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Financial Tip of the Day - Start Early
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I wish I would have started earlier. My employer has a 457b that matches up to 3% plus a pension that they match @ 4%. Due to some restrictions I was only able to change my contribution once a year. Last year I tried to change from 3% to 6%, but it never went through, so this year I changed from 3% to 9%. I spoke with a financial advisor and we went through my goals and he helped me set up my allocations to maximize my growth. My plan is to out in another 3-5% in by the end of they year.
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Originally posted by MLank View PostWho is your 401k and 457 thru? Could be easier to use if reputable.
If I had to start from scratch, I’d use Vanguard.
Edit: as Stgs stated
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Originally posted by BLACKFINTURKEY View PostNot exactly sure the website is TEXAS saver it’s set up through the state. I’ve seen very subtle growth over 9 years but wasn’t putting much in at first.
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So I understand this correct, when you open IRA with vanguard, money goes into settlement fund. Then, you must pick what you want to invest in, other wise money just sits in a money market?
Originally posted by scott123456789 View PostGo to Vanguard.com. Open a taxable brokerage account. Buy shares of VTI(total stock market index) sit back and relax.
Then open a Roth Account with vandguard and buy $6000 worth of VTI per year.
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This is excellent advice for those youngsters on this forum. I am 58 year old and will retire at 60 using this advice. Those worried about dips in the market should know you are not losing equity. The equity is always there and 100% of it will bounce back. I am not a savey investor. My strategy was always to invest it an forget it and over the last 3o some odd years I have managed a 8% return.
Start doing it now and reap the benefits down the road.
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Originally posted by scubasteven25 View PostI've read all about paying off debts but could use a little guidance on something. How about 0% interest debts like car loans, appliances, furniture, etc? Do you pay those off first before investing that extra money?
My wife is always telling me to pay off our debts first even though they are 0% except our house loan at 2.5%. To me that doesn't make sense as our investments make much more than that.
As background, I've never read any Gordon Ramsey stuff but have been a nearly life long saver. We pay off our credit cards each month and only use the cards to build points. We're a single income family and the good news is I get a pension at the end of my time in the military. Financially, we've got well into 6 figures of investments to date but I want to ensure my wife is set-up if something happens to me. I've also got $400K life insurance which would be enough to pay off all our debts with some left over. Kids school is paid for via 529Bs, GI Bill transfer, and if the kids go to school in Texas, the Hazelwood Act.
I agree with you on not being in a hurry to pay off your mortgage if it's at 2.5%. Another way you may be able to present the argument to your wife is like this. For this example take Exxon who pays dividends. Currently, their dividend rate is right at 7%. If you were to invest your money in Exxon instead of paying off a 2.5% mortgage, you would essentially get a 4.5% return on your investment since you would cover the 2.5% interest for your mortgage and earn an additional 4.5%. This does not take into account the stock value growth that's still available, which would be additional gains.
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Originally posted by aggie82josh View PostI would never be in a hurry to pay off an interest free loan, unless there is some kind of penalty tied to it. You are much better off taking the extra payments and investing it into something that might give you a return on your investment. When compared to a 0% loan, ANY return on investment is better than paying down a 0% loan.
I agree with you on not being in a hurry to pay off your mortgage if it's at 2.5%. Another way you may be able to present the argument to your wife is like this. For this example take Exxon who pays dividends. Currently, their dividend rate is right at 7%. If you were to invest your money in Exxon instead of paying off a 2.5% mortgage, you would essentially get a 4.5% return on your investment since you would cover the 2.5% interest for your mortgage and earn an additional 4.5%. This does not take into account the stock value growth that's still available, which would be additional gains.
Also don't forget to risk adjust your equity returns. Investing in equities has a higher risk than debt repayment (risk free).
To the original question about paying off 0% interest debt before investing...First realize that 0% on a car is a marketing gimmick where you forgo a rebate in return for "0%". If car dealerships called this program what it actually is, which is prepaid interest, instead of 0% interest, it would instantly lose its appeal. If you've already gone down this road then I wouldn't be in a hurry to pay it off.
On a big picture scale, I would advise everyone to do what you can to fully take advantage of all tax advantage space that is afforded to you in your working life. For example, if you work for 40 years and you are allowed tax advantaged contributions to a 401k or IRA and you miss maxing out your contribution in one of those years you never ever get that opportunity back. If you get 40 shots at it, try to take maximum advantage of all 40 because once its passes you by its gone forever. Managing taxes should be a key part to anyone's retirement plans.
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Originally posted by bbqfan5909 View PostSo I understand this correct, when you open IRA with vanguard, money goes into settlement fund. Then, you must pick what you want to invest in, other wise money just sits in a money market?
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I’ve got S&P index with vanguard, total bond and 529. Set up an Trad IRA and plan to max and convert to Roth due to income limits. Just threw me off when money went into settlement fund in IRA.
Originally posted by scott123456789 View PostYes precisely. I do believe the settlement fund yields interest returns comparable to online savings but the brokerage account is just a location for specific funds. The shares of VTI(total stock account, literately buying a single share of every stock available in the US index) are what yields between 4-8% that is so often quoted.
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