Where should my retirment $$ go?

[yAyA]

Newbie alert!

I'm 29 and young, fabulous, and broke . However, I don't plan to stay broke and that's why I'm so happy I found this board. My question has to do with where is the best place to put my retirement $$. I already contribute 10% of my income to my jobs retirement plan. I want to up my contribution to 22% but I don't want it going to my job's plan. I want to do a some type of IRA. I hear about places like Scottrade, Vanguard, etc. but I'm just overwelmed and just unfamiliar with it all.

Any advice?

 

[just_hatched]

I already contribute 10% of my income to my jobs retirement plan. I want to up my contribution to 22% but I don't want it going to my job's plan. I want to do a some type of IRA. I hear about places like Scottrade, Vanguard, etc. but I'm just overwelmed and just unfamiliar with it all.

Hi yAyA,

Is there something you don't like about your employer plan?

In general, I think most people contribute at least enough to get the company match in their employer plan, then contribute to a Roth IRA (after-tax contributions now, but tax-free withdrawals later), then if they have more money left over, either max out the employer plan or contribute to other taxable investments (or pay off debt, mortgage, etc.)

It sounds like you've got a great start already - and you're not even 30!

Vanguard is a mutual fund company that is popular because of its selection of low-fee low-expense funds. You can open a traditional IRA (but because you have an employer plan, you may not be eligible for a traditional IRA) or a Roth IRA just about anywhere. But you want to open it someplace that offers you lots of investment options at low cost. That's why many people choose Vanguard, but there are others like Fidelity, T.Rowe Price, etc.

You'll want to consider your investment "style" such as your mix of stocks, bonds, etc. that you want to target with your retirement contributions and choose appropriate funds.
Vanguard, for example, has "Target Retirement" funds that have estimated retirement dates such as 2045 that you can put your money there and they will adjust your investment mix as you get older.

Hope this helps.

Welcome!

 

[vic]

Check with your employer whether they pick up the tab for all 401K management fees. Mine did - that is a better deal than even the small management fee at Vanguard when it is in a similar S&P 500 fund. I just left the cube and I will be charged the fee - now I will pull it out.

Vicky

 

[Gonzo]

Hi YaYa,

There was a bar called YaYa's in Port Orange, Florida just south of Daytona... any connection?

Gonzo

 

[Repairmanjack]

Here'a a link to a very helpful Morningstar post that discusses soup to nuts about investing.

http://socialize.morningstar.com/NewSocialize/asp/FullConv.asp?forumId=F100000002&convId=60825

(Please let me know if the link doesn't work.)

And good for you for starting to invest. I started at 24 and retired in my late 40's.

 

[yAyA]

Thanks for the responses.

Just-hatched-

I just don't feel like putting my $$ with my employers is the right thing. I also hope to get another job soon. The different IRAs seem good. I've heard of Vanguard but then I was reading that Scottrade offers no fee IRAs. I have to read the small print but if it doesn't really matter where I go, then I would prefer the no fee one.

Gonzo-

No relation...sowy


Repairmanjack-

Thanks for the link. I wish I had started earlier but I was one of many that never thought about retirement until I saw David Bach on Oprah. He lit a spark in me and I'm trying to be like you

FIRE!!!BURN BABY BURN

 

[Martha]

You should be able to contribute more to the 401(k) than an IRA. So you might rethink your strategy. Also, when you get a new job and leave the old one, at that time you could either rollover the 401(k) into an IRA or possibly rollover the old 401(k) into your new employer's 401(k).

If you agressively want to save money, you might also think about contributing both to the 401(k) and the IRA. There are some income limits on contributing to a traditional IRA if you have a 401(k) at work. The income limits are higher if you contribute to a ROTH instead of a traditional deductible IRA.

There also is a lot of sense in contributing to the 401(k) up to any employer match, then maxing out a ROTH IRA and then going back to the 401(k) to max that, if you have enough money.

 

[yAyA]

I always planned to contribute up to the point my employer matched. It was the extra I want to have in an IRA. My concern is that my employers investing may not be up to par. I'm confused. Is all retirement account basically handled the same way and that is why no one seems worried about where they put it??

 

[Sheryl]

yAyA - Most 401(k)s these days are self-directed to the extent that you are given a list of funds and other investment options to choose from.

At least in my experience, fo both mine and my BF's we have about 25-30 choices, ranging from money market type accounts, to bond funds, foreign funds, sector funds, lifestyle funds, etc.

If you have to trust your employer's investment skills, I would understand your hesitation!

 

[Outtahere]

Unless your employers 401k consists only of your company stock or it has limited funds you can save much more through that than an IRA.

 

[pagar]

Scottrade is a great place for IRA money, with their No Fee, Low Commision features. I highly recommend them. If you don't want to do individual stocks right now, there is a long list of No-transaction Fee, No-Load Fund families. Two things, I recommend you consider, IRA's in some cases are limited by increases in income. (I don't keep up with this portion of the IRS rules) so if you start IRA's when you are young and earnings are low enough to allow you to have an IRA, it will give you increased options later. Second, I see people posting that they are worried about tax consequences of their stock trades on almost every investment site. Trading stocks in IRA's eliminate some of the tax planning and increases your return in stock trading. The only way to get a larger amount in IRA's so you're able to have enough money in the IRA to do major stock market investing is to max the contributions year after year. There is a Retirement Savings Contribution Credit that is income limited that some are not aware of (Don't have any idea if it applies). Hope this helps.

 

[yAyA]

Scottrade is a great place for IRA money, with their No Fee, Low Commision features. I highly recommend them. If you don't want to do individual stocks right now, there is a long list of No-transaction Fee, No-Load Fund families.   Two things, I recommend you consider, IRA's in some cases are limited by increases in income. (I don't keep up with this portion of the IRS rules) so if you start IRA's when you are young and earnings are low enough to allow you to have an IRA, it will give you increased options later. Second, I see people posting that they are worried about tax consequences of their stock trades on almost every investment site. Trading stocks in IRA's eliminate some  of the tax planning and increases your return in stock trading. The only way to get a larger amount in IRA's so you're able to have enough money in the IRA to do major stock market investing is to max the contributions year after year.  There is a Retirement Savings Contribution Credit that is income limited that some  are not aware of (Don't have any idea if it applies). Hope this helps.

That helps alot! Thank you very much. I'm so happy that I found this board

 

[AJL]

You are the same age as my son - only difference is that he's in the Air Force Security Forces, currently in Afghanistan, but due home in February we hope. I used to kid him about me being a great role model. "Just do everything the opposite from what I did and you'll be a millionaire in a short time!!"
I've gotten some excellent advice from this site also. The big difference with this site vs getting advice from a friend or well-meaning relative is that alot of them (including myself) have been where you are now, they have made the mistakes thru the years and can tell you how to avoid the "pitfalls" along the way. As one already mentioned - "you have a good start, you have already realized that saving toward your retirement is a must!" That's half of the battle. The nice "deal" already is that your already in a 401K at work? Normally the employer (if he has a good year) will fund up to about 6% or so of his own money as a matching contribution to the company's plan. Some will even include some extra profit sharing as an added incentive. The nice thing about the 401K is that its money added to your retirement fund that you do not see. It keeps the "cash" out of your hands, which one atypically will spend like pouring water thru a sieve!! What income level you are at now is all relative - the more you make in the coming years, the more one hs a tendancy to spend. The trick is to save as much as you can on a constant basis and hopefully get a decent return along the way. Watch the 401K plan-track the funds that you have at least once a week. Most plans have about 13 or so funds to choose from and you can move your money thru all 13 on a daily basis if you want, thats the beauty of this program, although you may have something a little different. Introduce yourself to your bank manager, loan officers and the tellers- they sometimes can offer valuable information and most are friendly because they want your business. The people at this site can tell you about the best interest rates, CD plans, the best checking plans, mortgage loans and especially how to keep the governments - being local, state and federal from fleecing your pockets!! They can offer input on telephone plans, cheapest vacation spots, best cars to buy, how to buy a house with little money down, and the getting the best deal in town on most everything. All this information - is free for the asking, pretty sweet deal, huh??
This site will definitely help you save for the future, pick you up when you get down & depressed and give you a "cheer" when they hear that your "doing ok!" I wish you well my friend.

 

[yAyA]

Thanks for that post. It really put a smile on me face

I'm in my jobs Thrift Savings Plan. They don't offer much but G, C, etc plans. I just switched where my money was going cause it wasn't aggressive enough. I just don't feel they offer enough but then again I'm not that money savvy and maybe that's good

I'm off to dig through the wealth of information on this board 8)

 

[Michael Moore]

It sounds like you are probably a Federal employee under the FERS retirement syste (I recently FIREd under CSRS). My impression was that FERS people got a pretty decent deal on matching funds.

I think the TSP has a very low administrative cost. When we FIREd we left our TSP money in and put it in the G fund as we're more interested in conserving principle than we are in pie in the sky potential gains (yes, we've been burned on investments ) . If you can pick the right TSP fund you can make some pretty good gains - the S and I funds are showing 17% returns for the last 12 months.

In the absence of any confidence at picking the "right" fund, a steady 4+% in the G fund, with zero chance of loss, is fine with us.

cheers,
Michael

 

[moghopper]

...a steady 4+% in the G fund, with zero chance of loss, is fine with us.

Other than the steady march of inflation, you mean.

 

[Michael Moore]

Yep, you've always got to consider that.  But for some reason the slow loss due to inflation is easier to live with than the near overnight drop of 50% in value (of money that was saved up and put in, not paper increases) that we've experienced in more volatile investments. 

As retirees, we can't put any more money into the TSP, so we're definitely interested in maintaining our principle.  We could put things in the C, F or other funds and hope that we'd have more money down the road when we pull it out.  But having had the dubious pleasure of investing at the wrong time/in the wrong fund it seems to us that our chances of again losing what we've already got (by gambling on the hope of getting a little bit farther ahead than the safe and slow method), is high enough that we're more comfortable with plodding along with the G fund.

Compounding over the last 10 years shows the G fund at 5.75%, the F at 7.72 and the C at 11.99.

http://www.tsp.gov/rates/monthly-history.html

Since we've not got multimillion dollar portfolios (instead depending on our CSRS pensions) the money obtained by that doubling of the interest rate between the G and C fund, (presuming we didn't again start right before a three year 55% drop) could be safely gained by a bit of economizing.

We're not gamblers, and much of "investing" often looks to us to be a synonym for gambling.

cheers,
Michael

 

[yakers]

Hey T.O.M.,

I understand the safety of the G fund but it would be good to hold some other funds too. I used to be 40%G, 20% S, I & C but now I just went to the Target Retirement Fund 2020, I am 55. I know that G will barely keep up with inflation but since you have a COLAd CSRS pension that is already like holding a lot of bonds and it can allow you to be more aggressive with other investments. I would suggest a Target fund or at least put 20% of your funds into C (S&P500) for some growth over time.
Yes you (and I) got burned a bit by the market but you have 20+ years needing financial resources so its asset allocation not market timing to hold some equities in your portfolio.

Just my 2 cents, but I am putting my resources where my mouth is, hoping to keep mouth well fed over many more years.

 

[wstu32]

the main thing is... STICK TO A PLAN and do not deviate! good luck!