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So I understand I am asking alot here. Thank you ahead of time
We are and will be, low income at retirement. Making more $$ now than later on. Opening up a RothIRA also very soon for hubby
In 5-7 years, we will be flipping houses every few years so no paying taxes.
Our company owner admitted around 2023-2024 she will be closing up the business. No one buys this kind if unique business. I want to invest in very safe funds
The man who manages the company plan gets a set 1.5% of all of us employees... for managing it. 4% Employer match
If all I did was try to break even, or maybe make up to a few percent, does anyone know how likely that is if I put 80% into this money market fund below? It's essentially a savings acct, i know.
Vanguard money market reserves federal VMFXX $1 https://personal.vanguard.com/us/fun...FundIntExt=INT
Going with the ROTH is good. You will have no taxes when you withdraw.
A savings account will not keep up with inflation.
You want to try and get into some long term investments.
The 1.5% fee is very high but since you get the match go for the plan. Maybe the plan is very small and that explains the fee.
Going with the ROTH is good. You will have no taxes when you withdraw.
A savings account will not keep up with inflation.
You want to try and get into some long term investments.
The 1.5% fee is very high but since you get the match go for the plan. Maybe the plan is very small and that explains the fee.
Yes the RothIRA is mainly for paying less taxes, correct.
I can do long term investments in my husbands RothIRA when we open that up
I've not had a retirement plan before to know if this is a small plan or not.
Must hit the arrow on this photobucket site to go to the second page to see the funds offered.
In 5-7 years, we will be flipping houses every few years so no paying taxes.
Flipping houses is tax intensive unless you are very careful how you do it. Do your research on tax hits.
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The man who manages the company plan gets a set 1.5% of all of us employees... for managing it. 4% Employer match
1.5% ! Yikes! That is a huge fee. So your employer match is effectively 2.5%. Anything you put in above 4% is suffering the 1.5% fee. I would not put in more than 4%.
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If all I did was try to break even, or maybe make up to a few percent, does anyone know how likely that is if I put 80% into this money market fund below? It's essentially a savings acct, i know.
Not likely to break even. Inflation will eat more than the interest.
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I also have the choice of Vanguard 500 Index Adml VFIAX $2.1056 but it seems awfully expensive.
Expensive??? VFIAX is cheap as far as funds go. Its fees are 0.05%!! Compare that to the 1.5% charged by the guy managing your employee fund. Don't look at the cost per share - that is not the measure of how expensive a fund is. What matters is the ER (expense ratio), which is only 0.05%.
If your horizon if 10+ years of investing AND you have some flexibility on when you will want to access the money, I would put it all into VFIAX. Over the long run it will return the most money. But it will go up and down and you have to be able to sit through a down period. If you cannot, because you need the money or are just too nervous watching it yo-yo, then do not put your money into it.
Basically, with investing, there is no free lunch and the more pain you can bear, the more gain you will have.
Flipping houses is tax intensive unless you are very careful how you do it. Do your research on tax hits.
Yes we need to hold it for one year and one day. We've already done it and my husbands been in construction a while so though this is no guarantee of course, he does have the correct knowledge to do it.
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Expensive??? VFIAX is cheap as far as funds go. Its fees are 0.05%!! Compare that to the 1.5% charged by the guy managing your employee fund. Don't look at the cost per share - that is not the measure of how expensive a fund is. What matters is the ER (expense ratio), which is only 0.05%.
Ok. I didn't understand this. Probably investing 101, thank you
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If your horizon if 10+ years of investing AND you have some flexibility on when you will want to access the money, I would put it all into VFIAX. Over the long run it will return the most money. But it will go up and down and you have to be able to sit through a down period. If you cannot, because you need the money or are just too nervous watching it yo-yo, then do not put your money into it.
Thank you. If I was able to maintain that 2.5% (employer match-1.5% managed fund fee) and just not loose money, I'd be very happy with that
NancyDrew, you need to understand that your 401k probably has 2 sets of fees. The first set is the expense ratio for the mutual funds. All mutual funds have them. As another poster said, VFIAX is a cheap fund with a very low expense ratio. It's not a bad fund, but it's 100% stocks. Any fund that invests 100% in stocks is going to be aggressive in nature...and I don't think you want to be that aggressive.
On top of the mutual fund expense ratios, the 401k plan administrator charges a fee on top of that. A 1.5% fee is s rip off. Usually large companies get charged a lot less per employee than small ones because it's cheaper per employee to have a plan for 5000 employees than for 50. For example, my employer's plan has extra fees of .21% tacked onto some (but not all) funds in my plan. It's basically the cheap index funds that have the fees tacked on, because the mutual fund administrator doesn't get any kickbacks from Vanguard for their funds, whereas mutual funds with higher expense ratios often give plan administrators kickbacks for putting their funds on 401k plan menus. (I could be wrong about this, but I don't think so) In any case, a 1.5% administrator fee is a rip off any way you slice it.
I honestly think the American Funds 2020 Fund is your best option. It's pretty conservative--currently about 47% bonds and cash--with the rest in US and international stocks. It will automatically get more conservative with time. It has a cheap expense ratio of .37%. Not ultra cheap like Vanguard's funds, but cheap nonetheless. American Funds has a good reputation, especially if you can get one of their cheaper share classes. The "R6" share class offered by your plan is the cheapest share class American Funds offers--so you're in good shape there. Overall, it's good one stop shopping for people who don't know much about investing but want to get decent returns without too much risk. The fund isn't risk free, though. It can lose money. You should expect that it will lose money at some point in the future--probably not a ton, but no guarantees. The good years should more than make up for the bad ones over time.
The real problem with your 401k isn't the mutual funds or their expense ratios, it's that rip off 1.5% fee the plan administrator charges.
But I would still put something in the plan to at least get the maximum possible match.
Last edited by mysticaltyger; 01-26-2017 at 11:22 PM..
Thank you mysticaltiger. So to clarify, are you saying you think I should do American Funds 2020 for 100% of my portfolio? or was that for the 20%?? And I know I should at least do the employer match but it appears i need to open a Roth for myself. I want to invest 14K per year for the majority of my employment (5-6 yrs). We need to catch up. And 1.5% of that will take alot out of it, probably more than depositing already taxed income from my paycheck to a ROTH.
I just figured out how to list them here. And I am looking up the expense ratios now too. Company has about 50 eligible employees.
Last edited by NancyDrew1; 01-27-2017 at 12:30 AM..
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