Klubbie
Recycles dryer sheets
Hello! I am looking for some insight on how to manage saving for retirement, and saving for other expenses. I am 31 (turn 32 in April)
I recently paid off my credit card debt (over the course of my 20's it totaled around $25k) which leaves me with student loans and a car loan. However, those two are their own animal:
Student Loan: $118k @ 7% interest (just under 22 years left on the loan)
Car Loan: $14k @ 3.75 interest
I am also trying to make some significant purchases in the next few years:
-engagement ring (this year)
-costs associated with a wedding (our families will be helping)
-saving to buy a home (next few years)
In addition I currently have about $1500 in savings. I know that is not enough. Fortunately, with the credit card paid off that allows me to ramp up my saving substantially.
So ultimately I am trying to balance saving for retirement, paying down my remaining debts, building some savings, and saving for some personal goals.
How would you approach this?
Currently my retirement savings look like this:
I just changed jobs so have not yet funded my 401k with the new employer (first change will be this next paycheck and I am contributing 4% to get the match right now)
401k with older employer: approximately 36k with the following AA:
40% S&P Index fund - 0.04 ER
10% Large Cap Value Index Fund - .10 ER
15% Small Cap Index Fund - .10 ER
15% Emerging Markets Index Fund - .18 ER
10% Large Cap International - .10 ER
5% Small Cap International - .15 ER
5% Common Stock Fund (company stock ) - 0.00 ER
In another thread I had mentioned that I had about a 3rd of my 401k in a stable value fund. I actually had held some cash but bought back in because I was thinking I could time the market. Stupid. It worked out this time, but I don't plan to do that anymore.
The old employer also has a pension that I can roll over to a tIRA. Currently the pension is about $6500.
My new employer has a lot of junk funds in their 401k so I have been reluctant to roll it over to the new employer. However after further examination they do have some Vanguard funds. I was spoiled at old employer because they had index funds for pretty much every asset class that I realized I may be underselling my new employer a little bit.
Here are the funds that the new employer currently offers that are worth investing in:
Vanguard Institutional Index Fund (VINIX) - .04 ER
Vanguard Protected Securities Fund - .07 ER
Vanguard Total International Stock Index Fund - .12 ER
Vanguard Wellington Fund (Admiral Shares) - .17 ER
Vanguard Total Market Bond Fund - .12 ER
Vanguard Target Retirement Funds ranging from 2015 to 2060
The only other funds that are worth mentioning in the plan are:
Fidelity Contrafund, a couple of T. Rowe Price funds, and company stock funds. Everything else is not an index fund and ER’s range from around .5 (these are PIMCO bond funds) to 1.6. Majority are over 1%. I plan to allocate the 401k with the new employer as follows:
65% Vanguard Institutional Index Fund
25% Vanguard Total International Stock Index Fund
10% Vanguard Total Bond Market Fund
New employer also offers an HSA which I won't max out this year, but will get close to maxing out with the employer contributions and my own. I have to see what else I can do with their wellness plan to fund it before I determine if I am going to max it or not.
Would you roll the old 401k to the new one or use a tIRA? If the new employer offered a Total Stock Market index fund (outside of the target retirement funds) I would roll over no question, but I know the Vanguard indexes it does offer are not bad either. I am just torn between keeping the 401k in one place, or creating a rollover IRA with the AA below.
I have a Roth IRA with TD Ameritrade and use commission free Vanguard ETF's there. Currently the AA there is as follows:
50% Vanguard Total Stock Market ETF (VTI) - .05 ER
10% Vanguard Small Cap ETF (VB) - .10ER
5% Vanguard REIT ETF (VNQ) - .10 ER
10% Vanguard Emerging Markets ETF (VWO) - .18 ER
10% Vanguard FTSE All World ex-US ETF (VEU) - .15 ETF
5% Vanguard FTSE All World ex-US ETF (VSS) - .25 ER
10% Vanguard Total Bond Market ETF (BND) - .12 ER
So I guess here are my questions/concerns:
1) I know I need to build emergency savings. Should I only contribute 4% to to 401K to get company match until I have 3-6 months of savings? Should I forgo contributing to the Roth IRA in lieu of building savings? I am in favor of maxing the 401k out at $17,500 so that it will lower my taxable income since I am in a higher tax bracket.
2) I am a little disheartened the new employer doesn’t have a total stock market index fund. Should I roll the old employer’s 401k to the new employer, or move to TD Ameritrade and allocate with my ETF AA? It should be noted the 401K does have a $2.66 administrative fee it charges monthly as well
3) In addition to planning my savings I have several big life expenses I am trying to plan for as I mentioned above. I plan to propose to my girlfriend this year and am saving for an engagement ring. We would also like to buy our first home in the next few years, and in addition to that getting engaged means we will have to spend some money on a wedding. How do you recommend balancing these and saving for retirement, and paying down my remaining debt?
4) Thoughts on my AA? I am trying to be aggressive by limiting bonds (My plan is to shift to either a 70/30 or 60/40 AA between now and when I turn 40). Since I have a longer time horizon to invest, I would like to have some exposure to emerging markets and small caps, but I don't want to go too far in to those. For those wondering, my goal is to ER by the time I am mid to late 50's.
My initial thought is to max out my 401k at the $17,500 allowed for the year, roll the 401k from the older employer to an IRA, and use the remaining money I have between savings, funding the Roth, and paying extra on my student loan and/or car loan. However, I am open to other ideas/suggestions on how to approach this. I appreciate any insight you can provide. If it helps to answer the question I make $100K per year, and my total monthly expenses are around $3000 per month (that includes around $1300 which are the car and student loan payments). If I contribute the max to my 401K that gives me around $1000 to $1100 each month to allocate between saving in a Roth, paying additional debts down, and saving for house/engagement ring/emergency savings.
I am a recent convert to accepting these principles of investing and finances (currently reading Bogleheads Guide on Investing and purchases 4 pillars of AA as well as some of the other texts recommended on these forums). For a long time I thought I was smarter and better able to invest than through the passive index approach. I was dead wrong. I have a lot of cleaning up to do with my finances, but I am hoping to learn and make positive changes from here on out. I appreciate any insight you may have on how to best manage my current situation.
Sorry for the long winded post, but I am really interested in feedback so that I can make smarter financial moves in the future than I made in my 20's when I racked up over $25k in credit card debt. I am trying to avoid those mistakes in the future.
I recently paid off my credit card debt (over the course of my 20's it totaled around $25k) which leaves me with student loans and a car loan. However, those two are their own animal:
Student Loan: $118k @ 7% interest (just under 22 years left on the loan)
Car Loan: $14k @ 3.75 interest
I am also trying to make some significant purchases in the next few years:
-engagement ring (this year)
-costs associated with a wedding (our families will be helping)
-saving to buy a home (next few years)
In addition I currently have about $1500 in savings. I know that is not enough. Fortunately, with the credit card paid off that allows me to ramp up my saving substantially.
So ultimately I am trying to balance saving for retirement, paying down my remaining debts, building some savings, and saving for some personal goals.
How would you approach this?
Currently my retirement savings look like this:
I just changed jobs so have not yet funded my 401k with the new employer (first change will be this next paycheck and I am contributing 4% to get the match right now)
401k with older employer: approximately 36k with the following AA:
40% S&P Index fund - 0.04 ER
10% Large Cap Value Index Fund - .10 ER
15% Small Cap Index Fund - .10 ER
15% Emerging Markets Index Fund - .18 ER
10% Large Cap International - .10 ER
5% Small Cap International - .15 ER
5% Common Stock Fund (company stock ) - 0.00 ER
In another thread I had mentioned that I had about a 3rd of my 401k in a stable value fund. I actually had held some cash but bought back in because I was thinking I could time the market. Stupid. It worked out this time, but I don't plan to do that anymore.
The old employer also has a pension that I can roll over to a tIRA. Currently the pension is about $6500.
My new employer has a lot of junk funds in their 401k so I have been reluctant to roll it over to the new employer. However after further examination they do have some Vanguard funds. I was spoiled at old employer because they had index funds for pretty much every asset class that I realized I may be underselling my new employer a little bit.
Here are the funds that the new employer currently offers that are worth investing in:
Vanguard Institutional Index Fund (VINIX) - .04 ER
Vanguard Protected Securities Fund - .07 ER
Vanguard Total International Stock Index Fund - .12 ER
Vanguard Wellington Fund (Admiral Shares) - .17 ER
Vanguard Total Market Bond Fund - .12 ER
Vanguard Target Retirement Funds ranging from 2015 to 2060
The only other funds that are worth mentioning in the plan are:
Fidelity Contrafund, a couple of T. Rowe Price funds, and company stock funds. Everything else is not an index fund and ER’s range from around .5 (these are PIMCO bond funds) to 1.6. Majority are over 1%. I plan to allocate the 401k with the new employer as follows:
65% Vanguard Institutional Index Fund
25% Vanguard Total International Stock Index Fund
10% Vanguard Total Bond Market Fund
New employer also offers an HSA which I won't max out this year, but will get close to maxing out with the employer contributions and my own. I have to see what else I can do with their wellness plan to fund it before I determine if I am going to max it or not.
Would you roll the old 401k to the new one or use a tIRA? If the new employer offered a Total Stock Market index fund (outside of the target retirement funds) I would roll over no question, but I know the Vanguard indexes it does offer are not bad either. I am just torn between keeping the 401k in one place, or creating a rollover IRA with the AA below.
I have a Roth IRA with TD Ameritrade and use commission free Vanguard ETF's there. Currently the AA there is as follows:
50% Vanguard Total Stock Market ETF (VTI) - .05 ER
10% Vanguard Small Cap ETF (VB) - .10ER
5% Vanguard REIT ETF (VNQ) - .10 ER
10% Vanguard Emerging Markets ETF (VWO) - .18 ER
10% Vanguard FTSE All World ex-US ETF (VEU) - .15 ETF
5% Vanguard FTSE All World ex-US ETF (VSS) - .25 ER
10% Vanguard Total Bond Market ETF (BND) - .12 ER
So I guess here are my questions/concerns:
1) I know I need to build emergency savings. Should I only contribute 4% to to 401K to get company match until I have 3-6 months of savings? Should I forgo contributing to the Roth IRA in lieu of building savings? I am in favor of maxing the 401k out at $17,500 so that it will lower my taxable income since I am in a higher tax bracket.
2) I am a little disheartened the new employer doesn’t have a total stock market index fund. Should I roll the old employer’s 401k to the new employer, or move to TD Ameritrade and allocate with my ETF AA? It should be noted the 401K does have a $2.66 administrative fee it charges monthly as well
3) In addition to planning my savings I have several big life expenses I am trying to plan for as I mentioned above. I plan to propose to my girlfriend this year and am saving for an engagement ring. We would also like to buy our first home in the next few years, and in addition to that getting engaged means we will have to spend some money on a wedding. How do you recommend balancing these and saving for retirement, and paying down my remaining debt?
4) Thoughts on my AA? I am trying to be aggressive by limiting bonds (My plan is to shift to either a 70/30 or 60/40 AA between now and when I turn 40). Since I have a longer time horizon to invest, I would like to have some exposure to emerging markets and small caps, but I don't want to go too far in to those. For those wondering, my goal is to ER by the time I am mid to late 50's.
My initial thought is to max out my 401k at the $17,500 allowed for the year, roll the 401k from the older employer to an IRA, and use the remaining money I have between savings, funding the Roth, and paying extra on my student loan and/or car loan. However, I am open to other ideas/suggestions on how to approach this. I appreciate any insight you can provide. If it helps to answer the question I make $100K per year, and my total monthly expenses are around $3000 per month (that includes around $1300 which are the car and student loan payments). If I contribute the max to my 401K that gives me around $1000 to $1100 each month to allocate between saving in a Roth, paying additional debts down, and saving for house/engagement ring/emergency savings.
I am a recent convert to accepting these principles of investing and finances (currently reading Bogleheads Guide on Investing and purchases 4 pillars of AA as well as some of the other texts recommended on these forums). For a long time I thought I was smarter and better able to invest than through the passive index approach. I was dead wrong. I have a lot of cleaning up to do with my finances, but I am hoping to learn and make positive changes from here on out. I appreciate any insight you may have on how to best manage my current situation.
Sorry for the long winded post, but I am really interested in feedback so that I can make smarter financial moves in the future than I made in my 20's when I racked up over $25k in credit card debt. I am trying to avoid those mistakes in the future.