25 year old who just started investing for retirement

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Topic Author
norm52
Posts: 9
Joined: Thu Feb 18, 2021 7:56 pm

25 year old who just started investing for retirement

Post by norm52 »

So I currently just started working. I am maxing out my ROTH IRA and HSA. Also meeting the employer's contribution for the 401k.

Roth IRA Portfolio:

FZROX ZERO Total Market Index Fund: 67%
FZILX ZERO International Index Fund: 30%
FZIIX International Bond Index Fund: 2%
FXNAX U.S. Bond Index Fund: 5%

Roth 401k Portfolio:

BLACKROCK EXTENDED FD CL K: 16.25%
BLACKROCK MSCI ACWI EX CL M: 30%
VANGUARD INSTL 500 IDX TRUST: 48%
VANGUARD INSTL TOTAL BND ID TR: 2.5%
VANGUARD INTER TREAS INDX INST: 2.5%

HSA:
$900

Currently making 65K. 10k in savings (Not including HSA).

Any suggestions and advices?

Also if I invest into traditional IRA and rollover to Roth IRA when my income is $0-12,000. Then start working again, can I completely avoid the income taxes. Is this also possible with rollover to Roth 401k?
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vineviz
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Re: 25 year old who just started investing for retirement

Post by vineviz »

norm52 wrote: Mon May 03, 2021 3:31 pm So I currently just started working. I am maxing out my ROTH IRA and HSA. Also meeting the employer's contribution for the 401k.

.....

Currently making 65K. 10k in savings (Not including HSA).

Any suggestions and advices?
I'm not necessarily a fan of simplicity merely for the sake of simplicity, but at your age it is good advice.

Invest the Roth IRA in Fidelity Freedom® Index 2060 Fund (FDKLX) and be done with it. If you have a similar fund in the 401k, use it as well. Otherwise, just do 50% BLACKROCK MSCI ACWI EX US and 50% VANGUARD INSTL 500 IDX TRUST.

Life is hard enough, don't make it harder than it needs to be.

norm52 wrote: Mon May 03, 2021 3:31 pm Also if I invest into traditional IRA and rollover to Roth IRA when my income is $0-12,000. Then start working again, can I completely avoid the income taxes. Is this also possible with rollover to Roth 401k?
I wouldn't mess with a traditional IRA unless you leave your job and need a place to roll over the 401k. If your 401k offers a Roth or after-tax option you can take advantage of that after you've maxed out the Roth IRA and HSA each year.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Topic Author
norm52
Posts: 9
Joined: Thu Feb 18, 2021 7:56 pm

Re: 25 year old who just started investing for retirement

Post by norm52 »

vineviz wrote: Mon May 03, 2021 3:43 pm I'm not necessarily a fan of simplicity merely for the sake of simplicity, but at your age it is good advice.

Invest the Roth IRA in Fidelity Freedom® Index 2060 Fund (FDKLX) and be done with it. If you have a similar fund in the 401k, use it as well. Otherwise, just do 50% BLACKROCK MSCI ACWI EX US and 50% VANGUARD INSTL 500 IDX TRUST.

Life is hard enough, don't make it harder than it needs to be.
So you think my investments are already complicated? In the future, at what rate should I allocate more money to bonds? Do you have any suggestions?
vineviz wrote: Mon May 03, 2021 3:43 pm I wouldn't mess with a traditional IRA unless you leave your job and need a place to roll over the 401k. If your 401k offers a Roth or after-tax option you can take advantage of that after you've maxed out the Roth IRA and HSA each year.
ok, but roller over from Traditional 401k to Roth 401k is Possible right similar to IRA. Yes i've maxed my HSA and Roth IRA.
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vineviz
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Re: 25 year old who just started investing for retirement

Post by vineviz »

norm52 wrote: Mon May 03, 2021 3:53 pm So you think my investments are already complicated? In the future, at what rate should I allocate more money to bonds? Do you have any suggestions?
It's just my opinion, of course, but.... yeah. I encounter very few investors whose portfolios get simpler over time, so at age 25 I put a premium on starting out simply.

Plus, I'm guessing that at your age the total value in your investment accounts is pretty low relative to the amount you'll be contributing. So don't worry about decisions, like fine-tuning asset allocations, that won't make any difference in the long run.

As for bonds, make a note on your calendar to check back in with us in May of 2031.
norm52 wrote: Mon May 03, 2021 3:53 pm
vineviz wrote: Mon May 03, 2021 3:43 pm I wouldn't mess with a traditional IRA unless you leave your job and need a place to roll over the 401k. If your 401k offers a Roth or after-tax option you can take advantage of that after you've maxed out the Roth IRA and HSA each year.
ok, but roller over from Traditional 401k to Roth 401k is Possible right similar to IRA. Yes i've maxed my HSA and Roth IRA.
Moving money from a traditional account within your 401k to a Roth account in the same plan is technically called a "Roth in-plan conversion". Some employers allow this, but many do not.

If you leave your job, traditional 401k balances will rollover into a Traditional IRA and Roth 401k balances will roll over into a Roth IRA. After that, the Traditional IRA funds can be converted to a Roth IRA if you want to do this.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Topic Author
norm52
Posts: 9
Joined: Thu Feb 18, 2021 7:56 pm

Re: 25 year old who just started investing for retirement

Post by norm52 »

vineviz wrote: Mon May 03, 2021 4:05 pm As for bonds, make a note on your calendar to check back in with us in May of 2031.
So I should be reevaluating my allocation every 10 years. Let's say the market maintains 8% return. 10 years later, how much more money would you put into bonds?
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