Newbie investor

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pr_investor
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Joined: Mon Mar 20, 2017 8:06 am

Newbie investor

Postby pr_investor » Mon Mar 20, 2017 8:14 am

Hello Bogleheads members,
I am a eager on doing something productive with my savings and my retirement. I started reading The Bogleheads Guide to Investing. So far I love it because all the principles apply to the way I see money.
Some background:
Age:33
Job: Very stable
Tax: 25%
Retirement: 401k(Thrifty Savings Plan) stock-bonds 80/20 (Lifecycle fund 2050) $20,000, Contribution 5% plus 5% max employer match.
Emergency Funds: 5 month
Debt: Only student loans $50k, 6.4% interest.
Saving: Cash $5,000

Basically I want to do something with does $5,000 cash because they are seating in a savings account with a .000000000001% interest. I don't expect to use them in the next 5-7 years, maybe to buy a house after 5 years or just let them grow. Finally my question. Should I invest them on an ETF or mutual funds? Also try to do monthly contributions. I am looking at some Vanguard funds or any other low fee funds. Any suggestions on the retirement contribution %? I know the importance of retirement, however I don't want to put all the money on retirement and end up without any savings for my regular financial life (travel, gift, etc.). Any advise will be much appreciated.
Last edited by pr_investor on Mon Mar 20, 2017 3:21 pm, edited 3 times in total.

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pennstater2005
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Re: Newbie investor

Postby pennstater2005 » Mon Mar 20, 2017 10:19 am

Welcome to the forum!

What is the interest rate on the student loans? How soon will they be paid off? You're getting the match on the 401k so good there. Are you investing in an IRA?
“Life is short, Break the Rules, Forgive quickly, Kiss slowly, Love truly, Laugh uncontrollably, And never regret anything that made you smile" - Unknown

Alto Astral
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Re: Newbie investor

Postby Alto Astral » Mon Mar 20, 2017 10:46 am

A few options:
1. Max out your 401k, that should take care of the extra $5K
2. If its for 5 years put it in a CD.
3. Put the $5K in a Roth IRA. It can stay in Money Market till you decide. If you don't need it in 5 years, you just increase your retirement contribution.

pr_investor
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Joined: Mon Mar 20, 2017 8:06 am

Re: Newbie investor

Postby pr_investor » Mon Mar 20, 2017 11:47 am

pennstater2005 wrote:Welcome to the forum!

What is the interest rate on the student loans? How soon will they be paid off? You're getting the match on the 401k so good there. Are you investing in an IRA?

6.4% interest student loans and they should be payoff within 10 years from now. Right now no IRA investment's.

pr_investor
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Joined: Mon Mar 20, 2017 8:06 am

Re: Newbie investor

Postby pr_investor » Mon Mar 20, 2017 11:52 am

Alto Astral wrote:A few options:
1. Max out your 401k, that should take care of the extra $5K
2. If its for 5 years put it in a CD.
3. Put the $5K in a Roth IRA. It can stay in Money Market till you decide. If you don't need it in 5 years, you just increase your retirement contribution.

What do you mean with the first option by maxing out the 401k that should take care of the $5k. Sorry for the lack of knowledge.

By put it on the roth IRA correct me if i'm wrong, I can withdraw the money without penalties after 5 years for buying a house?

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ruralavalon
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Re: Newbie investor

Postby ruralavalon » Mon Mar 20, 2017 12:05 pm

Welcome to the forum :) .

Paying more on the 6.4% student debt may be the next priority, after contributing enough to the 401k to get the full employer match. Please see the wiki article "prioritizing investments".

Some more information would be helpful. Other possibilities include opening an IRA at a low cost provider like Vanguard, or contributing more to your 401k, or medium duration CDs.

Do you have an emergency fund, something in addition to the $5k in savings?

What are the funds that you are using in your 401k? What are the other funds,offered in your 401k? Please give the fund names, tickers and expense ratios.

You can simply add this to your original post using the edit button, so that all of your information is in one place.
Last edited by ruralavalon on Mon Mar 20, 2017 12:43 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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pennstater2005
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Re: Newbie investor

Postby pennstater2005 » Mon Mar 20, 2017 12:38 pm

pr_investor wrote:
pennstater2005 wrote:Welcome to the forum!

What is the interest rate on the student loans? How soon will they be paid off? You're getting the match on the 401k so good there. Are you investing in an IRA?

6.4% interest student loans and they should be payoff within 10 years from now. Right now no IRA investment's.


6.4% is fairly high interest and I would consider putting some extra money to that. That is highly debated here however and is a personal decision. Here is a wiki article https://www.bogleheads.org/wiki/Paying_ ... _investing.

You can withdraw your contributions from a Roth IRA without penalty anytime http://www.schwab.com/public/schwab/inv ... awal_rules. Saving for the house in a CD would be no risk aside from possible early withdrawal penalties. If you're looking for higher returns then a mutual fund in the Roth would make sense but obviously riskier.

I would continue to read here before doing anything and educate yourself. It will be invaluable for your eventual decision making.

https://www.bogleheads.org/wiki/Getting_started
“Life is short, Break the Rules, Forgive quickly, Kiss slowly, Love truly, Laugh uncontrollably, And never regret anything that made you smile" - Unknown

Alto Astral
Posts: 650
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Re: Newbie investor

Postby Alto Astral » Mon Mar 20, 2017 1:46 pm

pr_investor wrote:
Alto Astral wrote:A few options:
1. Max out your 401k, that should take care of the extra $5K
2. If its for 5 years put it in a CD.
3. Put the $5K in a Roth IRA. It can stay in Money Market till you decide. If you don't need it in 5 years, you just increase your retirement contribution.

What do you mean with the first option by maxing out the 401k that should take care of the $5k. Sorry for the lack of knowledge.

No, no, don't be sorry :) I should have been clearer. If you start maxing out your 401k this year, you will be putting $18K. So assuming 9 months from Apr-Dec, the rest of your paychecks this year will be short of say $1K per paycheck. ($18K / 9 months / 2 paychecks per month)

pr_investor wrote:By put it on the roth IRA correct me if i'm wrong, I can withdraw the money without penalties after 5 years for buying a house?

Absolutely, if you plan to withdraw it, hold it in something like a Vanguard Prime Money Market account or something. I did that and needed to withdraw for an emergency. No penalty on the $5K you contribute, but don't withdraw the interest/gains you make out of it.

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pennstater2005
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Re: Newbie investor

Postby pennstater2005 » Mon Mar 20, 2017 2:03 pm

^
Correct me if I'm wrong but isn't the Vanguard MM fund at .80% interest with a .16% ER?

Why not say an Ally account then paying 1%?
“Life is short, Break the Rules, Forgive quickly, Kiss slowly, Love truly, Laugh uncontrollably, And never regret anything that made you smile" - Unknown

pr_investor
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Joined: Mon Mar 20, 2017 8:06 am

Re: Newbie investor

Postby pr_investor » Mon Mar 20, 2017 5:55 pm

Thank you I appreciate the inputs! :D


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