50 Year Old Late Starter With Questions

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CaliGirl
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50 Year Old Late Starter With Questions

Post by CaliGirl »

Hi everyone.

Yes, I'm 50 and just starting out. Why? My first child was born mentally and physically disabled and I had to be home to care for him. No day care would take him and I had no family to help. So, I had no income for years - until he turned 18 and the state began to pay me to be his caregiver. Now, after 7 years of caregiving, I finally have something to invest.

My son is still home with me and there are no retirement benefits for caregivers in my state so it's up to me.

I've been doing some research and I am thinking of going with TD Ameritrade and opening a Roth Ira.

I'm not sure whether I should open a target date fund or just go with two or three index funds. TD Ameritrade has over 100 commission free ETF's, including the big three from Vanguard - the "total" funds.

I'm wondering which would be the less expensive way to go - buying the three funds or getting a target date fund. I am concerned about the $49 mutual fund commission fee that TD Ameritrade charges. I think that would apply to the target date fund, but not to the commission free ETF's.

Also I am concerned about having to balance my portfolio. Does this mean (for the sake of simplicity) that if I want a 70% stock and 30% bond allocation and I have $100 to deposit, that I would put $70 in the stock fund and $30 in the bond fund?

And if the assets in the funds float around and get messed up, how do I get it back on track again? Sell shares in one and buy in the other? Or just add money to the one that needs it?

I've been going round and round for two weeks. I want to invest the maximum for last year in a Roth before it's too late, and start adding money for this year. I need to get it done!

I would also like to know what other kinds of investments would be good - low taxes - to invest in once I've got my Roth going.

I appreciate your comments and help!

Thank you!

UPDATE: The reason I chose TD Ameritrade is because they offer a good selection of commission free ETF's and they don't have an account minimum. The drawback is their mutual fund commission of $49, but I probably will never need to worry about it. Also, they offer a nice variety of investment vehicles.

My tax bracket is currently 25%, but will probably go higher soon as I'm starting a business. I don't want to continue caring for my son. I love him, but I'm ready to be just his mom.

I plan to work into my 80's. The idea of retirement has never appealed to me so I'll work until I drop! :-D I've got, hopefully, about 30 years until I'll need to start withdrawing money. Maybe a little longer.

UPDATE 2: Current assets: $11,000 in savings. Current debts: None. Current income: About $78,000 combined income with my husband, but I'm planning a divorce. My income on my own will be determined by my business as I won't be caregiving for my son anymore, so I don't have that information yet as my business is new.
Last edited by CaliGirl on Wed Jan 18, 2017 3:18 pm, edited 3 times in total.
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Tamarind
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Re: 50 Year Old Late Starter With Questions

Post by Tamarind »

Welcome! Sounds like you have a solid plan. In case you haven't found them already, there are also threads here specifically about finding affordable resources for adult children and planning for the two of you over the long term, as well as other posters with relevant experience.

I would recommend opening your Roth IRA with Vanguard instead of TD Ameritrade. I started my own Roth at a discount brokerage and had it at TDA for a while, but very glad I moved it to VG a year ago.

The reason is because in an account at Vanguard you can always buy any Vanguard products commission-free, including the three-fund portfolio and Target Date. If you have at least $3000 you can get the mutual fund form, but the ETFs are also always commission-free.

If what you want is the three fund portfolio, there's really no reason not to go straight to Vanguard.

Buying the three funds separately is a little cheaper (expense ratio) than the target date fund, but if you are concerned about rebalancing it's OK to pick the target date fund and not worry about it.

If you do buy the three fund and need to rebalance, it's not too complicated. While you are still adding money to the Roth, you will just add more to the funds that are lower.

For example if you buy once a year, the first year you might contribute $2730 to Total Stock Market, $1820 to Total International, and $1950 to Total Bond (this is what you would do if you had a 70/30 stock to bond ratio with 40% of stocks international, which is just one of many reasonable allocations, I've done the math assuming that you have the whole $6500 Roth plus catch-up amount to contribute at once).

If by the next time you contribute, the stocks have gone up more so that your account is 75% stocks, 25% bonds, then you would buy a slightly higher amount of bonds next time to bring the ratio back to where you want it.
Strayshot
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Re: 50 Year Old Late Starter With Questions

Post by Strayshot »

CaliGirl wrote: I've been doing some research and I am thinking of going with TD Ameritrade and opening a Roth Ira.

:moneybag Use Vanguard, Fidelity, or Charles Schawb. Avoid TDA.


I'm not sure whether I should open a target date fund or just go with two or three index funds. TD Ameritrade has over 100 commission free ETF's, including the big three from Vanguard - the "total" funds.

:moneybag This depends on your comfort level with purchasing funds and rebalancing. A Three Fund portfolio with annual rebalancing to your target Asset Allocation would likely have lower overall expenses and give you more control, but a target date fund is simple and requires no rebalancing as it is done by the fund.


I'm wondering which would be the less expensive way to go - buying the three funds or getting a target date fund. I am concerned about the $49 mutual fund commission fee that TD Ameritrade charges. I think that would apply to the target date fund, but not to the commission free ETF's.

:moneybag Avoid a fee and use Fidelity or Vanguard. A three fund approach will be less "expensive" on an expense ratio basis

Also I am concerned about having to balance my portfolio. Does this mean (for the sake of simplicity) that if I want a 70% stock and 30% bond allocation and I have $100 to deposit, that I would put $70 in the stock fund and $30 in the bond fund?

:moneybag Yes. Then each year you would contribute to, sell, or buy amongst the asset classes to get back to your desired 70/30 asset allocation.

And if the assets in the funds float around and get messed up, how do I get it back on track again? Sell shares in one and buy in the other? Or just add money to the one that needs it?

:moneybag Yes on an annual basis

I would also like to know what other kinds of investments would be good - low taxes - to invest in once I've got my Roth going.

:moneybag You should view taxable investing as part of your total portfolio and asset allocation taking into account tax efficiency of various asset classes. You have already selected the "good kinds of investments" by choosing a three-fund approach, the question becomes where to hold those funds.

Thank you!
Good Luck!
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greg24
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Re: 50 Year Old Late Starter With Questions

Post by greg24 »

I would recommend you open an IRA directly with Vanguard, to avoid additional fees. With the low contributions you mention, I would start with a LifeStrategy fund or Target Date fund. I prefer LifeStrategy, as the asset allocation within the fund doesn't change over time. But either should work for your needs.

https://investor.vanguard.com/mutual-fu ... estrategy/#/

https://investor.vanguard.com/mutual-fu ... etirement/#/
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ruralavalon
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Re: 50 Year Old Late Starter With Questions

Post by ruralavalon »

Welcome to the forum :) .

I suggest an IRA With Vanguard or Fidelity, instead of TDAmeritrade. If you want to use Vanguard or Fidelity funds there is usually no good reason to hold them anywhere other than a Vanguard or Fidelity account.

I suggest a traditional deductible IRA rather than a Roth IRA. The tax deduction is usually better for most people.

For simplicity I suggest just using a Target Retirement fund at least to start. If you use a Fidelity IRA, then be sure you use their low expense Fidelity Freedom Index Funds.

What is your tax bracket, both federal and state?

About how much extra will you have to invest in addition to what you put in an IRA?

Edit: Please just add this additional information to your original post using the edit button, it helps a lot to have all of your information in one place.
Last edited by ruralavalon on Wed Jan 18, 2017 8:47 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
aristotelian
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Re: 50 Year Old Late Starter With Questions

Post by aristotelian »

Sorry to hear about your circumstances. You are doing the right thing to get started. You still have a lot of time to invest and it is better late than never.

I would recommend just taking it step by step. First thing is to open that IRA. I agree, you cannot go wrong with Vanguard, Schwab, or Fidelity.

One question before you get started is whether you want your IRA to be Roth or Traditional. To make that decision you will need to post some additional details - current assets and debts, income, tax bracket now and expected tax bracket in retirement, etc.

I am guessing because you have a shorter time to retirement it may make sense to go with Traditional. Putting $5500 pre-tax dollars in traditional would effectively allow you to save $1375 on taxes, which you could then use to start a taxable account. Others here can weigh in, I just wanted to flag that before you get too far down the path because it can be costly to switch from one to the other.

I also question whether 70/30 is a good split for you so close to retirement. Could you afford to lose 50% of your stock allocation in the event of a market crash? The indexes are currently at all time highs and that is usually a better time to sell stocks than to buy.
engin33r
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Re: 50 Year Old Late Starter With Questions

Post by engin33r »

What are the specific reasons for avoiding TD Ameritrade?
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Tamarind
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Re: 50 Year Old Late Starter With Questions

Post by Tamarind »

engin33r wrote:What are the specific reasons for avoiding TD Ameritrade?
There's nothing wrong with TDA. I would recommend it for anyone with individual stock holdings who also wanted to buy index ETFs without commission.

But for someone wanting maximum simplicity who had no need for trading in individual stocks, Vanguard (or Fidelity or Schwab, I suppose) is the place to go. They make it very easy to never pay a fee for access to the 3-fund portfolio.
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Re: 50 Year Old Late Starter With Questions

Post by Jack FFR1846 »

I find Vanguard and Fidelity to work best for mutual funds and in house ETFs. Schwab and TDAmeritrade excel with in house, no commission ETFs. Don't be scared about rebalance work. It isn't hard or time consuming and if you don't do it for a year or 3, it doesn't matter that much.
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ruralavalon
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Re: 50 Year Old Late Starter With Questions

Post by ruralavalon »

engin33r wrote:What are the specific reasons for avoiding TD Ameritrade?
There is no reason to have the extra hassle of using ETFs at TDAmeritrade or any other brokerage. Buying ETFs is more trouble than buying regular mutual funds. Using ETFs you can't buy fractional shares, it's harder to set up automatic investment and automatic reinvestment of dividends, and you have to be concerned about bid/ask spreads and using limit orders.

If you want Vanguard funds, there is usually no benefit to buying in an account anywhere other than at Vanguard. At Vanguard you can eventually qualify for their very low expense ratio Admiral Shares of their index mutual funds, which you usually can't buy at other brokerages.

Is there some particular reason you want to use TDAmeritrade?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

I am guessing because you have a shorter time to retirement it may make sense to go with Traditional. Putting $5500 pre-tax dollars in traditional would effectively allow you to save $1375 on taxes, which you could then use to start a taxable account. Others here can weigh in, I just wanted to flag that before you get too far down the path because it can be costly to switch from one to the other.

I also question whether 70/30 is a good split for you so close to retirement. Could you afford to lose 50% of your stock allocation in the event of a market crash? The indexes are currently at all time highs and that is usually a better time to sell stocks than to buy.
I don't plan to retire. I plan to leave the money in the fund(s) until I'm at least 80. I'll work past that if I can. I should mention I'm starting a business, and that's where I plan to work. I love my son, but don't want to be his caregiver forever - just his mom.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

There is no reason to have the extra hassle of using ETFs at TDAmeritrade or any other brokerage. Buying ETFs is more trouble than buying regular mutual funds. Using ETFs you can't buy fractional shares, it's harder to set up automatic investment and automatic reinvestment of dividends, and you have to be concerned about bid/ask spreads and using limit orders.

If you want Vanguard funds, there is usually no benefit to buying in an account anywhere other than at Vanguard. At Vanguard you can eventually qualify for their very low expense ratio Admiral Shares of their index mutual funds, which you usually can't buy at other brokerages.

Is there some particular reason you want to use TDAmeritrade?
Ok. No fractional shares with ETF's. I wondered about that. So, if I buy into the funds at Vangaurd, can I buy fractional shares there?

I don't plan to set up automatic investments. I'll make those manually myself. But, I do plan to automatically reinvest dividends.

Bid/ask spreads? Limit orders? I need to look those up. Guess I have a little more research to do!

As for using TDA, I have looked at different companies until I made holes in my computer screen! I finally decided to create a my own chart with what's important to me. TDA had everything I want, the only drawback being the $49 commission fee for mutual funds. But, I might not ever pay that since the funds I want are commission free. I've read that with Vanguard you need $3000 to open an account or get started with a fund. I guess that doesn't matter for me since I'm going to put in the maximum for last year into a Roth IRA.
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Tamarind
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Re: 50 Year Old Late Starter With Questions

Post by Tamarind »

CaliGirl wrote:I finally decided to create a my own chart with what's important to me. TDA had everything I want, the only drawback being the $49 commission fee for mutual funds. But, I might not ever pay that since the funds I want are commission free. I've read that with Vanguard you need $3000 to open an account or get started with a fund. I guess that doesn't matter for me since I'm going to put in the maximum for last year into a Roth IRA.
What sorts of things are important to you?
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

Tamarind wrote:
CaliGirl wrote:I finally decided to create a my own chart with what's important to me. TDA had everything I want, the only drawback being the $49 commission fee for mutual funds. But, I might not ever pay that since the funds I want are commission free. I've read that with Vanguard you need $3000 to open an account or get started with a fund. I guess that doesn't matter for me since I'm going to put in the maximum for last year into a Roth IRA.
What sorts of things are important to you?
Customer service is important to me. I just looked at Vanguard's facebook page. a lot of people really like them, but they've got a few negative comments regarding their customer service. TD Ameritrade didn't have any negative comments on their page going back as far as August of last year, but I find that kind of suspicious. I know any company is going to have a few disgruntled customers.

I've looked at online reviews, but I think Facebook is a better place to get a more accurate picture.

Commission free ETF's is important.

Minimum deposit is important.

No fee ira is important.

Mutual Fund trade fee is important.

No inactivity fees is important.

No load mutual funds are important.

And then there are the nice to haves but less important:

After hours trading

Mobile app for android

No fee banking for checking and savings

Low stock trade fee (just in case I decide to buy a few for fun)

That's about it.
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Re: 50 Year Old Late Starter With Questions

Post by Caduceus »

You should use traditional vehicles rather than Roth ones, given your late start, low level of retirement assets currently and 25% marginal tax bracket. It is better to take the tax savings upfront and accelerate retirement savings first. If anything happens that prevents you from working the entire 30 years you are planning (until 80 - and lots of things can happen health-wise during this period), you can likely convert and withdraw at 0%.
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ray.james
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Re: 50 Year Old Late Starter With Questions

Post by ray.james »

In this position, I would open a Roth IRA and start putting into one of the life-strategy funds.(Vanguard LifeStrategy Moderate Growth Fund for 40% bonds, 60% stock. TD should have something commission free. I do not care what broker you choose, but choose someone cheap with commission free trades.) It will balance automatically and you can focus on your earning potential and business. Once you reach something like 100k+ assets you can do further optimizations. You can learn on the investing while you get there.

However, there are more important things:
1) You are just starting. I am not sure you have emergency fund etc., I would put atleast 6 months expenses on the side to protect yourself. A divorce is costly and not having emergency fund will ruin quite a strain on finances.

2) Business take a lot of effort before they take off. There is difference between making living money and making a lot of profits. If all you have is 11K, I wouldn't bother with investing now. Are you expecting any assets from divorce, like fully paid home/401k shared etc.,

3) if you still go ahead with purchase, many target retirement/life strategy funds balance themselves. You will have time as you gain more money and learn more, you can do more optimal things. Also consider traditional IRA for tax deduction. Unless you plan to leave it to off-springs, in your case, traditional ira will do better.

Good luck.
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engin33r
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Re: 50 Year Old Late Starter With Questions

Post by engin33r »

ruralavalon wrote:
engin33r wrote:What are the specific reasons for avoiding TD Ameritrade?
There is no reason to have the extra hassle of using ETFs at TDAmeritrade or any other brokerage. Buying ETFs is more trouble than buying regular mutual funds. Using ETFs you can't buy fractional shares, it's harder to set up automatic investment and automatic reinvestment of dividends, and you have to be concerned about bid/ask spreads and using limit orders.

If you want Vanguard funds, there is usually no benefit to buying in an account anywhere other than at Vanguard. At Vanguard you can eventually qualify for their very low expense ratio Admiral Shares of their index mutual funds, which you usually can't buy at other brokerages.

Is there some particular reason you want to use TDAmeritrade?
I use TDA because I opened an account with them a long time ago before I ever knew about BH. Once I found BH, I was able to implement my IPS without moving to Vanguard by using TDA's commission-free ETFs. I know the pluses and minuses of the ETF vs Mutual Fund debate, but I was surprised to see people flat-out say "don't use TDA" without qualification....I've actually been quite happy with my TDA experience (support, website, iPhone app), especially when compared to the experience I've had with my VG 401k, though of course I love the VG funds and fee structure.
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pondering
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Re: 50 Year Old Late Starter With Questions

Post by pondering »

What is your goal for the account?
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

pondering wrote:What is your goal for the account?
Build wealth for my later years.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

I use TDA because I opened an account with them a long time ago before I ever knew about BH. Once I found BH, I was able to implement my IPS without moving to Vanguard by using TDA's commission-free ETFs. I know the pluses and minuses of the ETF vs Mutual Fund debate, but I was surprised to see people flat-out say "don't use TDA" without qualification....I've actually been quite happy with my TDA experience (support, website, iPhone app), especially when compared to the experience I've had with my VG 401k, though of course I love the VG funds and fee structure.
Thanks for your reply! After looking at Vanguard's Facebook page, I'm really leaning toward TDA. I like TDA's website better too. And they do offer over 100 commission free ETF's.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

ray.james wrote:In this position, I would open a Roth IRA and start putting into one of the life-strategy funds.(Vanguard LifeStrategy Moderate Growth Fund for 40% bonds, 60% stock. TD should have something commission free. I do not care what broker you choose, but choose someone cheap with commission free trades.) It will balance automatically and you can focus on your earning potential and business. Once you reach something like 100k+ assets you can do further optimizations. You can learn on the investing while you get there.

However, there are more important things:
1) You are just starting. I am not sure you have emergency fund etc., I would put atleast 6 months expenses on the side to protect yourself. A divorce is costly and not having emergency fund will ruin quite a strain on finances.

2) Business take a lot of effort before they take off. There is difference between making living money and making a lot of profits. If all you have is 11K, I wouldn't bother with investing now. Are you expecting any assets from divorce, like fully paid home/401k shared etc.,

3) if you still go ahead with purchase, many target retirement/life strategy funds balance themselves. You will have time as you gain more money and learn more, you can do more optimal things. Also consider traditional IRA for tax deduction. Unless you plan to leave it to off-springs, in your case, traditional ira will do better.

Good luck.
Some say open a roth, some say open a traditional. A roth makes more sense to me.

Apparently I don't pay as many taxes out of my paycheck as others do. I didn't use to pay any taxes out of my paychecks until about a year ago (I know it sounds crazy and no, I didn't do anything wrong. It has to do with the fact that my client, my son, lives with me. I don't understand it and can't explain it. It's just how it was). Now I pay a couple of different taxes out of my check (social security and medicaid), but my husband said it's not as much as other working people pay.

Also, when I get paid my net is usually higher than my gross. Crazy again, but I see the gross listed at the top of my pay stub, then they add in paid time off which I claim every check, then they take out taxes, then they add over time. So my net ends up higher than my gross.

If I put my money in a roth, I won't pay any taxes on the returns. And since I'm not paying much now, a roth makes more sense I think. Also, it wouldn't save me anything if I use a traditional ira. My husband does the taxes and I never see any of the refund. Maybe after the divorce, but not now. But even then, wouldn't a roth make more sense if my business is doing well? It would have to be because I can't divorce until it is.

To answer your questions:

1) The $11,000 is my emergency fund. I would take $6,500 from it and invest it in a roth for last year. Then, I would take $600 a month from my paychecks and put that into the roth for this year.

2) Yes, I understand it takes time to make a business profitable. And no, there won't be any assets from the divorce. We lost our home at the end of 2012 and have been renting. There is no shared 401K and in fact, what little he had in a 401K ($4,000) he withdrew to try and save our home. I have more money than he does.

3) Yes, target date/life strategy fund. That's what I was thinking too. I'm thinking a date of 2045. If I need to withdraw earlier, I'm sure I could. I'd be well past 70. As for the offspring - once I have my account set up I'm thinking I'll set up a special account for my son, and my daughters will get anything left over in my account.
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pondering
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Re: 50 Year Old Late Starter With Questions

Post by pondering »

If it isn't an amicable divorce you will be without resources.

Will you be able to get a meaningful social security check on your husband's earning record?

Remember you will need to do some tax planning regarding when to take social security.
--Robert Sterbal | robert@sterbal.com | 412-977-3526
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

Caduceus wrote:You should use traditional vehicles rather than Roth ones, given your late start, low level of retirement assets currently and 25% marginal tax bracket. It is better to take the tax savings upfront and accelerate retirement savings first. If anything happens that prevents you from working the entire 30 years you are planning (until 80 - and lots of things can happen health-wise during this period), you can likely convert and withdraw at 0%.
Can you please explain how taking tax savings up front will accelerate my retirement savings? If you're thinking I could put that tax money into my retirement account, I never see the tax money we get. My husband does the taxes and I never even know when he gets the money. So, it won't go into my account.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

pondering wrote:If it isn't an amicable divorce you will be without resources.

Will you be able to get a meaningful social security check on your husband's earning record?

Remember you will need to do some tax planning regarding when to take social security.
It's as amicable divorce as can be. He's extremely passive, doesn't even want to talk about it. He's just waiting for me to make enough money to leave. When I do, I'll be leaving nearly everything behind and starting over. I'll have en entire household to buy again.

I don't know whether I'll be able to get social security on my husband's record. Maybe. We've been married 29 years. He's never earned alot, but he's always worked. I doubt I'll be able to get much on my own.

I hadn't thought much about tax planning and social security. I guess I should look into that. It's always good to know this stuff before you need it.
OnTrack
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Re: 50 Year Old Late Starter With Questions

Post by OnTrack »

Things to keep in mind regarding TDA no fee ETFs: 1. You must register for the program, otherwise you will pay a commission. 2. "Account owner must hold all shares of an etf position purchased for a minimum of 30 days without selling to avoid a short term trading fee." LIFO. Fee is $19.99.
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BL
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Re: 50 Year Old Late Starter With Questions

Post by BL »

I suggest you look around at vanguard.com

Vanguard Target Date retirement funds only require 1,000 to start, and small amounts are fine after that. I would not pay for buying mutual funds elsewhere. With all the change you may have in your life, I suggest you keep things simple. Set it and forget it, except for adding when you can.

If you are planning to buy and sell often, you may very well end up losing money. Mostly buy and hold is the way to go. Build an emergency fund before you invest. Also if you plan to start a business, you may need some start-up money.

There are suggested books and reading in the Wiki- see Getting Started.

Here is a small free pdf online just for beginning investors:
https://www.etf.com/docs/IfYouCan.pdf

You might qualify for subsidized senior housing at a certain age. Have you thought about health care insurance before age 65 when Medicare is available? You might want to read about Medicaid in your state.

Yes, you can get SS as an ex-spouse and as a survivor when he passes.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

OnTrack wrote:Things to keep in mind regarding TDA no fee ETFs: 1. You must register for the program, otherwise you will pay a commission. 2. "Account owner must hold all shares of an etf position purchased for a minimum of 30 days without selling to avoid a short term trading fee." LIFO. Fee is $19.99.
What program do I need to register for? Is this something different from getting an account with TDA?

Also, I plan to buy and hold for about 30 years, so I'm not concerned about the short term trading fee.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

BL wrote:Vanguard Target Date retirement funds only require 1,000 to start, and small amounts are fine after that. I would not pay for buying mutual funds elsewhere. With all the change you may have in your life, I suggest you keep things simple. Set it and forget it, except for adding when you can.

If you are planning to buy and sell often, you may very well end up losing money. Mostly buy and hold is the way to go. Build an emergency fund before you invest. Also if you plan to start a business, you may need some start-up money.

There are suggested books and reading in the Wiki- see Getting Started.

Here is a small free pdf online just for beginning investors:
https://www.etf.com/docs/IfYouCan.pdf

You might qualify for subsidized senior housing at a certain age. Have you thought about health care insurance before age 65 when Medicare is available? You might want to read about Medicaid in your state.

Yes, you can get SS as an ex-spouse and as a survivor when he passes.
I was thinking of buying ETF's at TD Ameritrade. They are commission free. But yes, I would need to rebalance them myself. It would be nice not to have to do that but there will be a commission on mutual funds no matter where I go, as I understand it. TD Ameritrade charges $49. I don't know what Vanguard charges.

I have concerns about Vanguard's customer service from some of what I've read on their Facebook page, and I worry about red tape when it comes time for me to make withdrawls, also based on research I've done.

I plan to buy and hold for 30 years or so.

I have been building an emergency fund. I got it up to $11,000 and decided I should start investing. My plan is to take $6,500 of it and put it into a roth account for last year. Then, I'll add money to the roth account for this year as well as work on building up the emergency fund again.

The area I'll be moving to doesn't have subsidized housing for anyone so unless I move again later, that won't be an option.

As for health care insurance, no I hadn't thought about that. I didn't even know there was such a thing. I have good health insurance now, but when my son moves out I'll lose it. Then I'll need to provide it for myself through the business.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

Well, I've looked at Vanguard and I just don't think they are for me. At least not right now. It appears they prefer investors with a lot more money to invest than I have. Also, I have concerns about their customer service, don't like their fee structure, and don't like that they discourage trading or selling. I plan to buy and hold, but if I want to sell that's my business and I want a company that will help me if that time comes.

Also, Vanguard seems to like to do things offline. I prefer an online company that's quick and simple as far as getting basic things done like address changes or adding new bank accounts.

So, I'm going to give TD Ameritrade a try. If I hate them I can always move later.

I'm also thinking I'll open a roth. If my business makes me enough money, the ira won't matter much anyway because I'll make too much to contribute to it, at which point I'll need to consider other options. But, for now, I really feel like this is the one I want. I don't want the tax savings now from a traditional IRA because I don't pay much in taxes anyway and anything that gets returned at tax time my husband keeps (this is an agreement we have). So I think a roth is best, but if there's something I'm missing please let me know.

Now, as for the fund - TD Ameritrade has a T Rowe Price target date retirement fund 2045. It's no load and no transaction fees. It's currently at about $15 a share, and has above average earnings. The expense ratio is higher than I'd like at 0.76%, but that's about as high as I would go. Not sure if this is my fund, but it could be. I need to look at it further.

Do no load and no transaction fees mean I can contribute to the fund without paying a commission? Or do I still have to pay their $49.00 mutual fund fee?

I plan to look at other funds as well.
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Tamarind
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Re: 50 Year Old Late Starter With Questions

Post by Tamarind »

There seems to be a contradiction in the way you are thinking about your broker choice. I have used and enjoyed TDA and they definitely have a flashier website, but I think Vanguard is a better fit for what you need.

Let's walk through some points:

You decided that you would like to invest in a target date fund, perhaps one from TRowe Price.

You like that TDA has after hours trading. But you can't trade any mutual funds that way at any broker.

You like that TDA has commission free ETFs. But none of the commission free ETFs are target date funds.

The TRP fund you like is available with no load and no transaction fee, but will cost you 0.76% of its value each year to hold. In its disclosures, TDA states that these funds are offered w no transaction fee because the fund company gives TDA a cut of that 0.76% in return for advertising the fund.

Vanguard offers a free account (no fees to open or keep the account as long as you accept electronic delivery of statements).

All of Vanguard's funds and ETFs are always no load, no transaction fee, no commission. Not just 100. All of them. Target date funds require a minimum of $1000 to invest which you easily have. After that you can add $1 at a time if you like.

Vanguard's 2045 target date fund will only cost you 0.16% per year to own.

The course you are currently pursuing will lose you at least $40 this year, $80 next year, and so on, increasing in cost every year. The cost will double each year you contribute the full amount to your account. That's the cost of the difference in annual expense ratio between two 2045 funds x $6500 per year. If your funds increase in value, which hopefully they will, the cost will be greater. You also lose the compounded gains on that money. (Each of those $40 lumps would become $500+ in 10 years.)

You are concerned about Vanguard's fees why? Which fees are those?

I know you may see me as being stubborn about this, but the math on costs is really strong and something Bogleheads are really passionate about.
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Re: 50 Year Old Late Starter With Questions

Post by Caduceus »

CaliGirl wrote:
Can you please explain how taking tax savings up front will accelerate my retirement savings? If you're thinking I could put that tax money into my retirement account, I never see the tax money we get. My husband does the taxes and I never even know when he gets the money. So, it won't go into my account.
If, as you say, you are currently in the 25% marginal tax bracket, contributing $5,500 to a Roth means you give up $1375 in tax savings. Depending on your level of withholding, using a Roth will mean either that you pay an extra $1375 during tax time, or that the level of your refund is smaller.

Even for people who are younger, people don't generally recommend using a Roth IRA when the marginal tax bracket is 25%. For someone older, it is more likely (though I am hoping not) that health issues or unemployment or underemployment issues might arise. In years with lower or no income, you can easily convert your traditional accounts into Roth ones and pay little/no tax, so that is a better strategy that paying tax upfront.
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Re: 50 Year Old Late Starter With Questions

Post by greg24 »

I don't know how you can dislike Vanguard's fee structure. Their fees will basically be less than any other company out there.

I can understand your hesitance to their customer service, it is not the best. But you are looking at a very simple portfolio. Once you set it up, customer service will be unnecessary. I haven't spoken to someone at Vanguard in over 10 years.
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Re: 50 Year Old Late Starter With Questions

Post by BL »

Caduceus wrote:
CaliGirl wrote:
Can you please explain how taking tax savings up front will accelerate my retirement savings? If you're thinking I could put that tax money into my retirement account, I never see the tax money we get. My husband does the taxes and I never even know when he gets the money. So, it won't go into my account.
If, as you say, you are currently in the 25% marginal tax bracket, contributing $5,500 to a Roth means you give up $1375 in tax savings. Depending on your level of withholding, using a Roth will mean either that you pay an extra $1375 during tax time, or that the level of your refund is smaller.

Even for people who are younger, people don't generally recommend using a Roth IRA when the marginal tax bracket is 25%. For someone older, it is more likely (though I am hoping not) that health issues or unemployment or underemployment issues might arise. In years with lower or no income, you can easily convert your traditional accounts into Roth ones and pay little/no tax, so that is a better strategy that paying tax upfront.
If her someday-to-be ex doesn't share the tax refund, I can understand the Roth choice. It can also double as an emergency fund, which hopefully won't be necessary. Perhaps using FDIC savings or CDs in a Roth at a bank or credit union would be suitable for a while. There is no guaranteed "get-rich-quick solution either in investing or in starting a business. There are many things to think about if massive life changes are planned, and we don't know much about this. It is not common for a person starting a business to even make a profit for years, and sometimes it doesn't ever work out. Moving sounds like out of the country, if no subsidized housing at all.
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Re: 50 Year Old Late Starter With Questions

Post by ruralavalon »

CaliGirl wrote:Now, as for the fund - TD Ameritrade has a T Rowe Price target date retirement fund 2045. It's no load and no transaction fees. It's currently at about $15 a share, and has above average earnings. The expense ratio is higher than I'd like at 0.76%, but that's about as high as I would go. Not sure if this is my fund, but it could be. I need to look at it further.
In my opinion a target retirement fund, a simple all-in-one solution which requires no rebalancing or management from you, would be a good idea for you as you begin.

At TDAmeritrade the T Rowe Price target date retirement fund 2045 has an expense ratio of 0.76%. At Vanguard their similar target retirement fund has an expense ratio of just 0.15%. The expense ratio is a recurring annual charge.

Expense ratios are critical in fund selection. That extra 0.61% in expense at TDAmeritrade would cost you about 5.9% in the end value of your investment over 10 years, and about 10.5% in the end value of your investment over 20 years. Vanguard blog post, "Stopping the silent killer of returns". Please see the table at the end of the post, "Cumulative impact of fees on ending wealth at various time horizons." Also, here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar article. “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: 50 Year Old Late Starter With Questions

Post by BL »

Yes, the other target funds cost more, in part because there is a 12b-1 kickback to the broker. It doesn't mean it is better. Costs matter!
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Re: 50 Year Old Late Starter With Questions

Post by IHateCasinos »

Tamarind wrote: (Each of those $40 lumps would become $500+ in 10 years.)

You are concerned about Vanguard's fees why? Which fees are those?

I know you may see me as being stubborn about this, but the math on costs is really strong and something Bogleheads are really passionate about.
Caligirl - the BEST part of your new journey to investing is that you found BOGLEHEADS.
Not just some forum on the internet, not some collection of friends, but GROUND ZERO of cost saving.
Do not overlook this. I only found it 10 years too late and i am now 44.
Cost saving 1 is one of the PILLARS of John Bogles investing, which manifests in his books and on THIS forum. you are in the best hands i.t.o. cost saving right here!


Now, to your original post:
Your vehicle choice is question 1. I will defer to the other posters answers above.
but separately , there is Question 2: "*where* to implement" (ie what fees they charge in year one and in year 10.)


It WILL be advised on this forum to use vanguard, no matter what the other firms offer because of ONE important fact:
Your funds at vanguard are operated on an at-cost basis. no margin for Vanguard. its a not for profit. its the ONLY ONE you will find. Every other house mentioned has a 2nd profit taking department in the back room, and they hit 100,000 customers for an extra dollar a year. and then $10.


John Bogle set this up specifically as his gift to us. He calls it "Not having the confict of 2 masters. (customers spend vs owners profits)". When u invest in vanguard mutual funds you are an owner and also a customer.

To Conclude:
Determine the answer to question 1 using people on this forum.
If that chosen strategy can be done at Vanguard, dont argue, just accept your good luck at finding this forum (and by inference, Vanguard) and use vanguard 100%.
90% of the people here probably do, or are desparately trying to get there.

Best wishes,
Marc.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

Hi everyone.

Yes, I understand the expense ration difference between the T Rowe Price fund at TDA and the Vanguard fund at Vanguard. In fact, after I posted here I went back over to TDA and looked at the expense chart there, and compared it with the Vanguard fund's expense chart on the TDA site. It is a significant difference and I do have a lot of catching up to do.

But, I'm still hesitant to go with Vanguard. My gut is telling me to be cautious. Maybe it's because I've read so many bad reviews, but then I've read the bad reviews on everyone - except WiseBanyan, which doesn't seem to have any bad reviews. But they haven't been in business very long so I'm hesitant to go with them.

I guess what really worries me most about Vanguard is that the day will come when I need to start withdrawing, or maybe I'll need a lump sum, and I'll have trouble getting my money out. I worry about being given the run around, having to snail mail forms, and the like.

Have any of you withdrawn money from your Vanguard funds, and if so, how difficult was it to do? What was the process like?

Thanks, Bogleheads, for helping this newbie. I appreciate your help!
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Tamarind
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Re: 50 Year Old Late Starter With Questions

Post by Tamarind »

There are terrible reviews of most anything online, but it's tough to know what fraction of users that is, or how many people did the same thing and had no problem. Vanguard is not known for shiny web design, but then again you also don't have to pay them as much to recoup the cost of their web designers. I find it clear and functional, though not beautiful.

There are plenty of folks here currently in retirement and getting withdrawals from Vanguard. I'm not one of them, but I just set up monthly recurring deposits and investments to my Roth there (TDA can't do that), and there's a similar interface to tell it to automatically sell/withdraw regularly to your bank account once you are at least age 59.5 (you can still take a lump sum of any amount of your deposits to the Roth at any time, see links below).

If you don't get a reply from a current retiree in a day or so, you might need to update your title to be more specific to experience withdrawing from Vanguard. A mod can help if you have questions about how to do that.

In the meantime here are a couple of threads about Roth withdrawal from Vanguard. Note that the simple website warns people anytime they *might* be incurring a tax penalty, but Vanguard will never actually charge a penalty as the tax filings are always up to you.
viewtopic.php?t=104223
There are some tax rules to understand about when and how much you can take out of any Roth.
viewtopic.php?t=188058

You might also wish to ask questions in a separate thread about what you can expect to do re: taxes during and after divorce. For example whoever files the taxes will need to know about Roth contributions.
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Re: 50 Year Old Late Starter With Questions

Post by ruralavalon »

CaliGirl wrote:I guess what really worries me most about Vanguard is that the day will come when I need to start withdrawing, or maybe I'll need a lump sum, and I'll have trouble getting my money out. I worry about being given the run around, having to snail mail forms, and the like.

Have any of you withdrawn money from your Vanguard funds, and if so, how difficult was it to do? What was the process like?

Thanks, Bogleheads, for helping this newbie. I appreciate your help!
All of our accounts (joint account, 2 Roth IRAs, and rollover IRA) are at Vanguard, and all of our funds are Vanguard funds.

I have been retired since 2011, and withdraw money on a regular basis using the Vanguard website and app. I have had no difficulty of any kind. We use direct electronic transfers to our checking account at a local bank, it takes about 2 days.
Last edited by ruralavalon on Fri Jan 20, 2017 10:16 am, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Tamarind
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Re: 50 Year Old Late Starter With Questions

Post by Tamarind »

ruralavalon wrote: All of our accounts (joint account, 2 Roth IRAs, and rollover IRA) are at Vanguard, and all of our funds are Vanguard funds.

I have been retired since 2011, and withdraw money on a regular basis using the Vanguard website and app. I have had no difficulty of any kind. We use direct electronic transfers to our checking account at a local bank, it takes about 2 days.
Do you think you could share some redacted screenshots of the interface so OP can see what the setup is like? I ran a few searches but couldn't find any threads on this precise subject.
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ruralavalon
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Re: 50 Year Old Late Starter With Questions

Post by ruralavalon »

Tamarind wrote:
ruralavalon wrote: All of our accounts (joint account, 2 Roth IRAs, and rollover IRA) are at Vanguard, and all of our funds are Vanguard funds.

I have been retired since 2011, and withdraw money on a regular basis using the Vanguard website and app. I have had no difficulty of any kind. We use direct electronic transfers to our checking account at a local bank, it takes about 2 days.
Do you think you could share some redacted screenshots of the interface so OP can see what the setup is like? I ran a few searches but couldn't find any threads on this precise subject.
Sorry. I am 71 years old and technologically inept, and I don't know how to do a screen shot.

I guess that just proves how easy it is to electronically exchange from a Vanguard fund to your checking account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

Do you think you could share some redacted screenshots of the interface so OP can see what the setup is like? I ran a few searches but couldn't find any threads on this precise subject.
Sorry. I am 71 years old and technologically inept, and I don't know how to do a screen shot.

I guess that just proves how easy it is to electronically exchange from a Vanguard fund to your checking account.
Thanks so much for your response. I'm fairly technologically inept myself, but I've discovered that Google is great at helping me out. You can Google how to take a screen shot and you'll probably get some youtube videos that tell you how. It's really easy to do do.

If there's ever anything you'd like to do or need to do online and you don't know how, just Google it and you'll probably get an answer you can understand.
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

What if I use TDA, and only invest in the commission free ETF's? As long as the expense ratios are low in the funds I invest in, wouldn't this save me a ton of money on fees? Sure, I would need to rebalance them myself, but that doesn't seem to be too difficult to do. Would this be a good plan?
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Re: 50 Year Old Late Starter With Questions

Post by ruralavalon »

CaliGirl wrote:What if I use TDA, and only invest in the commission free ETF's? As long as the expense ratios are low in the funds I invest in, wouldn't this save me a ton of money on fees? Sure, I would need to rebalance them myself, but that doesn't seem to be too difficult to do. Would this be a good plan?
If you use commission free ETFs with low expense ratios that would work.

However Target Retirement funds aren't available in ETF versions. I still think that when you are just starting and learning using a Target Retirement fund, as you originally wanted, is likely better for you.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

ruralavalon wrote:
CaliGirl wrote:What if I use TDA, and only invest in the commission free ETF's? As long as the expense ratios are low in the funds I invest in, wouldn't this save me a ton of money on fees? Sure, I would need to rebalance them myself, but that doesn't seem to be too difficult to do. Would this be a good plan?
If you use commission free ETFs with low expense ratios that would work.

However Target Retirement funds aren't available in ETF versions. I still think that when you are just starting and learning using a Target Retirement fund, as you originally wanted, is likely better for you.
Another question. If I invest in a Target Retirement fund, will I pay only one fee for the expense ratio? And if I invest in, say, three commission free ETF's, will I pay fees on three expense ratios?

Also, will TD Ameritrade or Vanguard keep a portion of my investment money in cash? Someone said I can't buy fractional shares of an ETF. What a bout a no load, commission free mutual fund? Is it possible to buy fractional shares of those?
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Re: 50 Year Old Late Starter With Questions

Post by GMT-8 »

Hi CaliGirl,

It appears you have some plans, many opinions and some questions. You have done some homework. Others on this site have chimed in with opinions which you have aggressively questioned or contested.

This isn't Facebook; Bogleheads are quite different from one another AND different from the amerage American investor, they don't know each other's real identities, and have no link to you. So they have no reason to be biased and they don't blurt things out off the top of their heads. The advice is generally based on hard-earned (or highly-paid-for) experience, and should be valued just as highly.

This is only my opinion, but I suggest you lurk around here for a few weeks or months before implementing any of the decisions that have been discussed, including starting an TDA account. The reason is you are in a stressful time, with multiple moving parts involving family, business, etc and with an uncertain future and funds that you may very well need soon.

If you are really planning to be in the market for 30 years, find a low-cost mutual fund, buy shares as and when you can, and forget everything else.

Taking money out of Vanguard is no problem if you have a linked bank account. You click "send to my bank" fill in the amount, and wait 2-3 days till the funds appear. Alternatively you can ask for a wire transfer, or a cashier's check, or you can write a check yourself if you'd ordered a pack of them (depends on account). I had money there for nearly 30 years before I began to take it out. But I've had no problems.
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Tamarind
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Re: 50 Year Old Late Starter With Questions

Post by Tamarind »

CaliGirl wrote:
ruralavalon wrote:
CaliGirl wrote:What if I use TDA, and only invest in the commission free ETF's? As long as the expense ratios are low in the funds I invest in, wouldn't this save me a ton of money on fees? Sure, I would need to rebalance them myself, but that doesn't seem to be too difficult to do. Would this be a good plan?
If you use commission free ETFs with low expense ratios that would work.

However Target Retirement funds aren't available in ETF versions. I still think that when you are just starting and learning using a Target Retirement fund, as you originally wanted, is likely better for you.
Another question. If I invest in a Target Retirement fund, will I pay only one fee for the expense ratio? And if I invest in, say, three commission free ETF's, will I pay fees on three expense ratios?

Also, will TD Ameritrade or Vanguard keep a portion of my investment money in cash? Someone said I can't buy fractional shares of an ETF. What a bout a no load, commission free mutual fund? Is it possible to buy fractional shares of those?
If you buy a single Target Retirement Fund, you will pay a single fee. If you buy multiple funds, you will pay a fee for each which will vary based on which funds you choose. Usually the fee for a target retirement fund is a tiny bit higher than the sum of the funds that make it up, because you are also paying for it to be rebalanced instead of doing it yourself.

You can buy fractional shares of mutual funds but not of ETFs. Any broker will let you keep cash, but this is one reason mutual funds might be preferred, as you'll never have leftover dollars like you would with ETFs.

These are good questions, but if you are just getting to grips with what kinds of investments are out there, you may need to do more reading before you pull the trigger. You can get the Boglehead's Guide to Investing at many libraries and it's very accessible.

That's another reason we are nudging you towards Vanguard. They don't have a lot of bells and whistles but they are the best in the business for making it easy and cheap to have the simplest possible portfolio, and simple is important when you are learning.
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Re: 50 Year Old Late Starter With Questions

Post by binvesting »

Caligirl
As a neutral stranger, I just wanted to ask you if you have considered the following. If you have and figured it all out, then great, ignore these :sharebeer If not, then I would think these are priority over investing the current money.

1. Do you have emergency funds. Folks generally have funds to cover any unexpected expenses and that is not considered as part of investing or generally not used for funding investments.
2. Budget - Its better to budget and estimate how much money comes in and goes out every month so that you have a clear picture of how much you can contribute to your savings, where you can cut costs etc. This includes everything end to end including rent, health and car insurance, food atc..
3. Car fund, renting deposit etc: since you mentioned you'll be starting new and moving, you'll have some initial setup costs.

Cheers and good luck!! :happy
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

binvesting wrote:Caligirl
As a neutral stranger, I just wanted to ask you if you have considered the following. If you have and figured it all out, then great, ignore these :sharebeer If not, then I would think these are priority over investing the current money.

1. Do you have emergency funds. Folks generally have funds to cover any unexpected expenses and that is not considered as part of investing or generally not used for funding investments.
2. Budget - Its better to budget and estimate how much money comes in and goes out every month so that you have a clear picture of how much you can contribute to your savings, where you can cut costs etc. This includes everything end to end including rent, health and car insurance, food atc..
3. Car fund, renting deposit etc: since you mentioned you'll be starting new and moving, you'll have some initial setup costs.

Cheers and good luck!! :happy
Hi, and thank you for your reply. Yes, I have emergency funds. Not as much as I'd like yet, but it's growing. But, I want to take advantage of being able to invest in a Roth for last year, so will dip into my emergency funds for that and the replace them.

As for a budget, since I have no clue how much I'll be making or how much my living expenses will be exactly, it's tough to figure that one out. Once my business is bringing in a solid income I'll be able to look into this.

Car fund? You mean repairs? That's emergency money for me.
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CaliGirl
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Re: 50 Year Old Late Starter With Questions

Post by CaliGirl »

citromike wrote:Hi CaliGirl,

It appears you have some plans, many opinions and some questions. You have done some homework. Others on this site have chimed in with opinions which you have aggressively questioned or contested.

This isn't Facebook; Bogleheads are quite different from one another AND different from the amerage American investor, they don't know each other's real identities, and have no link to you. So they have no reason to be biased and they don't blurt things out off the top of their heads. The advice is generally based on hard-earned (or highly-paid-for) experience, and should be valued just as highly.

This is only my opinion, but I suggest you lurk around here for a few weeks or months before implementing any of the decisions that have been discussed, including starting an TDA account. The reason is you are in a stressful time, with multiple moving parts involving family, business, etc and with an uncertain future and funds that you may very well need soon.

If you are really planning to be in the market for 30 years, find a low-cost mutual fund, buy shares as and when you can, and forget everything else.

Taking money out of Vanguard is no problem if you have a linked bank account. You click "send to my bank" fill in the amount, and wait 2-3 days till the funds appear. Alternatively you can ask for a wire transfer, or a cashier's check, or you can write a check yourself if you'd ordered a pack of them (depends on account). I had money there for nearly 30 years before I began to take it out. But I've had no problems.
Thank you for your response. I apologize if I seem ungrateful in any way for the advice I have received here. I appreciate everyone's time and effort.

As for being in a stressful time, this time is no more or less stressful than any other time. Living in a bad marriage for almost 30 years and having a child with a major disability means a lot of stress. And, when I move there will be new kinds of stress. Stress is part of life and I do my best to roll with it. It's not always easy but that's how it is.

I am hoping to be in the market 30 years! ;-D

Thank you for letting me know that you can get money out of Vanguard pretty easy. I have an online bank account, so I'm familiar with how that works. I'm glad to know you haven't had any problems. My hope is to put my money in, and never have to talk to anyone. Just later withdraw it when I need to.
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