Hello,
I have been trying to educate myself about how to invest. My husband and I are getting a late start at building capital wealth (I'm 40 years old, he is 35), so I'm motivated to learn. A month ago I had no idea what a mid cap index fund was, so the learning curve is steep right now. Bear with me. Thanks for any feedback...
Some background: We are both self-employed in our second year of private practice. We both basically came out of school to begin this (2nd Masters for me), so were starting with very little and didn't begin turning a profit until this past summer. We've been able to save 20k so far (and counting) since then towards a house purchase. In the spring we plan to buy a fixer house in a much cheaper town than where we currently live, hopefully getting something for about 80k + sweat equity, with a 15 yr. fixed mortgage (20% down). By the time we buy we could have close to 30k. We have a lot of tax write offs this year, so we won't be paying all that much in taxes for 2013 (some tax $ was also withheld from part time employee jobs). We currently live on about $1650 a month for our personal expenses, the rest goes to business expenses and savings.
We both just opened Vanguard solo 401k's. We'll also be using Roth IRA's as a kind of invested emergency backup savings.
Our Estimated Profit Before Taxes (estimated income minus personal and business expenses). We'll have to pay SE tax on this, but would be able to likely shelter as much as possible in our 401k. Our state doesn't have income tax.
2014 $35,000
2015 $50,000
2016 $55,000
2017 $65,000
2018 $65,000....
Note: We finish a yearly expensive training in 2016 so this decreases business costs after that year.
My husband loves his work, so he foresees himself working into his 50's (15+ years from now). I, on the other hand, want to pony in a contribution towards our retirement and then be free to work or not. By the time I scale back, I am guessing that his increased business will make up for my decrease, so our income will likely be only a little less. We would like to plan for the option of his full retirement in 15 years.
One thing I need help with is Asset Allocation. I don't know how aggressive we should be. My personality tends to tolerate risk well; my husband is more moderate in his dealings.
Thanks!
First Draft of Our Asset Allocation
401k
85% stocks split 50/50 foreign and domestic; mid cap and small cap index funds
15% bonds
Roth IRA
100% Large cap index funds
$5,000 cash savings
I would also like to open a regular investment account and buy some individual stocks that aren't available in the 401k. This would be a small % of our overall investments.
Thanks for any insights!
