Author Topic: What to do with my money?  (Read 16527 times)

Catica

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What to do with my money?
« on: March 16, 2018, 10:47:23 AM »
Hi,

I've been reading MMM blog and other blogs about investing and how to get to early retirement.  But I don't understand ANYTHING.  Everything I read assumes that I know what things are, Vanguard, Index Funds, eggs, etc. I have no clue where to start.  MMM says invest your money in stock invest funds, what the heck is that???  Is there really really really a basic explanation to any of this?  I read all kinds of steps, bullet points in what order one should save/invest the money, max out 401K, then IRA etc. etc.  I do not understand why I would do such things.  Why max out 401K???  Why put money in IRA if I already put my money in 401K, why do other things on top of that.  How does that help me in early retirement if I have to pay penalty if I take that money out?  Then I read that you can take the money out of 401K and roll it over to IRA and withdraw without penalty before I'm 59.5.  Why are there bizarre tricks one has to do? 
Having said all that and almost knowing that I guess I'll never get it as this is so complicated that no one really knows for sure, that's why we have financial advisors etc.  Can someone simply tell me what would be the next thing for me to do?  I probably can't retire early, too late for me as didn't save enough but here is where I'm right now.  I'm 41, single, childless, no debt, not paying mortgage, $205000 in 403B, 40K in a savings account.  I can save more but just never thought about it.  What should I do with the 40K that just sits in a savings account and earns 1.5%.  I would probably keep 10K in it for emergencies but would like to do something else with the rest (30K).  Also, what should my strategy be for saving more?  I can definitely save more out of my paycheck, but don't know what to do with it. 

I would appreciate any guidance.  I think it's pretty obvious that I'm clueless.

Thanks
Catica

MDM

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Re: What to do with my money?
« Reply #1 on: March 16, 2018, 11:00:19 AM »
Catica, welcome to the forum.

See the 'Basic Terms' tab in the case study spreadsheet for some terminology.  Probably won't explain everything, but it might help.

If you go to Investment Order, there are some "whys" to go with the "whats".

You might take a look at the items above, and references such as
Getting started - Bogleheads
Stock Series
www.etf.com/docs/IfYouCan.pdf.

Does any of that help?  Specific questions after reviewing that info?

Rob_bob

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Re: What to do with my money?
« Reply #2 on: March 16, 2018, 01:52:47 PM »
The goal is to save for retirement, at whatever age. 401K, IRA etc. allow you to save money with tax benefits.  You deduct the contributions from your income lowering your taxes.  The contributions grow tax free and compound the returns faster.

Index funds, ETF's, Mutual Funds are all baskets of stocks in U.S. and foreign companies.  When economies grow so do the stock funds.  Historically stocks outperform all other asset classes, however you have to have a long term perspective because economies go through bad times and stocks will go down but will recover and go higher...long term.

You max out a 401K first because it has higher contribution limits and many have an employer matching contribution, free money, you like free money right?

Vanguard, Fidelity etc. are companies where you can open an investment account either a IRA or taxable, they also have their own brand of index funds.

The simplest thing to do with money that isn't going into an employer sponsored plan is to open an IRA (there are income limits for an IRA) and invest the money into a Total Stock Market Fund. At Vanguard that would be the ticker symbol VTSMX.

Spend some time reading, it will make more sense and become simpler as you learn.

Catica

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Re: What to do with my money?
« Reply #3 on: March 16, 2018, 02:45:44 PM »
Catica, welcome to the forum.

See the 'Basic Terms' tab in the case study spreadsheet for some terminology.  Probably won't explain everything, but it might help.

If you go to Investment Order, there are some "whys" to go with the "whats".

You might take a look at the items above, and references such as
Getting started - Bogleheads
Stock Series
www.etf.com/docs/IfYouCan.pdf.

Does any of that help?  Specific questions after reviewing that info?

I'm still reading some of the links you posted but from the Investment Order link here are my questions:
0. What is emergency fund, just money stashed somewhere for emergency?  Under my pillow??
1. What does ďup to company match meanĒ?  Same % as the company is contributing to my 403B?  Why only that and not more?
3. What is HSA?
4. Do not understand the WHY of Max Traditional IRA or Roth based on income level.  How do I know what is current federal marginal rate?  What is MAGI?
5. How do I know what the fees are for 401K?

Catica

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Re: What to do with my money?
« Reply #4 on: March 16, 2018, 02:54:50 PM »
The goal is to save for retirement, at whatever age. 401K, IRA etc. allow you to save money with tax benefits.  You deduct the contributions from your income lowering your taxes.  The contributions grow tax free and compound the returns faster.

Index funds, ETF's, Mutual Funds are all baskets of stocks in U.S. and foreign companies.  When economies grow so do the stock funds.  Historically stocks outperform all other asset classes, however you have to have a long term perspective because economies go through bad times and stocks will go down but will recover and go higher...long term.

You max out a 401K first because it has higher contribution limits and many have an employer matching contribution, free money, you like free money right?

Vanguard, Fidelity etc. are companies where you can open an investment account either a IRA or taxable, they also have their own brand of index funds.

The simplest thing to do with money that isn't going into an employer sponsored plan is to open an IRA (there are income limits for an IRA) and invest the money into a Total Stock Market Fund. At Vanguard that would be the ticker symbol VTSMX.

Spend some time reading, it will make more sense and become simpler as you learn.
What is "baskets of stocks in U.S. and foreign companies"?  What does "basket" mean in here?
When you say "Historically stocks outperform all other asset classes", what are asset classes?
"You max out a 401K first because it has higher contribution limits and many have an employer matching contribution, free money, you like free money right?"  But I can get that free money without maxing out, so why max out?
What is a "brand of index funds"??  What does that mean?
"The simplest thing to do with money that isn't going into an employer sponsored plan is to open an IRA (there are income limits for an IRA) and invest the money into a Total Stock Market Fund. At Vanguard that would be the ticker symbol VTSMX."  Is it better to put money into an employer sponsored plan or to open IRA?  That's unclear to me from this sentence.

Thanks


FI45RE

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Re: What to do with my money?
« Reply #5 on: March 16, 2018, 02:58:59 PM »
http://jlcollinsnh.com/stock-series/

This helps to explain a lot of the definitions, and explains how these financial tools work.

Rob_bob

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Re: What to do with my money?
« Reply #6 on: March 16, 2018, 03:32:25 PM »
An emergency fund is cash in a bank account, usually an amount to cover at least six months of your bills in case you out of a job.

Yes the company match is the amount the employer will contribute to you retirement plan.

The government sets the max income someone can have to make tax deductible contributions to an IRA.

The reason you contribute to the limit for a 401K even after the company match is because you can contribute a larger amount and get a larger tax deduction than with an IRA which has a max contribution of $5500 if you are under 50 years old.  After you fully contribute to the 401K then you go to an IRA, the idea is to get the biggest tax reduction, you would like to pay less taxes right?

HSA is Health Savings Account.  Another place you can put money and deduct it from your taxes.  You need to have a qualified high deductible health insurance policy to use it.

Google marginal tax rates and MAGI, do you know your tax bracket?  MAGI is less than your gross income and more than your adjusted gross income on your tax form.

Fees on 401k, ask your employer.

Basket of stocks, just a descriptive term for a Mutual fund.  Fund companies simply by a bunch of stocks that make up some segment of the total stock market.  Say health care, or utilities or even the total market itself.  When you buy that single fund you own a piece of all the stocks in that fund.

Asset classes. Company stocks, Real estate, commodities, currencies etc.

Brand of index fund.  Some investment companies are in the business of creating stock funds for people to invest in and they put their name on them. Vanguard and Blackrock are the biggest.  It's like Ford and Chevy, brand names.

yachi

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Re: What to do with my money?
« Reply #7 on: March 16, 2018, 04:03:05 PM »
Catica,
There is a saying that perfection is the enemy of the good.  It means in striving for perfection, you can miss doing what's good.  The Investment Order link and bizarre tricks are the perfection, basically all they do is save you taxes.  You don't need to understand all of them right away if you don't want to. 

Let's start with what you have:

$205,000 in a 403b - This is great.  It's a lot of money.  Let's make sure that money is working it's hardest for you.  In your 403B you'll have a list of funds you can be invested in, do any have the word 'index' in them?

You are contributing something to your 403b each year.  The limit is $18,500 per year.  If you can, contribute up to this amount.  If you have a fund with the work 'index' in it choose that one.

You're savings account:
"I would probably keep 10K in it for emergencies" - Good, this is your emergency fund no need to put it anywhere special.

If you can't save $18,500 per year in your 403b, you can spend the $30,000 on living expenses until your $30,000 runs out, at which point you can reduce your 403b contributions.

If you can save more than $18,500 per year, we can look at other places to put the money.  If not, you're done.  That's the good.  No need for perfecting it unless you're ready for more.

MDM

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Re: What to do with my money?
« Reply #8 on: March 16, 2018, 04:18:56 PM »
I'm still reading some of the links you posted but from the Investment Order link here are my questions:
0. What is emergency fund, just money stashed somewhere for emergency?  Under my pillow??
1. What does ďup to company match meanĒ?  Same % as the company is contributing to my 403B?  Why only that and not more?
3. What is HSA?
4. Do not understand the WHY of Max Traditional IRA or Roth based on income level.  How do I know what is current federal marginal rate?  What is MAGI?
5. How do I know what the fees are for 401K?
0. Not recommended for it to be under your pillow, but that's up to you.  The $40K you have in a saving account would qualify.
1. In many 401k/403b plans, the employer will match contributions you make.  Sometimes the match is 1-for-1, sometimes 0.5-for-1, etc.  In those two cases, you are getting a 100% or 50% return on your money, better than anything else you can reasonably expect.
3. See Abbreviations and Acronyms - Bogleheads.
4. See Traditional versus Roth - Bogleheads, particularly the part about the commutative property of multiplication.  You can use the case study spreadsheet to determine marginal rates.  Another method is to take your current tax return and increase your 403b contribution by $100.  The marginal rate then is (amount tax decreases)/$100.
5. If it is a 401k, your employer has to show the fees.  Ask your benefits department.  If it is a 403b, they may or may not have to make the fees readily available.  But you should be able to find them by asking the person through whom you do your 403b investing.

Catica

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Re: What to do with my money?
« Reply #9 on: March 16, 2018, 05:19:05 PM »
An emergency fund is cash in a bank account, usually an amount to cover at least six months of your bills in case you out of a job.

Yes the company match is the amount the employer will contribute to you retirement plan.

The government sets the max income someone can have to make tax deductible contributions to an IRA.

The reason you contribute to the limit for a 401K even after the company match is because you can contribute a larger amount and get a larger tax deduction than with an IRA which has a max contribution of $5500 if you are under 50 years old.  After you fully contribute to the 401K then you go to an IRA, the idea is to get the biggest tax reduction, you would like to pay less taxes right?

HSA is Health Savings Account.  Another place you can put money and deduct it from your taxes.  You need to have a qualified high deductible health insurance policy to use it.

Google marginal tax rates and MAGI, do you know your tax bracket?  MAGI is less than your gross income and more than your adjusted gross income on your tax form.

Fees on 401k, ask your employer.

Basket of stocks, just a descriptive term for a Mutual fund.  Fund companies simply by a bunch of stocks that make up some segment of the total stock market.  Say health care, or utilities or even the total market itself.  When you buy that single fund you own a piece of all the stocks in that fund.

Asset classes. Company stocks, Real estate, commodities, currencies etc.

Brand of index fund.  Some investment companies are in the business of creating stock funds for people to invest in and they put their name on them. Vanguard and Blackrock are the biggest.  It's like Ford and Chevy, brand names.
Great, this was helpful.  I do to know my tax bracket, how do I find it out?

Catica

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Re: What to do with my money?
« Reply #10 on: March 16, 2018, 05:26:20 PM »
Catica,
There is a saying that perfection is the enemy of the good.  It means in striving for perfection, you can miss doing what's good.  The Investment Order link and bizarre tricks are the perfection, basically all they do is save you taxes.  You don't need to understand all of them right away if you don't want to. 

Let's start with what you have:

$205,000 in a 403b - This is great.  It's a lot of money.  Let's make sure that money is working it's hardest for you.  In your 403B you'll have a list of funds you can be invested in, do any have the word 'index' in them?

You are contributing something to your 403b each year.  The limit is $18,500 per year.  If you can, contribute up to this amount.  If you have a fund with the work 'index' in it choose that one.

You're savings account:
"I would probably keep 10K in it for emergencies" - Good, this is your emergency fund no need to put it anywhere special.

If you can't save $18,500 per year in your 403b, you can spend the $30,000 on living expenses until your $30,000 runs out, at which point you can reduce your 403b contributions.

If you can save more than $18,500 per year, we can look at other places to put the money.  If not, you're done.  That's the good.  No need for perfecting it unless you're ready for more.
Thank you yachi.  Here are the answers to your questions:

"In your 403B you'll have a list of funds you can be invested in, do any have the word 'index' in them?" - I have 2 with the word "index" in them, one is TIAA-CREF S&P 500 Index Fund  and the other is TIAA-CREF Lifecycle Index Retirement Income Fund    

You are contributing something to your 403b each year.  The limit is $18,500 per year.  If you can, contribute up to this amount. I'm afraid to put more money there because it won't be accessible until I'm 59.5yrs old.  What if I wanted to retire earlier than that?

Catica

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Re: What to do with my money?
« Reply #11 on: March 16, 2018, 05:40:09 PM »
http://jlcollinsnh.com/stock-series/

This helps to explain a lot of the definitions, and explains how these financial tools work.
I tried reading this last night and it was really hard to understand.  I don't think this is for people who know absolutely nothing.  His way of writing is perhaps hard to follow for me.  In Part I he talks about some Dr Lo and how not to believe him etc..  and another Part is about some Big Ugly Event etc.

MDM

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Re: What to do with my money?
« Reply #12 on: March 16, 2018, 05:56:37 PM »
I'm afraid to put more money there because it won't be accessible until I'm 59.5yrs old.  What if I wanted to retire earlier than that?
How to withdraw funds from your IRA and 401k without penalty before age 59.5.

ILikeDividends

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Re: What to do with my money?
« Reply #13 on: March 16, 2018, 09:07:34 PM »
You are contributing something to your 403b each year.  The limit is $18,500 per year.  If you can, contribute up to this amount. I'm afraid to put more money there because it won't be accessible until I'm 59.5yrs old.  What if I wanted to retire earlier than that?
You said you could save more.  That's where the additional savings come in.  You want to max out your tax advantaged accounts (403B, 401K, IRA, etc) first.  Then shove every penny more that you can save into a taxable investment account.

Ask yourself this: will paying more in taxes now help you retire earlier later?  That's why you want to max out your tax-advantaged accounts.  You should organize your plan around the assumption that you're not going to withdraw any of that money before 59.5.  Furthermore, the longer you can leave it in those accounts, after you hit 59.5, the better off you'll be.

I'll be 61 next month, but I'm not touching my IRA accounts until after I spend down my taxable accounts first, or until I hit 70, which is when you must start taking distributions from a traditional IRA.  Legally avoiding/deferring taxes is really nice no matter how old you are.

Plan your early retirement around a strategy of saving/investing even more than that in a taxable account, in order to bridge the gap from your early retire date until you are at least 59.5, or later than that is even better.
« Last Edit: March 16, 2018, 09:27:03 PM by ILikeDividends »

Catica

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Re: What to do with my money?
« Reply #14 on: March 17, 2018, 05:55:49 AM »
You are contributing something to your 403b each year.  The limit is $18,500 per year.  If you can, contribute up to this amount. I'm afraid to put more money there because it won't be accessible until I'm 59.5yrs old.  What if I wanted to retire earlier than that?
You said you could save more.  That's where the additional savings come in.  You want to max out your tax advantaged accounts (403B, 401K, IRA, etc) first.  Then shove every penny more that you can save into a taxable investment account.

Ask yourself this: will paying more in taxes now help you retire earlier later?  That's why you want to max out your tax-advantaged accounts.  You should organize your plan around the assumption that you're not going to withdraw any of that money before 59.5.  Furthermore, the longer you can leave it in those accounts, after you hit 59.5, the better off you'll be.

I'll be 61 next month, but I'm not touching my IRA accounts until after I spend down my taxable accounts first, or until I hit 70, which is when you must start taking distributions from a traditional IRA.  Legally avoiding/deferring taxes is really nice no matter how old you are.

Plan your early retirement around a strategy of saving/investing even more than that in a taxable account, in order to bridge the gap from your early retire date until you are at least 59.5, or later than that is even better.
I can save more than I'm saving now.  I can't save more than $18500.  What should I do with $30K that's sitting in the savings account?

bortman

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Re: What to do with my money?
« Reply #15 on: March 17, 2018, 06:55:50 AM »
Like you, when I came across MMM and the forum a few years back I was overwhelmed.

Some bullets to guide you on a macro level ...

ē Learning about FIRE -- or anything else, for that matter -- is a process. Give yourself time to take it in.

ē Saving your money is never bad. Not making it work for you in *some* way *is* bad. After that, it's all about optimizing how you save. This is the reason why we're here .. to make our money work so that we don't have to.

ē All investments have conditions, constraints, and benefits. Guidance about investment order is meant to help you to optimize your investments, so you get to FIRE more expeditiously.

ē For the most part, we're lazy-but-efficient investors. We aim for investments that don't require a great understanding of the minutiae of how various investments work .. only enough to allow us to minimize expenses and ensure slow-and-steady investment gains.

ē That said, savings rate -- the % of your income that you save -- is another big theme here. Maximizing savings rate will help you to accumulate wealth more quickly.


Quote
I can save more than I'm saving now.  I can't save more than $18500.  What should I do with $30K that's sitting in the savings account?

You are already contributing to a 403b. Many employers that offer 403b also make a 457b available. You should check if your employer has a 457b plan too.

If they do, then you could start contributing to the 457b in addition to the 403b. This will greatly reduce your net pay, but you could then live off of your $30k savings until you max out your 457b. That's a good way to reduce your taxable income while getting the $30k to work for you.

Note that:

ē you can contribute $18,500 to your 403b *and* another $18,500 to a 457b

ē 457b is more accessible prior to age 59.5, giving you another pool of money to access in early retirement

(if you haven't come across it already: FIRE =  Financial Independence Retire Early)
http://www.early-retirement.org/forums/f47/acronyms-and-slang-frequently-used-on-the-forum-34884.html

Rob_bob

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Re: What to do with my money?
« Reply #16 on: March 17, 2018, 02:07:23 PM »
An emergency fund is cash in a bank account, usually an amount to cover at least six months of your bills in case you out of a job.

Yes the company match is the amount the employer will contribute to you retirement plan.

The government sets the max income someone can have to make tax deductible contributions to an IRA.

The reason you contribute to the limit for a 401K even after the company match is because you can contribute a larger amount and get a larger tax deduction than with an IRA which has a max contribution of $5500 if you are under 50 years old.  After you fully contribute to the 401K then you go to an IRA, the idea is to get the biggest tax reduction, you would like to pay less taxes right?

HSA is Health Savings Account.  Another place you can put money and deduct it from your taxes.  You need to have a qualified high deductible health insurance policy to use it.

Google marginal tax rates and MAGI, do you know your tax bracket?  MAGI is less than your gross income and more than your adjusted gross income on your tax form.

Fees on 401k, ask your employer.

Basket of stocks, just a descriptive term for a Mutual fund.  Fund companies simply by a bunch of stocks that make up some segment of the total stock market.  Say health care, or utilities or even the total market itself.  When you buy that single fund you own a piece of all the stocks in that fund.

Asset classes. Company stocks, Real estate, commodities, currencies etc.

Brand of index fund.  Some investment companies are in the business of creating stock funds for people to invest in and they put their name on them. Vanguard and Blackrock are the biggest.  It's like Ford and Chevy, brand names.
Great, this was helpful.  I do to know my tax bracket, how do I find it out?

Google: tax brackets for 2018.  You will get a list of the income range for each tax bracket.

If you are concerned about getting money out of a retirement account before 59.5 without jumping through some hoops consider a Roth IRA.  All contributions  can be withdrawn at any time because you don't get a tax deduction on the contributions, but you must leave the gains in until 59.5.  You would need to keep track of how much you contribute over the years so you know how much you could withdraw.  You can contribute $5500 per year under age 50 and $6500 over age 50.  After age 59.5 all withdrawals are tax free.

If that $30k in savings is your emergency fund you could put it in a Certificate of Deposit, CD.  Usually they are for some set period of time like 1 year 2 years etc.  If you cash them in sooner you pay a penalty on the interest earned.  However Ally Bank has an 11 month Penalty Free CD paying about 1.74%.

Or if you don't care about a tax deduction and it's not emergency money open a Roth account and a taxable brokerage account. Put $5500 in the Roth and the rest in the taxable account, invest in a Total Market Index fund then every year move money from the taxable account to the Roth.

Google is your friend, whenever you don't understand a term just search for it  :)

MrThatsDifferent

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Re: What to do with my money?
« Reply #17 on: March 17, 2018, 03:30:12 PM »
Ok, Cattica, I think youíre being brave for putting yourself out there and letting everyone know what you donít know. I felt like you almost 18 months ago. I read everything and a lot of it was (still is) over my head and Iím a fairly intelligent and educated person. Finance and math though are not my fortes. But look at you, for someone who doesnít know jack shit, youíve got $245k of net worth with virtually no anchors. Thatís awesome and amazing. Imagine what you could do if you focused?

So, Iíll share what worked for me and maybe it can help you, one finance dummy to another. ;-)

Simplify everything. I have an excel spreadsheet where I record my assets (what gives/makes me money) and my liabilities (what takes my money away) to determine my net worth. I track this each month and record: Cash (what I have in the bank), Retirement (whatís in my retirement account) and Investments (whatís in my Vanguard account) and then I add this number up and subtract my liabilities (currently none as we rent and donít have a mortgage). Thatís how I determine my net worth. Your goal is to think of those 3 areas or buckets as levers you can use to increase your NW. Your other goal is to keep it simple.

For Cashósimplest thing you can do is take whatever safety money you want (say $10k) and put it in the bank that has the highest interest with the lowest fees and Park it there until/unless you need it as an emergency and then use and replenish.

For Retirement ógo to HR and say you want to max out whatever company retirement account you have and then forget about it for now.

For InvestmentsóLook up Vanguard dot com and get their number. Call them and say you want to open up an account that is a set and forget, like a total life strategy account. They will guide you through everything. All you want to do is send a set amount of money every pay to that account. Then get the ability to check the account online and record your figures. The key here is to not panic or get too excited when the numbers go up or down. You have to just let it do itís thing for at least 10 years, 20 is ideal.

And, thatís it. That simple. Donít make it more complex until you understand it all better.

Now, you have 2 more things to work out: what you can save and invest now, and what you want to live on when you retire. You need 2 budgets: now budget and retire budget. With now budget, the game is to live the life you want as efficiently as possible and take what is left over and put it in your investments. Your Cash and Retirement buckets are already set, so the excess just goes to Investments.

In your retirement budget, you think of the life you want when youíre done working or you scale work down. It might look the same, might look different but try to guesstimate what that yearly spend will be. Now, multiply that number by 25. Thatís the total amount of money you need of net worth to FIRE. Thatís it. Then youíve won the game!

Once you get everything simple and automated, then you can start tweaking and working on nuances like how to get more money from your Now budget. But start with this first. Good luck.
« Last Edit: March 17, 2018, 05:19:12 PM by MrThatsDifferent »

BTDretire

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Re: What to do with my money?
« Reply #18 on: March 17, 2018, 04:29:47 PM »
Congrates on the $240k+, that is way more than a start, in 10 years that mostly likely will be $500k. Now, what can you save and grow during those 10 years? Seems like in 10 to 15 years you could have $1M.

Management Fees are important, you want low costs, that's why many here recommend Vanguard index Funds.
If you have $1M invested with a 1% management fee, that's $10,000 out of your pocket. With $200,000, it's $10,000
over the next 5 years. So, Find out the fee for your 403b, if it is high, then you may want to only put money in, up to your company match. (because the match is free money) Then additional savings can go to an low fee IRA or a Roth IRA.

 Money invested in an IRA is a tax deduction the year you make it, and, it grows tax free. You would open a IRA at the company, say Vanguard, Schwab, T D Ameritrade, or a bank, then pick what you want the money invested in, VTSAX, LifeStrategy Funds,
etc.

Money invested in an ROTH IRA DOESN'T  get a tax deduction the year you make it, BUT it does grows tax free. You would open a ROTH IRA at the company, say Vanguard, Schwab, T D Ameritrade, or a bank, then pick what you want the money invested in, VTSAX, LifeStrategy Funds, etc.

  I would suggest VTSAX, that is an index fund that is invested in about 3600 companies, the companies cover
a wide range of types of companies, in other words, it is diversified, (not invested in one type of product, only like steel or only airplanes) Fee is only 0.04%.
  Someone above recommended the LifeStrategy Funds, nothing wrong there, they are less volatile, meaning the dollar amount will change less from day to day. Why are they less volatile?  Besides many stocks they also have bonds in their portfolio. There are 4 LifeStrategy Funds, they hold 20% bonds, 40% bonds, 60% bonds, and 80% bonds. The higher the percentage of bonds the more conservative. The higher percentage of bonds, the less it will rise in a booming stock market, but, also the less it will fall in a recession/depression. The website has some easily understood graphics.
 https://investor.vanguard.com/mutual-funds/lifestrategy/#/
 You may feel more comfortable with some bonds, but at 41yrs old, I think it is a bit early in your life for bonds. You can weather one or two more stock market cycles. The stock market goes up and down over the short term and up over the long term.

 An HSA is a Health Saving Account, IF you have a high deductible insurance plan, you can invest $3,450. And get a income tax deduction for it. It grows tax free, you can use it for health related expenses, BUT, many are saving it as a retirement account and paying for medical expenses with regular earnings.  You can save your medical receipts and then when retired spend any amount tax free upto the amount of your receipts.Or you canroll yur HSA into an IRA.

 I suggest you keep asking questions, this group is a treasure of knowledge, shared willingly with pleasure, and an occasional
facepunch. :-)


GOFU

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Re: What to do with my money?
« Reply #19 on: March 17, 2018, 06:23:05 PM »
You are pretty clearly a natural saver. That puts you ahead of the game and will serve you well. Don't go changin'.

All the entries above are good ones. My only advice at this stage would be:

1. Keep saving. This is the biggest difference between people who have a retirement fund and those who do not.

2. TAKE THE ADVICE YOU ARE GETTING!! Many come around asking for help but what they really want is confirmation of their own bad ideas. Don't be that person. Much of the advice so far is to increase your knowledge and start simply. But get started you must. This is good advice. Take it.

3. Keep reading. In six months or a year you will wonder why you found it all so mysterious, and you will wonder why people fork over their hard-earned money to financial "advisors" who know little to no more than you do.

Keep saving.

Did I mention you should keep saving?

Catica

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Re: What to do with my money?
« Reply #20 on: March 18, 2018, 06:20:54 AM »
0. Not recommended for it to be under your pillow, but that's up to you.  The $40K you have in a saving account would qualify.
1. In many 401k/403b plans, the employer will match contributions you make.  Sometimes the match is 1-for-1, sometimes 0.5-for-1, etc.  In those two cases, you are getting a 100% or 50% return on your money, better than anything else you can reasonably expect.
3. See Abbreviations and Acronyms - Bogleheads.
4. See Traditional versus Roth - Bogleheads, particularly the part about the commutative property of multiplication.  You can use the case study spreadsheet to determine marginal rates.  Another method is to take your current tax return and increase your 403b contribution by $100.  The marginal rate then is (amount tax decreases)/$100.
5. If it is a 401k, your employer has to show the fees.  Ask your benefits department.  If it is a 403b, they may or may not have to make the fees readily available.  But you should be able to find them by asking the person through whom you do your 403b investing.
Hi MDM, I missed this previous reply from you.
0. Got it!
1. My employer contributes a flat percentage to my plan no matter how much I contribute.
3. Thanks, will read
4. Thanks, will read and figure out
5. Yeah, the plan is 403b.  I will ask TIAA.  Do I just say "What are the fees for my account?"

Thank you
« Last Edit: March 18, 2018, 06:42:28 AM by Catica »

Catica

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Re: What to do with my money?
« Reply #21 on: March 18, 2018, 06:27:04 AM »
Like you, when I came across MMM and the forum a few years back I was overwhelmed.

Some bullets to guide you on a macro level ...

ē Learning about FIRE -- or anything else, for that matter -- is a process. Give yourself time to take it in.

ē Saving your money is never bad. Not making it work for you in *some* way *is* bad. After that, it's all about optimizing how you save. This is the reason why we're here .. to make our money work so that we don't have to.

ē All investments have conditions, constraints, and benefits. Guidance about investment order is meant to help you to optimize your investments, so you get to FIRE more expeditiously.

ē For the most part, we're lazy-but-efficient investors. We aim for investments that don't require a great understanding of the minutiae of how various investments work .. only enough to allow us to minimize expenses and ensure slow-and-steady investment gains.

ē That said, savings rate -- the % of your income that you save -- is another big theme here. Maximizing savings rate will help you to accumulate wealth more quickly.


Quote
I can save more than I'm saving now.  I can't save more than $18500.  What should I do with $30K that's sitting in the savings account?

You are already contributing to a 403b. Many employers that offer 403b also make a 457b available. You should check if your employer has a 457b plan too.

If they do, then you could start contributing to the 457b in addition to the 403b. This will greatly reduce your net pay, but you could then live off of your $30k savings until you max out your 457b. That's a good way to reduce your taxable income while getting the $30k to work for you.

Note that:

ē you can contribute $18,500 to your 403b *and* another $18,500 to a 457b

ē 457b is more accessible prior to age 59.5, giving you another pool of money to access in early retirement

(if you haven't come across it already: FIRE =  Financial Independence Retire Early)
http://www.early-retirement.org/forums/f47/acronyms-and-slang-frequently-used-on-the-forum-34884.html
Thanks Bortman.  My employer only offers 457b to very high paying employees, that's not me.  Looking closely I see that my contribution goes to TDA and the employers contribution goes to a separate plan but at the same investment company.

Catica

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Re: What to do with my money?
« Reply #22 on: March 18, 2018, 06:32:25 AM »
An emergency fund is cash in a bank account, usually an amount to cover at least six months of your bills in case you out of a job.

Yes the company match is the amount the employer will contribute to you retirement plan.

The government sets the max income someone can have to make tax deductible contributions to an IRA.

The reason you contribute to the limit for a 401K even after the company match is because you can contribute a larger amount and get a larger tax deduction than with an IRA which has a max contribution of $5500 if you are under 50 years old.  After you fully contribute to the 401K then you go to an IRA, the idea is to get the biggest tax reduction, you would like to pay less taxes right?

HSA is Health Savings Account.  Another place you can put money and deduct it from your taxes.  You need to have a qualified high deductible health insurance policy to use it.

Google marginal tax rates and MAGI, do you know your tax bracket?  MAGI is less than your gross income and more than your adjusted gross income on your tax form.

Fees on 401k, ask your employer.

Basket of stocks, just a descriptive term for a Mutual fund.  Fund companies simply by a bunch of stocks that make up some segment of the total stock market.  Say health care, or utilities or even the total market itself.  When you buy that single fund you own a piece of all the stocks in that fund.

Asset classes. Company stocks, Real estate, commodities, currencies etc.

Brand of index fund.  Some investment companies are in the business of creating stock funds for people to invest in and they put their name on them. Vanguard and Blackrock are the biggest.  It's like Ford and Chevy, brand names.
Great, this was helpful.  I do to know my tax bracket, how do I find it out?

Google: tax brackets for 2018.  You will get a list of the income range for each tax bracket.

If you are concerned about getting money out of a retirement account before 59.5 without jumping through some hoops consider a Roth IRA.  All contributions  can be withdrawn at any time because you don't get a tax deduction on the contributions, but you must leave the gains in until 59.5.  You would need to keep track of how much you contribute over the years so you know how much you could withdraw.  You can contribute $5500 per year under age 50 and $6500 over age 50.  After age 59.5 all withdrawals are tax free.

If that $30k in savings is your emergency fund you could put it in a Certificate of Deposit, CD.  Usually they are for some set period of time like 1 year 2 years etc.  If you cash them in sooner you pay a penalty on the interest earned.  However Ally Bank has an 11 month Penalty Free CD paying about 1.74%.

Or if you don't care about a tax deduction and it's not emergency money open a Roth account and a taxable brokerage account. Put $5500 in the Roth and the rest in the taxable account, invest in a Total Market Index fund then every year move money from the taxable account to the Roth.

Google is your friend, whenever you don't understand a term just search for it  :)
I'm in 22% tax bracket.

BTDretire

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Re: What to do with my money?
« Reply #23 on: March 18, 2018, 07:07:47 AM »
I'm in 22% tax bracket.

 Depending on your income, if you put enough money into tax deductible accounts you
can get down to the 12% bracket.
 My wife and I both have SEP/IRAs, and fund an HSA. With those and a few others
deductions we get to a very low tax burden. This may end in 2018, as the child deduction goes away.
Both my kids are over 16. I'm older and I want to start Roth conversions, which will bump my income.
 I still expect to stay in the 12% bracket.Other wisw I don't think it's worth doing a Roth conversion.

MDM

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Re: What to do with my money?
« Reply #24 on: March 18, 2018, 08:12:27 AM »
1. My employer contributes a flat percentage to my plan no matter how much I contribute.
...
5. Yeah, the plan is 403b.  I will ask TIAA.  Do I just say "What are the fees for my account?"
1. In that case, $0 is the "up to the company match" amount.

5. Yes, pretty much that.  There may be two types of fees:
a) A fee for your participation in the 403b plan, regardless of your investments.  This may be a flat fee (e.g., $40/yr) or some fraction of your 403b balance.
b) Fees specific to the funds in which you invest.  Those are often called a fund's "expense ratio" (ER) and might range from ~0.05% (which would be good) to ~1.5% (which would be bad).

CupcakeGuru

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Re: What to do with my money?
« Reply #25 on: March 18, 2018, 10:37:33 AM »
Catica, welcome! First of all you are doing very well. I see that others have recommended the http://jlcollinsnh.com/stock-series/ which is fabulous. I would also recommend the https://www.bogleheads.org/wiki/Getting_started. They are both very helpful when you are interested in learning how to invest.

Keep up the good work!

Catica

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Re: What to do with my money?
« Reply #26 on: March 18, 2018, 11:55:34 AM »
An emergency fund is cash in a bank account, usually an amount to cover at least six months of your bills in case you out of a job.

Yes the company match is the amount the employer will contribute to you retirement plan.

The government sets the max income someone can have to make tax deductible contributions to an IRA.

The reason you contribute to the limit for a 401K even after the company match is because you can contribute a larger amount and get a larger tax deduction than with an IRA which has a max contribution of $5500 if you are under 50 years old.  After you fully contribute to the 401K then you go to an IRA, the idea is to get the biggest tax reduction, you would like to pay less taxes right?

HSA is Health Savings Account.  Another place you can put money and deduct it from your taxes.  You need to have a qualified high deductible health insurance policy to use it.

Google marginal tax rates and MAGI, do you know your tax bracket?  MAGI is less than your gross income and more than your adjusted gross income on your tax form.

Fees on 401k, ask your employer.

Basket of stocks, just a descriptive term for a Mutual fund.  Fund companies simply by a bunch of stocks that make up some segment of the total stock market.  Say health care, or utilities or even the total market itself.  When you buy that single fund you own a piece of all the stocks in that fund.

Asset classes. Company stocks, Real estate, commodities, currencies etc.

Brand of index fund.  Some investment companies are in the business of creating stock funds for people to invest in and they put their name on them. Vanguard and Blackrock are the biggest.  It's like Ford and Chevy, brand names.
Great, this was helpful.  I do to know my tax bracket, how do I find it out?

Google: tax brackets for 2018.  You will get a list of the income range for each tax bracket.

If you are concerned about getting money out of a retirement account before 59.5 without jumping through some hoops consider a Roth IRA.  All contributions  can be withdrawn at any time because you don't get a tax deduction on the contributions, but you must leave the gains in until 59.5.  You would need to keep track of how much you contribute over the years so you know how much you could withdraw.  You can contribute $5500 per year under age 50 and $6500 over age 50.  After age 59.5 all withdrawals are tax free.

If that $30k in savings is your emergency fund you could put it in a Certificate of Deposit, CD.  Usually they are for some set period of time like 1 year 2 years etc.  If you cash them in sooner you pay a penalty on the interest earned.  However Ally Bank has an 11 month Penalty Free CD paying about 1.74%.

Or if you don't care about a tax deduction and it's not emergency money open a Roth account and a taxable brokerage account. Put $5500 in the Roth and the rest in the taxable account, invest in a Total Market Index fund then every year move money from the taxable account to the Roth.

Google is your friend, whenever you don't understand a term just search for it  :)
$40K is extra money I have in the bank that I want to do something with rather than having it sit in the bank.  $10K out of that would be the emergency money I would leave in the bank but I want to do something with $30K.  So you are suggesting to open Roth (if I don't care about tax deductions, but I don't know whether I care or not since I don't understand it), put $5500 out of the $30K and the rest in the taxable account (what would that be?).  How do I invest in the Total Market Index fund?

Catica

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Re: What to do with my money?
« Reply #27 on: March 18, 2018, 12:06:05 PM »
Ok, Cattica, I think youíre being brave for putting yourself out there and letting everyone know what you donít know. I felt like you almost 18 months ago. I read everything and a lot of it was (still is) over my head and Iím a fairly intelligent and educated person. Finance and math though are not my fortes. But look at you, for someone who doesnít know jack shit, youíve got $245k of net worth with virtually no anchors. Thatís awesome and amazing. Imagine what you could do if you focused?

So, Iíll share what worked for me and maybe it can help you, one finance dummy to another. ;-)

Simplify everything. I have an excel spreadsheet where I record my assets (what gives/makes me money) and my liabilities (what takes my money away) to determine my net worth. I track this each month and record: Cash (what I have in the bank), Retirement (whatís in my retirement account) and Investments (whatís in my Vanguard account) and then I add this number up and subtract my liabilities (currently none as we rent and donít have a mortgage). Thatís how I determine my net worth. Your goal is to think of those 3 areas or buckets as levers you can use to increase your NW. Your other goal is to keep it simple.

For Cashósimplest thing you can do is take whatever safety money you want (say $10k) and put it in the bank that has the highest interest with the lowest fees and Park it there until/unless you need it as an emergency and then use and replenish.

For Retirement ógo to HR and say you want to max out whatever company retirement account you have and then forget about it for now.

For InvestmentsóLook up Vanguard dot com and get their number. Call them and say you want to open up an account that is a set and forget, like a total life strategy account. They will guide you through everything. All you want to do is send a set amount of money every pay to that account. Then get the ability to check the account online and record your figures. The key here is to not panic or get too excited when the numbers go up or down. You have to just let it do itís thing for at least 10 years, 20 is ideal.

And, thatís it. That simple. Donít make it more complex until you understand it all better.

Now, you have 2 more things to work out: what you can save and invest now, and what you want to live on when you retire. You need 2 budgets: now budget and retire budget. With now budget, the game is to live the life you want as efficiently as possible and take what is left over and put it in your investments. Your Cash and Retirement buckets are already set, so the excess just goes to Investments.

In your retirement budget, you think of the life you want when youíre done working or you scale work down. It might look the same, might look different but try to guesstimate what that yearly spend will be. Now, multiply that number by 25. Thatís the total amount of money you need of net worth to FIRE. Thatís it. Then youíve won the game!

Once you get everything simple and automated, then you can start tweaking and working on nuances like how to get more money from your Now budget. But start with this first. Good luck.
Thanks for your simple explanation MrThatsDifferent.  Let me respond to each point you made.

1. Simplify everything / net worth.  Yes, I feel I got everything simplified and I calculated my net worth.  I can track monthly.
2. Cash. I will keep it in my bank account which yelds 1.5% APY.  I think that's decent, unless there is something much better that I'm not aware off.
3. Retirement.  I can change my contribution online.  I can just take $18500 divide by 12 and ask them to take out that amount out of my paycheck monthly.  Does that make sense?  One questions I have which investing company I should go with.  I have a choice of Vanguard, Fidelity and TIAA-CREF.  Currently I'm with TIAA.
4. Investments.  That Vanguard account, what is it?  Can I take the money out without penalty before I'm 59.5 years old?
5. I need to figure out what I want to live on when I retire.  That's hard :)

MDM

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Re: What to do with my money?
« Reply #28 on: March 18, 2018, 12:09:20 PM »
...if I don't care about tax deductions, but I don't know whether I care or not since I don't understand it)
If you enter your expected 2018 tax situation in the case study spreadsheet (or your 2017 tax situation in the last 2017 version (9.11), attached to post https://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/msg1825323/#msg1825323), what marginal rates do you see on the chart over cell J93?


Quote
How do I invest in the Total Market Index fund?
Start by opening an account at (listed alphabetically)
Fidelity,
Schwab, or
Vanguard.

Catica

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Re: What to do with my money?
« Reply #29 on: March 18, 2018, 12:15:33 PM »
Congrates on the $240k+, that is way more than a start, in 10 years that mostly likely will be $500k. Now, what can you save and grow during those 10 years? Seems like in 10 to 15 years you could have $1M.

Management Fees are important, you want low costs, that's why many here recommend Vanguard index Funds.
If you have $1M invested with a 1% management fee, that's $10,000 out of your pocket. With $200,000, it's $10,000
over the next 5 years. So, Find out the fee for your 403b, if it is high, then you may want to only put money in, up to your company match. (because the match is free money) Then additional savings can go to an low fee IRA or a Roth IRA.

 Money invested in an IRA is a tax deduction the year you make it, and, it grows tax free. You would open a IRA at the company, say Vanguard, Schwab, T D Ameritrade, or a bank, then pick what you want the money invested in, VTSAX, LifeStrategy Funds,
etc.

Money invested in an ROTH IRA DOESN'T  get a tax deduction the year you make it, BUT it does grows tax free. You would open a ROTH IRA at the company, say Vanguard, Schwab, T D Ameritrade, or a bank, then pick what you want the money invested in, VTSAX, LifeStrategy Funds, etc.

  I would suggest VTSAX, that is an index fund that is invested in about 3600 companies, the companies cover
a wide range of types of companies, in other words, it is diversified, (not invested in one type of product, only like steel or only airplanes) Fee is only 0.04%.
  Someone above recommended the LifeStrategy Funds, nothing wrong there, they are less volatile, meaning the dollar amount will change less from day to day. Why are they less volatile?  Besides many stocks they also have bonds in their portfolio. There are 4 LifeStrategy Funds, they hold 20% bonds, 40% bonds, 60% bonds, and 80% bonds. The higher the percentage of bonds the more conservative. The higher percentage of bonds, the less it will rise in a booming stock market, but, also the less it will fall in a recession/depression. The website has some easily understood graphics.
 https://investor.vanguard.com/mutual-funds/lifestrategy/#/
 You may feel more comfortable with some bonds, but at 41yrs old, I think it is a bit early in your life for bonds. You can weather one or two more stock market cycles. The stock market goes up and down over the short term and up over the long term.

 An HSA is a Health Saving Account, IF you have a high deductible insurance plan, you can invest $3,450. And get a income tax deduction for it. It grows tax free, you can use it for health related expenses, BUT, many are saving it as a retirement account and paying for medical expenses with regular earnings.  You can save your medical receipts and then when retired spend any amount tax free upto the amount of your receipts.Or you canroll yur HSA into an IRA.

 I suggest you keep asking questions, this group is a treasure of knowledge, shared willingly with pleasure, and an occasional
facepunch. :-)
Thanks BTDRetire.  Lots of good info in your post and lots to think about.
I'm finding about my account fees.
What is considered high deductible insurance plan?  I have nothing to compare to.

Catica

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Re: What to do with my money?
« Reply #30 on: March 18, 2018, 12:19:42 PM »
You are pretty clearly a natural saver. That puts you ahead of the game and will serve you well. Don't go changin'.

All the entries above are good ones. My only advice at this stage would be:

1. Keep saving. This is the biggest difference between people who have a retirement fund and those who do not.

2. TAKE THE ADVICE YOU ARE GETTING!! Many come around asking for help but what they really want is confirmation of their own bad ideas. Don't be that person. Much of the advice so far is to increase your knowledge and start simply. But get started you must. This is good advice. Take it.

Thanks GOFU.  The idea of retiring early only popped up last week and I've been reading since then, but obviously I'm super clueless so I need lots of help. Just a few days on this forum and I already feel I know twice as much as I knew before I came here, so I see a great benefit in hanging out here and reading various posts.

3. Keep reading. In six months or a year you will wonder why you found it all so mysterious, and you will wonder why people fork over their hard-earned money to financial "advisors" who know little to no more than you do.

Keep saving.

Did I mention you should keep saving?

Catica

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Re: What to do with my money?
« Reply #31 on: March 18, 2018, 12:21:16 PM »
I'm in 22% tax bracket.

 Depending on your income, if you put enough money into tax deductible accounts you
can get down to the 12% bracket.
Interesting.  This is a HUGE difference in taxes.  I will seriously try to get myself into the 12% bracket.

Catica

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Re: What to do with my money?
« Reply #32 on: March 18, 2018, 12:23:18 PM »
1. My employer contributes a flat percentage to my plan no matter how much I contribute.
...
5. Yeah, the plan is 403b.  I will ask TIAA.  Do I just say "What are the fees for my account?"
1. In that case, $0 is the "up to the company match" amount.

5. Yes, pretty much that.  There may be two types of fees:
a) A fee for your participation in the 403b plan, regardless of your investments.  This may be a flat fee (e.g., $40/yr) or some fraction of your 403b balance.
b) Fees specific to the funds in which you invest.  Those are often called a fund's "expense ratio" (ER) and might range from ~0.05% (which would be good) to ~1.5% (which would be bad).
1. So does that mean I should not contribute to 403B since my company match is irrelevant?  Should I put the money somewhere else?
2. I emailed them about the fees.  Thanks

Catica

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Re: What to do with my money?
« Reply #33 on: March 18, 2018, 12:24:02 PM »
Catica, welcome! First of all you are doing very well. I see that others have recommended the http://jlcollinsnh.com/stock-series/ which is fabulous. I would also recommend the https://www.bogleheads.org/wiki/Getting_started. They are both very helpful when you are interested in learning how to invest.

Keep up the good work!
Thanks, I will read

MDM

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Re: What to do with my money?
« Reply #34 on: March 18, 2018, 12:34:36 PM »
1. So does that mean I should not contribute to 403B since my company match is irrelevant?  Should I put the money somewhere else?
It means the dollar amount for step 1 of Investment Order is $0.  Keep going down the list....

Catica

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Re: What to do with my money?
« Reply #35 on: March 18, 2018, 12:53:29 PM »
1. So does that mean I should not contribute to 403B since my company match is irrelevant?  Should I put the money somewhere else?
It means the dollar amount for step 1 of Investment Order is $0.  Keep going down the list....
I don't understand. All these years I've been putting money in 403b.  What you are saying that I shouldn't have.  That's confusing. 
Then next thing on the list for me would be Max HSA.  I read the why for doing this, but I don't get why I would put money into something that can only be used for medical expenses

MDM

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Re: What to do with my money?
« Reply #36 on: March 18, 2018, 12:58:55 PM »
I don't understand. All these years I've been putting money in 403b.  What you are saying that I shouldn't have.  That's confusing.
Correct, not as part of "Step 1" - but keep reading....

Quote
Then next thing on the list for me would be Max HSA.  I read the why for doing this, but I don't get why I would put money into something that can only be used for medical expenses
Because
1. Most people will incur significant medical expenses at some time in their lives, and paying those tax-free is a good thing.
2. If you are the rare exception to #1, at worst the HSA acts the same as a tIRA after age 65.

testtest

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Re: What to do with my money?
« Reply #37 on: March 18, 2018, 02:58:40 PM »
No advice from me, just have to pay the community on the back for your patience. I don't work that way. I just reading this thread makes me cringe. Define "baskets"? Jeez.

Good for all of you; you really are exercising the power to change lives one at a time. Too much of a grump, over here.

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testtest

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Re: What to do with my money?
« Reply #38 on: March 18, 2018, 02:59:59 PM »


No advice from me, just have to pat the community on the back for your patience. I don't work that way. I just reading this thread makes me cringe. Define "baskets"? Jeez.

Good for all of you; you really are exercising the power to change lives one at a time. Too much of a grump, over here.

edit: "pay" to "pat"

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MrThatsDifferent

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Re: What to do with my money?
« Reply #39 on: March 19, 2018, 01:52:18 AM »
Ok, Cattica, I think youíre being brave for putting yourself out there and letting everyone know what you donít know. I felt like you almost 18 months ago. I read everything and a lot of it was (still is) over my head and Iím a fairly intelligent and educated person. Finance and math though are not my fortes. But look at you, for someone who doesnít know jack shit, youíve got $245k of net worth with virtually no anchors. Thatís awesome and amazing. Imagine what you could do if you focused?

So, Iíll share what worked for me and maybe it can help you, one finance dummy to another. ;-)

Simplify everything. I have an excel spreadsheet where I record my assets (what gives/makes me money) and my liabilities (what takes my money away) to determine my net worth. I track this each month and record: Cash (what I have in the bank), Retirement (whatís in my retirement account) and Investments (whatís in my Vanguard account) and then I add this number up and subtract my liabilities (currently none as we rent and donít have a mortgage). Thatís how I determine my net worth. Your goal is to think of those 3 areas or buckets as levers you can use to increase your NW. Your other goal is to keep it simple.

For Cashósimplest thing you can do is take whatever safety money you want (say $10k) and put it in the bank that has the highest interest with the lowest fees and Park it there until/unless you need it as an emergency and then use and replenish.

For Retirement ógo to HR and say you want to max out whatever company retirement account you have and then forget about it for now.

For InvestmentsóLook up Vanguard dot com and get their number. Call them and say you want to open up an account that is a set and forget, like a total life strategy account. They will guide you through everything. All you want to do is send a set amount of money every pay to that account. Then get the ability to check the account online and record your figures. The key here is to not panic or get too excited when the numbers go up or down. You have to just let it do itís thing for at least 10 years, 20 is ideal.

And, thatís it. That simple. Donít make it more complex until you understand it all better.

Now, you have 2 more things to work out: what you can save and invest now, and what you want to live on when you retire. You need 2 budgets: now budget and retire budget. With now budget, the game is to live the life you want as efficiently as possible and take what is left over and put it in your investments. Your Cash and Retirement buckets are already set, so the excess just goes to Investments.

In your retirement budget, you think of the life you want when youíre done working or you scale work down. It might look the same, might look different but try to guesstimate what that yearly spend will be. Now, multiply that number by 25. Thatís the total amount of money you need of net worth to FIRE. Thatís it. Then youíve won the game!

Once you get everything simple and automated, then you can start tweaking and working on nuances like how to get more money from your Now budget. But start with this first. Good luck.
Thanks for your simple explanation MrThatsDifferent.  Let me respond to each point you made.

1. Simplify everything / net worth.  Yes, I feel I got everything simplified and I calculated my net worth.  I can track monthly.
2. Cash. I will keep it in my bank account which yelds 1.5% APY.  I think that's decent, unless there is something much better that I'm not aware off.
3. Retirement.  I can change my contribution online.  I can just take $18500 divide by 12 and ask them to take out that amount out of my paycheck monthly.  Does that make sense?  One questions I have which investing company I should go with.  I have a choice of Vanguard, Fidelity and TIAA-CREF.  Currently I'm with TIAA.
4. Investments.  That Vanguard account, what is it?  Can I take the money out without penalty before I'm 59.5 years old?
5. I need to figure out what I want to live on when I retire.  That's hard :)

My pleasure.  Writing this for you has helped me share with others.

1. Thatís great!
2. That seems pretty good for the US
3. Personally I would stick with Vanguard as they have great products and low fees but the gang here might be able to answer that better.
4. Investments Vanguard are your index funds that sit outside your retirement accounts. Those you can access whenever. Again, depends on your strategy but for me, it gives me more control.
5. For me, I take the categories I use now and think through what Iíd still need if not working? Then I think of where I want to live, because I can choose to live somewhere cheaper. Then, if anything new, like maybe extended travel. World will be your oyster.
6. There is one other thing, tax minimization but youíll get to that eventually..

Catica

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Re: What to do with my money?
« Reply #40 on: March 19, 2018, 01:09:10 PM »
Ok, Cattica, I think youíre being brave for putting yourself out there and letting everyone know what you donít know. I felt like you almost 18 months ago. I read everything and a lot of it was (still is) over my head and Iím a fairly intelligent and educated person. Finance and math though are not my fortes. But look at you, for someone who doesnít know jack shit, youíve got $245k of net worth with virtually no anchors. Thatís awesome and amazing. Imagine what you could do if you focused?

So, Iíll share what worked for me and maybe it can help you, one finance dummy to another. ;-)

Simplify everything. I have an excel spreadsheet where I record my assets (what gives/makes me money) and my liabilities (what takes my money away) to determine my net worth. I track this each month and record: Cash (what I have in the bank), Retirement (whatís in my retirement account) and Investments (whatís in my Vanguard account) and then I add this number up and subtract my liabilities (currently none as we rent and donít have a mortgage). Thatís how I determine my net worth. Your goal is to think of those 3 areas or buckets as levers you can use to increase your NW. Your other goal is to keep it simple.

For Cashósimplest thing you can do is take whatever safety money you want (say $10k) and put it in the bank that has the highest interest with the lowest fees and Park it there until/unless you need it as an emergency and then use and replenish.

For Retirement ógo to HR and say you want to max out whatever company retirement account you have and then forget about it for now.

For InvestmentsóLook up Vanguard dot com and get their number. Call them and say you want to open up an account that is a set and forget, like a total life strategy account. They will guide you through everything. All you want to do is send a set amount of money every pay to that account. Then get the ability to check the account online and record your figures. The key here is to not panic or get too excited when the numbers go up or down. You have to just let it do itís thing for at least 10 years, 20 is ideal.

And, thatís it. That simple. Donít make it more complex until you understand it all better.

Now, you have 2 more things to work out: what you can save and invest now, and what you want to live on when you retire. You need 2 budgets: now budget and retire budget. With now budget, the game is to live the life you want as efficiently as possible and take what is left over and put it in your investments. Your Cash and Retirement buckets are already set, so the excess just goes to Investments.

In your retirement budget, you think of the life you want when youíre done working or you scale work down. It might look the same, might look different but try to guesstimate what that yearly spend will be. Now, multiply that number by 25. Thatís the total amount of money you need of net worth to FIRE. Thatís it. Then youíve won the game!

Once you get everything simple and automated, then you can start tweaking and working on nuances like how to get more money from your Now budget. But start with this first. Good luck.
Thanks for your simple explanation MrThatsDifferent.  Let me respond to each point you made.

1. Simplify everything / net worth.  Yes, I feel I got everything simplified and I calculated my net worth.  I can track monthly.
2. Cash. I will keep it in my bank account which yelds 1.5% APY.  I think that's decent, unless there is something much better that I'm not aware off.
3. Retirement.  I can change my contribution online.  I can just take $18500 divide by 12 and ask them to take out that amount out of my paycheck monthly.  Does that make sense?  One questions I have which investing company I should go with.  I have a choice of Vanguard, Fidelity and TIAA-CREF.  Currently I'm with TIAA.
4. Investments.  That Vanguard account, what is it?  Can I take the money out without penalty before I'm 59.5 years old?
5. I need to figure out what I want to live on when I retire.  That's hard :)

My pleasure.  Writing this for you has helped me share with others.

1. Thatís great!
2. That seems pretty good for the US
3. Personally I would stick with Vanguard as they have great products and low fees but the gang here might be able to answer that better.
4. Investments Vanguard are your index funds that sit outside your retirement accounts. Those you can access whenever. Again, depends on your strategy but for me, it gives me more control.
5. For me, I take the categories I use now and think through what Iíd still need if not working? Then I think of where I want to live, because I can choose to live somewhere cheaper. Then, if anything new, like maybe extended travel. World will be your oyster.
6. There is one other thing, tax minimization but youíll get to that eventually..
MrThatsDifferent, question about #4, if investment in Vanguard Index fund gives better return than savings account and can be accessed any time, why bother with a savings account and why not put the emergency stash in there?

ILikeDividends

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Re: What to do with my money?
« Reply #41 on: March 19, 2018, 02:27:30 PM »

MrThatsDifferent, question about #4, if investment in Vanguard Index fund gives better return than savings account and can be accessed any time, why bother with a savings account and why not put the emergency stash in there?
I'll take a stab at that.   Your emergency fund needs to be immediately available for short term unforeseen emergencies.

Historically, an index fund's return absolutely clobbers the return of a savings account over the long term.  But it can dip into loss territory over the short to medium term; for months or even for a few years.  You don't want to put yourself into a position to sell at a loss to cover a short term emergency.

A savings account has a paltry return, true, but it will never dip down into loss territory on a static dollar basis (i.e., unadjusted for inflation).  It will always be available, more or less at full value, to cover an emergency.
« Last Edit: March 19, 2018, 02:30:21 PM by ILikeDividends »

wenchsenior

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Re: What to do with my money?
« Reply #42 on: March 19, 2018, 02:41:39 PM »
Ok, Cattica, I think youíre being brave for putting yourself out there and letting everyone know what you donít know. I felt like you almost 18 months ago. I read everything and a lot of it was (still is) over my head and Iím a fairly intelligent and educated person. Finance and math though are not my fortes. But look at you, for someone who doesnít know jack shit, youíve got $245k of net worth with virtually no anchors. Thatís awesome and amazing. Imagine what you could do if you focused?

So, Iíll share what worked for me and maybe it can help you, one finance dummy to another. ;-)

Simplify everything. I have an excel spreadsheet where I record my assets (what gives/makes me money) and my liabilities (what takes my money away) to determine my net worth. I track this each month and record: Cash (what I have in the bank), Retirement (whatís in my retirement account) and Investments (whatís in my Vanguard account) and then I add this number up and subtract my liabilities (currently none as we rent and donít have a mortgage). Thatís how I determine my net worth. Your goal is to think of those 3 areas or buckets as levers you can use to increase your NW. Your other goal is to keep it simple.

For Cashósimplest thing you can do is take whatever safety money you want (say $10k) and put it in the bank that has the highest interest with the lowest fees and Park it there until/unless you need it as an emergency and then use and replenish.

For Retirement ógo to HR and say you want to max out whatever company retirement account you have and then forget about it for now.

For InvestmentsóLook up Vanguard dot com and get their number. Call them and say you want to open up an account that is a set and forget, like a total life strategy account. They will guide you through everything. All you want to do is send a set amount of money every pay to that account. Then get the ability to check the account online and record your figures. The key here is to not panic or get too excited when the numbers go up or down. You have to just let it do itís thing for at least 10 years, 20 is ideal.

And, thatís it. That simple. Donít make it more complex until you understand it all better.

Now, you have 2 more things to work out: what you can save and invest now, and what you want to live on when you retire. You need 2 budgets: now budget and retire budget. With now budget, the game is to live the life you want as efficiently as possible and take what is left over and put it in your investments. Your Cash and Retirement buckets are already set, so the excess just goes to Investments.

In your retirement budget, you think of the life you want when youíre done working or you scale work down. It might look the same, might look different but try to guesstimate what that yearly spend will be. Now, multiply that number by 25. Thatís the total amount of money you need of net worth to FIRE. Thatís it. Then youíve won the game!

Once you get everything simple and automated, then you can start tweaking and working on nuances like how to get more money from your Now budget. But start with this first. Good luck.
Thanks for your simple explanation MrThatsDifferent.  Let me respond to each point you made.

1. Simplify everything / net worth.  Yes, I feel I got everything simplified and I calculated my net worth.  I can track monthly.
2. Cash. I will keep it in my bank account which yelds 1.5% APY.  I think that's decent, unless there is something much better that I'm not aware off.
3. Retirement.  I can change my contribution online.  I can just take $18500 divide by 12 and ask them to take out that amount out of my paycheck monthly.  Does that make sense?  One questions I have which investing company I should go with.  I have a choice of Vanguard, Fidelity and TIAA-CREF.  Currently I'm with TIAA.
4. Investments.  That Vanguard account, what is it?  Can I take the money out without penalty before I'm 59.5 years old?
5. I need to figure out what I want to live on when I retire.  That's hard :)

My pleasure.  Writing this for you has helped me share with others.

1. Thatís great!
2. That seems pretty good for the US
3. Personally I would stick with Vanguard as they have great products and low fees but the gang here might be able to answer that better.
4. Investments Vanguard are your index funds that sit outside your retirement accounts. Those you can access whenever. Again, depends on your strategy but for me, it gives me more control.
5. For me, I take the categories I use now and think through what Iíd still need if not working? Then I think of where I want to live, because I can choose to live somewhere cheaper. Then, if anything new, like maybe extended travel. World will be your oyster.
6. There is one other thing, tax minimization but youíll get to that eventually..
MrThatsDifferent, question about #4, if investment in Vanguard Index fund gives better return than savings account and can be accessed any time, why bother with a savings account and why not put the emergency stash in there?

Generally speaking, an emergency fund needs to be absolutely safe (i.e., insured against loss or bank failure, which investment funds are not) and not subject to market fluctuations the way stocks and bonds in an investment account are.  Reason being that one of the prime reasons for suddenly needing to tap an e-fund is because of an unexpected job loss.  And one of the prime reasons for job loss is a recession, which is the same time that your investment accounts are probably going to be taking a wallop.  So most people keep some e-fund safe from loss due to to market fluctuation.  Most (not all, it depends on your risk tolerance, job situation, and emergency fund needs) people keep their e-fund in federally insured bank savings accounts, cds, etc. 

Catica

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Re: What to do with my money?
« Reply #43 on: March 19, 2018, 04:20:55 PM »

MrThatsDifferent, question about #4, if investment in Vanguard Index fund gives better return than savings account and can be accessed any time, why bother with a savings account and why not put the emergency stash in there?
I'll take a stab at that.   Your emergency fund needs to be immediately available for short term unforeseen emergencies.

Historically, an index fund's return absolutely clobbers the return of a savings account over the long term.  But it can dip into loss territory over the short to medium term; for months or even for a few years.  You don't want to put yourself into a position to sell at a loss to cover a short term emergency.

A savings account has a paltry return, true, but it will never dip down into loss territory on a static dollar basis (i.e., unadjusted for inflation).  It will always be available, more or less at full value, to cover an emergency.

Thanks!  Makes sense

Catica

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Re: What to do with my money?
« Reply #44 on: March 19, 2018, 04:21:35 PM »
Ok, Cattica, I think youíre being brave for putting yourself out there and letting everyone know what you donít know. I felt like you almost 18 months ago. I read everything and a lot of it was (still is) over my head and Iím a fairly intelligent and educated person. Finance and math though are not my fortes. But look at you, for someone who doesnít know jack shit, youíve got $245k of net worth with virtually no anchors. Thatís awesome and amazing. Imagine what you could do if you focused?

So, Iíll share what worked for me and maybe it can help you, one finance dummy to another. ;-)

Simplify everything. I have an excel spreadsheet where I record my assets (what gives/makes me money) and my liabilities (what takes my money away) to determine my net worth. I track this each month and record: Cash (what I have in the bank), Retirement (whatís in my retirement account) and Investments (whatís in my Vanguard account) and then I add this number up and subtract my liabilities (currently none as we rent and donít have a mortgage). Thatís how I determine my net worth. Your goal is to think of those 3 areas or buckets as levers you can use to increase your NW. Your other goal is to keep it simple.

For Cashósimplest thing you can do is take whatever safety money you want (say $10k) and put it in the bank that has the highest interest with the lowest fees and Park it there until/unless you need it as an emergency and then use and replenish.

For Retirement ógo to HR and say you want to max out whatever company retirement account you have and then forget about it for now.

For InvestmentsóLook up Vanguard dot com and get their number. Call them and say you want to open up an account that is a set and forget, like a total life strategy account. They will guide you through everything. All you want to do is send a set amount of money every pay to that account. Then get the ability to check the account online and record your figures. The key here is to not panic or get too excited when the numbers go up or down. You have to just let it do itís thing for at least 10 years, 20 is ideal.

And, thatís it. That simple. Donít make it more complex until you understand it all better.

Now, you have 2 more things to work out: what you can save and invest now, and what you want to live on when you retire. You need 2 budgets: now budget and retire budget. With now budget, the game is to live the life you want as efficiently as possible and take what is left over and put it in your investments. Your Cash and Retirement buckets are already set, so the excess just goes to Investments.

In your retirement budget, you think of the life you want when youíre done working or you scale work down. It might look the same, might look different but try to guesstimate what that yearly spend will be. Now, multiply that number by 25. Thatís the total amount of money you need of net worth to FIRE. Thatís it. Then youíve won the game!

Once you get everything simple and automated, then you can start tweaking and working on nuances like how to get more money from your Now budget. But start with this first. Good luck.
Thanks for your simple explanation MrThatsDifferent.  Let me respond to each point you made.

1. Simplify everything / net worth.  Yes, I feel I got everything simplified and I calculated my net worth.  I can track monthly.
2. Cash. I will keep it in my bank account which yelds 1.5% APY.  I think that's decent, unless there is something much better that I'm not aware off.
3. Retirement.  I can change my contribution online.  I can just take $18500 divide by 12 and ask them to take out that amount out of my paycheck monthly.  Does that make sense?  One questions I have which investing company I should go with.  I have a choice of Vanguard, Fidelity and TIAA-CREF.  Currently I'm with TIAA.
4. Investments.  That Vanguard account, what is it?  Can I take the money out without penalty before I'm 59.5 years old?
5. I need to figure out what I want to live on when I retire.  That's hard :)

My pleasure.  Writing this for you has helped me share with others.

1. Thatís great!
2. That seems pretty good for the US
3. Personally I would stick with Vanguard as they have great products and low fees but the gang here might be able to answer that better.
4. Investments Vanguard are your index funds that sit outside your retirement accounts. Those you can access whenever. Again, depends on your strategy but for me, it gives me more control.
5. For me, I take the categories I use now and think through what Iíd still need if not working? Then I think of where I want to live, because I can choose to live somewhere cheaper. Then, if anything new, like maybe extended travel. World will be your oyster.
6. There is one other thing, tax minimization but youíll get to that eventually..
MrThatsDifferent, question about #4, if investment in Vanguard Index fund gives better return than savings account and can be accessed any time, why bother with a savings account and why not put the emergency stash in there?

Generally speaking, an emergency fund needs to be absolutely safe (i.e., insured against loss or bank failure, which investment funds are not) and not subject to market fluctuations the way stocks and bonds in an investment account are.  Reason being that one of the prime reasons for suddenly needing to tap an e-fund is because of an unexpected job loss.  And one of the prime reasons for job loss is a recession, which is the same time that your investment accounts are probably going to be taking a wallop.  So most people keep some e-fund safe from loss due to to market fluctuation.  Most (not all, it depends on your risk tolerance, job situation, and emergency fund needs) people keep their e-fund in federally insured bank savings accounts, cds, etc.
Thank you!

Catica

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Re: What to do with my money?
« Reply #45 on: March 19, 2018, 04:37:03 PM »
I don't understand. All these years I've been putting money in 403b.  What you are saying that I shouldn't have.  That's confusing.
Correct, not as part of "Step 1" - but keep reading....

Quote
Then next thing on the list for me would be Max HSA.  I read the why for doing this, but I don't get why I would put money into something that can only be used for medical expenses
Because
1. Most people will incur significant medical expenses at some time in their lives, and paying those tax-free is a good thing.
2. If you are the rare exception to #1, at worst the HSA acts the same as a tIRA after age 65.
So, what do I do with the money that I have in 403B?  When I log in to my TIAA Cref account online I see two different plans, the one the employer contributes to and the one I contribute to (TDA). 
So from now on, I should not contribute to TDA?  I should open an account with Vanguard instead?  I see that I have a choice of Fidelity,  Vanguard and TIAA CREF for my TDA plan.  Should I just switch from TIAA CREF to Vanguard?

As far as HSA goes, I have a decent medical plan and will be able to continue that plan when I'm retired at 55.  Does HSA still make sense to me?

MDM

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Re: What to do with my money?
« Reply #46 on: March 19, 2018, 04:59:50 PM »
So, what do I do with the money that I have in 403B?  When I log in to my TIAA Cref account online I see two different plans, the one the employer contributes to and the one I contribute to (TDA). 
So from now on, I should not contribute to TDA?  I should open an account with Vanguard instead?  I see that I have a choice of Fidelity,  Vanguard and TIAA CREF for my TDA plan.  Should I just switch from TIAA CREF to Vanguard?
For investment choices within a given plan, presenting your situation using the format suggested by Asking Portfolio Questions - Bogleheads.org is worth doing.  We need to understand your options in order to provide specific ideas.

Quote
As far as HSA goes, I have a decent medical plan and will be able to continue that plan when I'm retired at 55.  Does HSA still make sense to me?
Depends how decent.  Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the case study spreadsheet.

CorpRaider

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Re: What to do with my money?
« Reply #47 on: March 20, 2018, 11:25:59 AM »
You might be a candidate for a low cost financial advisor if you don't want to invest the time and mental effort on this subject. 

Vanguard has a service you could check out on their website.  Alternatively, you could just use the lowest fee (expense ratio) target date funds that line up with your goal retirement date.  You would probably do better buying that over time and just relying on the allocation in the fund than most of these people buying 100% total market who will freak out when they are down 50%-90% at some point in the future and know just enough to be dangerous.

After you get that squared and get your assets working for you, you can decide if you want to optimize the investment order and whatnot.

Try keep after inflation results in mind, so you will realize why you might need to take a little volatility versus sitting in cash, as it seems you have been doing to this point.
« Last Edit: March 20, 2018, 11:32:22 AM by CorpRaider »

Catica

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Re: What to do with my money?
« Reply #48 on: March 20, 2018, 01:32:59 PM »
So, what do I do with the money that I have in 403B?  When I log in to my TIAA Cref account online I see two different plans, the one the employer contributes to and the one I contribute to (TDA). 
So from now on, I should not contribute to TDA?  I should open an account with Vanguard instead?  I see that I have a choice of Fidelity,  Vanguard and TIAA CREF for my TDA plan.  Should I just switch from TIAA CREF to Vanguard?
For investment choices within a given plan, presenting your situation using the format suggested by Asking Portfolio Questions - Bogleheads.org is worth doing.  We need to understand your options in order to provide specific ideas.

Quote
As far as HSA goes, I have a decent medical plan and will be able to continue that plan when I'm retired at 55.  Does HSA still make sense to me?
Depends how decent.  Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the case study spreadsheet.
Hi MDM, by "what do I do with the money that I have in 403B" I didn't mean what investment choices I should make within a given plan but more of like do I keep the money I have in it or do I transfer them to some other type of account.
As for HSA, what is considered decent?  I put the numbers into those calculator tools but I have no idea what my health expense will be when I'm old.  Right now, I have no health expense.  I see a doctor when I don't feel well, like I might have a cold or something, every 2-3 years or so.  I go to the dentist for cleaning 2x a year.  But I don't know my health will be later in life.  But health insurance is mandatory, so what choice do I have?

Catica

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Re: What to do with my money?
« Reply #49 on: March 20, 2018, 01:34:20 PM »
You might be a candidate for a low cost financial advisor if you don't want to invest the time and mental effort on this subject. 

Vanguard has a service you could check out on their website.  Alternatively, you could just use the lowest fee (expense ratio) target date funds that line up with your goal retirement date.  You would probably do better buying that over time and just relying on the allocation in the fund than most of these people buying 100% total market who will freak out when they are down 50%-90% at some point in the future and know just enough to be dangerous.

After you get that squared and get your assets working for you, you can decide if you want to optimize the investment order and whatnot.

Try keep after inflation results in mind, so you will realize why you might need to take a little volatility versus sitting in cash, as it seems you have been doing to this point.
I get a free advisor from TIAA.  I made an appointment to meet with her/him