Author Topic: So I need a book  (Read 4003 times)

Returnoftheyeti

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So I need a book
« on: May 27, 2015, 09:35:45 AM »
Starting a new job soon and I have to make some decisions with what to do with my income. I will have to option of a 401k, a 457, a 401a, and a Roth 401k. 

I have no credit card debt, and an emergency fund in a saving account equal to 5 months bills. I have a good, working budget.

I am going to aim to be able to save between 36-40k per year, but I have no idea how and where to split this money.   Previous to this job I just shoveled 18k a year into a 401k.

I need to maximize saving for retirement, but I also need some that I can liquefy if I need to. Want to go buy a car?  Go get 15k from (insert investing account here).

With so many options, I am not sure where to start, and what to jump on. I am also not sure how much should go in each account, pre tax and post tax.

I was looking at The Bogleheads' Guide to Investing, but it does not seem to cover 401k and other pre tax accounts at all.  Where do I start? 

forummm

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Re: So I need a book
« Reply #1 on: May 27, 2015, 09:52:17 AM »
You don't need a book. But you can get one if that will help you feel more informed.

Just contribute the maximum to your 401k, and your IRA, and then save everything left in your taxable Vanguard account.

Check this thread out for more info
http://forum.mrmoneymustache.com/mustachian-book-club/looking-for-how-to-investing-book-recommendations/

matchewed

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Re: So I need a book
« Reply #2 on: May 27, 2015, 10:22:55 AM »
What you can do rather than find a book is just outline specific goals and pair savings to it. Determine which tool (investment vehicle) will be best for each goal. Save appropriate amounts in the determined vehicles. Done.

For example short term savings goals or high liquidity needs usually would have a savings account recommendation. Longer term/rest of your life sort of goals like FIRE match up better with 401k's and IRA's (usually traditional versions).

http://www.madfientist.com/retire-even-earlier/ For some reference on accounts and why pre-tax is usually your best bet for a FIRE attempt if you're going the index fund route.

Returnoftheyeti

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Re: So I need a book
« Reply #3 on: May 27, 2015, 10:52:49 AM »
You don't need a book. But you can get one if that will help you feel more informed.

Just contribute the maximum to your 401k, and your IRA, and then save everything left in your taxable Vanguard account.

Check this thread out for more info
http://forum.mrmoneymustache.com/mustachian-book-club/looking-for-how-to-investing-book-recommendations/

But see, this is EXACTLY why I need a book.  Your advice, while sound, of contributing the Max to my 401k ignors the 457 completely. If I can save 20k a year, for example, it might be best to put 15k in the 457, an 5k into the 401k. Why?  Because I can pull from the 457 early with no penalty. 

What I need, even if it requires hiring someone, is to figure out how much to put in what accounts, and the pros and cons of each. 

I have 40k per year to save. 30% in the 457, 30% in the 401k, 30% in a Roth, 10% in a mutual fund.
This book might be as simple as "investing for dummies".


matchewed

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Re: So I need a book
« Reply #4 on: May 27, 2015, 10:59:19 AM »
You don't need a book. But you can get one if that will help you feel more informed.

Just contribute the maximum to your 401k, and your IRA, and then save everything left in your taxable Vanguard account.

Check this thread out for more info
http://forum.mrmoneymustache.com/mustachian-book-club/looking-for-how-to-investing-book-recommendations/

But see, this is EXACTLY why I need a book.  Your advice, while sound, of contributing the Max to my 401k ignors the 457 completely. If I can save 20k a year, for example, it might be best to put 15k in the 457, an 5k into the 401k. Why?  Because I can pull from the 457 early with no penalty. 

What I need, even if it requires hiring someone, is to figure out how much to put in what accounts, and the pros and cons of each. 

I have 40k per year to save. 30% in the 457, 30% in the 401k, 30% in a Roth, 10% in a mutual fund.
This book might be as simple as "investing for dummies".

Well you seem to know enough to have some nuance about 457's and the like. Why not just fill out that knowledge by reading about the rules governing each type of account and still do the above advice modified for your particular circumstances? You don't need a book for that just a wikipedia article or the IRS website. Start reading there.

A quick glance at wikipedia shows that you can contribute 18k to your 457 and your 401k. That covers 36k of your 40k. Then put the remainder in a Roth or a savings account based on your goals.

nereo

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Re: So I need a book
« Reply #5 on: May 27, 2015, 11:28:18 AM »

Well you seem to know enough to have some nuance about 457's and the like. Why not just fill out that knowledge by reading about the rules governing each type of account and still do the above advice modified for your particular circumstances? You don't need a book for that just a wikipedia article or the IRS website. Start reading there.

A quick glance at wikipedia shows that you can contribute 18k to your 457 and your 401k. That covers 36k of your 40k. Then put the remainder in a Roth or a savings account based on your goals.
Agreed. 
The problem with reading so many of the 'financial help' books out there is that almost all of them give advice based on "traditional' concepts of retiring in your 60s, drawing on SS and 'mitigating risk' (i.e. reducing downswings at the expense of limiting long term growth).  Virtually all ignore things like SEPP plans and roth conversions because they aren't that important for people retiring after 59.5. 

If you are on this forum, chances are you are trying to achieve FI relatively quickly.  If that's the case, you can throw almost all of those books out the window.  They are starting from a completely different premise than you are.

For reading, try the IRS guidelines, the wikipedia pages (surprisingly good) and JL Collins stock series (http://jlcollinsnh.com/stock-series/)
 
For a very simple (but incredibly effective plan)
max out your tIRA ($5500)
max out your 401(k) and 457 plans based how you want to withdraw money.* 
Contribute as much as possible to taxable accounts (e.g. Vanguard index funds)

*Note - you are limited to $18k in contributions TOTAL between both of them if you are under age 50 as tax deferred income. You can contribute up to $53k in a 401(k), but everything beyond $18k is taxable - the main reason for doing this would be if you want to use a Mega-backdoor ROTH. 
« Last Edit: May 27, 2015, 11:38:04 AM by nereo »

DrF

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Re: So I need a book
« Reply #6 on: May 27, 2015, 11:28:23 AM »
In your position here's what I would do.

Contribute to get the match in your 401k, then max your 457 (because of the benefits you already know about), then max the rest of your 401k if you are able.

Any extra I would put in a traditional IRA (if you are within the income limits, which now should be much easier since you are reducing your MAGI considerably with your pretax contributions above). If you ineligible for the tax benefits of traditional IRA, then put everything else into a roth.

If you still have more money (which you might, since you will be saving so much on taxes) then put that into a taxable brokerage account.

forummm

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Re: So I need a book
« Reply #7 on: May 27, 2015, 11:30:28 AM »
You don't need a book. But you can get one if that will help you feel more informed.

Just contribute the maximum to your 401k, and your IRA, and then save everything left in your taxable Vanguard account.

Check this thread out for more info
http://forum.mrmoneymustache.com/mustachian-book-club/looking-for-how-to-investing-book-recommendations/

But see, this is EXACTLY why I need a book.  Your advice, while sound, of contributing the Max to my 401k ignors the 457 completely. If I can save 20k a year, for example, it might be best to put 15k in the 457, an 5k into the 401k. Why?  Because I can pull from the 457 early with no penalty. 

What I need, even if it requires hiring someone, is to figure out how much to put in what accounts, and the pros and cons of each. 

I have 40k per year to save. 30% in the 457, 30% in the 401k, 30% in a Roth, 10% in a mutual fund.
This book might be as simple as "investing for dummies".

Sorry, I didn't intend to omit the 457. It's a great option too. When I have access to a 403 and 457, I max them both out, as well as an IRA.

You can pull out funds from any retirement account without penalty. Look up Roth IRA pipeline or substantially equal periodic payments.

DrF

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Re: So I need a book
« Reply #8 on: May 27, 2015, 11:30:44 AM »

Well you seem to know enough to have some nuance about 457's and the like. Why not just fill out that knowledge by reading about the rules governing each type of account and still do the above advice modified for your particular circumstances? You don't need a book for that just a wikipedia article or the IRS website. Start reading there.

A quick glance at wikipedia shows that you can contribute 18k to your 457 and your 401k. That covers 36k of your 40k. Then put the remainder in a Roth or a savings account based on your goals.
Agreed. 
The problem with reading so many of the 'financial help' books out there is that almost all of them give advice based on "traditional' concepts of retiring in your 60s, drawing on SS and 'mitigating risk' (i.e. reducing downswings at the expense of limiting long term growth).  Virtually all ignore things like SEPP plans and roth conversions because they aren't that important for people retiring after 59.5. 

If you are on this forum, chances are you are trying to achieve FI relatively quickly.  If that's the case, you can throw almost all of those books out the window.  They are starting from a completely different premise than you are.

For reading, try the IRS guidelines, the wikipedia pages (surprisingly good) and JL Collins stock series (http://jlcollinsnh.com/stock-series/)
 
For a very simple (but incredibly effective plan)
max out your tIRA ($5500)
max out your 401(k) and 457 plans based how you want to withdraw money.* 
Contribute as much as possible to taxable accounts (e.g. Vanguard index funds)

*Note - you are limited to $18k in contributions TOTAL between both of them if you are under age 50 as tax deferred income.  You can contribute up to $53k in a 401(k), but everything beyond $18k is taxable - the main reason for doing this would be if you want to use a Mega-backdoor ROTH.

My understanding is that the part I bolded is not true. You can contribute 18k to each. Then additional to each if you are over 50 as catch up contributions.

nereo

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Re: So I need a book
« Reply #9 on: May 27, 2015, 11:37:37 AM »

Well you seem to know enough to have some nuance about 457's and the like. Why not just fill out that knowledge by reading about the rules governing each type of account and still do the above advice modified for your particular circumstances? You don't need a book for that just a wikipedia article or the IRS website. Start reading there.

A quick glance at wikipedia shows that you can contribute 18k to your 457 and your 401k. That covers 36k of your 40k. Then put the remainder in a Roth or a savings account based on your goals.
Agreed. 
The problem with reading so many of the 'financial help' books out there is that almost all of them give advice based on "traditional' concepts of retiring in your 60s, drawing on SS and 'mitigating risk' (i.e. reducing downswings at the expense of limiting long term growth).  Virtually all ignore things like SEPP plans and roth conversions because they aren't that important for people retiring after 59.5. 

If you are on this forum, chances are you are trying to achieve FI relatively quickly.  If that's the case, you can throw almost all of those books out the window.  They are starting from a completely different premise than you are.

For reading, try the IRS guidelines, the wikipedia pages (surprisingly good) and JL Collins stock series (http://jlcollinsnh.com/stock-series/)
 
For a very simple (but incredibly effective plan)
max out your tIRA ($5500)
max out your 401(k) and 457 plans based how you want to withdraw money.* 
Contribute as much as possible to taxable accounts (e.g. Vanguard index funds)

*Note - you are limited to $18k in contributions TOTAL between both of them if you are under age 50 as tax deferred income.  You can contribute up to $53k in a 401(k), but everything beyond $18k is taxable - the main reason for doing this would be if you want to use a Mega-backdoor ROTH.

My understanding is that the part I bolded is not true. You can contribute 18k to each. Then additional to each if you are over 50 as catch up contributions.
Oh, right you are!  Will edit my post - I was looking at 401(k) and 403(b) plans, which allow you to contribute a maximum of $18k/year.  It does appear the 457 plans allow you to contribute an additional $18k.

milesdividendmd

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Re: So I need a book
« Reply #10 on: May 28, 2015, 12:00:20 PM »
457 are great in that you can withdraw from them without restriction or penalty once you leave your job.. Useful for early retirees for sure.

If you are in a higher tax bracket would max out all of your pretax options 403b, 457, IRA, before investing a penny of after tax money in roth or taxable accounts.