Tiny investment account advice needed

[DeskJockey2028]

Hey all, a bit long winded, so apologies up front.

I picked up another, very small side-gig type thing. It's money on a contract basis with no retirement accounts attached to it, so anything I make I get taxed on - no chance of throwing it into a pre-tax investment vehicle. We're talking anywhere from $30 to $400 a month. It's widely variable (I hunt down deals on specific products at Amazon and post links) and I tend to make more around the holiday season than in the summer. It's quick, I enjoy the heck out of it and a little extra stash money is nice.

Since I haven't yet maxed out my Roth IRA, that's where I'm throwing it now. Next year though, I plan to max out my Roth ASAP. Rather than throw these little monthly bonuses into a savings account or go out and buy beer and pizza, I'd like to start putting them into a taxable investment account via Vanguard. (Side note: I have a Roth because of another side-gig that nets me good money but all taxable with no pre-tax options).

I know I have to buy them at a minimum of 1 share at a time, correct? No halfsies? Could you recommend a good place to start? I don't mind carrying the money in a savings account until I have enough to dump into an investment account on the leaner months. But what should I invest in?

Currently my pre-tax investments are 80% total stock market, 12% international stock funds and 8% bonds.

My goal is to get this money into investments and over the next decade, try to max out my 403(B) and Roth, then shovel some extra money into these taxable accounts to give us some money on retirement and before we need to touch the pre-tax accounts.

Thanks!

Edit: Also, if anyone thinks I should be doing something else with this money, speak up! Thanks!

[jlcnuke]

Assuming you'll have enough to meet account minimums to start with, you can use mutual funds (instead of ETFs) to purchase partial shares.

Also, just to double check, I'm assuming you don't have any consumer debt outside of possibly a low-interest mortgage and already have your emergency fund... funded, correct?

[DeskJockey2028]

Yup, no real debt but my mortgage and 6-8 months in my e-grubs.

[dandarc]

Open an Individual 401K (if you're not deferring your full $18K at a day job) or SEP-IRA (if you are already deferring 18K at a day job) for this side-gig income.

[dandarc]

Also - you don't have to have taxable account money to retire early:

https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

And you have a 403(B) - do you also have access to a governmental 457(B)?  The government 457(B) is probably the best vehicle available for an early retiree - tax deferred now, penalty-free withdrawals upon separation.  The Roth 457 is a bad deal for an early retiree - so don't do that if it is available.

[Milkshake]

If you end up doing taxable, I would just save up $3k and buy VTSMX in a taxable brokerage account. Or $10k and buy VTSAX.

[DeskJockey2028]

Thanks everyone for the wonderful responses! Got me thinking a bit.

I don't want to just save up $3k because that would take several years - I'd rather dump it into something that's better than the savings account it's in now. Also, I do realize I don't need taxable accounts to retire - between the Roth, the cash savings we plan to build up between now and 2028 and whatnot, I'm not overly worried about it. It's just something that would be nice to have as a sort of 'first sell' option to give our investments another month/year/2-3 years to mature. I'll be retiring at just about 56 - meaning I'll need to wait only 3.5 years until I can start pulling from the 403(b) and the money I'd be socking into the Roth since, well, this year, will also be available (minus gains for the previous 5 years).

If you end up doing taxable, I would just save up $3k and buy VTSMX in a taxable brokerage account. Or $10k and buy VTSAX.

[jim555]

Several brokers offer no commission ETFs.  You need whole shares, but they are generally under $100 a share.

[dandarc]

Retiring at 56 means you need a taxable investment account even less.  Options to get money out of tax-advantaged account when retiring at that age, in no particular order:

1.  Roth IRA basis - you can withdraw regular contributions at any time
2.  SEPP - you'll only be locked in to the withdrawal amount for the 5 year minimum
3.  Age 55 exception - if your 403B offers this, you may have penalty free "early" withdrawals available regardless.  You have to separate at age 55 or older and leave your money in the plan (don't roll to IRA) to take advantage of this.
4.  If you've also got a 457 and fund it, you can withdraw without penalty after separation.
5.  Just pay the additional tax.  An extra 10%, particularly for only 3 years isn't that big of a deal.

You'll also be fairly close to where you can collect Social Security, so there's some additional margin of safety there.

So, I personally would max out all of the tax-advantaged vehicles at your disposal before going to a taxable account.

As Jim points out - you can open a Vanguard brokerage account and buy ETFs commission-free (VTI instead of VTSAX, for example) if you don't have the minimums for the mutual funds.

[ingrownstudentloans]

Do you not qualify for, or are already maxing out, pre-tax vehicles?  Maybe I missed where you addressed this, but you can contribute post-tax money during the year to get pre-tax benefits at the end of the year.

I get that there are no established programs with either of these side-gigs for pre-tax, but a tIRA contribution is still pre-tax.  It is just adjusted at tax time.  If you get paid $100 but they withhold taxes so your take home is $80 (ignoring social security/medicaid/etc.), and you contribute the $80 into a tIRA, at tax time you get to reduce your taxable income by $80...so larger refund.

Tax people - correct me if I am wrong.

[DeskJockey2028]

Starting in April of next year, I'll have my Roth IRA maxed out (until then, I'll shovel these little dribs and drabs of cash into it, not a taxable account). So next year, I should be able to front-load the Roth to full right after tax season ends.

I'm not maxing out my 403(b) though so another option is to go in and adjust it (say... quarterly) to take out more to match what I've accumulated through the side gig, and then take my side-gig money and throw it into my checking account to apply to my monthly budget for food/bills/etc.

Do you not qualify for, or are already maxing out, pre-tax vehicles?  Maybe I missed where you addressed this, but you can contribute post-tax money during the year to get pre-tax benefits at the end of the year.

I get that there are no established programs with either of these side-gigs for pre-tax, but a tIRA contribution is still pre-tax.  It is just adjusted at tax time.  If you get paid $100 but they withhold taxes so your take home is $80 (ignoring social security/medicaid/etc.), and you contribute the $80 into a tIRA, at tax time you get to reduce your taxable income by $80...so larger refund.

Tax people - correct me if I am wrong.