Investment advice for my 33 year old son.

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Topic Author
Skeeter1
Posts: 176
Joined: Sat Jul 06, 2019 1:50 pm

Investment advice for my 33 year old son.

Post by Skeeter1 » Sun Jul 28, 2019 8:23 am

Good morning. I have been trying to get my son into the market and he finally was in a position to do so and set up an account with Vanguard. Yippee. I have introduced him to this site as well as strategies to properly form a financial plan without a full time advisor with options like hiring an advisor like Rick Ferri to properly set up his accounts in the proper tax advantaged manner.
He is 33 years old, married with a two month old baby girl.
He is an independent contractor so does not have a 401k or any retirement accounts. He is late to the game, but he has taken his first step, which I am very proud.
He just recently hit his profession stride and currently is earning 200k plus a year. He has saved over $100k and growing rapidly because they are basically frugal (I.e one car ) except for living in California!
I suggested at minimum that he puts the 100k immediately into a Vanguard money market until he decides how to invest.
Even at 33 his stated risk profile is conservative.
I have sent him numerous articles including those from this site. He likes the three fund portfolio and to begin his journey bought $3,000 each of VTSAX, VTIAX and VBTLX.
My question is should he have gone the ETF direction with VTI, VXUS and BND?
Is he being too conservative?
I also am encouraging him to start his IRA’s for both his wife and himself and would appreciate any insight from the group as to the kind of investments they would suggest.
Thank you.

02nz
Posts: 3230
Joined: Wed Feb 21, 2018 3:17 pm

Re: Investment advice for my 33 year old son.

Post by 02nz » Sun Jul 28, 2019 8:36 am

Since he's self-employed, he likely qualifies for the Solo 401k (https://www.bogleheads.org/wiki/Solo_401(k)_plan). Others with more expertise in this area will chime in, I'm sure. If indeed he does, that's valuable tax-advantaged space that he should not give up, in addition to the Roth IRAs.

It sounds like a target retirement date fund (like those offered by Vanguard) would be an excellent fit for your son. Set it and forget it.

Topic Author
Skeeter1
Posts: 176
Joined: Sat Jul 06, 2019 1:50 pm

Re: Investment advice for my 33 year old son.

Post by Skeeter1 » Sun Jul 28, 2019 8:41 am

I appreciate your advice. Thank you

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Watty
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Re: Investment advice for my 33 year old son.

Post by Watty » Sun Jul 28, 2019 8:44 am

02nz wrote:
Sun Jul 28, 2019 8:36 am
Since he's self-employed, he likely qualifies for the Solo 401k (https://www.bogleheads.org/wiki/Solo_401(k)_plan). Others with more expertise in this area will chime in, I'm sure. If indeed he does, that's valuable tax-advantaged space that he should not give up, in addition to the Roth IRAs.

It sounds like a target retirement date fund (like those offered by Vanguard) would be an excellent fit for your son. Set it and forget it.
+1

I would assume that being in California he is also in a high combined tax bracket.

You might also buy him the book the "The Bogleheads' Guide to Investing" which is very readable for someone without a background in investing.

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

You could also encourage him to post here himself.
Last edited by Watty on Sun Jul 28, 2019 9:26 am, edited 1 time in total.

averagedude
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Re: Investment advice for my 33 year old son.

Post by averagedude » Sun Jul 28, 2019 9:03 am

The etf decision is minor compared to the not investing decision. He needs to become educated on the fact that stocks performing poorly when you are young is a great thing. I am benefiting greatly now from all of the stocks i purchased from 2000 to 2010, as i was happily buying mutual fund shares at cheap prices. A target date fund, a life strategy fund, or a three fund portfolio would be reasonable, but the most important thing is getting started. Your son investing now, coupled with the facts that he is a business owner, with a high income and savings rate, will be setting himself up to having a life with high financial success.

lakpr
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Re: Investment advice for my 33 year old son.

Post by lakpr » Sun Jul 28, 2019 9:07 am

+1 about the Solo 401(k) plan for your son. He can shelter up to $56k per year with that vehicle, and perhaps $112k (the additional $56k in the name of his spouse). It will be a savings vehicle on steroids.

Suggest eTrade as the Solo 401(k) provider for him, as it has In-Plan Roth Rollover ability for him to hyper-optimize the taxes towards the end of the year if need be. With other providers, once a contribution is defined as traditional (or Roth), it cannot be converted/recharacterized the other way. eTrade off-the-shelf plans do allow a portion of the tax-deferred money into the plan to be converted to Roth if that's beneficial to your son.

Topic Author
Skeeter1
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Joined: Sat Jul 06, 2019 1:50 pm

Re: Investment advice for my 33 year old son.

Post by Skeeter1 » Sun Jul 28, 2019 9:19 am

I have sent him and his wife this link because they are equally interested in their financial future. I am optimistic that they will join soon and enjoy this robust forum.
Thanks all

CurledMoss
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Re: Investment advice for my 33 year old son.

Post by CurledMoss » Sun Jul 28, 2019 9:26 am

Another option might be a SEP IRA

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Investment advice for my 33 year old son.

Post by lakpr » Sun Jul 28, 2019 9:30 am

CurledMoss wrote:
Sun Jul 28, 2019 9:26 am
Another option might be a SEP IRA
Respectfully, that would be a bad choice. The stated income is "$200k plus" in the original post, putting these folks squarely in the 24% tax bracket, and between/above the phase out limits of being able to contribute to a Roth IRA. Backdoor Roth IRA it must be, and for that, SEP-IRA would come in the way (pro-rata rule).

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Stinky
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Location: Sweet Home Alabama

Re: Investment advice for my 33 year old son.

Post by Stinky » Sun Jul 28, 2019 10:26 am

averagedude wrote:
Sun Jul 28, 2019 9:03 am
The etf decision is minor compared to the not investing decision. He needs to become educated on the fact that stocks performing poorly when you are young is a great thing. I am benefiting greatly now from all of the stocks i purchased from 2000 to 2010, as i was happily buying mutual fund shares at cheap prices. A target date fund, a life strategy fund, or a three fund portfolio would be reasonable, but the most important thing is getting started. Your son investing now, coupled with the facts that he is a business owner, with a high income and savings rate, will be setting himself up to having a life with high financial success.
This is excellent advice. The savings rate is the most important decision right now.

Encourage your son and DIL to join the Forum and to educate themselves more on financial topics.

And you’re a good father for helping to advance your sons’s knowledge.
It's a GREAT day to be alive - Travis Tritt

Topic Author
Skeeter1
Posts: 176
Joined: Sat Jul 06, 2019 1:50 pm

Re: Investment advice for my 33 year old son.

Post by Skeeter1 » Sun Jul 28, 2019 11:13 am

Great advice. It is with great pleasure to help my son and his family with their securing their financial future.
I wish my pops would have done it with me.

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