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Started By
Message
Recently opened a Roth with Fidelity and looking for some guidance
Posted on 11/27/18 at 1:22 pm
Posted on 11/27/18 at 1:22 pm
First off, I should have my arse kicked for not doing this sooner. I'm 38 yrs old, single with no dependents, and I recently graduated college after going back to school in my mid 30's to pursue my degree. I don't carry any debt other than my student loans and and about 2K in credit card debt. The past few months I have been laser focused on paying off as much debt as possible as quickly as I can. I've also recently managed to start setting aside ~800 - 1000 dollars a month in savings with the intention of purchasing a home within the next 2 years.
With all of the being said, I recently realized that I have completely ignored planning for retirement. I looked into IRA's and chose a Roth because I love the fact that it's post tax investing and my investments should grow tax free. My current plan is to contribute as much as I can for the remainder of the year, and then begin contributing each week starting next year so that I max out at $5500.
So my questions are as follows:
Where should I begin investing my money for good long term gains?
Should I immediately invest everything I contribute to my account or should I let my contributions accumulate for a period of time before I invest them?
Is there any rule of thumb I should follow as far as how much cash I should be putting away in savings vs how much I should be investing?
Finally, what else could I be doing with my money?
Thanks for the feedback
With all of the being said, I recently realized that I have completely ignored planning for retirement. I looked into IRA's and chose a Roth because I love the fact that it's post tax investing and my investments should grow tax free. My current plan is to contribute as much as I can for the remainder of the year, and then begin contributing each week starting next year so that I max out at $5500.
So my questions are as follows:
Where should I begin investing my money for good long term gains?
Should I immediately invest everything I contribute to my account or should I let my contributions accumulate for a period of time before I invest them?
Is there any rule of thumb I should follow as far as how much cash I should be putting away in savings vs how much I should be investing?
Finally, what else could I be doing with my money?
Thanks for the feedback
2
Posted on 11/27/18 at 1:27 pm to Blizzard of Chizz
First thing you should do is pay off your credit card debt. Then contribute to your employee sponsored 401k up to the match. Then the Roth, if not an HSA.
Posted on 11/27/18 at 1:47 pm to Mingo Was His NameO
Credit card debt is my major focus at the moment. I'm currently paying well above the minimum payments on each in order to kill the balances. Two cards should be at a zero balance within the next 2- 4 months and the 3rd shouldn't be too far behind it. I am purposely avoiding touching my savings to pay them off. The last thing I want to do is to wipe out my savings paying credit debt off and then something unexpected happen and I'm right back where I started.
I do contribute to my company 401K but I also currently work in the restaurant industry. The hourly check is not very large to begin with and typically it all goes towards taxes each week. I want to avoid pulling out too much and then getting smacked with a huge tax bill. As I transition out of this industry next year, this shouldn't really be an issue.
I do contribute to my company 401K but I also currently work in the restaurant industry. The hourly check is not very large to begin with and typically it all goes towards taxes each week. I want to avoid pulling out too much and then getting smacked with a huge tax bill. As I transition out of this industry next year, this shouldn't really be an issue.
Posted on 11/27/18 at 1:55 pm to Blizzard of Chizz
quote:
The hourly check is not very large to begin with and typically it all goes towards taxes each week. I want to avoid pulling out too much and then getting smacked with a huge tax bill. As I transition out of this industry next year, this shouldn't really be an issue.
Your two posts are making much sense to me. In your OP you said you are setting aside 800-1k a month for savings and you are opening a Roth. Now you're saying you aren't making much and don't have any savings. I might be misreading or you may be unclear, but it's not adding up to me either way. If you are saving a thousand dollars a month you can and need to pay off the 2k in credit card debt before you do anything else. Then open the Roth. The interest on the CCs is killing you.
Posted on 11/27/18 at 1:59 pm to Mingo Was His NameO
quote:He's in the restaurant industry. He gets a small paycheck and everything else is likely unreported cash tips. Just a guess.
In your OP you said you are setting aside 800-1k a month for savings and you are opening a Roth. Now you're saying you aren't making much
Posted on 11/27/18 at 2:02 pm to PearlJam
quote:
He's in the restaurant industry. He gets a small paycheck and everything else is likely unreported cash tips. Just a guess.
I get that, just the way he wrote it I understood the savings as unencumbered money. Maybe that's what he's saving to pay his taxes at the end of the year with. If so, how much of that is dedicated towards the tax bill is relevant information we would need to help.
Posted on 11/27/18 at 2:09 pm to Blizzard of Chizz
quote:
The last thing I want to do is to wipe out my savings paying credit debt off
How much do you have in savings? If you can pay off your credit card debt immediately and still have a small emergency fund, then do it. With the 800-1000 left over each month in your budget, then you should be able to replenish your savings in no time...
Posted on 11/27/18 at 2:11 pm to Mingo Was His NameO
quote:#1 and #2 could be flipped depending on interest rate, debt amount, salary and match percentage.
First thing you should do is pay off your credit card debt. Then contribute to your employee sponsored 401k up to the match. Then the Roth, if not an HSA.
Posted on 11/27/18 at 2:18 pm to Mingo Was His NameO
quote:
In your OP you said you are setting aside 800-1k a month for savings and you are opening a Roth. Now you're saying you aren't making much and don't have any savings.
I didn't say this. I make on average 800 - 1000 a week in cash, but it fluctuates. I opened a Roth because It's the best way for me to invest my money. I can and do invest in the company 401k, but there is only so much I can contribute without getting killed in taxes because all of my check goes towards paying the taxes on my weekly cash income... As I said previously, I'm not going to kill my savings to pay off my credit card debt because it takes one thing to put you right back into debt. Car troubles or unexpected medical bills do happen. Cash in the savings account for life's unexpected surprises gives me more peace of mind than having no credit debt and a depleted savings account. Besides, I'm ok with completely paying off all of my credit card debt within the next 2-5 months. Those are short term goals.
The purpose of this thread is to address my long term retirement goals. I opened a Roth but want feedback on how to invest wisely from those who know what they are doing. I want to learn from people who know more than me in this area vs blindly going about it on my own.
Edit: have approximately 2K in savings at the moment.
This post was edited on 11/27/18 at 2:21 pm
Posted on 11/27/18 at 2:22 pm to Blizzard of Chizz
quote:This part is tough to understand, however it is irrelevant as long as you contribute enough to max out any match your employer provides.
I can and do invest in the company 401k, but there is only so much I can contribute without getting killed in taxes because all of my check goes towards paying the taxes on my weekly cash income
Posted on 11/27/18 at 2:22 pm to Blizzard of Chizz
quote:
I didn't say this
quote:
I've also recently managed to start setting aside ~800 - 1000 dollars a month in savings
It seems you did.
quote:
I can and do invest in the company 401k, but there is only so much I can contribute without getting killed in taxes because all of my check goes towards paying the taxes on my weekly cash income...
401k would be a better alternative for you than a Roth then because it lowers your taxable income and therefor tax liability.
quote:
As I said previously, I'm not going to kill my savings to pay off my credit card debt because it takes one thing to put you right back into debt. Car troubles or unexpected medical bills do happen. Cash in the savings account for life's unexpected surprises gives me more peace of mind than having no credit debt
You'd be better of paying it and getting a 0% introductory APR card in case that happens or transferring your current balance to one of those cards.
Posted on 11/27/18 at 2:26 pm to Mingo Was His NameO
quote:Guy is in the restaurant industry and just finished college and is soon to transition careers (presumably one that will increase his income over time). Chances are his tax rate will increase rather than decrease. Roth is therefore likely more advantageous for him than 401k.
401k would be a better alternative for you than a Roth
ETA: assuming he isn't missing out on a company match
This post was edited on 11/27/18 at 2:31 pm
Posted on 11/27/18 at 2:29 pm to Blizzard of Chizz
quote:
The purpose of this thread is to address my long term retirement goals. I opened a Roth but want feedback on how to invest wisely from those who know what they are doing.
Fidelity Target 2050 Fund
Once you have $10,000 in that, come back to us for some diversification advice and reassessment of your situation and current market conditions.
Posted on 11/27/18 at 2:31 pm to PearlJam
quote:
Guy is in the restaurant industry and just finished college and is soon to transition careers (presumably one that will increase his income over time). Chances are his tax rate will increase rather than decrease. Roth is therefore likely more advantageous for him than 401k.
Not if he's worried about his current tax liability.
I wouldn't contribute any extra to retirement at this point in any vehicle. He has as much CC debt as he has cash. He needs to eliminate that debt and have more cash of hand before he worries about either, in my opinion.
Posted on 11/27/18 at 2:32 pm to PearlJam
quote:
This part is tough to understand, however it is irrelevant as long as you contribute enough to max out any match your employer provides.
Let me explain it a little better. I make an hourly wage of 2.13 an hour, but I make approximately 800 - 1000 a week in cash. The 2.13 that ends up as a weekly paycheck pays the taxes on the cash income I make. If I start pulling too much out of that check and investing it in a 401k, there is not much going towards paying the taxes on my cash income. In other words, I would get killed in April. Currently I have a 800 or 900 dollar state tax bill each year because Federal taxes get paid first, and very little is left over for the state. The Roth is my best option to avoid owing several grand in additional Federal taxes.
Posted on 11/27/18 at 2:35 pm to Blizzard of Chizz
quote:
The Roth is my best option to avoid owing several grand in additional Federal taxes.
You're going to owe it either way and putting more into a 401k is going to make you pay less total, you'll just have to pay it when you file instead of having it withheld throughout the year.
My advice since you've clarified, not put any extra into a Roth or the 401k. work on upping your cash in your savings (emergency fund) and getting the CC debt paid off.
Posted on 11/27/18 at 2:37 pm to Blizzard of Chizz
The amount you owe in taxes doesn't change regardless of whether it is deducted from your small paycheck or paid by you otherwise. Investing in the Roth doesn't help you with taxes in the present tax year as that money has already been taxed. It just grows tax free. A 401k is invested pre tax and could reduce your current tax liability, but you will be taxed upon withdrawal.
It doesn't appear you have a clear understanding of how your taxes work.
It doesn't appear you have a clear understanding of how your taxes work.
This post was edited on 11/27/18 at 2:38 pm
Posted on 11/27/18 at 2:40 pm to Blizzard of Chizz
quote:
Where should I begin investing my money for good long term gains?
Some kind of balanced global fund composed of roughly 80% stocks and 20% bonds.
quote:
Should I immediately invest everything I contribute to my account or should I let my contributions accumulate for a period of time before I invest them?
monthly or bi weekly is probably best for Dollar Cost Averaging. If the market tanks and you happen to have 5k in savings or elsewhere then feel free to make a large purchase.
quote:Really there's not. Just MAKE SURE you're maxing out your Roth on a monthly basis (because you're playing catch up at 38).
Is there any rule of thumb I should follow as far as how much cash I should be putting away in savings vs how much I should be investing?
quote:I think you're doing quite well now, but I would also open up another taxed investment account, and look at some sector specific funds like QQQ (tech), individual stocks, and Reits (like CIM).
Finally, what else could I be doing with my money?
You'll never get rich on mutual funds starting at 38 so I think you'll need some help playing catch up.
If you're buying $500 worth of a global mutual fund in your Roth every month, then I'd try to put $100 into another investment account for individual stocks or ETFs.
So, twice a year pick some. $600 each time.
For what it's worth...
Edit to add: I bought 130 shares of CIM just a year ago, and I have now have 145 shares thanks to reinvesting dividends.
10.62% dividend rate as of today
This post was edited on 11/27/18 at 2:44 pm
Posted on 11/27/18 at 2:42 pm to bayoubengals88
quote:
I think you're doing quite well now
He has 2k in his savings account and 2k worth of credit card debt.
quote:
I would also open up another taxed investment account
See above.
quote:
If you're buying $500 worth of a global mutual fund in your Roth every month, then I'd try to put $100 into another investment account for individual stocks or ETFs.
So, twice a year pick some. $600 each time.
Again, see above. You've put nearly his entire monthly income into investment accounts.
Posted on 11/27/18 at 2:49 pm to PearlJam
quote:
nvesting in the Roth doesn't help you with taxes in the present tax year as that money has already been taxed. It just grows tax free. A 401k is invested pre tax and could reduce your current tax liability, but you will be taxed upon withdrawal.
I just do not see the benefit of only investing in my company 401K and not my Roth. At 2.13 an hour and working a 40 hour work week, my total check pre taxes is 80 dollars of which I can only invest a max of 25%. Even with a company match that's only 40 dollars invested each week. That's approximately 2100 dollars a year. With a Roth, I can invest up to 5500 a year, and it's post tax. If I am thinking long term retirement, shouldn't I be investing more and not less? Now, when my job situation changes, I can see the benefits of the 401k, but right now there just isn't a lot there to invest because the check is a tiny part of my income
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