Update: Yikes, I waited too long, am I [too late]? 50k to invest

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ASplitSecond
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Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 8:57 pm

:(

*big sigh* OK, I am 45 and don't have an opportunity for a 401k and I haven't really contributed into social security. Yikes. Where did the time go???

I have 50k I need/want to invest in the instance I can't bank on my parents (who are sinking EVERYTHING into REITS) so I'm hoping to bend your big brains here and ask what you would do if you were me.

I want to grow this money but I'm used to being conservative. It's like letting my baby go out into the big world but I know it HAS to happen! I'd love to be as diversified as possible AND have growth. I want to just put it in and not think about it and grow, grow, grow! :)

Here are some extra details

Have you been paying the self-employment tax?
I haven't made enough to do so. So no.

Have you been filing income tax returns?
Yes.

How much is currently in your Roth IRA?
15k

Do you have any other investing or retirement accounts?
I have a CD with 20k that matures this July and I will take it out as it did NOTHING.

What investments do you have in your Roth IRA? Please give fund names, tickers and expense ratios.
It is a Barclays mid-cap growth fund that did 23% and has a 10year average of 9%

Where is your Roth IRA currently located?
US Bank

How much did you contribute to the Roth IRA for 2017? What have you contributed to the Roth IRA for 2018?
5500 for 2018.

About how much do you earn in most years?
Less than 10k but receive funds elsewhere as well. (non taxable)

About how much do you feel you might be able to add to investing most years?
$500 to 1k per month
A penny for your thoughts, please?

Thank you sooo much!
Last edited by ASplitSecond on Thu Feb 22, 2018 12:20 am, edited 2 times in total.

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randomizer
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by randomizer » Tue Feb 20, 2018 9:15 pm

Life Strategy or target date retirement fund and forget about it.

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 9:48 pm

Is a target date retirement fund different than an IRA?

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Pajamas
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by Pajamas » Tue Feb 20, 2018 9:51 pm

A target date retirement fund is a type of investment that combines stocks and bonds in varying proportions over time. An IRA is a type of account that can hold various investments, including a target date retirement fund.

You should take a deep breath and start with the basics before you do anything.

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

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 9:54 pm

randomizer wrote:
Tue Feb 20, 2018 9:15 pm
Life Strategy or target date retirement fund and forget about it.
Agreed. Any idea what stock/bond ratio? Vanguard Lifestrategy Growth would give you 80% stocks and 20% bonds and it rebalances automatically.

Also agree with Pajamas advice to start with some reading so you have a better understanding of what you're getting into.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 9:56 pm

Thank you. I went through the Getting Started portion and understand the basics for sure. I went through the 129 mutual fund list on the site and just really don't know how to pick one exactly. I took the questionnaire on the site and it recommended the "whole market in one portfolio" but I'm not sure that it's comprehensive enough.

Any thoughts are appreciated. :)

TropikThunder
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by TropikThunder » Tue Feb 20, 2018 10:06 pm

ASplitSecond wrote:
Tue Feb 20, 2018 9:56 pm
I took the questionnaire on the site and it recommended the "whole market in one portfolio" but I'm not sure that it's comprehensive enough.
I’m not sure how one could get more comprehensive than “the whole market in one portfolio”. 😃 What are you concerned is missing?

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 10:10 pm

Hey Tropik,

Well, I will definitely get the "total market" fund but what I'm wondering about is how to split up the 50k. Would I put ALL the 50 into the total market fund (is that a good idea?) or should I put say, 20k in the Total Market fund, then spread out the 30k in other funds?

Thank you :)

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 10:12 pm

ASplitSecond wrote:
Tue Feb 20, 2018 9:56 pm
Thank you. I went through the Getting Started portion and understand the basics for sure. I went through the 129 mutual fund list on the site and just really don't know how to pick one exactly. I took the questionnaire on the site and it recommended the "whole market in one portfolio" but I'm not sure that it's comprehensive enough.

Any thoughts are appreciated. :)
The Lifestrategy and Target Date funds are extremely diversified. Each holds Vanguard Total Stock market index fund, international stock market fund, bond market fund, international bond market fund. Meaning....3,614 different US stocks, 6,253 different international stocks, 7,412 US bonds, 4,784 international bonds.

I'd say that's diversification. You just need to decide what stock/bond ratio you want. And what you will hold them in. These funds are better held in a tax advantaged account such as 401k, traditional, or Roth IRA.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 10:19 pm

This is great. I however, do not have the ability to put it into a 401k because I don't work for a company. :(

I have an IRA that I have already put in the 5k for this year.

Would I put the whole 50k into the LifeStrategy Target date retirement split 50/50?

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 10:26 pm

ASplitSecond wrote:
Tue Feb 20, 2018 10:19 pm
This is great. I however, do not have the ability to put it into a 401k because I don't work for a company. :(

I have an IRA that I have already put in the 5k for this year.

Would I put the whole 50k into the LifeStrategy Target date retirement split 50/50?
Are you self employed? The max currently for either a traditional or roth IRA is $5,500. That is total. Some folks max out either a Roth or a Traditional and some do a mix but the total is $5500.

There are catch up contributions for IRA's but I believe you have to be 50 or older.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 10:31 pm

I do work for myself and have already maxed it out.

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 10:33 pm

ASplitSecond wrote:
Tue Feb 20, 2018 10:31 pm
I do work for myself and have already maxed it out.
Do you have a Solo 401k, SEP IRA? Just curious. And what are you invested in?
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 10:37 pm

I didn't know a solo 401k existed so no. Nor do I have a SEP Ira. I have a roth IRA. My business has been so small and I just take in cash. The cash I have is just a savings I had built up.

Just think of me as an independent dog walker kind of person.

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 10:47 pm

ASplitSecond wrote:
Tue Feb 20, 2018 10:37 pm
I didn't know a solo 401k existed so no. Nor do I have a SEP Ira. I have a roth IRA. My business has been so small and I just take in cash. The cash I have is just a savings I had built up.

Just think of me as an independent dog walker kind of person.
Okay, got it. Remember the max is actually $5500 for the IRA so you could put in the additional $500 if you haven't already filed your taxes. You're not going to want to use the Lifestrategy or Target Date funds for the 50K for reasons below (from the wiki)

Tax efficiency of balanced funds
Balanced funds (stocks and bonds) are very popular among individual investors. These funds hold a variety of asset classes in one simple fund instead of several. They have a variety of names such as balanced, lifestyle, or target retirement funds. Since these funds include both stocks and bonds their tax efficiency sits somewhere between stocks and bonds.

If you have a balanced fund in a taxable account, you cannot sell only the bonds (to hold bonds in a different account, or to hold fewer bonds, or to hold a different type of bonds); you have to sell the whole fund, which can result in realizing a capital gain.

In a taxable account, the bond dividends will get taxed at ordinary income rates; in addition, the investor loses the option to harvest losses of individual asset classes. The more efficient strategy is to own the individual asset classes in separate funds and in their most tax-efficient locations.


This is a lot to take in. I would consider just holding onto your money in the savings account for now and do some reading. It will be worth it to understand tax efficient placement of funds amongst other stuff.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

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rob
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by rob » Tue Feb 20, 2018 10:51 pm

Sounds to me like you need a plan... that does not involve inheritance...
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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CyclingDuo
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by CyclingDuo » Tue Feb 20, 2018 10:52 pm

ASplitSecond wrote:
Tue Feb 20, 2018 8:57 pm
:(

*big sigh* OK, I am 45 and don't have an opportunity for a 401k and I haven't really contributed into social security. Yikes. Where did the time go???

I have 50k I need/want to invest in the instance I can't bank on my parents (who are sinking EVERYTHING into REITS) so I'm hoping to bend your big brains here and ask what you would do if you were me.

I want to grow this money but I'm used to being conservative. It's like letting my baby go out into the big world but I know it HAS to happen! I'd love to be as diversified as possible AND have growth. I want to just put it in and not think about it and grow, grow, grow! :)

A penny for your thoughts, please?

Thank you sooo much!
Age 45 means you should look at the Vanguard Target Fund 2035 as a possible place to invest, or to use as a template for getting the right asset allocation for your age.
https://investor.vanguard.com/mutual-fu ... rview/0305

Currently, it has the following asset allocation:

47.25% in Vanguard Total Stock Market Fund
31.50% in Vanguard Total International Stock Market Fund
14.88% in Vanguard Total Bond Fund
6.38% in Vanguard Total International Bond Fund

You could either just put the entire $50K in the Target Fund 2035 which has an ER fee of .15%, or do a DIY version (skipping the International Bonds) for lower ER fees, divided up like this:

47% in Vanguard Total Stock Market Fund VTSMX or VTI
31% in Vanguard Total International Stock Market Fund VGTSX or VXUS
22% in Vanguard Total Bond Fund VBMFX or BND

Either way, you'd have the classic Boglehead favorite known as The Three Fund Portfolio. This Wiki page shows you how you can get the Three Fund Portfolio at various different brokers: https://www.bogleheads.org/wiki/Three-fund_portfolio

You are going to have to utilize your human capital for the next 20+ years since you have not contributed much to Social Security. This means you'll need to sock away in the three fund portfolio (or Target Fund) as much as you can the next two decades on top of the starting $50K. We don't know your current salary, or anything else about your financial situation. How much are you able to invest every month? $1K? $2K? $3K? If you play some serious catch up the next 20 - 23 years, you have the potential to build a nice nest egg.

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 10:57 pm

See Penn,

I did read that, and the lingo is what gets me. But now I also agree that a lifestragegy or target is (due to the bonds), isn't most ideal.

I am not sure what will make me feel ready. Honestly, speaking to you all here is AMAZING compared to just reading on my own.

Just to be clear, would the "Total Market" fund that was recommended by the questionnaire have the same no sell of bonds like the lifestrategy and target retirement?

And when you say individual, does that mean, I'd have to individually pick each stock? (eg, Apple, Coke, Sbux etc?)

Thank you again,so so so much. My biggest fear was this: thinking something looked good but then missing the fine print. Again, thank you and thoughts?

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 11:04 pm

Will this fund have the no selling of bonds and taxes as listed in the example above? This sounds great too. What are the downsides?

CyclingDuo wrote:
Tue Feb 20, 2018 10:52 pm
Age 45 means you should look at the Vanguard Target Fund 2035 as a possible place to invest, or to use as a template for getting the right asset allocation for your age.
https://investor.vanguard.com/mutual-fu ... rview/0305

Currently, it has the following asset allocation:

47.25% in Vanguard Total Stock Market Fund
31.50% in Vanguard Total International Stock Market Fund
14.88% in Vanguard Total Bond Fund
6.38% in Vanguard Total International Bond Fund

You could either just put the entire $50K in the Target Fund 2035 which has an ER fee of .15%, or do a DIY version (skipping the International Bonds) for lower ER fees, divided up like this:

47% in Vanguard Total Stock Market Fund VTSMX or VTI
31% in Vanguard Total International Stock Market Fund VGTSX or VXUS
22% in Vanguard Total Bond Fund VBMFX or BND

Either way, you'd have the classic Boglehead favorite known as The Three Fund Portfolio. This Wiki page shows you how you can get the Three Fund Portfolio at various different brokers: https://www.bogleheads.org/wiki/Three-fund_portfolio

You are going to have to utilize your human capital for the next 20+ years since you have not contributed much to Social Security. This means you'll need to sock away in the three fund portfolio (or Target Fund) as much as you can the next two decades on top of the starting $50K. We don't know your current salary, or anything else about your financial situation. How much are you able to invest every month? $1K? $2K? $3K? If you play some serious catch up the next 20 - 23 years, you have the potential to build a nice nest egg.
[/quote]

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 11:08 pm

ASplitSecond wrote:
Tue Feb 20, 2018 10:57 pm
See Penn,

I did read that, and the lingo is what gets me. But now I also agree that a lifestragegy or target is (due to the bonds), isn't most ideal.

I am not sure what will make me feel ready. Honestly, speaking to you all here is AMAZING compared to just reading on my own.

Just to be clear, would the "Total Market" fund that was recommended by the questionnaire have the same no sell of bonds like the lifestrategy and target retirement?

And when you say individual, does that mean, I'd have to individually pick each stock? (eg, Apple, Coke, Sbux etc?)

Thank you again,so so so much. My biggest fear was this: thinking something looked good but then missing the fine print. Again, thank you and thoughts?
You would not pick individual stocks. Vanguard Total stock market holds a vast array of stocks to mirror the market. You also don't have to hold bonds if you don't want to but I recommend you do. So, if you wanted to keep it simple you could purchase Vanguard Total stock market index fund with say 40k and the other 10k could go to purchase Vanguard Total bond market index fund. Links below.

https://personal.vanguard.com/us/funds/ ... irect=true (stocks)

https://personal.vanguard.com/us/funds/ ... irect=true (bonds)

You still need to figure out what you want your asset allocation to be. That depends on how much risk you are willing to take. You also need to take into account what fund you have currently in your IRA into your overall asset allocation, again being how much stock you have as a percentage compared to bonds as a percentage. This isn't confusing at all is it :P

I still recommend you do nothing before you read more of the wiki. Also, a great book that I read that really simplified a lot for myself was William Bernstein's "The Investor's Manifesto". It's an easy read. It's written as if you know nothing about investing....which used to be me :D
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

RRAAYY3
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by RRAAYY3 » Tue Feb 20, 2018 11:16 pm

25 K each in :

Total US index
Total International Index

Admiral Shares

It is this simple - own the world, 2 tax efficient funds

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 11:19 pm

I will get the book and dig into some serious reading. I'm frustrated because everyone is saying THIS WEEK is the week to invest, do itttt!!!

But I don't want to rush into anything and at the same time I do!

And your answer is a great one, yet, I have to wonder, IS it better to get the all in 1 fund or do as you also mentioned, the 40k in stocks and 50 in bonds? How would a reasonable person answer this because looking between the two options, they BOTH seem fine to me. ;)

Any downside to either of those 2 options?

And again, I can't thank you all enough.

pennstater2005 wrote:
Tue Feb 20, 2018 11:08 pm

You would not pick individual stocks. Vanguard Total stock market holds a vast array of stocks to mirror the market. You also don't have to hold bonds if you don't want to but I recommend you do. So, if you wanted to keep it simple you could purchase Vanguard Total stock market index fund with say 40k and the other 10k could go to purchase Vanguard Total bond market index fund. Links below.

https://personal.vanguard.com/us/funds/ ... irect=true (stocks)

https://personal.vanguard.com/us/funds/ ... irect=true (bonds)

You still need to figure out what you want your asset allocation to be. That depends on how much risk you are willing to take. You also need to take into account what fund you have currently in your IRA into your overall asset allocation, again being how much stock you have as a percentage compared to bonds as a percentage. This isn't confusing at all is it :P

I still recommend you do nothing before you read more of the wiki. Also, a great book that I read that really simplified a lot for myself was William Bernstein's "The Investor's Manifesto". It's an easy read. It's written as if you know nothing about investing....which used to be me :D

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CyclingDuo
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by CyclingDuo » Tue Feb 20, 2018 11:21 pm

ASplitSecond wrote:
Tue Feb 20, 2018 11:04 pm
Will this fund have the no selling of bonds and taxes as listed in the example above? This sounds great too. What are the downsides?
Well, the target fund does the rebalancing for you as it adheres to asset allocation that Vanguard feels is appropriate for your age. It's a hands off fund requiring nothing from you (outside of your regular monthly contributions). It's not the most tax efficient fund to have in a taxable account, hence why I listed the three separate funds which is my preference. Plus the ER fees are less for holding the separate funds (either the mutual funds or the ETF versions - stands for exchange traded funds).

The DIY method of The Three Fund Portfolio gives you more options in terms of location, taxes, and rebalancing. As the Total Stock Market Fund and the Total International Stock Market Fund are both very tax efficient, so they are fine to hold in taxable accounts. You could hold the bonds in your IRA. Or, you could hold tax exempt bonds in your taxable account.

Here is the Bogleheads Wiki on tax efficient fund placement:

https://www.bogleheads.org/wiki/Tax-eff ... _placement
CyclingDuo wrote:
Tue Feb 20, 2018 10:52 pm
47% in Vanguard Total Stock Market Fund VTSMX or VTI
31% in Vanguard Total International Stock Market Fund VGTSX or VXUS
22% in Vanguard Total Bond Fund VBMFX or BND

Either way, you'd have the classic Boglehead favorite known as The Three Fund Portfolio. This Wiki page shows you how you can get the Three Fund Portfolio at various different brokers: https://www.bogleheads.org/wiki/Three-fund_portfolio

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 11:24 pm

ASplitSecond wrote:
Tue Feb 20, 2018 11:19 pm
I'm frustrated because everyone is saying THIS WEEK is the week to invest, do itttt!!!

But I don't want to rush into anything and at the same time I do!
Don't rush. You'll regret it. The market will be up, the market will be down. Take your time, if you are going to do this on your own, to learn about what you are doing. You will feel much more confident. Educate yourself. Keep asking questions. My suggestions are just that, suggestions. But when you begin to understand more of what is being discussed here you'll know what to do.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

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Epsilon Delta
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by Epsilon Delta » Tue Feb 20, 2018 11:32 pm

pennstater2005 wrote:
Tue Feb 20, 2018 10:47 pm
ASplitSecond wrote:
Tue Feb 20, 2018 10:37 pm
I have a roth IRA.
Remember the max is actually $5500 for the IRA so you could put in the additional $500 if you haven't already filed your taxes.
If he's eligible he can put the extra $500 into a Roth IRA whether or not he's file his taxes. There would be no tax paper work since a Roth contribution is not reported on a tax return (And the final $500 can't even affect the savers credit.)

Actually, he could contribute $500 to any type of IRA after filing, but a contribution to a traditional IRA would require an amended tax return.

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Tue Feb 20, 2018 11:34 pm

Thank you Cycling and Penn, (and everyone else),

I would normally get this burning feeling in my face and shy away from all this talk but speaking to others who aren't direct friends is so different! I am not sure why but it does. So thank you for that.

In looking at the way to shuffle securities into places that are tax efficient (did I REALLY just type that sentence, wow!) I realize there is so much more to learn but I really wished it was just totally out in the open. By open I mean, somewhere it would say "This is the most cost-efficient for YOU".

I very much dislike the feeling of regret that based on my own misunderstanding so that is why I'm asking all these questions. And of course, I will confirm what you've said with the data but it really helps.

My question now is - does shuffling securities around REALLY save people THAT much money? It seems like a lot of work but I will do it if it's a sizable amount. I would love to just do the One and Done approach want to be smart first.

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pennstater2005
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pennstater2005 » Tue Feb 20, 2018 11:38 pm

Epsilon Delta wrote:
Tue Feb 20, 2018 11:32 pm
pennstater2005 wrote:
Tue Feb 20, 2018 10:47 pm
ASplitSecond wrote:
Tue Feb 20, 2018 10:37 pm
I have a roth IRA.
Remember the max is actually $5500 for the IRA so you could put in the additional $500 if you haven't already filed your taxes.
If he's eligible he can put the extra $500 into a Roth IRA whether or not he's file his taxes. There would be no tax paper work since a Roth contribution is not reported on a tax return (And the final $500 can't even affect the savers credit.)

Actually, he could contribute $500 to any type of IRA after filing, but a contribution to a traditional IRA would require an amended tax return.
Thanks. I was referring to the traditional IRA when speaking to taxes. Didn't consider the amended return.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

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whodidntante
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by whodidntante » Tue Feb 20, 2018 11:43 pm

Why haven't you invested until now? Has your situation changed in any way that makes you think you can invest going forward?

My perspective on asset allocation is that you should take more risk when your portfolio is smaller, assuming that you are willing and able. A 100% stock portfolio has a realistic (though unlikely in a given year) risk of a 50% loss. A loss of 50% on 50k, while bad, isn't going to matter much in terms your ability to retire. Asset allocation matters more when you're talking about a big portfolio, where a big swing downwards could be devastating to your plans.

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Wed Feb 21, 2018 12:01 am

I didn't invest earlier because my parents never learned and currently my mother is putting everything she has in REITs because of the "free dinner guy" and so I didn't have great role models. I regret it all. :(

I know I can't time the market, but losing 50% before retirement would be horrible. Is there a way to go that I don't get that bad?

I may have family inheritance but with what my mom is doing, who knows. I hope I get her house. I'm the only sibling.

Is there a fund you would recommend that would be a growth fund but couldn't lose half of what I put in?

Thank you so much!

rgs92
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by rgs92 » Wed Feb 21, 2018 12:10 am

I would put it all in VBIAX (Vanguard balanced index admiral) and forget about it. You won't lose 50% in that unless the world ends.
It's a fine fund any you won't find a better balance of risk and reward.
My crystal ball says that in the year 2038 your investment will be worth a whole lot more. Just put it all in now and relax and enjoy life.
(And keep adding to it whenever you have the money.)
Again, just do it and don't think about it. There is really not a lot to learn that could lead to to a decision that could be better than this course of action. Beware of TMI.
Just do it on faith.
Good luck to you and your parents.
(And watch out for those REITS.)
You'll be fine with this approach.
[I own a lot of vanguard balanced index myself, much more than we are talking about here. I sleep well with it.]

WanderingDoc
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by WanderingDoc » Wed Feb 21, 2018 12:31 am

ASplitSecond wrote:
Tue Feb 20, 2018 8:57 pm
:(

*big sigh* OK, I am 45 and don't have an opportunity for a 401k and I haven't really contributed into social security. Yikes. Where did the time go???

I have 50k I need/want to invest in the instance I can't bank on my parents (who are sinking EVERYTHING into REITS) so I'm hoping to bend your big brains here and ask what you would do if you were me.

I want to grow this money but I'm used to being conservative. It's like letting my baby go out into the big world but I know it HAS to happen! I'd love to be as diversified as possible AND have growth. I want to just put it in and not think about it and grow, grow, grow! :)

A penny for your thoughts, please?

Thank you sooo much!
Investing in (U.S.) REITs is probably the silliest investment in the world. Why would anyone settle for a 6-7% return? The U.S. has the best market to invest in actual real estate (not paper). Low interest, fixed, 30 year financing, cash flow, great tax benefits. Even a 100% passive investment in a large residential deal will return a 14-18% IRR. If you want to get your hands dirty, individual deals with 75% LTV leverage will return 20-35% per year. Anything lower than this in real estate is disappointing. If you want to invest in REITs in Australia or New Zealand, or other markets where REITs pay a 8-10% dividend alone, go ahead but you've need information and a competitive advantage most don't have or aren't willing to learn.
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

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whodidntante
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by whodidntante » Wed Feb 21, 2018 12:33 am

OK, but I would say that your main issue has been inability to save, not asset allocation. And improving your ability to save is the most important thing going forward. I recommend you focus on that issue first and continuously. Asset allocation doesn't matter when nothing has been invested! Set a target for yourself, and do your best to achieve it. Some here save a very high percentage of income. You should consider how much you can save and need to save to achieve your goals.

If you have money in an FDIC insured account, there is no risk of loss in nominal terms, but you still might lose to inflation. To get more growth, you have to accept risk. You can think of risk as a risk of gain and a risk of loss. It will happen at some point that the balance this week isn't as high as last week. It probably will not take that long for that to happen. It's important that you don't panic when it does. The risk aversion you are expressing makes me concerned that you might need this money soon and will pull it out in a down market. So I would take a step back and determine if this money is really for retirement or not.

As has been recommended above, Vanguard has some asset allocation funds they market as "lifestrategy" funds. These are low expense, professional managed, reasonable choices. See if one of those would meet your risk tolerance. All of them have a risk of loss so I would caution you to wait until you can accept that risk before buying. None of these funds are great for taxable accounts because they aren't very tax efficient. That's a deal breaker for some people, not really a concern for others, so just something to consider before buying. You can do an IRA this year even if you don't have a 401k.

https://investor.vanguard.com/mutual-fu ... estrategy/#/

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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by pkcrafter » Wed Feb 21, 2018 12:38 am

Welcome,

And from the top,

ASplitSecond wrote:
Tue Feb 20, 2018 8:57 pm
:(

*big sigh* OK, I am 45 and don't have an opportunity for a 401k and I haven't really contributed into social security. Yikes. Where did the time go???

I have 50k I need/want to invest in the instance I can't bank on my parents (who are sinking EVERYTHING into REITS) so I'm hoping to bend your big brains here and ask what you would do if you were me.

Your parents are investing everything in REITs? individual or funds? Anyway, it's a really bad idea.

I want to grow this money but I'm used to being conservative. It's like letting my baby go out into the big world but I know it HAS to happen! I'd love to be as diversified as possible AND have growth. I want to just put it in and not think about it and grow, grow, grow! :)

Ok. First, you are conservative. Also you are new to investing and the volatility that goes with it, so your asset allocation should not be too high--maybe 50%-60% stocks, 40-50% bonds/cash. A Life Strategy fund or a Target Retirement Fund is probably the best option for you since they are diversified and they automatically rebalance and stay at target allocation. The TR funds have allocations that get lower in stocks over time. LS funds are fixed.There is also tax-managed balanced fund which is 50/50.

Vanguard Funds--

LS funds. 3k mim and only come in 80/60/40/20% stock.

https://investor.vanguard.com/mutual-funds/lifestrategy

Target Date Funds. Don't pick by date, pick by asset allocation. TR funds have a 1k min. and come in a variety of allocations.

https://investor.vanguard.com/mutual-fu ... mpgn=PS:RE

Tax-managed balanced, 50/50

https://personal.vanguard.com/us/FundsS ... irect=true

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.

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Wed Feb 21, 2018 1:33 am

Thank you. I will take this all into my thoughts and likely dreams tonight.

I do not need the money at this point for anything. It needn't be liquid. :)

I went for a walk around the block (it's cold!!!) and now I'll sip some tea and read, read, read!

Any other random thoughts come your way, please feel free to chime in.

:happy

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ruralavalon
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ruralavalon » Wed Feb 21, 2018 9:32 am

Age 45 is not to late to make a difference in retirement saving.

Please do avoid the "free dinner guys" and their shoddy investments.

ASplitSecond wrote:
Tue Feb 20, 2018 8:57 pm
:(

*big sigh* OK, I am 45 and don't have an opportunity for a 401k and I haven't really contributed into social security. Yikes. Where did the time go???
Have you been paying the self-employment tax?

Have you been filing income tax returns?


ASplitSecond wrote:
Tue Feb 20, 2018 10:37 pm
I didn't know a solo 401k existed so no. Nor do I have a SEP Ira. I have a roth IRA. My business has been so small and I just take in cash. The cash I have is just a savings I had built up.

Just think of me as an independent dog walker kind of person.
How much is currently in your Roth IRA?

Do you have any other investing or retirement accounts?

What investments do you have in your Roth IRA? Please give fund names, tickers and expense ratios.

Where is your Roth IRA currently located?

How much did you contribute to the Roth IRA for 2017? What have you contributed to the Roth IRA for 2018?

About how much do you earn in most years?

About how much do you feel you might be able to add to investing most years?

You can simply add this to your original post using the edit button (the pencil icon, near the upper right of your post), it helps a lot if all of your information is in one place.


ASplitSecond wrote:
Wed Feb 21, 2018 1:33 am
Thank you. I will take this all into my thoughts and likely dreams tonight.

I do not need the money at this point for anything. It needn't be liquid. :)

I went for a walk around the block (it's cold!!!) and now I'll sip some tea and read, read, read!

Any other random thoughts come your way, please feel free to chime in.

:happy
I agree with the others that you should probably just use a single very diversified balanced fund like a Target Retirement Fund, Vanguard LifeStrategy fund or Vanguard Balanced Index Fund.

In my opinion at age 45 a reasonable asset allocation would be 60% stocks, 40% bonds. You could get that allocation with either Vanguard LifeStrategy Moderate Growth (VSMGX) or Vanguard Balanced Index Fund Admiral Shares (VBIAX).

From your description of your work, I don't believe that tax-efficiency will likely be a serious issue.

I agree that the issue seems to be generating savings to invest, more than what to invest in.

I suggest some reading on the wiki, see the "getting started" link below, try "Bogleheads Investment Philosophy" to begin. You could also read one or two books on general investing, please see the wiki article "Books: Recommendations and Reviews".
Last edited by ruralavalon on Wed Feb 21, 2018 10:09 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

rixer
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by rixer » Wed Feb 21, 2018 9:58 am

I think a balanced fund would work best for you also. As far as tax efficient goes, it's not always so bad. It depends on your tax rate and how much income it generated. Which may not be that much to worry about.
I have a balanced fund in my taxable account and it's been no problem for us as it just doesn't add up to that much because we're retired, have little income and there isn't enough there to generate much of a tax event. So you have to look at it in your own personal situation. It may be just fine.

Will you have enough time to build SS eligibility?

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dratkinson
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by dratkinson » Wed Feb 21, 2018 6:42 pm

Believe we need a little more information.

Copy the sticky topic "Asking Portfolio Questions" into a Word document: viewtopic.php?f=1&t=6212

Edit the Word document with your information. Please include information about your cost of living now, and if you can project how that might change when you retire.

Then edit your OP (original post, original poster) to include your information. Just copy the Word document to the bottom of your OP and post it. In this way we'll know more about your financial situation and all be on the same page.

Create a new reply telling us you've updated your information. The new reply will ding the system to send out email notification to call us back.

And we can resume from there.
Last edited by dratkinson on Wed Feb 21, 2018 6:47 pm, edited 1 time in total.
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WhiteMaxima
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by WhiteMaxima » Wed Feb 21, 2018 6:44 pm

just buy vanguard static balanced fund (30/30/40 US/Intl/Bond). never be late.

ASplitSecond
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Re: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Wed Feb 21, 2018 10:31 pm

I'm not sure if this will ping you all please let me know if it did.

Have you been paying the self-employment tax?
I haven't made enough to do so. So no.

Have you been filing income tax returns?
Yes.

How much is currently in your Roth IRA?
15k

Do you have any other investing or retirement accounts?
I have a CD with 20k that matures this July and I will take it out as it did NOTHING.

What investments do you have in your Roth IRA? Please give fund names, tickers and expense ratios.
It is a Barclays mid-cap growth fund that did 23% and has a 10year average of 9%

Where is your Roth IRA currently located?
US Bank

How much did you contribute to the Roth IRA for 2017? What have you contributed to the Roth IRA for 2018?
5500 for 2018.

About how much do you earn in most years?
Less than 10k but receive funds elsewhere as well. (non taxable)

About how much do you feel you might be able to add to investing most years?
$500 to 1k per month

[/quote]

ASplitSecond
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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Thu Feb 22, 2018 12:21 am

Posting to see if anyone gets notified of my update. Sorry if this is annoying.

TwstdSista
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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by TwstdSista » Thu Feb 22, 2018 5:31 am

If you had enough income last year, fund your Roth for 2017 as well.

You're self-employed. Open a SEP IRA and you can contribute 20% (minus self-employment taxes) of your 2017 income -- 18.587045% (approximately 18.6%) of net profit.

Then open a solo 401k for 2018. You can eventually roll your SEP into the solo 401k after your 2017 contributions have been made -- make sure to open a solo 401k at an institution that accepts Rollovers.

2018 solo 401k contributions are $18500 (assuming you earn that much) plus 20% of 2018 income, assuming you are a sole proprietor.

Then see what is left -- fully fund an emergency fund. Then invest in a taxable brokerage account.

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Starchild
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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by Starchild » Thu Feb 22, 2018 5:56 am

You have 20 years until retirement and not a lot of money. I'm not sure people's rationale for a 60/40 portfolio. That's very conservative. I'd be more like 90/10.

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ruralavalon
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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ruralavalon » Thu Feb 22, 2018 11:25 am

If you did not contribute to your Roth IRA for 2017, you can contribute for 2017 anytime before tax day 2018. You can contribute the amount of your earned income up to $5.5k, contribute now for 2017, don't wait until the last minute.

You say you can contribute to "$500 to 1k per month" ($6k-12k/year) to investing, so each year contribute the maximum $5,500 to your Roth IRA.

Anything extra every year can go into an individual taxable account. I suggest you open that account at a low cost provider like Vanguard or Fidelity. You could also put the rest of the $50k mentioned in your original post, and the $20k from that CD maturing this July, in this same individual taxable account.

I suggest that you move your Roth IRA from U.S. Bank to a low cost provider like Vanguard or Fidelity. This is to get no transaction fee access to their low expense mutual funds. My personal choice would be Vanguard, they have several good balanced funds which you could use. Just call Vanguard and they will help you with the rollover.

In both accounts I suggest that you use a single very diversified balanced fund. I suggest either:
Vanguard LifeStrategy Moderate Growth (VSMGX); or
Vanguard Balanced Index Fund Admiral Shares (VBIAX).

Both have an asset allocation of 60% stocks and 40% bonds. The Balanced Index Fund invests in U.S. domestic stocks and bonds. The LifeStrategy fund invests in stocks and bonds, both U.S. and international.

. . . . .

I suggest that you do some reading on the wiki, see the "getting started link which I give below. You could begin with "Boglehead's Investment Philosophy".

I also suggest that you read one or two books on general investing, please see the wiki article "Books: Recommendations and Reviews".

If you have any questions just ask.

I hope that this helps.
Last edited by ruralavalon on Thu Feb 22, 2018 12:07 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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ruralavalon
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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ruralavalon » Thu Feb 22, 2018 12:06 pm

Starchild wrote:
Thu Feb 22, 2018 5:56 am
You have 20 years until retirement and not a lot of money. I'm not sure people's rationale for a 60/40 portfolio. That's very conservative. I'd be more like 90/10.
At age 45 a 60/40 asset allocation is not "very conservative", it's a little conservative. Some would consider it fairly normal. A 60/40 asset allocation is within the range of what is reasonable for age 45, and is suitable for almost any age. ASplitSecond has said he is "used to being conservative", and I don't feel it would be wise to suddenly switch to a 90/10 allocation which would be fairly aggressive for age 45.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

delamer
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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by delamer » Thu Feb 22, 2018 3:47 pm

So you have not been making employment tax payments to Social Security and Medicare?

https://www.ssa.gov/pubs/EN-05-10022.pdf

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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by invst65 » Thu Feb 22, 2018 5:04 pm

delamer wrote:
Thu Feb 22, 2018 3:47 pm
So you have not been making employment tax payments to Social Security and Medicare?

https://www.ssa.gov/pubs/EN-05-10022.pdf
I questioned this myself. I didn't know there was a minimum amount you needed to earn before you were required to pay self-employment tax. Then again, I was never in that situation when self-employed.

Also, it would seem that the OP is well on his way to a zero-percent tax bracket for both capital gains and ordinary income in retirement so what is the point of the Roth IRA?

Also, the OP didn't say if he/she was married. If not, you still have time to earn the required 40 quarters for eligibility for SS benefits and if you marry someone with a higher benefit you can collect on their earnings. Not the best reason to get married, of course, but something to keep in the back of your mind.

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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by LadyGeek » Thu Feb 22, 2018 7:29 pm

I removed an off-topic comment and a reply related to the future of Social Security (proposed legislation). As a reminder, see: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by ASplitSecond » Thu Feb 22, 2018 7:37 pm

invst65 wrote:
Thu Feb 22, 2018 5:04 pm
40 quarters for eligibility for SS benefits
I have worked 40 quarters in my life for regular full time jobs. Does that mean I can get SS even if it wasn't recent?

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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by Nummerkins » Thu Feb 22, 2018 8:08 pm

ASplitSecond wrote:
Thu Feb 22, 2018 7:37 pm
invst65 wrote:
Thu Feb 22, 2018 5:04 pm
40 quarters for eligibility for SS benefits
I have worked 40 quarters in my life for regular full time jobs. Does that mean I can get SS even if it wasn't recent?
Yes, create an account on the Social Security website. It will show your wage history and what you can expect to receive at a few different retirement ages.

https://secure.ssa.gov/RIL/SiView.do

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Re: Update: Yikes, I waited too long, am I [too late]? 50k to invest

Post by Stvr » Thu Feb 22, 2018 9:11 pm

Exactly what rgs92 said: "I would put it all in VBIAX (Vanguard balanced index admiral) and forget about it."

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