Author Topic: <---- Help this idiot investor  (Read 4043 times)

mountainjillian

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<---- Help this idiot investor
« on: October 08, 2015, 01:49:32 PM »
Ok guys... I am an idiot when it comes to investing, and also, I'm lazy. These are two important things to know. So, let's get to my question.

My laziness led me recently to try opening a Roth IRA with Vanguard with a $100 deposit, before realizing I need $1000 to buy into any of their funds. #dumb I do have an extra $900 I can put in there to get things rolling, but I've been hustling to pay off a 6.8% student f***ing loan and would prefer to throw that money there - is it dumb maybe allow Vanguard to withdraw $100/mo from my account to force the savings and then in 10 mos when I hit the $1000 I can buy in? Or did I just screw myself out of $100 because I'm stupid and just let it be for now?

ALSO - I am leaving my job to work with a start-up company on Dec 31. I have about $7500 in a Simple IRA through T. Rowe Price. Should I roll that over into the Vanguard Roth? Or should I leave it with T.Rowe? Or do something else with it?

#iaminovermyheadbutiamtryingguys

Aphalite

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Re: <---- Help this idiot investor
« Reply #1 on: October 08, 2015, 01:57:21 PM »
Ok guys... I am an idiot when it comes to investing, and also, I'm lazy. These are two important things to know. So, let's get to my question.

My laziness led me recently to try opening a Roth IRA with Vanguard with a $100 deposit, before realizing I need $1000 to buy into any of their funds. #dumb I do have an extra $900 I can put in there to get things rolling, but I've been hustling to pay off a 6.8% student f***ing loan and would prefer to throw that money there - is it dumb maybe allow Vanguard to withdraw $100/mo from my account to force the savings and then in 10 mos when I hit the $1000 I can buy in? Or did I just screw myself out of $100 because I'm stupid and just let it be for now?

ALSO - I am leaving my job to work with a start-up company on Dec 31. I have about $7500 in a Simple IRA through T. Rowe Price. Should I roll that over into the Vanguard Roth? Or should I leave it with T.Rowe? Or do something else with it?

#iaminovermyheadbutiamtryingguys

1. Regardless of what you do, you didn't screw yourself out of $100, it will always belong to you, and the only way it loses value is if inflation kicks in, lowering the purchasing power of your $100. It's no different than a zero interest savings account at this point. If you would like to start investing, I would have automatic withdrawls from your bank account monthly to fund your Vanguard account, perhaps much more than $100 if you can afford to save that much

2. You can leave it at TRP, they have low cost index funds there as well, no need to roll it to Vanguard unless you like having everything in one place

bacchi

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Re: <---- Help this idiot investor
« Reply #2 on: October 08, 2015, 03:46:04 PM »
Transfer $110 next month and then buy 2 VTI shares for no commission.

Indexer

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Re: <---- Help this idiot investor
« Reply #3 on: October 08, 2015, 07:43:26 PM »
...

1. Opening a roth with $100 is a great idea even if you don't use it. Roth IRAs have a 5 year rule before you can take earnings out*. You just started your 5 year clock.  If you keep the $100 in there you never have to do that again. $100 well spent. You could add a million dollars to that in the next 20 years, and ALL of it(except conversions, they have their own rule) will meet the 5 year rule because of this $100 contribution! :D  As noted you could buy ETFs instead of mutual funds since the minimums are lower.

2. Well first off you would roll a SIMPLE into a traditional IRA, not a Roth IRA. If you roll it into a Roth then you have to pay taxes on the whole amount. SIMPLE is pre-tax, Roth is after tax, so you have to pay taxes to convert it and just speaking bluntly if you don't have $1000 for a mutual fund you probably don't have the money to pay taxes on a $7500 conversion. SIMPLE IRAs also have an odd rule that you have to have the thing for 2 years before you can roll it into another non-SIMPLE retirement plan. So just make sure your first contribution was over 2 years ago.

*In most cases you also have to be over 59 1/2 to w/d the funds unless you are doing roth conversion ladders but that is another story. Regardless your 5 year clock is already ticking.

Left

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Re: <---- Help this idiot investor
« Reply #4 on: October 09, 2015, 08:13:22 AM »
@indexer, you sure you understand the 5 year rule?
I thought it was 5 years for rolled over principle, but the earned part is still going to be taxed if taken out/hit by 10% penalty...
And regardless of time frame, you can always take the principle back out with no penalty... so he could take $100 back out without problem

Anyways, I thought just leaving it in brokerage but not buying anything with it IE, banking it there, you still get interest on it. I get interest on my uninvested money but not a lot since they want people to use it and not park it. I think it is around 0.01% interest on uninvested money, but it's so small I don't even count it. But the main part is that it provides $500k of FDIC insurance instead of $250k like banks do. Not that I have that much, nor would I leave it as cash but it's just something that is offered. And where the interest comes from too

I'd just leave it or buy an ETF with $100 if you can get one with no commission. If there is commission, you'd lose out on it on just $100 invested
« Last Edit: October 09, 2015, 08:19:25 AM by eyem »

ShoulderThingThatGoesUp

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Re: <---- Help this idiot investor
« Reply #5 on: October 09, 2015, 08:33:23 AM »
Not sure I'd bother with any post-tax investments like Roths when you have a 6.8% loan you're paying off. Maybe post a full case study? Those tend to attract posts from MDM who is the master of doing things in the right order.

Grigory

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Re: <---- Help this idiot investor
« Reply #6 on: October 10, 2015, 08:41:08 PM »
I've been hustling to pay off a 6.8% student f***ing loan and would prefer to throw that money there

6.8% is a pretty bad interest rate, so I would advise you to pay off the loan first, and work on your investments only after you're done with it.

First, make sure you have an emergency fund - enough money to last you in case something goes terribly wrong. After that, pay off your high-interest loan. The only way it'd make sense to invest the money instead is if you were guaranteed to get a return above 6.8%. In other words, by using your money to pay off your student loan, you'll already make a 6.8% return on your investment. :)

In other words, don't invest unless you're absolutely certain your return on investment will be higher than your loan interest rate.

Financial.Velociraptor

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Re: <---- Help this idiot investor
« Reply #7 on: October 10, 2015, 08:53:41 PM »
I completely extinguished my 6.00% home mortgage before beginning in the market.  And that had tax benefits your student loan doesn't.  YMMV but if I was you, I'd extinguish the loan first.

dess1313

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Re: <---- Help this idiot investor
« Reply #8 on: October 10, 2015, 09:14:55 PM »
overall picture i would work on killing your loan, you're not going to make back more than 6.8% in the markets.  clean that up and research what you want to do when it is done.  but keep at least a few $ for emergencies as you're switching jobs.  never know when you have a few bumps in the road

Seppia

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Re: &lt;---- Help this idiot investor
« Reply #9 on: October 10, 2015, 09:28:08 PM »
Kill the loan first, the $100 are not going to go anywhere so don't worry about them.
Yes they are not going to be working hard for you but even in a good scenario where the return 7% per year you're only missing out on 7 bucks.
Skip two lattes and you're ahead.

 

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