If you were not "in" but going to start...

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Topic Author
huskerfan1414
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Joined: Wed Mar 11, 2020 7:51 pm

If you were not "in" but going to start...

Post by huskerfan1414 »

I do not have a Roth IRA but am going to open one. I was already planning to do so this year, but this virus news has made me more anxious to do so. At 33, I'm not scared of losing everything in my 401k, etc, but I'm more scared I'm "missing out" on good deals.

So I have a different type of "timing" question:

If you were currently NOT in a roth, would you start one this week, or wait? This is a little different than "timing the market" if you are already in an investment. It's more of a decision of when to start.

What would you do? Maybe it doesn't matter too much since my time horizon is 30 years. Would just like to buy low, and guessing, personally, that it goes a little lower than it is now. Going to open vanguard and doing something simple, either straight s&p or a target 2050 fund (open to suggestions there too).
Last edited by huskerfan1414 on Sun Mar 29, 2020 2:18 pm, edited 1 time in total.
“I’m confident, but not really sure.” -Tom Petty
mega317
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Re: If you were not "in" but going to start...

Post by mega317 »

How is this different from timing the market? You are using words like "when" and making predictions about future prices.

You're also mixing a few concepts. Opening an account and contributing to it are different from what you purchase in the account. You should defnitely contribute to a Roth IRA if you're eligible. You can hold cash or anything else in there if you want to time the market. I think you might also be mixing up 401k and IRA.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
MotoTrojan
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Re: If you were not "in" but going to start...

Post by MotoTrojan »

You sure a Roth 401k is the way to go? Maybe you meant IRA and already have a pretax/traditional 401k.

You are in fact timing the market. Deciding not to buy now is no different than moving equities in a 401k to cash-equivalents. Every day you stay invested you’re deciding to lump sum.

I invest as much as I can, as soon as I can. Makes life simple and has the highest expected return.
Topic Author
huskerfan1414
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Joined: Wed Mar 11, 2020 7:51 pm

Re: If you were not "in" but going to start...

Post by huskerfan1414 »

mega317 wrote: Sun Mar 29, 2020 1:48 pm How is this different from timing the market? You are using words like "when" and making predictions about future prices.

You're also mixing a few concepts. Opening an account and contributing to it are different from what you purchase in the account. You should defnitely contribute to a Roth IRA if you're eligible. You can hold cash or anything else in there if you want to time the market. I think you might also be mixing up 401k and IRA.
It is timing the market, you are correct.

I just wondered if it was treated any different than timing the market by taking something out of a fund you are already in and locking in your losses. Since I technically don't have any losses.

The money I would start (and contribute to) the roth is currently in cash. (And not emergency fund.)
“I’m confident, but not really sure.” -Tom Petty
Topic Author
huskerfan1414
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Re: If you were not "in" but going to start...

Post by huskerfan1414 »

MotoTrojan wrote: Sun Mar 29, 2020 1:50 pm You sure a Roth 401k is the way to go? Maybe you meant IRA and already have a pretax/traditional 401k.

You are in fact timing the market. Deciding not to buy now is no different than moving equities in a 401k to cash-equivalents. Every day you stay invested you’re deciding to lump sum.

I invest as much as I can, as soon as I can. Makes life simple and has the highest expected return.
Well now I'm confused.

I currently have a 401k through work. I've had that for years.

I do not own a Roth. I thought my portfolio should probably have one. Do you disagree?

I'd like to open one. Unless you think I should just open an IRA on top of my 401k.
“I’m confident, but not really sure.” -Tom Petty
Olemiss540
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Re: If you were not "in" but going to start...

Post by Olemiss540 »

Get in now and dont think about it any further. Starting buying every two weeks when the paycheck hits and focus on savings rate over market swings and investment ideas.

Ask me what the market was priced at.

I HAVE NO IDEA, nor do I care. It's been compounding on its own and earning dividends for the last 10 years and I have the same mental philosophy on the dollars I invest today as I have about the dollars I invested when I started. They should be worth more than had I put them in a bank account once I am ready to sell. Hopefully they grow enough to allow me to retire early, but if not, so what. Enjoy the other facets of your life and you will concern yourself much less with your investments. As it should be and why passive index fund investing exists IMO.
Last edited by Olemiss540 on Sun Mar 29, 2020 2:01 pm, edited 2 times in total.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
mega317
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Re: If you were not "in" but going to start...

Post by mega317 »

I don't believe in the concepts of paper losses or locking in losses. Our portfolios, especially in tax-advantaged accounts, can be wholly exchanged to and from cash in a day without conseqeuences. One could also consider sitting in cash and missing the run up last week to be locking in losses. If you had maxed a Roth IRA and bought stocks Monday morning you'd be almost 1k richer. You holding cash right now is absolutely no different from someone who had stocks then went to cash and "locked in losses" as you say.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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sometimesinvestor
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Re: If you were not "in" but going to start...

Post by sometimesinvestor »

Here isa non sophisticated way of timing the market that even bogleheads might say is ok. If you can invest in/at 1 week intervals tHat will make you put in what you want by the middle of September. THat will mean you invested at neither the best or the worst time.The company you invest with may have conditions that you will have to accomodate
Hyperchicken
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Re: If you were not "in" but going to start...

Post by Hyperchicken »

OP, it is not clear if you understand the difference between traditional 401k vs. Roth 401k vs. traditional IRA vs. Roth IRA. Some of your questions are unclear because of that.
Topic Author
huskerfan1414
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Re: If you were not "in" but going to start...

Post by huskerfan1414 »

mega317 wrote: Sun Mar 29, 2020 2:00 pm I don't believe in the concepts of paper losses or locking in losses. Our portfolios, especially in tax-advantaged accounts, can be wholly exchanged to and from cash in a day without conseqeuences. One could also consider sitting in cash and missing the run up last week to be locking in losses. If you had maxed a Roth IRA and bought stocks Monday morning you'd be almost 1k richer. You holding cash right now is absolutely no different from someone who had stocks then went to cash and "locked in losses" as you say.
Thank you!
“I’m confident, but not really sure.” -Tom Petty
carminered2019
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Re: If you were not "in" but going to start...

Post by carminered2019 »

are you maxing out your 401K first and what funds and bonds are you in ?
mega317
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Re: If you were not "in" but going to start...

Post by mega317 »

sometimesinvestor wrote: Sun Mar 29, 2020 2:01 pm If you can invest in/at 1 week intervals tHat will make you put in what you want by the middle of September. THat will mean you invested at neither the best or the worst time.
Huh? It's fine to DCA over 6 months. It may not be ideal but it's fairly benign and probably helps many as a mental crutch. I don't have a problem with that. But how can you know it's neither the best nor worst time? What if today is the low point and before September there is a big rally? What if stocks are flat and then tank in September?

Any attempt to predict the future is crazy.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Topic Author
huskerfan1414
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Re: If you were not "in" but going to start...

Post by huskerfan1414 »

Hyperchicken wrote: Sun Mar 29, 2020 2:02 pm OP, it is not clear if you understand the difference between traditional 401k vs. Roth 401k vs. traditional IRA vs. Roth IRA. Some of your questions are unclear because of that.
Ok, my apologies. I'm more ignorant than I thought I was. :?

I simply was going to open a roth ira with some cash I have on hand since I already have a traditional 401k (pre tax contributions/tax on withdrawl) through work.
Perhaps I shouldn't open a roth. I guess I'll look into it.
“I’m confident, but not really sure.” -Tom Petty
Topic Author
huskerfan1414
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Re: If you were not "in" but going to start...

Post by huskerfan1414 »

vipertom1970 wrote: Sun Mar 29, 2020 2:03 pm are you maxing out your 401K first and what funds and bonds are you in ?
Yes.
ishares s&p 500 index K (WFSPX) 55%
ishares total intl index (BDOKX) 25%
ishares aggregate bond index k (WFBIX) : 20%

(considering moving some international to the s&p 500 index in the future but that might not be relevant.)
“I’m confident, but not really sure.” -Tom Petty
Hyperchicken
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Re: If you were not "in" but going to start...

Post by Hyperchicken »

huskerfan1414 wrote: Sun Mar 29, 2020 2:08 pm Ok, my apologies. I'm more ignorant than I thought I was. :?

I simply was going to open a roth ira with some cash I have on hand since I already have a traditional 401k (pre tax contributions/tax on withdrawl) through work.
Perhaps I shouldn't open a roth. I guess I'll look into it.
No worries. :) But see, your first post says Roth 401k, and you meant Roth IRA, so that was a bit confusing.

If you don't have an IRA, there isn't really a reason not to open one. Every year that you aren't contributing to an IRA, you're losing this tax-advantaged space.
Topic Author
huskerfan1414
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Re: If you were not "in" but going to start...

Post by huskerfan1414 »

Hyperchicken wrote: Sun Mar 29, 2020 2:16 pm
huskerfan1414 wrote: Sun Mar 29, 2020 2:08 pm Ok, my apologies. I'm more ignorant than I thought I was. :?

I simply was going to open a roth ira with some cash I have on hand since I already have a traditional 401k (pre tax contributions/tax on withdrawl) through work.
Perhaps I shouldn't open a roth. I guess I'll look into it.
No worries. :) But see, your first post says Roth 401k, and you meant Roth IRA, so that was a bit confusing.

If you don't have an IRA, there isn't really a reason not to open one. Every year that you aren't contributing to an IRA, you're losing this tax-advantaged space.
Well don't I feel like a horses petute! Didn't realize I put that. edited.

So you think I should open a traditional IRA instead of a Roth IRA?
“I’m confident, but not really sure.” -Tom Petty
carminered2019
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Re: If you were not "in" but going to start...

Post by carminered2019 »

huskerfan1414 wrote: Sun Mar 29, 2020 2:15 pm
vipertom1970 wrote: Sun Mar 29, 2020 2:03 pm are you maxing out your 401K first and what funds and bonds are you in ?
Yes.
ishares s&p 500 index K (WFSPX) 55%
ishares total intl index (BDOKX) 25%
ishares aggregate bond index k (WFBIX) : 20%

(considering moving some international to the s&p 500 index in the future but that might not be relevant.)
why are you excited about equities but currently holding bonds in 401K when you have 30+ years ? Yes, this one of the best opportunities to fund ROTH IRA.
Last edited by carminered2019 on Sun Mar 29, 2020 2:28 pm, edited 1 time in total.
Topic Author
huskerfan1414
Posts: 169
Joined: Wed Mar 11, 2020 7:51 pm

Re: If you were not "in" but going to start...

Post by huskerfan1414 »

vipertom1970 wrote: Sun Mar 29, 2020 2:22 pm
huskerfan1414 wrote: Sun Mar 29, 2020 2:15 pm
vipertom1970 wrote: Sun Mar 29, 2020 2:03 pm are you maxing out your 401K first and what funds and bonds are you in ?
Yes.
ishares s&p 500 index K (WFSPX) 55%
ishares total intl index (BDOKX) 25%
ishares aggregate bond index k (WFBIX) : 20%

(considering moving some international to the s&p 500 index in the future but that might not be relevant.)
why are you excited about equities but currently holding bonds in 401K when you have 30+ years ? Yes, this one of the best opportunity to fund ROTH IRA.
Because I'm an idiot? :idea:

Seems to be a lot of back and forth on this site regarding bonds, thought 80/20 was a good allocation. Has risk but has some bonds. If I choose to reallocate my international maybe I'll go 90/10 while I'm at it.

Thanks for sharing your thoughts. :beer
“I’m confident, but not really sure.” -Tom Petty
MotoTrojan
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Re: If you were not "in" but going to start...

Post by MotoTrojan »

huskerfan1414 wrote: Sun Mar 29, 2020 1:55 pm
MotoTrojan wrote: Sun Mar 29, 2020 1:50 pm You sure a Roth 401k is the way to go? Maybe you meant IRA and already have a pretax/traditional 401k.

You are in fact timing the market. Deciding not to buy now is no different than moving equities in a 401k to cash-equivalents. Every day you stay invested you’re deciding to lump sum.

I invest as much as I can, as soon as I can. Makes life simple and has the highest expected return.
Well now I'm confused.

I currently have a 401k through work. I've had that for years.

I do not own a Roth. I thought my portfolio should probably have one. Do you disagree?

I'd like to open one. Unless you think I should just open an IRA on top of my 401k.
A Roth IRA is a great idea and totally separate from your 401k. You can have traditional and Roth portions of your 401k but they are not separate contribution limits ($19.5K is combined limit). An IRA has more flexibility so I would go with a Roth IRA (not 401k) to complement your traditional 401k. If you’re already maxing your traditional 401k then aiming to also max a Roth IRA is a great plan.

Be sure to contribute to 2019 1st; you have until 4/15/20 (may even be 7/15/20 now) to contribute to 2019, that way any future savings can go towards 2020.
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Duckie
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Re: If you were not "in" but going to start...

Post by Duckie »

huskerfan1414 wrote:So you think I should open a traditional IRA instead of a Roth IRA?
Can you get a deduction for a TIRA contribution? If you can't a Roth IRA is a no-brainer. If you can then maybe a TIRA would be better (although I prefer Roth IRAs).

2019 IRA Deduction Limits

2020 IRA Contribution and Deduction Limits
Olemiss540
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Re: If you were not "in" but going to start...

Post by Olemiss540 »

A target fund is PERFECTLY acceptable way to set it and forget it. You can contribute 19.5k to your 401k (roth or traditional) AND 6500 to your IRA (roth most likely depending on income). Let us know what your income or AGI is and whether you are married or single and we can give better input. There are limits to Roth IRA contributions if you have an income near 200k+.

There are no income based limits regarding your 401 decision. What's your current state and federal marginal tax brackets?

I am all in target date funds. They are a great low cost and diversified investment.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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