I just opened a Roth IRA, and am ready to invest in the stock market

[TurboMinivan]

It looks like RME has not had a discussion on investing since at least 2010, so I figured I'd begin a new thread.

I've been at my job for over 21 years. We have a company 401(k) plan, and I'm doing fairly well with that. I just upped my contribution from 8% to 10%, and I get an extra 2% from the company match. As I compare my annual returns against the market, I've been consistently beating the S&P 500 for the last 15 years. (My first few years were pretty dismal as I was paranoid and had no idea what I was doing.) But as I have made some estimated mathematical calculations over the last few years, I realize that it won't be enough. Oh, sure, it would be sufficient to pay for my retirement eventually, but I don't want to work that long. So I've been telling myself for years that I ought to open a Roth IRA and get that going, too.

I kick myself for taking so long, but last week I finally did it! I opened an online account with E-Trade, and deposited $5000. I immediately put that money into two mutual funds--half into a large blend fund, the other half into a small growth fund. Since I'm playing a long game here, that seemed to be a good idea for me.

The IRS will let me add another $1000 to this account this year, and that is my plan. However, I'm thinking I'll put this portion into some dividend stocks rather than another mutual fund. I haven't decided which one(s) yet, but I am beginning to research my options. I'm also trying to read and study about dividend stock investing in general, just to get a better feel for how to make smart choices.


And that's mainly why I started this thread. I'd love to talk with some friends about all this stuff, but I don't know anybody who actually invests (other than a company 401(k) plan). Anybody else here in dividend stocks? If so, please speak up.

 

[jeeper]

I don’t invest myself, I think a professional who has spent their life focusing on it will do a much better job, so I just pay in and hope for the best. So I am not much help there.

But, I did just finish ‘everyday millionaire’, and my major take-away from that book is just how easy it really is to become a millionaire if you start early and be consistent. So if anyone is on the fence, get started ASAP.

 

[TurboMinivan]

... my major take-away from that book is just how easy it really is to become a millionaire if you start early and be consistent. So if anyone is on the fence, get started ASAP.

THIS. The more I read and study, the more I realize it is easy for anyone to become financially independent given enough time. I wish I had started 30 years ago.

 

[I Lean]

I wish I had started 30 years ago.

^^ Ditto.

 

[Jinx]

Just because everyone loves numbers...

A while back I was given 10% of each check for retirement, and 5% to savings to cover incedential crazyness, (so you can avoid credit card dept)...

knock on wood so far it is looking good.

But to second what has already been said here, a little money per month for 40 years is a better in the long run than a lot of money for short period of time 10-15 years.

If you are 25 and aren't actively putting money away for retirement it is something to think about. I, for one, am not counting on Social Security for any income in retirement...

 

[spaggyroe]

And that's mainly why I started this thread. I'd love to talk with some friends about all this stuff, but I don't know anybody who actually invests (other than a company 401(k) plan). Anybody else here in dividend stocks? If so, please speak up.

I invest regularly in a Roth, as well as a separate brokerage account, but I am admittedly an index fund guy. Congrats on what you've been able to accomplish with your 401k, as consistently beating the market average for an extended period is usually quite difficult. Whatever you're doing, keep it up. Also, getting the extra 2% company match was a great move. Always take the free money.

With your managed funds, make sure to subtract out the fees, as some investment companies seem to skew the numbers a little bit by showing you an XX% return on investment on the statement, which is before their fees are taken out.

I have a hard time believing that the government will tax us LESS in the future, so the Roth is an awesome addition to your portfolio.

 

[Greg]

I realize you're not too interested in talking about a company 401k, but I like talking about this stuff, so....

I pay into Railroad retirement at 12%, but about a year ago started a company 401k thru Vanguard. I'm currently putting 7% into the 401k, after I first started it I was loosing money with the investments they automatically selected for me. I did quite a bit of reading & research, (Anthony Robbins book Money, Master the Game) and sat down and studied all my options and what was best for my needs. Over a year later and I'm seeing a 14% ROI on my 401k and it's currently over $5k. I have about 16 yrs until I can retire at 60 and want the 401k to help supplement my RR retirement. I'm going pretty aggressive with my investments, since it's not my main source of retirement funds and also to help make up for lost time. So far, it's been working out. My 401k is set to increase by 1% each year, I think when I hit 10% I'll stop and let it ride.... then I'll be putting 22% of my check into retirement. I think that will be enough!

I have 74% in Stocks, 20% in Bonds and 6% in company stock.

I also have my money split up so 3% is going into a Roth Basic, 3% is Pre-Tax and 1% is Post-Tax. Nobody knows what tax rates are going to look like in 15-20 yrs, so I'm trying to spread out what I'll be paying taxes on and keep as much as I can for compounding interest.

 

[Jinx]

Side note: I forgot to mention, as a minimum, (Speaking to no one in particular) consider paying in in such a way to max whatever your company contribution is.

So if will match your contribution up to 6%, it is a good idea to contribute 6% so you actually get 12%...

 

[Pike2350]

I did things a little different. For much of my career to date I worked for companies that had very little or no retirement benefits. I made the mistake of not starting a Roth IRA on my own.

However I did buy a rental property and have been putting money into that to make sure it is in good condition and will last a long time. Over the past few years I've started to cash flow on the property and hope to buy more on the future.

My last company and current one had 401k's and I've taken advantage as best I can....but I'm started late at 37. Im hoping the passive rental income will be the main retirement money and I only have to supplement it like Greg mentioned he's doing.

As for investments..... I'm clueless and generally pick target date funds...I did just opt for 8% withholdings....all as Roth. I think my tax bracket in the future will be higher...so better to pay the piper now

 

[Cody]

I do a round up plan through acorns... It's something. Other than that, I've cashed out all of my 401k money I had invested working for other people's companies to invest in myself. Hopefully one day I will be able to ramp up some normal investments

 

[johngottfredson]

Like Cody, most of my investments are in my own "stock," though my wife and I max out Roth IRA investments every year. Invested in a real estate deal that seems to be doing well, looking for a couple more. Have some equity/stock ownership in my old company they say is worth a decent amount but I just assume I'll never see any of it just to be safe.

I'm mostly banking on my own business game, with some safer modest investments on the side...just in case. I don't plan on getting into the stock market any farther than $12k/yr. I don't like putting money in things I can't control, and basically don't understand.

 

[Greg]

..... But, I did just finish ‘everyday millionaire’, and my major take-away from that book is just how easy it really is to become a millionaire if you start early and be consistent. So if anyone is on the fence, get started ASAP.

The most important thing is just to get started putting money away for retirement/investing, no matter how old you are. I was never worried about retirement when I was younger and didn't put much thought about it until my late 20's when I started with the UP (and retirement became a big topic), but I wish I would have payed in from the get go and my first job at 15 yrs old. Obviously I wasn't making much, but if I would have started back then and been consistent, I'd have on helluva nest egg by now.

I have talked to a few coworkers about starting a 401k like I have and they're interested, but only 1 has had me help him get setup and started. I've encouraged the others, these guys don't know how to do it, but its super simple. They just don't want to 'give up' that little bit of their check, but aren't looking at the big picture and seeing what it can turn into.

At my current rate of return and what I'm investing, over 16 yrs mine should end up around $300k. Not bad for just a little extra play money.

 

[Noahfecks]

So I am forbidden from giving any specific stock advice, and no one should take the advice of some 4x4 yahoo on the internet anyway, seek the help of a professional. I would like to add my $.02 regarding portfolio balance.

As others have mentioned, you should ALWAYS contribute the amount an employer will match, that's free money, take it.

If you are fortunate to be in a situation where you are able to contribute additional funds I highly recommend splitting your amount in excess of employer match to a ROTH. The rational is this; during retirement you have the ability to control your tax bracket if you have a good mix of qualified and non-qualified investments. You can take the max from your qualified funds to stay in a low income bracket, and supplement your financial wants/needs with the unqualified money in your Roth. For instance you can live on 401k money year over year and stay in a low tax bracket, but pull funds from your Roth to make major purchases (motor home, new jeep, corvette) or supplement income without entering a higher tax bracket.

You should not overlook the power of becoming debt free prior to retirement. It's nice to have a big check coming in from good investments but that money won't go as far in the future if you still have debt. Having a paid off mortgage, credit card, and auto should be as important a part of your strategy as saving for retirement.

Buy my book, only $19.95

 

[glockman]

I started contributing at to my 401k 21. I'm now 40 and I feel like I have a decent egg. I've upped the contribution a little at a time and and now at 10%. My company matches 4%. I have also started pumping money into an HSA since it's tax free and you are definitely going to have medical expenses in retirement. We just refinanced our house to a 15 year mortgage so I should be clear on that and have no debt by the time I'm 55. That should give me at least 5 more years to work and stash cash so I can die at work in my early 60's and my wife can have a sweet life.
My real goal is to get out of a job I have to work sometime in the next 10 years and spend my last 15 years working a job that I have fun at.

 

[N-Smooth]

I went several years without contributing to a 401k so that hurt me but I do get a pension from my 10 years at the county- so that's cool. It'll only be 20% of my salary but hey it's money. I contribute to a ROTH IRA now and my company matches 6%. Vanguard actually provides a service that raises your contributions by 1% each year so I have that go through at raise/bonus time and I don't even miss the money.
My wife is the one that killed it on her 401k, consistently contributing for the last 12 years. It's really paying off and is projected to be worth a few M by retirement time. It's hard to say if that's even enough money though *shrugs shoulders*
Other than that I contribute to my (discounted) employee stock purchase plan. I've had coworkers that invested early when it was ~$5 and retired when it hit $350 last year. If only I could see into the future, right?

 

[Bart]

Luckily I've had a great employer based 401k plan for the past 30 years, and in 5 to 6 years I plan on taking advantage of it. My biggest regret is not being more fiscally responsible early in life. Get started now and never stop. Retirement age comes regardless of your planning and it will be much easier then if you suffer a little now.

 

[zmotorsports]

THIS. The more I read and study, the more I realize it is easy for anyone to become financially independent given enough time. I wish I had started 30 years ago.

Agreed. I was told early on in my career that in order to retire wealthy or doing fairly well you need one of two things. Time & Money. If you have a lot of money, you don't need as much time. If you don't have a lot of money, you need time to let your money work. Compound interest.

My wife and I started at our jobs when they had a pension and we were both very young. In 2000 (I was 31 and my wife 30 years of age), our company went away from the traditional pension to a 401(k) format. We both took advantage of it and contributed enough to get the company match. The problem with our company managed 401(k) is that the avenues for investing are very limited as most in the company participate in what is known as a "target based retirement". Meaning you select a year in which you want to retire and the portfolio is managed accordingly. This is way too conservatively managed and I felt like we were leaving money on the table so about 12 years ago we started moving things around according to the economy and within the very limited places within the account. We also at this time opened a ROTH account and have been putting the maximum amount in each year and in this account we have complete autonomy to put funds in any sector or market we want.

Our current path is continuing to put money into our 401(k) in order to get the company match, continue to max out our ROTH annually and then we've been paying extra on our home to get it paid off within the next 8-9 years while putting more into savings as we will need to pay for insurance once we retire as it will be before we quality for Medicare.

Bottom line is you should have a plan and stick to it because no plan is just planning for failure which isn't an option so I'm glad to see this topic come up. Too many of my co-workers are under the philosophy that they will worry about it later and they want to live and play now.

Mike

 

[RockChucker]

I, for one, am not counting on Social Security for any income in retirement...

Me too. In fact, I wish I could just opt out of Social Security all together. I'm pretty sure I could do much better investing that money myself that letting the government blow it.

This year I maxed out my 401k. I don't think I'll do that again. I'll just drop down to whatever the company match is. I think that is 5%. Things are a little gray since IM flash just was acquired by Micron. I'd like to see if I can roll my company 401k into an IRA and have more options for investing. I'm still working on that one.

I'm going to revamp my 7702 and put more money into that after rolling back my 401k contributions. And I'll put more money into a Roth. My initial philosophy was to max out the 401k to try and reduce the tax burden while both my wife and I are working, but after thinking about things, I only see taxes going up. I'll just pay the piper now, so I don't have to later.

I just signed up for an acorns account too. I'll play around with that a bit. And I'm maxing out my HSA.

 

[zmotorsports]

Me too. In fact, I wish I could just opt out of Social Security all together. I'm pretty sure I could do much better investing that money myself that letting the government blow it.

This year I maxed out my 401k. I don't think I'll do that again. I'll just drop down to whatever the company match is. I think that is 5%. Things are a little gray since IM flash just was acquired by Micron. I'd like to see if I can roll my company 401k into an IRA and have more options for investing. I'm still working on that one.

I'm going to revamp my 7702 and put more money into that after rolling back my 401k contributions. And I'll put more money into a Roth. My initial philosophy was to max out the 401k to try and reduce the tax burden while both my wife and I are working, but after thinking about things, I only see taxes going up. I'll just pay the piper now, so I don't have to later.

I just signed up for an acorns account too. I'll play around with that a bit. And I'm maxing out my HSA.

I think that is a good move. We aren't calculating Social Security into ours either. I think anything (if anything) we get we will just look at it like the cherry on top.

I believe in having a balanced portfolio and not all in a 401(k) for the reason you mentioned. If you defer your tax burden via a 401(k) then you will be hit with the total upon the time and rate of withdrawal. By having a nicely fortified 401(k) AND a ROTH account you can draw out of each and not have to pay taxes on the ROTH withdrawals and only on the lesser amount of 401(k) withdrawals and therefore lower your overall tax burden during retirement.

Mike

 

[Greg]

... In fact, I wish I could just opt out of Social Security all together....

Get a railroad job! We don't pay into social security at all.