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 Post subject: 26 Years Old and have little debt
PostPosted: Wed Jun 13, 2007 8:13 am 

Joined: Wed Jun 06, 2007 2:09 am
Posts: 466
When I say little, I mean $3,700 for the car and that's it.

I will have $250 dollars for retirement savings this paycheck and can save atleast $4,000 by the end of the year. What type of retirement investment should I make (Roth IRA, Traditional IRA, 403b, etc.) and why?

I appreciate your advice.


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 Post subject: Re: 26 Years Old and have little debt
PostPosted: Wed Jun 13, 2007 8:18 am 
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Joined: Wed May 30, 2007 11:23 am
Posts: 859
Location: Portland, OR
sdogg1m wrote:
When I say little, I mean $3,700 for the car and that's it.

I will have $250 dollars for retirement savings this paycheck and can save atleast $4,000 by the end of the year. What type of retirement investment should I make (Roth IRA, Traditional IRA, 403b, etc.) and why?

I appreciate your advice.


What is the rate on your car loan? If it's under 6% or so (my personal limit, may vary for others) I would keep it and save for retirement. However, if it is above 6% I would pay it off ASAP and then you can start using your former payment (plus any extra to start saving).

The only reason I wouldn't follow that advice is if you have access to an employer plan that gives you a company match. If this is the case, you should put in enough to get the company match and then apply the extra as described above.

If you don't get a match then I would recommend doing a Roth IRA before you participate in an employer plan.

You're already doing well to be that age with that little debt so you're ahead of the game which is great!


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PostPosted: Wed Jun 13, 2007 9:22 am 

Joined: Sun Apr 15, 2007 1:33 pm
Posts: 42
Location: FL
As usual, I second pf101's advice.

Pay off car loan if it is high interest first, otherwise save for retirement.
Get your company's match if they offer one, it's free money.
If there is no match, a RothIRA is a good choice because you have more control over your investments and can access your contributions in a emergency.


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PostPosted: Wed Jun 13, 2007 9:27 am 
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Location: England
Agreeing here too except I believe the order should be:

if matching money available from employer - take that

else if car loan interest rate > 6% - pay that off more quickly

else if earn less than Roth contribution income limit - invest in Roth IRA

else tax deductible IRA / 401(k)

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PostPosted: Wed Jun 13, 2007 9:04 pm 

Joined: Wed Jun 06, 2007 2:09 am
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Are all Roth IRAs the same?

I think I have narrowed down my choices to Vanguard and Guidestone but want to make sure there weren't any difference between the two choices.


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PostPosted: Wed Jun 13, 2007 11:03 pm 
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Location: Portland, OR
sdogg1m wrote:
Are all Roth IRAs the same?

I think I have narrowed down my choices to Vanguard and Guidestone but want to make sure there weren't any difference between the two choices.


A Roth is just a type of account. Every Roth is the same. It's what you hold in the account that matters. I've never heard of Gladstone before today but I'm not overly impressed. They're really expensive. Quick comparison for you:

Annual Expenses:
Guidestone 2045: 2.4%
Vanguard 2045: .21%

A 10k investment getting 8%/year for 30 years would be worth:

Guidestone: @ $57k
Vanguard: @ $100k

It's scary what expenses will do to you...


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PostPosted: Thu Jun 14, 2007 8:51 am 

Joined: Wed Jun 06, 2007 2:09 am
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Thank you so much for your help pf!!!

What have you read that assisted in this area? I have started studying but feel a little overwhelmed.

Also, the car loan does have a high interest rate (10.25%) but the loan ends in 2008 and I have a plan to pay it off early thus the interest will only cost $300. The developed discipline of investing for retirement interests me greater than paying off a loan. I don't believe I will be in debt from that day forward as I have learned the value of saving and as of friday will be able to save a great deal of money.

A few more questions, I will have the opportunity to opt out of Social Security. Do I take the opportunity and invest in other retirement accounts? Also, not investing in Social Security will open myself to financial problems if I become disabled. In that case, what type of safety net should I invest in?


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PostPosted: Thu Jun 14, 2007 9:14 am 
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Location: Portland, OR
sdogg1m wrote:
Thank you so much for your help pf!!!

What have you read that assisted in this area? I have started studying but feel a little overwhelmed.

Also, the car loan does have a high interest rate (10.25%) but the loan ends in 2008 and I have a plan to pay it off early thus the interest will only cost $300. The developed discipline of investing for retirement interests me greater than paying off a loan. I don't believe I will be in debt from that day forward as I have learned the value of saving and as of friday will be able to save a great deal of money.

A few more questions, I will have the opportunity to opt out of Social Security. Do I take the opportunity and invest in other retirement accounts? Also, not investing in Social Security will open myself to financial problems if I become disabled. In that case, what type of safety net should I invest in?


Happy to help.

I've read dozens of books and magazines. I also learned a lot through my time at Vanguard. I have 2 books on my must read list: The Automatic Millionaire and Investing for Dummies. If you need help with general personal finance stuff then Personal Finance for Dummies is good too. I'd just read the Automatic Millionaire at the store (I'll take a couple hours depending on how fast you read) but Investing for Dummies has a LOT of info that can be good to refer back to as you learn more so it might be a good investment (used).

If you have weighed the advantages/disadvantages of not paying off your car loan then you are making an informed decision so go for it.

I would give my right arm to opt-out of SS. I don't think I'll ever get any benefit from it and would MUCH rather take home that 7% and invest it elsewhere...god knows it will benefit me more that way. But your point about disability is good so you should look into disability insurance (most people should have it anyway). I would shop around a bit (I think Bach talks about this in the AM) to make sure you're getting a good deal and make sure you get appropriate coverage (so it covers you for doing YOUR job, not just any job).

Good luck, it sounds like you're on a good path!


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PostPosted: Tue Jun 19, 2007 9:06 am 

Joined: Wed Jun 06, 2007 2:09 am
Posts: 466
pf101 wrote:
sdogg1m wrote:
Thank you so much for your help pf!!!

What have you read that assisted in this area? I have started studying but feel a little overwhelmed.

Also, the car loan does have a high interest rate (10.25%) but the loan ends in 2008 and I have a plan to pay it off early thus the interest will only cost $300. The developed discipline of investing for retirement interests me greater than paying off a loan. I don't believe I will be in debt from that day forward as I have learned the value of saving and as of friday will be able to save a great deal of money.

A few more questions, I will have the opportunity to opt out of Social Security. Do I take the opportunity and invest in other retirement accounts? Also, not investing in Social Security will open myself to financial problems if I become disabled. In that case, what type of safety net should I invest in?


Happy to help.

I've read dozens of books and magazines. I also learned a lot through my time at Vanguard. I have 2 books on my must read list: The Automatic Millionaire and Investing for Dummies. If you need help with general personal finance stuff then Personal Finance for Dummies is good too. I'd just read the Automatic Millionaire at the store (I'll take a couple hours depending on how fast you read) but Investing for Dummies has a LOT of info that can be good to refer back to as you learn more so it might be a good investment (used).

If you have weighed the advantages/disadvantages of not paying off your car loan then you are making an informed decision so go for it.

I would give my right arm to opt-out of SS. I don't think I'll ever get any benefit from it and would MUCH rather take home that 7% and invest it elsewhere...god knows it will benefit me more that way. But your point about disability is good so you should look into disability insurance (most people should have it anyway). I would shop around a bit (I think Bach talks about this in the AM) to make sure you're getting a good deal and make sure you get appropriate coverage (so it covers you for doing YOUR job, not just any job).

Good luck, it sounds like you're on a good path!


Grrr....Went to sign up for my Vanguard account and found out that your initial investment for a Roth IRA must be $3000. I believe I will be able to save $3000 before 2007 end but I am dissappointed as I wanted to invest today.

https://flagship.vanguard.com/VGApp/hnw/accounttypes/retirement/ATSRothIRAOverviewContent.jsp


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PostPosted: Tue Jun 19, 2007 9:22 am 
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Location: Portland, OR
sdogg1m wrote:
Grrr....Went to sign up for my Vanguard account and found out that your initial investment for a Roth IRA must be $3000. I believe I will be able to save $3000 before 2007 end but I am dissappointed as I wanted to invest today.

https://flagship.vanguard.com/VGApp/hnw/accounttypes/retirement/ATSRothIRAOverviewContent.jsp


You can start with the STAR fund for $1k and then when you get to $3k transfer to another fund.


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PostPosted: Tue Jun 19, 2007 9:48 am 

Joined: Wed Jun 06, 2007 2:09 am
Posts: 466
pf101 wrote:
sdogg1m wrote:
Grrr....Went to sign up for my Vanguard account and found out that your initial investment for a Roth IRA must be $3000. I believe I will be able to save $3000 before 2007 end but I am dissappointed as I wanted to invest today.

https://flagship.vanguard.com/VGApp/hnw/accounttypes/retirement/ATSRothIRAOverviewContent.jsp


You can start with the STAR fund for $1k and then when you get to $3k transfer to another fund.


What is a STAR fund???


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PostPosted: Tue Jun 19, 2007 10:07 am 
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Location: Portland, OR
sdogg1m wrote:
What is a STAR fund???


It's a balanced fund. Very good, if a bit conservative. But a good way to get started with a smaller amount and then get more agressive as you get more money.

https://flagship.vanguard.com/VGApp/hnw/funds/snapshot?FundId=0056&FundIntExt=INT


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PostPosted: Sun Jun 24, 2007 11:59 am 

Joined: Mon May 14, 2007 7:20 pm
Posts: 309
Fidelity allows you to start with around 200, as long as you sign up for auto-investing every month.

But, if you have your heart set on vanguard, it would be worth it to wait, since you will have this account for many many years.


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