First Post: Looking for Advice for Accounts

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poffra
Posts: 2
Joined: Tue Aug 21, 2018 6:18 pm

First Post: Looking for Advice for Accounts

Post by poffra » Tue Aug 21, 2018 6:47 pm

Hello all my name is Ryan (29 years old), and i am looking for some advice on my future and investing. At this point in time, I have made the following investments:

Through my work:
1. I have a 401K where my employer matches $0.60 on the dollar up to 5%. I put the 5% in my 401K all pre tax.
I also have a cash balance pension.
Should my 401K be pre or post tax for my future?
My investments in my 401K are allocated as follows: I have about $45,000 in my 401K

30% in Vanguard target retirement fund
25% in US Equity Fund
25% in Blackrock US Equity Fund
10% in International Equity Fund
10% in Blackrock All Country World
Are these good investment to have? I have on a normal basis got a rate of return around 10%. Should I look into bonds and money market accounts offered though my 401k as well?

I have also recently invested in a roth IRA through Vanguard. I have currently put the max of $5,500 for 2 years and am currently investing in the admiral share total stock market index fund (VTSAX). Would there be any better fund to invest in or keep it in this?

I have also opened up and individual account through Vanguard to take the money sitting in my savings in hopes it starts working for me. I took a total of $6,000 into the taxable account. The funds I am allocating my money towards in this account are:
1. $3000 in Total stock market ETF
2. $3000 in Total World Stock ETF

Should i be investing in anything else in a taxable account? I seem very stock heavy with minimal to no bonds at all. Is this ok? Any advice is welcome as i am starting out and trying to get some advice. I have done some research but want to make sure I am on the right track.

Also, just as a side note, I have about $25,000 in my emergency fund which i am looking to transfer some of that to an online high interest savings account. Any help with my situation or am i on the right track?

mega317
Posts: 2554
Joined: Tue Apr 19, 2016 10:55 am

Re: First Post: Looking for Advice for Accounts

Post by mega317 » Tue Aug 21, 2018 7:57 pm

Welcome. I would say you are certainly on the right track.
1. What is your income? Pre-tax 401k is probably better for most people but can't say about you.
2. I would suggest contributing more to the 401k, up to the max, before investing in stocks in a taxable account.
3. However I would also suggest making sure you have enough money in taxable beyond an emergency fund to cover life expenses. People your age are often not far from engagement ring, wedding, car(s), house, and child(ren).

With regards to choosing mutual funds, that should be the last step. First you need to determine your risk tolerance, financial goals, desired asset allocation, then maybe where to place the components of your allocation, and THEN the funds. You should consider your whole portfolio as one and so, for example, you don't necessarily need total stock ETF in taxable, VTSAX in Roth, and multiple US equity funds in 401k.

I would suggest holding some bonds.

You should read a few books suggested on the bogleheads wiki and the wiki itself to get a little better sense of big-picture ideas.

TBH if you did nothing but continue your current path, contributing to 401k, IRA, saving in taxable, using low-cost index funds (which I think are all you're in?) you'd be fine. But buy some bonds.

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camillus
Posts: 509
Joined: Thu Feb 28, 2013 9:55 pm

Re: First Post: Looking for Advice for Accounts

Post by camillus » Tue Aug 21, 2018 8:16 pm

1) I agree with above, max 401k before investing money in taxable
2) You have some fund overlap in your 401k with owning a target date fund as well as other funds. The target date fund would actually be fine by itself, if it has a low expense ratio.
3) Speaking of the target date fund, notice that the fund probably has something like 10% bonds. That's the suggestion of that investment firm for an asset allocation of a person your age. When I was beginning, I took that suggestion of 10% bonds to heart and made that my asset allocation across my total portfolio.
4) You are doing great and actually have been quite lucky by investing almost 100% stocks during a bull market. It might be time to think hard about an asset allocation (a bond position) moving forward.
5) Ally is a popular Online Bank around here. Vanguard also has high rates on their money market accounts which you can treat like savings, if you want to keep from opening an account with yet another institution.
6) I recommend pre-tax (deferred) for your 401k. You are already maxing a Roth. You actually need a huge amount of money in retirement to "fill up" the lower tax brackets.

dogagility
Posts: 170
Joined: Fri Feb 24, 2017 6:41 am

Re: First Post: Looking for Advice for Accounts

Post by dogagility » Wed Aug 22, 2018 5:00 am

poffra wrote:
Tue Aug 21, 2018 6:47 pm
Through my work:
1. I have a 401K where my employer matches $0.60 on the dollar up to 5%. I put the 5% in my 401K all pre tax.
I also have a cash balance pension.
Should my 401K be pre or post tax for my future?
My investments in my 401K are allocated as follows: I have about $45,000 in my 401K

30% in Vanguard target retirement fund
25% in US Equity Fund
25% in Blackrock US Equity Fund
10% in International Equity Fund
10% in Blackrock All Country World
Are these good investment to have? I have on a normal basis got a rate of return around 10%. Should I look into bonds and money market accounts offered though my 401k as well?

I have also recently invested in a roth IRA through Vanguard. I have currently put the max of $5,500 for 2 years and am currently investing in the admiral share total stock market index fund (VTSAX). Would there be any better fund to invest in or keep it in this?

I have also opened up and individual account through Vanguard to take the money sitting in my savings in hopes it starts working for me. I took a total of $6,000 into the taxable account. The funds I am allocating my money towards in this account are:
1. $3000 in Total stock market ETF
2. $3000 in Total World Stock ETF

Should i be investing in anything else in a taxable account? I seem very stock heavy with minimal to no bonds at all. Is this ok? Any advice is welcome as i am starting out and trying to get some advice. I have done some research but want to make sure I am on the right track.

Also, just as a side note, I have about $25,000 in my emergency fund which i am looking to transfer some of that to an online high interest savings account. Any help with my situation or am i on the right track?
Welcome, Ryan. As others have stated you're doing well.
Some thoughts going forward:
1) Asset allocation between bonds and stocks for your retirement funds. This is a personal choice. Being 100% allocated to stocks at your age and with your retirement time horizon (assuming >30 years) is a fine choice. It will maximize your return. However, it will have the most volatility of any stock/bond allocation, and you will experience the occasional large drop in valuation. If you have the emotional fortitude to stay invested (not sell) when your portfolio value decreases 50%, an all stock allocation is fine. Should you choose to add 10% bonds, this volatility will decrease a bit, but you'll still see significant decreases. I would not invest any of your retirement money in a money market account.
2) Roth vs pre-tax 401k. I would suggest this depends upon your current marginal tax rate. If you're in the lower bracket, choose a Roth. If you're in a higher bracket, choose pre-tax. There is a lot of information on making this choice online.
3) Suggest investing as much as your money as your budget will allow. Do you have an HSA available through your work? This is another great retirement investing vehicle. I believe the wiki on the Boglehead site has information on the order of investing when you have a choice of 401k, HSA, and IRA.
4) Fund choice. Keeps costs low by investing in index funds. Reduce complexity. If you're going with a 100% stock allocation, you could keep investing all of your IRA money VTSAX. You could also add a total international index fund and allocate 20-30% to this fund (VGTSX or VTIAX). Fidelity recently introduced to total stock market funds with no expense fees (FZROX and FZILX). If you want to use Fidelity's Cash Management as a checking account and take advantage of the Fidelity 2% cash-back credit card, then it may make sense to transfer your IRA from Vanguard to Fidelity and use FZROX/FZILX.
5) Emergency fund. A high yield savings account or a "No-penalty CD" at Ally would be good choices for this money. There are other options too for this money, including a money market fund like Vanguard's VMRXX.
6) Perhaps most importantly, and not something you mentioned, is to not put yourself heavily into debt... pay off the credit card(s) each month, spend wisely, and maximize your savings rate. Temper this with spending enough to enjoy life too! :beer
Taking "risk" since 1995.

poffra
Posts: 2
Joined: Tue Aug 21, 2018 6:18 pm

Re: First Post: Looking for Advice for Accounts

Post by poffra » Wed Aug 22, 2018 6:48 pm

Thanks for the response all and the assistance! I have always been very frugal with my money and finally starting to realize I can make my money work for me and be much more successful, hopefully in the end!

Mega:
1. My income is roughly around $70,000 a year. Have some opportunities to start advancing shortly so this will only increase.
2. I will have to look more into this. I always felt that i could do better on my own but from research and all i think my 401K seems to do pretty well. Like i said i have always been involved in mostly stocks in my 401. Have normally had a rate of return around 10% (give or take)
3. I am not married but that is in the near future. I do have a fairly large amount of money in a checking account (roughly 15K for no real purpose) but to have as just in case. Cars do not interest me i will always pay cash, i own a house currently, and children will be in the future.

I will need to consider more and look at my asset allocations, What bond would you suggest? Should i do bonds in my tax differed accounts like my 401 and roth? Is that beneficial, as form what i read bond in taxable account is not a good option.

Camillus:
1. I will look more into my 401K and maxing this out.
2. I will have to see the ratio of bonds to stocks in my target retirement 401 and maybe minimize this and invest in other avenues or put the majority of my money in this account. I think by putting majority of money in the target, I will minimize my gains drastically but it will levelize my portfolio more.
4. What bond funds would you suggest either go through these in my 401, or should i look into my roth to add a bond account?
5. I am thinking of using ally or there are other options out there. The highest i have seen is 2.25% APY form Northfield Bank but have been considering others.

Dogagility:
1. I think when i hit 30 i will prob focus on a 80/20 allocation. As i get older this will then adjust but i think the magic age for me to start really investing in bonds will be 30. This will be next year.
2. I would be in the 22% tax bracket. Would it be better to do pre or post, i will have to do some more research on this!
3.I do have an HSA through work where they will put in $500 as well.
4. I do plan in adding money to an international fund eventually (next year) when i can add more money to my Roth.
5. Will prob go with a high yield savings see Camillus #5 above.
6. I like to think i am well off and in minimal debt. I do not have any car payment, credit card debt, or school bills, The only thing i am paying on is my house which i bought last year. Still owe about $140,000. I still do enjoy my life although i am not materialistic at all. Personal object do not interest me. I am more interested in traveling. If i do travel, i wll make sure the trip is payed off before i go. As stated i am very frugal with my money and like to think i am responsible.

Thanks again for all the help and assistance as i am getting my feet wet in this market and investing thing. I do appreciate all the help and assistance. I do feel more comfortable then i originally did when making my investments!

dogagility
Posts: 170
Joined: Fri Feb 24, 2017 6:41 am

Re: First Post: Looking for Advice for Accounts

Post by dogagility » Wed Aug 22, 2018 7:21 pm

poffra wrote:
Wed Aug 22, 2018 6:48 pm
I do have an HSA through work where they will put in $500 as well.
You're doing well, Poffra!
Just an FYI, you don't have to spend the money invested in an HSA until much later in life. There are several great things about an HSA: the money invested is tax deductible, the money grows tax free until withdrawn, and the money withdrawn for eligible expenses is not taxed. A triple win!
If you're organized and save receipts for eligible expenses (but don't use your HSA to pay for these services at the time of purchase), you can withdraw the sum of money in the saved receipts at any time in the future... tax free.
Taking "risk" since 1995.

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