Author Topic: Older guy, not invested, would like some direction  (Read 583 times)

Mr_Z

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Older guy, not invested, would like some direction
« on: March 25, 2020, 08:36:26 AM »
Hello everyone,

I'm 61 years old, I've been reading MMM articles here for some time, I'm an adherent on the frugal side. However, I'm not invested at all in the stock market, due to reasons too long to go into here. I have a tendency to delay things until I understand them, and I think that holds me back when sometimes I should just let fly.

What I am seeking is advice or thoughts on what possible courses of action I could take, based on the following resources. I have about $14k I can invest right now, and after that I can make monthly investments of $500.00.

I don't know what I don't know, sort of a Rumsfeldian quandry. I have started reading the Bogleheads beginners guide, but I'm not through it yet. I an starting later at work for awhile, due to the virus conditions, so I thought I'd put it to you fine folks.

The kinds of things I am trying  to get a handle on are things like does it make a difference for me to go with a taxable account vs Roth? I mean, since I will not exceed $35k in the next few years for my income, then less after that? 

If a person making less than $20k on SS plus perhaps another $10k in earned income in retirement doesn't have to pay capital gains tax (or do I? ), should I just dump the money into VTSAX or VTI? One over the other? I only know about these two low fee Vanguard index funds from reading many posts here, this does not mean I know anything.

Maybe there are other routes to go. I just know that I an earning nothing with this money in the credit union. I want to be in better financial shape by the time I'm 70.

With the current situation and the stock market down, it seems like now is the time to get going. Once I get going, I'm fine. I just could use some advice, please.

Thank you,

Z


Jack0Life

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Re: Older guy, not invested, would like some direction
« Reply #1 on: March 25, 2020, 10:24:04 AM »
The short answer is YES.
Even if you dump that $14k in VTSAX now, you will come out way ahead by 70.(although I think the market is in for more tough times).
I wouldn't worry about capital gains. Its considered long-term so you won't be paying any.
For a single filer, its something like $40k taxable income you paid 0 long-term capital gains.

jc4

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Re: Older guy, not invested, would like some direction
« Reply #2 on: March 25, 2020, 10:30:54 AM »
Hello everyone,

I'm 61 years old, I've been reading MMM articles here for some time, I'm an adherent on the frugal side. However, I'm not invested at all in the stock market, due to reasons too long to go into here. I have a tendency to delay things until I understand them, and I think that holds me back when sometimes I should just let fly.

Congrats on making some smart decisions and picking a good time to start investing.

What I am seeking is advice or thoughts on what possible courses of action I could take, based on the following resources. I have about $14k I can invest right now, and after that I can make monthly investments of $500.00.

How secure is your income? Invest as much as you're comfortable not seeing for 2-3 years. If you might lose your job, maybe only invest $7k. If you have reliable fallbacks, throw all $14k in.

For where to invest, there are 2 stock answers here.
Option 1: Very Easy. Betterment. Open an account. Set to 90/10 Stock / Bond. Transfer from your bank. They do the rest. Swap the ration to 60/40 stock to bond when you hit 70 or now if you want to be a bit more cautious.
Option 2: Less easy, but not hard. Vanguard. Open an acount do the transfer. Buy VTSAX (100% stock). Someone can give you the best bond fund if you want bonds too.

I don't know what I don't know, sort of a Rumsfeldian quandry. I have started reading the Bogleheads beginners guide, but I'm not through it yet. I an starting later at work for awhile, due to the virus conditions, so I thought I'd put it to you fine folks.

The kinds of things I am trying  to get a handle on are things like does it make a difference for me to go with a taxable account vs Roth? I mean, since I will not exceed $35k in the next few years for my income, then less after that? 

It's taxes now or taxes later. You want to pay when your incomes lower, so go traditional for taxes later. MORE IMPORTANT. If you have a 401k invest there (no income tax). Second best is a IRA, same reason.

There's a lot of tax optimization strategies, but at your income, you'll have very little taxes no matter what you do, so don't stress it. If you can put it in a 401k or IRA do it. Otherwise you can't really go wrong.


If a person making less than $20k on SS plus perhaps another $10k in earned income in retirement doesn't have to pay capital gains tax (or do I? ), should I just dump the money into VTSAX or VTI? One over the other? I only know about these two low fee Vanguard index funds from reading many posts here, this does not mean I know anything.
.

Yep. That's the idea. That or Betterment.


Maybe there are other routes to go. I just know that I an earning nothing with this money in the credit union. I want to be in better financial shape by the time I'm 70.



Always. But we're the long haul, low cost index fund people. The answer on this forum is going to be VTSAX. The only other recomendation you'll get here is to maybe go 60/40 stock to bond due to age. I'm holding my investments for the next 30-40 years. You're going to be using yours soon.


With the current situation and the stock market down, it seems like now is the time to get going. Once I get going, I'm fine. I just could use some advice, please.

Yep. Should be an easy 30%-50% gain over the next 2 years. Just don't panic and sell if it drops first. We could see another 20+% loss from today's levels before we bottom. Just hold on. It'll be back up un 1-3 years.


Thank you,

Z


You're welcome,

D

Rob_bob

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Re: Older guy, not invested, would like some direction
« Reply #3 on: March 25, 2020, 06:17:16 PM »
I'm 61.  You probably know that the max contribution to a Roth is $7k per year, so some money is going to be in a taxable account.

I like the Roth not just because it comes out tax free but the income also doesn't count as income in regards to your medicare premiums or ACA subsidies etc.

A total stock fund would be the simplest, maybe a little total foreign.  Bonds are high now and when rates go higher, if they ever do LOL, then bonds will go down.  But maybe some short term treasuries like BIL or SCHO (exchange traded funds).

Steeze

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Re: Older guy, not invested, would like some direction
« Reply #4 on: March 25, 2020, 07:39:40 PM »
I think your plan of going half in a Roth and half in a taxable is a good one. Like others have said make sure you have an emergency fund and it isnít your last 14k. You will want some cash in the bank for emergencies.

You are getting started at an opportune moment, but know that prices can move significantly in either direction in the next few months. Over 10 years though I am confident you will be very happy you invested today.

As for a particular etf or fund to choose, that depends on many things but most will recommend VTI(etf) or VTSAX (mutual fund) for US stock exposure, vxus or vtiax for international, and BND or VBTLX for a total us bond fund. Your suggestion of short term treasuries also makes sense to me, although you can earn nearly as much in high yield online bank account (for now) and have better insurance.

Sounds like you are making good moves, congratulations on educating yourself and taking some risk. Over the next decade you will be rewarded for it. Just donít 2nd guess yourself when the market moves erratically in the short term and you will succeed.

As for how much stock or bonds to hold, what ratios, that is a very personal choice. I would defer to someone more knowledgeable on the end game.

My uncle recently asked me what to do, he is 67, retired with SS and (had) 80k in a 401k. His portfolio is 80/20 stocks/bonds and recently took a big hit. He wanted to sell and move to bonds because he is afraid of losing his only nest egg. I recommended to him that he wait 2-3 years before rebalancing to something more comfortable like a 60/40 or 50/50 split. For now SS covers his living expenses and he has a paid off house and paid off truck. Changes are he wonít need to cash in those stocks any time soon, and itís better to let his portfolio recover.

Mr_Z

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Re: Older guy, not invested, would like some direction
« Reply #5 on: March 26, 2020, 08:00:56 AM »
Hello again everyone,


Man, thanks for all the great replies, I got home late last night from work, and was gratified to see so much good advice. Now all the sudden, they want me to go in early AND stay late, but I'm not complaining, lots of folks are not working.

I'm going to have to digest all this for a couple days, but I want to get on with it.

Steeze, JC4, Rob_bob, Jack0Life - I sure appreciate you taking the time to help me. JC4, such detail!

I noticed in this forum, before I posted, how kind the regulars were to novices.  The trend continues.

I'll report back, might be a little bit before I do, but again, thank you all so much.

Z