by Hope
I don’t know if the saying “better late than never” applies at this time. But I’ve taken a teeny tiny baby step toward formal retirement. I opened a ROTH IRA account with Charles Schwab and schedule small bi-monthly cash deposits from my every day checking account. (My primary focus is still on debt payoff so this will start off small.)
I think I can start investing with any amount, but I can’t take advantage of their financial plan tool until I have $5,000 ready to invest. So for now, I’m going to begin to do some reading and do some manual investing with a small amount of cash while I build up the account. I know I have asked it before, but any free resources for learning to invest would be great. And by learning…I mean, very, very basics.
How Aggressive Can I Be?
I know it’s not a lot, but it is something. I figure I have at least 20 years until retirement so I will need to be pretty aggressive with my savings and balance that with how risky I’m willing to be with my investments at least here to start. From what I understand, I have about 10 years to be pretty intense and risky before I’ll need to be more moderated in the chances I take.
Do you know of any blogs of people who started planning for retirement late in life? I am going to need all the tips and tricks I can gather.
(At the same time I am doing this, I have also looking at opening ROTH IRA accounts for Gymnast and Princess. I need to be a bit more knowledgeable about how they work first.)
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 5 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
Well first off, why’d you choose a Roth? Do you even know why? Knowing the why is the first start in figuring out retirement savings.
The choice between Roth and traditional is typically based on your current and future tax rates. Do you know what your fed tax rate is last year, this year, expected in the future? Self employed people actually have an enormous amount of tax-advantaged retirement space if they create a solo-401k. You don’t share much about your taxes, but I would imagine they are low now that you have dependents (may favor after-tax/Roth contributions) and will likely go up in the future years as they age out (may favor pre-tax/traditional).
For investing, I wouldn’t worry about specific stocks yet or ever. Use mutual funds, either a target retirement fund or generic SP500 fund, VTSAX. Then you can get started and change up your specific investments later. I would recommend to make the contributions automatic and do not look at your loss/earnings for the first year or so. You’ll get discouraged too easily if the market drops.
You are right. I had just always heard that if self employed, you get a Roth IRA. So I did.
And I have automated the transfer of funds to my new retirement account…every 2 weeks for the time being. I will have to look at automating the investment piece.
And thankfully, I do know not to really pay much attention to it on a regular basis as it can be quite volatile. So automating is definitely the way to go.
I have A LOT to learn for sure!
Make it really easy. Just do the s&P index fund. Whatever theirs is, it will be ultra low commission. VTSAX for Vangaurd total market. No need to overcomplicate it, especailly with smaller amounts.
And if they have managed index funds/plans broken down by retirement year (usually done in 5-year increments, so 2020, 2025, etc.), that’s about the easiest thing you can do. I know T Rowe Price and Fidelity offer such options.
Good job getting started. You will also be buying the stocks cheap since the market is down right now.
When you say you are looking to set up accounts for Princess and Gymnast, does that mean you plan to contribute to them or just help them get set up and started? I’d advise you not to contribute at this time, you need to get yourself taken care of first.
At this point, as long as the minimum contributions are very low, the goal is to have at least Princess begin contributing something every month to her own. I will probably hold on Gymnast until he starts working or making money with his business so he can contribute to his own.
You need to have earned income in order to have a Roth, so Gymnast won’t be able to open one until he has taxable income.
The younger you are, the bigger the benefits of a Roth (because the growth isn’t taxed so the more years it has to grow the better the tax advantage). I think it’s an awesome idea for Princess.
You can only contribute to Roth IRA’s if you have earned income. Gymnast would not be eligible for a Roth IRA until he has a W2 job or starts reporting income from his business.
I would be more concerned with learning the ins/outs of IRAs and retirement plans with the twins. Now that they are out on their own and not your dependents, they’d be eligible for the Saver’s credit on their tax return giving them a nice 50% boost.
Also, the sp500 is near all-time highs, within 3-4% or so. So sure some industry stocks are at all time lows (travel stocks, oil/gas, etc.), but in general the market is near a high. I would park your contributions in the money market fund (risk free) until you have whatever minimum you need to contribute to a Target Retirement or total market fund (like VTSAX). For Vanguard, this is $1,000 or $3,000. I’m not sure what it is for Schwab.
I am so glad that you have gotten started! I would also say to focus on you and keep it simple.
I am so glad you have started. I would focus on you, not so much on the children. But the twins, being older, should start contributing to whatever retirement plans they have at their workplaces. You and they could learn together!
Since you had set aside $5k for a car and it won’t be needed since Princess is not commuting to the private school can you use that to get to the $5k threshold to take advantage of the financial planning tool? Then I agree that picking a retirement fund for when you plan to retire and just riding the waves will be your best bet!
So no help for your other two kids? Once again you’re treating your ‘real’ kids differently than the ones you adopted.
Seriously?!? They are different phases of life and all get different help.
Different but equal.
How is it equal when the twins have been working and are able to contribute to their retirement; while Princess just started working and Gymnast is not even eligible to begin a retirement fund since he has no earned income? You start to contribute to your retirement and right away think of contributing for the two youngest and their future retirement but leave out the twins. Yes they are all in different stages of life, but seeing they are older, one would think you would’ve thought of the twins first for a retirement fund.
The twins have so many financial benefits the littles do not have when it comes to school. For instance, the twins schooling is essentially free.
They also had free healthcare. There are lots of financial differences between the kids, it’s just the nature of the beast.
Another example is when the twins were first placed with me, the twins got SO MANY Christmas presents from all the agencies and “do gooders”, I couldn’t compete for the littles. So while from the outside, you may think my kids are treated unfairly, but reality is they are all very equally treated but very differently.
As for the retirement accounts, my dad spent hours with my youngest brother (14 years younger) teaching him how to invest, getting him started in investing, etc. It’s not that he was being unfair to the 4 older kids, it was just a different time in his life, both financially and priority wise. So yes, I’m learning and starting late in life. And yes, I’m passing the lessons down to my kids at different times in their lives.
History Buff has started his retirement savings. We sat down this past spring and talked about it to get him started. We also review his statements together when they come in. Do I contribute financially to his 401K, no. But I’m contributing to him getting his own place.
The kids all have different life experiences, different strengths, different needs and different maturity levels, especially when it comes to finances. I help them equally, but differently. I can give dozens of examples of this from my own growing up years, one of 5 siblings. And all my kids are aware of the help I give each of them and none of them feels like I am unfair. (They all think I have a favorite, and each of them thinks my favorite is a different child, but that is not because of how “fair” I am…it’s just typical sibling rivalry.)
Why the quotes around do gooders? Kids with happy, stable families do not end up in foster homes. Trying to make up for that just a little with extra Christmas presents sounds fine to me. I hope you explained that to your bio kids.
Your other kid’s schooling would have been free too if you had sent them to public school.
I’m talking about their college…not their middle/high school experience. The twins college is essentially free as they receive additional government monies should they decide to attend college/trade school because they were so old in foster care. (I believe it’s 15, if you are in foster care after 15, there are additional monies for future schooling.)
I also recommend VTSAX. I read a book that recommended it and then Suze Orman just recommended it on Sunday during her podcast.
It is an index fund with companies that represent domestic, international, small, large. You get everything you need.
VTSAX is mutual fund that includes only domestic large cap companies. No international, small, mid, or bonds. Still a very solid pick That is frequently recommended by ethical professionals.
If you don’t want to wait for a minimum investment requirement, you can go with VTI, which is vanguards total stock market ETF – the EFT version of VTSAX. You can purchase as little as one share of VTI from the outset. Trades like a stock and not a mutual fund. A big benefit is that there are lower fees associated with ETFs than their corresponding mutual funds, generally, unless you pass certain balance thresholds of MFs which then often drop the fee percentage (e.g. vanguards admiral shares for MFs).
Target date fund sometimes don’t perform as well as non-target date funds because 1) they are managed funds with somewhat higher fees, 2) they often become too conservative in stock/bond blends too early, and 3) stinker funds that don’t sell well individually are sometimes packaged into target date funds. You can bypass #2 by choosing a target fund that is has a date maybe 5-10 years longer than you actually retire. People love them because it’s set it and forget it.
Roth vs 401. Both have their plusses and minuses. The closer you are to retirement, 401s have better tax advantages. They are also generally protected from bankruptcy and lawsuits. Roth’s have many other benefits such as no need to worry about paying taxes on it (with today’s legislation anyway),easier to withdraw funds preretirement, and no required withdrawal age. As for tax status now ca later, I think looking at the current national debt along with how much COVID is costing along with historically low tax rates currently, everyone’s taxes are likely to be higher in the future. I wouldn’t base my decision too much on that until you are well into six figure income territory.
These are details. The important thing is that you save often and long.
I correct myself by saying VTSAX is predominantly large cap. Some small and kid are included. But no bonds or international.
Those large cap domestic stocks have a lot of international exposure so you do not need international stocks.
Of course not. Not one ‘needs’ international stocks and bonds. And from a philosophical level, with the global nature of business, there are domestic companies that have international exposure and visa versa.
But there is a difference between owning domestic stocks and bonds vs international especially if one wants exposure to emerging markets.