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I been reading a lot and has been researching different type of investment plan. I am 24, single, no kids. Condo Owner, paying it off in 10 years. Earning 68k as Sr Software Developer. Absolutely no debt (beside condo, at 3.5% interest). I would like to retire at the age of 50 (if I need to, I can push it to 55).
1. Max out ROTH IRA, $5.5k per year. Invest everything in VFIAX, Vanguard Admiral Index fund. Why did I choose this? From all the reading, especially, bogleheads, they said Index fund, over 30 years period, generally gains the max return. Expecting to start taking money out at 60.
2? Max out 401k. $17k per year. I am matching my employers contribution but I'm not sure whether to max out 401k. I read somewhere that I am able to start taking money out at the age 55, if I am working for a company. Large cap, middle cap. Target date 2050. Diversify.
3? If #2 is max out 401k, I'd still have few grand left for more investment, I was thinking of opening a personal investment account. Contribute few grand every year. Maybe use it in the future for real estate investment, or just leave it in my account til 50. Probably going Index fund on this as well.
Questions:
#1: What do you guys think of this strategy? Am I doing something wrong? Can I improve it?
#2: Very very interested in start taking money out of 401k at age 55. Are there any special requirements? Would you have to be working for the company for CERTAIN amount of time to be eligible to start taking money out? If not by 55, can I keep rolling over my 401k to my Roth IRA and investing there? (So I can take out at 60). Would this be smart?
#3: Should I not max out 401k? Instead put MORE money on my personal investment account? Since, I can take it out anytime and invest elsewhere/use it. The only reason I'm hesitant is because all the tax I'd have to pay.
#4: Any other tips, recommendation, etc. are highly appreciated.
Also, if anyone has any question I can help with, I'd be glad to do so.
I been reading a lot and has been researching different type of investment plan. I am 24, single, no kids. Condo Owner, paying it off in 10 years. Earning 68k as Sr Software Developer. Absolutely no debt (beside condo, at 3.5% interest). I would like to retire at the age of 50 (if I need to, I can push it to 55).
1. Max out ROTH IRA, $5.5k per year. Invest everything in VFIAX, Vanguard Admiral Index fund. Why did I choose this? From all the reading, especially, bogleheads, they said Index fund, over 30 years period, generally gains the max return. Expecting to start taking money out at 60.
2? Max out 401k. $17k per year. I am matching my employers contribution but I'm not sure whether to max out 401k. I read somewhere that I am able to start taking money out at the age 55, if I am working for a company.
3? If #2 is max out 401k, I'd still have few grand left for more investment, I was thinking of opening a personal investment account. Contribute few grand every year. Maybe use it in the future for real estate investment, or just leave it in my account til 50. Probably going Index fund on this as well.
Questions:
#1: What do you guys think of this strategy? Am I doing something wrong? Can I improve it?
#2: Very very interested in start taking money out of 401k at age 55. Are there any special requirements? Would you have to be working for the company for CERTAIN amount of time to be eligible to start taking money out?
#3: Should I not max out 401k? Instead put MORE money on my personal investment account? Since, I can take it out anytime and invest elsewhere/use it. The only reason I'm hesitant is because all the tax I'd have to pay.
#4: Any other tips, recommendation, etc. are highly appreciated.
Also, if anyone has any question I can help with, I'd be glad to do so.
While I don't live in US..Up here..always max out your 401k..Then IF you have anything left over invest into something you are comfy with...allowing for failures or losses...My point is...IF you happen to have a job who matches your investment..maybe try that....as even though it can get locked..at least it's there.. I may very well be way off base on how American retirement investments work..BUT as a retired peep now..This worked for myself
While I don't live in US..Up here..always max out your 401k..Then IF you have anything left over invest into something you are comfy with...allowing for failures or losses...My point is...IF you happen to have a job who matches your investment..maybe try that....as even though it can get locked..at least it's there.. I may very well be way off base on how American retirement investments work..BUT as a retired peep now..This worked for myself
The problem becomes under current law he wants to retire up to ten years before he can access the dedicated retirement tax sheltered funds without penalty. For most the employer match on the 401k which the OP has done is well below the $17K limit on 401K accounts. Generally it is about 5% of the base pay level.
Given that the goal is to retire early get someone or a calculator to run the numbers of how much you will need to survive ten years. If the needed investment level is a number you can live, considering the tax sheltered funds available when you do reach 59 1/2 will be lower with go outside of the IRA and 401K for that amount before kicking up the 401K to the max
The problem becomes under current law he wants to retire up to ten years before he can access the dedicated retirement tax sheltered funds without penalty. For most the employer match on the 401k which the OP has done is well below the $17K limit on 401K accounts. Generally it is about 5% of the base pay level.
Given that the goal is to retire early get someone or a calculator to run the numbers of how much you will need to survive ten years. If the needed investment level is a number you can live, considering the tax sheltered funds available when you do reach 59 1/2 will be lower with go outside of the IRA and 401K for that amount before kicking up the 401K to the max
We need more info. If his 401k has a roth option that would get rid of the early withdrawal issues. Also if his match is 100% he should max out. Matching goes into the pretax side so he may be able to put 36,000 in savings a year
I been reading a lot and has been researching different type of investment plan. I am 24, single, no kids. Condo Owner, paying it off in 10 years. Earning 68k as Sr Software Developer. Absolutely no debt (beside condo, at 3.5% interest). I would like to retire at the age of 50 (if I need to, I can push it to 55).
1. Max out ROTH IRA, $5.5k per year. Invest everything in VFIAX, Vanguard Admiral Index fund. Why did I choose this? From all the reading, especially, bogleheads, they said Index fund, over 30 years period, generally gains the max return. Expecting to start taking money out at 60.
2? Max out 401k. $17k per year. I am matching my employers contribution but I'm not sure whether to max out 401k. I read somewhere that I am able to start taking money out at the age 55, if I am working for a company. Large cap, middle cap. Target date 2050. Diversify.
3? If #2 is max out 401k, I'd still have few grand left for more investment, I was thinking of opening a personal investment account. Contribute few grand every year. Maybe use it in the future for real estate investment, or just leave it in my account til 50. Probably going Index fund on this as well.
Questions:
#1: What do you guys think of this strategy? Am I doing something wrong? Can I improve it?
#2: Very very interested in start taking money out of 401k at age 55. Are there any special requirements? Would you have to be working for the company for CERTAIN amount of time to be eligible to start taking money out? If not by 55, can I keep rolling over my 401k to my Roth IRA and investing there? (So I can take out at 60). Would this be smart?
#3: Should I not max out 401k? Instead put MORE money on my personal investment account? Since, I can take it out anytime and invest elsewhere/use it. The only reason I'm hesitant is because all the tax I'd have to pay.
#4: Any other tips, recommendation, etc. are highly appreciated.
Also, if anyone has any question I can help with, I'd be glad to do so.
Sounds good, but I don't think you should have more than 300% of your money in real estate, as a rule. This is too concentrated.
I been reading a lot and has been researching different type of investment plan. I am 24, single, no kids. Condo Owner, paying it off in 10 years. Earning 68k as Sr Software Developer. Absolutely no debt (beside condo, at 3.5% interest). I would like to retire at the age of 50 (if I need to, I can push it to 55).
1. Max out ROTH IRA, $5.5k per year. Invest everything in VFIAX, Vanguard Admiral Index fund. Why did I choose this? From all the reading, especially, bogleheads, they said Index fund, over 30 years period, generally gains the max return. Expecting to start taking money out at 60.
2? Max out 401k. $17k per year. I am matching my employers contribution but I'm not sure whether to max out 401k. I read somewhere that I am able to start taking money out at the age 55, if I am working for a company. Large cap, middle cap. Target date 2050. Diversify.
3? If #2 is max out 401k, I'd still have few grand left for more investment, I was thinking of opening a personal investment account. Contribute few grand every year. Maybe use it in the future for real estate investment, or just leave it in my account til 50. Probably going Index fund on this as well.
Questions:
#1: What do you guys think of this strategy? Am I doing something wrong? Can I improve it?
#2: Very very interested in start taking money out of 401k at age 55. Are there any special requirements? Would you have to be working for the company for CERTAIN amount of time to be eligible to start taking money out? If not by 55, can I keep rolling over my 401k to my Roth IRA and investing there? (So I can take out at 60). Would this be smart?
#3: Should I not max out 401k? Instead put MORE money on my personal investment account? Since, I can take it out anytime and invest elsewhere/use it. The only reason I'm hesitant is because all the tax I'd have to pay.
#4: Any other tips, recommendation, etc. are highly appreciated.
Also, if anyone has any question I can help with, I'd be glad to do so.
Excellent plan, I wish I was as smart as you when I was 24, a lifetime ago!
For the personal investment account, don't concentrate on any one asset class. Get broad based ETFs, or stocks like BRK and MKL.
I don't know how house prices are where you live, but maybe consider buying a house and get some more deductions. No reason to pay non-deductible rent. Because even after maxing out your 401K so your taxable income is somewhere around $50K, in California you'd forking over 9.3% of that to our great state. Federal tax bracket will be lower for you so may not be a big concern.
EDIT: never mind, you already have a condo at a low rate. Yep, you got things in hand financially. Now forget about all that and go out and score
Last edited by cfa-ish; 01-20-2015 at 11:05 AM..
Reason: Oops, reading comprehension fail.
VFIAX is too concentrated in US Large Cap. Add other asset classes, including Completion Index (VXF),
Master Limited Partnerships, REITs, Emerging Markets, Asia Developed markets, etc....
#2. You can't take money outta there 'til age 59 1/2. That's why you need the personal acct you spoke of in #3.
#3. Very wise. And stick with the index funds.
Isn't it interesting that the most basic plan can be the most effective?
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