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Started By
Message
What would you do if you were me?
Posted on 5/26/15 at 1:56 pm
Posted on 5/26/15 at 1:56 pm
Background of my financial situation:
22 years old
$75,000 annual salary
9% employer match 401k
$20,000 in bank (I've been working for a year)
No debt (paid off car/school)
I live below my means and I usually save 35-50% of my income after all expenses (rent/utilities/gas/food/ect)
The 9% match is fantastic, no doubt, but I'd like to diversify a bit and get ahead of the game while I'm young. Just reading this board and talking to my family it seems like a Roth IRA is the best way to go, which I was recommended to do through Vanguard. It feels wrong to have $20,000 just sitting in the bank earning practically nothing so I'd like to put 35-50% of that in an additional savings/retirement fund.
What would you do if you were in my shoes? I'd like to get an idea of what's out there and funds to invest in.
22 years old
$75,000 annual salary
9% employer match 401k
$20,000 in bank (I've been working for a year)
No debt (paid off car/school)
I live below my means and I usually save 35-50% of my income after all expenses (rent/utilities/gas/food/ect)
The 9% match is fantastic, no doubt, but I'd like to diversify a bit and get ahead of the game while I'm young. Just reading this board and talking to my family it seems like a Roth IRA is the best way to go, which I was recommended to do through Vanguard. It feels wrong to have $20,000 just sitting in the bank earning practically nothing so I'd like to put 35-50% of that in an additional savings/retirement fund.
What would you do if you were in my shoes? I'd like to get an idea of what's out there and funds to invest in.
21
Posted on 5/26/15 at 1:59 pm to Aubs10
quote:
Aubs10
I was close to your situation 8 years ago, making about 55k...so you are a little better off.
Do you plan on buying a house at any point in the near future? 9% is pretty good match, you don't want to save yourself poor...cash is awesome.
Posted on 5/26/15 at 2:01 pm to CidCock
quote:
What would you do if you were me?
Rejoice
Posted on 5/26/15 at 2:05 pm to Aubs10
FML
Posted on 5/26/15 at 2:06 pm to Aubs10
Switch places with me.
Posted on 5/26/15 at 2:06 pm to CidCock
quote:
Do you plan on buying a house at any point in the near future? 9% is pretty good match, you don't want to save yourself poor...cash is awesome.
Yeah this is something that bothers me. I feel like you need a set amount of cash in your account for general expenses, emergencies, and if you want to purchase a house/car. Unfortunately there's no telling how much you should keep in your account and there don't appear to be any rules for it. Whenever I ask, most people say they have around $10,000 in the bank.
Posted on 5/26/15 at 2:08 pm to Aubs10
are you maxing out your 401k?
and definitely max out a roth IRA
good job, you are way ahead of me at that age
and definitely max out a roth IRA
good job, you are way ahead of me at that age
Posted on 5/26/15 at 2:10 pm to Aubs10
Just here to say congrats on your situation. My advice more than anything is to stay the course and don't accumulate debt in any way, shape, or form in the very least.
Posted on 5/26/15 at 2:10 pm to Golfer
quote:
FML
Seriously. 22? Oilfield?
Keep taking full 9% match. Maximizing roth is good idea also.
If you plan on purchasing a house in the next 2-3 years, the cash on hand isn't a bad idea either. Having that much liquid will open up possibilities when buying/renovating/furnishing a new home.
Posted on 5/26/15 at 2:12 pm to Aubs10
quote:
What would you do if you were in my shoes?
I would create a thread that's really a subtle brag.
Posted on 5/26/15 at 2:13 pm to Aubs10
quote:
Background of my financial situation:
22 years old
$75,000 annual salary
9% employer match 401k
$20,000 in bank (I've been working for a year)
No debt (paid off car/school)
I live below my means and I usually save 35-50% of my income after all expenses (rent/utilities/gas/food/ect)
The 9% match is fantastic, no doubt, but I'd like to diversify a bit and get ahead of the game while I'm young. Just reading this board and talking to my family it seems like a Roth IRA is the best way to go, which I was recommended to do through Vanguard. It feels wrong to have $20,000 just sitting in the bank earning practically nothing so I'd like to put 35-50% of that in an additional savings/retirement fund.
What would you do if you were in my shoes? I'd like to get an idea of what's out there and funds to invest in.
if you really like the idea of a roth see if you can split your 401K contributions into some combination of traditional 401K and roth 401K...you wont get the tax benefit of traditional but you'll get some money into a tax free account...
Posted on 5/26/15 at 2:14 pm to Aubs10
Honestly, I wouldn't change a thing. At your age and income level, and with that generous an employer match on the 401k, you're already ahead of the game and doing better than 99% of your 22 year old peers.
Taking $5k from that $20k and opening a ROTH wouldn't hurt you. Then you can just start throwing some money in it every month, say $500.
It's a good idea to keep 3-6 months of your salary in some sort of liquid account you can easily access if you were to lose your job for some reason. So I wouldn't take all of that out.
Taking $5k from that $20k and opening a ROTH wouldn't hurt you. Then you can just start throwing some money in it every month, say $500.
It's a good idea to keep 3-6 months of your salary in some sort of liquid account you can easily access if you were to lose your job for some reason. So I wouldn't take all of that out.
Posted on 5/26/15 at 2:15 pm to LSUAfro
quote:
Oilfield?
Was in that for a year before switching to my new job in technology.
Thanks guys. So it's a general consensus that a Roth IRA is the best retirement plan outside of 401k? Will a 401k, Roth IRA, and Social Security(haha) be enough to retire on?
Posted on 5/26/15 at 2:18 pm to Aubs10
quote:What interest rate are you getting on your savings account?
It feels wrong to have $20,000 just sitting in the bank earning practically nothing
Posted on 5/26/15 at 2:18 pm to Aubs10
quote:
$20,000 in bank (I've been working for a year)
Our "emergency fund" is about twice that (wife, 2 kids, that's 6-8 months living expenses). Last year, we qualified for a Roth, so I maxed out a Roth for her and 1 for me from this fund. We qualified again this year, so another $11,000 went into our retirement. We have replaced some of this money in our savings account, but the way I see it, if I have about $10,000 in cash and the rest in a Roth, then I have the opportunity to make that money work for me and make a decent return, but I can pull my contributions out in case of emergency and I won't face any penalties.
I'd go ahead and fund a Roth in addition to your 401K, then start saving to buy a house, if that's in your near future plans. Congrats on being in the spot you are at such a young age.
Posted on 5/26/15 at 2:21 pm to Aubs10
quote:
It feels wrong to have $20,000 just sitting in the bank earning practically nothing so I'd like to put 35-50% of that in an additional savings/retirement fund.
I would look to be more toward the 50% end of the spectrum. Obviously, that would put you over the Roth limit, but not a bad idea to get an additional standard brokerage account going.
quote:
I'd like to get an idea of what's out there and funds to invest in.
Yeah, just pick out a couple ETFS and allocate very aggressively (at least 90% equity if not 100%). Just to warn you, a market "correction" is assumed to be very likely over the next 6-12 months; however, this should really not affect you at all given your time horizon.
Posted on 5/26/15 at 2:22 pm to Aubs10
Throw $5500 into the roth
Posted on 5/26/15 at 2:22 pm to UMRealist
quote:
What interest rate are you getting on your savings account?
Jack Sh*t. Like 1% if that. Thanks Wells Fargo.
Posted on 5/26/15 at 2:24 pm to Aubs10
quote:
Thanks guys. So it's a general consensus that a Roth IRA is the best retirement plan outside of 401k? Will a 401k, Roth IRA, and Social Security(haha) be enough to retire on?
Probably not.
I'm in the same boat as you in that I'm young and am putting a lot of money away. It will probably be seized from us in 40 years.Posted on 5/26/15 at 2:24 pm to LSUGUMBO
quote:
I'd go ahead and fund a Roth in addition to your 401K, then start saving to buy a house, if that's in your near future plans
When do I know to start saving for a house and to stop putting large contributions into Roth? I suppose it's all situational?
Also, are you including general living expenses in your "emergency fund"? If not, how much do you have in general expenses?
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