Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Investing Strategy for Young Worker
Old 01-15-2011, 01:51 PM   #1
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 197
Investing Strategy for Young Worker

I started my first after-college job a couple months ago. Since then I have:

1. Set up automated deposits to put 10% of my salary into a 401k (more than what is required to get entire match)
2. Max Roth IRA
3. Max HSA (including employer contributions)
4. Transfer money on a biweekly basis to a savings account for the what-ifs in life

That was the easy part now I have to decide on an investment strategy going forward. Currently my 401k is entirely in a Target Retirement account and I was planning on doing the same in my Roth for now at least until I build up a decent account balance. Is this too simple of an approach? My Roth at VG currently has enough to meet at least 2 fund minimums may be 3.
__________________

__________________
RedHawk 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 01-15-2011, 02:45 PM   #2
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,608
That sounds like a good plan to me. When you are just starting out, developing habits of saving will matter much more than fine tuning your investment strategy. Target retirement funds make this easy. Some people stick with them, even with considerable balances. You will do fine using them, even for years, while you read books and decide if you want any more complicated strategy or not. Nice job so far.
__________________

__________________
growing_older is offline   Reply With Quote
Old 01-15-2011, 04:51 PM   #3
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Congratuations on a fine start to savings. You have time on your side, so read some good books to educate yourself on a strategy that you will be comfortable with. John Bogle, William Bernstein, Ellis and Larry Swedroe have all written good investment strategy books.

Do the reading, put a strategy together and the good people on this board and bogleheads.org will be happy to help you fine tune it.

All the best.
__________________
walkinwood is offline   Reply With Quote
Old 01-15-2011, 05:30 PM   #4
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 195
I'd suggest sticking with the targeted retirement actually. You goal right now, with the best rate of return, is going to be getting better at your job - studying things outside work hours to learn more, making connections, and doing your job well. Your savings total value is low - even if you are an investing genius, making 15% return on your savings isn't going to be nearly as valuable than getting an extra 5% raise, especially since future raises build on the larger base. As you get raises, save them, or save most of them, and you'll be surprised how much difference it will make.
__________________
seabourne is offline   Reply With Quote
Old 01-16-2011, 07:50 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Sounds good to me, roughly what I urged my DS to do (successfully).

I recommend saving 15% of your gross income, which you are likely to be hitting, though maybe not. That won't get you super early retirement, but it will get you there.

The targeted retirement funds are the easiest way to save. You'll have time to learn more about investing and chose something different if you want later.
__________________
Animorph is offline   Reply With Quote
Old 01-16-2011, 06:24 PM   #6
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Congrats on a strong start!

One bit of advice:

Quote:
Originally Posted by RedHawk View Post
3. Max HSA (including employer contributions)
Since you're pretty young, make sure you get a quote on an individual health insurance policy. If you're in pretty good health, your age will likely allow you to get an incredibly low quote compared to the group health insurance plan at work. I'd suggest trying ehealthinsurance.com, assurant.com, and your state Blue Cross/Blue Shield carrier. Those 3 sources should yield nearly all of the competitive, low quotes you could get on your own.

Of course, depending on the value of your employer contribution, it may make sense to be on the group health insurance policy...however, the decent employers will give you at least some cash benefit if they pay part of your health insurance policy and you decide to opt out of the company plan, so that could help offset the elimination of the employer contributions.

And remember: if your employer's HSA investment options line the pockets of the insurance company at your expense suck, it could also be worth it to drop out of the plan and transfer it to another provider with your own HSA policy (HSABank.com partners with TD Ameritrade, for example, to let you invest in nearly anything).
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 01-16-2011, 07:03 PM   #7
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 195
MooreBonds - we've just started an HSA offering at my work, and one thing that jumped out at me - my understanding of the taxation rules are the you are exempted from SS taxes ONLY if the contributions are deducted via employer. Following the route of using an outside HSA banker might lose that exemption worth about 7.65%. I may be incorrect, but be certain before you leave the employer HSA for your own!
__________________
seabourne is offline   Reply With Quote
Old 01-16-2011, 07:35 PM   #8
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by seabourne View Post
MooreBonds - we've just started an HSA offering at my work, and one thing that jumped out at me - my understanding of the taxation rules are the you are exempted from SS taxes ONLY if the contributions are deducted via employer. Following the route of using an outside HSA banker might lose that exemption worth about 7.65%. I may be incorrect, but be certain before you leave the employer HSA for your own!
My 2011 $5,500 deductible policy is running $40/month.

The group plan at w*rk employee portion (about 45% of the total cost) w/ a $2,500 deductible is waaaaay higher than that, even counting in the tax benefit.

Last year (for the first time in 3 years), it was roughly break-even in terms of maintaining my $5,000 individual policy versus going w/ the $1,000 deductible group policy - but since I had had an individual policy for the previous 9 years, I just opted to keep it. But this year, several high claims really jacked up the group policy premiums - and the employer had employees pay a higher percentage of it.

I did a quick comparison on ehealthinsurance.com for the director of my office (40 years old, married, 1 teenage son); if he went with a family policy on his own (same $2,000 deductible as the group family plan), he would save $100/month - even AFTER he loses the income tax benefit of paying with after-tax dollars versus pre-tax dollars.

Of course, even after telling all of my co-workers about how to get their own quotes, would you like to guess how many actually did it and purchased their own individual policies to save money?
zero Granted, some wouldn't qualify for as low of a premium due to age....but why complain about something if you're not going to fix it

Also, even if you can save 7.65% on a $3,000 HSA contribution, that only is worth $229. Granted, it's a sizable amount, but my premium savings more than offsets that, and I can invest my money in virtually anything - not some overfeed fund.
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 01-16-2011, 08:32 PM   #9
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 197
Quote:
Originally Posted by MooreBonds View Post
Congrats on a strong start!

One bit of advice:
Since you're pretty young, make sure you get a quote on an individual health insurance policy.
I think my work plan is actually pretty competitive. Part of the reason is I work somplace with a realatively young work force so most of the work force is pretty healthy. Plus my employer contributions when netted against my premiums make my health insurance almost free.

Last year during grad school I had my own insurance bought through ehealthsurance.com and it was $14/month than my employer plan, but the HSA contributions more than make up for the difference.

However, I do need to look into the investment options at the employer provided HSA. Is it possible to transfer money from one HSA to another without incurring a penalty without qualified health expenses?
__________________
RedHawk is offline   Reply With Quote
Old 01-16-2011, 10:05 PM   #10
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by RedHawk View Post
Is it possible to transfer money from one HSA to another without incurring a penalty without qualified health expenses?
Nearly all corporate plans are the same when it comes to HSAs and 401ks. Legally, the IRS allows the plan to offer current employees the ability to transfer out funds without having to terminate their employment; however, 99.9% of companies won't offer that, because the fund providers will be afraid of loosing the easy-money that 401k plans offer to the administrators.

I'm willing to bet that your HSA plan probably doesn't allow you to transfer to another bank/investment account while you're still working for the employer.
__________________

__________________
Dryer sheets Schmyer sheets
MooreBonds 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


Similar Threads
Thread Thread Starter Forum Replies Last Post
Different Investing Strategy harley FIRE and Money 17 10-05-2009 08:51 PM
Investing strategy AZ2TX FIRE and Money 20 09-18-2008 08:10 PM
investing strategy lawman FIRE and Money 30 09-09-2008 09:02 PM
Investing Strategy ktupper FIRE and Money 4 11-07-2005 06:18 PM
Pre-Retirment Investing Strategy DFW_M5 FIRE and Money 22 10-05-2003 10:18 AM

 

 
All times are GMT -6. The time now is 10:38 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.