New Vanguard Account Question

[Dragonstrike]

Hey guys.  Thanks for the advice you have been giving me.  It's been a real help in the long run here.

So I just liquidated my old ICM-ARC Roth IRA, and caught the market just right.  It went from 8.9k to 9.9k over the course of three weeks.  When I saw the funds in my new Vanguard Money Market Fund for holding till I buy into VTSAX, it was 9.9k. $100 dollars under the minimum 10k that I need for the VTSAX fund to be fully purchasable.

So here's my questions:

1) I want to buy into the VTSAX fund and contribute roughly $500 a month towards that fund, or at least that and another couple bills towards a bond fund to diversify with the 90 % stocks/10%bond rule. I have another $3000 plus my rainy day fund of $5000 sitting in my bank account right now.  What should I do with the other $3000 dollars?

2) How much am I able to contribute to the Vanguard funds per year?  Is the VTSAX a Roth itself? In which case I can only contribute $5500 per year to it? 

3) I am doing the $500 a month automatic withdrawal plus an additional $200 towards my TSP for military.  Is this good or should I change it up a bit?

Your advice is always welcome.  Thank you.

[forummm]

You can buy VTSMX now with your 9.9k. When you add another $100 to it you can do a conversion to VTSAX (no tax, no fee for the conversion).

You could use the $3k for more VTSAX or a bond fund. Up to you.

Did you withdraw your money from your old Roth? Or did you convert it? You wanted to convert it, not withdraw from it.

[Dragonstrike]

So I didn't withdraw from my old Roth; I had Vanguard do the paperwork and liquidate the fund and convert it over to Vanguard from ICM-ARC. 

Also, please refer to my other questions about contributions.  I really could use an answer on it.

[forummm]

If you don't have $10k, you can buy VTSMX, which is just a different share class of VTSAX that allows a lower initial investment. It owns the same underlying stocks. When you get the position over $10k, Vanguard will convert it for you to VTSAX.

You can contribute $5500/year to your Roth IRA (or $6500 if you are 50 or older). If you have a spouse they can contribute an additional amount as well. VTSAX is not a Roth--it's a fund you can own inside a Roth. There are hundreds of options for funds you can own inside your Roth.

The TSP is a great plan. It's like a 401k for government employees. You should save as much in it as you can and leave it there until you retire.

[MDM]

Is the VTSAX a Roth itself?

This type of question comes up often.  I've looked without success for a good link to explain the basics without needing to cover all possibilities, but haven't found one (anyone have a good one?).

Something similar to the outline below might work:

[Travis]

Hey guys.  Thanks for the advice you have been giving me.  It's been a real help in the long run here.

So I just liquidated my old ICM-ARC Roth IRA, and caught the market just right.  It went from 8.9k to 9.9k over the course of three weeks.  When I saw the funds in my new Vanguard Money Market Fund for holding till I buy into VTSAX, it was 9.9k. $100 dollars under the minimum 10k that I need for the VTSAX fund to be fully purchasable.

So here's my questions:

1) I want to buy into the VTSAX fund and contribute roughly $500 a month towards that fund, or at least that and another couple bills towards a bond fund to diversify with the 90 % stocks/10%bond rule. I have another $3000 plus my rainy day fund of $5000 sitting in my bank account right now.  What should I do with the other $3000 dollars?

2) How much am I able to contribute to the Vanguard funds per year?  Is the VTSAX a Roth itself? In which case I can only contribute $5500 per year to it? 

3) I am doing the $500 a month automatic withdrawal plus an additional $200 towards my TSP for military.  Is this good or should I change it up a bit?

Your advice is always welcome.  Thank you.

Dragon,

Think of the TSP and the IRA as an empty box.  The funds (such as TSP C Fund, or VTSAX) are things you can put into the box.  You can put damn near any financial product into the IRA box.  That box will give the fund a specific tax treatment.  The basic rule of thumb is to max out your tax-advantaged accounts (boxes) before you begin a normal taxable portfolio.  You can contribute up to $18k in the TSP and $5500 in an IRA each year.  If you're going to buy bonds and stock ETFs, you want to make sure the bonds are in your tax advantaged boxes first (my bonds are in TSP).

Why are you making an automatic withdrawal AND a manual contribution to TSP?  Are you doing ROTH or traditional?  If your TSP contribution is supposed to be traditional, it should all come out right at payday as a pre-tax contribution.

MDM, the Bogleheads Wiki is probably the most detailed place for those basic questions. https://www.bogleheads.org/wiki/Main_Page

[MDM]

MDM, the Bogleheads Wiki is probably the most detailed place for those basic questions. https://www.bogleheads.org/wiki/Main_Page

Travis, thanks, Bogleheads is indeed a good complementary forum to this one.

What I'm looking for is some type of FAQ-like page for folks just getting started, that explains the relationships among accounts, investments, traditional, Roth, taxable, etc.  E.g., something like your "empty box" analogy or the diagram I drew.

[Proud Foot]

MDM, is this what you were thinking of? https://personal.vanguard.com/us/help/FAQRetirementIRAContent.jsp

[MDM]

MDM, is this what you were thinking of? https://personal.vanguard.com/us/help/FAQRetirementIRAContent.jsp

Proud Foot, thanks, that does cover some of the issues.  E.g., "An IRA is not an investment in itself; rather, it's a type of account that holds the investments you select."

It doesn't cover some others, e.g., the difference between IRA and 401k/403b/457.

Might not be possible to condense "Retirement Investments and Accounts 101" to a single page (so maybe that Vanguard link plus something else would work), but that's what I'm looking for.  Another issue is that the efficacy of such a page must be evaluated by testing how well it communicates the concepts to someone not already knowledgeable.  We might have to try "it" several times with new posters to see if "it" is successful.

[Proud Foot]

Not a problem! I thought maybe you were looking for something with more detail but thought I would go ahead and throw that out.

[Dragonstrike]

Hey guys.  Thanks for the advice you have been giving me.  It's been a real help in the long run here.

So I just liquidated my old ICM-ARC Roth IRA, and caught the market just right.  It went from 8.9k to 9.9k over the course of three weeks.  When I saw the funds in my new Vanguard Money Market Fund for holding till I buy into VTSAX, it was 9.9k. $100 dollars under the minimum 10k that I need for the VTSAX fund to be fully purchasable.

So here's my questions:

1) I want to buy into the VTSAX fund and contribute roughly $500 a month towards that fund, or at least that and another couple bills towards a bond fund to diversify with the 90 % stocks/10%bond rule. I have another $3000 plus my rainy day fund of $5000 sitting in my bank account right now.  What should I do with the other $3000 dollars?

2) How much am I able to contribute to the Vanguard funds per year?  Is the VTSAX a Roth itself? In which case I can only contribute $5500 per year to it? 

3) I am doing the $500 a month automatic withdrawal plus an additional $200 towards my TSP for military.  Is this good or should I change it up a bit?

Your advice is always welcome.  Thank you.

Dragon,

Think of the TSP and the IRA as an empty box.  The funds (such as TSP C Fund, or VTSAX) are things you can put into the box.  You can put damn near any financial product into the IRA box.  That box will give the fund a specific tax treatment.  The basic rule of thumb is to max out your tax-advantaged accounts (boxes) before you begin a normal taxable portfolio.  You can contribute up to $18k in the TSP and $5500 in an IRA each year.  If you're going to buy bonds and stock ETFs, you want to make sure the bonds are in your tax advantaged boxes first (my bonds are in TSP).

Why are you making an automatic withdrawal AND a manual contribution to TSP?  Are you doing ROTH or traditional?  If your TSP contribution is supposed to be traditional, it should all come out right at payday as a pre-tax contribution.

MDM, the Bogleheads Wiki is probably the most detailed place for those basic questions. https://www.bogleheads.org/wiki/Main_Page

I'm sorry, the wording on that is weird now that I look at it.  Let me reiterate:

I'm putting $500 a month away into my Vanguard funds.  $200 since I started every month since I've been in the military (going on 5 years now) has been put away into my TSP (total of over 10k now).

[Travis]

Hey guys.  Thanks for the advice you have been giving me.  It's been a real help in the long run here.

So I just liquidated my old ICM-ARC Roth IRA, and caught the market just right.  It went from 8.9k to 9.9k over the course of three weeks.  When I saw the funds in my new Vanguard Money Market Fund for holding till I buy into VTSAX, it was 9.9k. $100 dollars under the minimum 10k that I need for the VTSAX fund to be fully purchasable.

So here's my questions:

1) I want to buy into the VTSAX fund and contribute roughly $500 a month towards that fund, or at least that and another couple bills towards a bond fund to diversify with the 90 % stocks/10%bond rule. I have another $3000 plus my rainy day fund of $5000 sitting in my bank account right now.  What should I do with the other $3000 dollars?

2) How much am I able to contribute to the Vanguard funds per year?  Is the VTSAX a Roth itself? In which case I can only contribute $5500 per year to it? 

3) I am doing the $500 a month automatic withdrawal plus an additional $200 towards my TSP for military.  Is this good or should I change it up a bit?

Your advice is always welcome.  Thank you.

Dragon,

Think of the TSP and the IRA as an empty box.  The funds (such as TSP C Fund, or VTSAX) are things you can put into the box.  You can put damn near any financial product into the IRA box.  That box will give the fund a specific tax treatment.  The basic rule of thumb is to max out your tax-advantaged accounts (boxes) before you begin a normal taxable portfolio.  You can contribute up to $18k in the TSP and $5500 in an IRA each year.  If you're going to buy bonds and stock ETFs, you want to make sure the bonds are in your tax advantaged boxes first (my bonds are in TSP).

Why are you making an automatic withdrawal AND a manual contribution to TSP?  Are you doing ROTH or traditional?  If your TSP contribution is supposed to be traditional, it should all come out right at payday as a pre-tax contribution.

MDM, the Bogleheads Wiki is probably the most detailed place for those basic questions. https://www.bogleheads.org/wiki/Main_Page

I'm sorry, the wording on that is weird now that I look at it.  Let me reiterate:

I'm putting $500 a month away into my Vanguard funds.  $200 since I started every month since I've been in the military (going on 5 years now) has been put away into my TSP (total of over 10k now).

Got it. I read that as $500 AND $200 going to TSP.  I would recommend maxing out your TSP first (unless you really think you'll need the money sooner than retirement).  The TSP has the lowest expense ratios and lowers your tax bill.

[Dragonstrike]

Ok, so I've just gotten confirmation:  My fund transfer of 9.9k plus the $500 I added from my bank account allowed me to purchase VTSAX funds. I now own at least $10,400 in VTSAX funds, for a total of 202 stock pieces.

So here's the next question:  Does this mean I can only contribute $5000 dollars more this year to the VTSAX fund?  I'm still trying to figure out if this is a mutual fund or a ROTH.

Also, does this limit me in purchasing regular individual stock trades if I want to play the "stock market game", so to say?

[Driko]

mutual fund and roth are apples and oranges

ETF vs Mutual fund vs stocks vs bonds etc are all investment options

Roth vs Traditional IRA are the account types

you can have an etf mutual fund stock bond etc in a roth or a tira

You will know which account it is in because under account summary it specifically says what type of account it is. It will say brokerage which means taxable. Roth which means roth and traditional which means traditional.

[NoStacheOhio]

Ok, so I've just gotten confirmation:  My fund transfer of 9.9k plus the $500 I added from my bank account allowed me to purchase VTSAX funds. I now own at least $10,400 in VTSAX funds, for a total of 202 stock pieces.

So here's the next question:  Does this mean I can only contribute $5000 dollars more this year to the VTSAX fund?  I'm still trying to figure out if this is a mutual fund or a ROTH.

Also, does this limit me in purchasing regular individual stock trades if I want to play the "stock market game", so to say?

You can deposit $5000 more dollars into your IRA. You can buy anything you want with that money. With the money currently in the account, you bought VTSAX.

You could also open a taxable investment account and buy as much VTSAX as you can afford, or any other thing traded on the public market.

[Dragonstrike]

Which taxable account would you suggest?  Is it named a different fund in Vanguard?

[NoStacheOhio]

Which taxable account would you suggest?  Is it named a different fund in Vanguard?

No, funds aren't accounts. They don't have tickers. A taxable investment account is like any other bank account, you just put money into it. Within the account, you can buy funds with that money, like you can buy stuff with a debit card on your bank account. VTSAX (and every other fund) is the same regardless of what type of account you put it in.

[Travis]

Which taxable account would you suggest?  Is it named a different fund in Vanguard?

Dragon, I put together a quick guide to show how the funds system works out.  Any fund can be bought to be placed in your ROTH IRA. Any fund can be bought to be placed in your taxable brokerage account. You could buy the same fund for both if you wanted.  The kind of account the fund is in determines the tax treatment and contribution limits. 

[Dragonstrike]

Which taxable account would you suggest?  Is it named a different fund in Vanguard?

Dragon, I put together a quick guide to show how the funds system works out.  Any fund can be bought to be placed in your ROTH IRA. Any fund can be bought to be placed in your taxable brokerage account. You could buy the same fund for both if you wanted.  The kind of account the fund is in determines the tax treatment and contribution limits.

Travis,  thank you for that example.  It helped me see the picture in a clearer way.  I'm seemingly confused due to the fact that the fund "Roth IRA Brokerage Account" on my vanguard page is named that, and for awhile I was under the impression that it wasn't a Roth. 

So that being said, am I doing the right thing having a Roth IRA with VTSAX?  Or should I open a taxable fund and start into VTSMX?

I'm just trying to get to that point where the 4% rule can go into effect. Retiring early would be nice.

Again, thanks for the help despite any frustrations.

[Travis]

Which taxable account would you suggest?  Is it named a different fund in Vanguard?

Dragon, I put together a quick guide to show how the funds system works out.  Any fund can be bought to be placed in your ROTH IRA. Any fund can be bought to be placed in your taxable brokerage account. You could buy the same fund for both if you wanted.  The kind of account the fund is in determines the tax treatment and contribution limits.

Travis,  thank you for that example.  It helped me see the picture in a clearer way.  I'm seemingly confused due to the fact that the fund "Roth IRA Brokerage Account" on my vanguard page is named that, and for awhile I was under the impression that it wasn't a Roth. 

So that being said, am I doing the right thing having a Roth IRA with VTSAX?  Or should I open a taxable fund and start into VTSMX?

I'm just trying to get to that point where the 4% rule can go into effect. Retiring early would be nice.

Again, thanks for the help despite any frustrations.

Nothing wrong with VTSAX being in your Roth.  It's a great fund. As a rule of thumb, always max out your tax-advantaged accounts before starting a taxable one.  In this case, make sure you can max out your Roth ($5500) and your TSP ($18000) before worrying about a regular taxable account.  What fund or funds are you buying in your TSP?

[Dragonstrike]

Which taxable account would you suggest?  Is it named a different fund in Vanguard?

Dragon, I put together a quick guide to show how the funds system works out.  Any fund can be bought to be placed in your ROTH IRA. Any fund can be bought to be placed in your taxable brokerage account. You could buy the same fund for both if you wanted.  The kind of account the fund is in determines the tax treatment and contribution limits.

Travis,  thank you for that example.  It helped me see the picture in a clearer way.  I'm seemingly confused due to the fact that the fund "Roth IRA Brokerage Account" on my vanguard page is named that, and for awhile I was under the impression that it wasn't a Roth. 

So that being said, am I doing the right thing having a Roth IRA with VTSAX?  Or should I open a taxable fund and start into VTSMX?

I'm just trying to get to that point where the 4% rule can go into effect. Retiring early would be nice.

Again, thanks for the help despite any frustrations.

Nothing wrong with VTSAX being in your Roth.  It's a great fund. As a rule of thumb, always max out your tax-advantaged accounts before starting a taxable one.  In this case, make sure you can max out your Roth ($5500) and your TSP ($18000) before worrying about a regular taxable account.  What fund or funds are you buying in your TSP?

Currently have $10,400 in my TSP:  10% G Fund, 20% C Fund, 20% F Fund, 50% S Fund, and 0% I Fund.