This is something new to me. I am looking at Vanguard traditional IRAs since I'm sure retirement income will be less than our working income. So far in life retirement funding has been limited to 401k type plans. These will stay in place and NOT be rolled over. The IRA will be something new.

What are the most recommended starting investment options with Vanguard? I see their Target -years plan and also see their stock ETF plans and Mutual Funds.

I'm up for moderate risk for this particular account over say 25 years.

I would open a Roth IRA instead. Earnings grow tax free plus you can take the principle if needed. Target funds are good if you dont have tome to research mutual funds. They are made up of different stock and bond funds and allocated based on age.

I supposed I could do both. I was thinking traditional right now to offset whatever the gov wants me to pay in each year, at least up to the contribution limit.

quote:

So far in life retirement funding has been limited to 401k type plans. These will stay in place and NOT be rolled over. The IRA will be something new.

Are you still contributing to the 401k plan?

Can I contribute to an IRA if I participate in a retirement plan at work?

You can contribute to a traditional or Roth IRA whether or not you participate in another retirement plan through your employer or business. However, you might not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level.

For 2019, your total contributions to all of your traditional and Roth IRAs cannot be more than:

a. $6,000 ($7,000 if you’re age 50 or older), or
b. your taxable compensation for the year, if your compensation was less than this dollar limit.

https://www.irs.gov/retirement...-contribution-limits

quote:

Originally posted by chellim1:

quote:

So far in life retirement funding has been limited to 401k type plans. These will stay in place and NOT be rolled over. The IRA will be something new.

Are you still contributing to the 401k plan?

Yes. Increasing amounts each year.

quote:

Originally posted by Oz_Shadow:
I supposed I could do both. I was thinking traditional right now to offset whatever the gov wants me to pay in each year, at least up to the contribution limit.

traditional is fine.

you are basically hedging a bet between CURRENT taxation (or tax break) versus FUTURE tax rates and tax code

so with Traditional (unless you are higher than the allowable income level) you are opting for a CURRENT tax break (ie the contribution deduction). the Roth choice is betting on the value of a FUTURE tax break (assuming the laws aren't changed). The Roth does have a couple extra advantages over the Traditional which may or may not be important to you.

I have a lot of money at Vanguard. Couldn't recommend them more highly. A Target Date Fund would be a decent 'invest it and forget it' type deal. Index Funds like the S&P 500 Index or the Total Stock Market Index would be fine also.

Jack Bogle would have said ' Just get started!'

-----------------------------------------------

First, I will offer the same advice I always offer on these types of threads:

See if your local library has a copy of the latest edition of "Investing for Dummies," and "Personal Finances for Dummies." Both books will help you understand the basics of these topics, so you can make informed choices, and avoid scams. That is not meant as joke, but is serious advice, and the same advice I give to friends and family who ask me about these topics. I always tell them to read those books, and then we can have a good informed discussion about it.

That being said, is your current 401(k) plan account(s) a "traditional," "Roth," or both? Some employers have plans that allow you to invest in either, but many only offer one or the other. (Note for a Roth 401(k) all employer contributions will be in a "traditional" account(s), while the employee contributions are in the Roth account(s).

If it's a "traditional" 401(k), you may want to consider using a Roth IRA, instead of a "traditional" IRA. If your 401(k) account(s) are "traditional," you are already deferring a lot of income, and you may want to "hedge" your retirement tax strategy, by getting some tax free earnings through a Roth IRA.

Also, distributions from a "traditional" IRA, 401(k), etc, will be taxable income in retirement, while distributions from "Roth" accounts will not. That can have a huge impact on taxation of Social Security benefits. Please view this link from the SSA for more details:
https://www.ssa.gov/planners/taxes.html

Further, if you are hoping to leave money to your heirs, their are tax implications for your heirs with "Roth" v. "Traditional" retirement accounts.

I am also curious why you are not planning on doing a "rollover" at retirement, from your 401(k). There may be some reasons to leave retirement plans with an employer, such as a federal employee who is an "index investor," and has invested in the very "low cost" (low management fees) Thrift Savings Plan (TSP) (the US government equivalent of a 401(k)). However, for most people there are big advantages for doing a rollover, and taking complete control of your investments. You will no longer be restricted by the employer's plan in what your money is invested, and you can often greatly reduce the management fees. Since you will no longer be getting "matching funds" after you retire, the main advantage of staying in your employer's plan has come to an end.

I will also say, I find most "target date" plans are far to conservative. We actually use one of those plans for a portion of my spouse's retirement investments (old IRAs), as she is less interested in making any adjustments over time. However, we picked a fund that has a "target date" more than a decade past our actual planned "full retirement," because otherwise it would be far too conservative.

Good luck, as you move forward.

This message has been edited. Last edited by: DMF,

Vanguard guy here too.

Diversify. Some stock funds and some bond funds. Mix would be based on your specific risk and time line. Market volatility is in our future.

I have not done target funds. No advice there.

When I say diversify I also mean in your overall portfolio. All your assets.

Go to https://www.bogleheads.org/wiki/Main_Page. Do a little research.

Go with the Roth. If I could do it all over again - I would have transitioned my traditional IRA's 10 years back.

Given the market conditions right now - wade in very slowly.

I have used Vanguard, Fidelity and T. Rowe Price and they were all fine to work with/good fund offerings.

I once read that I needed to diversify and look in to precious metals, so I bought a 50 cal.

A Roth works better for me. Vanguard and Fidelity are the best low cost companies that I have found.

As the year progresses, I'd concentrate on 401K matched contributions (if your employer does such a thing), Then max out a Roth. After you are able to finish that, take a break for a bit. Spend a little time fixing up an old truck for a hobby or chase down that Triumph motorcycle you always wanted. The rest can be saved up later when time or your budget allows.

If you are also thinking about a 529 plan, remember that they give out scholarships for going to school, not retirement.

Firstly, make sure you are able to set a few grand off to the side for that hot water heater / roof repairs / timing chain that you don't know about yet.

I'd go with a Roth also.

As for investments, I honestly believe that with a little research, you can do as well or better than mutual funds. I'd specifically recommend researching solid income producing/dividend paying companies. Find ones who consistently raise their dividends as well and reinvest your dividends.

When you do leave your job, I'd rollover your 401k into your investment account portfolio. Of course make sure it's a qualified rollover so no penalties will be paid. You then have a LOT more options in how you can invest your money.

quote:

Originally posted by Oz_Shadow:
I supposed I could do both. I was thinking traditional right now to offset whatever the gov wants me to pay in each year, at least up to the contribution limit.

Used to work for Vanguard years ago, really great company.

One thing I learned: Almost every one is better off with 100% Roth all the time. The relatively little bit of taxes people save now are dwarfed by the potential savings when it comes to withdrawals. Plus the added benefit of being able to pull back your pay-in without tax penalties is a great backup if needed.

Both wife and I have only contributed to traditional IRAs and we put in the max allowable from about age 50. We have been taking RMD withdrawals since I had to at age 70.5. I've yet to pay a single penny in taxes on the withdrawals. I guess if I took more than the RMD it might put me into a taxable state, but since we don't need the cash at this time, we're just riding along. At this point there would be no tax benefit to having a Roth IRA instead of traditional.. Of course that's my particular situation which could change down the line if we need to withdraw more than just the RMD.

So, if you need the tax deduction now and feel that once you do retire, you'll be in a significantly lower tax bracket, a traditional IRA might be a good choice. On the other hand if you don't need the tax deduction now and would feel more comfortable knowing that no matter your tax bracket when you retire, you won't pay taxes on your savings then go with a Roth. The key is to get it started and keep it up.

Rmd?

Required minimum distribution.
None with a Roth; with a traditional IRA or 401k you are required to take a minimum withdrawal each calendar year; the amount is the balance at December 31 of the last year, divided by a longevity factor, which is based on your age and your wife’s age.
Any conversion to a Roth account must be above the MRD amount.

I also highly recommend Vanguard. As far as Roth or Traditional IRA that is pretty much up to individual situation. Roth IRA you pay taxes now and with Traditional IRA you pay later BUT taxes you would have paid are also invested and grow over time (hopefully LOL).

Be sure to take tax situation into account including state income taxes as some states tax IRA distributions fully or partially and others not at all. We have both ROTH and Traditional IRAs. We are planning to retire to state that does not tax IRA distributions and we expect our income to be significantly less than it is now but we will have no mortgage, no debt, and much much lower property taxes.

As far as what to invest in, Vanguard has plenty of options including target date funds and balanced funds such as the very popular Wellington and Wellesley Income funds. They also make it easy to invest in extremely low expense index funds like the S&P500 or Total Stock Market. Something like 80 plus percent of actively managed funds fail to beat the S&P500 index over the long term. If you are looking at mutual funds be sure to look at bear market performance too. You can use a website like Yahoo finance to loot at past history of a mutual funds performance year by year, below is an example of Vanguard Wellington and Vanguard Primecap which is a more aggressive growth stock fund. We are invested in both. Vanguard also offer ETF, exchange traded funds, which are similar to mutual funds but trade like a stock.

https://finance.yahoo.com/quot.../performance?p=VWELX

https://finance.yahoo.com/quot...VPMCX&.tsrc=fin-srch


As already mentioned read up on basic financial planning and investments. Good luck!

quote:

Originally posted by Oz_Shadow:
This is something new to me. I am looking at Vanguard traditional IRAs since I'm sure retirement income will be less than our working income. So far in life retirement funding has been limited to 401k type plans. These will stay in place and NOT be rolled over. The IRA will be something new.

What are the most recommended starting investment options with Vanguard? I see their Target -years plan and also see their stock ETF plans and Mutual Funds.

I'm up for moderate risk for this particular account over say 25 years.

Why do you want to invest in a t-IRA at Vanguard if you have not maxed out your 401k?

quote:

Originally posted by Kranky:


Why do you want to invest in a t-IRA at Vanguard if you have not maxed out your 401k?

quite frankly - some companies 401k options aren't very good. plus may come with higher expenses.

i agree to contribute AT LEAST enough to get the full - if any - company match

beyond that - IRAs may be a better option for some people

----------------------------------------

I agree with using Vanguard of Fidelity. They have good info on their website, the full spectrum of types of investments and low fees.
Don't worry too much at first about the exact fund. You can keep the money in the IRA and change funds as you learn more.
The important thing is to get it in each year before the deadline for that year. I believe it is April 15th or whenever you file, for the previous year. I'm sure they have that info somewhere on their site.
As you go, keep reading so you get a better understanding of the type of investments, their good and less good points. Having your own money at play will tend to focus your mind to make a dry subject more interesting.
The earlier in your life you start will make a big difference in how much you end up with.