Mia, assuming the choice is the ETF or mutual fund version of the same Vanguard fund, there's little difference, but I'd say the automatic investing argues for the fund version:
Mia - Mutual funds and etf's have advantages an disadvantages. I tend to prefer mutual funds because the minimum investment id lower and you can automatically reinvest the dividends and interest. Etf's are a little more tax friendly and you can trade them anytime you want. If you want an opinion on what is best for the average investor, I vote mutual funds but one of my colleagues on this board may disagree. What is important is the type of fund you invest in - not whether or not it is an ETF or mutual fund.
Maxwell: Both types of IRAs grow tax free. You are probably better off with a traditional IRA if your income tax bracket is lower in retirement.
Murph, The sooner you invest, the sooner your funds are working for you. So the every other week may have an advantage. The real action you want to take, if possible, is to invest the full IRA allowed amount-$5,500 or more as soon as you have earned that at your job. This may be very early in the year. Your funds have much more time to work for you with that strategy. If you have emergency funds, consider investing those early in the year, then the $250 per paycheck goes to replenish your emergency funds.
Phillip - to paraphrase a recent vice presidential candidate - you betcha! I can't think of a reason why you would not. The more you are able to save, the more un you can have in retirement.
Mia - another tough question from you. I think the answer is that it needs to be positive and growing. How much depends on your personal circumstances. Don't try to compare yourself to others. personal finance is not a contest.
Philip: The missing piece here is what your spending is like. The HSA is a good thing because the funds can be used to purchase long-term care insurance and eventually (at age 65) withdrawn without penalty for any type of expense in addition to health care costs.
Maxwell, it's really hard to project, frankly, what your marginal tax rate might be in 20 years. Tax law changes all the time. That being said, if you don't see a definite drop in marginal tax rates in retirement given current tax law, I think a Roth makes sense, purely for the tax diversification.
Mia, take a look here; it might be helpful:
Mia, Frank is right on. What you invest in-they type of mutual fund is FAR more important than the mutual fund/ETF decision. Many times mutual funds may have the same costs as an ETF. Also, ETF's may have costs that are harder to understand and follow. For average investors, I also agree with Frank here, mutual funds may be a wise choice.
Inherited - the only annuities I like are those that I actually understand and that would be an immediate fixed annuity. Your return would be higher than what you would get from a bank account and you don't need to worry about outliving it. On the downside, once you buy it, you bought it and there is no turning back. This is another situation where you would really benefit from sitting down with a fee only financial planner and have your entire situation assessed. You can find one in your area at www.napfa.or.
Maxwell: Both Ordinary and Roth IRAs grow tax free, but withdrawals from Ordinary IRAs are taxed as ordinary income and withdrawals from Roth IRAs are not.
john r - those are good income producing investments but you need to look at the bigger picture. You may not be properly diversified and you may need some growth in your portfolio. Do you realize that if y and your wife are healthy, there is a good chance that one of you will live to age 95?. Have a pro take a look at your whole portfolio. Make sure he or she is fee only.
Philip, I think you may mean: 3.5% of the starting balance, annually adjusted upwards for inflation? You need to run a retirement projection to determine that, but my guess is that 3.5% may be too high given that long of a time horizon (the 4% sustainable withdrawal rate rule of thumb developed by Bill Bengen tested 30 year retirements). Feasible if markets go your way, perhaps, but you have to be prepared should they not....
Philip: In that case, you have plenty of room to fund the HSA and Roth. These are both fairly flexible savings vehicles with tax benefits that you can take advantage of.
Inherited, whether you buy an annuity or not really depends on the other fixed secure income you already have for your retirement. For example, you and your spouse may have Social Security benefits. You may want to use a Social Security Maximization program to determine what these benefits are and how best to draw them. many of my clients have a Net present value of benefits of $700,000 or more. The program will give you this number. This Social Security benefit is like a government bond added to your investment portfolio. If you already have a Bond that is that big, COLA adjusted, does it make sense to have another annuity, likely not COLA adjusted, in your portfolio? Each situation is unique and you'll want to look at your fixed/ required expenses in comparison to your non discretionary expenses in retirement to determine the amount of certain income -like Social Security-that you may need.
Hi Victor, I believe to get the maximum for your children you'll want to wait until 4 months before your FRA 66 before you file and suspend and start benefits for your children. Social Security is quite complex. It's not just that you want to collect for your children, but you want to collect the maximum amount that you can for them. Consider going to Maximize my Social Security.com and pay the $40 cost to do the maximization for your family. If you have any questions, be sure to call the support staff.
lynn: I would work with a CFP professional to put together a formal financial plan. Based on your goals and tolerance for risk, you can come up with an investment portfolio that is appropriate. You can find one at www. napfa.org.
Thanks for joining wreckon!
lynn - You really need to see a financial planner. You have a pension and you will probably be eligible for Social Security if you are covered under FERS. Also you do not say how your TSP is invested. Do yourself a big favor and go to www.napfa.org and find a financial planner near you. It will save you a lot of money and make your retirement much more enjoyable.
Lynn, for starters at $260k you're over the $250k FDIC insurance limit for any single financial institution, so take care of that. I know it's not an easy time to invest in either the stock or bond markets, but cash isn't a long term solution, as you clearly know! Assuming this $260k is part of the retirement nest egg (not being saved for short term goals), can you imagine dollar-cost-averaging in to diversified stock & bond funds (making equal dollar amount purchases over a period of months, say 6-24)? What's holding you back?
Inherited, you really need to use some software to analyze an maximize your Social Security to get the full picture on your situation. Consider going to Maximize My Social Security.com. Pay the $40 and get the report. The report gives you the amount of your Social Security benefits in a Net present value form which is like have a large bond with many future payments. Consider this Social Security Bond is a part of your investment portfolio. You'll want to look into an Asset Allocation that may be a fit for you--vanguard.com-will likely have something for you in their website. You'll likely need to do their risk tolerance assessment first. In addition, you want secure income like social security
to cover your fixed expenses. What to do with the $50,000 takes a bit of time because of the tax form it's in and you'll need to look at your overall situation to see where there's a good fit
Thank you so much to all of the NAPFA personal finance advisers who participated today.
And, thank you to everyone who asked questions.
Mark your calendars for your next Jump-Start Your Retirement Plan day on June 18. See you then!