Author Topic: Just opened my Roth IRA account at Vanguard. What now? Please help.  (Read 6616 times)

xclonexclonex

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Hello all,

Just to give you a quick background, I am not an American yet. I am a permanent resident, and after reading on the internet, I learned about IRAs. I was hesitant to open an investment account because I realize there is a risk of me losing it all, minimal as it may be. However, I realized that the only way to ensure a comfortable retirement is to invest in a retirement account.

Now that I have opened a Roth IRA account. What should I do? I only transferred $50 from my checking account into my Vanguard account. Is that good enough to start? Should I transfer more?

If this is the wrong place to ask, or if I am asking the wrong questions, I apologize.

I thought about going to a professional for advice, but I thought I should ask here first before I did anything.

Thanks for your time.

pzxc

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #1 on: December 03, 2014, 08:51:35 AM »
Now that you have a Roth IRA account, there is only one thing to do.  Max that sucker out!!!  :)  You are allowed to put $5,500 in it per year.  You have until April 15th of the FOLLOWING year to do it.  So you have until April 15th, 2015 to make contributions for the 2014 year.  You don't have to max it out each year, but you get more benefit the more you put in.

You should also consider traditional retirement accounts.  What's your gross annual income?  Does your employer offer any or all of: 401k, 403b, 457?  Those are all accounts you can deposit pre-tax money into (the Roth IRA gets post-tax money).  The limits are also higher than a Roth IRA.  Because of their pre-tax nature, if you make enough income to put you into one of the higher tax brackets, they can be extremely valuable for sheltering your income from tax, and when you take the money out in your old age you will probably have a much lower income than you do now and the taxes paid on the money at that time will thus be less than if you paid taxes on the money now.  If you have a low income presently, then it's to your advantage to save your money in post-tax accounts like the Roth IRA because you pay the tax now, it grows tax-free and you never have to pay taxes on it again.

catccc

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #2 on: December 03, 2014, 09:01:59 AM »
I thought Vanguard had a minimum amount to invest of  1 or 2 thousand?  Maybe not. 

I'm not sure what kind of restrictions there are around non-residents for investing.

But keep contributing.  It can be scary at first, but the money's going to be sitting around for a while, and it will have time to ride out the lows.  It's not going to all disappear, just make sure you put it in a respected organization, like Vanguard.  I just read a post at ERE about a guy that loaded all of his $250K savings into what turned out to be a ponzi scheme.  He lost it all.

And it gets easier.  My portfolio passed a 1/2 million this year, and monthly market swings that result in losing or gaining upwards of $20K just make me roll my eyes or half-smile.  It's a process!

I kept way too much cash around because I was too conservative, and I know I lost out.  Don't make the same mistakes I did!
« Last Edit: December 03, 2014, 09:04:28 AM by catccc »

Franklin

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #3 on: December 03, 2014, 09:23:37 AM »
Quote
Now that I have opened a Roth IRA account. What should I do?

I'm going to take you literally on this and let others chime in:

1. You have transferred the money into the Roth IRA, but now you need to pick an investment.  I would direct you to a total market index fund, but I don't know what the minimum is for Vanguard.  Others will advise.
2. Contribute up to $5500, but not more than your expected annual earnings.  This is a limitation.
3. Turn on automatic reinvesting (if you so desire)
4. Add a beneficiary

La Bibliotecaria Feroz

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #4 on: December 03, 2014, 10:22:35 AM »
I'm all about the Total Stock Market Index. Now, to buy it as a mutual fund, you do need 3K. BUT, you may be able to buy shares of it as an ETF (exchange traded fund).

That is the total extent of my knowledge on ETFs :-). Congrats on opening your Roth!

xclonexclonex

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #5 on: December 03, 2014, 11:55:38 AM »
Now that you have a Roth IRA account, there is only one thing to do.  Max that sucker out!!!  :)

Thank you! I will do that!

You should also consider traditional retirement accounts.  What's your gross annual income?  Does your employer offer any or all of: 401k, 403b, 457? 

My gross annual income is $70000. I do not have any other retirement type accounts. I have a 401k account, but my employer does not provide a match. They do however deposit a part of our bonus in that account.

Thank you for your advice. I appreciate it.

xclonexclonex

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #6 on: December 03, 2014, 12:01:52 PM »
I thought Vanguard had a minimum amount to invest of  1 or 2 thousand?  Maybe not. 

I do not know about this, but I had the option to transfer $50 - I mean the application let me, and I did. I wasn't really thinking anything at that point. I hope I didn't do something stupid and lose my $50.

I'm not sure what kind of restrictions there are around non-residents for investing.

I am a permanent resident. I am not a citizen yet. As far as I am aware, there are no restrictions on green card holders. I asked around, I could invest just like a citizen could.

But keep contributing.  It can be scary at first, but the money's going to be sitting around for a while, and it will have time to ride out the lows.  It's not going to all disappear, just make sure you put it in a respected organization, like Vanguard.

I definitely intend to keep contributing to the retirement account. I understand that the maximum is $5500, so I will max this out. I just need figure out how to work the website, and invest conservatively.

I kept way too much cash around because I was too conservative, and I know I lost out.  Don't make the same mistakes I did!

I am afraid I might have made the same mistake already. I am a pretty frugal person. I saved about $95000 in the last 3 years. I didn't know what to do with it, so I just put it in a 5 year CD for an interest rate of 2.30%. Oh well...

At least from now on, I am going to keep emergency fund, and then invest the rest.

Thanks for your input!

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #7 on: December 03, 2014, 12:10:37 PM »
1. You have transferred the money into the Roth IRA, but now you need to pick an investment.  I would direct you to a total market index fund, but I don't know what the minimum is for Vanguard.  Others will advise.
2. Contribute up to $5500, but not more than your expected annual earnings.  This is a limitation.
3. Turn on automatic reinvesting (if you so desire)
4. Add a beneficiary


Thank you so much for this! I have a few questions, and if you could please answer this, I would be very grateful.

1. I would direct you to a total market index fund, but I don't know what the minimum is for Vanguard.  Others will advise. - Could you please direct me to a fund that you think is good? I am only asking because I don't know where to even start looking, so an example would help.


2. Contribute up to $5500, but not more than your expected annual earnings.  This is a limitation. - My annual income is $70000. I can contribute $5500, right?


3. Turn on automatic reinvesting (if you so desire) - Any idea how I can do this on the vanguard website?

4. Add a beneficiary - Yes, I will do this. Thanks!

Thanks for your help! I appreciate it!

Chranstronaut

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #8 on: December 03, 2014, 12:13:51 PM »
*High Five* I literally just did this yesterday, too!  I think I can answer some of your questions.

Yes, you can contribute the full $5500.

catcc's post is correct, there is a minimum amount you must invest at Vanguard.  You will need $1000 in the account before you can actually invest it; until that point, your money is held in a money market account (I think).  So it's still your money, but it's as if it's in a savings account, more or less, and you're not earning market returns on it.

When you have $1k, you can invest in targeted age funds that are a blend of different bond and stock percentages.  The date gives you an idea of who they are targeted toward, but if you look at the details, you will see the actual breakdown of indexes and their %.  You can choose a nearer date fund with a higher % of bonds for lower returns, but more stability, or you can choose a later date fund for higher % of stock for the possibility of greater returns, but more volatility.  In general, unless you are nearing retirement, the higher stock % funds are a better choice as they will grow your money faster over a long period of time.  I believe these targeted year funds will change the % distributed to bonds and stocks as it ages, so it will become more bond heavy over time (I'm not sure).  When you sign up for your investment fund, you will have the chance to check a box to re-invest any dividends.

When you have at least $3k, you will have more options and can choose which indexes you'd like to buy individually, or you can stick with the targeted funds.  These should look familiar as the indexes that people usually recommend on the forum.

Follow Franklin's advice as well, and check out the Investor Alley threads if you want to know more about how to choose your investments for your personal goals.  Welcome to the forum! Cheers!

be

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #9 on: December 03, 2014, 01:29:28 PM »
First of all GREAT JOB!! 

You're over the first hurdle.  After you figure out AA (asset allocation) and what fund or funds to put it in, that's the bulk of the work. I would encourage you to set automatic investing.  I always think if something is easier to do it's more likely to get done.  (I'm lazy that way.)  Don't look at it too often and keep investing. 

Remember the money is for your retirement, so do your very best to not touch it, especially if you're young.  You'd lose the magic of compounding.

Congrats.

LLCoolDave

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #10 on: December 03, 2014, 01:40:57 PM »
The minimum for any Vanguard fund is $3000. It helps keep their (and our) costs down. That means you can only choose one fund this year. Total Market Index. Next year you can start to diversify.
« Last Edit: December 03, 2014, 01:42:58 PM by LLCoolDave »

Dezrah

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #11 on: December 03, 2014, 02:04:41 PM »
Congrats, OP!

I'd like to fill in a few minor points:

Now that you have a Roth IRA account, there is only one thing to do.  Max that sucker out!!!  :)  You are allowed to put $5,500 in it per year.  You have until April 15th of the FOLLOWING year to do it.  So you have until April 15th, 2015 to make contributions for the 2014 year.  You don't have to max it out each year, but you get more benefit the more you put in.

This advice is correct with one minor exception: you have complete your contributions to your Roth IRA BEFORE you file taxes.  April 15th is the final post date for taxes.  So if you want to file your taxes earlier than that, you'll need to move up your Roth contributions accordingly.



1. I would direct you to a total market index fund, but I don't know what the minimum is for Vanguard.  Others will advise. - Could you please direct me to a fund that you think is good? I am only asking because I don't know where to even start looking, so an example would help.

...

3. Turn on automatic reinvesting (if you so desire) - Any idea how I can do this on the vanguard website?


Go to this link to see all of Vanguards funds: https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list

From there you can filter out and compare the various funds until you find one you like.  The cheapest ones start at $1000 for Target Retirement Funds (not $3k as others have stated).  Don't be afraid to click around Vanguard; there's not really anything you can do to lose your money or get in trouble with the law when you're just clicking around.

From what I've read, the general goal is to get into the Admiral Shares of whatever general index your looking for.  They have the best expense ratios but require the largest initial investments ($10k+ for most).  If you can, why not contribute $5500 for 2014 now, $5500 for 2015 in January and pick one of these elite funds?

Also, I've attached a screen shot from Vanguard's website and highlighted the tab and link you need to click on in order to set up auto-transactions.  Vanguard makes this super easy and even lets you do things like "take $XXXX contributions every month until I reach the federal limit".  If you did something like that, you wouldn't even have to keep track of how the limit changes year to year because Vanguard will adjust it for you.

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #12 on: December 03, 2014, 02:40:27 PM »

I am afraid I might have made the same mistake already. I am a pretty frugal person. I saved about $95000 in the last 3 years. I didn't know what to do with it, so I just put it in a 5 year CD for an interest rate of 2.30%. Oh well...


I know we are not market timers, but if the stock market experienced a large correction, say 15% or more, I'd probably pay the interest penalty to close the CD and invest in the market.

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #13 on: December 04, 2014, 10:20:26 PM »
*High Five* I literally just did this yesterday, too!  I think I can answer some of your questions.

Yes, you can contribute the full $5500.

catcc's post is correct, there is a minimum amount you must invest at Vanguard.  You will need $1000 in the account before you can actually invest it; until that point, your money is held in a money market account (I think).  So it's still your money, but it's as if it's in a savings account, more or less, and you're not earning market returns on it.

When you have $1k, you can invest in targeted age funds that are a blend of different bond and stock percentages.  The date gives you an idea of who they are targeted toward, but if you look at the details, you will see the actual breakdown of indexes and their %.  You can choose a nearer date fund with a higher % of bonds for lower returns, but more stability, or you can choose a later date fund for higher % of stock for the possibility of greater returns, but more volatility.  In general, unless you are nearing retirement, the higher stock % funds are a better choice as they will grow your money faster over a long period of time.  I believe these targeted year funds will change the % distributed to bonds and stocks as it ages, so it will become more bond heavy over time (I'm not sure).  When you sign up for your investment fund, you will have the chance to check a box to re-invest any dividends.

When you have at least $3k, you will have more options and can choose which indexes you'd like to buy individually, or you can stick with the targeted funds.  These should look familiar as the indexes that people usually recommend on the forum.

Follow Franklin's advice as well, and check out the Investor Alley threads if you want to know more about how to choose your investments for your personal goals.  Welcome to the forum! Cheers!

Hello,

Thank you so much for the kind words.

I intend to invest up to $5500 in my Roth IRA. I just don't know what exactly I will be putting in right this second, but I am going to have to do a lot of research on this subject over the next few days.

I understand now that there is a minimum amount I need to have in my Roth IRA account for me to be start investing. Unfortunately, I cannot transfer $1000 into that account this month, so I am going to have to wait until the beginning of January 2015 to start. This at least gives me plenty of time to learn how the website works and do research on what funds I want to invest into.

Also, would it be possible for me to remove my $50 from Vanguard now? I am just curious.

Also, I think targeted funds maybe better for me. I am fairly conservative. I might change my allocations at a later time, but for now its probably best to stick to a targeted fund.

For me to get to 3k, will take a couple of months. So, the good news with that is I get to learn a lot in the meanwhile.

Thanks again for all your help. I really appreciate it!

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #14 on: December 04, 2014, 10:37:33 PM »
Congrats, OP!

From what I've read, the general goal is to get into the Admiral Shares of whatever general index your looking for.  They have the best expense ratios but require the largest initial investments ($10k+ for most).  If you can, why not contribute $5500 for 2014 now, $5500 for 2015 in January and pick one of these elite funds?

Also, I've attached a screen shot from Vanguard's website and highlighted the tab and link you need to click on in order to set up auto-transactions.  Vanguard makes this super easy and even lets you do things like "take $XXXX contributions every month until I reach the federal limit".  If you did something like that, you wouldn't even have to keep track of how the limit changes year to year because Vanguard will adjust it for you.

What you have suggested is an excellent idea and I will do this next year.

I have a few of questions though.

If I invested $5500 in a fund this year, next year when I have $5500, can I transfer my total amount into a new fund? Are there any costs associated with doing this?

Thanks for all your help!

MDM

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Re: Just opened my Roth IRA account at Vanguard. What now? Please help.
« Reply #15 on: December 04, 2014, 11:36:52 PM »
Q1.  If I invested $5500 in a fund this year, next year when I have $5500, can I transfer my total amount into a new fund?
Q2.  Are there any costs associated with doing this?
A1.  Yes
A2.  Probably not.  Depends on which funds you have.  See https://investor.vanguard.com/mutual-funds/fees:
Quote
Purchase and redemption fees
Very few Vanguard funds charge fees when you buy and sell shares.
You can then follow a link to see which ones do.

Vanguard, Fidelity, and Schwab all have decent FAQ and other help screens.  It's relatively easy to move your account to a different firm so it's in their best interest to keep you happy - you can also call them toll-free and ask newbie questions.  Good luck!