Author Topic: new to investing, seeking advice (moved from general discussion)  (Read 1306 times)

pedal stache

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Oops, I had posted this in General Discussion but Investor Alley seems like a more appropriate place for the topic.

My Situation:

Hi, I am 26 and started my first benefited full-time job in May 2015. I have a question about what kind of account I should open (or should I?) with Vanguard to invest in.

I make 54k/year. My employer contributes %15 of my salary to a TIAA-CREF defined contribution retirement plan and I contribute %2 (pre-tax). I also have a TIAA-CREF 403(b) which my employer contributes $20 and I contribute a minimum of $50. I recently increased my contribution to the 403(b) to $500/month but after reading on this forum, I get the impression that this may be a bad idea due to fees.

I have a Roth IRA (max out annually) with Vanguard and would be interested in investing in different accounts with Vanguard.

Questions:

Should I only contribute the minimum($50) to the TIAA-CREF 403(b) and the rest into a Vanguard account?
What kind of Vanguard account should I open?
Is there any sense in trying to rollover the 403(b) and or defined contribution retirement plan annually to a different Vanguard account? (not sure if this is even an option)

I am happy to provide additional information as needed and I really appreciate any advice on this topic.
« Last Edit: October 19, 2015, 09:53:58 PM by pedal stache »

Telecaster

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Re: new to investing, seeking advice (moved from general discussion)
« Reply #1 on: October 19, 2015, 11:09:54 PM »
You should max the 403(b).  The reason is that you save at whatever your top tax bracket is, which is 25% at your income if you are single.  That will overcome a lot of fees.

My wife had a TIAA-CREF account a few years ago and there were some reasonable fund choices. 

MDM

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Re: new to investing, seeking advice (moved from general discussion)
« Reply #2 on: October 20, 2015, 12:00:09 AM »
pedal stache, welcome to the forum.

In the lists below, thinking "first your 457 (if you have one), then your 401k and/or 403b" wherever "401k" appears is likely correct.   
Differences of a few tenths of a percent are not important when applicable for only a few years (in other words, these are guidelines not rules).   
   
WHAT   
0. Establish an emergency fund to your satisfaction   
1. Contribute to 401k up to any company match   
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.   
3. Max HSA    
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level   
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)   
6. Fund mega backdoor Roth if applicable   
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.   
8. Invest in a taxable account with any extra.   
   
WHY   
0. Give yourself at least enough buffer to avoid worries about bouncing checks   
1. Company match rates are likely the highest percent return you can get on your money   
2. When the guaranteed return is this high, take it.   
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.   
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between (or see   
   http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/
   if you want even more details on that topic.)
5. See #4 for choice of traditional or Roth for 401k   
6. Applicability depends on the rules for the specific 401k   
7. Again, take the risk-free return if high enough   
8. Because earnings, even if taxed, are beneficial   
   
The emergency fund is your "no risk" money.  You might consider one of these online banks: http://www.magnifymoney.com/blog/earning-interest/best-online-savings-accounts275921001   
      
If your 401k options are poor (i.e., high fund fees) you can check http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/ for some thoughts on "how high is too high?"   

pedal stache

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Re: new to investing, seeking advice (moved from general discussion)
« Reply #3 on: October 20, 2015, 07:16:14 AM »
Thank you for the advice Telecaster and MDM.

I will continue with the 403(b) contributions based on the current responses.

I do want to adjust a few things based on MDM's advised guidelines:

Quote
WHAT   
0. Establish an emergency fund to your satisfaction   
1. Contribute to 401k up to any company match   
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.   
3. Max HSA   
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level   
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)   
6. Fund mega backdoor Roth if applicable   
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.   
8. Invest in a taxable account with any extra.

0. Not there quite yet, I have $1,500 emergency fund with $7,500 available credit. I want to increase my actual emergency fund to $5,000 for 4 months living expenses.
1. Doing.
2. Fortunate to have never had debt.
3. I know my employer offers an HSA plan, I will look into it. I am currently on a high deductible traditional plan.
4. Doing.
5. I do not think I can max my 401k as my employer said I cannot increase my contribution from 2% when I asked to increase it. I will do some more digging on this.
6. Not sure what this is, I'll Google after writing this reply.
7. Fortunate to have never had debt.
8. If I have some remaining after maxing 403(b), Roth IRA, and 401k contributions, I will investigate this option.

Thank you both again, it is great to have your input.