Author Topic: Advice for a new guy!  (Read 1407 times)

blando13

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Advice for a new guy!
« on: August 10, 2015, 09:31:47 PM »
Ok ... just getting my ducks in a row.  I'm currently maxing out my 401k with some pretty low cost index fund options (Blackrock).  I chose 401k over Roth 401k to help on my tax's owed.  If I'm wanting to take the next step but make too much for a Roth IRA, what are the advantages/disadvantages of going with a Traditional IRA vs a Vanguard Total Stock Index Fund (and lets say I'm putting in 10k for the lowest fees).

Thanks in advance!

birdman2003

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Re: Advice for a new guy!
« Reply #1 on: August 10, 2015, 09:56:41 PM »
As a single if you make more than $131k you can't use a Roth IRA.  If you're married, your combined income has to be less than $193k for a Roth IRA.

If you're making too much to contribute to a Roth IRA, then you won't qualify for the ability to deduct your Traditional IRA contributions from your taxable income.

So after maxing out the 401k, I would just sock it away in a taxable brokerage account using index funds like you mentioned.

detailoriented

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Re: Advice for a new guy!
« Reply #2 on: August 11, 2015, 08:35:23 AM »
One thing to consider before the taxable accounts.

Depending on your health you may want change to a High Deductable Health Plan (HDHP) and open a Health Savings Account (HSA).

A great write-up on using and HSA as an investment vehicle can be found at:
http://www.madfientist.com/ultimate-retirement-account/

As a high earner it is another vehicle that allows you to set aside pre-tax dollars.

DO

harshalpatel

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Re: Advice for a new guy!
« Reply #3 on: August 11, 2015, 05:48:20 PM »
You asked: difference between Traditional IRA vs a Vanguard Total Stock Index Fund.

An IRA is an account that has stocks, ETF's, mutual funds you choose.

The Vanguard Fund is a mutual fund.

You should be able to invest in the Vanguard Total Stock Fund through an IRA. Contribution limits won't get you to $10k in one year, but you should be there in 2 years.

Advantages of IRA:
- Tax savings
- No annual capital gains taxes

DisAdvantage of IRA:
- Penalty if you withdraw early

Advantages of Taxable Investment (not through IRA) in Vanguard:
- Access to Funds when you needs them with no penalty

DisAdvantages of Taxable Investment (not through IRA) in Vanguard:
- No tax saving up font
- Capital Gains taxes annually on dividends.