Young Investor - Needs Wisdom

[NolaMark]

Hey guys,

I'm new here to the community and I'd like to first off start by saying hello to everyone, this blog is great and this forum is a fantastic way to connect with like minded individuals.  That said, I could use some advice.  Here's my current situation:

• 25 years old
• 401k through work with match
• Rollover IRA with Vanguard with funds from 401ks from previous jobs
• Roth IRA w/ Vanguard
• Taxable brokerage account w/Vanguard

The blog has definitely helped in terms of finding creative ways to save and while I'd like to save more (wouldn't we all) I think my questions really lie in the structure of my portfolio.

Every year I've typically maxed out the Roth IRA account first ($5,500) while contributing 20% of each paycheck to the 401k.  Each paycheck I also take out another 20% and put that into my taxable account made up of ETFs.  Am I going about this the right way based on everyone's experience?  I'm just wondering what I should/could be doing differently.  I'm most concerned about maxing out the right accounts and utilizing the tax preferential vehicles to my advantage.  I've also got another $30k coming my way and want to know the best way to allocate that as well.  Lastly, any funds/ETFs that you all think would fit the portfolio of someone in my shoes would be helpful.  I'd love to make sure I get on the right track now so I can continue automating everything as I work towards retirement.

Thanks for reading!

Mark

[hokiegb]

First off, good job on saving so much by 25!

For the best way to allocate, that depends a lot on your risk tolerance. I've got most of my taxable funds in Vanguard's Total Stock Market Index Fund, with about 10% in their total bond market index for some diversification of asset classes. And I recently diversified again with the purchase of a rental house. So a lot depends on what you want to do, how active you want to be in managing your money, etc. I've also been following MMM in his Lending Club experiment, so that's an option if you want a higher return in exchange for more work up front and somewhat more risk.

Overall, I'd just make sure your asset allocation matches your risk tolerance and make sure you're paying the lowest fees you can on them.

[finitelement]

What are the taxable accounts I'm hearing of?  I always thought the best route to take was to maximize 401k and IRA contributions first.

[Dexterous]

You'll probably be provided some outstanding advice from people here if you're willing to provide more detailed information.  Ideally, how much income do you have and invest?  What are your current holdings in each account, including the contributions in the Roth?

Without knowing that, I'll assume it's still far better to be maxing your 401K and Roth prior to worrying about taxable investments.  Considering you started young, you'll probably have enough Roth contributions + taxable money to cover your first 5 years of retirement while you wait for the 401k rollovers to be considered contributions.  Also, you mentioned you have 30k coming your way that seems extra so there's definitely no reason to not be maxing your 401k this year... unless you have a lot of debt that wasn't mentioned!  :)

I allocate 90% in stocks and 10% in bonds (I have the TSP though, so it has a bond fund that's quite different than civilian accounts).  Considering you already have Vanguard, the Total Stock Market Index Fund can easily cover your needs for stocks.  Consider adding international if you want more diversification.  The bogleheads forum has some good portfolio examples.

[NolaMark]

Thanks guys, I appreciate it!