Finding a direction - What next?
Finding a direction - What next?
New learner here with basic knowledge, just finishing the Bogelheads Guide and pondering my future of investing, having a difficult time on deciding where to go next. Quick base line on where I am at and what I am doing,
Just turned 29, married with one child. Mostly single income family with my wife’s small supplemental income on the side from a home business (very little now with a newborn at home). We live in a rural and low cost of living part of the country, bringing in a gross 115k household. Currently maxing 2 Roth IRAs, with my employer 401k at 10% total after match. They just opened up a Roth 401k option which I am moving to (Vanguard 2055 funds for now). Current retirement accounts come to 105k. We do have a 6 month emergency fund. We live fairly modestly but love to travel and I have an expensive aviation habit as well that will soak up a good deal of spare fun money. Hence why we keep a very modest home (below 100k) and lower cost vehicles to enjoy the other areas of life. Only debt load is a 11k vehicle note at 2.9% and 38k left on the house. We intend to have no more debt load than that until we decide to upgrade in home, where we will be rid of any other notes and keep mortgage only debt.
I feel I need to be more aggressive in investing and strategy. I am at a point I feel I need to find an edge to get ahead with more creative investing. I however don’t want to dive into something to regret it. There’s a lot of bait out there for people wanting to get ahead. What will this be? Stay the course and keep investing early and often on the course i am already going? Taking a step back and asking the experienced minds....
Just turned 29, married with one child. Mostly single income family with my wife’s small supplemental income on the side from a home business (very little now with a newborn at home). We live in a rural and low cost of living part of the country, bringing in a gross 115k household. Currently maxing 2 Roth IRAs, with my employer 401k at 10% total after match. They just opened up a Roth 401k option which I am moving to (Vanguard 2055 funds for now). Current retirement accounts come to 105k. We do have a 6 month emergency fund. We live fairly modestly but love to travel and I have an expensive aviation habit as well that will soak up a good deal of spare fun money. Hence why we keep a very modest home (below 100k) and lower cost vehicles to enjoy the other areas of life. Only debt load is a 11k vehicle note at 2.9% and 38k left on the house. We intend to have no more debt load than that until we decide to upgrade in home, where we will be rid of any other notes and keep mortgage only debt.
I feel I need to be more aggressive in investing and strategy. I am at a point I feel I need to find an edge to get ahead with more creative investing. I however don’t want to dive into something to regret it. There’s a lot of bait out there for people wanting to get ahead. What will this be? Stay the course and keep investing early and often on the course i am already going? Taking a step back and asking the experienced minds....
Re: Finding a direction - What next?
You said two things that conflict with each other. You said you finished the Bogleheads Guide and you said you need to find an edge with more creative investing. "Creative investing" will most likely lead you to failure -- financially. The best thing you can do to get a head is (1) Continue to increase your income as much as possible, (2) live below your means, (3) fully fund your retirement accounts in low cost index funds (prefer the 3 fund portfolio, (4) find a savings rate that allows you to maximize your investments while still enjoying life.....etc...etc... Stay the course with the Bogleheads. Seriously -- there are so many multimillionaires on here that achieved that status by following the basics. Nothing creative about it (except it is so simple and boring it is shocking that more people don't do it.
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Re: Finding a direction - What next?
Creative investing on Bogleheads equals - 3 fund portfolio with a possible small tilt to small cap value. Save more, spend less, stay the course. Improve your human capital if you can will potentially lead to higher cash flow (to be saved, not spent on hobbies) and thus larger investment balances.
Previous poster said it, simple but not easy, thus not everyone is doing it.
Previous poster said it, simple but not easy, thus not everyone is doing it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: Finding a direction - What next?
You are laying a good foundation, which at your age is huge. Ditch the aviation hobby (sorry) and you improve things drastically.
Re: Finding a direction - What next?
It appears you are in the 25% tax bracket. For that reason, you should switch back to traditional 401k and not use the Roth 401k option. Or at least use enough traditional 401k to drop into the 15% bracket and use Roth 401k after that.
The reason to do this is there is a good possibility you will pay a lower tax rate than 25% in retirement. No need to pay 25% now when you could pay less later. There is more traditional vs Roth information in the Wiki and there is a new thread on this topic every other day so there is plenty of reading material available on this subject.
If you are going to get creative, it should be with 5% or less of your portfolio. I don't have any "creative" suggestions, just saying that it could be a disaster to involve your entire portfolio that way. Creative almost always means higher risk. Keep in mind that the two biggest threats to portfolio sanity are fear and greed. Looking for too much more creativity could be bordering on greed and might be unwise. Looking for a little is probably harmless.
It seems you are doing most everything right. Accept that good investing is very boring and get your thrills from your hobby.
The reason to do this is there is a good possibility you will pay a lower tax rate than 25% in retirement. No need to pay 25% now when you could pay less later. There is more traditional vs Roth information in the Wiki and there is a new thread on this topic every other day so there is plenty of reading material available on this subject.
If you are going to get creative, it should be with 5% or less of your portfolio. I don't have any "creative" suggestions, just saying that it could be a disaster to involve your entire portfolio that way. Creative almost always means higher risk. Keep in mind that the two biggest threats to portfolio sanity are fear and greed. Looking for too much more creativity could be bordering on greed and might be unwise. Looking for a little is probably harmless.
It seems you are doing most everything right. Accept that good investing is very boring and get your thrills from your hobby.
Link to Asking Portfolio Questions
Re: Finding a direction - What next?
Thank you for the replies. I sincerely appreciate it and can’t wait to begin to really get a grasp of the education on here. My first statement does go against each other.... A battle of the heart/mind with peak interest, lots of things are grabbing my attention.
I will keep my book copy open ard start adjusting my portfolio to follow the plan and stay the course. I still have room to max out employer 401K so I will begin that and analyze the tax section a little more studiously.
Now.... A couple years ago I started to work with a FA that many members of my family have been using for years, happily. My IRA contributions have been sitting in a brokerage account with no investment purchases, so I’ve missed out the last 2 years of gains. When asking the reason why this was the case, she (FA) said it was to ‘make sure I was serious about investing, and I really needed 20k in the account to begin’. Should I fire her and move on alone? If so, how has this group done that in the past?
I will keep my book copy open ard start adjusting my portfolio to follow the plan and stay the course. I still have room to max out employer 401K so I will begin that and analyze the tax section a little more studiously.
Now.... A couple years ago I started to work with a FA that many members of my family have been using for years, happily. My IRA contributions have been sitting in a brokerage account with no investment purchases, so I’ve missed out the last 2 years of gains. When asking the reason why this was the case, she (FA) said it was to ‘make sure I was serious about investing, and I really needed 20k in the account to begin’. Should I fire her and move on alone? If so, how has this group done that in the past?
Re: Finding a direction - What next?
Hogwash. There is no need to have $20k to start investing. Chances are she goofed or she does not make any money unless there is at least $20k.
Yes, you should fire her. Just call the custodian you want to use and have them transfer over your account. You might send her a courtesy email, but don't get into a conversation with her about this or about why or about staying. Just say that you have decided to move your money. Period.
Link to Asking Portfolio Questions
- CyclingDuo
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Re: Finding a direction - What next?
Yes. DIY as you have no need to be paying a AUM fee when you can use three simple low cost index funds. What brokerage firm are your cash funds currently residing? If you can't get the low cost funds there, it's super easy to transfer your IRA to Vanguard, Fidelity, Schwab, etc... . You can make the three fund portfolio at any of them:flyby wrote: ↑Thu Nov 23, 2017 4:17 pm Thank you for the replies. I sincerely appreciate it and can’t wait to begin to really get a grasp of the education on here. My first statement does go against each other.... A battle of the heart/mind with peak interest, lots of things are grabbing my attention.
I will keep my book copy open ard start adjusting my portfolio to follow the plan and stay the course. I still have room to max out employer 401K so I will begin that and analyze the tax section a little more studiously.
Now.... A couple years ago I started to work with a FA that many members of my family have been using for years, happily. My IRA contributions have been sitting in a brokerage account with no investment purchases, so I’ve missed out the last 2 years of gains. When asking the reason why this was the case, she (FA) said it was to ‘make sure I was serious about investing, and I really needed 20k in the account to begin’. Should I fire her and move on alone? If so, how has this group done that in the past?
https://www.bogleheads.org/wiki/Three-fund_portfolio
Age 29, with only one child, household gross at $115, and in a LCOL is a really good position to be in with regard to your finances. Combined with your $105K saved thus far in retirement accounts - nothing should be holding you back. Sounds like your housing expenses are low, so if you can - max out the $18K in your 401K, and max out both of your Roth IRA's. That's $29K per year, or 25% of your gross income which at your age will provide more bang for the buck over the long haul. And it will keep your current taxes low. If 25% of gross feels like too much, how about 20%? Or 17%. How about starting a 529 for Junior while you are at it?
You are going to have to choose between accumulating wealth and feeding the aviation habit/hobby for now. Get a cheap bicycle and ride like the wind instead.
Very few shortcuts out there when it comes to investing that are good for the longer haul. It's like smoking meat to get the best returns: low and slow wins the prize!
"Save like a pessimist, invest like an optimist." - Morgan Housel |
"Pick a bushel, save a peck!" - Grandpa
- Sandtrap
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Re: Finding a direction - What next?
Some helpful links:
Bogle Philosophy
https://www.bogleheads.org/wiki/Bogleh ... hilosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleh ... rt-up_kit
Define General Investment Goals and Objectives
https://www.bogleheads.org/wiki/Invest ... statement
Outline of Investing
https://www.bogleheads.org/wiki/Outline_of_investing
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
What the experts say about investing
https://www.bogleheads.org/wiki/What_ ... investing
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212
Bogle Philosophy
https://www.bogleheads.org/wiki/Bogleh ... hilosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleh ... rt-up_kit
Define General Investment Goals and Objectives
https://www.bogleheads.org/wiki/Invest ... statement
Outline of Investing
https://www.bogleheads.org/wiki/Outline_of_investing
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
What the experts say about investing
https://www.bogleheads.org/wiki/What_ ... investing
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212
Re: Finding a direction - What next?
flyby wrote: ↑Wed Nov 22, 2017 9:58 pm New learner here with basic knowledge, just finishing the Bogelheads Guide and pondering my future of investing, having a difficult time on deciding where to go next. Quick base line on where I am at and what I am doing,
Just turned 29, married with one child. Mostly single income family with my wife’s small supplemental income on the side from a home business (very little now with a newborn at home). We live in a rural and low cost of living part of the country, bringing in a gross 115k household. Currently maxing 2 Roth IRAs, with my employer 401k at 10% total after match. They just opened up a Roth 401k option which I am moving to (Vanguard 2055 funds for now). Current retirement accounts come to 105k.
So, you are saving/investing 11k in Roths, plus 401k contributions. What is the % of the match? I'm guessing you are contributing more than 12% of total income to retirement funding, is that correct? If so, that is a good savings rate. Is your asset allocation (AA) 90/10? If so, that's higher than most would recommend.
We do have a 6 month emergency fund. We live fairly modestly but love to travel and I have an expensive aviation habit as well that will soak up a good deal of spare fun money. Hence why we keep a very modest home (below 100k) and lower cost vehicles to enjoy the other areas of life. Only debt load is a 11k vehicle note at 2.9% and 38k left on the house. We intend to have no more debt load than that until we decide to upgrade in home, where we will be rid of any other notes and keep mortgage only debt.
If your investing rate is 12% or better, I'd say you don't have to alter your current activities.
I feel I need to be more aggressive in investing and strategy. I am at a point I feel I need to find an edge to get ahead with more creative investing.
Creative investing is not a good idea. Follow the BH methods. Keep it simple and unwavering.
If you have not explored the Wiki, here's 2 links
https://www.bogleheads.org/wiki/Boglehe ... philosophy
https://www.bogleheads.org/wiki/Getting_started
Drop the FA. Use a custodian to custodian transfer for the Roths. You can check out Vanguard, Fidelity, and Schwab as new custodian. When ready, call the company and have them initiate the transfer. Also remember all accounts are part of one portfolio.
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.
Re: Finding a direction - What next?
That’s one of the stupidest things I’ve ever From a FA. Translation: until you get $20k it isn’t worth her time and the commissions won’t be high enough for her to bother with you. Fire her.flyby wrote: ↑Thu Nov 23, 2017 4:17 pm Thank you for the replies. I sincerely appreciate it and can’t wait to begin to really get a grasp of the education on here. My first statement does go against each other.... A battle of the heart/mind with peak interest, lots of things are grabbing my attention.
I will keep my book copy open ard start adjusting my portfolio to follow the plan and stay the course. I still have room to max out employer 401K so I will begin that and analyze the tax section a little more studiously.
Now.... A couple years ago I started to work with a FA that many members of my family have been using for years, happily. My IRA contributions have been sitting in a brokerage account with no investment purchases, so I’ve missed out the last 2 years of gains. When asking the reason why this was the case, she (FA) said it was to ‘make sure I was serious about investing, and I really needed 20k in the account to begin’. Should I fire her and move on alone? If so, how has this group done that in the past?
Maximize your savings especially your retirement accounts. Use low fee index funds. If you do that you are 90-95% of the way there. Everything else is fine tuning.
- randomizer
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Re: Finding a direction - What next?
Yes. She is adding no value, really just subtracting it at this point.
87.5:12.5, EM tilt — HODL the course!
Re: Finding a direction - What next?
Account is with Ameriprise, I’d rather move funds to a more user friendly platform like Vanguard, TD Ameritrade?, etc.
The 10% 401K includes company match. It has been pre-tax gross historically. So 11k Roth plus 11,500 total pretax in the 401k, I also have another employee contribution that I forgot to mention equaling a couple percent (I put it out of mind). So total of gross I have 20% or better going into retirement accounts. My AA would be 90/10 at the moment so I need to adjust manually and begin to handle myself per the BH plan. I’ll move on from the FA.
As far as the Aviation hobby goes..... it’s a generational thing and part of my life blood (building a home built experimental at the moment). I don’t need to be the richest man I can but be comfortable with a solid financial future. I feel if I can keep a 15-20% retirement saving going, I am on track to cash flow my airplane equity, which will hold very solid with the model I am completing. When it’s done in a few years, I’ll convert most of that to investment cash.
Low and slow like BBQ...... now you’re talking my language....
The 10% 401K includes company match. It has been pre-tax gross historically. So 11k Roth plus 11,500 total pretax in the 401k, I also have another employee contribution that I forgot to mention equaling a couple percent (I put it out of mind). So total of gross I have 20% or better going into retirement accounts. My AA would be 90/10 at the moment so I need to adjust manually and begin to handle myself per the BH plan. I’ll move on from the FA.
As far as the Aviation hobby goes..... it’s a generational thing and part of my life blood (building a home built experimental at the moment). I don’t need to be the richest man I can but be comfortable with a solid financial future. I feel if I can keep a 15-20% retirement saving going, I am on track to cash flow my airplane equity, which will hold very solid with the model I am completing. When it’s done in a few years, I’ll convert most of that to investment cash.
Low and slow like BBQ...... now you’re talking my language....
- ruralavalon
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Re: Finding a direction - What next?
Welcome to the forum .
That's a good choice in reading material. Your savings rate is excellent.
I suggest that you move the two Roth IRAs to a low cost provider like Vanguard or Fidelity. My own personal preference is Vanguard, they have the largest election of low expense mutual funds offered anywhere. Just call Vanguard and they will help you with the transfer.
. . . . .
1) Could you also please list the funds offered in the 401k, giving fund names, tickers and expense ratios? Please see this for format: "Asking Portfolio Questions". You can simply add this to your original post using the edit button, so that all of your information is in one place.
2) How much money is currently in each of the 3 accounts?
3) How much in dollars) are you currently contributing annually to the 401k?
4) How much (in dollars) is the employer contribution annually?
That's a good choice in reading material. Your savings rate is excellent.
flyby wrote: ↑Wed Nov 22, 2017 9:58 pm New learner here with basic knowledge, just finishing the Bogelheads Guide and pondering my future of investing, having a difficult time on deciding where to go next. Quick base line on where I am at and what I am doing,
Just turned 29, married with one child. Mostly single income family with my wife’s small supplemental income on the side from a home business (very little now with a newborn at home). We live in a rural and low cost of living part of the country, bringing in a gross 115k household. Currently maxing 2 Roth IRAs, with my employer 401k at 10% total after match. They just opened up a Roth 401k option which I am moving to (Vanguard 2055 funds for now). Current retirement accounts come to 105k. We do have a 6 month emergency fund. . . . . .
flyby wrote: ↑Thu Nov 23, 2017 4:17 pm . . . . .
Now.... A couple years ago I started to work with a FA that many members of my family have been using for years, happily. My IRA contributions have been sitting in a brokerage account with no investment purchases, so I’ve missed out the last 2 years of gains. When asking the reason why this was the case, she (FA) said it was to ‘make sure I was serious about investing, and I really needed 20k in the account to begin’. Should I fire her and move on alone? If so, how has this group done that in the past?
That fimacial advisor is worthless. There is no reason for your account to sit idle for two years.flyby wrote: ↑Thu Nov 23, 2017 10:01 pm Account is with Ameriprise, I’d rather move funds to a more user friendly platform like Vanguard, TD Ameritrade?, etc.
The 10% 401K includes company match. It has been pre-tax gross historically. So 11k Roth plus 11,500 total pretax in the 401k, I also have another employee contribution that I forgot to mention equaling a couple percent (I put it out of mind). So total of gross I have 20% or better going into retirement accounts. My AA would be 90/10 at the moment so I need to adjust manually and begin to handle myself per the BH plan. I’ll move on from the FA.
As far as the Aviation hobby goes..... it’s a generational thing and part of my life blood (building a home built experimental at the moment). I don’t need to be the richest man I can but be comfortable with a solid financial future. I feel if I can keep a 15-20% retirement saving going, I am on track to cash flow my airplane equity, which will hold very solid with the model I am completing. When it’s done in a few years, I’ll convert most of that to investment cash.
Low and slow like BBQ...... now you’re talking my language....
I suggest that you move the two Roth IRAs to a low cost provider like Vanguard or Fidelity. My own personal preference is Vanguard, they have the largest election of low expense mutual funds offered anywhere. Just call Vanguard and they will help you with the transfer.
. . . . .
1) Could you also please list the funds offered in the 401k, giving fund names, tickers and expense ratios? Please see this for format: "Asking Portfolio Questions". You can simply add this to your original post using the edit button, so that all of your information is in one place.
2) How much money is currently in each of the 3 accounts?
3) How much in dollars) are you currently contributing annually to the 401k?
4) How much (in dollars) is the employer contribution annually?
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- CyclingDuo
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Re: Finding a direction - What next?
Dump Ameriprise like a hot rock! We were with one of their former incarnates known as IDS way back in the latter part of the 1980's. Just open an account at Vanguard, Fidelity, or Schwab and have everything transferred over. (They will all do this for you!)
20% total is good. Really good. Keep that pace up and you will hit nirvana 35-40 years down the road.flyby wrote: ↑Thu Nov 23, 2017 10:01 pmThe 10% 401K includes company match. It has been pre-tax gross historically. So 11k Roth plus 11,500 total pretax in the 401k, I also have another employee contribution that I forgot to mention equaling a couple percent (I put it out of mind). So total of gross I have 20% or better going into retirement accounts. My AA would be 90/10 at the moment so I need to adjust manually and begin to handle myself per the BH plan. I’ll move on from the FA.
Too bad the family wasn't into running marathons, or playing soccer, or cycling - or something less expensive. Expensive hobbies can be the undoing of wealth accumulation - so beware.flyby wrote: ↑Thu Nov 23, 2017 10:01 pmAs far as the Aviation hobby goes..... it’s a generational thing and part of my life blood (building a home built experimental at the moment). I don’t need to be the richest man I can but be comfortable with a solid financial future. I feel if I can keep a 15-20% retirement saving going, I am on track to cash flow my airplane equity, which will hold very solid with the model I am completing. When it’s done in a few years, I’ll convert most of that to investment cash.
Great for your core position with the Three Fund Portfolio "low and slow" approach.
In terms of an "edge", you really have to use concentration to outfox the broader market in terms of gains for shorter durations. Be that concentration in the best performing stocks (no matter what sector they are in), or concentration in a few sectors, or concentration in a particular stock. We use the concentration element in our investing to seek an "edge". Currently, one of our best performing stocks in the past year has to do with chickens. Yup. Chickens. Pilgrim's Pride. The other is Nvidia. It's nice to hear about FANG, or STAB stocks...
graphic from one point earlier this year
But concentration into stocks that are outperforming the broader indices can give you an edge at times, and for various time periods. Pilgrims Pride, Nvidia, Apple, Abbot Labs, Tinto Rio, Walmart, Checkpoint Software, Salesforce.com, etc... have been the horses we have personally been riding to outperform in the past year to 14 months. Core positions should be in the BBQ low and slow arena, but the bull market has provided a backdrop for leaders to continue outperforming - be it FANG, STAB, or others. There are times to use risk on, and there are times not to. The bull market that broke out in 2016 after a one year bear market in 2015-2016 has been an excellent period to do that to date.
Excellent guru to keep an eye on with regard to growth stocks: https://www.joefahmy.com/blog
"Save like a pessimist, invest like an optimist." - Morgan Housel |
"Pick a bushel, save a peck!" - Grandpa
Re: Finding a direction - What next?
Too much paralysis by analysis. Just open a brokerage account (Interactive Brokers is my current favorite), fill out all your tax advantaged opportunities, use your surplus savings to purchase VT (Vanguard Total World) and then spend more time analysing and contemplating what next, how to fine tune, 3 ETFs, etc. Pity, you just missed a ludicrously good, irrationally exuberant stock market year (up 20+%!) while awaiting revelation. Revelation ain't coming. Save and invest 30% of after tax income, year in, year out. What you do with the rest does not matter much. I just worked out what you can look forward to, if the next 50 years is similar to the past 50, totally invested in the SP 500 from age 30 and a $50k income:
Mediocre careers with your incomes just keeping up with inflation: you can retire at age 57 with a Net Worth of $2.5 million
Average careers with your incomes rising at 1% p.a. above inflation: you can retire at age 60 with a Net Worth of $3.8 million
Good careers with incomes rising at 2% p.a. above inflation: you can retire at age 64 with a Net Worth of $6.7 million
I define free-to-retire-age at a point when your Net Worth = 25xIncomex0.7 (since you no longer have to save and invest that 30%). It comes later with better careers since your income rises much higher, but in all cases you do not need to drop your standard of living an iota upon retirement. Save and invest 30% of after tax income, today onwards. That's what matters, the rest are just details that you can analyse ad nauseam over the next 3 decades
Mediocre careers with your incomes just keeping up with inflation: you can retire at age 57 with a Net Worth of $2.5 million
Average careers with your incomes rising at 1% p.a. above inflation: you can retire at age 60 with a Net Worth of $3.8 million
Good careers with incomes rising at 2% p.a. above inflation: you can retire at age 64 with a Net Worth of $6.7 million
I define free-to-retire-age at a point when your Net Worth = 25xIncomex0.7 (since you no longer have to save and invest that 30%). It comes later with better careers since your income rises much higher, but in all cases you do not need to drop your standard of living an iota upon retirement. Save and invest 30% of after tax income, today onwards. That's what matters, the rest are just details that you can analyse ad nauseam over the next 3 decades