Author Topic: 19 years old do i max my 401k?  (Read 4020 times)

SimpleSpartan

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19 years old do i max my 401k?
« on: June 18, 2017, 01:32:29 PM »
Background: Live with my mother (parents divorced) they pay for schooling and living expenses. I attend the local junior college and should be able to transfer to the state school currently 3.4 gpa and major in accounting fall 2018. They will continue to pay expenses as long as i pull grades, yes i know I'm fortunate. Always been a  minimalist working odd jobs, since i was 12. I had amassed 5,000 by the time i was 16.

Job: Second year working at my job (retail), started at $11 now making 14.38 and expected raise to $15 in the fall, so HR tells me. Really enjoy it, they let me pick hours, virtually any job in the store. I forsee myself staying  next 2 or so years. I feel like I'm overpaid, but i don't complain about it lol. Last year I earned 13k. This year  expected 18-20k. Save about 80%, so  about 15k would be investable.

Job 2- I have also been doing landscaping and random side jobs around the neighborhood could easily pull in couple grand this summer.

Savings-  15,000 cash, $700 401k (more on that later) also have 1500 set aside for 8 week trip to thailand/SE asia next winter that i just bought tickets for
 
Car- 96 accord 170,000  miles runs great do the minimal maintenance myself

401k- got a late jump on this currently $700, fees are .31 6% match and so far I've been contributing just the match.

I've always thought I  would just keep saving and when I graduate put a down payment on a home. With the uncertainty of RE prices in western Washington, and the thought of my money sitting in cash for 3-4+ years makes me uncomfortable. Should i just contribute the most i can to my 401k and open up a roth ira?

If i keep working here until i graduate i could potentially have 30-50k invested which would be a nice head-start.

I dont know, what would you do?
« Last Edit: June 18, 2017, 11:08:39 PM by SimpleSpartan »

extremedefense

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Re: 19 years old do i max my 401k?
« Reply #1 on: June 18, 2017, 01:38:52 PM »
Are your parents claiming you as a dependent when they file their taxes?

SimpleSpartan

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Re: 19 years old do i max my 401k?
« Reply #2 on: June 18, 2017, 01:43:14 PM »
Are your parents claiming you as a dependent when they file their taxes?
yes

TomTX

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SimpleSpartan

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sokoloff

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Re: 19 years old do i max my 401k?
« Reply #5 on: June 18, 2017, 02:37:35 PM »
In the context of that other post, choose a Roth IRA, not a traditional, when you come to that step in the process.

SimpleSpartan

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Re: 19 years old do i max my 401k?
« Reply #6 on: June 18, 2017, 03:21:23 PM »
In the context of that other post, choose a Roth IRA, not a traditional, when you come to that step in the process.

Thank you, I just started the process of opening up an account with vanguard that seems to be the smart decision considering my low income level. Would it make sense to switch to traditional once i get a "real" job?

SimpleSpartan

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Re: 19 years old do i max my 401k?
« Reply #7 on: June 18, 2017, 03:24:42 PM »
Also what should i fund the account with? i would go VTSAX, but they require 10,000, and I'm just going to put in the 5500 for the roth.

sokoloff

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Re: 19 years old do i max my 401k?
« Reply #8 on: June 18, 2017, 03:46:04 PM »
In the context of that other post, choose a Roth IRA, not a traditional, when you come to that step in the process.
Thank you, I just started the process of opening up an account with vanguard that seems to be the smart decision considering my low income level. Would it make sense to switch to traditional once i get a "real" job?
You stay with a Roth as long as your current marginal tax rate is low. Once you get a "real" job, it will probably offer a 401K, at which point, you run down the recommendations in the other post again with the new information.

VTSMX is the "same" investment as VTSAX, with two differences: a lower minimum investment and slightly higher fees. Invest in that and Vanguard will eventually auto-convert (or allow you to convert; I forget which as it's been a while) to VTSAX once you cross the $10K figure.

TomTX

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Re: 19 years old do i max my 401k?
« Reply #9 on: June 18, 2017, 05:21:42 PM »
In the context of that other post, choose a Roth IRA, not a traditional, when you come to that step in the process.
Thank you, I just started the process of opening up an account with vanguard that seems to be the smart decision considering my low income level. Would it make sense to switch to traditional once i get a "real" job?
You stay with a Roth as long as your current marginal tax rate is low. Once you get a "real" job, it will probably offer a 401K, at which point, you run down the recommendations in the other post again with the new information.

VTSMX is the "same" investment as VTSAX, with two differences: a lower minimum investment and slightly higher fees. Invest in that and Vanguard will eventually auto-convert (or allow you to convert; I forget which as it's been a while) to VTSAX once you cross the $10K figure.

VTI is another option with the same underlying stock mix. It's an "exchange traded fund" or ETF.  Not sure if there is a minimum on that one. VTSMX has a $3k minimum.

respond2u

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Re: 19 years old do i max my 401k?
« Reply #10 on: June 18, 2017, 06:31:14 PM »

Thank you, I just started the process of opening up an account with vanguard that seems to be the smart decision considering my low income level. Would it make sense to switch to traditional once i get a "real" job?

It will depend on the tax rules (including health care since ACA) and your options when that happens. Generally, if you have access to a 401k that the company matches, the usual advice is to contribute at least to the match since it will benefit you regardless of your income.


SimpleSpartan

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Re: 19 years old do i max my 401k?
« Reply #11 on: June 18, 2017, 10:54:54 PM »
In the context of that other post, choose a Roth IRA, not a traditional, when you come to that step in the process.
Thank you, I just started the process of opening up an account with vanguard that seems to be the smart decision considering my low income level. Would it make sense to switch to traditional once i get a "real" job?
You stay with a Roth as long as your current marginal tax rate is low. Once you get a "real" job, it will probably offer a 401K, at which point, you run down the recommendations in the other post again with the new information.

VTSMX is the "same" investment as VTSAX, with two differences: a lower minimum investment and slightly higher fees. Invest in that and Vanguard will eventually auto-convert (or allow you to convert; I forget which as it's been a while) to VTSAX once you cross the $10K figure.
Thank you guys, I think i will go with VTSMX and fully fund my roth this year and the next and afterwards have it convert to VTSAX. My main concern was keeping this as simple as possible, so its nice to know i can convert it once i hit that 10k threshold. Also wil be  putting as much as i can into my 401k. Its about time i got off my ass and started putting this money to work.

TomTX

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Re: 19 years old do i max my 401k?
« Reply #12 on: June 19, 2017, 05:16:09 AM »
In the context of that other post, choose a Roth IRA, not a traditional, when you come to that step in the process.
Thank you, I just started the process of opening up an account with vanguard that seems to be the smart decision considering my low income level. Would it make sense to switch to traditional once i get a "real" job?
You stay with a Roth as long as your current marginal tax rate is low. Once you get a "real" job, it will probably offer a 401K, at which point, you run down the recommendations in the other post again with the new information.

VTSMX is the "same" investment as VTSAX, with two differences: a lower minimum investment and slightly higher fees. Invest in that and Vanguard will eventually auto-convert (or allow you to convert; I forget which as it's been a while) to VTSAX once you cross the $10K figure.
Thank you guys, I think i will go with VTSMX and fully fund my roth this year and the next and afterwards have it convert to VTSAX. My main concern was keeping this as simple as possible, so its nice to know i can convert it once i hit that 10k threshold. Also wil be  putting as much as i can into my 401k. Its about time i got off my ass and started putting this money to work.

Great! You have time on your side.

Just remember - stay the course. When the market crashes, be happy because stocks are on sale at clearance discount prices. When the market is up, be happy - you're relying on overall growth to be FIRE.

Most individual investors fail because they try to out-guess the market and either sell low/buy high - or just stay on the sidelines and miss the big runups.

Stay the course, keep socking away whatever you can, keep the lifestyle in check.

SeattleCPA

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Re: 19 years old do i max my 401k?
« Reply #13 on: June 19, 2017, 07:21:15 AM »
In the context of that other post, choose a Roth IRA, not a traditional, when you come to that step in the process.
Thank you, I just started the process of opening up an account with vanguard that seems to be the smart decision considering my low income level. Would it make sense to switch to traditional once i get a "real" job?
You stay with a Roth as long as your current marginal tax rate is low. Once you get a "real" job, it will probably offer a 401K, at which point, you run down the recommendations in the other post again with the new information.

VTSMX is the "same" investment as VTSAX, with two differences: a lower minimum investment and slightly higher fees. Invest in that and Vanguard will eventually auto-convert (or allow you to convert; I forget which as it's been a while) to VTSAX once you cross the $10K figure.

+1