Don't know where to start at all

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anthonny
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Don't know where to start at all

Post by anthonny » Wed Sep 06, 2017 8:19 pm

Good evening everybody,
as my title says " I don't know how to start my investing path".
A little bit about where I am right now,
I'm 27 my wife is 28 both of us work as a servers( we don't have any retirement plans in our jobs.
No kids maybe in 3 years.
We work a lot and our tips are daily cash. We don't have debts at all.
We just pay rent and monthly expenses.
We have an emergency fund for 6 months in cash and we have 10k saved up in cash . I am the one reading about investing on line and also a book called index investing for dummy's.
Based on my reading I have the choice to invest in a non retirement account where I pay taxes on capital gains but I can take the money anytime.
The other path will the the Roth IRA where I won't be touching the money until I turn 65 years.
I was looking at vanguard brokerage firm to place my money. In the total stock Market index fund " vtsmx". Where the expense ratio is 0.18 until I get the chance to change it to the admiral share which is the same index fund but the expense ratio is lower.
I'm planing to start with 3k and then monthly deposits of 300 to 500 dollars.

-Should I place it in a Roth IRA or just non retirement account?
- or maybe the vtsmx is not the best one ?
What should I do. I really want to start investing I just need the little push that I can find here. Thank you very much for your help

bob_m10
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Re: Don't know where to start at all

Post by bob_m10 » Wed Sep 06, 2017 8:29 pm

anthonny wrote:
Wed Sep 06, 2017 8:19 pm
Good evening everybody,
as my title says " I don't know how to start my investing path".
A little bit about where I am right now,
I'm 27 my wife is 28 both of us work as a servers( we don't have any retirement plans in our jobs.
No kids maybe in 3 years.
We work a lot and our tips are daily cash. We don't have debts at all.
We just pay rent and monthly expenses.
We have an emergency fund for 6 months in cash and we have 10k saved up in cash . I am the one reading about investing on line and also a book called index investing for dummy's.
Based on my reading I have the choice to invest in a non retirement account where I pay taxes on capital gains but I can take the money anytime.
The other path will the the Roth IRA where I won't be touching the money until I turn 65 years.
I was looking at vanguard brokerage firm to place my money. In the total stock Market index fund " vtsmx". Where the expense ratio is 0.18 until I get the chance to change it to the admiral share which is the same index fund but the expense ratio is lower.
I'm planing to start with 3k and then monthly deposits of 300 to 500 dollars.

-Should I place it in a Roth IRA or just non retirement account?
- or maybe the vtsmx is not the best one ?
What should I do. I really want to start investing I just need the little push that I can find here. Thank you very much for your help
Welcome to the forum. I am new to investing as well so look forward to more experienced advice from others. It is good your are thinking about retirement. My understanding with a Roth is you are able to pull out your contributions at any time without penalty. You are not however allowed to pull out earnings without a penalty. The earnings will grow tax free in the Roth so that may be the better deal for you than the taxable.

Good Luck

Fallible
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Re: Don't know where to start at all

Post by Fallible » Wed Sep 06, 2017 8:37 pm

Welcome!

You've asked good questions and most of the answers will be on the wiki's "Getting Started" page:

https://www.bogleheads.org/wiki/Getting_started
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

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Pajamas
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Re: Don't know where to start at all

Post by Pajamas » Wed Sep 06, 2017 8:48 pm

If your tax rate is fairly low now, putting money into a Roth is a good idea because then you can let it grow until you need it for retirement and then take it out without paying any taxes at all on it. That really makes a huge difference over long periods of time and as your income and tax rate goes up. However, you can access your contributions sooner if you really need to, so it can also function as a back-up emergency fund.

Depending on your tax rate, some capital gains in a taxable account won't actually be taxed, at least not at the federal level. This article focuses on capital gains distributions, but it applies to all capital gains. It's the long-term gains and qualified dividends that are most advantaged.

https://www.bogleheads.org/wiki/Capital ... stribution

Sounds like you are already off to a good financial start in general and the getting started link provided above by Fallible is a good next step since you are now ready to begin investing.

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badbreath
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Re: Don't know where to start at all

Post by badbreath » Wed Sep 06, 2017 8:54 pm

take a look at this it may help

http://jlcollinsnh.com/stock-series/

I think you are in a good position to to Roths at this point in time
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

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Taylor Larimore
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Re: Don't know where to start at all

Post by Taylor Larimore » Wed Sep 06, 2017 9:00 pm

Anthonny and Bob:

You have come to the right place, without a conflict of interest, to learn about investing.

In my opinion, it is important to read a good book about investing before starting. If You Can by Wm. Bernstein is one of the best for new investors. You can read the pdf version, online at the bottom, in less than an hour here:

https://www.etf.com/docs/IfYouCan.pdf

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

billfromct
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Re: Don't know where to start at all

Post by billfromct » Wed Sep 06, 2017 9:12 pm

Vanguard is one of the best mutual fund companies to work with as they are very customer focused. They are a true "mutual" mutual fund company owned by the share holders, indirectly.

I have used Vanguard for about 33 or 34 years.

Definitely open a Roth IRA for retirement savings. You can contribute up to $5,500 per year as long as you have earned (W2 or self employed) income. As you know, your Roth IRA will grow state & Federal tax free & can be taken out state & Federal tax free after age 59.5.

You may want to consider one of the Target Retirement Funds, which requires a $1,000 contribution to open.

I would recommend the 2060 Retirement Fund which starts out 90% stocks (domestic & international)/10% bonds (domestic & international).

Then the allocation would adjust to 50% stocks/50% bonds by 2060 when you are about 70 or so; then adjusts to 35% stocks/65% bonds 7 years later.

I'm a little more aggressive when it comes to stock allocation in retirement accounts. Others on this site are a lot more conservative. My feeling is that over time (which you have on your side), stocks offer the best returns if you have the intestinal fortitude not to bail out during the first correction or bear market.

My kids, about your age, opened their Roth IRA when they were 16 with earnings from their first after school job. Now they have over $100k in their Roth retirement accounts with 35-40 years until retirement. I wish Roth retirement accounts were available when I had my first Summer job working in the tobacco fields of Connecticut at the age of 14. If they were available then, I could probably have retired by now.

Once you get more experience, you can move to individual mutual funds later if you choose.

You should also open a Roth IRA for your spouse as well.

bill

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BL
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Re: Don't know where to start at all

Post by BL » Wed Sep 06, 2017 10:52 pm

The amount of Roth IRA contribution cannot exceed your reported income from work on the 1040, up to the max of $5500. A couple can each contribute to a Roth, whether or not they both work, as long as total income covers the contribution amounts.

The afore-mentioned If You Can is a great pdf to get you started. The Target Date fund is similar to the 3-fund portfolio in this booklet, but also includes international bonds. It is a great way to get into investing in your retirement account.

anthonny
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Re: Don't know where to start at all

Post by anthonny » Wed Sep 06, 2017 11:40 pm

Pajamas wrote:
Wed Sep 06, 2017 8:48 pm
If your tax rate is fairly low now, putting money into a Roth is a good idea because then you can let it grow until you need it for retirement and then take it out without paying any taxes at all on it. That really makes a huge difference over long periods of time and as your income and tax rate goes up. However, you can access your contributions sooner if you really need to, so it can also function as a back-up emergency fund.

I DON't KNOW MY TAX RATE.BUT I MAKE AROUND 300 a week ( I DONT KNOW IF THAT INFO HELPS). Is that low or high rate ?

Depending on your tax rate, some capital gains in a taxable account won't actually be taxed, at least not at the federal level. This article focuses on capital gains distributions, but it applies to all capital gains. It's the long-term gains and qualified dividends that are most advantaged.

https://www.bogleheads.org/wiki/Capital ... stribution
I WILL READ THAT ARTICLE AS SOON AS I CAN. Thanks for your response
Sounds like you are already off to a good financial start in general and the getting started link provided above by Fallible is a good next step since you are now ready to begin investing.

anthonny
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Joined: Wed Sep 06, 2017 7:51 pm

Re: Don't know where to start at all

Post by anthonny » Wed Sep 06, 2017 11:42 pm

badbreath wrote:
Wed Sep 06, 2017 8:54 pm
take a look at this it may help

http://jlcollinsnh.com/stock-series/

I think you are in a good position to to Roths at this point in time
SO SHOULD I START MY FIRST INVESTMENT AS I ROTH IRA with vanguard vtsmx?

anthonny
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Re: Don't know where to start at all

Post by anthonny » Wed Sep 06, 2017 11:43 pm

Taylor Larimore wrote:
Wed Sep 06, 2017 9:00 pm
Anthonny and Bob:

You have come to the right place, without a conflict of interest, to learn about investing.

In my opinion, it is important to read a good book about investing before starting. If You Can by Wm. Bernstein is one of the best for new investors. You can read the pdf version, online at the bottom, in less than an hour here:
Thank you for the info about the book I will read it as soon as a I finish the one I'm reading.
https://www.etf.com/docs/IfYouCan.pdf

Best wishes
Taylor

anthonny
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Re: Don't know where to start at all

Post by anthonny » Wed Sep 06, 2017 11:47 pm

billfromct wrote:
Wed Sep 06, 2017 9:12 pm
Vanguard is one of the best mutual fund companies to work with as they are very customer focused. They are a true "mutual" mutual fund company owned by the share holders, indirectly.

I have used Vanguard for about 33 or 34 years.

Definitely open a Roth IRA for retirement savings. You can contribute up to $5,500 per year as long as you have earned (W2 or self employed) income. As you know, your Roth IRA will grow state & Federal tax free & can be taken out state & Federal tax free after age 59.5.

You may want to consider one of the Target Retirement Funds, which requires a $1,000 contribution to open.


How about if I use the Roth IRA with the total stock market vtsmx. Will it be a good idea ?
Which will Be better to start off. The target retirement or vtsmx ???

I would recommend the 2060 Retirement Fund which starts out 90% stocks (domestic & international)/10% bonds (domestic & international).

Then the allocation would adjust to 50% stocks/50% bonds by 2060 when you are about 70 or so; then adjusts to 35% stocks/65% bonds 7 years later.

I'm a little more aggressive when it comes to stock allocation in retirement accounts. Others on this site are a lot more conservative. My feeling is that over time (which you have on your side), stocks offer the best returns if you have the intestinal fortitude not to bail out during the first correction or bear market.

My kids, about your age, opened their Roth IRA when they were 16 with earnings from their first after school job. Now they have over $100k in their Roth retirement accounts with 35-40 years until retirement. I wish Roth retirement accounts were available when I had my first Summer job working in the tobacco fields of Connecticut at the age of 14. If they were available then, I could probably have retired by now.

That is the reason why I want to start now. Time is in my favor. And thank you very very much for your help I really appreciate it

Once you get more experience, you can move to individual mutual funds later if you choose.

You should also open a Roth IRA for your spouse as well.

bill

mhalley
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Re: Don't know where to start at all

Post by mhalley » Thu Sep 07, 2017 1:33 am

Just starting out, you don't have enough money to go with standard portfolios such as the 3 fund portfolio, and etf investing is more complicated Than mf investing. Therefore I would recommend starting with the target retirement fund, get started on your investing education by reading the wiki and recommended books. You have 2-3 years before you would have enough money to switch to the underlying portfolio of individual funds, should you choose to do so. Plenty of time to learn how to be your own financial advisor.
You have many decisions to make, including things such as desired asset allocation, optimum savings rate, creating an investment policy statement, etc. the tr fund starts you out with a reasonable asset allocation with lower than average expenses, leaving you with only the decision of how much to invest.

Jags4186
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Re: Don't know where to start at all

Post by Jags4186 » Thu Sep 07, 2017 1:58 am

Is $300/wk the amount on your paycheck which is then supplemented by tips? If so you would be paying no tax and actually be receiving credit from the government with the Earned Income Tax Credit. You would also be eligible for the Saver's Credit.

As fair warning, if you have substantial unreported tips (say you get paid $15,000 a year from your employer and take home another $20,000 in cash tips) you won't be paying much into social security and when you are ready to collect it would be an extremely meager amount. All the more reason to save aggressively now.

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BL
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Re: Don't know where to start at all

Post by BL » Thu Sep 07, 2017 6:24 am

Tips are reportable and taxable (including SS and Medicare taxes) to the IRS. Here is one page from the IRS with some info:
https://www.irs.gov/businesses/small-bu ... -reporting

Vanguard Target Date retirement fund is ideal for a retirement account for almost anyone. So would some other all-in-one funds such as Life Strategy Aggressive (20% bonds). They include some international as well, so when US is down, that may be up, and bonds cushion the fall in a crash.
I would say Total Stock Market is fine; it may lose 1/2 its value in a market crash, but if you don't panic and sell, it should recover since you have many years until retirement. Just don't jump around from one thing to another just because of what the markets are doing.

CJF
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Re: Don't know where to start at all

Post by CJF » Thu Sep 07, 2017 6:48 am

Welcome to the forums!

Without a retirement plan at work, you have the options of a taxable account and an IRA - Roth and Traditional. IRA, based on your information, appears to be the correct option for you. It's not an either or situation on the IRA(just can't go beyond the limit of $5,500 at your age).

Roth is Post Tax(You've paid taxes on it) or Pre Tax(Pay taxes later when you withdraw the money) which is Traditional, and will lower your current taxes. I mention this because of "The Saver's Credit." Look that up and read about it, then consider doing financial planning around that.

Real life example; generally my fiancee makes well above 30k and isn't anywhere close to claiming it. However, one year she ended up making 31k. So we put $1,001 into her Traditional IRA to lower her under the cut off and allowed her to get $200 back on her taxes from the Saver's Credit.

So, depending on your income, Roth maybe best or Traditional or a combination of both. Now you mention making $300 a week. So that's around $14,400 a year. Is that take home pay? If it's not, then it's best to use a Roth. If you are able to put $2,000 a year into your Roth then you can get up to $1,000 back from the Saver's Credit.

So you actually want to make sure your Federal taxes are over $1,000 so you can get that back, which is why Traditional IRA doesn't appear to be the correct account type for you at this time(it would lower your current taxes).

If your $300 is take home pay, then you're actually probably making around 19-20k before taxes. The cutoff for the largest amount back with the Saver's Credit is $18,250. You go from getting, potentially, back $1,000 to $400. In this case, you may want to consider doing enough Traditional to get you under $18,250 and then the rest of the money you're willing to invest going into the Roth side of the IRA.

Hope this has helped, and I encourage you to continue reading and posting!

https://www.irs.gov/retirement-plans/pl ... ers-credit

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Pajamas
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Re: Don't know where to start at all

Post by Pajamas » Thu Sep 07, 2017 8:48 am

anthonny wrote:
Wed Sep 06, 2017 11:40 pm

I DON't KNOW MY TAX RATE.BUT I MAKE AROUND 300 a week ( I DONT KNOW IF THAT INFO HELPS). Is that low or high rate ?
Fairly low rate, depending on whether that is pre- or post-tax and assuming that your wife has a similar income. Best thing to do would be to look at your 2016 tax forms and see what your income was and how much taxes you paid, if you think that 2017 will be similar to 2016 as far as income and taxes.

DanMahowny
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Re: Don't know where to start at all

Post by DanMahowny » Thu Sep 07, 2017 9:38 am

BL wrote:
Thu Sep 07, 2017 6:24 am
Tips are reportable and taxable (including SS and Medicare taxes) to the IRS. Here is one page from the IRS with some info:
https://www.irs.gov/businesses/small-bu ... -reporting
This is why I always tip in cash.

I hope the server does not report it as income, otherwise I am tipping the federal government too.

lhl12
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Re: Don't know where to start at all

Post by lhl12 » Thu Sep 07, 2017 9:44 am

DanMahowny wrote:
Thu Sep 07, 2017 9:38 am
BL wrote:
Thu Sep 07, 2017 6:24 am
Tips are reportable and taxable (including SS and Medicare taxes) to the IRS. Here is one page from the IRS with some info:
https://www.irs.gov/businesses/small-bu ... -reporting
This is why I always tip in cash.

I hope the server does not report it as income, otherwise I am tipping the federal government too.
I don't think it is right to say that you are tipping the Federal Government. Our laws define tipping as taxable income, whether paid in cash or not. If you pay the server in cash, it is still taxable income to them and they should be declaring it on their 1040 (and paying the associated tax). I always try to tip via credit card, not cash, so that the income is more likely to be reported and tax is more likely to be paid. I have no desire to facilitate tax evasion nor to cause total tax receipts by the US Treasury to be lower.

I would love to see servers earn a higher income, but that should come via Congressional action, not tax evasion.

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BolderBoy
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Re: Don't know where to start at all

Post by BolderBoy » Thu Sep 07, 2017 1:05 pm

anthonny wrote:
Wed Sep 06, 2017 11:42 pm
SO SHOULD I START MY FIRST INVESTMENT AS I ROTH IRA with vanguard vtsmx?
I will cautiously say, "Yes!" Have your wife do it, too.

Then be sure to read enough so that you know the maximum contribution limits. Also plan to add VBSMX so have rebalancing opportunities going forward.
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

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LadyGeek
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Re: Don't know where to start at all

Post by LadyGeek » Thu Sep 07, 2017 3:38 pm

With regards to tax evasion: For the record, discussions of dishonest behavior or bypassing the law are totally unacceptable.

The intent is to understand how to do this within the existing legal framework; in which case this discussion can continue.

Everything is a matter of degree. The choice of using a tax deferred account, e.g. IRA, to avoid taxes during some period of time is one extreme, managing assets to qualify for Medicaid is the other. Gifting assets to avoid taxes is somewhere in the middle. The bottom line is to work within the legal framework. Ethics is the ever present elephant in the room.

The approach is to educate members on how to do things legally. State your points in a factual manner. If the intent strays from this objective, please report the post and we'll investigate.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

staythecourse
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Re: Don't know where to start at all

Post by staythecourse » Thu Sep 07, 2017 3:50 pm

To be honest, the best place to start is by getting a good education and higher paying jobs. Trying to make it on 2 servers salary AND add children in the future is not a recipe for financial success.

If I were you I would drop any books about investing and start planning on improving your education and get a higher paying career. I would delay kids until you get higher and more predictable income.

The more one makes the more they have to invest and the easier getting "rich" gets.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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