> Be 22
> $5000 in savings
> $17,000 a year
> American
Should I start a Roth IRA?
If so, what bank?
Can anyone calculate what $5000 initially with $4000 a year would be?
I like how I can take money out tax free if I fall on hard times, and a 401k is kinda pointless because the government doesn't take much from me.
Thoughts?
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> Bump
Should I go for something else?
You don't need to bump a thread after 10 minutes. This board isn't super fast.
A Roth IRA is basically just a tax shelter for lower/middle class people.
Say, if you invested the 5k into something and made 100 dollars, normally you would have to pay taxes on that 100 dollars. With a Roth IRA, you don't have to.
If that's the kind of thing you're interested in, then sure.
Someone was trying to explain it to me, they said I can put my money in a Roth IRA, $5,500 a year, and a mutual fumd that invests in stocks will use it, getting me am average of 7% return per year. I can withdrawl from it at any time without fees, but I can't touch the money I made with it or I get a huge fee.
Am I wrong on any counts? Could I end up losing everything?
Sorry for the spelling errors, typing this on my phone.
Sure you can lose it all. It's incredibly unlikely though. Mutual fund is basically just letting someone else invest in things for you, and they get a cut.
For instance, I made 5% in the last 3 weeks. Pretty sure I'll hit 7% in the next 2 weeks, so that's 7% in 5 weeks. They'll play the stock market for 52 weeks, and only cut you 7%.
On one hand, your cut is pretty small. On the other hand, you don't need to think about or even learn about investing at all. It'll continue to grow and your money is in the hands of professions, so it's relatively safe.
Just pray we don't have another giant depression or recession.
Is it as risky as a 401k?
What's the safest vehicle for saving?
>What's the safest vehicle for saving?
A CD. Except the rates are total garbage and just barely keep up with inflation if at all.
get an index fund with vanguard
you can roth or traditional with them
or just a standard account
you should be contributing at least 15% of your income to your retirement. here is the easiest way to start:
1) open a roth IRA through vanguard.com
2) you can contribute up to 5500/yr to your roth IRA. (try to max it out every year... it is most important that you make the most contribution you can early in life)
3) buy (invest in) low cost, diversified index funds or ETFs within your roth IRA. here is a very simple plan:
60% Vanguard Total Stock Market ETF (VTI)
30% Vanguard Total International Stock ETF (VXUS)
10% Vanguard Total Bond Market ETF (BND)
4) keep trying to increase your income so that 15% isn't so difficult to do.
5) do this until your portfolio is making enough money by itself every year that you could live on the profits.
6) live off the profits and have fun until you die.
your IRA and 401k are not emergency funds for when you are short on rent or need a new car. that shit you should have an emergency fund set aside for.
You know what? I think you need to see the baby steps:
1) set aside a $1000 emergency fund (for REAL emergencies)
2) pay off your consumer debt (credit cards, auto loans, etc.) except for your mortgage
3) build your emergency fund up to 6 months of expenses (so you can go without a jerb for 6 months and still eat, have insurance, pay your mortgage or rent, etc.)
4) invest 15% of your income for retirement (the roth IRA shit)
5) set up and contribute to college funds for your kids
6) pay off your mortgage
7) save like a mofo. give like a mofo.
Watching that video on YouTube prompted me to think about this. My only debt is college.
Is his info legit? What are the risks of a Roth IRA?
Why Vanguard?
Yes nigger, started mine when I was 18, and it doesn't mean you can't invest in other things as well.
There is no risk. An IRA is just a place you put money, like any bank account with no fee. What makes it unique is that any gains from that money is tax free.
The risk comes from how you choose to invest that money, whether a mutual/index fund, stocks, bonds, CDs or whatever else
Isn't one of the advantages of a Roth IRA that you can take from it with no penalty if you really have to? I'm planning to keep $1000 in savings, the rest in Roth IRA, then split the money I save into them evenly until I get to $5000 savings. Then Max out IRA yearly and put the rest in savings. It would be nice to know I could use it if I had to though
Is it difficult getting money in Vanguard? I've never had my money in 2 places before.
are you saying you make 17k a year, or that you can save 17k a year? if the former, then don't even worry about this shit yet.
Roth IRA allows you to take out money after a set period of time without penalty in case of emergency. Don't remember exact time though.
If it's a real emergency you can just accept the penalty
Warren Buffett's advice to the trustee of his wife's estate for when warren dies:
"My advice to the trustee couldn't be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S & P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers."
>Why Vanguard?
Typical investment management companies are owned by outside stockholders. These companies have to charge fees to pay their owners, which can reduce investors' returns.
At Vanguard, there are no outside owners, and therefore, no conflicting loyalties. The company is owned by its funds, which in turn are owned by their shareholders—including you, if you're a Vanguard fund investor.
Also, vanguard ETFs (of which many have the lowest fees available) trade commision free with a vanguard account.
read up on Vanguard founder John Bogle and his investment philosophy: en.wikipedia.org
learn about roth IRAs: investopedia.com
opening and funding a vanguard account is not difficult. you will need to know your bank account number and bank routing number... just go to vanguard.com and follow the steps to open a new account.
>Isn't one of the advantages of a Roth IRA that you can take from it with no penalty if you really have to?
read the investopedia link i posted. read the bit about the "5 year clock" and qualified tax-free distributions.
you don't really want to rely on your IRA for emergency funding. that is shit eternally poor ppl do. learn how to plan, budget, and live within your means. have a liquid emergency fund on standby. i like that you're already thinking of this with your plan to save 5k aside. stealing from your retirement is a last-ditch, don't want to stay in the homeless shelter another night - type of thing... unless you're a poorminded fag who thinks an emergency is a broken tv.
also this... kind of.
if you're only making 17k/yr you better get your shit together and step it up. get a cart-pusher job at costco and you'll make about twice that amount.
however, it is VERY important that you start fully funding your retirement. fuck man, you don't want to have to work forever and you aren't going to stay young. you need to prioritize this shit.
Where should I put my money in the Roth IRA? I know what mutual funds are, but not ETFs, Bonds, CDs, etc. I kind of want something middle ground, decent return without extraordinary risk.
T-Bills are way safer than CDs, but they also pay literally the lowest rate.
You need to figure out what your risk tolerance is and invest based on that. As a general long term investment guideline you can count on 6-7% yearly over the long term. That means that some years will return less than that, possibly even go negative. Other years will make much more than that.
Investing in stocks, bonds, mutual funds, etc, all carries risk. You -could- lose your money but the chances are against it. As noted above, with T-Bills you will -not- lose your money (as long as there is a US government left to print bills to pay it) but the return is generally not worth it. The other end of the spectrum would be something like leveraged ETFs which can quadruple your money in days or leave you flat broke in as little time.
What's the middle ground? Mutual Funds?
Mutual funds could be considered something of a middle ground. Try calling up either your bank or whoever you would be opening the IRA with and they should have someone who can talk to you about what sort of stuff you can do with the money. They will probably try to sell you on a managed account, which would be where they hook you up with a bunch of mutual funds and charge you a fee but you are not required to accept that.
I'm going to open it through Vanguard, the consensus is their the best it seems.
I'm nervous to call desu, they'll throw a lot of technical shit at me and I'll end up doing the worse thing.
Rather listen to you guys, seems like you have my best interests at heart. Help the younger generation out, impart your wisdom, and all that.
just use this portfolio to start with:
60% Vanguard Total Stock Market ETF (VTI)
30% Vanguard Total International Stock ETF (VXUS)
10% Vanguard Total Bond Market ETF (BND)
what are ETFs: An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
investopedia.com
ETFs are easy to buy/sell and typically have much lower fees than mutual funds. Once you have grown your funds enough you can move over to index funds if you want.... but just set up your roth, fund it, and use those funds to set up that simple portfolio first.
my roth portfolio is
VTI, VXUS, VIG, VYM, VDE, BND and a few individual stock picks.
OR... vanguard has a retirement mutual fund thing... lemme look it up and see...
investor.vanguard.com
something like this probably.
this is a managed type of fund that shifts risk/reward as your retirement date nears.
So it's fairly safe? I'm looking for a middle road when it comes to risk
nobody on here can tell you what an acceptable amount of risk for you is. you'll have to make that decision for yourself.
the target retirement fund that you should be in (based on your age) is targeting 2060. so check out its risk potential rating and fund makeup: personal.vanguard.com
1 Vanguard Total Stock Market Index Fund Investor Shares 53.9%
2 Vanguard Total International Stock Index Fund Investor Shares 36.0%
3 Vanguard Total Bond Market II Index Fund Investor Shares** 7.0%
4 Vanguard Total International Bond Index Fund Investor Shares 3.1%
if that is an unacceptable risk for you, check out Vanguard Target Retirement 2025 Fund (VTTVX) personal.vanguard.com
fund makeup:
1 Vanguard Total Stock Market Index Fund Investor Shares 39.8%
2 Vanguard Total International Stock Index Fund Investor Shares 26.6%
3 Vanguard Total Bond Market II Index Fund Investor Shares* 23.7%
4 Vanguard Total International Bond Index Fund Investor Shares 9.9%
notice that the risk is shifted by not by investing in different index funds but by adjusting what percentage of your money is invested in each fund. as you get older this 'target retirement' fund shifts your investments from stocks towards bonds. you can structure your own "custom" portfolio based on this.
whatever you end up doing, remember that there will be ups and downs. do not sell out when the market tanks. do not panic sell. if you think you'll need this money before you retire, don't put it in your IRA. if you're just looking for a better interest rate than your bank pays find a new bank or money market account: bankrate.com
Why is the performance of VXUS so poor in comparison to everything else?
Because other countries are clown shows. VTI and BND are Murica only, VXUS is everything outside the US.
Rampant corruption, mismanagement, lack of IP laws, debt, crises, etc.
So why invest in that fund? For when they get their act together? Or additional diversification?
Yeah, everyone says that they will get their act together and it's good for diversification.. hell, vanguard's target date funds are 40% international. I am a contrarian in that I don't agree and I think USA is #1.
If you buy stocks from an index fund, and hold them for at least 20 years, it's one of the least risky things you can do. Now, if you check that account 18 months from now, it might have less money than what you put in. Doesn't matter.
Thanks Ramsey.
Should I follow buffets 90/10 if I don't plan on touching the money for the next 30 years?
I'm 30 with no retirement fund. I've got some money saved up and don't plan on having kids or getting married. My biggest goal is buying a nice, simple colonial house in the country.
I honestly don't mind working until I die. I like working. I liking having a job that plans out my day and don't mind the physical ailments. Hell, I've just about done anything not immoral for money.
Let's say, I start one with vanguard. Put $3k , could I keep adding any amount of money in it during the year or is there a cap on how much I can add?
>I honestly don't mind working until I die. I like working. I liking having a job that plans out my day and don't mind the physical ailments.
Here's the problem with that plan though: You get old. You like to work less and you develop physical ailments. You don't want to be stuck in a situation where your body is unable to keep up with the amount of work you -need- to do to keep yourself warm and fed.
Not him, but what if I have a work pension that will probably give me around $70k-$80k a year when I retire? Is 90-10 still a bad idea with a transition to a more stable fund as I near retirement age?
So 90/10 out of the equation?
Just went in at 90% VOO and 10% BSV, probably gonna max out my roth ira every year. Got about 25 years to retirement and no real need to ever touch this money.
Getting on vanguard tonight and gonna go threw their options. Anyone else think the market is inflated or is this the new norm. Hard to believe it could reach higher levels when it's already at unprecedented levels.
This is also my concern. I know since its long term investing it should be less of an issue but still.
> what are the risks of a roth ira
there are none. you need to do some basic research. A roth IRA is just an account that you put your money into that comes with tax benefits. Once in that tax-beneficial account, there are more risky and less risky investments. A roth IRA by itself comes with no risk, and if you don't invest in anything, it's functionally useless.
> why vanguard?
They are the standard for low fee funds. The founder, john bogle, is the godfather of modern investment theory. Pick up one of his books and poke around bogleheads.
In short, though, the prior poster's advice is excellent and you should follow it.
> MODS MODS MODS THIS DUMB SHIT IS WHY WE NEED A FUCKING STICKY REEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
Shout out to common sense bros for being patient
It's exactally the same as a 401k with regard to risk. In fact, it's like a 401k in most respects.
Both are tax deferred buckets for investments.
Good ole Dave
good man. now just let keep feeding your fund on a regular basis and don't panic when the market drops. after 15-20 yrs, you should rethink your 90/10 and adjust for risk.
market will have drops but it's pretty silly to try to time them. best thing to do is feed your fund regularly and keep some cash on stand-by for when the market shits all over itself. when the market is down is when everything goes on SALE and that is the time to BUY EXTRA. don't be a scared pleb and panic sell.
>THIS DUMB SHIT IS WHY WE NEED A FUCKING STICKY
i agree that this needs a sticky but it is far from dumb. i always try to answer these threads because it is so important to get young ppl started off right. i wish i had been told this stuff and don't really mind answering the same questions over and over from new investors. i remember... it's sort of a scary thing starting out.
>tfw VTI keeps going stagnant to negative
Yup, that's what I plan on doing. I'll be pulling in around $70k a year during retirement from my pension alone, so my IRA is just extra.