Vanguard and retirement

[EMon78]

Hey folks, I have been searching the forums with out luck for a thread a while back about how much income to put in to a retirement account and how much to invest in Vanguard general fund. Anybody remember this!!??!?!

Short and sweet, I'm hoping to start really upping my contributions to these accounts. I gross about 40k/year, have about $10,000 cash safety net. I also am on income based repayment for student loan 100k+ (arts degree....) so keeping my on paper income as low as possible is preferable. Do you split 50/50 between the two? Invest more in one than the other? Thanks for any input or help.

[Bracken_Joy]

Perhaps I'm misreading, but I think you're misunderstanding how retirement accounts work.

Something like an IRA is just a "bucket". You can do many things within that bucket: hold money, hold an index fund, invest in bonds, etc.

So if you are asking, "should I put my money into a retirement bucket or an after tax bucket", then I refer you to this: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

And if you're asking, "what should I invest in, inside my retirement bucket" then I refer you to this: https://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/

Either way, be sure you read this: http://jlcollinsnh.com/stock-series/

Hope that helps, and apologies if I misunderstood your question.

[EMon78]

That's super helpful, thanks. I'm very new to this still, just have a plain old index find at this point.

[Bracken_Joy]

That's super helpful, thanks. I'm very new to this still, just have a plain old index find at this point.

Is it after tax? You really want to be filling up your pre-tax space before you bother at ALL with after tax! You'll save yourself lots of money on taxes this way. Also, your income is low enough you might qualify for the "savers credit": https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

Do you have access to a 401k through work? (Or a 403b?)

[EMon78]

It's before tax. I work for/run a non-profit, looking in to 401k options now. I just ordered that book from amazon as well. Appreciate it.

[GenXbiker]

Hopefully your expenses aren't too bad through your company retirement plan.   Mine are pretty high, and after several years of each $ invested, I lose the advantage of it being tax advantaged due to the expenses eating away at the investment, so in the long run, I can do better in an after-tax investment (after I've invested enough for the maximum company match in the work account).  Fortunately, I'm near the final stretch and can increase my allocation these last 2 to 4 years of my working career.  Then when I FIRE, I can move the funds to my Vanguard account with reasonable expenses while I'm still ahead.  I'll lose the "year I turn 55" withdrawal option by moving those accounts out, but I can get by 4 years without needing those funds, and I'll save close to $10,000/yr by moving them out to a Vanguard IRA.

Another thing to keep in mind is that the traditional 401K withdrawals will count as ordinary income, so that could lead to more of your SS benefits being taxed or affect your eligibility for Obamacare subsidies when you FIRE.  With Roth, withdrawals don't count as ordinary income, and with your non-retirement investments, only the gains/dividends count as income.

You may be a long way from FIRE or SS, but if you wait until then, it's too late to go back in time and make the change in how you invest.