The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: TK421 on March 01, 2017, 09:56:42 AM
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Hey all,
Relatively new to the MMM way of life. Looking for some investing advice. Here's the rundown on my situation:
-Current company 401K balance of $5k-I contribute 10% of my income and company matches 7% (w/ $70k annual income, that means roughly $12k per year contribution)
-ROTH IRA balance of $8k with Betterment
-Emergency fund of $10k
-Additional savings of almost $30k (thought we'd save it up for a down payment on a house but we scrapped that plan. Now that money is just sitting in a regular savings account with Wells Fargo)
-After all expenses, monthly surplus is anywhere from $1000 to $1200
-100% debt-free
-28 years old, would like to retire around 50 yrs old
My questions are:
-Should I keep my ROTH in Betterment or move it somewhere else?
-Should I contribute to my ROTH and if so, how much of my current savings should I contribute?
-Should I open another investment account with Betterment and if so, how much of my current savings should I contribute?
-Should I open an account with Vanguard and if so, how much of my current savings should I contribute and where should I allocate the funds?
Basically, just trying to figure out where my current savings should be allocated and how much I should leave in my normal savings account. Thanks for the help-looking forward to the responses!
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Step one is to increase 401k contributions to the full $18k. No sense sitting on post-tax cash when you have tax-deferred room. What are your fees and fund choices?
Are you married? What's your spouse's employment/401k situation?
Why are you using Roth over Traditional?
Figure out how much cash you want to hold, then move it to a higher interest savings account. Take any cash above that amount and put it in a taxable investment account.
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My questions are:
-Should I keep my ROTH in Betterment or move it somewhere else?
-Should I contribute to my ROTH and if so, how much of my current savings should I contribute?
-Should I open another investment account with Betterment and if so, how much of my current savings should I contribute?
-Should I open an account with Vanguard and if so, how much of my current savings should I contribute and where should I allocate the funds?
-Yes, you should move your Betterment roth to an index fund at Vanguard (Schwab or Fidelity are also fine) with lower fees. Just call and they'll walk you through it.
-Generally, it's better to max your 401k first before contributing to a roth.
-No, Betterment charges high fees for the marginal benefits they provide, so it's better to invest directly in index funds.
-Vanguard is great, feel free to move your roth there, but there's no need to put any more money there until you max your 401k (unless it has really atrocious funds or you expect a pension).
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Definitely aim to max out 401K and then ROTH.
I would put the savings into an online account that yields 1%+, at least. Better yet, you can still contribute to 2016 ROTH, if you haven't done so. 5500 for 2016 and 5500 for 2017, then put the rest in an online savings account that yields far greater than Wells Fargo's savings.
What are your current AA?
-Richard
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Is maxing 401K for the pre-tax benefit a hard science? Why would you not simply invest up the company match, and then put the rest of the money elsewhere?
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Is maxing 401K for the pre-tax benefit a hard science? Why would you not simply invest up the company match, and then put the rest of the money elsewhere?
http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/msg1333153/#msg1333153
Yes, it is, but only after paying off high interest rate debts, maxing out HSA (if available) and then maxing the Roth/traditional IRA.
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Frankie's Girl thanks. That makes it more clear.
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Awesome advice, thanks everyone! So to recap, I should:
-Move ROTH from Betterment over to Vanguard
-Max out 401k ($18k)
-Max out ROTH ($5500 for 2017)
-Transfer remaining savings to an account with a higher return rate
Am I missing anything else?
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If you're contributing $18,000 to a 401k on $70,000 income, that makes you eligible to deduct traditional IRA contributions (Single MAGI under $62,000). Consider contributing to a traditional instead.