Should I hire a financial advisor?
- Thread starter HGoat
- Start date
It's for the outside investments. While you may not withdraw funds, there are some capital gains that you will pay taxes on. my kids' college funds are in an outside account and I've paid capital gains taxes on parts of them.
You don't think an individual income of $75k (in his 20's, with no debt) is well off?
If he adds a wife who makes the same and they share a mortgage, he'll still be well off.
I think there was a mention of HSAs earlier, but if you have a high deductible health plan, I'd start maxing out the HSA contribution and throw that into index funds because:
1. if you have a high deductible plan, you'll probably end up meeting your out of pocket max for something major like an ACL tear, having kids, appendectomy, etc., might as well use pre-tax money if it's available
2. if you're planning on a family sometime, you'll probably blow through what you can contribute every year with the HDHP, so doesn't hurt to start saving up earlier.
3. if you don't end up using it, it essentially doubles as another 401k after 65 where you just have to pay taxes on the withdrawals without additional non-qualified penalty. If you use it for qualified expenses it would still be tax-free.
1. if you have a high deductible plan, you'll probably end up meeting your out of pocket max for something major like an ACL tear, having kids, appendectomy, etc., might as well use pre-tax money if it's available
2. if you're planning on a family sometime, you'll probably blow through what you can contribute every year with the HDHP, so doesn't hurt to start saving up earlier.
3. if you don't end up using it, it essentially doubles as another 401k after 65 where you just have to pay taxes on the withdrawals without additional non-qualified penalty. If you use it for qualified expenses it would still be tax-free.
Since life insurance was brought up, only buy term life insurance.
This thread helped a lot. I’m in a similar situation as HGoat though I’m making between 60-65k just out of school, so I don’t have quite the money he’s making so I need to be careful. I only matched my 401 and upped it to 800 per check to catch up. Rent is around 950, looking for nice cheaper places in Des Moines for the future.
Any other recommendations? Roth IRA worth it?
Any other recommendations? Roth IRA worth it?
On paper, a Roth IRA is worth it. Personally I would prefer a conventional IRA because I don't trust government to not change the tax laws in the future. Basically it's the sure thing of a deduction today versus hoping tax exempt money stays tax exempt in the future.
An argument brought up by my CPA in favor of a Roth is: "Who is going to be in a higher tax bracket when they retire? Well, if you do it right it's quite possible...although few are committed to investing the amount necessary to be in that position. Using before tax dollars gives you a bigger base to start with, negating much of the advantage anyway.
This idea of avoiding a Roth because the government might take away its tax benefit someday is pretty extreme IMO. Even if Congress were to eliminate Roths entirely, they're not going to strip away benefits on existing Roth money. There would be blood in the streets. Obama tried something similar with 529s a few years ago and backed off within days.
Besides, taxes have come down over the years, not gone up. Unless Republicans become extinct, the chances of you seeing a significant tax increase in your lifetime - let alone a radical change like stripping away the tax benefits on hundreds of billions of dollars held by tens of millions of people - are pretty small.
HGOAT, as you can tell, there are a lot of various opinions and ideas here. Go talk to an advisor and let them help sort this out for you. Everybody has different situations that would require different strategies. This is not a 1 size fits all.
You don't necessarily have to hire them, but it's good to have a conversation. If you don't get a good vibe from the 1st one, try another one. Best of luck to you and congrats on getting off to a good start.
You don't necessarily have to hire them, but it's good to have a conversation. If you don't get a good vibe from the 1st one, try another one. Best of luck to you and congrats on getting off to a good start.
Thanks for all of the feedback, guys. Some really good stuff in here!
Regarding life insurance, my company offers 3x my annual salary to beneficiaries of my choice if I die, and since I don't have any dependents, I think that is more than enough.
I do think there is a discussion to be had on rent vs owning. For me, the main reasons I haven't really seriously considered owning is because of two primary factors:
1. I don't want all of the responsibility that comes with it. Maintenance/costs that come with it, lawn upkeep, HOA fee's, snow removal, etc etc... By themselves they are all small things but when combined together make for a lot of time and effort that I don't have to worry about with renting.
2. Career Flexibility/Mobility- some of this can be minimized by companies that help pay for costs associated with selling your home when they hire you. While I am happy with my job right now, in a couple of years, who knows? I'm open to the idea of moving to a new geographic areas while I'm young for the possibility of career advancement, and owning is a long term investment that could hinder that.
As for a financial advisor, ultimately I'm just going to need to make a firm and honest decision on whether I will really take the time and energy to learn to do it myself. I'm going to set up a time to meet with some advisors and hear what they have to say. I agree with what an earlier poster said, no one will care about my money more than me. And because of that, I'm thinking I should learn to do it myself, even if it is a time commitment.
Regarding life insurance, my company offers 3x my annual salary to beneficiaries of my choice if I die, and since I don't have any dependents, I think that is more than enough.
I do think there is a discussion to be had on rent vs owning. For me, the main reasons I haven't really seriously considered owning is because of two primary factors:
1. I don't want all of the responsibility that comes with it. Maintenance/costs that come with it, lawn upkeep, HOA fee's, snow removal, etc etc... By themselves they are all small things but when combined together make for a lot of time and effort that I don't have to worry about with renting.
2. Career Flexibility/Mobility- some of this can be minimized by companies that help pay for costs associated with selling your home when they hire you. While I am happy with my job right now, in a couple of years, who knows? I'm open to the idea of moving to a new geographic areas while I'm young for the possibility of career advancement, and owning is a long term investment that could hinder that.
As for a financial advisor, ultimately I'm just going to need to make a firm and honest decision on whether I will really take the time and energy to learn to do it myself. I'm going to set up a time to meet with some advisors and hear what they have to say. I agree with what an earlier poster said, no one will care about my money more than me. And because of that, I'm thinking I should learn to do it myself, even if it is a time commitment.
You were correct about this. I enrolled in my healthcare plan and 401k at the same time(both of which were my first time enrolling), and healthcare is what is enrolled annually. For some reason I lumped them together. Onboarding can be a bit of an information overload...
Thanks!
I think the scenario that makes the government change the law regarding Roth could occur if we have some-type of economic meltdown to the likes we have not had since the great depression. I think a discussion on how that might occur is probably a thread topic for itself (and there are plenty of doomsday financial people out there writing books if you are that interested).
If this should occur and there is the reality of billions and billions of dollars that "well off" people are holding completely tax-free and withdrawing tax-free (while everything in the economy has imploded), I don't think it is far fetch to see the gov't finding a way to tax these huge IRAs. The only thing crazier would be if the gov't implemented taxing some Social Security benefits as a way to increase revenues....oh yeah...they did that one already.
All that said, I do contribute part of my 401k deferrals as after tax Roth K contributions (and have s modest Roth IRA that I contributed to periodically in the past when eligible).
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I think you are wise to carefully consider the buying vs renting question and it appears you are. Congrats.
There are a lot of head winds against renting as so many players have a bias interest for as many people to buy vs rent as possible. .i.e..there are many more out there pushing for people to take out a mortgage and buy vs renting:
* real estate agents
* developers
* banks/mortgage companies
* lumber indusrty
* construction industry
* cities (more rooftops, mean more tax revenue)
* Federal gov't - one on our key economic measures is "housing starts" and thus policy is shaped to encourage home-ownership. As we've learned, some of this has been bad policy so much as it encourage many to buy there were really not in a position to do so.
* "conventional wisdom" - most of us have had it hammered into us our whole lives about the importance of buying and owning a home as soon as possible. Because of this, you get a lot of "well, my uncle says..." or "...this is what I did..." type of advice on this subject.
* current home owners - for selfish reasons, we want the housing market to stay strong as that is what allows our homes to appreciate in value.
None of the parties with a vested interest in promoting buying are going to remind you of the maintenance costs, risk of having to sell quickly (if your career offers mobility), and just the time and effort it takes to upkeep a house. e.g...do you want to go off for the weekend to Chicago on a whim or is that the weekend you're going to need to mow and fertilize your lawn?
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I was in a similar situation 25 years ago. I had a great job and very little debt shortly after graduation from college. Like others have said, I would increase your 401k contribution. You can do this all at once or in my case I chose to increase it as I earn raises each year. I would increase my 401K contribution by 50% of my raise or all of my % raise depending on my money situation. I quickly got to 15-18% contribution without any change in my daily finances. I would also suggest starting some accounts using direct deposit to save for future life events (house, marriage, kids, cars). These accounts were set up at another institution from my checking/savings to avoid easy money transfers.
As for an adviser, I think that depends are your comfort level. I would start out trying it yourself and then if you feel that someone else can really make a difference investigate your options then.
Anyone have any experience with back-door Roth IRAs? Specifically with the concern of immediately converting an after-tax non-deductible traditional IRA contribution into a Roth? I had done that in 2017, and was planning continuing it yearly, but am reading some articles with concerns about how the IRS might unfavorably view such as move based on the step-transaction doctrine. I only waited a few days in 2017 to convert the funds.
Save as much as you can NOW and don't get too bogged down on what the exact investment vehicle is. Index type funds or whatever just so long as you do the hard work now when you're younger. You can get lots of free advice from strangers - some of it MAY actually be good and pertain to you, your life goals, your current circumstances etc...
I'm turning 55 next year and am looking at retirement. It's REALLY easy - all you have to do is save and invest consistently for 30+ years and the rest takes care of itself.
Honestly - don't overthink it and just save as much as you can now.
A thread after my own heart..
Late to the party, but...
When I was out of school I put $50/month into an account. Wisest thing i could have done was put much more. You don't need a FA. You'll learn so much more researching things and making your own decisions, plus it'll be less expensive.
Late to the party, but...
When I was out of school I put $50/month into an account. Wisest thing i could have done was put much more. You don't need a FA. You'll learn so much more researching things and making your own decisions, plus it'll be less expensive.
