Newbie Advice

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chadamrein
Posts: 12
Joined: Mon Feb 22, 2021 9:09 pm

Newbie Advice

Post by chadamrein »

Hello, So I'm a pretty newish investor and wanted to see if I could get some MOTIVATIONAL advice from you experienced investors. I just turned 35 and hope I'm not too late to the game, I'm a little worried and stressed abt it. I really would like to live the F.I.R.E life. I appreciate you guys/gals for your help! Thanks

1. Salary 70,000

2. No debt

3. 401k
Will be maxing out the $19,500/yearly
$20,000 as of today

4. Roth IRA
2020 6K
2021 6K

5. Emergency funds checking/savings
$10,000

I'm currently in VTWAX/VBTLX
$9,000 VTWAX $3,000 VBTLX

Questions:

1. Would it be a better plan to do the 3 fund portfolio VTSAX/VBTLX/VTIAX or keep it as is? If so what percentage should I put in each one? Or should I just do a lifecycle fund?

2. I love the book "The Simple Path To Wealth" and thought abt even following his plan with 100% VTSAX.

Just kind of lost right now on what would be best for a set-and-forget portfolio.

The other question and this might be a dumb question, should I keep bonds in a Roth IRA?

Thank you
Misenplace
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Posts: 3174
Joined: Mon Feb 01, 2016 9:46 pm

Re: Newbie Advice

Post by Misenplace »

This thread is now in Personal Investments.

Welcome to the forum! A Target Date fund or Life Cycle funds may be a good idea for set it and forget it. It's what I recommend for those who don't want to mess with their retirement accounts.
Can you post the available funds in your 401k and Roth, including the expense ratios, per the template. You can just use the Pencil Icon in the upper right of your post, and then put in a new post noting that you have updated the original post.
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ruralavalon
Posts: 21091
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Newbie Advice

Post by ruralavalon »

Age 35 is not too late to start. It's great to see that you are debt free, with an emergency fund, and using tax-advantaged accounts.

Your annual savings rate ($25.5k/$70k = 36%) looks very good. Establishing a high savings rate is the most important investing decision you can make. Forum discussion, link.

chadamrein wrote: Mon May 03, 2021 4:29 pm Hello, So I'm a pretty newish investor and wanted to see if I could get some MOTIVATIONAL advice from you experienced investors. I just turned 35 and hope I'm not too late to the game, I'm a little worried and stressed abt it. I really would like to live the F.I.R.E life. I appreciate you guys/gals for your help! Thanks

1. Salary 70,000

2. No debt

3. 401k
Will be maxing out the $19,500/yearly
$20,000 as of today

4. Roth IRA
2020 6K
2021 6K

5. Emergency funds checking/savings
$10,000

I'm currently in VTWAX/VBTLX
$9,000 VTWAX $3,000 VBTLX

Questions:

1. Would it be a better plan to do the 3 fund portfolio VTSAX/VBTLX/VTIAX or keep it as is? If so what percentage should I put in each one? Or should I just do a lifecycle fund?

2. I love the book "The Simple Path To Wealth" and thought abt even following his plan with 100% VTSAX.

Just kind of lost right now on what would be best for a set-and-forget portfolio.

The other question and this might be a dumb question, should I keep bonds in a Roth IRA?

Thank you
What funds are offered in your employer's 401k plan? Please give fund names, tickers and expense ratios.

What is your tax bracket, both federal and state? What is your tax filing status?

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

For the "best for a set-and-forget portfolio" you could use a single fund in both accounts, either a target date fund or another balanced or allocation type fund.

Using an allocation fund seems to insulate the investor from behavioral errors, and so produce higher investor returns. Morningstar ( 8/15/2019) "Mind the Gap 2019", link.

It will depend on what funds are offered in your employer's 401k plan.
Last edited by ruralavalon on Mon May 03, 2021 5:40 pm, edited 1 time in total.
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RadAudit
Posts: 4043
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Newbie Advice

Post by RadAudit »

chadamrein wrote: Mon May 03, 2021 4:29 pm I just turned 35 and hope I'm not too late to the game,
You're not too late to the game.
chadamrein wrote: Mon May 03, 2021 4:29 pm I'm currently in VTWAX/VBTLX
$9,000 VTWAX $3,000 VBTLX
chadamrein wrote: Mon May 03, 2021 4:29 pm Would it be a better plan to do the 3 fund portfolio VTSAX/VBTLX/VTIAX or keep it as is? ... Or should I just do a lifecycle fund?
I'd stay with what you have. If you want to DIY, again, I'd choose VTWAX over VTSAX because, it appears to me, while VTSAX has higher returns, VTWAX is more diversified. I just don't know if VTSAX will maintain this advantage over the next 40 to 50 years. (And no one else knows what'll happen over the next 50 years either.) But that does away with the need for VTIAX, so you're back to where you started.

If you don't want to stress about this stuff, I'd choose a VG target date fund that closely matched your expected retirement date and then switch to a 60 / 40 or 40 / 60 LifeStrategy fund when you got close to retirement and then just keep it there for the duration. Additionally, it's better to do this in a tax deferred account.

It took me close to 40 years to arrive at a LifeStrategy fund just a few years after retirement. I believe the journey would have been considerably less stressful it they had offered TDF or LifeStrategy funds earlier and if I had believed in the basic promises of those funds.

YMMV. Best of luck.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
hi_there
Posts: 792
Joined: Sat Aug 29, 2020 7:00 pm

Re: Newbie Advice

Post by hi_there »

Given your current tax bracket and still relatively young age, I think it makes sense to put stocks in the Roth IRA, since these have the greatest potential for long term and tax free growth. In terms of motivation, everyone has to start somewhere. If you plan to live until 80 or 90, it doesn't seem to matter too much if you start saving in your 20s or 30s.
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