Where to start - advising my DS #1

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cjzimmer2
Posts: 13
Joined: Mon Sep 14, 2020 7:37 pm

Where to start - advising my DS #1

Post by cjzimmer2 »

I'm new to learning anything about investing but realize it's way past time. I've read most of The Simple Path to Wealth and browsed some on here. But I still need things spelled out pretty simply. I've also got 2 adult children who are working (and living at home) that I need to start teaching this topic to as well. Since each group (DH and I, DS #1 and DS #2) each have distinct situations I'm going to ask about each in different posts as I gather the information.

DS #1 (22 years old)
DS has been working for 4 years while in college. He contributes 6% to his 401k and has since the day he began. However, they sold off his branch to another company so he has money in 2 accounts. Account from old company he has about $1800 as his vested portion. There is more than that in the account but since he no longer works for that company I'm assuming there is no way for him to earn the extra portion. I'm assuming we should roll this into something else but not sure what (can he roll it into his current's company's or does he have to set up a new one). Current company he has just under $10k but it says he is 100% vested. I don't know what percentage his company matches but I'm guessing maybe 2-3% since the statement shows their contributions to be quite a bit less than his. The money seems to be going into a traditional 401k but I see on the investment screen that there appears to be an option for a Roth 401k as well.

Further points of note. He has 2 semesters of part time college left. He has more funds left in his 529 than he needs to pay for this, however, if he gets high enough grades, the company will reimburse for these 2 semesters. My understanding is that we can switch the name on the 529 to a younger sibling (we would then have that sibling reimburse him the cash value), or he can leave it there for possible future kids or withdraw it at a penalty? (not as sure about this option). Only relevant to the investment discussion in case we should be taping it as a source of cash for him to invest elsewhere.

Back to investing, since his college expenses are met (he lives at home so no room/board even if everything wasn't online). He can easily live on less than he's making. Last year he made about 31K, I expect this year will be a little bit higher as he is able to work more hours with only part time schooling.

Long term goals. He will remain at his current company until at least May of 2023 (needs to remain for 2 years after last education dispersal) which will be no hardship as he enjoys his job and the company loves him. There is a high probability that he will get married in 2022 and would need to have some money saved up for those expenses as well as moving out. But in the meantime, I figure we should bump up his savings.

I understand there are probably missing pieces of information but since neither he nor I really know much about this, I don't even know what questions to tell him to be asking so feel free to fill us in that too.

What changes would you suggest I advise him to make?
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Re: Where to start - advising my DS #1

Post by LadyGeek »

Welcome! DS #2 is here: Where to start - advising my DS #2
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iraconfused
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Re: Where to start - advising my DS #1

Post by iraconfused »

In post for DS#2 you said "we tithe 10%". Does your son Tithe off of his checks? If so since he has no debt have him do 10%. Whatever % for company match and above that start a Roth IRA. Since he started young 10% should be good and after tithes and saving whatever left is to live on. I think most on here would say total stock or S&P 500 in Roth and either TDF or low cost stock and bond index in 401k.
Topic Author
cjzimmer2
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Re: Where to start - advising my DS #1

Post by cjzimmer2 »

iraconfused wrote: Tue Sep 15, 2020 8:41 am In post for DS#2 you said "we tithe 10%". Does your son Tithe off of his checks? If so since he has no debt have him do 10%. Whatever % for company match and above that start a Roth IRA. Since he started young 10% should be good and after tithes and saving whatever left is to live on. I think most on here would say total stock or S&P 500 in Roth and either TDF or low cost stock and bond index in 401k.

DS #1 has more expenses than DS#2 and I guess I got sidetracked. DS #1 donates probably closer to 15% of his money (he handles it himself so I don't know the actual number but I know he actively supports various projects he has a passion for. Someday he thinks he might like to do full time mission work but this is nothing set in stone at this point so I would just like to help him get set up as best as possible now). He does go out to eat more, he has to fly to see his girlfriend so has plane tickets a few times a year, and generally isn't as frugal as DS #2 but he is still very open to suggestions from me on how to handle finances. I just needs to give him a plan but I'm so new to this myself, I've failed to really educate them on this topic well.

So I'll have him check company match, I'm assuming it's a part of up to 6% since that seems pretty common for all the places my DH has ever worked but if not I will have him up it. But assuming he is already at the amount for company matching, if we were to aim for the 10% you suggested, should he be looking at putting the extra 4% into to Roth 401k that it appears his company has available or create his own Roth IRA outside of his employment? This is where we are reaching the edges of my knowledge and I don't know what criteria, I should be looking at to determine where/how to invest money beyond what one sticks in a company 401k.
iraconfused
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Re: Where to start - advising my DS #1

Post by iraconfused »

cjzimmer2 wrote: Tue Sep 15, 2020 10:38 am
iraconfused wrote: Tue Sep 15, 2020 8:41 am In post for DS#2 you said "we tithe 10%". Does your son Tithe off of his checks? If so since he has no debt have him do 10%. Whatever % for company match and above that start a Roth IRA. Since he started young 10% should be good and after tithes and saving whatever left is to live on. I think most on here would say total stock or S&P 500 in Roth and either TDF or low cost stock and bond index in 401k.

DS #1 has more expenses than DS#2 and I guess I got sidetracked. DS #1 donates probably closer to 15% of his money (he handles it himself so I don't know the actual number but I know he actively supports various projects he has a passion for. Someday he thinks he might like to do full time mission work but this is nothing set in stone at this point so I would just like to help him get set up as best as possible now). He does go out to eat more, he has to fly to see his girlfriend so has plane tickets a few times a year, and generally isn't as frugal as DS #2 but he is still very open to suggestions from me on how to handle finances. I just needs to give him a plan but I'm so new to this myself, I've failed to really educate them on this topic well.

So I'll have him check company match, I'm assuming it's a part of up to 6% since that seems pretty common for all the places my DH has ever worked but if not I will have him up it. But assuming he is already at the amount for company matching, if we were to aim for the 10% you suggested, should he be looking at putting the extra 4% into to Roth 401k that it appears his company has available or create his own Roth IRA outside of his employment? This is where we are reaching the edges of my knowledge and I don't know what criteria, I should be looking at to determine where/how to invest money beyond what one sticks in a company 401k.
If 401k has Roth option that is fine. Easier since money comes straight out of check. Just know that money will be split between whatever his 401k choice are. If wants all stock open a Roth IRA
Topic Author
cjzimmer2
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Joined: Mon Sep 14, 2020 7:37 pm

Re: Where to start - advising my DS #1

Post by cjzimmer2 »

iraconfused wrote: Tue Sep 15, 2020 11:08 am
If 401k has Roth option that is fine. Easier since money comes straight out of check. Just know that money will be split between whatever his 401k choice are. If wants all stock open a Roth IRA
Thank you. That sounds nice and easy. He's currently invested in it the retirement target year groups (2060). I'm not sure how it's invested but I'm assuming it's mostly stocks since it's so far out. The ER is 0.08 which I thought was decent (correct me if I'm wrong) and so that seemed a better choice than trying to pick something else when neither of us knows what we are doing yet.
iraconfused
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Re: Where to start - advising my DS #1

Post by iraconfused »

cjzimmer2 wrote: Tue Sep 15, 2020 11:24 am
iraconfused wrote: Tue Sep 15, 2020 11:08 am
If 401k has Roth option that is fine. Easier since money comes straight out of check. Just know that money will be split between whatever his 401k choice are. If wants all stock open a Roth IRA
Thank you. That sounds nice and easy. He's currently invested in it the retirement target year groups (2060). I'm not sure how it's invested but I'm assuming it's mostly stocks since it's so far out. The ER is 0.08 which I thought was decent (correct me if I'm wrong) and so that seemed a better choice than trying to pick something else when neither of us knows what we are doing yet.

Keep the TDF and add S&P500 index if he has that in 401k or TSM. Put like 80% in S&P and 20% in TDF.
Topic Author
cjzimmer2
Posts: 13
Joined: Mon Sep 14, 2020 7:37 pm

Re: Where to start - advising my DS #1

Post by cjzimmer2 »

iraconfused wrote: Thu Sep 17, 2020 9:52 am
Keep the TDF and add S&P500 index if he has that in 401k or TSM. Put like 80% in S&P and 20% in TDF.
Schwab Retirement Government Money (SNRXX) Money Market
Vanguard Short-Term Infl-Protect Sec Idx (VTAPX) Inflation-Protected Bond
Vanguard Short-Term Invt-Grade (VFSUX) Short-Term Bond
American Century Government Bond (ABTIX) Intermediate Government
Vanguard Total Bond Market Index (VBTLX) Intermediate Core Bond
Vanguard Wellington (VWENX) Allocation--50% to 70% Equity
Vanguard Growth Index (VIGIX) Large Growth
Fidelity 500 Index (FXAIX) Large Blend
Vanguard Value Index (VIVIX) Large Value
Vanguard Mid Cap Growth Index (VMGMX) Mid-Cap Growth
Vanguard Mid Cap Index (VMCIX) Mid-Cap Blend
Vanguard Mid Cap Value Index (VMVAX) Mid-Cap Value
Vanguard Small Cap Growth Index (VSGIX) Small Growth
Vanguard Small Cap Index (VSCIX) Small Blend
Vanguard Small Cap Value Index (VSIAX) Small Value
Vanguard Total Int'l Stock Index (VTSNX) Foreign Large Blend
Vanguard Developed Markets Index (VTMGX) Foreign Large Blend
Vanguard FTSE AllWorld ExUS SmCp Idx (VFSAX) Foreign Small/Mid Blend
Vanguard Emerging Markets Stock Index (VEMAX) Diversified Emerging Mkts
DFA Real Estate Securities (DFREX) Real Estate

These are his other options. Would the Fidelity 500 be close to the S&P 500?
iraconfused
Posts: 56
Joined: Tue Apr 16, 2019 4:05 pm

Re: Where to start - advising my DS #1

Post by iraconfused »

It is. He could also do 90/10 split Vanguard mid cap index TDF
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