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Started By
Message
Where should I start putting extra money every month?
Posted on 2/26/17 at 2:57 pm
Posted on 2/26/17 at 2:57 pm
Background info: 31 years old and make a modest salary but not balling by any means. I purchased my first home in December which is within my means and my live-in SO chips in for the mortgage and bills. I have always lived well within my means and keep a great check on my expenses. Keep a budget, take my lunch to work everyday, etc. I contribute to my work retirement fund the max that they'll match, and have just recently upped my roth to the max 5,500 per year (divided monthly of course). It is a target date retirement fund through Vanguard.
With that said, I think I'm in position after all bills, fun stuff, savings, etc to still have a little leftover to conrtibute towards investments. Since I've maxed out the roth, what am I supposed to do with this? I guess it depends on what I want to return, which I have no idea about, but I assume boils down to 2 schools:
1) Short-medium term: Put it into something for 5-10 years and basically jsut get some extra money to have down the road for any home-related items, kid's schooling, major expenses, whatever
2) Extra retiremtnt. With my employer fund and the VG target date I'm on teh right track, but I would like to retire the second that I'm able to and not a minute longer so anything extra can't hurt. So this would be more like a 20-30 year type deal. I jsut don't know what to do. Start another target date fund? Put it into a highly rated vanguard fund and just leave it for the long haul?
I'm a novice when it comes to investing which is why I chose a target date fund in the first place because it's basically "set it and forget it" which I appreciate. When it comes to my personal goals or wants, as I said above I don't really like working and would prefer to not do it any more than I have to so anything that can help me quit sooner would be awesome, so I guess any additional money I throw into investments would be with an eye towards retiring earlier. So I'm not really looking for a short term (5-10 year) payoff.
With that said, I think I'm in position after all bills, fun stuff, savings, etc to still have a little leftover to conrtibute towards investments. Since I've maxed out the roth, what am I supposed to do with this? I guess it depends on what I want to return, which I have no idea about, but I assume boils down to 2 schools:
1) Short-medium term: Put it into something for 5-10 years and basically jsut get some extra money to have down the road for any home-related items, kid's schooling, major expenses, whatever
2) Extra retiremtnt. With my employer fund and the VG target date I'm on teh right track, but I would like to retire the second that I'm able to and not a minute longer so anything extra can't hurt. So this would be more like a 20-30 year type deal. I jsut don't know what to do. Start another target date fund? Put it into a highly rated vanguard fund and just leave it for the long haul?
I'm a novice when it comes to investing which is why I chose a target date fund in the first place because it's basically "set it and forget it" which I appreciate. When it comes to my personal goals or wants, as I said above I don't really like working and would prefer to not do it any more than I have to so anything that can help me quit sooner would be awesome, so I guess any additional money I throw into investments would be with an eye towards retiring earlier. So I'm not really looking for a short term (5-10 year) payoff.
5
Posted on 2/26/17 at 3:05 pm to WG_Dawg
I personally went with option 1, in Vanguard's Equity Income Fund.
If available, get an HSA, and max that contribution first however.
If available, get an HSA, and max that contribution first however.
Posted on 2/26/17 at 3:15 pm to WG_Dawg
Well, I'd say it seems you've given a good bit of thought to how to approach it. Both routes have their merit, though none of us can tell you which to choose.
Personally, it seems to me like if you're on track to retire when you set your goal then I'd work on some of the shorter-term investments and live a little. But if early retirement is your main goal and you're happy in the now then by all means, don't deviate.
My long term investments will always be real estate plays. They've traditionally yielded more and I simply know it far better than the stock market. They also take more hands-on maintenance and patience.
Never rush into an investment. Study everything you can on it. Beat the subject into the dirt. THEN make your play. And not a moment sooner.
Personally, it seems to me like if you're on track to retire when you set your goal then I'd work on some of the shorter-term investments and live a little. But if early retirement is your main goal and you're happy in the now then by all means, don't deviate.
My long term investments will always be real estate plays. They've traditionally yielded more and I simply know it far better than the stock market. They also take more hands-on maintenance and patience.
Never rush into an investment. Study everything you can on it. Beat the subject into the dirt. THEN make your play. And not a moment sooner.
This post was edited on 2/26/17 at 3:26 pm
Posted on 2/26/17 at 3:20 pm to Decisions
quote:
it seems to me like if you're on track to retire when you set your goal
another thing, due to me being a novice, is not really knowing what's "on track". I'm sure I'm in a better situation than most of my friends but I have no idea what I'm "supposed" to have in retirement. So I think that everything I do investment-wise is with an eye on trying to quit working sooner than later.
So now that I think about it, scrap option 1. Kids aren't in the picture right now so I guess I'd rather put any extra money into retirement. So that brings me back to kinda the original question...should I start a new retirement fund? Should I just open another Vanguard fund and just have it for 25 years? Open another target date fund?
Posted on 2/26/17 at 3:35 pm to WG_Dawg
Sounds like you are not maxing your 401k.
That seems like the obvious choice. As the tax savings alone will be better than your other options. Guessing your employer is giving you similar target date fund options?
That seems like the obvious choice. As the tax savings alone will be better than your other options. Guessing your employer is giving you similar target date fund options?
This post was edited on 2/26/17 at 3:38 pm
Posted on 2/26/17 at 3:45 pm to UltimaParadox
quote:
Sounds like you are not maxing your 401k.
That seems like the obvious choice. As the tax savings alone will be better than your other options. Guessing your employer is giving you similar target date fund options?
I don't know what any of this means. I'm contributing the max to my employer fund that they will give a percentage max.
Posted on 2/26/17 at 4:10 pm to WG_Dawg
I work in an ICU. I dont know crap about investing but I can tell you with certainty that you are not guaranteed to live a lonh happy life. If I were in your position, i would continue with your plan to retirement and spend extra money on things that make memories and make you and yours happy today.
Posted on 2/26/17 at 4:20 pm to WG_Dawg
He thinks you have a 401k rather than an IRA
Posted on 2/26/17 at 4:21 pm to WG_Dawg
quote:
I'm contributing the max to my employer fund that they will give a percentage max.
You can contribute up to $18000 this year in your 401(k). Most employers will match up to a far lower level but it's still worth maxing this to get the tax deduction.
quote:
I don't know what any of this means.
Study this topic, it's a really important one.
The typical advice is to go something like this:
1) Contribute as much as you can to anything your employer will toss in extra for you. That's free money.
2) Then get a Roth going. Because you can take out anything you put in without a penalty, it can be a solid emergency fund too. Max this.
3) If 1 and 2 are covered, max your 401 up to the $18k limit.
This post was edited on 2/26/17 at 4:25 pm
Posted on 2/26/17 at 4:27 pm to Jibbajabba
quote:
i would continue with your plan to retirement and spend extra money on things that make memories and make you and yours happy today.
There is definitely a plus here. Personally what I do is max my Roth, my 401(k) and my HSA. That's $27k/year. Anything left over I can use for hookers and blow (well, travel mostly) and don't feel a shred of regret about it.
Posted on 2/26/17 at 5:34 pm to foshizzle
quote:
1) Contribute as much as you can to anything your employer will toss in extra for you. That's free money.
2) Then get a Roth going. Because you can take out anything you put in without a penalty, it can be a solid emergency fund too. Max this.
3) If 1 and 2 are covered, max your 401 up to the $18k limit.
This is what most people should follow. Sounds like you have steps 1 and 2 covered.
So now up your contribution to your 401k. Since all of these contributions are pre-tax, you are lowering your taxable income for the year. Only after you hit the 18K limit would you need to worry about putting money elsewhere.
Posted on 2/26/17 at 6:19 pm to WG_Dawg
Take advantage of compounding interest. Overall, it's really about reinvesting of earnings and time. That's the formula for long-term wealth.
Posted on 2/26/17 at 8:36 pm to Paul Allen
Look at your Vanguard options. See what performed well last year and consider investing equally in the highest 3. Target date retirement accounts have a certain amount of bonds involved. With interest rates as low as they are and The Fed talking about numerous rate hikes, you are setting yourself up for losses on that front. Do you have your emergency fund set up? (6 months of expenses)? Want to learn a bit about some of this? Consider buying Dave Ramsey's book "The Total Money Makeover". Great for novice investors. I agree with the above saying to max out your 401K and be sure you are contributing all of your money to pre tax contributions for maximum tax benefits. Also remember that Vanguard offers you free advice and counseling. There is no shame in saying that you are new to the game or don't know something. Everyone is learning daily.
Posted on 2/26/17 at 9:51 pm to Popths
...though you can pick a target date fund that has a more distant target date that lessens the bond exposure yet gives you diversity all in one neatly wrapped package. I'm jumping into Roth IRAs for me and the wife this year, and I think that's the route I'm taking.
This post was edited on 2/26/17 at 9:52 pm
Posted on 2/28/17 at 11:55 am to WG_Dawg
I would get a HSA and max that sucker out every year. HSA account is building for your own and your future family's medical needs. And after that I would max out your 401k. Since you have a modest salary you probably will not be able to max it out but try to increase it to a point that you are comfortable with. As your salary increases through the years don't forget to keep increasing your 401k contributions so you can eventually max it out.
Roth is a good idea. I never had one. I make to much money to qualify for one or I would be maxing it too.
I would put money in a Roth and HSA and make it top priority and then put as much as you can in your 401k. Your money issue is solved.
Roth is a good idea. I never had one. I make to much money to qualify for one or I would be maxing it too.
I would put money in a Roth and HSA and make it top priority and then put as much as you can in your 401k. Your money issue is solved.
This post was edited on 2/28/17 at 12:03 pm
Posted on 2/28/17 at 12:23 pm to WG_Dawg
my play money goes into Lending Club. I like helping people avoid the big banks.
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