Help me out .... 1st investment help

[ricky bobby]

Hi... and thanks ahead of time....

I've been on the "right" financial path for just over 8 months.  In that time, I've paid off ALL debt, and I'm saving about 50% of my income. That should improve over the next few weeks. Now that I don't need all of my money, I want to start investing... But I have no idea where to start.

Currently, I Have:

-$5000 in a money market account at my local credit union. 0.1% interest isn't exactly swelling the account.  I'm looking at this account as my "emergency fund". I know that there are much better rates available online, but I really like being able to access this money at any time if I had too.

-$1900 in a Roth IRA that I started in January. It's with Edward Jones, and I'm making monthly payments to max it out this year. I have NO 401k plan with my job, so I think that this is my only option for retirement savings.

-$5000 in my checking account. This is the money that I'd like to invest. It's sitting, waiting to grow.

Other info
- I'm currently able to contribute / save $500 week
-I'm currently 33 years old, and other than what's listed above, I have NO retirement / savings.

What should I do with this money?

[homeymomma]

Open a vanguard account? We have one with just VFINX and it's been a good "starter" account for us. As you get more knowledgeable about investments you can add additional funds to your portfolio in vanguard.

We also have only Roth IRAs as our retirement savings vehicle, it's so frustrating!

If you have a high deductible health plan, an HSA is another tax-advantaged account to consider before investing in a taxable one. You have to game the HSA a little bit but you basically get both benefits of a traditional and Roth IRA. As far as I understand, you get a tax break on both ends, as long as it's used to healthcare expenses, or at least you prove health care expenses equalling that amount.

[Another Reader]

The easiest way to start is to open up an account with Vanguard or Fidelity.  Both offer excellent mutual funds and ETF's to pick from.  Read up on investing - there are a number of threads on that subject here.  William Bernstein, an author of investing books among other things, was the subject of an interesting article in the New Your Times yesterday.  His new mini-book is directed at people in your situation and is available for free download through today at Amazon.  I read through it last night and sent it to several young family members.  It's called "If You Can: How Millenials Can Get Rich Slowly."

In your shoes, I would move the IRA away from Edward Jones ASAP.  They will sell you loaded (commission) funds with high expense ratios.  This is not in your interest.  You can invest it in the Star account at Vanguard now or add a little more money ($2,500 minimum) and open an IRA at Fidelity.

[TomTX]

If you have $5k sitting around to invest, why not just max your Roth? Preferably, do it at Vanguard.

Call the nice people at Vanguard Concierge Services. Set up an account. Have them initiate a rollover from Edward Jones, and while Edward Jones drags their feet on the transfer, send a few thousand more to Vanguard.

[Cwadda]

First of all, congrats on paying off your debt. That is a huge step.

-$1900 in a Roth IRA that I started in January. It's with Edward Jones, and I'm making monthly payments to max it out this year. I have NO 401k plan with my job, so I think that this is my only option for retirement savings.

Did you make the $1900 contribution for 2013 or 2014? If you made it for 2014, ask them to re-allocate it to 2013 so that you can have a fresh $5500 to make out on.


Next, start building a financial education. You can ask for advice on here all you want for what to do with your money. However, knowing what and why you're doing something will go much further.

I highly recommend reading this for financial education: http://jlcollinsnh.com/stock-series/

If your employer offers a 401k plan, definitely contribute to that - especially if they match (free money). Other than that, a Roth IRA is a good option. As you will read in that link, Vanguard is a great company because they have such low fees!


Remember, the numbers do not lie. You are not as far behind as you think.
Refer to this calculator: https://www.investor.gov/tools/calculators/compound-interest-calculator#.U2hJ8PldVmA

Current principal: $1900
Monthly addition: $458 (which is 5500/12)
Years to grow: 30 (which would put you at 63 years old)
Interest Rate: 6% and that is being conservative
Compound Interest 1 time per year

Future Value: $445,416.42

[Wile E. Coyote]

First of all, congrats on paying off your debt. That is a huge step.

-$1900 in a Roth IRA that I started in January. It's with Edward Jones, and I'm making monthly payments to max it out this year. I have NO 401k plan with my job, so I think that this is my only option for retirement savings.

Did you make the $1900 contribution for 2013 or 2014? If you made it for 2014, ask them to re-allocate it to 2013 so that you can have a fresh $5500 to make out on.

It's too late to designate a contribution to a prior year.  If it wasn't designated as a contribution for 2013 by the original filing deadline of the 2013 return, it will be treated as a contribution for 2014.

[Cwadda]

When I said I had to make a tax correction, both Vanguard and American Funds both offered to re-allocate the contribution since I made it in 2014.

[Wile E. Coyote]

When was that?  If it was before the April filing deadline, that makes sense. Otherwise that seems odd. But I've been wrong before. ;)

[Cwadda]

It was in January of 2014. I had already filed but they offered to re-allocate to 2013.

[wtjbatman]

It was in January of 2014. I had already filed but they offered to re-allocate to 2013.

That's because you have until April 15th of the next year to make previous year contributions. When you file your taxes doesn't really matter, as long as you claim contributions on or before April 15th. It's too late now to make 2013 contributions.