Investing Basics

[kyle1987]

I'm new to this. I need to know where to go to open a Roth IRA- is this something I can do at my bank or should I do it through Vanguard? Through my workplace, I have an HSA ($275 annual match) and 401k (no annual match). I have 30k saved up just sitting in a bank until I figure out what to do with it. I make about 3k each month. I just need some basic guidance and practical steps to get things started. Thanks for any help you can give!

[dandarc]

Before investing, be sure to read this:

http://jlcollinsnh.com/stock-series/

While you can open a Roth IRA at your bank, you almost certainly shouldn't.  Vanguard is a fine choice.

You may want to do some back of the napkin math to see if Roth or Traditional is better in your situation, because for a lot of people on this board, Roth sucks.  http://www.gocurrycracker.com/roth-sucks/

Regarding the HSA specifically - all things being equal, it is better to do this through payroll to avoid FICA.  Often, things are not equal, so do your homework.

[talltexan]

Based on your username, you seem as though you could still be fairly young. If your income is below $75,000/year (i.e. marginal tax bracket is below 25%), Roth is the obvious choice.

[dandarc]

Roth is only the obvious choice if your marginal rate is 0% or below - if there is nothing to be gained with a deduction this year.  At any current marginal rate above 0, you could come out ahead by going traditional.  Obviously, the higher your marginal rate today, the better traditional looks.

Also - due to the way certain tax credits are calculated, the marginal tax rate can be shockingly high at certain lower incomes, so even if OP determines 25% = traditional, 15% = Roth, that doesn't necessarily mean <$37,950K = Roth for a single person, < $75,900K for married filing jointly.

Example:  You do a draft of your taxes in January 2018, and you find that your AGI is $18,600.  Standard Deduction, 1 exemption, filing Single.  You have $100, you think "I know, I'll put this into a Roth IRA for 2017!"  Marginal tax rate is 10%, so Roth makes sense, right?  You forgot the savers credit.  If you put that $100 into a traditional IRA, you'll get a 50% credit instead of a 20% credit - so your marginal rate on that $100 is actually 40% - ($10 saved on tax + $30 additional credit) / $100.

And you've got to factor state income taxes in as well.  Particularly if you're willing to retire to a state with no income tax.

[MDM]

Before investing, be sure to read this:

http://jlcollinsnh.com/stock-series/

While you can open a Roth IRA at your bank, you almost certainly shouldn't.  Vanguard is a fine choice.

Regarding the HSA specifically - all things being equal, it is better to do this through payroll to avoid FICA.  Often, things are not equal, so do your homework.

+1 to all that.

See also Getting started - Bogleheads.

You may want to do some back of the napkin math to see if Roth or Traditional is better in your situation, because for a lot of people on this board, Roth sucks.  http://www.gocurrycracker.com/roth-sucks/

While much of what GCC writes is good, the math in that particular article is not correct and can lead unsuspecting investors astray.  It makes traditional look better than it is in reality.  Traditional will be better than Roth for most, but not for as many as that article indicates.  See Traditional versus Roth - Bogleheads for what might not be as folksy a read as GCC but at least has the correct math.

[BrandNewPapa]

If you already have a Vanguard account, go there for a roth or traditional.

If you don't, you might want to consider a Betterment account. IMO it is more flexible, more user friendly, and offers more features than Vanguard. It is more hands off. There is a small fee associated with it, but if you take advantage of all the features it is more than offset once your account grows in value.

If you are interested in signing up, send me a PM. I will send you a link. If you use my link, you'll get 90 days free and I'll get 30 days free.

[Aggie1999]

If you already have a Vanguard account, go there for a roth or traditional.

If you don't, you might want to consider a Betterment account. IMO it is more flexible, more user friendly, and offers more features than Vanguard. It is more hands off. There is a small fee associated with it, but if you take advantage of all the features it is more than offset once your account grows in value.

If you are interested in signing up, send me a PM. I will send you a link. If you use my link, you'll get 90 days free and I'll get 30 days free.

IMO, bad advice. Robo advisor claim to fame are automated tax loss harvesting. With a retirement account you don't get that. Even with taxable accounts the tax loss harvesting does not offset the fees unless you continually contribute a decent amount of money.

Lookup some of the investment fee calculators out there. Over a 30 year period you are talking huge amount of money lost to the Betterment 0.25% fee. Then there is the whole problem with Betterment increasing fees at their discretion when they need to make more money like they did a few months ago.

[BrandNewPapa]

Whether it is good or bad advice depends on the situation of the OP. They didn't provide much information, so we don't have much to go on. Based on the year in his name, I assume he is relatively young.

It could be stellar advice - if they are just starting out and plan to contribute large sums of money every year (like a FIRE person would), the fees would more than make up for it in the long run. Betterment's fees are reasonable in my opinion - 0.25 for any funds over $2 million. There are no fees for any funds over $2 million.

Any fund or adviser can change their fees at any time. There is nothing from preventing Vangarud from raising their fund fees to 40% if they feel like it. If you read the CEO's statement of the fee structure change, I think it was a reasonable move. I don't expect any changes anytime soon to the fee structure.

Tax loss harvesting got me a 1700 deduction on my taxes this year - even for a modest account value. They also offer tax coordinated portfolios to reduce taxes you pay on any dividends.

[Aggie1999]

Sure, any firm can raise fees at their discretion. With Vanguard though you have a 40 year history of them generally lowering fees. With Betterment you have a small for profit firm with little history and a recent substantial fee increase.

The OP did specifically say he was looking for advice on where to open a Roth IRA. No real reason to have a retirement account at Betterment unless other taxable accounts are with Betterment and one is trying to avoid wash sales.

[wienerdog]

Merriman has some free ebooks that have a lot of information for a newby to digest.  Read the First-Time Investor at the very least.

http://paulmerriman.com/how-to-invest-series-complimentary-download/