College student with extra cash

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
ad995
Posts: 41
Joined: Wed Jul 13, 2016 8:39 pm

College student with extra cash

Post by ad995 » Tue Aug 30, 2016 8:59 am

Hello,

I've gotten some great advice on this site so far to jump start my Vanguard account and investing for retirement. I am 21 years old and have 2 more years of college left. Since I've last asked for your advice I opened a Roth IRA and contributed the max for the year and still have some money left in my taxable account. I also took tax efficiency into account. Here is how I sit today:

Asset Allocation: 90/10

Taxable (Vanguard):
S&P 500 Index - $3,150
Consumer Staples ETF - $500

Roth IRA (Vanguard):
Total Stock Market Index - $4,500
Intermediate-Term Bond ETF - $1,000

Platinum Savings (Wells Fargo):
.4% Savings Account - $40,000

Here is my income situation for the next 4 years:
2016 Income (gross): $20,000
2017 Income (gross): $20,000
2018 Income (gross): $25,000 (depending on what summer month I start my full time job, starting salary will be around $55-60,000)
2019 Income (gross): $55-60,000

1) Considering I don't need much of the money sitting in my savings account would it be favorable to transfer $10-15,000 to my taxable at vanguard?
2) Transfer less to my taxable and wait for January 1, 2017 and max out my Roth IRA for 2017?
3) A combination of both?
4) Your guys/girls opinions?

FYI: Yes, I will need a good chunk of money in my bank for such things like an emergency fund, day to day expenses, and small down payment upon graduation. Although, graduating with $55,000 in a bank account is more than I need, I much rather put a portion of it in my taxable at Vanguard and pull it only if I REALLY need to considering it is somewhat liquid. Which I doubt would happen.

Thank you for all of the help, let me know if I am missing any important information

investor1
Posts: 1040
Joined: Thu Mar 15, 2012 8:15 pm

Re: College student with extra cash

Post by investor1 » Tue Aug 30, 2016 9:12 am

A small down payment for what after graduation?

User avatar
CAsage
Posts: 931
Joined: Sun Mar 27, 2016 6:25 pm

Re: College student with extra cash

Post by CAsage » Tue Aug 30, 2016 9:52 am

Assuming you have no expenses or student loans to nibble at that cash? Great! I would suggest these first steps:
1) Sort out the time frame for your cash. What you invest it in should be decided by when you need it. Couple years - bank. Retirement? Stock. There are some very good wiki's on this site on Asset Allocation and investing fundamentals.
2) Suggest you earmark $5500 of that for your Roth each year.
3) You can do a lot better than 0.4% on savings. Check out various online banks, Ally, Capital One, Alliant CU (and there are more) all pay at least 1% on plain old savings. There are websites that list various deposit rates.... Nothing wrong at all with keeping your cash for your next-few-years plans. Bond funds might pay better, but right now low risk bonds aren't paying much more.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

ad995
Posts: 41
Joined: Wed Jul 13, 2016 8:39 pm

Re: College student with extra cash

Post by ad995 » Tue Aug 30, 2016 5:01 pm

investor1 wrote:A small down payment for what after graduation?
I will be purchasing a vehicle

CAsage wrote:Assuming you have no expenses or student loans to nibble at that cash? Great! I would suggest these first steps:
1) Sort out the time frame for your cash. What you invest it in should be decided by when you need it. Couple years - bank. Retirement? Stock. There are some very good wiki's on this site on Asset Allocation and investing fundamentals.
2) Suggest you earmark $5500 of that for your Roth each year.
3) You can do a lot better than 0.4% on savings. Check out various online banks, Ally, Capital One, Alliant CU (and there are more) all pay at least 1% on plain old savings. There are websites that list various deposit rates.... Nothing wrong at all with keeping your cash for your next-few-years plans. Bond funds might pay better, but right now low risk bonds aren't paying much more.
I like the idea of earmarking $5,500/year ($11,000 over the next 2 years of college) for Roth IRA contribution. That will leave me with plenty in my bank for emergencies as well as expenses upon graduation.

I thought about the online savings but decided to upgrade to the PMA Package at Wells Fargo for a .4% rate just to keep everything simple and in one place.

Thank you for the feedback

Post Reply