Too much information! Where to begin?

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milkshake
Posts: 15
Joined: Mon Mar 20, 2017 1:38 am

Too much information! Where to begin?

Post by milkshake » Mon Mar 20, 2017 2:00 am

I'm a 34 year old M (single) in Seattle, WA (living expenses are unbearable) currently making $94k (25% tax bracket), contributing 10% of pay to current 401(k) with all fund options close to 1%, $5.5k to Roth IRA through Vanguard currently sitting at $25k with nearly 50% of funds in 2050 all-in-one fund, 25% in 2045 all-in-one fund, and 25% in vanguard S&P 500 fund. I have my former employer's 401(k) still sitting with the old employer for the past 1 yr as ER% are all 0.05%.
To cap:
Old 401(k): $90k at ER% 0.05%
New 401(k): 10% income of 25% tax bracket with ER% 1.0%
Roth IRA: Vanguard: $25k distributed in 50% in all-in-one 2050, 25% in all-in-one 2045, 25% S&P 500

Student loans: $16k at 3.75% interest rate for the next 12 years, minimum payment $185/mo, currently paying $300/mo

Question 1: Keep old 401k money in old 401k instead of rolling over to new 401k due to fees but no additional contributions; or roll to an IRA? I hope to move to another cheaper area in the country and may look to roll the old 401K money to newer employer in the future. Good plan or not a good plan?
Question 2: There is so much information to go through I have no idea where to even begin; if i wanted to save $ for a home downpayment, should I continue saving my $ as is with 401(k) at high fees, or decrease this amount to save more for a home?
Question 3: Following BH guidance and have enough for emergency fund with some $ for home down payment of 20%, but this would exhaust my funds. Where can I even begin to think about saving money in a taxable account such as brokerage account?

Like I said, so many questions for someone wanting to get my act together. Any help/guidance would be welcome! Of side note, I DO NOT want to use a financial advisor who will take more of my earned $ for their own pockets! I'm skeptical! Thanks and much appreciated

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Majormajor78
Posts: 849
Joined: Mon Jan 31, 2011 9:13 pm
Location: Chicagoish

Re: Too much information! Where to begin?

Post by Majormajor78 » Mon Mar 20, 2017 8:33 am

Question 1: Keep old 401k money in old 401k instead of rolling over to new 401k due to fees but no additional contributions; or roll to an IRA? I hope to move to another cheaper area in the country and may look to roll the old 401K money to newer employer in the future. Good plan or not a good plan?
With fees so low in the old plan not moving the funds makes perfect sense so long as the investment choices are what you want and fees remain low. Just keep in mind that they can be changed at any time. I wouldn't really consider moving the money into a new employers 401K unless it was phenomenal. If you ever have a reason to move it I'd roll it into an IRA at Vanguard just so you don't have to worry about fund or policy changes from the plan.

Question 2: There is so much information to go through I have no idea where to even begin; if i wanted to save $ for a home downpayment, should I continue saving my $ as is with 401(k) at high fees, or decrease this amount to save more for a home?
Almost impossible to definitively answer. It comes down intermediate term goals vs. longterm goals. How important is buying a new home, and how soon you want to make this purchase? I certainly would not decrease 401K savings below any matching levels. With fee's at around 1% the 401K is still a solid savings vehicle long term though far from optimized.

Question 3: Following BH guidance and have enough for emergency fund with some $ for home down payment of 20%, but this would exhaust my funds. Where can I even begin to think about saving money in a taxable account such as brokerage account?


There are a number of brokerages out there that don't charge an arm and a leg. Vanguard, Fidelity no fee ETF's, TD ameritrade commission fee ETF's. I hear good things about Charles Schwab but don't do business with them.

I'd be careful about saving for a home down payment in a stock fund though. If you want to buy a home in the next few years I personally would look at savings accounts or short-term bond funds. No yield but a downturn in the market cant set your purchase back for years if you put it in a risky investment.

You also want to make sure you still have an emergency fund after you buy your house. Nothing quite like buying a home and then a month later finding a crack in the furnaces heat exchanger (condemning the unit) and a few months later having the water heater spring a leak. That's what happened to me.
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."

Vanguard Fan 1367
Posts: 667
Joined: Wed Feb 08, 2017 3:09 pm

Re: Too much information! Where to begin?

Post by Vanguard Fan 1367 » Mon Mar 20, 2017 10:15 am

'Good point about the emergency fund and buying a house. Just this weekend one of my employees found termites in her house. Unfortunately you cannot just go around the house with Raid and get rid of them.

rabbitrun
Posts: 69
Joined: Wed Feb 15, 2017 8:54 pm

Re: Too much information! Where to begin?

Post by rabbitrun » Mon Mar 20, 2017 10:30 am

1. No need to switch it, esp with that ER of 1%. What funds are available in your new 401k- can you get ER any lower?
2. Begin by reading some books on the recommended reading list of this website. Does your company have a 401k match? You do not want to miss out on that free money.
3. Getting an emergency fund which will cover 3-6 months of expenses should be a top priority. Why save for a house, especially if you want to move? Once you have an EF, have maxed 401k, I would invest in a Roth IRA and then a taxable account. If you wanted to build up savings to use in the next year or two I would do that in a high yield personal savings account (ie Ally, amex, barclays, etc).

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