32, New to investing, No retirement fund, Advice Please

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Sammp
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32, New to investing, No retirement fund, Advice Please

Post by Sammp » Thu Mar 19, 2015 10:33 am

I'm 32 with $600 in a fidelity IRA. The money is just sitting there, doing nothing. I'm ready to start buckling down and contributing to my IRA, and I am interested in investing.

I met with someone from Edward Jones yesterday, but after much research I have decided it's probably not the best bet. I would rather learn the ropes then pay someone to do everything for me.

I have read books, articles, etc. but there is so much conflicting advice out there, and I just don't know where to start.

I was thinking of going with Vanguard. Does anyone have any opinions on their Target Retirement Funds? I don't have a lot of money to invest initially, and until my student loans are paid off, I will probably only be able to contribute $300 a month.

Can anyone recommend any books for someone who is just starting out. I need EASY books that break everything down. There is so much information and I'm having a hard time piecing everything together to make informed decisions.

Any advice at all, including what mutual funds to look into would be MUCH appreciated!

red5
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Re: 32, New to investing, No retirement fund, Advice Please

Post by red5 » Thu Mar 19, 2015 11:02 am

This is the book that I really enjoyed.
http://www.amazon.com/Bogleheads-Guide- ... +investing

The Vanguard retirement funds are top notch. If in an IRA of some kind they are all you would ever need.

Are your student loans high interest?

Make sure you have some kind of emergency fund.

Good luck.

Topic Author
Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Thu Mar 19, 2015 12:40 pm

I owe about $51,000 in student loans. The interest rates range from 1.6 - 6.8%!!! I have zero credit card debt, thankfully!

Topic Author
Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Thu Mar 19, 2015 12:41 pm

Thank you for the book advice!

kjvmartin
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Re: 32, New to investing, No retirement fund, Advice Please

Post by kjvmartin » Thu Mar 19, 2015 12:42 pm

Good to start the compounding interest game as early as possible. You'd need $1000 to start your IRA at Vanguard in a Target Retirement account. This would be a wonderful idea. Of course, you do need to make sure you have a cash cushion available so you can leave your nest egg untouched in an emergency.

Mike

Rupert
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Rupert » Thu Mar 19, 2015 12:48 pm

OP, a couple of questions: First, does your employer offer a retirement plan, either a defined benefit plan such as a pension or a defined contribution plan such as a 401(k) or 403(b) plan? Second, is your existing IRA at Fidelity a traditional IRA or a Roth IRA?

Stay away from Edward Jones and the like. Your instincts served you well there. Vanguard is a great choice, but Fidelity isn't bad if you want to stick with them. Given your relative lack of investment knowledge, Target Retirement or Lifecycle-type funds are a good options for you.

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Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Thu Mar 19, 2015 12:58 pm

My employer is actually my mom :) She owns a small but very successful business, though she does not offer a retirement or 401k plan. She wants to give me $20,000 in increments to invest. Should that go into a retirement fund or should I use that to pay off my student loans do you think? My account at Fidelity is a Roth IRA.

Dave Ramsey says you should pay off all your debt before you start putting money in your retirement, but I'm reading elsewhere you should do 50/50. Thoughts?

retiredjg
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Re: 32, New to investing, No retirement fund, Advice Please

Post by retiredjg » Thu Mar 19, 2015 1:08 pm

You really can't lose if you pay off the higher interest loans. There is no guarantee that an investment would make more income than you are paying out in interest on some of those. Once you get to the lower interest loans, it does start to make more sense to start investing.

Once you get $1000, I think a Target Retirement fund at Vanguard would be a great idea. But be sure you have some money in the bank as your emergency fund first.

Topic Author
Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Thu Mar 19, 2015 1:12 pm

Okay! Thank you!!

niceguy7376
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Re: 32, New to investing, No retirement fund, Advice Please

Post by niceguy7376 » Thu Mar 19, 2015 1:21 pm

Sammp wrote:Mom does not offer a retirement or 401k plan. She wants to give me $20,000 in increments to invest. Should that go into a retirement fund or should I use that to pay off my student loans do you think?
If your mom does not offer a retirement plan, how is this 20K in increments coming to you? As a salary or personal gift/loan type? You need salary to contribute to IRA.
What are your long term prospects of working for your mom in future? How many employees does she have? Are you considered an employee or a partner in business (Company structure)?

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Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Thu Mar 19, 2015 1:34 pm

It would come as a personal gift. But I am on payroll, I do pay taxes, I have a W2, all that good stuff.

She wants me to take the company over in 10 years, but that isn't where my heart is. Even though she makes good money, it isn't something I can see myself doing. I am not passionate about it like she is. So I know that at some point I will need to come up with a change of plans, I just don't know what yet. I kind of have it made here. I don't make a ton ($17/hr), but on top of my salary she pays my health insurance ($230 a month), phone bill ($50 a month) and I have a very flexible schedule.
I am considered just an employee right now, legally.

We have 10 part-time employees, 3 full-time.

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Jake46
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Jake46 » Thu Mar 19, 2015 5:25 pm

Thanks for the insights - very helpful.

Natsdoc
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Natsdoc » Thu Mar 19, 2015 7:43 pm

If You Can, by William Bernstein is an excellent read for someone just starting out!

https://dl.dropboxusercontent.com/u/290 ... %20Can.pdf

Good Luck!

sawhorse
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Re: 32, New to investing, No retirement fund, Advice Please

Post by sawhorse » Thu Mar 19, 2015 8:07 pm

Could you possibly consolidate your student loans with SoFi?

Topic Author
Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Fri Mar 20, 2015 12:15 pm

Natsdoc wrote:If You Can, by William Bernstein is an excellent read for someone just starting out!

https://dl.dropboxusercontent.com/u/290 ... %20Can.pdf

Good Luck!

Started reading "If You Can" before I went to work. That was extremely informative and VERY easy to understand. Thank you!! I still have more reading to do and also pick up the recommended reading.

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Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Fri Mar 20, 2015 12:16 pm

sawhorse wrote:Could you possibly consolidate your student loans with SoFi?
I'm not sure. I need to look more into that! I've read that you can really get screwed over consolidating?

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BL
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Re: 32, New to investing, No retirement fund, Advice Please

Post by BL » Fri Mar 20, 2015 12:47 pm

Sammp wrote:I owe about $51,000 in student loans. The interest rates range from 1.6 - 6.8%!!! I have zero credit card debt, thankfully!
For more specific advice, list how much you owe at each rate. Usually you would pay minimums on all, but add extra to the highest rate loan (or perhaps the smallest loan, Ramsey style).

Topic Author
Sammp
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Re: 32, New to investing, No retirement fund, Advice Please

Post by Sammp » Fri Mar 20, 2015 1:40 pm

BL wrote:
Sammp wrote:I owe about $51,000 in student loans. The interest rates range from 1.6 - 6.8%!!! I have zero credit card debt, thankfully!
For more specific advice, list how much you owe at each rate. Usually you would pay minimums on all, but add extra to the highest rate loan (or perhaps the smallest loan, Ramsey style).
Okay....here goes nothing... I will list them from highest interest rate to lowest for the fedloans

$431.82 1.61% Consolidated Stafford
$362.00 1.61% Consolidated Stafford
$2394.58 1.61% Consolidated Unsub
$2340.07 1.86% Consolidated Stafford
$712.00 4.5% Sub Stafford
$5500.00 5.6% Sub Stafford
$2334.00 6.0% Sub Stafford
$3448.53 6.3% Consolidated Stafford
$750.00 6.3% Consolidated Unsub
$2216.89 6.3% Consolidated Stafford
$2216.89 6.3% Consolidated Stafford (yes, there are two)
$1250.00 6.3% Consolidated Unsub
$2000.00 6.3% Consolidated Unsub
$3166.00 6.0% Sub Stafford
$929.94 6.8% Unsub Stafford
Is this ever going to end?
$1599.07 6.8% Unsub Stafford
$2341.74 6.8% Unsub Stafford
$2641.00 6.8% Unsub Stafford
$2867.43 6.8% Unsub Stafford
$5922.93 6.8% Unsub Stafford
$5665.51 6.8% Unsub Stafford

I might as well tell you the rest of my financials. I am so desperate for advice, I don't care at this point.

I make approx $2424 a month

Mortgage payment is $650
Car insurance for my boyfriend and I $180
(in exchange he pays DTE, Cable, and extra on our mortgage)
Water bill $40

I put $67.50 biweekly into my savings account, though I know I should put more. I just paid off my credit card debt so that is where my extra money was going. Car is paid off, so no car payment.

$500 or 600 in Fidelity Roth IRA account, $100 in BofA Ira, $1500 in savings

Is there any hope for me!?!

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timboktoo
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Re: 32, New to investing, No retirement fund, Advice Please

Post by timboktoo » Fri Mar 20, 2015 2:00 pm

When you're just starting out, investing is incredibly confusing. You're going to read a lot of advice that contradicts other advice and it'll be hard (impossible) to discern who is right. Because the truth is, nobody knows what the future will bring. So you have to approach this from the 10,000 foot view in order to not go crazy :)

The majority of retirement investing comes down to coming up with a plan and sticking to it. The Target Retirement Funds are pretty ideal for this. I wish there was one book that I could recommend above all others, but there isn't. The closest that I can come up with is to read the Bogleheads' WIKI. Here's a good place to start:

http://www.bogleheads.org/wiki/Getting_started

- Tim

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timboktoo
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Re: 32, New to investing, No retirement fund, Advice Please

Post by timboktoo » Fri Mar 20, 2015 2:21 pm

Sammp wrote:Is there any hope for me!?!
Of course! You're just getting started!

I would recommend you read the Total Money Makeover, by Dave Ramsey. Don't follow his investing advice, but he's a great debt payoff motivator. I did The Baby Steps and highly recommend them.

Good luck and welcome to the forum.

- Tim

retiredjg
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Re: 32, New to investing, No retirement fund, Advice Please

Post by retiredjg » Fri Mar 20, 2015 2:22 pm

Here's another Wiki article that you might find helpful.

https://www.bogleheads.org/wiki/Paying_ ... _investing

When I graduated from college back in the dark ages, I had loans and I thought I'd never get them paid off. Then poof, it was done. Don't let this take on a larger life than it deserves. You'll get there.

EnjoyIt
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Re: 32, New to investing, No retirement fund, Advice Please

Post by EnjoyIt » Fri Mar 20, 2015 2:40 pm

Congrats on getting started. Here are the basics:

1) Start saving now.
2) Live below your means (live on less than you make) and save the rest.
3) Usually building an emergency fund is the first step. The reason for this is anything can happen, and the last thing you want to do is take out more debt during that emergency. Start with 3 months of expenses in that fund. If possible put it in a high yield savings account like ally.com
4) Next start paying off your high interest rate loans. People may argue about what exactly is the cutoff for high interest rate loans. At this point anything in the 6% or higher has to go. I would recommend you use the Dave Ramsey snowball approach. Start with the smallest one ($750.00 then the $929.94, and so forth) and start paying them off one at a time. Once you get all the 6% loans out of the way, you may even consider the 5.5% loan and then the 4.5% just because it is so small.
5) After that start investing putting money in a retirement account. Either a Traditional or Roth IRA. Which one is a matter of opinion/preference. If you think you will be making a lot more money in the future and at a higher tax bracket, you should consider the Roth IRA instead. If you are making $17/h or $35K/yr, at your current tax bracket, Roth is probably your best option. But if/when your income goes up into the 25% tax bracket, I think a traditional IRA is better (my opinion.)

Good luck!
A time to EVALUATE your jitters. | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418

rtw318
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Re: 32, New to investing, No retirement fund, Advice Please

Post by rtw318 » Fri Mar 20, 2015 3:53 pm

Being 32 and not having a retirement fund isn't really a big deal, but being 32 and not having an EMERGENCY FUND is a very big deal that can really hurt your chances at success. Make sure to prioritize setting up that EF with a couple months expenses.

As long as all of the loans are:
-in repayment, not forbearance
-Federal Stafford (subsidized vs unsubsidized doesn't matter once you're in repayment),

Then your consolidation should be pretty straight-forward and there's not a lot of risk of "getting screwed" with these loans. If you have Federal Perkins loans, then it may be best to leave these as unconsolidated. The main reason given usually is that Perkins loans can be forgiven if you're in the "right" career, namely teaching. Once you consolidate a Perkins loan, that potential for forgiveness goes away. More details about consolidating Perkins loans can be found here: http://www.collegescholarships.org/cons ... erkins.htm

With these rates, you probably will not get a great deal on a new interest rate, unfortunately. The consolidated rate would be a weighted average of all student debts, so since you have ~10% of student debt at <2%, your new rate will likely be somewhere in the low-6% range. It could still be psychologically beneficial though to just put all the loans into one big pile...just sending in one big check is better than sending out multiple checks to different servicers.
Sammp wrote:
$431.82 1.61% Consolidated Stafford
$362.00 1.61% Consolidated Stafford
$2394.58 1.61% Consolidated Unsub
$2340.07 1.86% Consolidated Stafford
$712.00 4.5% Sub Stafford
$5500.00 5.6% Sub Stafford
$2334.00 6.0% Sub Stafford
$3448.53 6.3% Consolidated Stafford
$750.00 6.3% Consolidated Unsub
$2216.89 6.3% Consolidated Stafford
$2216.89 6.3% Consolidated Stafford (yes, there are two)
$1250.00 6.3% Consolidated Unsub
$2000.00 6.3% Consolidated Unsub
$3166.00 6.0% Sub Stafford
$929.94 6.8% Unsub Stafford
Is this ever going to end?
$1599.07 6.8% Unsub Stafford
$2341.74 6.8% Unsub Stafford
$2641.00 6.8% Unsub Stafford
$2867.43 6.8% Unsub Stafford
$5922.93 6.8% Unsub Stafford
$5665.51 6.8% Unsub Stafford

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BL
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Re: 32, New to investing, No retirement fund, Advice Please

Post by BL » Fri Mar 20, 2015 5:27 pm

My suggestions:
Do a simple net worth statement maybe every 6 months or at least annually. It doesn't have to be a fancy spreadsheet, plain ol' pencil and paper would work fine. Any payments on loans would increase net worth, as would investments.

You are well on the way. Paying off credit cards is just as important, or more important, as investing.

Save some money now for your emergency fund, then put $1,000 in a Roth IRA at Vanguard. Put it into something at least as conservative as Target Retirement Income until your separate EM has a couple month's expenses covered.

Talk to your mom about using her gift for paying off student loans instead of investing, or splitting it 50-50. You need to let her know how much it stresses you out to have those 6+% loans. Once they are paid off, use that money to build up emergency fund and invest.

You may also need to do some research on other jobs and make some plans as to what you really want to do. It may be that you will find that the "grass is not greener on the other side", but it will require some other experience to know that. Keep your Mom in the loop, but don't give up your life decisions to anyone else.

bluejello
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Re: 32, New to investing, No retirement fund, Advice Please

Post by bluejello » Sat Mar 21, 2015 8:02 am

Hi Sammp,

Welcome to Bogleheads! Don't worry, there is plenty of hope for you. Here's my advice:

1) Budgeting: I would try to save at least 15-20% of your income, so around $350 - $500 a month. This should be doable if you are frugal. Since you listed your fixed expenses (mortgage + car insurance + water bill) at $870, that still leaves you with $2424 - $870 - $500 = $1024 a month for food, gas, etc. Set up automatic transfers from your checking to your savings account as soon as your paychecks arrive; that way you never even see the money and aren't tempted to spend it. This is called "paying yourself first."

2) Student Loans: After you have an emergency fund of $2k - $3k, then I would start tackling the student loans. The advice to use the "snowball approach" is very sound. Personally, this is the order in which I would tackle your loans (ignoring the ones which are less than 6% for now):

$750.00 6.3% Consolidated Unsub
$929.94 6.8% Unsub Stafford
$1250.00 6.3% Consolidated Unsub
$1599.07 6.8% Unsub Stafford
$2000.00 6.3% Consolidated Unsub
$2216.89 6.3% Consolidated Stafford #1
$2216.89 6.3% Consolidated Stafford #2
$2334.00 6.0% Sub Stafford
$2341.74 6.8% Unsub Stafford
$2641.00 6.8% Unsub Stafford
$2867.43 6.8% Unsub Stafford
$3166.00 6.0% Sub Stafford
$3448.53 6.3% Consolidated Stafford
$5665.51 6.8% Unsub Stafford
$5922.93 6.8% Unsub Stafford

I know it seems like an insurmountable sum, but if you pay off $500 a month you should be able to have ALL of these loans paid off within 7 years. If you earn more money in the future and can accelerate your payments, then you'll be able to do it even faster.

3. Earning: I know you said you don't have a passion for your mom's business but frankly, you are not in a position to worry about passion right now. Figuring out "what you really want to do with your life" is a luxury for people who already have money. If I were you, I would work my ass off at my mom's business. Pull extra hours, ask for more responsibility, learn everything you can, do whatever it takes to increase your income in both short-term and long-term. Don't worry about the fact that "your heart is not in it", just do it.

Success opens doors. Let's say that in 7 years you know the business and the industry inside and out, and you have proven yourself capable of running a successful multi-million dollar business. Think about all the job opportunities you would have in that situation. You would be in a much stronger position to start looking for jobs that interest you, compared to where you are now.

4. Investing: It's wonderful that your mom wants to give you $20,000 to invest. Ask her to contribute $5500 a year to a Roth IRA in your name, and invest it in a Vanguard Target Retirement Fund. If you hurry, you can still make your contribution for 2014 before April 15.

Best of luck!

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