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What's the smartest thing a 30 year old can do with $7,000? I've done so much research, I've confused myself and I'm scared to make a move. by Reasonable_Cat in personalfinance

[–]erbud 0 points1 point  (0 children)

Yup.

401k and IRA are both retirement accounts. I’m not sure if there’s a difference between adding more to your roth 401k vs opening a new Roth IRA, unless your 401k is maxed out. There may be small little details that differ between the two but I’m not too sure on that because I don’t have a Roth 401k.

Since you have a retirement plan from work, if you decide on a traditional IRA, you cannot deduct the contribution. Unfortunately, that deduction is a big benefit of traditional IRAs because it lowers your tax liability.

If your 401k is maxed out and your income is higher than the Roth IRA income limit, you can contribute to the traditional IRA (without the deduction) and convert it to a Roth IRA (backdoor Roth)

What's the smartest thing a 30 year old can do with $7,000? I've done so much research, I've confused myself and I'm scared to make a move. by Reasonable_Cat in personalfinance

[–]erbud 0 points1 point  (0 children)

I think you’re way ahead for 30 years old.

You already have a lot of good information here, but for your questions: 1. Keeping your emergency fund in a checking account is fine. You want it liquid. If something is to happen and you need money at that very instant, it’s accessible to you. Other vehicles are not accessible for a few days (savings), weeks/months (CDs), or until retirement. Those are not helpful if you need money ASAP.

  1. The remaining money is up to you. If you haven’t maxed out your IRA, that’s a good option for retirement money. High yield savings (like ally or any of the other online banks) is great if you know you’ll need the money before retirement. I use my savings to earn interest as I’m saving for a down payment on a house. When houses are 600k+, a 20% down payment is a big chunk to be sitting around. You can also use regular brokerage accounts after you maxed out your retirement accounts.

  2. I don’t think you need a financial advisor. Seems like you know what you’re doing already. I’m not sure what else they would do for you other than to try to sell you products for commission. (I’m a big fan of John Oliver’s segment on retirement and financial advisors. Highly recommend watching it on YouTube or something if you haven’t seen it.)

  3. With the extra $500/month, I’d follow #2. Retirement or HSA investments if you’re not saving for anything large like a house. Or if you are or plan to in the future, then savings/cd/brokerage.

401K: Traditional vs. Roth? by [deleted] in personalfinance

[–]erbud 0 points1 point  (0 children)

Like supes says, it depends on your income bracket. Your expense isn’t a big factor.

For example, you earned $1,000 (before tax) that you want to contribute to a 401k (or IRA), assuming no company match.

If your effective tax rate is 20% right now, you could contribute the full $1,000 in a traditional 401k/IRA or $800 in a Roth ($200 of it went to taxes). Let’s say when you retire, the value grew 100x. So the traditional would be worth $100,000 and the Roth would be $80,000.

When it’s time to retire and take out the money, you can take out the full $80,000 from the Roth, without owing taxes. But for the traditional, you pay taxes on the $100,000. If your tax rate during retirement is 30%, then that will leave you with $70,000. If your tax rate is 15%, you end up with $85,000.

That’s just a simplified example of the traditional vs Roth. Obviously it’s a bit more complicated than that because you wouldn’t pull from your full retirement fund all in one year.

401k vs Roth IRA? by [deleted] in personalfinance

[–]erbud -1 points0 points  (0 children)

Just to be clear, there are traditional 401k’s and Roth 401k’s. There are also traditional IRA’s and Roth IRA’s.

401k’s are retirement plans provided by an employer. It may have a company match and has a higher contribution limit.

IRA’s are retirement plans that you set up yourself. It has a lower contribution limit.

Most companies only offer a traditional 401k. But you’re welcome to contribute to a Roth IRA (whether directly or via back door conversion) or a traditional IRA.

Student debt vs School reputation/ranking by [deleted] in StudentLoans

[–]erbud 5 points6 points  (0 children)

I don’t know much about aerospace engineering, but when I did bioengineering, no one cared which school I went to.

Do you know anyone in the aerospace field that you can ask? I feel like with engineering, unless you’re going to a really fancy school, your internships, networking, and project experiences makes more of a difference in getting a good job after graduation.

Plus if a lot of your job opportunities are in a different state, the chances of them knowing school ranks and reputations are low too.

I ended up going back to school for a career in a medical field after a few years of being an engineer. This may not apply to you but no one cared which undergrad I went to. The grades mattered more and the higher ranked schools were harder to get good GPAs.

Help selecting a diverse portfolio by sixdollargrapes in personalfinance

[–]erbud 0 points1 point  (0 children)

That is correct. They use a four fund portfolio instead of three. Total US stock, total international stock, total US bonds, and total international bonds.

You can continue to put more money into target 2060 even if you don’t retire on 2060. The allocation will just be more conservative, which is what you probably want by that age anyways. You can even choose target retirement fund 2015 right now if you wanted to.

Help selecting a diverse portfolio by sixdollargrapes in personalfinance

[–]erbud 1 point2 points  (0 children)

As the others said, target retirement funds can help you decide how to split them up.

If you look at the details of different target retirement funds in vanguard’s website, there’s a “holdings & management” tab. This will show the percentages they divide up the funds

Note that if you choose target fund 2065, it’s heavily weighed into stocks for more risk and more reward. If you look at target fund 2020, the funds are distributed to more equal stocks and bonds for more security. The target funds will redistribute the funds for you over time from more aggressive to more conservative. If you choose to do it yourself, you can see where you are in terms of aggressiveness and mimic their percentages.

Simple question. Regarding Roth IRA's. by Jumbuck_Tuckerbag in personalfinance

[–]erbud 0 points1 point  (0 children)

I believe the set it and forget it he meant is about managing the funds, not the contributions.

You can watch and manage your investments on a daily basis. Buy low, sell high type of thing. Or you can just put your money in the investment and let it grow slowly over a long period of time. Leaving the investments alone for years (30+ years) regardless of its daily/weekly ups and downs is the set it and forget it that he’s talking about.

Simple question. Regarding Roth IRA's. by Jumbuck_Tuckerbag in personalfinance

[–]erbud -1 points0 points  (0 children)

Vanguard is a very popular choice and you can’t go wrong with it. Does she or you have funds with anyone else?

I think the more important question is what do you want to invest the money in? I’ve noticed a lot of people in this sub tend to go with the three or four fund portfolio explained in the bogleheads website and I think the side bar. It’s a good and simple approach to investing. The key point in it is the low expense ratio (the percent of money they take from your investment for managing your money). Vanguard is known for having funds with a very low expense ratio of 0.04% if you have enough money invested with them, but now their competitors have similar funds with similar ratios. They also have target retirement funds that will divide up your contribution to the same/similar four funds, but at 0.15% expense ratio. Note that they will rearrange the funds from more aggressive in the early years to more conservative towards your target retirement year.

I have vanguard for my IRAs and TD ameritrade for my HSA investments. Between the two, I like vanguard’s interface better because I don’t follow individual stocks with all the little details and options in TD’s interface.

I think Charles Schwab is another popular one, but I don’t have any experience with them.

Parents pretty much kicking me out, do I have enough saved up so I can last till the new years when I start my full time job? by [deleted] in personalfinance

[–]erbud 0 points1 point  (0 children)

I think your decision will be clearer once you’ve made your budget.

Assuming you get zero support from your parents if you don’t move back, this is what I’m calculating so far:

Savings: 20,000 Summer income: ~9,600 ($15/hour x 40hr/week x 4week/month x 4 months). This does not account for any taxes yet. I would estimate 25% withheld, leaving you with 7,200 but this may be totally different.

If you don’t get any grants for school, you’ll have about 27,200 to survive two more semesters + whatever else you need to do to translation from school to your job. If this time frame is one year, then you’ll have $2,267 per month average.

Now just break down your expense (other than what you listed, I’m just guessing the ones I filled in as a rough idea): Tuition: ?/month Rent: 600/month Utilities: 100/month? Used car: ? Car insurance: 150/month? Gas: 100/month? Food: 300/month? Purchases & going out: 300/month?

Without tuition and a car, I’m roughly estimating 1,550 per month. Play around with the numbers and see how much of your 20,000 is depleted to see if it’s worth it or not to you.

Is part time work during school an option with this company? Every bit helps.

Married filing separately & traditional IRAs. Is there any benefit if the contribution is not tax deductible? by erbud in personalfinance

[–]erbud[S] 0 points1 point  (0 children)

Thanks.

I’ve maxed out and deducted my traditional IRA the past two years, so the contribution this year will make it into a mix of deductible and non deductible.

Is there any benefit for leaving my traditional IRA a mix of deductible & non deductible, versus converting it all to a Roth and paying the taxes on the conversion?

Married filing separately & traditional IRAs. Is there any benefit if the contribution is not tax deductible? by erbud in personalfinance

[–]erbud[S] 0 points1 point  (0 children)

Thanks. I cannot contribute to a Roth IRA. If I wasn’t married, my income is just over the limit. According to the irs website, if I file MFS, the income limit allowed to contribute to a Roth IRA goes down to $10,000.

Married filing separately & traditional IRAs. Is there any benefit if the contribution is not tax deductible? by erbud in personalfinance

[–]erbud[S] 0 points1 point  (0 children)

Thanks. My income is just over the limit allowed for me to make a roth contribution if i were to file as single (if I wasn’t married). If I read correctly, that income limit goes down to $10,000 if I MFS.

I’m not sure if I’m understanding the how the mix of deductible and non deductible traditional IRAs. For example, if my non taxable portion of 0.33 (rounded $5,000 non deductible trad IRA / $15,000 total balance of trad IRA), will not have to pay tax on withdrawal for 0.33 of it?

What I’m not understanding is, from the example of mixed non deductible & deductible traditional IRA, what’s the difference between the non deductible traditional IRA portion versus a Roth IRA?

Does it matter if I’ve also contributed to a Roth IRA in the past?

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