30,000 in Checking Account

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GridironGems
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Joined: Mon Aug 14, 2017 8:50 pm

30,000 in Checking Account

Post by GridironGems » Mon Aug 14, 2017 9:05 pm

I am 31 years old and currently have 30,000 in my checking account and am tired of it just sitting there earning nothing. I already match my employer retirement to get the most out of them, have a Roth IRA, already paid off my student loans, no car payment, no credit card debt, and I rent, so no mortgage. So I have 0 debt at this time.
I have not put this years 5,500 into my Roth IRA yet, any suggestions?
So that'll leave me with 25,000. I would like to have 10,000 as my emergency fund, should I keep that in a online savings account, money markets, bonds, CD's, etc?
That leaves me with 15,000. I have been thinking about putting that into Vanguard index funds. Just don't know how much in each one, and which accounts exactly, and if I should put in a large amount at once, or by smaller amounts each month.
Thanks for all your input!

MotoTrojan
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Re: 30,000 in Checking Account

Post by MotoTrojan » Mon Aug 14, 2017 9:18 pm

GridironGems wrote:
Mon Aug 14, 2017 9:05 pm
I am 31 years old and currently have 30,000 in my checking account and am tired of it just sitting there earning nothing. I already match my employer retirement to get the most out of them, have a Roth IRA, already paid off my student loans, no car payment, no credit card debt, and I rent, so no mortgage. So I have 0 debt at this time.
I have not put this years 5,500 into my Roth IRA yet, any suggestions?
So that'll leave me with 25,000. I would like to have 10,000 as my emergency fund, should I keep that in a online savings account, money markets, bonds, CD's, etc?
That leaves me with 15,000. I have been thinking about putting that into Vanguard index funds. Just don't know how much in each one, and which accounts exactly, and if I should put in a large amount at once, or by smaller amounts each month.
Thanks for all your input!
Depends what else you have. I'd put $10K in an Ally 1.15% savings account, $5500 in Roth, and the rest in Taxable account, under the same AA (one merged portfolio). Place funds in a tax-efficient manner.

Actually, if by "match my employer retirement" you mean you aren't maxing them out, but just getting your match, I would contribute more to your 401k.

RRAAYY3
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Re: 30,000 in Checking Account

Post by RRAAYY3 » Mon Aug 14, 2017 9:27 pm

Max in Roth asap. Buy Admiral Shares Total US + Total Int'l in taxable ... 5K in ally

Contribute monthly to whichever of those funds drops

You're young - if you have a stable job, be aggressive

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flamesabers
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Re: 30,000 in Checking Account

Post by flamesabers » Mon Aug 14, 2017 9:40 pm

OP,

Depending on what your overall asset allocation is, I would recommend putting your excess $15k in one of Vanguard's equity index funds as a taxable account.

lostdog
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Re: 30,000 in Checking Account

Post by lostdog » Mon Aug 14, 2017 9:43 pm

Make sure you're maxing your 401(k).
"Our life is frittered away by detail. Simplify, simplify." -Thoreau | Vanguard Total World Index-buy the haystack.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Mon Aug 14, 2017 9:45 pm

MotoTrojan wrote:
Mon Aug 14, 2017 9:18 pm
GridironGems wrote:
Mon Aug 14, 2017 9:05 pm
I am 31 years old and currently have 30,000 in my checking account and am tired of it just sitting there earning nothing. I already match my employer retirement to get the most out of them, have a Roth IRA, already paid off my student loans, no car payment, no credit card debt, and I rent, so no mortgage. So I have 0 debt at this time.
I have not put this years 5,500 into my Roth IRA yet, any suggestions?
So that'll leave me with 25,000. I would like to have 10,000 as my emergency fund, should I keep that in a online savings account, money markets, bonds, CD's, etc?
That leaves me with 15,000. I have been thinking about putting that into Vanguard index funds. Just don't know how much in each one, and which accounts exactly, and if I should put in a large amount at once, or by smaller amounts each month.
Thanks for all your input!
Depends what else you have. I'd put $10K in an Ally 1.15% savings account, $5500 in Roth, and the rest in Taxable account, under the same AA (one merged portfolio). Place funds in a tax-efficient manner.

Actually, if by "match my employer retirement" you mean you aren't maxing them out, but just getting your match, I would contribute more to your 401k.
There are higher APY than Ally, so why them in particular?

I work for the state and it doesn't invest my money, it has a 4% rate, so not interested in putting in more than that

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Mon Aug 14, 2017 9:49 pm

RRAAYY3 wrote:
Mon Aug 14, 2017 9:27 pm
Max in Roth asap. Buy Admiral Shares Total US + Total Int'l in taxable ... 5K in ally

Contribute monthly to whichever of those funds drops

You're young - if you have a stable job, be aggressive
Admiral shares is 10k each, so 20k total. Don't have enough to invest that much at this time

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Mon Aug 14, 2017 9:52 pm

lostdog wrote:
Mon Aug 14, 2017 9:43 pm
Make sure you're maxing your 401(k).
I work for the state and their plan is terrible, so not interested 4% rate of return is what I get

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Mon Aug 14, 2017 9:53 pm

flamesabers wrote:
Mon Aug 14, 2017 9:40 pm
OP,

Depending on what your overall asset allocation is, I would recommend putting your excess $15k in one of Vanguard's equity index funds as a taxable account.
I don't have much assets elsewhere. Which one do you have in mind?

Avo
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Re: 30,000 in Checking Account

Post by Avo » Mon Aug 14, 2017 10:02 pm

GridironGems wrote:
Mon Aug 14, 2017 9:52 pm
I work for the state and their plan is terrible, so not interested 4% rate of return is what I get
By "rate of return", do you mean the state matches your contributions up to 4% of salary?

If so, that is likely still worth participating in, even if the plan is not the best.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Mon Aug 14, 2017 10:18 pm

Avo wrote:
Mon Aug 14, 2017 10:02 pm
GridironGems wrote:
Mon Aug 14, 2017 9:52 pm
I work for the state and their plan is terrible, so not interested 4% rate of return is what I get
By "rate of return", do you mean the state matches your contributions up to 4% of salary?

If so, that is likely still worth participating in, even if the plan is not the best.
I put in 6%, and the state puts in 8.5%

My 6% that I contribute, only earns 4%

The 8.5% the state puts in, goes into a fund

I cannot see the amount the state puts in until I am eligible to retire

pkcrafter
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Re: 30,000 in Checking Account

Post by pkcrafter » Mon Aug 14, 2017 11:30 pm

What kind of plan is the state plan--457, 403b? Are you saying you don't have choices of funds to select, you just get a 4% return on the money you put in?
I put in 6%, and the state puts in 8.5%

My 6% that I contribute, only earns 4%
Only earns 4%? What about the 8.5%? How does that work? Does the state put in 8.5% only up to a 6% contribution? What happens if you invest more than 6%?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Tue Aug 15, 2017 6:23 am

pkcrafter wrote:
Mon Aug 14, 2017 11:30 pm
What kind of plan is the state plan--457, 403b? Are you saying you don't have choices of funds to select, you just get a 4% return on the money you put in?
I put in 6%, and the state puts in 8.5%

My 6% that I contribute, only earns 4%
Only earns 4%? What about the 8.5%? How does that work? Does the state put in 8.5% only up to a 6% contribution? What happens if you invest more than 6%?

Paul
It's a 401a plan. And Yep I don't have a choice of funds to select, just get the 4% return

Yes, 8.5% is the max the state will put in. They will not put in more if I invest more than 6%

hafjell
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Re: 30,000 in Checking Account

Post by hafjell » Tue Aug 15, 2017 7:42 am

GridironGems wrote:
Mon Aug 14, 2017 9:45 pm
I work for the state and it doesn't invest my money, it has a 4% rate, so not interested in putting in more than that
Have you factored in taxes on that 4%? Could be a much higher real return if you're not taxed on contributions. Lots of folks who know more than me will chime in, but it seems like it could be a nice part of your fixed/bonds allocation.
If you've maxed out your bond allocation, figure out a true emergency fund dollar number. What do you want to help you sleep at night? 3 months of rent plus utilities plus moving costs plus food plus gas plus car insurance plus x? 6 months?
Otherwise, if not saving for a down payment on a house or looming education costs, into a taxable account the remainder goes. Most here will tell you to fund the IRA immediately. I agree.

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Tue Aug 15, 2017 7:48 am

GridironGems wrote:
Mon Aug 14, 2017 9:05 pm
I am 31 years old and currently have 30,000 in my checking account and am tired of it just sitting there earning nothing. I already match my employer retirement to get the most out of them, have a Roth IRA, already paid off my student loans, no car payment, no credit card debt, and I rent, so no mortgage. So I have 0 debt at this time.
I have not put this years 5,500 into my Roth IRA yet, any suggestions?
So that'll leave me with 25,000. I would like to have 10,000 as my emergency fund, should I keep that in a online savings account, money markets, bonds, CD's, etc?
That leaves me with 15,000. I have been thinking about putting that into Vanguard index funds. Just don't know how much in each one, and which accounts exactly, and if I should put in a large amount at once, or by smaller amounts each month.
Thanks for all your input!
This type of question requires more information than you have given. If you want more reliable help, you should see the link at the bottom of this message.

My first impression is to completely fill whatever work plan you have (401k, 403b, etc). Whatever is left should go into a taxable account, invested in a broad stock index fund. That's about all that can be said based on such limited information.

bloom2708
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Re: 30,000 in Checking Account

Post by bloom2708 » Tue Aug 15, 2017 8:07 am

At your bank, create Money Market account next to your Checking Account. Transfer $10k to that account. Use it for an Emergency. It doesn't matter really if it makes .1% or 1%. Not going to make much difference on $10k.

Put $5,500 in your 2017 Roth IRA. Keep $5,500 for your 2018 Roth IRA. Invest that on January 1st of 2018.

Putting pre-tax into your 401a defers the 15% or 25% tax until 30+ years down the road. You are getting 8.5% matched. That is free money. If you are guaranteed 4% return, that is pretty good. I would max that out. Post the fund options and expenses/costs.

Do you have an HSA account paired with a High Deductible Health Plan? That is another vehicle to save pre-tax.

Start a taxable account (At Vanguard) when you are filling up all your other available buckets. Your future retired self thanks you.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Tue Aug 15, 2017 8:35 am

People who work for the state and have a 401a plan often have a 457b plan available as well. Do you?

ryman554
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Re: 30,000 in Checking Account

Post by ryman554 » Tue Aug 15, 2017 8:40 am

GridironGems wrote:
Tue Aug 15, 2017 6:23 am

It's a 401a plan. And Yep I don't have a choice of funds to select, just get the 4% return

Yes, 8.5% is the max the state will put in. They will not put in more if I invest more than 6%
It's also a 4% guaranteed rate of return. Do not discount the guarantee part of it.... This is better than any bond we could point you at. Lots of folks around here would kill for that kind of guarantee.

This is better than any CD we can point at today, and it's tax-advantaged. What is your marginal tax rate?

Now, please listen carefully. I get the sense that you are looking to chase return. I get the sense that you want to try to be better than average. Stocks return something like 8% on average. So buy the entire stock market with whatever you don't put in you stable value fund.

before you do this, what will you do when the stock market declines by 20-25% (or more)? Will you move your money out into something else? Why or why not?

RRAAYY3
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Re: 30,000 in Checking Account

Post by RRAAYY3 » Tue Aug 15, 2017 9:01 am

GridironGems wrote:
Mon Aug 14, 2017 9:49 pm
RRAAYY3 wrote:
Mon Aug 14, 2017 9:27 pm
Max in Roth asap. Buy Admiral Shares Total US + Total Int'l in taxable ... 5K in ally

Contribute monthly to whichever of those funds drops

You're young - if you have a stable job, be aggressive
Admiral shares is 10k each, so 20k total. Don't have enough to invest that much at this time
apologies ... missed the emergency fund amount. Bank the 10K in Ally ... Buy Total US Admiral Shares in taxable (after Roth contribution). From there, make a monthly contribution to this fund - you can set it automatically or do it manually - OR - set money aside until you have the 10K for Int'l and have both funds in Admiral share class. From there, contribute monthly to which ever fund to maintain your target allocation (ratio of US:International)

mega317
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Re: 30,000 in Checking Account

Post by mega317 » Tue Aug 15, 2017 9:43 am

bloom2708 wrote:
Tue Aug 15, 2017 8:07 am
Keep $5,500 for your 2018 Roth IRA. Invest that on January 1st of 2018.
Invest that today in taxable, then move it to Roth on Jan 1.

pkcrafter
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Re: 30,000 in Checking Account

Post by pkcrafter » Tue Aug 15, 2017 10:32 am

Is that 4% return based on the amount in the 403A or your contributions? A 4% tax-deferred return is about what you might expect from a 60/40 allocation. It a very good deal and you should max out contributions if you can get the return on everything in your account.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

bloom2708
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Re: 30,000 in Checking Account

Post by bloom2708 » Tue Aug 15, 2017 11:35 am

mega317 wrote:
Tue Aug 15, 2017 9:43 am
bloom2708 wrote:
Tue Aug 15, 2017 8:07 am
Keep $5,500 for your 2018 Roth IRA. Invest that on January 1st of 2018.
Invest that today in taxable, then move it to Roth on Jan 1.
That is an option. Just be aware that the $5,500 might be $3,700 or $4,300 or $5,800. With 4 months to go, I would probably just keep it safe. But, if taxable is going to get $10k+, then pulling $5,500 out in 4 months likely won't matter.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

mega317
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Re: 30,000 in Checking Account

Post by mega317 » Tue Aug 15, 2017 12:03 pm

bloom2708 wrote:
Tue Aug 15, 2017 11:35 am
mega317 wrote:
Tue Aug 15, 2017 9:43 am
bloom2708 wrote:
Tue Aug 15, 2017 8:07 am
Keep $5,500 for your 2018 Roth IRA. Invest that on January 1st of 2018.
Invest that today in taxable, then move it to Roth on Jan 1.
That is an option. Just be aware that the $5,500 might be $3,700 or $4,300 or $5,800. With 4 months to go, I would probably just keep it safe. But, if taxable is going to get $10k+, then pulling $5,500 out in 4 months likely won't matter.
If it went into the IRA today (if contribution limits were higher) it would still be $3,700 or $4,300, or $5,800 on January 1st. If it goes up while in taxable before Jan 1 you've made money. If it goes down you can tax loss harvest and it would have gone down in the IRA anyway. If it's in cash it does nothing.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Tue Aug 15, 2017 9:31 pm

I'll try to reply to all in this one post as I don't have much time.

Yes, I have a HSA and a 457b plan is available.

I should also note that I do not plan on being at this job forever, and if I leave this job, I do not get the 8.5% the state contributes. To get what they put in, you have to retire with the state. That is why I cannot see the amount the state has put in until I am eligible to retire.

It seems a lot of you guys think a 4% return is good and I should be happy with that. I guess the way I look at it, at my age (31) I would like to see a 8% return at this point in my life. When I choose to leave this job, I can leave my contributions in for 5 years and continue to get the 4% interest. After 5 years it will not change and remain the same.

Why is Admiral Shares VTSAX better then the VTI ETF? They both have a 0.04 fee

There are online savings accounts with higher APY then Ally, so what makes Ally better then the others?

Thanks for all the replies and help!

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Wed Aug 16, 2017 6:27 am

In that case, there seems to be no benefit to putting more into the 401a. Consider using the 457b for tax deferral rather than putting your extra money into a taxable account.

runner540
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Re: 30,000 in Checking Account

Post by runner540 » Wed Aug 16, 2017 7:05 am

GridironGems wrote:
Tue Aug 15, 2017 9:31 pm
It seems a lot of you guys think a 4% return is good and I should be happy with that. I guess the way I look at it, at my age (31) I would like to see a 8% return at this point in my life
Most of us no matter our age would be ecstatic about reliable 8% returns. But that's not on the table. You should not count on 8% annual returns to hit your retirement goals.

I'm not sure you have calculated the tax benefits of the retirement savings options you have, and I hope you appreciate that 4% guaranteed return is not available on the open market.

ryman554
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Re: 30,000 in Checking Account

Post by ryman554 » Wed Aug 16, 2017 8:38 am

runner540 wrote:
Wed Aug 16, 2017 7:05 am
GridironGems wrote:
Tue Aug 15, 2017 9:31 pm
It seems a lot of you guys think a 4% return is good and I should be happy with that. I guess the way I look at it, at my age (31) I would like to see a 8% return at this point in my life
Most of us no matter our age would be ecstatic about reliable 8% returns. But that's not on the table. You should not count on 8% annual returns to hit your retirement goals.

I'm not sure you have calculated the tax benefits of the retirement savings options you have, and I hope you appreciate that 4% guaranteed return is not available on the open market.
To reiterate: a guaranteed 4% return is excellent. But it is far from sufficient to grow into a large enough nest egg.

You have to combine it with your desired AA. To the degree you want to hold "safe" investments, like bonds, you put your money in this 4% slot. It is a superb place to rely on for retirement spending during down years.

For the long run, equities will indeed return you 8% "guaranteed", but only guaranteed from historical data via the central limit theorem, and then only on the order of 15+ years. The caution we are giving you is that you sound eager to "chase" the 8%. If I am misreading you, I apologize. Dump money into a total stock market fund (or similar), and leave it alone in good times and in bad, and you're expected return will be ~8%. Just don't move it around during down years.

jbuzolich
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Re: 30,000 in Checking Account

Post by jbuzolich » Wed Aug 16, 2017 8:43 am

To OP regarding Ally you'll find many to most on this site just really recommend that bank. I would say go with what you feel most comfortable with yourself if you see decent rates but compare against Ally. For me personally all our cash savings and emergency blanket are at Ally and I've been happy with them. I've found the great website, fast transfers, and mostly competitive rate to be the winning factors. Yes there are higher out there but for now I'll stick with Ally. When I have shared our rates with family members they often have been shocked and we're making 5x-10x what they were earning with much larger balances.

hafjell
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Re: 30,000 in Checking Account

Post by hafjell » Wed Aug 16, 2017 10:22 am

GridironGems wrote:
Tue Aug 15, 2017 9:31 pm
It seems a lot of you guys think a 4% return is good and I should be happy with that.
Not happy with 4% for the portfolio. Happy with 4% from the fixed/bond portion of the portfolio.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Wed Aug 16, 2017 7:27 pm

Thanks for all the replies.

I understand and now appreciate the 4% when you put it in those terms. A lot of people I work with do not like it because they want it to retire on, but it simply is not enough to do so. Thankfully I am in a position where I can have other forms of funds I can contribute to. I am not looking to chase, just want the best possible scenario for my age.

The highest savings interest rate available is 1.4% and Ally bank is currently 1.15% . So if you all recommend Ally, then that is probably what I'll go with

My current mind set is putting my emergency fund into Ally bank.
5,500 into Vanguard Roth IRA - 2050 Target Retirement Fund
Then the rest: 60% into VTI / 40% into VXUS

What do you guys think? I also like the Vanguard Wellington and Wellesley funds. Should I put some into those or would that just complicate things and be unnecessary?

I will think about opening a 457b plan at work as well

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Wed Aug 16, 2017 7:39 pm

GridironGems wrote:I will think about opening a 457b plan at work as well
This is pretty much a no-brainer.

Putting money into a taxable account when you have a 457b available is highly unlikely to be your best choice.

SimplicityNow
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Re: 30,000 in Checking Account

Post by SimplicityNow » Wed Aug 16, 2017 7:55 pm

I realize that you are short on time but a lot of people have taken their time to post their advice.

Take the time to post as retiredjg pointed out in the format we need to give you more detailed and comprehensive advice. You can find the link at the bottom of the post in the signature line.

To know whether the 457 plan would be good for you we need to know what fund choices you have available to you as well as their expense ratios.

Take the time, it will be worth it in the end.

And to answer your question about Ally: people recommend it because many have had good experiences with it and they are pretty reliable. To get a few extra tenths of a percentage point is not really going to make a difference for the sums of money we are discussing here.

If you want an alternative PurePoint bank I believe is paying 1.30% for a savings account. There may be a minimum amount required though for that rate.

I would also suggest you read (if you haven't already) the boglehead wiki as well as the getting started guide. A book or two from the list of books would be advisable too such as the Bogleheads Guide to Investing and a book on asset allocation.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Thu Aug 17, 2017 10:22 pm

Emergency funds: Would like to keep 10,000
Debt: None
Tax Filing Status: Single
Tax Rate: xx% Federal, xx% State (Not sure)
State of Residence: Kansas
Age: 31
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 40% of stocks

I read a bit on the KPERS 457 b plan today and I think there may be a Roth option for that too. I can have a Roth IRA and a Roth 457 both correct?
There are a number of options I could use on my 457 including Vanguard Target Retirement Funds, Vanguard Institutional Index Fund (VINIX), quite a few other Vanguard funds, Fidelity Contrafund, etc. Based on fees alone, I like the VINIX for this option at 0.04% My KPERS could be my bond part of portfolio at 4%, and VINIX could be my stock portion of my portfolio.

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FiveK
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Re: 30,000 in Checking Account

Post by FiveK » Fri Aug 18, 2017 12:02 am

GridironGems wrote:
Thu Aug 17, 2017 10:22 pm
I can have a Roth IRA and a Roth 457 both correct?
Yes. Why do you prefer a Roth 457 over a traditional 457? See Traditional versus Roth - Bogleheads.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Fri Aug 18, 2017 5:54 am

FiveK wrote:
Fri Aug 18, 2017 12:02 am
GridironGems wrote:
Thu Aug 17, 2017 10:22 pm
I can have a Roth IRA and a Roth 457 both correct?
Yes. Why do you prefer a Roth 457 over a traditional 457? See Traditional versus Roth - Bogleheads.
I thought a Roth was always better than a traditional?

TravelforFun
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Re: 30,000 in Checking Account

Post by TravelforFun » Fri Aug 18, 2017 6:40 am

lostdog wrote:
Mon Aug 14, 2017 9:43 pm
Make sure you're maxing your 401(k).
May not be a good suggestion. If the OP's tax rate is low, contribute enough to get the match and put the rest in taxable.

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Fri Aug 18, 2017 7:10 am

Tax Rate: xx% Federal, xx% State (Not sure)
State of Residence: Kansas
Compare your taxable income, line 43 from 1040, to this chart. And see if you can find a similar chart on the internet for Kansas.

http://www.moneychimp.com/features/tax_brackets.htm

I thought a Roth was always better than a traditional?
This is a common misconception and is discussed almost every other day. Look for some old threads and read the wiki link already provided. You can find old threads by using the google box above.

You probably want to use the 457b for deferring taxes until you are in retirement (when your tax rate may be lower). There are a few exceptions.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Fri Aug 18, 2017 4:58 pm

I found a Kansas paycheck calculator and it looks like:

Federal: 9.59%
State: 2.58%
FICA: 7.65%

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Fri Aug 18, 2017 5:02 pm

GridironGems wrote:
Fri Aug 18, 2017 4:58 pm
I found a Kansas paycheck calculator and it looks like:

Federal: 9.59%
State: 2.58%
FICA: 7.65%
I don't think this is related to your tax brackets. It might be related to your withholding.

GridironGems
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Re: 30,000 in Checking Account

Post by GridironGems » Fri Aug 18, 2017 9:29 pm

retiredjg wrote:
Fri Aug 18, 2017 5:02 pm
GridironGems wrote:
Fri Aug 18, 2017 4:58 pm
I found a Kansas paycheck calculator and it looks like:

Federal: 9.59%
State: 2.58%
FICA: 7.65%
I don't think this is related to your tax brackets. It might be related to your withholding.
My tax bracket is 15%

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Sat Aug 19, 2017 7:07 am

GridironGems wrote:My tax bracket is 15%
This is a little surprising. To be single with a tax bracket of 15%, your taxable income would be less than $37,950. You have a lot of money saved for that income. :happy

In the 15% bracket, you likely want to use Roth 457b instead of traditional 457b. Or use a combination of the two. When you actually get to retirement, having some untaxed money and already taxed money is a good thing.

There is an exception to this suggestion. If you find that using traditional 457b will lower your income enough to qualify for the Saver's Credit on your taxes, then using traditional might be the better idea. However, I'm not sure you will be able to qualify - your income may be too high.

https://www.bogleheads.org/wiki/Saver%27s_credit

Since you have a target fund in your Roth IRA, consider just using the same target fund in your 457b.

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BL
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Re: 30,000 in Checking Account

Post by BL » Sat Aug 19, 2017 7:29 am

Here is a great little pdf written especially for new investors:
https://www.etf.com/docs/IfYouCan.pdf

There is a lot of good reading here in threads and in our Wiki, along with suggested books.

An income at top of 15% tax bracket would be about $37,000 taxable income + about $10,000 (for standard deduction + exemptions) + any tax-reduction like 4XX retirement accounts. So do you make under 47,000 after retirement account contributions?

Look for low Expense Ratio funds in the 457, such as S&P 500 or Total Stock Market or some other index funds. Vanguard's Total Stock Market is only 0.4% ER, but you might be lucky to find something under 0.20% or at least under 0.50% in the 457. If you give us name, ticker, and ER of the choices you have, we would be glad to help pick the best/lowest cost of what is available.

I would not suggest Wellington or Wellesley at this point. They are good active funds, but kick off taxable income in a taxable account, rather than the lower taxed qualified dividends and currently no Capital Gains given off by Total Stock Market. Also, it is not as simple to see your bond % when you mix balanced funds with separate mutual funds. I will admit it is less painful to see the balance on balanced funds when the market falls, as it will.

retiredjg
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Re: 30,000 in Checking Account

Post by retiredjg » Sat Aug 19, 2017 8:09 am

Oh, BL's post reminded me of something I forgot.

You should not be investing money for retirement in a taxable account until you have filled your 457b and Roth IRA accounts (in addition to your obligation to the 401a account). You have not told us how much you are saving each year, but it does not seem you can fill all that and still have money to put into a taxable account.

Now if you decide to save for a house or a car or whatever, that money would go into a taxable account. But it might not be a good idea to invest it in stocks.

GridironGems
Posts: 66
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Re: 30,000 in Checking Account

Post by GridironGems » Sat Aug 19, 2017 10:48 am

retiredjg wrote:
Sat Aug 19, 2017 7:07 am
GridironGems wrote:My tax bracket is 15%
This is a little surprising. To be single with a tax bracket of 15%, your taxable income would be less than $37,950. You have a lot of money saved for that income. :happy

In the 15% bracket, you likely want to use Roth 457b instead of traditional 457b. Or use a combination of the two. When you actually get to retirement, having some untaxed money and already taxed money is a good thing.

There is an exception to this suggestion. If you find that using traditional 457b will lower your income enough to qualify for the Saver's Credit on your taxes, then using traditional might be the better idea. However, I'm not sure you will be able to qualify - your income may be too high.

https://www.bogleheads.org/wiki/Saver%27s_credit

Since you have a target fund in your Roth IRA, consider just using the same target fund in your 457b.
It's not how much you make, it's how much you spend!

My 401a is taxed, so I'd like to do the 457b as a Roth. I've read about the Saver's Credit before, and I don't think I qualify

I don't have a target fund in my Roth IRA yet, but that is my plan for this year. I put in 11,000 last year (for 2015 and 2016) in a index annuity which earned 3.52% last year. A financial advisor put me in that and I did not know any better, which I realize now was a mistake

Since my 401a is 4% and essentially my bond portion, I was thinking of VINIX for my 457b and stock portion. Target fund is 0.16% and VINIX is 0.04% fee

I graduated from college in 2009, but am going back to school next week and taking a Personal Financial Planning class (only taking 1 class as I work for a university and I get 1 free class per semester) and if I continue to pursue this program, I can get a Certificate in Financial Planning through a 18 credit hour program. If I continue to take 1 class per semester, it'd take me a few years. If that's the case, I will only be at this job for a few more years if that makes any difference

GridironGems
Posts: 66
Joined: Mon Aug 14, 2017 8:50 pm

Re: 30,000 in Checking Account

Post by GridironGems » Sat Aug 19, 2017 10:52 am

BL wrote:
Sat Aug 19, 2017 7:29 am
Here is a great little pdf written especially for new investors:
https://www.etf.com/docs/IfYouCan.pdf

There is a lot of good reading here in threads and in our Wiki, along with suggested books.

An income at top of 15% tax bracket would be about $37,000 taxable income + about $10,000 (for standard deduction + exemptions) + any tax-reduction like 4XX retirement accounts. So do you make under 47,000 after retirement account contributions?

Look for low Expense Ratio funds in the 457, such as S&P 500 or Total Stock Market or some other index funds. Vanguard's Total Stock Market is only 0.4% ER, but you might be lucky to find something under 0.20% or at least under 0.50% in the 457. If you give us name, ticker, and ER of the choices you have, we would be glad to help pick the best/lowest cost of what is available.

I would not suggest Wellington or Wellesley at this point. They are good active funds, but kick off taxable income in a taxable account, rather than the lower taxed qualified dividends and currently no Capital Gains given off by Total Stock Market. Also, it is not as simple to see your bond % when you mix balanced funds with separate mutual funds. I will admit it is less painful to see the balance on balanced funds when the market falls, as it will.
Thanks for all the info and tips!

Yes I make under 47,000 after all that

kpers457.org is the website and there is an investments tab at the top

GridironGems
Posts: 66
Joined: Mon Aug 14, 2017 8:50 pm

Re: 30,000 in Checking Account

Post by GridironGems » Sat Aug 19, 2017 10:55 am

retiredjg wrote:
Sat Aug 19, 2017 8:09 am
Oh, BL's post reminded me of something I forgot.

You should not be investing money for retirement in a taxable account until you have filled your 457b and Roth IRA accounts (in addition to your obligation to the 401a account). You have not told us how much you are saving each year, but it does not seem you can fill all that and still have money to put into a taxable account.

Now if you decide to save for a house or a car or whatever, that money would go into a taxable account. But it might not be a good idea to invest it in stocks.
This is an idea I did not think of until you mentioned it. I am not planning on buying a house or car in the next few years, but it would be nice to have some account grow that is not intended for retirement. Any suggestions?

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: 30,000 in Checking Account

Post by retiredjg » Sat Aug 19, 2017 11:00 am

GridironGems wrote:Since my 401a is 4% and essentially my bond portion, I was thinking of VINIX for my 457b and stock portion. Target fund is 0.16% and VINIX is 0.04% fee
That works too.

Eventually, you need to figure out what stock to bond ratio you want for your entire portfolio and strive to hit that number. I do not know how to work an indexed annuity into that, or even if you can. Have you checked what the surrender fees might be?

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: 30,000 in Checking Account

Post by retiredjg » Sat Aug 19, 2017 11:07 am

GridironGems wrote:This is an idea I did not think of until you mentioned it. I am not planning on buying a house or car in the next few years, but it would be nice to have some account grow that is not intended for retirement. Any suggestions?
I'd use the 3 fund portfolio - total stock index, total international index, and total bond index (since you are in a low tax bracket). Make it as aggressive as your goal - long goal of 15 years can have a good amount of stocks; European vacation next year should probably be all bonds.

GridironGems
Posts: 66
Joined: Mon Aug 14, 2017 8:50 pm

Re: 30,000 in Checking Account

Post by GridironGems » Sat Aug 19, 2017 11:15 am

retiredjg wrote:
Sat Aug 19, 2017 11:00 am
GridironGems wrote:Since my 401a is 4% and essentially my bond portion, I was thinking of VINIX for my 457b and stock portion. Target fund is 0.16% and VINIX is 0.04% fee
That works too.

Eventually, you need to figure out what stock to bond ratio you want for your entire portfolio and strive to hit that number. I do not know how to work an indexed annuity into that, or even if you can. Have you checked what the surrender fees might be?
I'd like a 90% stock/10% bond ratio at this point.
It's currently a 9% surrender fee and goes down each year so I just intend to keep it there and take it as a learning moment and a comparison for my future funds. I can just consider it as my safe portion of my portfolio

GridironGems
Posts: 66
Joined: Mon Aug 14, 2017 8:50 pm

Re: 30,000 in Checking Account

Post by GridironGems » Sat Aug 19, 2017 11:22 am

retiredjg wrote:
Sat Aug 19, 2017 11:07 am
GridironGems wrote:This is an idea I did not think of until you mentioned it. I am not planning on buying a house or car in the next few years, but it would be nice to have some account grow that is not intended for retirement. Any suggestions?
I'd use the 3 fund portfolio - total stock index, total international index, and total bond index (since you are in a low tax bracket). Make it as aggressive as your goal - long goal of 15 years can have a good amount of stocks; European vacation next year should probably be all bonds.

The 3 fund portfolio is what my retirement savings would look like, so essentially the same thing, just different percentages
VTI, VXUS, and BND

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