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Message
Vanguard Roth IRA help
Posted on 11/21/16 at 11:49 am
Posted on 11/21/16 at 11:49 am
Trying to wrap my head around this stuff, and it's all new to me, so I'm hoping for a little guidance to help me understand what I'm doing a little better. For a little background:
I have 5k saved up for my "emergency fund" which I have sitting in a savings account that can easily be accessed in a few days (online account, so transfers take a bit) and $500 that I have set aside in my checking account in case something happens that I need money immediately for.
So, having hit those savings goals I decided today was the day that I should open up a Roth IRA to start my retirement savings. My work does not have a matching 401k plan, so opening anything through them seems pointless and was verified by the guy that comes in to discuss the 401k plan when I talked to him briefly.
So, now I have this Roth IRA...I only opened it with $25 as a means to simply open the account and was planning to drop ~20% of each paycheck every 2 weeks to start funding it. It seems as though this account is simply a savings account with the Roth IRA name attached to it.
I found the vanguard fund that has a retirement date of 2050 (or 2055) that has a buy in of 1k and is 90% stocks 10% bonds, which is what the little thing says I should do based on my age. So, am I just supposed to save up money in my Roth account until I hit 1k and then buy in and repeat that over and over, or once I've bought in to that fund, can I just have each bi-weekly deposit go straight in to it? I know I can only put in $5500 a year into that account and it will take me a few months of saving before I can even hit that goal.
Once tax time comes around, would it make sense for me to take money from my emergency savings account and finish funding the $5500 for this taxable year and then replenish it back up over a few months?
I really don't have a clue wtf I'm doing
I have 5k saved up for my "emergency fund" which I have sitting in a savings account that can easily be accessed in a few days (online account, so transfers take a bit) and $500 that I have set aside in my checking account in case something happens that I need money immediately for.
So, having hit those savings goals I decided today was the day that I should open up a Roth IRA to start my retirement savings. My work does not have a matching 401k plan, so opening anything through them seems pointless and was verified by the guy that comes in to discuss the 401k plan when I talked to him briefly.
So, now I have this Roth IRA...I only opened it with $25 as a means to simply open the account and was planning to drop ~20% of each paycheck every 2 weeks to start funding it. It seems as though this account is simply a savings account with the Roth IRA name attached to it.
I found the vanguard fund that has a retirement date of 2050 (or 2055) that has a buy in of 1k and is 90% stocks 10% bonds, which is what the little thing says I should do based on my age. So, am I just supposed to save up money in my Roth account until I hit 1k and then buy in and repeat that over and over, or once I've bought in to that fund, can I just have each bi-weekly deposit go straight in to it? I know I can only put in $5500 a year into that account and it will take me a few months of saving before I can even hit that goal.
Once tax time comes around, would it make sense for me to take money from my emergency savings account and finish funding the $5500 for this taxable year and then replenish it back up over a few months?
I really don't have a clue wtf I'm doing
5
Posted on 11/21/16 at 12:39 pm to Doldil
First, I would save up some more money for an emergency. But that's just me. If you feel fine with that, then go to retirement.
Not sure what you opened up for $25 at vanguard.
You basically open up the Roth target date with $1000. Then you can contribute up to the 5500 a year.
Best thing you can do though is call vanguard and tell them what you want.
I have called before about some stuff and they are quite helpful.
Not sure what you opened up for $25 at vanguard.
You basically open up the Roth target date with $1000. Then you can contribute up to the 5500 a year.
Best thing you can do though is call vanguard and tell them what you want.
I have called before about some stuff and they are quite helpful.
Posted on 11/21/16 at 1:20 pm to Doldil
The vanguard site says you can get started with as little as $1,000. So how did you get started with $25?
Posted on 11/21/16 at 1:58 pm to Doldil
You opened an account (which you can do with as little as $1) but it isn't invested in anything yet (this is less to OP and more to responses). Many of the things you can/should invest in will have minimums of $1,000 at least and you can invest as little as $1 additionally once you've got an initial investment in a fund.. so investing each pay period is possible.
Yes you should max it out if you can do it comfortably (take out the difference from saving account).
You can contribute to Roth for 2016 up until tax day in April 2017 so don't worry about trying to max it out before December 31st.
I'd just add money to the account until you get $1,000 and invest in a market index or S&P 500 index fund (assuming $1,000 is minimum for those as well) as opposed to a target date retirement fund. Then invest a portion of each paycheck going forward.
ETA: Putting money into the account counts as contributing to your ROTH IRA for the year even if it isn't invested in anything. I'd avoid investing any money in a ROTH that you think you'll need in the near future. I know that isn't a black/white rule as some people do withdraw from their ROTH for certain things but I'd consult somebody who knows what they're talking about (i.e. not TD) if you end up needing to do that in the future.
Yes you should max it out if you can do it comfortably (take out the difference from saving account).
You can contribute to Roth for 2016 up until tax day in April 2017 so don't worry about trying to max it out before December 31st.
I'd just add money to the account until you get $1,000 and invest in a market index or S&P 500 index fund (assuming $1,000 is minimum for those as well) as opposed to a target date retirement fund. Then invest a portion of each paycheck going forward.
ETA: Putting money into the account counts as contributing to your ROTH IRA for the year even if it isn't invested in anything. I'd avoid investing any money in a ROTH that you think you'll need in the near future. I know that isn't a black/white rule as some people do withdraw from their ROTH for certain things but I'd consult somebody who knows what they're talking about (i.e. not TD) if you end up needing to do that in the future.
This post was edited on 11/21/16 at 2:00 pm
Posted on 11/21/16 at 2:19 pm to Doldil
For someone who is admittedly clueless about the process and logistics what you're attempting to do is quite wise.
To answer your most important question, YES, once you have 1,000 invested in that target date fund then you can continue buying into that fund with a MINIMUM of $100 per deposit. Since you're buying a Vanguard fund, there is no commission.
If you don't want to try to get any cuter than that, just keep buying that target date until you reach $10,000.
THEN switch to Investor Shares...THEN come back to us. Ragacamps gives good advice, but it doesn't seem that you to be too active with your account...am I wrong?
To answer your most important question, YES, once you have 1,000 invested in that target date fund then you can continue buying into that fund with a MINIMUM of $100 per deposit. Since you're buying a Vanguard fund, there is no commission.
If you don't want to try to get any cuter than that, just keep buying that target date until you reach $10,000.
THEN switch to Investor Shares...THEN come back to us. Ragacamps gives good advice, but it doesn't seem that you to be too active with your account...am I wrong?
Posted on 11/21/16 at 2:24 pm to Doldil
How old are you? Sorry if I missed that.
I ask because target dates are fine for someone with minimal knowledge, however, I would argue there are alternatives to that which may be more beneficial but carry a certain inherent risk with them.
Ultimately, you can't (you could but unlikely) go wrong with a target date fund.
I don't usually like to quote this but, "time in the market beats timing the market". Just keep chipping in!
I ask because target dates are fine for someone with minimal knowledge, however, I would argue there are alternatives to that which may be more beneficial but carry a certain inherent risk with them.
Ultimately, you can't (you could but unlikely) go wrong with a target date fund.
I don't usually like to quote this but, "time in the market beats timing the market". Just keep chipping in!
This post was edited on 11/21/16 at 2:28 pm
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