New member, need help evaluating where i should be putting my money

[j-rad]

Could use some advice on where to put my money.

27 yrs old next month
Current salary 75k
Just purchased a house with my girlfriend - 300k, put down 60k of my money so 240k mortgage (3.625%)
Mortgage is around 1900/mo - high taxes where I live

I pay 900 of the mortgage plus all utilities - internet/TV, electric, etc.

No student loans, own my car, no CC debt
40k in savings account

I have a Roth 401k through work where I contribute 8% (250/mo) and my company contributes 110/mo currently into an ESOP fund.  Current balance is 40k.

Also have a company pension that I don't have to contribute to - around 10k balance so far.

My 401k is a bit messy - I've played around with allocations in the past so there's shares in a ton of funds - I think I need to move everything to 1-2 funds.  We have a S&P500 fund with <0.01% expense ratio.  Should I allocate everything to that?  There are also small cap, emerging market and intl funds, along with a bond fund and a ton of target date funds.

Also, should I be only contributing up to what my company matches and put the rest into a different type of account?

Any advice is appreciated.

[Emg03063]

First off, congrats on your financial situation.  To answer your question, we really need to know what your goals for the money are.  For retirement money, the Roth 401k is hard to beat.  I would keep the bulk of it in the s&p, with possibly a small mix of small cap, international, and bond funds for diversity (assuming the fees o the other funds aren't exorbitant).  Shop around.  It's also not a bad idea to keep some investments out of the 401k for pre- retirement needs (your kids' education, major home expenses, etc).  Also, at your salary, you should probably keep at least 6 months of expemses in cash reserve (or open a heloc, which can funcction as the same thing).  How long do you want to work for?  Being mortgage free at retirement is always nice.

[j-rad]

I've always toyed with the idea of starting my own business, just not sure when/if that will happen.  But I know for sure I don't want to have an office job until I'm 60+.

I know we are going to have some large expenses at the house in the next 1-3 years (new roof being the major one), but I do have the $40k in a regular savings account.  I'm wondering if I should start another account and put maybe $10-15k in it, plus 4% of my salary currently going into my Roth 401K (keeping the other 4% there to get the full match from my company).

What's the right type of account to set up?  I have a Roth IRA set up at a brokerage firm (from when I was in college - maybe $600 in it) - or should I start a different type of account on my own without anyone taking a fee?

Also need to plan for getting engaged/wedding (have the engagement ring money set aside already, not included in any numbers above).

[matchewed]

General advice of priority - 401k to match, max Roth IRA, Max 401k, other (taxable accounts, paying off mortgage, buying properties...etc.).

Yeah the S&P 500 fund sounds just right for your age, remember it will go through some wild rides.

I personally would not use a HELOC as a source for an emergency fund. There is a large amount of risk in that and your emergency fund is for those risky situations.

As an aside to this, is housing in your area pretty expensive? I ask this because 300k house for two people is a whole lotta house.

[j-rad]

Looks like you live in CT - I do as well.  I live in a small town with generally high home prices and high taxes.  2k sq ft house, 3 beds 2 baths.  Bought it knowing kids are in the future.

What's the reason for having both a 401K and a Roth IRA?  I always assumed both don't allow withdrawals until a certain age.

[j-rad]

I did a bit more reading on the 401k + Roth IRA combo, and I see that you can withdraw contributions from the IRA without penalty. 

Questions:

1.  My 401K is a Roth - would I be better off with a traditional?  Not even sure I can change it now.
2.  Any recommendations for Roth IRA providers with minimal fees?
3.  Any recommendations for websites to track accounts/net worth?

[matchewed]

1. It depends on your income currently and your anticipated income in the future (retirement or FIRE). But generally it is recommended to go traditional for the tax savings.
2. Vanguard/Fidelity/Charles Schwab there are several others.
3. Mint or a simple excel file if you do not like the the security risk Mint may pose.

And to answer your other post - having a mix of traditional tax deferred and post tax retirement accounts allows you tax flexibility for an uncertain tax law future. I can't tell you what taxes will be like in 10/20/30 years but I can tell you they will be different than today. Another reason for having both is that it is your future money, more future money is a good thing.

*Edit* Yeah I know CT has expensive housing. I assume most people on the forums aren't from CT though, the rest of the country generally has more reasonable housing prices.

[neoptolemus412]

I did a bit more reading on the 401k + Roth IRA combo, and I see that you can withdraw contributions from the IRA without penalty. 

Questions:

1.  My 401K is a Roth - would I be better off with a traditional?  Not even sure I can change it now.
2.  Any recommendations for Roth IRA providers with minimal fees?
3.  Any recommendations for websites to track accounts/net worth?

1. Stick with the Roth.  Money goes tax free and you can w/draw principal if need be.  The traditional 401k gives you a tax deduction today, but you pay taxes upon w/draw at retirement age.  With your age of 27, it's best to pile into a Roth as much as possible and let the growth increase tax free.

2. Roth IRA - Vanguard, Schwab, Fidelity.  Vanguard has most low cost, index funds out there.  Schwab has tons of options (I use schwab for this & their checking acct.).  Fidelity, tons of options and easy interface. 

3. Mint.com is my personal favorite budgeting site/app.  There are multiple others out there.  Mint is easy to use, has a smart phone app, and easy to setup budgets, goals, ect.  I still use different excel files to track certain data, but mint is great for everyday tracking.

other notes:

Max out until your company match is gone.  It's a guaranteed return with 0 risk.  Won't get that anywhere else. 

[j-rad]

Are there advantages to opening an IRA with Vanguard over my current bank (Wells Fargo)?  Assuming I have access to Vanguard MF/ETFs through WF, does going direct through Vanguard save on any fees (trade fees, etc.)?

So I should:

1. Lower 401K allocation just to the point of company match
2. Put remainder + extra into new Roth IRA account

Anything I should do with my 40k balance in savings account?  Maybe move $5k to the IRA and the additional $500 will come from reallocating 401K contributions to max out 2013 contributions?

[curler]

1.  My 401K is a Roth - would I be better off with a traditional?  Not even sure I can change it now.

1. Stick with the Roth.  Money goes tax free and you can w/draw principal if need be.  The traditional 401k gives you a tax deduction today, but you pay taxes upon w/draw at retirement age.  With your age of 27, it's best to pile into a Roth as much as possible and let the growth increase tax free.

I'm not sure that is true.  My understanding is that the rules for withdrawing from a Roth 401(k) are the same as for withdrawing from a traditional 401(k). 

Are there advantages to opening an IRA with Vanguard over my current bank (Wells Fargo)?  Assuming I have access to Vanguard MF/ETFs through WF, does going direct through Vanguard save on any fees (trade fees, etc.)?

Vangaurd has no fees for buying/selling their mutual funds (so long as you sign up for electronic statements).  I don't know what WF does, but if they do charge a trade commission, then opening with Vanguard directly would likely save you money.

[minimalist]

1.  My 401K is a Roth - would I be better off with a traditional?  Not even sure I can change it now.

1. Stick with the Roth.  Money goes tax free and you can w/draw principal if need be.  The traditional 401k gives you a tax deduction today, but you pay taxes upon w/draw at retirement age.  With your age of 27, it's best to pile into a Roth as much as possible and let the growth increase tax free.

I'm not sure that is true.  My understanding is that the rules for withdrawing from a Roth 401(k) are the same as for withdrawing from a traditional 401(k). 

Your understanding is wrong.

[matchewed]

1.  My 401K is a Roth - would I be better off with a traditional?  Not even sure I can change it now.

1. Stick with the Roth.  Money goes tax free and you can w/draw principal if need be.  The traditional 401k gives you a tax deduction today, but you pay taxes upon w/draw at retirement age.  With your age of 27, it's best to pile into a Roth as much as possible and let the growth increase tax free.

I'm not sure that is true.  My understanding is that the rules for withdrawing from a Roth 401(k) are the same as for withdrawing from a traditional 401(k). 

Your understanding is wrong.

I'll break this down a bit.

Regarding the Roth vs. Traditional. It really depends on your taxes now vs. your anticipated taxes later no one answer will fit all. If you want to minimize your taxes paid and you will need less income in retirement then a traditional 401k is better. If your income is the same then it starts to move towards a Roth. Try this tool - http://www.calcxml.com/do/ret10

Also a nice table about all these different accounts - https://en.wikipedia.org/wiki/Comparison_of_401%28k%29_and_IRA_accounts
Look for the Early Withdrawal section.

[Tony_SS]

I've always toyed with the idea of starting my own business, just not sure when/if that will happen.  But I know for sure I don't want to have an office job until I'm 60+.

I know how you felt. I was 27, hated my job, but made great money. I bought things to compensate. The feeling you have now to be your own boss will only intensify. Prepare for it now. That might be a challenge with your house and taxes you forced to pay, but I would definitely plan on an exit if you have any desire to be self employed.

I'm 39 and have been freelancing for about 7 years. I love it. I took a huge risk, don't have much savings or debt, but I can say I'm happy day in and day out. If I had a huge house and taxes, I could not have taken that risk.