47 years old and self-employed - where to start?

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SnowCoast
Posts: 2
Joined: Mon Jul 08, 2024 11:43 am

47 years old and self-employed - where to start?

Post by SnowCoast »

I would appreciate advice about how to start retirement planning for someone in my situation - self-employed, no 401k, 47 years old. This is all very new to me.

Five years ago I became self-employed. Though I worked for employers with 401k options, the wages were so low I never had extra to put aside. I started my own business and now bring home about $150-180 per year. I have a partner (we do not plan to marry) who makes about $40-$50 a year, also with their own business. At this point I have no household debt - I've paid off my house, my student loans, my car loans, my credit card debt. I have one child who is about to start University and I am expecting each year will be about 20k to support that. I have 200k sitting in a high-yield saving account and have the ability to save 8-10k per month.

I read the core book on Common Sense Investing this weekend and am trying to wrap my head around everything. I wasn't raised by people who invested, my family were blue collar pension folks who died young from bad hearts or alcoholism. I've known I need to 'plan for the future' but haven't really thought about it much past the idea of stuffing my extra money into a mattress.

What else should I read, how do I start?
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BolderBoy
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Re: 47 years old and self-employed - where to start?

Post by BolderBoy »

SnowCoast wrote: Mon Jul 08, 2024 1:09 pmWhat else should I read, how do I start?
If I were you I would:

1) decide on a 401k custodian to use. Good, low cost ones are Schwab and Fidelity (I don't think Vanguard offers these anymore). Each has pros/cons. Were it me, I'd pick one that offers both individual 401k and individual Roth 401k options. I think the forum wiki has some discussion about this. You'll learn about employER and employEE contributions.

2) open the individual 401k with the custodian you choose. At this point, plan to use that custodian for all your investing needs. That gets the process started and be sure to get this done before December 31 this year. You need not fund the newly opened 401k plan(s) immediately.

3) study up on IRAs (tradition and Roth). Lots of info on the forum wiki an innumerable forum threads on the subject.

4) get a feeling for retirement and non-retirement accounts. Again lots of info in the forum wiki. (look for a link there called "Getting Started")

5) expect to spend some serious time reading, learning and understanding.

6) we are here to answer questions and make suggestions but much of the basic learning you'll have to do yourself.

Welcome to the forum!
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Topic Author
SnowCoast
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Joined: Mon Jul 08, 2024 11:43 am

Re: 47 years old and self-employed - where to start?

Post by SnowCoast »

Thanks so much! I now have a Fidelity account and am looking forward to doing more reading this weekend.
djtx34
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Joined: Sun Jun 19, 2022 8:16 am

Re: 47 years old and self-employed - where to start?

Post by djtx34 »

Do you have any W2 employees?
lgb
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Joined: Fri Mar 01, 2019 8:46 am

Re: 47 years old and self-employed - where to start?

Post by lgb »

At ~$200K a year and no expenses aside from what you choose to spend money on and the College costs mentioned, I can relate to your situation somewhat. I started much earlier of actually investing, but you have a big shovel presently and need to make sure you keep doing what you've always been doing to get to where you've got a paid house, no dumb 'asset' debts like cars and get used to packing away into retirement accounts. And not frittering away the present big shovel income you've got going on (it could go away, so if you don't invest now, you may not get a chance later with a big shovel) You seem to be of the mind set to do that, but are just uncertain as to what to do. The specifics. Totally understandable.

You'll need to determine an Investment profile/mix of Mutual Funds equities for growth, Bonds for protection, how much you should have set aside as liquid cash that you and spouse are comfortable with. That's my general view, but it could be entirely different for yourself.

Since you're self employed, I'd recommend you find a CPA to talk to about your present situation, a good one will be your new found friend that seems to be on Team SnowCoast and you'll wonder why they care so much about helping you help yourself. Good one's have your back and that's a good feeling to know you've got that on your side/family to draw upon. They may not get into the investment details but will guide you on what to take advantage of tax-wise for yourself/situation that you're not likely to get from the 'everyday' tax shops setup to help file taxes for average joe. It's just good to have that CPA connection. I'd say the exact same for an Attorney. An Attorney to help with 'life things', like having a Will, setting up a Trust.

Then you'll want to focus on the Investment side and choose a place like Fidelity or Vanguard (as these are the places that provide the broadest amount of options of all things) and speak with them about putting together a plan with their help, or you'll also be able to gather from here a basic plan to put together to fit what you might be comfortable with to DIY (I kind of gather you're reading/learning to maybe do DIY, but would probably rather someone tell you what to do that is already well in the know.

Understand, everyone is different, Investing for some is picking Individual stocks and timing the market, picking winners and losers following what's going on and determining for yourself when to get in and get out, for others it's more about investing in the overall marketplace using Mutual Funds and not worrying so much about the day to day, for others it could be focusing more on the more 'speculative' things and hoping to win big which could be investing in Futures like Corn or newer stuff like Crypto. That debate could go on and on and people tend to over time fiddle with this and that and figure out their comfort level when it comes to what they are able to stomach.

I can't answer that for you, an Investment pro tries to determine what 'you' want hopefully and sets aside their own personal desires/commission interest (but if it feels like that isn't happening, then you've got to walk and/or run..)..... a Pro should realize 90 year old granny doesn't need to be aggressively investing and selling and trading.... if 90 year old granny is from advice from an Investment Pro, time to run.. hehe..

I'm sure you'll get great responses here to provide some helper information. What I've learned, is there are people that 'talk' about doing, and there are those that actually take action. Make sure you're taking action. I believe you are collecting information/analyzing before taking action, some never even collect/analyze.... just make sure you 'do' and not just 'talk' about it... :sharebeer - it should always circle back to 'great discussion, so what are we going to do that is 'actionable'.. if nothing actionable it's still on the list and not done yet....and we're still just collecting information/analyzing or talking.... which is needed, but 'action' gets results.
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retired@50
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Re: 47 years old and self-employed - where to start?

Post by retired@50 »

SnowCoast wrote: Mon Jul 08, 2024 6:02 pm Thanks so much! I now have a Fidelity account and am looking forward to doing more reading this weekend.
The information will be coming at you like water from a fire hose. :shock:

Prepare yourself for lots of good, but possibly conflicting, ideas. Some folks may recommend 100% US stocks, while others will recommend a globally diversified mix of stocks and bonds. To sort through all the information will take some time. You have to find your own way, and discover your own "investing personality".

Here are some links that might help you along your path.

As previously mentioned by BolderBoy... Getting Started.

Also, since determining an acceptable asset allocation is really Job #1, you may want to read about asset allocation in the wiki, and possibly take the Vanguard Investor Questionnaire quiz which will recommend an asset mix at the conclusion of the quiz.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
bonesly
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Re: 47 years old and self-employed - where to start?

Post by bonesly »

SnowCoast wrote: Mon Jul 08, 2024 1:09 pm I would appreciate advice about how to start retirement planning for someone in my situation - self-employed, no 401k, 47 years old. This is all very new to me.
...
What else should I read, how do I start?
In addition to Retired@50's advice to read Wiki topic on assessing risk tolerance and to take the Vanguard investor questionnaire, I'd also recommend that you read the five introductory topics in Wiki Main Page (left side) under "Getting Started for US Investors:"

1) Getting started - Start here.
2) Investment philosophy - Our investment principles.
3) Investing start-up kit - A top-down approach to start investing.
4) Investment policy statement - Identify your investment objectives and how you plan to meet them.
5) Prioritizing investments - Choosing where to save your investing money, such as an employer's retirement plan or a savings account.

Generally, contribute what you can, potentially to the maximum annual limit, to the Trad 401K ($23K/yr) and a Roth IRA ($7K/yr). You might not be able to max both and still meet your non-savings expenses, but that's where "Prioritizing Investments" might help you decide how much to contribute to each if you can't max both.

Invest the contributions in accordance with your desired/target asset allocation (AA) as determined by your Vanguard quiz results, which should be tailored for your personalized risk tolerance. If you need help with how to invest to meet your AA, post your desired AA here and we can recommend a proportional split of your contributions to make a 3-Fund Portfolio that is simple, low-cost yet diversified, and can meet any AA using Fidelity funds you have access to in your 401K and Roth IRA.

Reading the two links Retired@50 gave is probably the best "next step" as determining an AA that is tailored to your risk-tolerance sets the roadmap for the rest of your investment plan.
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
AlmstRtrd
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Re: 47 years old and self-employed - where to start?

Post by AlmstRtrd »

BolderBoy wrote: Mon Jul 08, 2024 3:39 pm
SnowCoast wrote: Mon Jul 08, 2024 1:09 pmWhat else should I read, how do I start?
----------

1) decide on a 401k custodian to use. Good, low cost ones are Schwab and Fidelity (I don't think Vanguard offers these anymore). Each has pros/cons. Were it me, I'd pick one that offers both individual 401k and individual Roth 401k options. I think the forum wiki has some discussion about this. You'll learn about employER and employEE contributions.

---------
Agree that having the individual Roth 401k option is good. Alas, Fidelity does not offer that possibility unless something has changed in recent months. I opened both individual 401k and individual Roth 401k accounts with TD Ameritrade around 2015. When TDA was absorbed by Schwab, they forced me to find a new custodian and the only one I could find was Etrade (Schwab did not want to offer the Roth option). Moving the accounts involved a ton of paperwork but I finally got it done.
vanuber
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Joined: Mon Nov 18, 2019 4:07 pm

Re: 47 years old and self-employed - where to start?

Post by vanuber »

SnowCoast wrote: Mon Jul 08, 2024 1:09 pm I would appreciate advice about how to start retirement planning for someone in my situation - self-employed, no 401k, 47 years old. This is all very new to me.

Five years ago I became self-employed. Though I worked for employers with 401k options, the wages were so low I never had extra to put aside. I started my own business and now bring home about $150-180 per year. I have a partner (we do not plan to marry) who makes about $40-$50 a year, also with their own business. At this point I have no household debt - I've paid off my house, my student loans, my car loans, my credit card debt. I have one child who is about to start University and I am expecting each year will be about 20k to support that. I have 200k sitting in a high-yield saving account and have the ability to save 8-10k per month.

I read the core book on Common Sense Investing this weekend and am trying to wrap my head around everything. I wasn't raised by people who invested, my family were blue collar pension folks who died young from bad hearts or alcoholism. I've known I need to 'plan for the future' but haven't really thought about it much past the idea of stuffing my extra money into a mattress.

What else should I read, how do I start?
What I would do now to capture savings for 2024:

1) Open a solo 401(k). Contribute the annual maximum of $23K to VTSAX (or similar index fund with low expense ratio).
2) Open a Vanguard Roth IRA account. Contribute the max $7K into VTSAX (be sure your MAGI is under the income limit which should be possible with your traditional 401(k) contributions).
3) Open a Vanguard taxable brokerage account and contribute any additional funds into VTSAX.

What I would do later:

1) Learn through books, the BH Wiki, and this forum. Make a financial and retirement plan and stick to it.

I think it is most important to get started now due to your age and the present "big shovel". The rest can come later.

I would recommend JH Collins book, Simple Path to Wealth.
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