Advice for Initial Roth Investment - 24 years old

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bfinners23
Posts: 33
Joined: Wed Mar 22, 2017 2:50 pm

Advice for Initial Roth Investment - 24 years old

Postby bfinners23 » Thu Apr 20, 2017 2:38 pm

Hey Bogleheads,

I would love to get some advice on what to do with my initial $5500 deposit into a Roth IRA, thank you in advance!

Emergency Fund: 3K (6 months)
Debt: None (possible car payment coming up within 2-3 months)
Tax Filing Status: Single
Tax Rate: 25% Federal 5.75% state
State of Residence: Virginia
Age: 24
Desired AA: 85/15 or 80/20 socks to bonds
Desired International Allocation: 30% international

Within that desired AA, I really don't have much preference in terms of breaking that down further within each asset class. Probably lean more large caps.

I currently have 8K in a brokerage account with TD Ameritrade
I have 3K in my work Roth 401K. I contribute 10% and company matches 2% right now.
I have $5500 sitting in TD Ameritrade Roth IRA that I just contributed to three days before Tax Day. That's what I'm looking for advice with how to invest.

Taxable:
Cash: $15K

Retirement Assets

Roth 401K at Work:
FlexPath Index Mod 2055 RI

Domestic Stock 56%
Foreign Stock 36%
Cash 5%
Other 1.4%
Bonds 0.85%

Is it okay to invest in Vanguard Funds with a TD Ameritrade Roth IRA?
What suggestions would you make for this? I don't plan on needing to pull this any time in the near future.

Thanks for all of your help!
Brady

bloom2708
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Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Advice for Initial Roth Investment - 24 years old

Postby bloom2708 » Thu Apr 20, 2017 3:18 pm

Welcome.

It is fine to hold Vanguard index funds at TD Ameritrade as long as you aren't paying and trade fees. See if you can buy the Admiral version of the funds (compared to the higher cost Investor shares).

A Total US stock market fund would be the first type of account to add to your Roth IRA. Due to minimums you might want to just use the Total US Stock index for your first $5,500 purchase.

One recommendation. Switch to Pre-tax 401k unless you are in the 15% tax bracket. Pay tax "40 years from now". Invest the higher amount now, let it grow. It also reduces your taxable income which can keep you in a lower tax bracket.

Pre-tax 401k + Roth IRA. Next target would be HSA if you have that as an option.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead | | Want to buy something? Watch this first: https://vimeo.com/41152287

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knpstr
Posts: 1269
Joined: Thu Nov 20, 2014 8:57 pm
Location: Michigan

Re: Advice for Initial Roth Investment - 24 years old

Postby knpstr » Thu Apr 20, 2017 3:21 pm

Probably just go with a target date fund or LifeStrategy Growth fund (80/20 your desired AA) that would be the simplest to manage.
Using TD is fine.

Note: You really only live on $6,000 per year?
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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flamesabers
Posts: 375
Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: Advice for Initial Roth Investment - 24 years old

Postby flamesabers » Thu Apr 20, 2017 3:50 pm

OP,

Do you have any other assets you haven't listed? You indicate you want 15%-20% of your assets in bonds, but all I'm seeing is the 0.85% of your 401k in bonds. You may want to consider putting some of your IRA in bonds in order to fulfill your desired asset allocation.

Also, since you're in the 25% bracket, you may want to think about investing in traditional retirement accounts versus Roth.

https://www.bogleheads.org/wiki/Traditional_versus_Roth

knpstr wrote:Note: You really only live on $6,000 per year?


I would guess he's living at home with his parents or something.

bfinners23
Posts: 33
Joined: Wed Mar 22, 2017 2:50 pm

Re: Advice for Initial Roth Investment - 24 years old

Postby bfinners23 » Thu Apr 20, 2017 4:12 pm

bloom2708 wrote:Welcome.

It is fine to hold Vanguard index funds at TD Ameritrade as long as you aren't paying and trade fees. See if you can buy the Admiral version of the funds (compared to the higher cost Investor shares).

A Total US stock market fund would be the first type of account to add to your Roth IRA. Due to minimums you might want to just use the Total US Stock index for your first $5,500 purchase.

One recommendation. Switch to Pre-tax 401k unless you are in the 15% tax bracket. Pay tax "40 years from now". Invest the higher amount now, let it grow. It also reduces your taxable income which can keep you in a lower tax bracket.

Pre-tax 401k + Roth IRA. Next target would be HSA if you have that as an option.


Thanks Bloom. Of all the things I looked at it appeared that a Total US Stock index is something that appealed to me in terms of just adding the whole market. That's a great point on doing a Traditional 401K. When I was choosing a few months ago I honestly didn't know the biggest difference except that people loved throwing around the word "roth'' for a younger employee/investor.

Thank you for the note!

bfinners23
Posts: 33
Joined: Wed Mar 22, 2017 2:50 pm

Re: Advice for Initial Roth Investment - 24 years old

Postby bfinners23 » Thu Apr 20, 2017 4:13 pm

knpstr wrote:Probably just go with a target date fund or LifeStrategy Growth fund (80/20 your desired AA) that would be the simplest to manage.
Using TD is fine.

Note: You really only live on $6,000 per year?


That's probably a bit of a typo, more like 4.5 months. It was honestly just including rent and basic food, like bare essentials. And no, I don't live at home with my parents.

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knpstr
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Joined: Thu Nov 20, 2014 8:57 pm
Location: Michigan

Re: Advice for Initial Roth Investment - 24 years old

Postby knpstr » Thu Apr 20, 2017 5:41 pm

bfinners23 wrote:That's probably a bit of a typo, more like 4.5 months. It was honestly just including rent and basic food, like bare essentials. And no, I don't live at home with my parents.


Well good for you! You should be able to save a LOT of money and build wealth relatively quickly.

:beer
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

bfinners23
Posts: 33
Joined: Wed Mar 22, 2017 2:50 pm

Re: Advice for Initial Roth Investment - 24 years old

Postby bfinners23 » Fri Apr 21, 2017 7:12 am

VTSMX?

VOO?

VTI?

They are the three I am looking at and would like to purchase today. Any thoughts on these 3 for the first 5500 investment into my Roth? Also what are some good International ones that you'd suggest?

Thank you all!


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