Hello from Michigan! I have a few questions!

[Halligan]

Hello, 



First off, thank you to the many posters who have been active on this site; I have been diligently reading and absorbing everything that I can.

I am new to the idea of financial independence, and investing in general. I'm sure I will have several questions that seem fairly basic to the experienced members of this forum, but I would appreciate any advice given!

Intro



I am a 27 year old full time firefighter, that has been at this job for 1.5 years.

Debt



I owe ~$5000 on my student loans. 
$3500 is at a 4.6% interest rate, and the rest are at 5.35%



I have a lease for a truck (yes, I know.. I know. Please don’t get the pitchforks out just yet! I am slowly realizing the error of my ways) that will be finished next month ($350/month).

I pay $11.99/month for Hulu
$9.99/month for Netflix

$50/month union dues

$50/month for medical insurance
$65/month for AFLAC accidental injury/death and cancer insurance.
$120/month for car insurance

I also contribute $50/month total to charity.

Investments

I have a six month emergency fund.



I have 13k in an employer 401(a) plan. I am 100% invested in VINIX, which gave me a 14% return last year.  I contribute 3%  (mandatory) of my gross pay, and my employer puts in 14%.  The employer’s portion does not change, regardless of whether or not I contribute more.


I also have ~3k in an old employer’s 401k plan that I am planning on switching over to a Vanguard traditional IRA.

Each paycheck, I also contribute 4% of my pay (mandatory) to a retiree health plan (defined contribution).

Short term plan

• Purchase a used car with cash; Ideally less than $8000.
• Purchase a bike, and bike to work as often as I can. (I live just over 10 miles from work).
  
• Pay off my student loans
• My employer offers a 457 plan. I am going to open one up, and contribute 15% of my pay to start with, and bumping that up to 25-30% in the next six months. (I am going to be filling out rental applications in the next month, and want to show high earnings. I do not plan on paying more than $800/month).



Long term plan
I am two years away from finishing my RN, and will look for contingent jobs, and work 12-24 hours/week. From speaking with RNs I know, the contingent rate of pay in my area is $35+/hr.



Questions:


• The age old one: Traditional IRAs and 457s are the way to go for me, right? Right now I am in the 25% bracket, and when I start as an RN, that will bump me up into the 28% bracket.
• Should I go with the 457 idea, or just contribute more to my 401(a)?


• I am currently invested 100% in stocks, and my plan is to do the same for my IRA, and 457. I am comfortable with the level of risk at this point. I have just been learning more about stocks, and am wondering if diversifying into small or medium cap stocks in addition to the index fund I am already invested in would be a good idea? It increases risk, but in the current political climate, I think small(er) businesses will prosper. Am I a fool for thinking this is a good strategy?


• Anything else that I’m missing?

Thank you

[deborah]

See http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/ - the USA investment order is at the top of the list.

[Dee18]

I am curious about the $65 for AFLAC.  Is this disability insurance?  You don't mention dependants so I wouldn't think you would need life insurance.

[Halligan]

See http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/ - the USA investment order is at the top of the list.

Thank you for the link!

I am curious about the $65 for AFLAC.  Is this disability insurance?  You don't mention dependants so I wouldn't think you would need life insurance.

The AFLAC accident insurance is supplemental. https://www.aflac.com/individuals/products/accident-insurance.aspx is the plan that I have. The other plan I have with them is supplemental cancer insurance. I receive Life insurance, and short/long term disability insurance at no cost through work.

[Fomerly known as something]

If you plan on ER, focus on the 457, one can pull money from it immediately upon leaving one's job unlike a 401a/ira where you can do so but you have to be careful about how. 

So I vote manditory, max 457, then other retirement vehicles.

[Dee18]

I would think your combination of health insurance and disability would cover expenses from an accident, as well as from cancer.  But given your high risk job, this may well be worth it. 

[Viking Thor]

the Aflac seems like a big expense especially if you already have full insurance through work (health, disability, and life insurance). I dont know the details but if I were you, would scrutinize the work plan to see if sufficient and then potentially cancel Aflac.

Your company match is great, if you want to FIRE earlier rather than later, try to invest more of your salary.

Good luck!

[Halligan]

Thank you for all of the replies!

AFLAC: After reviewing the accident policy in more detail, I may very well cancel that, but will probably keep the cancer policy for at least another year. Firefighters are up to 6x more likely to be diagnosed with certain cancers, and I have a strong family history of cancer as well, which is part of my reluctance to give up this policy. My state has recently passed a law that allows for firefighters to claim certain types of cancer as on-the-job injuries, but it has yet to be funded. If this does become funded, then I will cancel that policy as well.

457: Investing more in this was the route I was planning on taking, and I appreciate the backup on this decision.

Thank you once again to everyone who has responded!

[aceyou]

• I am currently invested 100% in stocks, and my plan is to do the same for my IRA, and 457. I am comfortable with the level of risk at this point. I have just been learning more about stocks, and am wondering if diversifying into small or medium cap stocks in addition to the index fund I am already invested in would be a good idea? It increases risk, but in the current political climate, I think small(er) businesses will prosper. Am I a fool for thinking this is a good strategy?



100% in stocks is very common around here for young people building their stache, and I do the same thing.   You are not a fool for being 100% stocks, but you are fooling yourself if you think you can analyze the political climate and foresee what the market will do.  You don't know what the future brings, and neither do any of us.  So buy what you are going to buy, but I wouldn't base your decision on the current political climate. 

Good luck,  I'm a Michigander too.  You are off to a terrific start!!!

[Kriegsspiel]

Michiganer? Is that the correct usage? As a future resident of your state, I'd like to propose Michigandalf. Michigandalfs (pl).

[Halligan]

100% in stocks is very common around here for young people building their stache, and I do the same thing.   You are not a fool for being 100% stocks, but you are fooling yourself if you think you can analyze the political climate and foresee what the market will do.  You don't know what the future brings, and neither do any of us.  So buy what you are going to buy, but I wouldn't base your decision on the current political climate. 

Good luck,  I'm a Michigander too.  You are off to a terrific start!!!

Glad to see another Michigander around this site! Thank you for the reply; I can see where you're coming from in regards to the political climate. If it were that easy to see what the market will do, we wouldn't have any use for this site!

Michiganer? Is that the correct usage? As a future resident of your state, I'd like to propose Michigandalf. Michigandalfs (pl).

I could get on board with Michigandalf. I'll bring it up at our next meeting.

Where in MI are you moving to?

[Kriegsspiel]

I could get on board with Michigandalf. I'll bring it up at our next meeting.

Could you do that? Man that would be great. Do you think it would garner a plebiscite? I don't see why it wouldn't. Wizardry is ing these days.

Where in MI are you moving to?

WHY

DO YOU WANT TO HUNT ME DOWN AND HARVEST MY TEETH

[Fomerly known as something]

I'd keep the extra cancer coverage.  Firefighters have an abnormally high level of it and there have been some recent changes (or proposals I can't remember which) in health care coverage for retired cops and firefighters in Michigan that would likely make it worth the $65.

[Fomerly known as something]

Michiganer? Is that the correct usage? As a future resident of your state, I'd like to propose Michigandalf. Michigandalfs (pl).

There are already plenty of trolls in MI.  In fact the majority of us are.

[MMM98]

A coworker's  had AFLAC like cancer policy under his wife's employer.  She  survived breast cancer.  He is the only person I am aware of who ever collected from one of those policies.  He was sketchy on the details but he outlined a process that was tortuous at best. Claims, denials, refiling, stonewalling, and eventual payment of something in the neighborhood of 9,000.  He was under the impression that they were hoping he would give up, or not meet the documentation demands.  I am not sure how many years he paid the premium and I am quite sure he could of survived with out the 9K but he did appreciate it, although he did have some choice words about them and the hell they but him through to receive what was clearly a proper claim.

[Halligan]

A coworker's  had AFLAC like cancer policy under his wife's employer.  She  survived breast cancer.  He is the only person I am aware of who ever collected from one of those policies.  He was sketchy on the details but he outlined a process that was tortuous at best. Claims, denials, refiling, stonewalling, and eventual payment of something in the neighborhood of 9,000.  He was under the impression that they were hoping he would give up, or not meet the documentation demands.  I am not sure how many years he paid the premium and I am quite sure he could of survived with out the 9K but he did appreciate it, although he did have some choice words about them and the hell they but him through to receive what was clearly a proper claim.

Thanks for the response. I will take a look at the fine print and see what is offered/required for claims.


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[Bicycle_B]

Just curious - what do you get in return for additional contributions to your 401a?  Are the returns or fees defined?

I've never seen one before.  Descriptions from my Google search suggest that they can offer a variety of investment types, ranging from a "money purchase pension plan" to...well, other investment types. 

Since 401a is not on the "USA investment order" link, I'm also curious how previous posters chose 457 plan over it.  I suspect the decision is right, just curious about the reasoning. 

[DavidAnnArbor]

The 457 plan is the most versatile. I have one with the State of Michigan, a Voya plan. I put money in their s&P 500 index, mid cap, and russell 2000 index. These are index funds and have the lowest expense ratios.