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Great. You've said this before, but it took twice to sink in & follow. Thank you.
Hopefully, I'll have a 401K with my next job... I'm about to re-relocate back to CA. In the meantime, I'm researching into putting my money in a credit union instead of Wells Fargo, a bank I despise using. They've made so many mistakes just on basics, like losing freshly printed checks 3 times, that they've got me nail biting. I only used them to begin with as they have branches in Denver & San Diego... but, I've got to get moving on transferring funds into a CA credit union & will find out about their Roth's, as well.
I see you've written other posts, Darrell & will be back later to respond. I appreciate all your time, as well as the others who've taken their time & patience to guide a novice. I like helpful posts as I can't be the only one who needs similar advice & your info is surely helping those who'll come behind me. Thank you, all, again!
That's a starter plan. The goal is to keep this process as simple as possible.
Do this:
1. Use Vanguard for ROTH IRA. WHY? they are very cheap, very. And good funds.
2. Take $5.5K from your savings and move it to Vanguard ROTH IRA. This will allow you to max it out for the 2012 year. Deadline is April 2013. Don't invest in nothing yet. Just leave it there. Its the same as leaving in the saving account its just stored somewhere.
3. Decide what date you want to retire. https://personal.vanguard.com/us/wha...entfundchoices
4. What ever date you pick, you can park the $5.5 in that fund and let it ride.
5. before doing that cross check back here or boglehead forums to see if anyone have any comments. When you post on boglehead you need list all your current assets, salary, and plan year of retirement so we can help you better. Also decided your asset allocation.. Bogleheads® investment philosophy - Bogleheads
6. After you do step 4 and 5. You are done.
7. Let vanguard take monthly payments from your checking account and contribute $458 a month to max out ROTH IRA for the 2013 year 458 x 12 = $5500. This way you are contributing every month and you know where it is going. Its going to one fund and you are done.
8. That's it. You are done.
9. When you get 401K, max it out every year with the cheapest fund in there.
For now, focus on asset allocation to define your risk.
Thats it. Nice and simple and smooth. Forget all the buy apple stock crap for now.
Right, that's why I was asking in the hopes someone who had a retirement account could reply. I did get poor advice & now recall that with my Roth the $ was disbursed (if that's the right word) into 4 accounts, obviously not the safest ones.
I've learned the hard way that the bank's advisers are not acting in customer's best interests. I've recently visited the bank to have someone tell me about CDs, perhaps to put the $ into one until I can safely invest for retirement. (As an aside, relatives told me not to trust CDs, further complicating the issue). A kid (& I mean kid... seems no one over 25 works in the entire bank, really) in a bad suit told me he was an expert, however, I left before he could get into his CD spiel because he couldn't properly understand or answer the few q's I first had on my savings/checking accounts! I had to keep correcting him on how it worked, which is quite pathetic as I'm not the most savvy with money issues. I was stunned. No matter the field, anyone who isn't a pro can print up a card stating the opposite.
Also, it seems people who can't do it are filled with advice. I've had more people tell me to buy stocks who never seem to have a $ in their pockets & based on how they live, I'm concluding they don't have a $ in the bank either. And, the websites/books by 'experts' I've relied upon in the past turned out to not work in my best interests... so, where does one go for solid, reliable advice taking into consideration what I mentioned before about people I know who've lost pension funds, etc?
Yes, I said that before. It's sitting in a savings account until I can decide which path to take. I'm just asking what others do that is working. Of course, before taking any action, I'd do my own research first 'til I understand exactly what I'm doing & which risks are present. What I don't know is where to begin & who's advice (websites, books, podcasts, whatever) to listen to & trust.
this is a story i told many times here. before i met my wife she was a widowed mom. she never had any interest in in anything pertaining to investing or finance.
she always dumped it on someone else.
well like you she trusted the guy at her bank. he took her money and put it in internet stocks and dot coms.
when the smoke cleared she lost 1/2 of it.
on the other hand i alaways took an interest and have been an investor for more then 25 years now.
well slowly she would listen to me talk, watch the shows i do ,pick up a magazine i would read.
little by little we were actually able to converse.
well today she has a good understanding of things and i am confident no one will pull the wool over her eyes again.
all our investment decisions are made together now and her input actually makes sense.
if there is one thing you learn from this forum it is this. no one can tell you what to do. finding what is right for you financially is like finding a husband.
you need to learn the basics and then you can make valid decisions on your own.
This is becoming clearer, so I do appreciate your patience & time. I hear what you're saying, but... say you're at retirement age now & your 401K dropped $22K or more & now you need it. This is what I'm trying to avoid & understand how to avoid. Does that make sense?
As you approach your planned retirement you want to shift towards more conservative investments to decrease your chances of that happening.
If worst comes to worst, you might have to work a few more years.
If you want any kind of decent return you're going to have to take on some risk though.
I'm a bit lost here. All the money I lost in the past was WITH a Roth IRA I opened myself (not through a company) in NC. I'm more than a wee bit distrustful of banks, based on how many I know who've lost money with IDG, pension plans with companies that just shut down & walked away with employees' money (including my mum), etc. In fact, my company is going bankrupt, so I'd need to find a new job anyway... glad I have no investments with them. The $40K is in a low interest savings account with Wells Fargo... not my preferred bank, but since they have offices in CA & CO, I opted to stay with them... despite the multitude of mistakes they've made on my accounts.
I think your first statement is the truest. You are ignorant about investing and that is your real problem (not trying to be mean). That is a big part of the reason why you lost money in whatever you invested in in the IRA....you (very likely) didn't know anything about what you were investing in and what the true risk/reward profile for that investment looked like.
Saying you "lost money in a Roth IRA" is really meaningless. A Roth IRA is basically a tax shelter. You're making a deal with the IRS and saying "I'm going to create a pot of money for my old age and in return you're going to give me a tax benefit/incentive for doing it". You can put anything from money market accounts, CDs, stocks, bonds, mutual funds (which essentially buy stocks and bonds for you so that you don't have to pick individual stocks/bonds), and even real estate, inside an IRA (although that last one I hear is complicated).
So what really needs to happen is you need to get yourself to a library and start reading the basics about stocks, bonds, mutual funds, etc and what their typical risk/reward characteristics are. There are also a lot of blogs and such online that discuss this.
As far as real estate investing goes....it's like any other investment. You have to know what you are doing and can't just go into it blindly...or you will lose money. Here is a very good blog series on residential real estate investing. By the way, the house you live in is really not an investment. I'm not saying owning a home is a bad thing, but it's not a true investment by any stretch:
this is a story i told many times here. before i met my wife she was a widowed mom. she never had any interest in in anything pertaining to investing or finance.
she always dumped it on someone else.
well like you she trusted the guy at her bank. he took her money and put it in internet stocks and dot coms.
when the smoke cleared she lost 1/2 of it.
on the other hand i alaways took an interest and have been an investor for more then 25 years now.
well slowly she would listen to me talk, watch the shows i do ,pick up a magazine i would read.
little by little we were actually able to converse.
well today she has a good understanding of things and i am confident no one will pull the wool over her eyes again.
all our investment decisions are made together now and her input actually makes sense.
if there is one thing you learn from this forum it is this. no one can tell you what to do. finding what is right for you financially is like finding a husband.
you need to learn the basics and then you can make valid decisions on your own.
I agree with all of this. Just to piggyback onto what was said about banks. People who don't know anything about investing typically think banks are a good place to go for advice. The truth is banks are usually TERRIBLE places for average people to go. They generally put people in overpriced and/or inappropriate investments that charge high fees and commissions. The only people the banks care about are the already very well off (people with $1 million or more to invest), and even then their high fees are often not justifiable.
Also, I might quibble with a few minor points on what darrell said....but overall he gave very good and succinct advice.
Again, how can you ensure you won't lose $ in a Roth IRA?
The short answer: You can't. Unless you invest your IRA in bank CDs...Of course, the problem with CDs is they pay almost nothing in interest and won't even keep you even with inflation...so you lose puchasing power year after year.
The bottom line is that no matter what you do, there is going to be risk, even in the "guaranteed" investments. It's just that the risk takes different forms depending on the type of investment. Very few of us can save all of our money in low yielding CDs and actually have enough money to retire. That is why most of us typically need to invest in a mix of stocks and bonds with higher growth potential (like the Target Date mutual funds Darrell was talking about). Almost all of us need our retirement savings to grow at 6%, 7%, 8% rates in order to have enough for old age. Of course, the thing is, you will not get a specific rate of return in any given year. In some years you are going to lose money....but a balanced Target date fund like Darrell talked about will generally keep your losses manageable in bad years and more than make up or those losses in good years.
You have to understand, there really is no such thing as a guarantee in life. The best you can do is balance one kind of risk against another. It's impossible to eliminate risk entirely.
Just as an example...A Target Date mutual fund will have a certain % in cash (usually not much), a certain % in stocks, and a certain % in bonds. Usually these 3 types of asset classes are not going up or down at the same time. (Usually bonds and cash are more "slow and steady" but offer low returns in the long run). That is what I mean by balancing one risk against another.
This is becoming clearer, so I do appreciate your patience & time. I hear what you're saying, but... say you're at retirement age now & your 401K dropped $22K or more & now you need it. This is what I'm trying to avoid & understand how to avoid. Does that make sense?
Yes, it makes sense and this can be a problem. That's actually what Target Date mutual funds help with. The fund will automatically get more conservative with time to reduce the risk of losing a lot of money when you are about to retire. (Notice, risk can be reduced...it can't be eliminated).
Once again, if you only get 1%, 2%, or 3% in bank CDs for 30 years, you are not going to have much money to retire on...so even though you will never "lose" money in any given year, the interest rates on CDs are so low, your money won't grow fast enough.
You could potentially own a mutual fund that loses 20% in the year you are about to retire...but that fund's average return over a 20 year period might still be 7% or 8% (which would beat the return from the CDs) even with the 20% loss in the year you retire.
problem is risk is all relative at different times. buying equities after the market fell 6,000 points in 2008 was not as risky as a retiree oriented target fund is today.
a target fund that has a retiree in almost all bonds at this point regardless of there age is very risky.
there is a pretty good chance that rates have no where to go but up from here and that spells losses for these target date funds.
a 1% rise in intermediate term rates can be a 5-7% loss in these funds . now considering we are at least 4% behind the historical average right now you do the math.
these target date funds are going to kill retirees once they drop.
since most target date funds are heavy heavy in bonds by retirement it is not even a question of if they drop, just when and how bad.
although i am 97% fixed income myself at this point i am ready to move to a growth and income portfolio as soon as nav drops enough to wipe out 2 month's interest.
Thanks, Darrell. Never had any debt, so that to me is the main focus for anyone. I had parents who came to this country just after the depression & frugal extraordinaire is a rather apt description for each. I still follow mum's advice... never buy anything for which you don't have the cash. Even if I have to wait a few years, I've bought every car with cash, save one, new or used. I do dislike the stress of a monthly pmt over my head anyway... I'm just not used to it beyond rent & utilities.
If more people thought like you, we could remove the tentacles of the banking/finance sector from around our necks. As it is today, most people require these services because they simply can't afford to purchase major items without them. Lack of discipline is one obvious cause. Of course, as long as banksters facilitate the purchase of things people simply cannot afford, like RE, we will continue to see unstable bubbles form ever decade or two. Most Americans would prefer stability, but volatility is how money is made (and lost).
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You've said this before, but it took twice to sink in & follow. Thank you. 
