Advice on ... everything.

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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Topic Author
GeauxBR
Posts: 116
Joined: Mon Sep 12, 2011 10:53 pm
Location: Baton Rouge

Advice on ... everything.

Post by GeauxBR »

I apologize for the wall of text this post became, if I need to split some of it out into another forum I’d be happy to.

My wife and I were hoping to get some good advice on a little bit of everything. In the last year and a half we’ve been getting out of debt and just trying to become more liquid (while cash flowing a baby). We’ve paid off the car early and our medical debt, and by the end of the year we hope to have our 6month emergency fund in place.

So…here goes:

Emergency Funds: On pace to have 6months ($16k) funded by end of 2012

Debt:
-House: owe $124k @ 3.75% 15year fixed. Mortgage/Insurance/Taxes =$ 1,130/month. Will be paid off before child finishes high school (possibly helping to cash-flow college).
-Lawn Mower (side job investment): owe $9k @ 0%. 4 year loan taken out March ‘12.

Tax Filing Status: Married Filing Jointly

Tax Rate: Fed: 15% Louisiana: 4%

Income: $70.5k (combined)

Age: He 29, She 27.

Current Portfolio: We are self-employed (5 employee “mom and pop” family business) and our only current investments are our simple ira’s. It’s all currently through American Funds and it’s divided among Invesco Van Kampen funds/money markets. I want to move our Simple IRA’s to Vanguard but am unsure of what funds would be best.

His simple: $32k Her simple: $2k (recently opened). Both just putting in 3% (max company match).

Both IRA’s are spread among these funds (copy/paste job from mint). I can track down how much is in each, but I’m looking to move everything to vanguard anyway.
INVESCO MONEY MARKET FUND – CLASS B
INVESCO VAN KAMPEN GROWTH AND INCOME FUND CLASS B
INVESCO GROWTH ALLOCATION FUND – CL B
INVESCO VAN KAMPEN AMERICAN FRANCHISE FUND CLASS B
INVESCO DEVELOPING MARKETS FUND –CL B

Questions:

-For the simple ira’s: What would be the best place to put them at vanguard? Target date funds seem to be the easiest, but I’m willing to put in the extra time splitting it out into other funds if it means better results.

-Once our emergency fund is finished we plan on opening a roth at vanguard. For now it’s our goal to open 1 and max it each year and then go from there (might be awhile opening the 2nd). Any recommendations on which funds or would we be best served going with the target date funds?

-We are looking at some of the Louisiana 529 plans. The state offers some Vanguard options (I’ll list them below) and I was wondering what might be best suited for us. We’ll probably only put $100 a month in it as our main focus will be funding the roth.

529 options: link also https://www.startsaving.la.gov/savings/options2.jsp
LifeStrategy Moderate Growth Fund VSMGX
LifeStrategy Conservative Growth Fund VSCGX
LifeStrategy Income Fund VASIX
LifeStrategy Growth Fund VASGX
Total World Stock Index Fund, Investor Shares VTWSX
Institutional Total Stock Market Index Fund, Institutional Shares VITNX
Total International Stock Index Fund, Institutional Shares VTSNX
Small-Cap Index Fund, Signal Shares VSISX
Mid-Cap Index Fund, Signal Shares VMISX
Large-Cap Index Fund, Signal Shares VLCSX

-I guess the last question is am I even doing this right? Ha! Should the priority for a couple in our situation be: fund the simple ira to the company match>then go to funding a roth? I was sort of confused if I should use a Traditional IRA instead for the tax breaks now or go for the tax free later.

Thanks for any info and help. This post has been a long time coming. Months of reading until I thought I had it figured all out, then thinking I read too much and got myself confused.
Last edited by GeauxBR on Thu May 31, 2012 11:22 pm, edited 1 time in total.
k-slice
Posts: 152
Joined: Sun May 27, 2012 3:13 pm

Re: Advice on ... everything.

Post by k-slice »

What is a TIRA?
If you have the money, buying a Roth is a very good idea.
If you have the stomach for fluctuations up and down of the share price, to appreciate capital, use stock mutual funds.
I believe that a person who has time on their side, i.e. young, should seek capital appreciation for a retirement goal. In plain language, you want a lot of money when you are older in that account.
Other posters here have 1. awesome salaries 2. worked in govt. and have awesome retirement benefits 3. older, richer, etc.
If you do not fit into these categories, you need your investments to "work hard" for you to achieve a retirement goal.
So, in a nutshell: as you work, save, and invest, do so for capital appreciation, until you have capital.
As you near retirement, your capital will not need to appreciate as much, but provide income. Bond funds provide income.
Stocks=to appreciate capital, Bonds=pay income.
Which funds you choose may be from various families.
I haven't researched the so called target funds, but rather I bought several stock funds at Vanguard and T.Rowe Price when I began.
Almost all stock funds would be OK, check out maxfunds.com , and other places to screen funds.
I have one fund to avoid: Vanguard US Growth. Do not buy it.
Mudpuppy
Posts: 6445
Joined: Sat Aug 27, 2011 2:26 am
Location: Sunny California

Re: Advice on ... everything.

Post by Mudpuppy »

No need to get into complexities. For your retirement investing, a simple three fund portfolio (US total stock market, international total stock market and total bond market) should work just fine. The biggest question you have to ask yourself is what percentage do you want to be bonds vs stocks. Then ask yourself what percentage of stocks do you want to be international stocks. That will form your asset allocation. There are all sorts of debates as to how to answer these questions. Read through this Wiki article to get some ideas of which answers are best suited for you and your wife: http://www.bogleheads.org/wiki/Asset_Allocation

At Vanguard, you have the option of (a) roll your own three fund portfolio, (b) purchase a Target Retirement fund that matches your desired asset allocation or (c) purchase a LifeStrategy fund that matches your desired asset allocation. Both the Target Retirement and LifeStrategy fund use the three fund portfolio as part of their underlying makeup. If you choose option (a), you'll have to keep your eye on the three funds and periodically rebalance to your desired asset allocation. If you chose options (b) or (c), Vanguard does some rebalancing automatically, but in different ways. The Target Retirement funds rebalance among the asset classes and the percentage of bonds increases over time. The LifeStrategy funds rebalance among asset classes but the percentage of bonds remains the same (unless the underlying makeup of the fund is changed). So if you wish to purchase more bonds over time, you will have to do that manually with LifeStrategy funds. But there's no guarantee the Target Retirement funds will change the bond percentage as you desire either, so you might end up manually buying more bonds with option (b) as well.

I do not have children, so you'd have to ask others about the 529 options.
letsgobobby
Posts: 12073
Joined: Fri Sep 18, 2009 1:10 am

Re: Advice on ... everything.

Post by letsgobobby »

No 529 until all other tax advantaged retirement space is filled, unless there is an amazing state tax benefit.
Topic Author
GeauxBR
Posts: 116
Joined: Mon Sep 12, 2011 10:53 pm
Location: Baton Rouge

Re: Advice on ... everything.

Post by GeauxBR »

Thank you for the info everyone. Looks like i may just do the target date funds for everything.
letsgobobby wrote:No 529 until all other tax advantaged retirement space is filled, unless there is an amazing state tax benefit.
It's a dollar for dollar tax break up to 4800 for a couple (2400 for single) Louisiana, not that we would be maxing it out. I've seen it multiple times here on this board though, the old "you can borrow for school but not for retirement". So we may hold off on the 529.

Thanks again
kikie
Posts: 339
Joined: Sat Apr 09, 2011 4:37 pm

Re: Advice on ... everything.

Post by kikie »

fwiw, i think your marginal tax bracket is 25% :) > $67k ; so i guess you wanna use that TIRA for at least $4k
Those who know do not speak; those who speak do not know.
kikie
Posts: 339
Joined: Sat Apr 09, 2011 4:37 pm

Re: Advice on ... everything.

Post by kikie »

if you self employed, how are you getting a company match? i'm sure everyone will tell you the match is 'free' money, so you always contribute to the level of the match, that is, unless, like me, you have a reasonable chance of not getting vested, mine is 'the cliff' type 100% vested after 1000 hours /year of 5 years


2) are you using your money market funds as your emergency fund? if not, not sure why your 'investing' in money market at all ; if your unsure of VG change, then what are your expense ratios, and what is your bond/stock ratio otherwise , i believe expense and allocation choice over your next 30 years, is most of what matters.

when your late 20s maybe you don't know how successful or unsuccessful you'll be, i had target funds before, trouble is your bonds/stocks may be in taxable when they should be in non-taxable , vice versa, and though it seems simplier, it's not in the long run

no one can tell you what your stock/bond or risk tolerance is :http://www.isi-su.com/new/risktol2.htm



Questions:

-For the simple ira’s: What would be the best place to put them at vanguard? Target date funds seem to be the easiest, but I’m willing to put in the extra time splitting it out into other funds if it means better results.

-Once our emergency fund is finished we plan on opening a roth at vanguard. For now it’s our goal to open 1 and max it each year and then go from there (might be awhile opening the 2nd). Any recommendations on which funds or would we be best served going with the target date funds?

-We are looking at some of the Louisiana 529 plans. The state offers some Vanguard options (I’ll list them below) and I was wondering what might be best suited for us. We’ll probably only put $100 a month in it as our main focus will be funding the roth.
Those who know do not speak; those who speak do not know.
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