New to investing, somewhat

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LOLC2k
Posts: 32
Joined: Fri Feb 09, 2018 8:42 pm

New to investing, somewhat

Post by LOLC2k » Fri Feb 09, 2018 8:48 pm

Hi there, I'm somewhat new to investing, being a late starter in having a real career.

I'm currently getting about 60k a year (it varies based on how many hours of OT I pull).
I'm 32 years old no debts, but not much in savings and no house.

Right now I have a Roth-IRA that has about 50,000 in it (more like 45,000 after the last week, yuck).
I also have a Roth 403b through my employer. After 2 years, they will match 5%. I have them taking out 15% right now, which is the most they will take out.

A few questions.

1. I plan to switch health insurance during the next open enrollment to take advantage of an HSA. It seems like this will be priority #1 once I have it.
2. No questions on the Roth IRA, unless I become a nurse practioner and make enough to worry about a backdoor, but is it correct to use the Roth 403b instead of a regular 403b? I think I am getting paid less than I will be later on.
3. If I open the HSA should I contribute less to the 403b? I'm not very impressed with the funds in the 403b. While I know HSA can have similar problems, they can also be moved, unlike 403bs.
4. I notice the first 5% of my roth IRB contribution is based on only my normal FTE, even when I work overtime.. but the other 10% is based on everything. I assume this is to save them matching contributions once they begin matching?

Edit: I plan on contributing the 5,500 in the Roth forever, yes, unless my income goes too high for it.
Last edited by LOLC2k on Sat Feb 10, 2018 11:02 am, edited 1 time in total.

mega317
Posts: 2448
Joined: Tue Apr 19, 2016 10:55 am

Re: New to investing, somewhat

Post by mega317 » Sat Feb 10, 2018 8:30 am

Are you saying your employer will not let you contribute more than 15% of your salary to your 403b? I don't think that's legal.

I think we need more detail to answer your questions well. Consider using the "asking portfolio questions" format.
more like 45,000 after the last week, yuck
You need to get over this way of thinking. If the recent drop gives you a negative reaction you might consider adjusting your asset allocation.

Compound
Posts: 587
Joined: Mon May 26, 2014 1:32 pm

Re: New to investing, somewhat

Post by Compound » Sat Feb 10, 2018 9:05 am

LOLC2k wrote:
Fri Feb 09, 2018 8:48 pm
Hi there, I'm somewhat new to investing, being a late starter in having a real career.

I'm currently getting about 60k a year (it varies based on how many hours of OT I pull).
I'm 32 years old no debts, but not much in savings and no house.

Right now I have a Roth-IRA that has about 50,000 in it (more like 45,000 after the last week, yuck).
I also have a Roth 403b through my employer. After 2 years, they will match 5%. I have them taking out 15% right now, which is the most they will take out.

A few questions.

1. I plan to switch health insurance during the next open enrollment to take advantage of an HSA. It seems like this will be priority #1 once I have it.
2. No questions on the Roth IRA, unless I become a nurse practioner and make enough to worry about a backdoor, but is it correct to use the Roth 403b instead of a regular 403b? I think I am getting paid less than I will be later on.
3. If I open the HSA should I contribute less to the 403b? I'm not very impressed with the funds in the 403b. While I know HSA can have similar problems, they can also be moved, unlike 403bs.
4. I notice the first 5% of my roth IRB contribution is based on only my normal FTE, even when I work overtime.. but the other 10% is based on everything. I assume this is to save them matching contributions once they begin matching?
1. If you are healthy, it seems reasonable to go with a high deductible health plan and HSA.
2. The Roth 403b is a reasonable option in your tax bracket, particularly if you expect your income to rise significantly in the future and expect to utilize the plan by placing pre-tax dollars in the account. This will provide some tax diversification.
3. Depends on what funds are available in each. Ideally you’d max both, but that may not be feasible.
4. Hard to answer without specific knowledge about the plan. This is probably a question to direct to your HR representative.

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ruralavalon
Posts: 13475
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: New to investing, somewhat

Post by ruralavalon » Sat Feb 10, 2018 9:09 am

Welcome to the forum :) .

Congratulations on being debt free.

Age 32 is not a late start at all. Having $45k in a Roth IRA at age 32 puts you ahead of most of your peers.


LOLC2k wrote:
Fri Feb 09, 2018 8:48 pm
Hi there, I'm somewhat new to investing, being a late starter in having a real career.

I'm currently getting about 60k a year (it varies based on how many hours of OT I pull).
I'm 32 years old no debts, but not much in savings and no house.

Right now I have a Roth-IRA that has about 50,000 in it (more like 45,000 after the last week, yuck).
I also have a Roth 403b through my employer. After 2 years, they will match 5%. I have them taking out 15% right now, which is the most they will take out.

A few questions.

1. I plan to switch health insurance during the next open enrollment to take advantage of an HSA. It seems like this will be priority #1 once I have it.
That may be correct, until the time you are eligible for the employer match in your 403b.

First determine if a High Deductible Health Plan and Health Savings Account are suitable for you insurance needs.

Please see the wiki article "Prioritizing Investments".


LOLC2k" wrote:2. No questions on the Roth IRA, unless I become a nurse practioner and make enough to worry about a backdoor, but is it correct to use the Roth 403b instead of a regular 403b? I think I am getting paid less than I will be later on.
It may be better to switch to traditional contributions to your 403b. Most people will likely be better off making traditional contributions. Please see the TFB blog post "The Case Against Roth 401k".

See also the wiki article "Traditional versus Roth".

It looks like you are in the 22% tax bracket, a factor which would favor traditional contributions to your 403b plan.

The traditional vs Roth decision on the 403b plan may depend on how likely you feel it is that you will go on to become a Nurse Practitioner, with substantially higher income for most of your working life.


LOLOC2k" wrote:3. If I open the HSA should I contribute less to the 403b? I'm not very impressed with the funds in the 403b. While I know HSA can have similar problems, they can also be moved, unlike 403bs.
Probably not. It spends on the quality and expense of the funds offered in your 403b plan.

What are the funds offered in your 403b? If the list is very long then just give the 2-3 funds with the lowest expense ratios in each of these 3 categories -- 1) domestic stocks, 2) international stocks, and 3) bonds. Please give fund names, tickers and expense ratios.

In addition to contributing 15% to your 403b plan are you also contributing to your Roth IRA, and if so how much?

You can simply add this to your original post using the edit button, it helps a lot if all of your information is in one place.


LOLC2k wrote:4. I notice the first 5% of my roth IRB contribution is based on only my normal FTE, even when I work overtime.. but the other 10% is based on everything. I assume this is to save them matching contributions once they begin matching?
I have no idea why that is.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

LOLC2k
Posts: 32
Joined: Fri Feb 09, 2018 8:42 pm

Re: New to investing, somewhat

Post by LOLC2k » Sat Feb 10, 2018 11:04 am

I'm capped at 15% on my 403b at least as far as payroll deductions go. I think I can make payments to it by myself, which, since it's a roth anyhow, doesn't make a huge difference.

So it seems like I might be better off going with a regular 403b and a Roth IRA at this point..
I will be checking the funds offered overthe weekend (I work weekend nights, so not too awake right now being saturday) and can list them Monday. I'm more than happy with my roth IRA choices at Fidelity, but the things offered by TIAA in the 403b are... lacking. Most have either poor 10 year gains or a high ETF.

LOLC2k
Posts: 32
Joined: Fri Feb 09, 2018 8:42 pm

Re: New to investing, somewhat

Post by LOLC2k » Mon Feb 12, 2018 4:30 pm

I will need to make a special trip to HR to figure out how I can actually contribute more than 15%. Online, I can only put 5 into my basic (which they match after 2 years) and 10 into supplemental.
I do save more than that, as I always max my roth IRA.

I need to make that trip anyhow to figure out the details of their HDHP/HSA stuff, as the details there are minimal on their website.
As far as the available funds in the 403b

Name: Gross/Net ER
American Century Income and Growth Fund I (AMGIX) 0.47%/0.47%
American Century One Choice 2020 I (ARBSX) 0.62%/0.57%
American Century One Choice 2025 I (ARWFX) 0.64%/0.59%
American Century One Choice 2030 I (ARCSX) 0.67%/0.61%
American Century One Choice 2035 I (ARLIX) 0.69%/0.64%
American Century One Choice 2040 I (ARDSX) 0.72%/0.66%
American Century One Choice 2045 I (AOOIX) 0.75%/0.70%
American Century One Choice 2050 I (ARFSX) 0.77%/0.72%
American Century One Choice 2055 I (ARENX) 0.78%/0.72%
American Century One Choice Inc Ret I (ATTIX) 0.61%/0.57%
BlackRock High Yield Bond Instl (BHYIX) 0.63%/0.62%
Columbia Mid Cap Index Fund Class R5 (CPXRX) 0.27%/0.20%
Columbia Small Cap Index Fund Class R5 (CXXRX) 0.20%/0.20%
CREF Money Market Account (R2) (QCMMPX) 0.34%
Shares MSCI EAFE International Index Instl (MAIIX) 0.15%/0.12%
iShares S&P 500 Index Instl (BSPIX) 0.11%/0.11%
Shares U.S Aggregate Bond Index Instl (BMOIX) 0.12%/0.10%
Ivy International Core Equity Fund Class I (ICEIX) 0.97%/0.97%
Janus Henderson Triton Fund Class I (JSMGX) 0.77%/0.77%
JPMorgan Intrepid Value Fund Class R5 (JIVRX) 0.62%/0.44%
JPMorgan Small Cap Value Fund Class R5 (JSVRX) 0.87%/0.84%
MassMutual Select Mid Cap Growth Equity II Fund Class R5 (MGRFX) 0.82%
Oppenheimer Developing Markets Fund - Class Y (ODVYX) 1.07%/1.07%
Oppenheimer International Small-Mid Company Fund Class Y (OSMYX) 1.17%/1.16%
Pioneer Bond Fund Class Y (PICYX) 0.59%/0.58%
Principal Real Estate Securities Fund Class R5 (PREPX) 1.08%/1.08%
Prudential QMA Mid Cap Value Fund Class Z (SPVZX) 0.99%/0.95%
T. Rowe Price Blue Chip Growth (TRBCX) 0.72%/0.72%

-----------------

TwstdSista
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Re: New to investing, somewhat

Post by TwstdSista » Mon Feb 12, 2018 5:02 pm

These are very decent funds:

Shares MSCI EAFE International Index Instl (MAIIX) 0.15%/0.12% -- international
iShares S&P 500 Index Instl (BSPIX) 0.11%/0.11% -- 80% of total stock market
Shares U.S Aggregate Bond Index Instl (BMOIX) 0.12%/0.10% -- bonds

LOLC2k
Posts: 32
Joined: Fri Feb 09, 2018 8:42 pm

Re: New to investing, somewhat

Post by LOLC2k » Mon Feb 12, 2018 5:08 pm

Thank you for the advice, those are current 3 of the 5 I'm in, so I will probably keep those. Just checking if there's anything else I'm missing that I should be investing into. I might drop the others... much more impressed with the range in my roth IRA, obviously.

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ruralavalon
Posts: 13475
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Location: Illinois

Re: New to investing, somewhat

Post by ruralavalon » Tue Feb 13, 2018 7:43 am

TwstdSista wrote:
Mon Feb 12, 2018 5:02 pm
These are very decent funds:

Shares MSCI EAFE International Index Instl (MAIIX) 0.15%/0.12% -- international
iShares S&P 500 Index Instl (BSPIX) 0.11%/0.11% -- 80% of total stock market
Shares U.S Aggregate Bond Index Instl (BMOIX) 0.12%/0.10% -- bonds
LOLC2k wrote:
Mon Feb 12, 2018 5:08 pm
Thank you for the advice, those are current 3 of the 5 I'm in, so I will probably keep those. Just checking if there's anything else I'm missing that I should be investing into. I might drop the others... much more impressed with the range in my roth IRA, obviously.
I agree. Those are clearly the best choices in your 403b in my opinion.

I don't think that you are missing anything critical if you use those three funds in your 403b.


International stocks.
A MSCI EAFE international index fund like the one in your 403b covers stocks of larger companies in developed markets except Canada. In my opinion the omissions of emerging markets and Canada are both important omissions, the omission of stocks of smaller companies not as important.

To fill the gaps in the iShares MSCI EAFE fund I do NOT suggest using the Oppenheimer developing markets and small-cap funds offered in your 403b, because of their high expense ratios (1.07% and 1.16%).

In your Roth IRA you could instead use Fidelity Total International Index Fund (FTIGX) which covers stocks of both larger and smaller companies, in both emerging and developed markets including Canada. Or you could use the iShares MSCI EAFE fund in your 403b and some Fidelity Emerging Markets Index Fund (FPEMX) in your Roth IRA.


Domestic stocks.
I prefer a total stock market index fund if available, if not then a S&P 500 index fund is good enough for U.S. stocks in my opinion. A S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of large-cap and mid-cap U.S. companies. In the 25 years since the creation of the first total stock market index fund the two types of fund have had almost identical performance.

So historically there has been little gained by adding stocks of smaller U.S. companies. You could if you want also use some Columbia Small-cap Index Fund Class R5 (CXXRX) ER 0.20%. An 82/18 mix of S&P 500/small-cap will mimic the holdings of a total stock market index fund. Please see the wiki article "Approximating Total Stock Market". Adding small-cap is optional and not necessary in my opinion.


Bonds.
IShares U.S. Aggregate Bond Index Fund uses the Bloomberg Barclays U.S. Aggregate Bond Index, almost identical to the index used by Vanguard Total Bond Market Index Fund and by Fidelity U.S. Aggregate Bond Index Fund. The iShares fund is a very complete bond index fund, nothing important omitted.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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