How to begin investing without 401 k?

[MichelleD1977]

Hello all!

After spending all my excess income on paying down student loans, I am finally ready to begin investing! I work for a small company that does not offer 401k plans. From what I can tell, I have options of a traditional or Roth IRA but only up to 5,500/year.  What are the best options after that? I am hoping to invest up to $2,000 to $2,500/month if all goes well. The information out there is overwhelming, and hard to digest.

I know everyone on this site loves vanguard. Would anybody recommend using their financial advisor service for under educated folk such as myself? They do have a quota you need to meet, but I could possibly transfer my husband's 401 k over to them. We currently have it with Tiaa cref.

[MDM]

Hello all!

After spending all my excess income on paying down student loans, I am finally ready to begin investing! I work for a small company that does not offer 401k plans. From what I can tell, I have options of a traditional or Roth IRA but only up to 5,500/year.  What are the best options after that? I am hoping to invest up to $2,000 to $2,500/month if all goes well. The information out there is overwhelming, and hard to digest.

I know everyone on this site loves vanguard. Would anybody recommend using their financial advisor service for under educated folk such as myself? They do have a quota you need to meet, but I could possibly transfer my husband's 401 k over to them. We currently have it with Tiaa cref.

There are any number of good options, so don't worry about finding "the best," because one only knows the best in hindsight.

But, as you correctly imply, there are not-so-good options as well. 

One very defensible option for someone, like yourself, just starting is to put all your money - IRA and taxable - into VTTSX while you learn more.  After you learn more, you might very well decide to keep it there, or move it.

Some places to start you learning, if you haven't found them already:
http://www.bogleheads.org/wiki/Category:Getting_started
http://jlcollinsnh.com/stock-series/
http://www.mrmoneymustache.com/the-mmm-reading-list/ - Haven't read them all, but A Random Walk Down Wall Street by Burton Malkiel and The Four Pillars of Investing by William Bernstein were good.
Good luck, and let us know of any you find particularly helpful!

[thedayisbrave]

Would your company consider a SIMPLE IRA plan, do you think? They are retirement plans for small sized companies.

I plan to talk to my direct supervisors about this around this time next year, unless they've already initiated some sort of employee retirement plan.  I work for a very small start-up and I was their first non-tech hire so we're still barely out of the starting gate, but from what I've read they are pretty straightforward and don't require much paperwork on behalf of the employer. 

[ScarElbow]

If you have employer match contribution, just stuff the fund in the total u.s index with the lowest fee. No contribution from employer, I'd say just open up any broker account and automate your checking account to transfer over to SPY as it matches exactly what the sp500 is doing without any mutual fund fee. Long term 7% return is very likely. That's a vanilla way of investing. Have fun

[kendallf]

Hello all!

I work for a small company that does not offer 401k plans. From what I can tell, I have options of a traditional or Roth IRA but only up to 5,500/year.  What are the best options after that? I am hoping to invest up to $2,000 to $2,500/month if all goes well. The information out there is overwhelming, and hard to digest.

I know everyone on this site loves vanguard. Would anybody recommend using their financial advisor service for under educated folk such as myself? They do have a quota you need to meet, but I could possibly transfer my husband's 401 k over to them. We currently have it with Tiaa cref.

Good links above; I'd add the Mad Fientist and Go Curry Cracker for more on tax deferred accounts (just Google for links).

Max out your IRA; a traditional IRA makes sense for most aspiring early retirees (see http://www.gocurrycracker.com/roth-sucks/ for one take on why this is the case).  Then if your husband is not already maxing out his 401(k), and the options in his plan are reasonable (fund choices and fees), then max that out as well.  If you have a HDHP available, consider maxing out an HSA; there's another $6750 in tax deferred (tax free if you spend it on medical bills at any future date) savings.  If you have the option of payroll HSA contributions, you don't even have to pay SS/Medicare tax on those contributions.

When you're done exploiting all available tax deferred options, start a regular brokerage account.  If you plan on a diversified portfolio, try to use the taxable account for tax efficient investments; i.e., index funds that don't often sell and incur capital gains.  Hold bonds and the like in your tax deferred accounts to minimize your taxable investment income.

[MichelleD1977]

Thanks everyone! I've looked into those resources a bit in the past, but then didn't end up beginning to invest at that time, and stopped my research. Good to be reminded of them now.

Would an example of a broker account be investing in mutual funds through Vanguard?

and Kendallf, could you explain this suggestion a bit more-

"try to use the taxable account for tax efficient investments; i.e., index funds that don't often sell and incur capital gains.  Hold bonds and the like in your tax deferred accounts to minimize your taxable investment income."

Would "taxable account" be the money I invest after taxes are taken out (and what we're talking about here) and the "tax deferred account" be those that we invest in 401 K and are not taxed now (but presumably taxed later)? Hey I think I just may have answered my own question!

[MDM]

Thanks everyone! I've looked into those resources a bit in the past, but then didn't end up beginning to invest at that time, and stopped my research. Good to be reminded of them now.

Would an example of a broker account be investing in mutual funds through Vanguard?

and Kendallf, could you explain this suggestion a bit more-

"try to use the taxable account for tax efficient investments; i.e., index funds that don't often sell and incur capital gains.  Hold bonds and the like in your tax deferred accounts to minimize your taxable investment income."

Would "taxable account" be the money I invest after taxes are taken out (and what we're talking about here) and the "tax deferred account" be those that we invest in 401 K and are not taxed now (but presumably taxed later)? Hey I think I just may have answered my own question!

You must research well.  The answer to all your questions is "yes" - well done!

[iamlindoro]

The company I work at keeps its funds continually invested. As far as I know, our company consults the financial advisors from https://linkagemind.com/practices/tax-investment/ to invest money efficiently. So, feel free to contact them to get advice concerning your issue.

I'm... concerned about this poster's post history.

ETA:

tax due diligence of the representative offices and branches of non-residents in the Republic of Kazakhstan

Well, that ought to help someone to make benefit glorious US 401(k)... Very nice, I like.

[MDM]

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[iamlindoro]

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Was that reply meant for this thread?

Yes, though now it lacks context since it seems the spam was removed.  Oh well, job done I guess!  :)