Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
25 year old ready to open first account, please help!
Old 11-26-2013, 02:32 PM   #1
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
25 year old ready to open first account, please help!

Hello,

I'm 25 years old and currently work full time. Long story short, I'm finally ready to invest some of my hard earned money into the money market to kick start my Early Retirement Fund.

Below is an outline of my current/future siutation/plan:

- I have $3,000 that I would like to use as my initial investment
- I would like to retire at the age of 55-60 (year 2043-2048)
- I make $36,000 anually before taxes
- At my current rate, after expenses, I'm able to save about $8,000 a year
- My company matches 5% of my 401K contributions

I've had very little knowledge in regards to investing and still have much to learn. The past month I've been doing a lot of research on IRAs, Roths, and Mutual Funds. I've become interested in opening a Vanguard Target Retirement Fund, particulary with the VTIVX, and setting it up within a Roth IRA. I

I suppose my question then would be, if you were in my shoes, would you consider investing in this mutual fund? If not, what would you suggest I do with my $3,000 to kick start my Early Retirement Fund? Any input would be much appreciated, thank you
__________________

__________________
dpark6 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-26-2013, 03:07 PM   #2
Recycles dryer sheets
 
Join Date: Jan 2005
Posts: 487
Are you contributing to your 401K yet? Opening up a Roth Ira at Vanguard is a great addition. If I were your age I would use my Roth Ira for a stock fund.
__________________

__________________
tinlizzy is offline   Reply With Quote
Old 11-26-2013, 03:14 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,978
Same reaction as tinlizzy, I'd enroll in the company 401k and contribute at least enough to get the maximum company match if not more. A Roth IRA is a great next step, and while you're just beginning to build a portfolio, a broad balanced mutual fund like the Vanguard Target Retirement Fund is a very good choice. No reason to think about a more elaborate asset allocation until your portfolio grows some.

Educate yourself, the more you know and the less you rely on paid or free advice from others, the better. Unfortunately you will inevitably get some good and some bad advice, and unless you educate yourself, you won't be able to separate good from bad.Investment Books

Oh, and congrats, you're off to a very good start with saving & investing - you're at least 5 years smarter than I was way back when...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   Reply With Quote
Old 11-26-2013, 03:20 PM   #4
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
Thanks for your response!

I understand at my age I should (and am) be willing to take on a little more risk in hopes for greater returns. However, I feel skeptical about investing soley on a stock fund because of the higher volatility associated with it.

Are you considering that I should invest in a stock fund given my financial situation? Or because of my youth I shouldn't be afraid to do so?
__________________
dpark6 is offline   Reply With Quote
Old 11-26-2013, 03:28 PM   #5
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
Quote:
Originally Posted by Midpack View Post
Same reaction as tinlizzy, I'd enroll in the company 401k and contribute at least enough to get the maximum company match if not more. A Roth IRA is a great next step, and while you're just beginning to build a portfolio, a broad balanced mutual fund like the Vanguard Target Retirement Fund is a very good choice. No reason to think about a more elaborate asset allocation until your portfolio grows some.

Educate yourself, the more you know and the less you rely on paid or free advice from others, the better. Unfortunately you will inevitably get some good and some bad advice, and unless you educate yourself, you won't be able to separate good from bad.Investment Books

Oh, and congrats, you're off to a very good start with saving & investing - you're at least 5 years smarter than I was way back when...
I have started contributing to my company 401K plan this week. I'm contributing the maximum amount my company matches, which is 5%.Thanks for the link you've provided, I'll definitely be doing more research. I appreciate the input!
__________________
dpark6 is offline   Reply With Quote
Old 11-26-2013, 04:47 PM   #6
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,709
Quote:
Originally Posted by dpark6 View Post
Thanks for your response!

I understand at my age I should (and am) be willing to take on a little more risk in hopes for greater returns. However, I feel skeptical about investing soley on a stock fund because of the higher volatility associated with it.

Are you considering that I should invest in a stock fund given my financial situation? Or because of my youth I shouldn't be afraid to do so?
You will get to the first 100K much quicker if you invest in the total us stock market. Then you can begin to think of adding fixed investments. Of course much more reading is necessary. And no one can predict how things will go.

How much of a drop in the total invested would you be OK with?
__________________
target2019 is offline   Reply With Quote
Old 11-26-2013, 04:56 PM   #7
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
Quote:
Originally Posted by target2019 View Post
You will get to the first 100K much quicker if you invest in the total us stock market. Then you can begin to think of adding fixed investments. Of course much more reading is necessary. And no one can predict how things will go.

How much of a drop in the total invested would you be OK with?
At the moment, I'm comfortable investing in $3000 and would be okay if I dropped it. Of course I wouldn't be happy about it, but it's what I'm willing to go with.
__________________
dpark6 is offline   Reply With Quote
Old 11-26-2013, 05:24 PM   #8
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,571
Quote:
Originally Posted by Midpack View Post
Oh, and congrats, you're off to a very good start with saving & investing - you're at least 5 years smarter than I was way back when...
Or in my case, ten years. Some of us are slow learners.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Old 11-26-2013, 05:29 PM   #9
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
Quote:
Originally Posted by Walt34 View Post
Or in my case, ten years. Some of us are slow learners.
Give yourself some credit Walt, look at you now. 6099 posts later and now you're a moderator! And doing well I'm surre
__________________
dpark6 is offline   Reply With Quote
Old 11-26-2013, 05:30 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: No. California
Posts: 1,601
dpark6,
]
The Target retirement fund mentioned is a fund that is comprised of 4 other Vanguard funds. Looking at Target 2045 (your proposed retirement date) it has:

Total stock market index fund 63%
Total international fund 27%
Total Bond market fund 8%
Total International bond 2%

The other Target retirement funds have different percentages of these funds changing the risk level of each one.

So, investing in one of these actually gives you 4 funds.
__________________
KB is offline   Reply With Quote
Old 11-26-2013, 05:42 PM   #11
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
Quote:
Originally Posted by KB View Post
dpark6,
]
The Target retirement fund mentioned is a fund that is comprised of 4 other Vanguard funds. Looking at Target 2045 (your proposed retirement date) it has:

Total stock market index fund 63%
Total international fund 27%
Total Bond market fund 8%
Total International bond 2%

The other Target retirement funds have different percentages of these funds changing the risk level of each one.

So, investing in one of these actually gives you 4 funds.
I just realized that this particular fund has the majority of funds going towards stock.. For some reason I thought more investments in bonds were involved, thanks for pointing that out for me.
__________________
dpark6 is offline   Reply With Quote
Old 11-26-2013, 06:54 PM   #12
Dryer sheet wannabe
 
Join Date: Mar 2011
Location: slingerlands
Posts: 14
Regarding KB comment....+1

Sound like you are off to an excellent start. Congratulations!
Now work really hard...at your age the sky IS the limit. You'll enjoy increases in your salary over time. Learn to put some of that away. Your nest egg will grow beyond your dreams. Once you learn to live on less than you make...you have learned the greatest lesson.
Having said that do not forget to live and enjoy yourself. You've earned it.
Keep us posted as well all enjoy your journey. Good luck!
__________________
birdie is offline   Reply With Quote
Old 11-26-2013, 08:29 PM   #13
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 196
If your company offers the option I'd recommend using a Roth 401k accoujt since you're in a low tax braclet.
__________________
seabourne is offline   Reply With Quote
Old 11-26-2013, 10:00 PM   #14
Recycles dryer sheets
Rothman's Avatar
 
Join Date: Apr 2013
Posts: 249
+1 for a Roth 401k option, or Roth IRA outside of 401k. The reason your target fund is so high on equities is the long away target year, as you approach the target the bond % will increase. Key rule at your age is to stay in equities when the market goes down, many panic and leave stocks in bad market and then buy late into market rallies. Stay the course, and enjoy all the milestones 10k, 25k, 100k, they are great achievements, don't withdraw or loan against just grow your contribution, think of this as paying yourself, and you come first.
__________________
Rothman is offline   Reply With Quote
Old 11-27-2013, 12:29 AM   #15
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
birdie- Thanks! I'm definitely enjoying my life right now, I'm very fortunate to have the job that I have. I have the pleasure of working with one of my best friend's Father's company and he treats me well. I've had close to 3 months worth of work off this year traveling Europe and South America! I have a feeling I might be working for him for awhile

seabourne- Unfortunately, my company does not offer a Roth 401K account.

Rothman- Thank you for your input. I don't anticipate ever withdrawing my funds until it's time for me to retire, that's the plan at least!
__________________
dpark6 is offline   Reply With Quote
Old 11-27-2013, 06:20 AM   #16
Thinks s/he gets paid by the post
 
Join Date: Jul 2002
Posts: 1,041
Make sure you have a "rainy day" pot set aside for the unexpected before investing in anything else but the 401k match. If your car needed $2K of work, it'd be a shame to have to withdraw funds from an IRA and eat the penalty for the lack of funds to cover the unexpected.
__________________
RE2Boys is online now   Reply With Quote
Old 11-27-2013, 10:11 AM   #17
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
Quote:
Originally Posted by RE2Boys View Post
Make sure you have a "rainy day" pot set aside for the unexpected before investing in anything else but the 401k match. If your car needed $2K of work, it'd be a shame to have to withdraw funds from an IRA and eat the penalty for the lack of funds to cover the unexpected.
That's a great idea, thanks for the input!
__________________
dpark6 is offline   Reply With Quote
Old 11-27-2013, 11:05 AM   #18
Confused about dryer sheets
 
Join Date: Nov 2013
Location: Port Vincent
Posts: 9
Lots of great advice in this thread. My simple suggestions:

Keep debts low, every time you get a raise live as if you didn't. Invest the rest.

Get your max company match out of your 401K first.

Open the ROTH IRA asap. It is the best thing going. Pay your self today we pretaxed dollars and pay yourself later tax free. Also can be used for education. Vanguard is a wonderful resource.

Don't buy too much house. It costs a lot to maintain an expensive house. Interest is a stupid tax.

Drive your cars till the wheels fall off. My lifetime personal automobile expenses average is under $2000 per year including (cash) payment and repairs for my entire life. I've been driving for 30 years for $60,000. One vehicle today can cost that much! Make smart purchases. I'm currently driving a 2005 F-250, 4-wheel drive, diesel King Ranch in near perfect condition. You can have luxury, buy smart.

Take smart vacations. National Parks (they are back open yeah!), national forests trails, Couchsurfing, camping, national seashores and motel 6. For hundreds and not thousands you can have the time of your life and get healthy exercise.

Credit cards are evil. Never use one unless you have the cash immediately available to pay it off. Interest is for stupid people to pay.
__________________
Bateauxdriver is offline   Reply With Quote
Old 11-27-2013, 11:12 AM   #19
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: Rancho Santa Margarita
Posts: 15
Quote:
Originally Posted by Bateauxdriver View Post
Lots of great advice in this thread. My simple suggestions:

Keep debts low, every time you get a raise live as if you didn't. Invest the rest.

Get your max company match out of your 401K first.

Open the ROTH IRA asap. It is the best thing going. Pay your self today we pretaxed dollars and pay yourself later tax free. Also can be used for education. Vanguard is a wonderful resource.

Don't buy too much house. It costs a lot to maintain an expensive house. Interest is a stupid tax.

Drive your cars till the wheels fall off. My lifetime personal automobile expenses average is under $2000 per year including (cash) payment and repairs for my entire life. I've been driving for 30 years for $60,000. One vehicle today can cost that much! Make smart purchases. I'm currently driving a 2005 F-250, 4-wheel drive, diesel King Ranch in near perfect condition. You can have luxury, buy smart.

Take smart vacations. National Parks (they are back open yeah!), national forests trails, Couchsurfing, camping, national seashores and motel 6. For hundreds and not thousands you can have the time of your life and get healthy exercise.

Credit cards are evil. Never use one unless you have the cash immediately available to pay it off. Interest is for stupid people to pay.
Wow, that's incredible you've been able to minimize your driving costs to that average for such a long period of time. Thanks for your advice!
__________________
dpark6 is offline   Reply With Quote
Old 11-28-2013, 10:50 AM   #20
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,709
Quote:
Originally Posted by dpark6 View Post
At the moment, I'm comfortable investing in $3000 and would be okay if I dropped it. Of course I wouldn't be happy about it, but it's what I'm willing to go with.
I should have picked my words more carefully. What percentage drop can you tolerate? Obviously if all of the 3k disappears the game is over. Unless you invested in a few stocks only, that won't occur.

If you invest in the target fund with 90% equities, would you be OK with a drop of 45 percent? It sounds like you would be.
__________________

__________________
target2019 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 06:58 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.