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two 401ks, mutual fund and want to open a ROTH IRA

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Sdubz
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two 401ks, mutual fund and want to open a ROTH IRA  Reply with quote  

Hi Everyone!

I am 23 years old and make around $65-$75k a year. I have one student loan left at $13800 at 5.8% and plan to pay it off this year to become debt free. I have 5k cash in savings acct. and $500 i-bond. my car is worth $3k-4.5k.

I would like to open a ROTH IRA.

I currently have:
401k (past job) - $7400
401k (current job 6% match Vanguard 2050) -$1120
Vanguard Mutual Fund (TSMX) -$3500

I live at home so no rent or other bills currently . let me know if you need any other info to give better suggestions.

1) What funds should i pick for ROTH IRA?

2)is the target 2050 a good idea for my current 401k? (i can list my options for that 401k. i currently put enough in my current 401k to get the full match and nothing more.)

3) should i roll over my past 401k? where to?

4) any advice would be greatly appreciated
Post Sat Feb 04, 2012 8:25 pm
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littleroc02us
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So why not pay off your school loans within 4 months and become debt free then? You make over 4k a month and you live at home, you should have plenty of money. Then I would open up a Roth IRA with Vanguard, do some studying first on where your interest lie. I've read that the projection funds such as the 2050 don't perform quite as well as say a Wellington fun or Total Stock Market index fund. After you pay off your debt max out the Roth's for 2012 and 2013 asap.

Ronald Reagan once noted the basic difference between Democrats and Republicans. “Republicans believe every day is the Fourth of July,” he said. “Democrats believe every day is April 15th.”
Post Mon Feb 06, 2012 2:34 pm
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coaster
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Congrats on having your emergency fund already funded. Nice going! Smile Yes, I'd get that loan paid off; 5.8% isn't bad for a student loan, but it's still kind of "on the cusp" IMO for keeping or killing. I don't see any problem deferring a decision on the rest until you have that paid off. But I don't see any problem opening a Roth, either. I think it's a good idea to have a combination of retirement plans. If you decide to roll that 401(k), though, remember that it has to be rolled into a traditional IRA else you'll have to pay tax. Wink

~Tim~
Post Mon Feb 06, 2012 4:25 pm
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Sdubz
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Thanks for the advice. i understand the vanguard target 2050 is not best.. i want to change it..

which would you suggest out of these?

Stock Investments
TRP EQUITY INCOME
Inception Date 10/31/1985 -0.72 12.82 -0.96 4.07 10.45 12/31/2011

COLUMBIA ACORN Z
Inception Date 06/09/1970 -4.61 18.84 2.12 8.24 14.52 12/31/2011

FID US EQ INDX
Inception Date 12/31/1991 4.14 19.26 0.29 3.47 7.98 01/31/2012

DODGE & COX INTL STK
Inception Date 05/01/2001 -15.97 12.10 -3.45 7.99 6.73 12/31/2011

VANG MORGAN GRTH ADM
Inception Date 05/14/2001 -2.42 16.51 0.66 3.62 2.51 12/31/2011

FID LOW PRICED STK K
Inception Date 12/27/1989 4.83 24.09 3.10 9.14 14.04 01/31/2012

JANUS OVERSEAS I
Inception Date 07/06/2009 -32.70 N/A N/A N/A 1.48 12/31/2011
Post Tue Feb 07, 2012 5:11 am
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coaster
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I'm sorry, it wouldn't really be appropriate to recommend specific investments; not only I am no longer licensed and registered to do that, but I haven't researched any of those (and I'm not about to --- that's your job Wink ); and finally I have no idea of the suitability of the specific investment for you as an individual.

You have to gauge your risk tolerance; you can take a fair amount of risk at your age, so in general you might want to be looking at those areas where the future growth promises to be the greatest, and in my opinion, that's probably not in either the U.S. or in Europe. But those high-growth areas also fluctuate up and down more ... are you going to be panicked into selling if your investment is down 15%?

You might want to check out www.morningstar.com to do your research.

~Tim~
Post Tue Feb 07, 2012 7:00 am
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oldguy
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quote:
i understand the vanguard target 2050 is not best.. i want to change it..


I would use an SP500 based index for your core holdings. Not sure why you dislike the Target2050, that is mostly a SP500 index.

From your list, I would pick the Fid SP500 Index. And avoid the income funds, bonds funds, etc. You could mix in a small % of int'l if you like - but your core holdings will be what builds your longterm wealth. (Ie, a 10% holding could double and it only adds 10% to your wealth)
Post Tue Feb 07, 2012 3:43 pm
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Sdubz
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Thanks for the advice. i plan to kill my student loans in the next six months, then plant o max out a roth ira for 2012 and 2013.

@oldguy would you suggest:

100% Fidelity Low-Priced Stock Fund - Class K

OR

90% Fidelity U.S. Equity Index Commingled Pool Class 1

10% Janus Overseas 1

The fidelity low priced stock fund seems to perform very well. im 23 and live at home fyi

Thanks!
Post Wed Feb 22, 2012 2:32 am
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oldguy
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I would go with 100% in the Fidelity SP50 Index Fund (that may be what the comingled pool is, I don't know - so do the researtch first).

I would not use the Low Priced fund, too many small companies that may not even be around when you want your money.

As for prepaying the 5.8% SL's - personally I would keep them. If you are risk averse you may feel the need to pay them early. But age 23 is the best time to take some risks and build some wealth. When you are about age 55 and you have accumulated wealth, you need to shift your investments to wealth preservation - bonds, CDs, etc - becuz you won't have enough working yrs left to rebuild if you hit a Market Correction, a rebuild often takes 15 years or more.

Example - if your $13,800 loan is 5.8% for 10 yrs, it will cost $18,220 to keep it full term. If you put your $13,800 cash (that you were going dump onto the SL in 6 months) into an 11%/yr index fund it will be about $40,000 in 10 yrs. And about $112,000 if you leave it for 20 yrs, And so on - that's how you make money work for you. Obviously there is a risk, maybe you won't beat your $18,220 boggy - or maybe you'll make $80,000 instead of only $40,000. But age 23 is the time to try.
Post Wed Feb 22, 2012 3:33 am
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Sdubz
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Thanks for the reply oldguy. i appreciate your thoughts and like your style

also thanks to my fellow christian littleroc02us & coaster
Post Wed Feb 22, 2012 3:56 am
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