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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: bgray on October 22, 2015, 01:22:25 AM

Title: Confused about where money should be within Vanguard
Post by: bgray on October 22, 2015, 01:22:25 AM
I have been in the working world for about 2 years now, and have invested money in a Vanguard Roth IRA and have a Vanguard 401k through work.
My understanding is that each of those types of investments require one to reach a certain "traditional retirement age" before withdrawals are allowed without penalty.
For someone hoping to retire early, is there a certain type of fund that I am missing that I should have investments in? Is there a type that allows me to withdraw the earnings without penalty?

Thanks for any tips or clarification!!

bgray
Title: Re: Confused about where money should be within Vanguard
Post by: MDM on October 22, 2015, 01:38:23 AM
bgray, welcome to the forum.

First, note that Roth IRA contributions may be withdrawn tax free at any time.

Then, peruse http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ and let us know what questions you have after that.
Title: Re: Confused about where money should be within Vanguard
Post by: FLBiker on October 22, 2015, 12:38:35 PM
If you got it available, 457's are cool.  I just started one, and it works a lot like a 401K / 403B except you can withdraw from it as soon as you quit your job.
Title: Re: Confused about where money should be within Vanguard
Post by: alexrcraig on October 22, 2015, 01:24:52 PM
bgray, welcome to the forum.

First, note that Roth IRA contributions may be withdrawn tax free at any time.


This is true. Do note ONLY the contributions.

If you are looking to retire early, then you are going to need to likely sock cash away in a regular investment account. This would be an account with zero tax benefits.

With an IRA you will not have to pay taxes either on withdrawl or will have to pay at withdrawl. Obviously there are different advantages to both.

But for your sake you might want an investment account. This would be an account where if you sold for a profit you will pay the taxes that year. If you lost money then you could claim deductions on your taxes for the year.

My wife and I have a little account with TD Ameritrade where we put money away into individual stocks and we might sell at a profit. As long as you do not sell you will not have to pay taxes as these will be unrealized gains, but the moment you sell you will have to pay taxes. That is why they recommend at least about a 30% return on any individual stock so you can get a nice return after taxes.

I think Vanguard has a traditional account like I am describing that you can invest in index funds and such, but I like playing around with stocks.
Title: Re: Confused about where money should be within Vanguard
Post by: Kroaler on October 22, 2015, 03:10:30 PM
Please do read the link MDM posted. I know people sometimes don't read links.   

This is one of the game changer links for the early retirement folks that everyone on here should be familiar with. 
Title: Re: Confused about where money should be within Vanguard
Post by: bgray on October 24, 2015, 01:46:18 AM
Alright, I have read several articles on the Roth IRA Conversion Ladder and am feeling much less confused now. Thanks for the tips everyone!