Author Topic: Help Getting Started (Roth & Taxable)  (Read 1935 times)

ConsistentEffortWins

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Help Getting Started (Roth & Taxable)
« on: May 31, 2015, 12:58:00 PM »
Hi all, I recently graduated and finished paying off my student loans (~18k) and am now transitioning to beginning to take control of my investments. Here is my situation:

- 4.7K in Betterment (100 stocks/0 bonds) as an emergency fund
- 6K available for investing (I plan on allocating 5.5K to max my Roth IRA)
- 10K in a Roth IRA my parents set up for me

I am going to be switching over my Roth IRA account to Vanguard soon, and plan to max out my Roth IRA right after switching over. I am trying to think of what allocation would be best to start out with.

I was thinking 70% VTSMX (7K) and 30% VGTSX (3K) for the switch over.

Then with my Roth IRA contributions balancing with VBMFX (3K) and putting the rest in VTSMX so that I can unlock Admiral shares (VTSAX) the next year. My allocation would then be 61% VTSMX (9.5K), 19% VGTSX (3K), and 19% VBMFX (3K).

I'd like to hear thoughts on this plan.

Aside from my Roth, I plan to put another 1.3K into Betterment and leave that as a 3-month emergency fund (I'm okay with the risk of putting an emergency fund in Betterment).

After that though, I'm not sure what the best strategy would be in regards to starting my Taxable account. Should it simply mirror my Roth? Should I instead purchase ETFs? I intend on opening this taxable account with Vanguard as well.

I'm 22 and am not very risk-adverse. My monthly expenses come out to 1.5K, I can save about 2-4K a month (depends on my side business' income which varies by month). I anticipate monthly expenses going up to 2K in September when I move. My goal is to max my Roth and have 25K in a taxable by the end of the year.

Thank you for your help.

MDM

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Re: Help Getting Started (Roth & Taxable)
« Reply #1 on: May 31, 2015, 01:19:55 PM »
CEW, welcome to the forum.

What is in your post looks reasonable.  E.g., see http://forum.mrmoneymustache.com/investor-alley/help-with-vanguard-stock-fund/ for a similar discussion.

It's what is not there - any mention of a 401k or similar - that leads to the question: why not?

ConsistentEffortWins

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Re: Help Getting Started (Roth & Taxable)
« Reply #2 on: May 31, 2015, 01:24:22 PM »
My company does not offer a 401K since it is an early stage company.

MDM

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Re: Help Getting Started (Roth & Taxable)
« Reply #3 on: May 31, 2015, 01:33:20 PM »
Solo 401k based on the side business?

KC1983

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Re: Help Getting Started (Roth & Taxable)
« Reply #4 on: May 31, 2015, 01:53:05 PM »
Stock index funds are the most tax efficient. Choose among one or two stock index funds for your taxable account (Total US stock market, total international, etc.). Bond funds and REITs are the least tax efficient, so put those in your 401k/IRAs. Look at the whole picture for your asset allocation. Therefore, you're IRAs will have a higher % of bond fund money, and your taxable account will have none.

TomTX

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Re: Help Getting Started (Roth & Taxable)
« Reply #5 on: May 31, 2015, 03:19:03 PM »
Too scattered, IMO. Since you're not risk averse, I would just put the whole Roth into VTSAX and get the lower Admiral class costs.

I wouldn't bother diversifying the Roth further until you have something in the $50k-$250k range. Not worth it.

ConsistentEffortWins

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Re: Help Getting Started (Roth & Taxable)
« Reply #6 on: May 31, 2015, 03:44:02 PM »
Solo 401k based on the side business?

Interesting--I have not explored that avenue yet. I will look into this further! Thank you