Author Topic: vanguard.com signing up questions  (Read 799 times)

kevj1085

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vanguard.com signing up questions
« on: February 02, 2020, 01:33:51 PM »
Ok, I want to join in on the vanguard vti. I'm trying to sign up and it's asking me if this will be a retirement, general savings, or education investment. Umm, I have no idea which one to pick. None of them say "vti" or "index funds". Retirement only lists options like roth ira, ira, sep-ira, and annual annuity. General savings just says individual, joint, or trust. I don't want to make the wrong decision here, and will probably have more questions as this process continues so I'll just ask here. So, where do I go from here? My goal is just to invest my money and earn like MMM says an average 4% return.

bacchi

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Re: vanguard.com signing up questions
« Reply #1 on: February 02, 2020, 02:45:38 PM »
IRAs are Individual Retirement Accounts. You probably want a regular (traditional) IRA.

Roth IRA is post-tax.
SEP IRA is through a small business.
You don't want an annuity.

Or you can always create a brokerage account, which is general savings.

If it's only you, and not with your spouse, it's an individual account.

Once you establish an account, you can then buy VTI and BND and VXUS, etc.

markbike528CBX

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Re: vanguard.com signing up questions
« Reply #2 on: February 02, 2020, 02:46:10 PM »
You are trying to set up some Vanguard account.  I'd suggest a general savings/individual account, as that is the most generic/flexible to use.

While I understand what Vanguard is trying to do, it does make it more complicated on the front end.

All the things like VTI, etc are things that are held _within_ an account.

What they are asking is what kind of account you would like the VTI, etc to be held in.

kevj1085

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Re: vanguard.com signing up questions
« Reply #3 on: February 02, 2020, 05:15:17 PM »
Well I'd like to reinvest everything earned to snowball over months and years, but I'd also like the ability to pull the returns made if needed. Is that basically what you can do with vti?

bacchi

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Re: vanguard.com signing up questions
« Reply #4 on: February 02, 2020, 05:27:20 PM »
Well I'd like to reinvest everything earned to snowball over months and years, but I'd also like the ability to pull the returns made if needed. Is that basically what you can do with vti?

Well...yes. You'd possibly owe taxes on any profits though.

A Roth IRA would allow you to withdraw the contributions at any time without penalty.

A regular brokerage account will allow you to sell at any time and withdraw the proceeds.


You really should learn about IRAs and decide which type of account you want. Do you have a plan at work? A 401k or 403b or SEP or SIMPLE?


Frankies Girl

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Re: vanguard.com signing up questions
« Reply #5 on: February 02, 2020, 05:48:49 PM »
Vanguard is asking what type of account you want to open to HOLD VTI (or whatever).

Accounts are your buckets. VTI is a Exchange Traded Fund or ETF, or more simple... a stock. You can't just go in and say "here is 1 bazillion dollars, I would like to purchase VTI" without having some sort of account to put it into. Think of it as if you walked into an ice cream parlor and told them you wanted two scoops of rocky road and they're asking you "what kind of cone would you like?" You need to choose the type of cone first.

Stocks, bonds, mutual funds... they have to go into an account of some type.

So types of accounts...

You are probably familiar with a saving account and a checking account? You may have both, but at least a checking account with a bank.

Vanguard (or any financial institution) have different categories of accounts, and fall into two main styles: retirement accounts and brokerage/investing accounts. The major differences are with retirement accounts, you have to have EARNED income (work a job, get paid, then that money makes it earned) to use them. Brokerage/investing accounts could be money your grandma gave you, winnings off a lucky card game, or earned income. Pretty much anything can be used to put money into one of those.

RETIREMENT ACCOUNTS: traditional or rollover IRAs, Roth IRAs, 401k, 403b, basically these have limits set by the government about how much and what kind of money you can put into them. All of them grow tax deferred, meaning you don't owe/pay tax until you pull money out of them. You can open your own traditional or Roth IRA and invest up to the government limits (I believe at this time, it is $6,000/year) as long as you made at least that much of earned income.

The number ones (401/403/etc) are only available to set up through employers, and they control who you are allowed to invest with (they pick the company and what funds/stocks/bonds) you are allowed to buy). If you own your own business you could open a solo 401k but they are still an "employer" related account.

So you have to figure out if you want to open an IRA (traditional or Roth) or a brokerage account with Vanguard. Both have advantages and disadvantages. Most folks end up with at least a few IRAs and a brokerage account. You may want to read more here:

https://www.irs.gov/retirement-plans/traditional-and-roth-iras

https://www.fool.com/the-ascent/buying-stocks/articles/brokerage-account-vs-ira-whats-the-right-move/

« Last Edit: February 02, 2020, 07:54:34 PM by Frankies Girl »

kevj1085

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Re: vanguard.com signing up questions
« Reply #6 on: February 02, 2020, 05:58:51 PM »
What did MMM put his $625k into that allowed him to gain monthly income from it? That's what I want.

Frankies Girl

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Re: vanguard.com signing up questions
« Reply #7 on: February 02, 2020, 08:15:47 PM »
What did MMM put his $625k into that allowed him to gain monthly income from it? That's what I want.

I'm not sure you're really processing the information, just wanting to jump in the deep end without doing the basics first.


MMM likely had a work account (401k?) through an employer, opened a traditional or Roth IRA (it depends on your income and future taxes whether to have one or the other, or both). And then added in a taxable/investment account when he filled up the space in those and had extra $ to invest.

He worked, if I remember correctly, in software and so did the former Mrs MMM, so they made GOOD money and lived well below their means pretty quickly after realizing what they could do. They were able to max their yearly contributions through work, and the IRAs and opened a brokerage (which has no restrictions on amounts allowed to invest) and he recommended investing in Vanguard funds, mostly VTSAX, but that may have changed and you definitely should not blindly choose to put 100% into anything without a basic understanding because you have no idea why/what/how this works, and might panic or need a better idea of what works the best for your situation.

You may very well end up being 100% VTSAX, but go into it KNOWING WHY you're choosing that asset allocation and not "he got rich, so I'm just going to do the same" because one thing should take away from all of this: educate yourself so you know the reasons for your choices. If you can't explain it, you shouldn't be doing it. I promise it's not that hard, and at most just will take a week or two to get things started if you're enthusiastic about learning this stuff.

You need to read a bit more, figure out what your specific circumstances warrant for your investments/accounts. I suggest if nothing else, you review this post for the order to invest:

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153



Also suggest (since it sounds like you might be young/at the beginning of your career):

https://www.etf.com/docs/IfYouCan.pdf

https://www.bogleheads.org/wiki/Investment_policy_statement

https://www.bogleheads.org/wiki/Main_Page
^this is the best and comprehensive guide for index investing, and is what MMM likely would recommend to learn any and every thing about investing.

https://jlcollinsnh.com/stock-series/
^Jim Collins' blog, turned into book "The Simple Path To Wealth" which is an updated version of the blog (which I believe is approaching 10 years now, so book - check the library).


« Last Edit: February 02, 2020, 09:32:43 PM by Frankies Girl »

Ready2Save27

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Re: vanguard.com signing up questions
« Reply #8 on: February 02, 2020, 08:24:39 PM »
The above suggestions are good. Adding to them, I recommend reading A LOT more. I donít think it hurts to start investing now, but if you donít know the difference between a retirement account and a fund, you really need to learn more so you can understand your investments and risk tolerance.

I think listening to an interview with Jim Collins (just Google it) May be helpful in understanding the basics.

kevj1085

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Re: vanguard.com signing up questions
« Reply #9 on: February 03, 2020, 05:34:57 AM »
Thank you guys. My wife and I are 34, I'm a teacher she used to be but opted for part time work due to our 2 kids. We have $572k net worth, a paid off rental property and only $63k left on primary residence. I'm mostly deciding what our next steps should be. I've never known much about investing, just crunched the numbers on returns over time. I figured since we have education pensions and a rental, something like index funds might be a logical next step to diversification. We have no matching 403b or anything like that. However, I do have a HSA account and looking at that list of investing opportunities looks like it might be the better next choice.

MDM

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Re: vanguard.com signing up questions
« Reply #10 on: February 03, 2020, 09:41:41 AM »
Frankies Girl has spent a fair amount of time to lay it out for you.  It would be wise to read her posts thoroughly, including a good read of the material at the links she included.  That may be enough to answer your questions.

If not, after doing that reading you should at least be able to ask more specific questions.  Good luck!