Author Topic: Beginning in Investing  (Read 2204 times)

TradHunterRN

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Beginning in Investing
« on: January 17, 2016, 09:42:33 AM »
Hey gang!

I am sure that this question has been addressed multiple times but I am asking it 'cus I have had a problem finding an answer that makes solid sense to me.

My situation briefly to help out:

-Married with 2 kids.
-Current combined household income 40k/year after taxes (Me)
-Both in grad school; she finishes this Summer and will start working; I start working with my new degree next summer presumably
-Assuming about 40k salary minimum for her (just to be conservative) and 80k for me (average for my area) = 120000k
-about 90k student loans by the end of it
-no interest in increasing spending/cost of living for a while = 80k/yr savings
-have no mortgage (family circumstances got us here) so basically 100% debt free in just over a year with a then average savings rate of 2/3 our annual income.

So here is where the investing question hits. This blog is about early retiring, having access to your investments at a young age. Conventional investing says to use as much tax advantaged investing as I can (403B/IRA etc). But these require you to be 60ish before you can withdraw funds (I know there is a post here about doing it early penalty free but that seemed a little complicated).

So is this the right option for my situation?:

-Currently automatically saving 6% pretax into My 403B to receive the max company match. Keep it that way if I stay with current employer
-Once the cash starts flowing do I then open up 2 Roth IRAs $5500 for me and wife each = $11k/year
-Then with the remaining $69k/year I just use a personal investing account like Vanguard for index funds?

Thanks for any information you all have. This community is a great one!

Derrian

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Re: Beginning in Investing
« Reply #1 on: January 17, 2016, 01:07:41 PM »
If you are planning on saving 80k in post-tax dollars, then you really need to learn about why saving in a 403b/401k/457 is beneficial for your long term goals and will enable you to retire earlier. It is a bit complicated at first but you are going to have to get over that hurdle by learning about it. Luckily you have plenty of time to learn. If both you and your wife max out 401k/403b and roth IRAs you will end up with:

Tax deferred: 36k
Tax advantaged: 11k
Brokerage: 33k (actually this will be significantly higher because your tax deferred contributions will lower your taxes) figure this will be closer to 40k

You are going to need funds after turning 60.

My best advice for your is to read everything you can on the following blogs: madfientist, go curry cracker

TradHunterRN

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Re: Beginning in Investing
« Reply #2 on: January 17, 2016, 03:31:13 PM »
Thanks for the great resources! Will definitely look into it, and you're right, I have a lot to learn

I still am missing something here I guess. My understanding is that you can "retire" once your investment earnings = your expenses.

If I "need" 40K/year to cover expenses that requires $1M in investments.

Applying $40k/year to brokerage accounts at 5% only nets me just around $528K in a 10 year period. According to my savings percentage and a chart about time to financial independence on the blog I should be able to retire in 10.5 years. Not sure how I could do that if I was maxing out the tax accounts in that time frame since I can't touch the funds for the next 34 years (forgot to mention I was 26 I think). So that was the purpose of my question I guess; how can someone young retire so early if they are putting all their stash into funds that they cannot touch until they are at a normal retirement age of 60.

TradHunterRN

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Re: Beginning in Investing
« Reply #3 on: January 17, 2016, 03:39:43 PM »
Derrian,

I apologize!

One article in on madFIentist and I am starting to see how this would look!

I'll just quietly continue reading then.... :P