and put the $9500 in the 401k, paying yourself with the remaining $9500 with the rest of the windfall assets, and that's two years where you've seriously shored up your security.

Laura
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Re: $44,000 for 1st Time Investor

Post by Laura » Sun Dec 07, 2014 1:58 pm

Can you post the fund options available in your 401k along with the expense ratio of each fund? That will help us blend yoru 401k and your new roth into one unified portfolio. I agree with the recommendation from fposte about increasing your 401k contributions above what you can actually afford and using this money you just received for your living expenses. This lets you "transfer" the money into your retirement accounts where it can grow in a tax advantaged manner for many years. This will be hugely helpful for you in the long term.

The roth IRA is another excellent choice and will help you secure a good retirement.

With a bit more information on the choices available in your 401k we can give you some very quick options.

On the life insurance, is this $50 per month or $50 per year. If it is per month I would think about whether you really need that or whether you have any health conditions that would prevent you from getting any insurance in the future. It won't benefit you but if you do get married or have children you would need it at that time.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

killjoy2012
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Re: $44,000 for 1st Time Investor

Post by killjoy2012 » Sun Dec 07, 2014 1:59 pm

OP: The other thing you should consider when making your investment plan is how engaged and "into it" you want to be WRT managing your investments. If you read through this forum, you're sure to stumble on common topics like the 3 fund portfolio, the need to periodically rebalance, various types of tilting, tax optimizations, should I do this tweak or that, etc. If you find personal finance fun, then that's great - go do some reading now, set a plan, execute your plan and stick with it on-going. OTOH, if you're just trying to get this game plan set now and don't foresee yourself wanting to spend time managing your investments monthly/quarterly/whatever, then you may just want to consider a single "retirement target" or LifeStrategy fund - set it and forget it.

The Boglehead approach to investing doesn't take a lot of effort of manage, but it does take someone with the interest and willingness to commit the time... kinda like farming your land. That's no problem for some, and unappealing to others. I would just ask yourself which type you are before you get too deep into setting an AA.

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Sun Dec 14, 2014 8:40 pm

Thank you everyone for your response. I will investigate and respond when I am on winter break in a few weeks.

BogleBoogie
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Re: $44,000 for 1st Time Investor

Post by BogleBoogie » Sun Dec 14, 2014 8:47 pm

killjoy2012 wrote:OP: The other thing you should consider when making your investment plan is how engaged and "into it" you want to be WRT managing your investments. If you read through this forum, you're sure to stumble on common topics like the 3 fund portfolio, the need to periodically rebalance, various types of tilting, tax optimizations, should I do this tweak or that, etc. If you find personal finance fun, then that's great - go do some reading now, set a plan, execute your plan and stick with it on-going. OTOH, if you're just trying to get this game plan set now and don't foresee yourself wanting to spend time managing your investments monthly/quarterly/whatever, then you may just want to consider a single "retirement target" or LifeStrategy fund - set it and forget it.

The Boglehead approach to investing doesn't take a lot of effort of manage, but it does take someone with the interest and willingness to commit the time... kinda like farming your land. That's no problem for some, and unappealing to others. I would just ask yourself which type you are before you get too deep into setting an AA.
+1 for a "Target Date" or "Life Strategy" fund from Vanguard. Pick the date, purchase and sit back - DO NOTHING!

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Sun Mar 12, 2017 6:41 pm

I am back after 2 years :)

I haven't done much except set up a Roth IRA and start being organized about my budgeting. I've updated the top half of the first post in this thread with new information. If you have a moment, I'd appreciate any advice you can give. Thank you.

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StormShadow
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Re: $44,000 for 1st Time Investor

Post by StormShadow » Sun Mar 12, 2017 7:02 pm

Springbok wrote:I am back after 2 years :)

I haven't done much except set up a Roth IRA and start being organized about my budgeting. I've updated the top half of the first post in this thread with new information. If you have a moment, I'd appreciate any advice you can give. Thank you.
What investment options do you have in your 401k? What are the expense ratios for each option?

If they are relatively affordable (my definition would be < 1% ER per year; with no front-or-back load/fees), I'd consider maxing your 401k (up to $18,000 for 2017) in addition to your IRA ($5,500 for 2017).

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Mon Mar 13, 2017 1:33 pm

StormShadow wrote:
Springbok wrote:I am back after 2 years :)

I haven't done much except set up a Roth IRA and start being organized about my budgeting. I've updated the top half of the first post in this thread with new information. If you have a moment, I'd appreciate any advice you can give. Thank you.
What investment options do you have in your 401k? What are the expense ratios for each option?

If they are relatively affordable (my definition would be < 1% ER per year; with no front-or-back load/fees), I'd consider maxing your 401k (up to $18,000 for 2017) in addition to your IRA ($5,500 for 2017).

Here are the other options for the 401K (I think... I'm still new to this)
Image

I did not know that $18,000 was the limit for 401K. I'm waiting for a response from TIAA as confirmation to see how much I can contribute. For the Roth IRA, I've already added $5,000 for 2017 :)

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Tue Mar 14, 2017 6:58 pm

StormShadow wrote:
Springbok wrote:I am back after 2 years :)

I haven't done much except set up a Roth IRA and start being organized about my budgeting. I've updated the top half of the first post in this thread with new information. If you have a moment, I'd appreciate any advice you can give. Thank you.
What investment options do you have in your 401k? What are the expense ratios for each option?

If they are relatively affordable (my definition would be < 1% ER per year; with no front-or-back load/fees), I'd consider maxing your 401k (up to $18,000 for 2017) in addition to your IRA ($5,500 for 2017).
I'm confused about maxing out the 401K. So, that $18,000 has to be automatically deducted from my paycheck over the course of a year? Or, since I have that money in the bank, can I just add it all at once? I got confused after speaking to a TIAA representative who said that if I add any amount that is over 5% of my salary, it will need to go into a supplemental account. Maybe this isn't a big concern, but it through me off.

Saving$
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Re: $44,000 for 1st Time Investor

Post by Saving$ » Tue Mar 14, 2017 7:08 pm

Yes, the $18k max allowable contribution to 401k must come out of your paycheck.

With most plans, you can either front load this (ie contribute almost the entire paycheck until you reach the max) or do it over the course of the year in equal deductions from your paycheck. Not sure why the TIAA rep thinks anything over 5% of your salary has to go to a different account. Suggest calling back and talking to a different rep.

Pros to frontloading:
- if you are going to quit/get fired this year, you will have more socked away in your 401k than if you did not front load.
- gets you invested in the market sooner, theoretically giving you more time to realize gains.
Cons to frontloading:
- if your employer matches contributions by the paycheck only, you may miss out on the matching after you have maxxed out your annual contribution

Note: 2016 and 2017 max Roth IRA if you are under 50 is $5,500, rather than the $5,000 you posted. Also if you are 50 or over in 2017, both the 401k and Roth IRA max contributions increase.

ETA: Even though maxxing out your 401k will lower your take home pay, I'd suggest doing so, and living off of your $100k in savings.
How old are you?
Do you have any other sources of income, or are your taxes based on the income posted above? If so, does your employer offer a Roth 401k option? With your low tax bracket, that may be worth considering.

Springbok
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Re: $44,000 for 1st Time Investor

Post by Springbok » Tue Mar 14, 2017 9:40 pm

Saving$ wrote:Yes, the $18k max allowable contribution to 401k must come out of your paycheck.

With most plans, you can either front load this (ie contribute almost the entire paycheck until you reach the max) or do it over the course of the year in equal deductions from your paycheck. Not sure why the TIAA rep thinks anything over 5% of your salary has to go to a different account. Suggest calling back and talking to a different rep.

Pros to frontloading:
- if you are going to quit/get fired this year, you will have more socked away in your 401k than if you did not front load.
- gets you invested in the market sooner, theoretically giving you more time to realize gains.
Cons to frontloading:
- if your employer matches contributions by the paycheck only, you may miss out on the matching after you have maxxed out your annual contribution

Note: 2016 and 2017 max Roth IRA if you are under 50 is $5,500, rather than the $5,000 you posted. Also if you are 50 or over in 2017, both the 401k and Roth IRA max contributions increase.

ETA: Even though maxxing out your 401k will lower your take home pay, I'd suggest doing so, and living off of your $100k in savings.
How old are you?
Do you have any other sources of income, or are your taxes based on the income posted above? If so, does your employer offer a Roth 401k option? With your low tax bracket, that may be worth considering.
I am 33. I don't have any other sources of income. I can easily live off the $100k for a while.
Taxes are based on the income provided above. I am not sure if they offer the Roth 401K option, but I will look into that.

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jmndu99
Posts: 341
Joined: Sun Jul 14, 2013 4:18 pm

Re: $44,000 for 1st Time Investor

Post by jmndu99 » Tue Mar 14, 2017 10:29 pm

I'm confused about maxing out the 401K. So, that $18,000 has to be automatically deducted from my paycheck over the course of a year? Or, since I have that money in the bank, can I just add it all at once? I got confused after speaking to a TIAA representative who said that if I add any amount that is over 5% of my salary, it will need to go into a supplemental account. Maybe this isn't a big concern, but it through me off.
Welcome back OP.

It sounds like your employer will match up to the first 5% you contribute.

This means that you can contribute, for insurance, 10% of your paycheck. Your employer matches your first 5% and the other 5% is what is known as your supplemental contribution. It DOES NOT go into a "supplemental account"

Best wishes,
J

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StormShadow
Posts: 575
Joined: Thu Feb 09, 2012 6:20 pm

Re: $44,000 for 1st Time Investor

Post by StormShadow » Wed Mar 15, 2017 2:43 pm

jmndu99 wrote:
I'm confused about maxing out the 401K. So, that $18,000 has to be automatically deducted from my paycheck over the course of a year? Or, since I have that money in the bank, can I just add it all at once? I got confused after speaking to a TIAA representative who said that if I add any amount that is over 5% of my salary, it will need to go into a supplemental account. Maybe this isn't a big concern, but it through me off.
It sounds like your employer will match up to the first 5% you contribute.

This means that you can contribute, for insurance, 10% of your paycheck. Your employer matches your first 5% and the other 5% is what is known as your supplemental contribution. It DOES NOT go into a "supplemental account"
+1

My contributions go into a 401(k).

My employer matched contributions go into a 401(a).

Be careful that you don't over-contribute. My retirement plan automatically stop contributing once I've reached $18k in any given year, but yours may not. Otherwise, you'll have to remove the excess contribution.

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Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: $44,000 for 1st Time Investor

Post by Uncle Pennybags » Thu Mar 16, 2017 12:45 am

backpacker wrote:The only thing close to a consensus among Bogleheads is that investors should have somewhere between 20% and 50% of their stocks in international.
Mr. Bogle says we don't need any. I have 10% just because.
jmndu99 wrote:This means that you can contribute, for insurance, 10% of your paycheck. Your employer matches your first 5% and the other 5% is what is known as your supplemental contribution. It DOES NOT go into a "supplemental account"
OP after you max out what your employer will match check out a traditional IRA; it may be a better deal than your companies 401k.

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