Author Topic: Roth IRA + VTSAX  (Read 6491 times)

dionnenicole

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Roth IRA + VTSAX
« on: April 30, 2016, 07:40:42 PM »
Hello all! I'm 33, and finally on the investing train! For the last two years I have maxed out my Vanguard Roth IRA, and after researching, I'd like to open a VTSAX account. My question is should I continue to have both a Roth IRA and VTSAX?

If not, should I roll my Roth IRA funds into the VTSAX since it would be the 10K I need? Is that even possible?

If I should keep both, I only have $3,000 to invest. I was going to start with VTSMX but wasn't sure if I should just wait until I had the full 10K.

Thanks for all your help! This is pretty overwhelming for me but I want to try and catch up.


Paul | pdgessler

  • 5 O'Clock Shadow
  • *
  • Posts: 89
  • Age: 29
  • Location: Appleton, WI
Re: Roth IRA + VTSAX
« Reply #1 on: April 30, 2016, 07:46:53 PM »
VTSAX is not an account, it is an investment (a mutual fund, to be precise). You can hold it in any account (401k, IRA, taxable) that allows you to purchase it.

You can think of the accounts (401k, IRA, Roth versions of each, taxable, and other less common account types) as "buckets" and the investments are what you put into the buckets.

tarheeldan

  • Pencil Stache
  • ****
  • Posts: 775
Re: Roth IRA + VTSAX
« Reply #2 on: April 30, 2016, 07:49:57 PM »
Hi! Welcome aboard the investing train :-)

So, Roth IRA is a type of account, and VTSAX is an index fund, which you can invest in within your Roth IRA.

What have you been investing in so far?

Are you talking about opening up an after-tax brokerage account and investing in VTSAX there?

In general, it makes sense to use as much tax-advantaged space as possible and then investing after tax with what's left over. 

dionnenicole

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Roth IRA + VTSAX
« Reply #3 on: April 30, 2016, 08:33:37 PM »
Thank you both so much for breaking down the difference between a type of account and the actual investment. I had no idea!!

I just looked at my Vanguard account, and right now, this is my investment.
Symbol: VTIVX | Name: Vanguard Target Retirement 2045 Fund | $9,992.64 Total assets

I was drawn to having a Roth IRA because I didn't want to use my company's 401K program. I also liked the idea of not having to worry about taxes later, and the ability to take out money penalty-free if I needed it.

So now I will look at it differently. I would like to have the VTSAX index fund, and I'm not sure what kind of BUCKET I should put it in. What would be considered tax-advantaged?

CRG

  • 5 O'Clock Shadow
  • *
  • Posts: 42
Re: Roth IRA + VTSAX
« Reply #4 on: April 30, 2016, 09:58:54 PM »
Why are you opposed to using the company 401k? At the very least, you should contribute enough to benefit from the employer match, assuming there is one in place.

MDM

  • Walrus Stache
  • *******
  • Posts: 9711

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1803
Re: Roth IRA + VTSAX
« Reply #6 on: May 01, 2016, 10:10:45 AM »
Let's say your employer plan is terrible, with a 2.00% expense ratio and 25% employer match.  If you put $4,000 you get a total of $5,000.  That extra $1,000 of free money can pay that expense ratio for a very long time.  If you have unpaid credit card debt, invest in the 401k to the point of the match, then pay the credit card debt - it's that good.

Vanguard is a company that structures investment funds.  They have customers like you, individuals, and institutions (company 401k plan, for example).  When you send Vanguard a check, that money starts in a money market fund.  It's cash, and not earning much.  I take it you've already done this to get your Roth account setup, and then purchased VTSAX with that money.

When you create an individual account, you need to fit your investment to the fund minimums:
$113 ($7 commission + 1 share of VTI) to $2,999: need to buy an ETF, like VTI
$3,000 to $9,999: can buy "investor" class of fund, like VTSMX
$10,000 to millions: can purchase "admiral" class of fund, like VTSAX
(millions lets you buy various institutional classes of funds)